U.S. Supreme Court Issues Favorable Decision for Employers!

May 29, 2018

This is an important decision for all employers on a national basis. Art Silbergeld, an Attorney with the firm Thompson Coburn wrote the following article. He explains it best.

“The U.S. Supreme Court on May 21, 2018 in Epic Systems Corp. v. Lewis (No. 16-285) ruled that the Federal Arbitration Act permits courts to enforce agreements to arbitrate individual employee disputes and to compel arbitration even when the employee has waived the right to file and/or participate in a class action.  Typically, if an employee has signed an otherwise valid arbitration agreement and then files or seeks to participate in a class action, the employer goes into court to enforce the agreement to arbitrate the dispute.  If the court orders the matter to arbitration, the individual is precluded from participating in a class action.  The National Labor Relations Board had earlier ruled that waivers violate the National Labor Relations Act (NLRA), which protects employees’ rights to engage in collective action, and defended that ruling in the appeal.  In Epic Systems, the Supreme Court concluded that neither the NLRA nor the Federal Arbitration Act preclude federal courts from enforcing arbitration agreements that provide for individualized proceedings.

For California employers, there are several take-aways: 1.  The decision does not affect California Supreme Court and appellate court decisions holding that Private Attorneys General Act (PAGA) claims are not arbitrable.  2.  Employers need to review their arbitration agreements to ensure that the document (a) is signed by the employee and the company; (b) contains language waiving the employee’s right to file a class action and to participate in a class action relating to the individual’s employment and the end of that employment; and (c) that the agreement is subject to the Federal Arbitration Act.  If these terms are not in any current agreement, a new agreement should be drafted for the employee and the company to sign.

Whether California court will follow the Epic Systems decision and whether the California legislature will seek a way around it remains uncertain.”

Arthur F. Silbergeld, Esq.

asilbergeld@thompsoncoburn.com

P: 310.282.9412

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Harassment Prevention Tips!

May 21, 2018

If you did not watch the last episode of 60 Minutes you missed out! It detailed pervasive and rampant sexual harassment by famed chef and television personality Mario Batali.

And it laid much of the blame at the feet of the CEO of one of the restaurants in which Batali invested, The Spotted Pig, and its owners, Ken Friedman and April Bloomfield. The segment argues that Friedman and Bloomfield turned a blind eye to years of Batali’s sexual harassment of the female employees of their restaurant, and knowingly allowed it to continue.

We have discussed this issue many times in our seminars! You cannot turn a blind eye to this behavior. The EEOC said it best by putting out “…to any effective anti-harassment program…harassment prevention starts at the top.”

According to the EEOC:

“Workplace culture has the greatest impact on allowing harassment to flourish, or conversely, in preventing harassment.… Organizational cultures that tolerate harassment have more of it, and workplaces that are not tolerant of harassment have less of it.… If leadership values a workplace free of harassment, then it will ensure that harassing behavior against employees is prohibited as a matter of policy; that swift, effective, and proportionate responses are taken when harassment occurs; and that everyone in the workplace feels safe in reporting harassing behavior. Conversely, leaders who do not model respectful behavior, who are tolerant of demeaning conduct or remarks by others, or who fail to support anti-harassment policies with necessary resources, may foster a culture conducive to harassment.”

If you want ensure you are doing everything you can as an organization, start by taking a hard look at yourself and your leadership, and answering these key questions:

  • Do you foster an organizational culture in which harassment is not tolerated, and in which respect and civility are promoted?
  • Does your behavior communicate and model a consistent anti-harassment commitment?
  • Have you devoted sufficient resources to effective harassment prevention efforts?
  • Have you nurtured an environment in which employees are comfortable coming forward with complaints of harassment that will be taken seriously, investigated, and corrected, all free from retaliation?
  • Do you impose swift, proportional, and consistent discipline (without playing favorites or showing favoritism) when you have found harassment to have occurred?
  • Do you hold managers and supervisors accountable for preventing and responding to workplace harassment?

