Federal Guidelines on Independent Contractors/Joint Employers Changed for the Better!

June 19, 2017

At last some good news from a Federal standpoint. The past two years have been busy for the Department of Labor’s Wage and Hour Division (DOL). One can directly track a large part of its busy workload to its enlargement of who qualifies as an “employer” under the Fair Labor Standards Act. In 2015, the DOL issued guidance re-defining, and broadening the definition of, who qualifies as an “independent contractor”. And, the following year, the DOL did the same with its definition of “joint employer”. Although there are still many pitfalls of classifying an independent contractor the news here is really the DOL now taking a second look at “joint employer” liability.

Alex Acosta, the newly appointed Secretary of Labor, looks to roll back the clock on both of these interpretations. In a recent press release it was noted that Acosta stressed that the removal of the administrator’s interpretations of who qualifies as an independent contractor and the definition of a “joint employer” (now not as broad) does not change the legal responsibilities of employers under the Fair Labor Standards Act.

Short and to the point. It is safe to assume that the DOL’s regulatory agenda on these crucial issues just changed for the better for employers.

So what now?

For starters, employers can expect other regulatory rollbacks. Obvious places to look? The NLRB (such as its own joint-employer standard and ambush Union election rules), OSHA (such as its more stringent injury reporting rules, tighter retaliation rules that include bans on post-accident drug testing, looser whistleblower guidance, and more liberal burden of proof in whistleblower cases), and the EEOC (dare we dream that it will yank its controversial criminal-history guidance).

More to the point the specific FLSA-related memos the DOL pulled, the agency will now shift its focus back to its pre-Obama standards for joint employment and independent contractor, which focused on the actual control the putative employer exercised over the employees of the actual employer. We should also see the DOL take a less aggressive enforcement stance when these issues may present themselves.

It’s a start. Let’s see what happens.

Note: California employers still need to be on guard regarding both of these issues.

New Pending Laws! Ugh!

June 12, 2017

Last Friday was the last day for the California Legislators to pass out of their house of origin.  As is usually the case in the Golden State, the bills that California’s legislators approved are largely bad for employers, with the helpful bills having been killed early on in committee.  The bills that passed their house of origin are still far from becoming law (they still have to be passed by the second house and signed into law by the Governor), but they are on that path at this time.  Here’s the list of bills moving on for consideration by the second house of the Legislature:

SB 63 (New Parent Leave):  The bill would require California employers with 20 or more employees to provide up to 12 weeks of job-protected leave to eligible employees to care for/bond with a new child.  California law (CFRA) already provides for such leave for employees working for large employers (50 or more employees).  This bill would expand the leave requirements to smaller employers.  This bill is very similar to a bill that  was vetoed by Governor Brown last year.

AB 450 (Penalty for Cooperating with ICE):  This bill would prohibit California employers from providing federal government enforcement agents access to worksites or to employment records (including I-9 forms) without a judicial warrant or subpoena. The bill would authorize the Labor Commissioner to recover civil penalties of between $10,000-$25,000 for employer violations of these requirements.  The bill would also require employers to provide at least 24 hours’ advance written notice to employees and to the Labor Commissioner of impending immigration worksite enforcement actions (audits or inspections of I-9 forms or other employment records, worksite interviews, investigations, and/or raids). The employer also would have to give the Labor Commissioner access to the workplace and allow the Labor Commissioner to conduct its own investigation(s) — including into unrelated labor standards matters.  In the event a federal immigration agent appears at the worksite without advance notice, the employer would have to notify the Labor Commissioner immediately and provide the Labor Commissioner access to the worksite.  Under the bill, the Labor Commissioner would have the authority to notify affected employees that they have the right to remain silent, the right to speak to a lawyer before answering questions, and the right to speak to his or her foreign consulate. Again, an employer’s failure to comply with these notice provisions would subject the employer to fines of between $10,000-$25,000.

AB 1209 (Pay Data/Gender):  This bill would require employers with 250 or more employees to submit to the Secretary of State’s Office, and post on a public Internet site, information on gender pay differentials, including (1) the difference between the mean salary of exempt male employees and exempt female employees, by job classification; (2) the difference between the median salary of exempt male employees and exempt female employees, by job classification;  and (3) the differences in the mean and median compensation of male and female board members.  This data would not take into account any justifications for reported pay differentials.

AB 1565 (Salary Increase for Exempt Status):  This bill would increase the minimum salary for exempt executive, administrative, or professional workers to $47,472 or twice the state minimum wage, whichever is greater.  As California’s minimum wage continues to rise, a salary of twice the state minimum wage eventually will be a number greater than $47,472.  Until that time, $47,472 would be the minimum salary for exempt status in California.

AB 168 (Prior Salary Information):   This bill would prohibit employers from seeking prior salary information from applicants and would also require employers, upon request, to provide the pay scale for a position to an applicant.  The Legislature has tried to get similar bills signed into law in recent years, but thus far has not succeeded.