Unless you’ve answered “yes” to each of these six questions, then I suggest that you are not doing everything you can to create a top-down, holistic, anti-harassment strategy. Which means that you are not doing everything you can to protect your most valuable asset … your employees.

Come on people, it is time! Let’s take a more aggressive approach to this issue! Managers, supervisors and upper management must all be on the same page. Keep in mind, personal liability is becoming a major factor in in resolving these types of claims. Can you afford to take the chance?

 


Question: Should employers still test for marijuana?

May 14, 2018

As we all know, a number of the states have legalized the use of medical and recreational marijuana. Generally, the various laws do not require that employers accommodate employees’ lawful use of medical marijuana. It also permits employers still to maintain drug testing policies, drug-free workplace policies, and zero-tolerance drug policies. Yet, with the lawful use of marijuana spreading, employers are asking if it still makes sense to test for it as part of pre-employment drug screenings. We are starting to hear that a large number of applicants are testing positive. Makes sense since the average person does not realize that employers do not have to abide by the legislation in question. Experts are gradually acknowledging that;

“Employers … are quietly taking what once would have been a radical step: They’re dropping marijuana from the drug tests they require of prospective employees. Marijuana testing … excludes too many potential workers at a time when filling jobs is more challenging.”

Other than the fact the fact that employers have historically included marijuana in their drug testing panels, why do employers test for this substance? Well, there are concerns about a person being impaired, especially if they are operating machinery, driving vehicles, or maybe a file clerk that has inadvertently left a bottom file draw open. Workers Comp and other such liabilities are a consideration.

There are those who would argue alcohol is more dangerous and yet the employers do not test for that at the pre-employment stage. How could they? Arguably, the effects are gone relatively quickly as opposed to marijuana.  So, employers, let me ask you—are you pre-employment testing for marijuana, and, if so, are you considering dropping it from your drug testing panel? Email me your confidential thoughts at paaerrep@aol.com. Be assured your names and the name of the business will not be in my next post but your comments may be. My Blog reaches out nationally and internationally so I am sure the comments will vary.

Give me your thoughts.


A New Test for Establishing Independent Contractors!

May 7, 2018

Last week, the California Supreme Court issued a decision in Dynamex Operations West, Inc. v. Superior Court (Lee), and adopted a very broad view of the workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This is a surprising decision that magnifies the risk of classifying workers as independent contractors in California, and is likely to lead to increased claims (in an already litigious area) challenging such classifications in this state.  This is particularly true because the Court’s decision makes it easier for plaintiffs to succeed in getting a class certified in an independent contractor misclassification case.

Background

Dynamex is a delivery company that provides delivery services for retail stores and for consumers.  Dynamex historically classified its delivery drivers as employees but then reclassified them as independent contractors because it was more economical.  [Note to employers: this is generally a bad idea, particularly where improving the bottom line is the stated purpose for the reclassification.]  The drivers basically performed the same work, but were permitted to provide services for other companies and were permitted to hire other workers to assist them. They also had some control over the details of their delivery schedules and routes.

In typical fashion, a driver who worked for Dynamex for a whopping 15 days filed this class action lawsuit (which is now in its 13th year of litigation) alleging various wage and hour violations stemming from the independent contractor classification.  Some of the claims alleged violations of the California wage order applicable to transportation industry employees, such as minimum wage, overtime, and meal and rest break violations.  Other claims alleged violation of obligations set forth in the Labor Code, but not the wage order (specifically, a claim for failure to reimburse business expenses).