AB 1008 (Criminal History):  This bill is a “ban the box” measure and would amend FEHA to make it an unlawful practice for an employer to inquire about an applicant’s criminal conviction history (on an employment application or otherwise) prior to making a conditional job offer.  An employer that intends to deny an applicant a position of employment solely or in part because of the applicant’s prior conviction of a crime must make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.  If the employer makes a preliminary decision that the applicant’s conviction history disqualifies him or her from employment, the employer shall notify the applicant of this preliminary decision in writing and (1) identify the conviction at issue; (2) provide a copy of the conviction history report; and (3) provide the applicant at least 10 business days to respond and to either challenge the accuracy of the information and/or provide evidence of mitigation or rehabilitation (defined by the bill to mean evidence showing that at least one year has elapsed since release from prison without subsequent conviction of a crime, evidence showing compliance with terms and conditions of parole, and/or any other evidence of present fitness such as letters of reference). If the applicant provides such evidence, the employer shall not disqualify the applicant from employment.  If an employer does decide to deny employment based on a criminal conviction, the employer must notify the applicant in writing and disclose information concerning any existing procedure the employer has to challenge the decision or request reconsideration, whether the applicant may be eligible for other employment or occupation with the employer, the earliest date the applicant may reapply for a position of employment, and the employee’s right to file a complaint with the Department of Fair Employment and Housing.

AB 569 (Discrimination Based on Reproductive Health):  This bill would add Labor Code 2810.7 to the Labor Code to prohibit an employer from taking any adverse employment action, as defined, against an employee based on his or her reproductive health care decisions, methods, or the use of any drug, device, or medical service related to reproductive health by an employee or employee’s dependent.  The bill would also prohibit requiring an employee to sign a code of conduct or similar document that purports to deny any employee the right to make his or her own reproductive health care decisions, including the use of a particular drug, device, or medical service.  The bill would require an employer that provides an employee handbook to its employees to include in the handbook notice of the employee rights and remedies under the provisions of this bill.

AB 568  (School Employees – Paid Maternity Leave):  This bill would require school districts and community colleges to provide paid maternity leave.

AB 1099  (Tips – Gig Economy):  This bill would require an employer who allows a patron to pay for services by debit or credit card to also accept a debit or credit card for payment of gratuity, payable not later than the next regular payday.

SB 201 (CBA Rights for Student Employees):  This bill would grant collective bargaining rights to student employees of the University of California, California State Universities, and Hastings College of Law.

SB 306 (Expanded Labor Commissioner Power; Retaliation Claims):  This bill would amend several Labor Code provisions to strengthen Labor Commissioner power in investigation retaliation claims, including by allowing the Labor Commissioner to petition a court for, and to secure, temporary injunctive relief against an employer based on a showing of “reasonable cause” to believe that an employee has been the victim of retaliation.  The bill would also allow the Labor Commissioner to recover attorneys’ fees.

AB 46 (Equal Pay Law Amendment):  This bill would amend Labor Code 1197.5 (equal pay law), which prohibits employers from paying a lower wage rate to employees on the basis of gender, race, or ethnicity.  This bill would clarify that these provisions apply to both public and private employers.

AB 263 (Emergency Medical Services Workers/Rest Breaks):  This bill would allow certain emergency medical services workers to remain “on-call” during rest breaks.

AB 353 (Veteran Hiring Preference):  This bill would allow private employers to establish and maintain a policy that provides for preferential hiring and retention of veterans.

The foregoing bills will be considered by the non-originating house between now and September 15, 2017.  Bills that are passed by both houses will then be presented to Governor Brown to veto or sign into law by October 15, 2017.

Within this week, I will post the other bills that were killed by the Legislators that could have helped employers! Sad.


Altering Time Records Can Bring Personal Liability!

June 5, 2017

Altering an employee’s time record, or being responsible for approving a time record can bring personal liability. Keep in mind, it is not just the company that is at risk. Your personal assets can be attacked to pay off a judgement be it on a state or federal level.

From a federal perspective, The Fair Labor Standards Act (FLSA) permits employees to sue their manager or supervisor, executives, or human resources personnel for personal liability for altering time records.

A common occurrence is supervisors encouraging off the clock work or simply altering a time record when an employee forgets to clock in or out. In addition, the U.S. Department of Labor announced that they are receiving more and more complaints about employees being forced to work through their breaks.

The law is very clear that for breaks to be unpaid, employees must be completely relieved of their duties. Do not let employees eat lunch at their desks. Some states, such as California, require employers to pay a one hour rate of compensation as a penalty for these types of violations.

In a recent case an unsuspecting employer who owned group homes for the disabled routinely deducted eight hours from the checks of the “living assistants” because each of these individuals received two 4 hour breaks. The managers were responsible for the deductions and the CEO signed off on the adjustments. The real problem here was that the employees could not leave the facility that each worked at and they had to call in every hour during their break. Clearly these actions made no sense.