In the course of the litigation, a dispute arose concerning the proper test for determining whether the drivers were employees or independent contractors.  The drivers argued that the wage order definition of “employ” (which includes “suffering or permitting to work”) governs.  Dynamex argued that the common law, multi-factor test (known in California as the Borello test), which focuses significantly on the level of control the hiring entity has over the worker’s performance of the work (but also considers many other factors), applies.  Ultimately, the Court of Appeal held that the broad wage order definition applies to the extent the claims in the case alleged violations of the wage order, but that the common law test applies to claims alleging violations of the Labor Code (rather than the wage order itself).  Dynamex petitioned for review by the California Supreme Court, but only as to the ruling that the broad wage order definition applies to claims alleging violations of the wage order.  The California Supreme Court granted review on this issue.

The Supreme Court’s Ruling

In an 82-page decision that reads in significant part like new legislation, the Court held that where a worker alleges violations of a California wage order, the wage order’s definition of “employ” must be used to determine whether the worker is an “employee” entitled to the wage order’s protections or an independent contractor who is not entitled to those protections.  The wage order at issue, like most of the wage orders, defines “employ” in less than clear terms.  The Supreme Court interpreted it as providing three alternative definitions:  (1) to exercise control over the wages, hours, or working conditions, OR (2) to suffer or permit to work, OR (3) to engage, thereby creating a common law employment relationship.  If any one of these tests is met, the worker is an employee covered by the wage order (and able to sue for a violation of any of the wage order’s provisions).

The Supreme Court further announced a new standard for what it means to “suffer or permit” an individual “to work,” so as to make that worker an “employee” within the meaning of the wage orders.  Under this new test, a worker will be PRESUMED to be an employee UNLESS the hiring entity proves ALL of the following:  (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

With respect to the first prong (A), the Court explained that this means that the hiring entity must not, in fact, exercise control over the performance of the work, nor retain the right to exercise such control by contract.  With respect to the second prong (B), the Court explained that the worker must not perform work that is a usual part of the hiring entity’s business.  The Court gave the example of a retail store that hires a plumber to fix a leak.  Because plumbing work is not part of the usual business carried out by a retail store, a retail store could establish this prong to support a finding of independent contractor status for a plumber. Conversely, in the Dynamex case before the Court, the drivers were performing deliveries – the same type of work regularly carried on by the company, thereby supporting a finding that Dynamex “suffered or permitted” the drivers to work and that they were “employees” within the meaning of the wage order.  Thus, for a hiring entity to successfully establish prong B of the new test, it would have to establish that the worker performs work that is outside the usual course of its business.  Finally, with respect to prong (C), the Court explained that the hiring entity must show that the worker is actually engaged in an independently established business and cannot do this simply by showing that the worker has the right to do so or is permitted by contract to do so (e.g. a contractor agreement that expressly allows the worker to provide similar services to other entities).  The hiring entity also cannot establish this simply on proof that the worker was not “prevented” from operating an independent business.  Instead, the hiring entity must demonstrate that the worker made the independent decision to go into business for himself and that there is indicia of such an independent business actually operating (e.g. marketing materials, etc.)

Unanswered Questions

To make things more fun for employers, the state’s high court limited its holding (and its new independent contractor v. employee test) to apply only to claims alleging violations of California’s wage orders. The Court held that it was not deciding whether or not the same test would apply to claims alleging violations of the California Labor Code (e.g. an expense reimbursement claim), or whether, a different test (such as the traditional, multi-factor Borello test) would apply.  This issue no doubt will be the subject of further litigation.  The possibility that a better test for independent contractor status may apply to non-wage-order-based claims should be of little solace to employers, however, because most lawsuits in California alleging independent contractor misclassification will predominantly allege violations of the applicable wage order.

Bottom Line

Classifying workers as independent contractors just got a lot riskier in California.  Independent contractor classifications are a lot more likely to be challenged in litigation, and employers will have a much tougher time defeating the claims.  It will also be easier for such claims to be successfully pursued on a class basis.  If you’ve got a significant number of workers performing services for you in California as independent contractors, now is a good time to re-evaluate those classifications.  This also obviously is not a good ruling for those ride-sharing services we all love.