The bad news is that the CEO was held personally to the tune of $500,000 for back wages and another $155,000 as a penalty. It should also be noted that in California there is no longer a corporate protection for certain wage & hour violations. The aggrieved employee can “pierce the corporate veil” to have his or her judgement satisfied.

There are employers who have their employees sign off on all changes to their time records but remember, if the adjustment is illegal, then having them sign off on it will not matter. Employers and managers must understand that “messing” with an employee’s compensation through illegal deductions and/or alterations, will more than likely be viewed by state & federal agencies as a violation ultimately bringing harsh penalties.


Wage Theft: Are You Truly Guilty?

May 30, 2017

There was a recent study published by the Economics Policy Institute, which stated that “employers short their employees $15 billion in wages per year”. In my opinion, I do not believe most employers are truly trying to cheat their employees out of their hard earned dollars. In fact, most instances of an employer not paying an employee all he or she is owed under the law results from a complex system of wage & hour laws (and constant changes to those laws) and not a malicious penny pinching employer who is intentionally stealing from their employees. Let me make it clear that I do believe there are some out there but those individuals make up a very small percentage.

Let’s discuss the term “wage theft.” The very terminology suggests an intentional taking of wages by an employer. Are there employees are who paid less than the wage to which the law entitles them? Absolutely. It can happen. The reason is simple, we have a wage-and-hour problem in this country. Wage-and-hour non-compliance, however, is a sin of omission, not a sin of commission. Employer aren’t intentionally stealing; they just don’t know any better. I have seen it over my years in the business.

And who can blame them? The law that governs the payment of minimum wage and overtime in the country, the Fair Labor Standards Act, is 70 years old. It shows every bit of its age. Over time it’s been amended again and again, with regulation upon regulation piled on. What we are left with is an anachronistic maze of rules and regulations in which one would need a Ph.D. in FLSA (if such a thing existed) just to make sense of it all. Since most employers are experts in running their businesses, but not necessarily experts in the ins and outs of the intricacies of the Fair Labor Standards Act, they are fighting a compliance battle they cannot hope to win.

As a result, sometimes employees are underpaid. The solution, however, is not creating wage theft statutes that punish employers for unintentional wrongs they cannot hope to correct. Instead, legislators should focus their time and resources to finding a modern solution to a twisted, illogical, and outdated piece of legislation.

Let’s face it we are nothing without our employees. Most scrupulous employers favor employees receiving a full day’s pay for a full day’s work (although there are some employees…). What employers and employees need, though, is a streamlined and modernized system to ensure that workers are paid properly.

The FLSA and various state laws (let’s not talk about California) are voluminous in nature. Adding to this complex web are Plaintiff attorneys who suggest that employers are all are cheating their employees especially when the wages are commissioned based. Not true in the overall scheme of things! Commission issues arises sometimes merely by oversight. Employers did not create this mess. Instead, let’s fix the cause of the problem—a baffling maze of wage & hour regulations be it the FLSA or a state promulgated law.

Federal Court Decision: “Gender Dysphoria” is a Disability Under the ADA

May 26, 2017

The ADA expressly excludes from its coverage “transvestism, transsexualism, … [and] gender identity disorders not resulting from physical impairments….” Therefore, it should have been an easy call for a court to dismiss a lawsuit in which an employee, born a male but who identifies and presents as a female, alleges disability discrimination because of her gender identity disorder. This may seem simple enough however, the Court saw otherwise.

In Blatt v. Cabela’s Retail, the court denied the employer’s motion to dismiss the employee’s ADA claims, and expressly recognized her gender dysphoria as an ADA-protected disability.

Admittedly, it is fairly possible to interpret the term gender identity disorders narrowly to refer to simply the condition of identifying with a different gender, not to exclude from ADA coverage disabling conditions that persons who identify with a different gender may have —such as Blatt’s gender dysphoria, which substantially limits her major life activities of interacting with others, reproducing, and social and occupational functioning.

This is but one decision of one court on a preliminary motion to dismiss. Other courts may (and likely will) hold differently in future cases. However, this case is part of a larger trend—as long as Congress continues to drag its feet amending Title VII to protect LGBT employment rights, courts will continue to fill the void. By broadly (and, in my view, incorrectly) interpreting the ADA to achieve its view of a just and fair result, this court broke new ground. It will not, however, be the last court to find a similar conclusion. The realities are this is an issue that is not going away. Employers need to start planning ahead on this and related issues (bathrooms).

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New Law/Case: Using Prior Salary History

May 22, 2017

The Ninth Circuit recently issued is decision in Rizo v. Yovino, reversing a district court ruling holding that an employer violated the federal Equal Pay Act through its bright-line policy of paying new employees 5% more than their prior salary.  According to the district court (and the stated position of the EEOC), basing compensation on an applicant’s prior compensation only serves to further historical wage disparity between men and women, and therefore violates the Equal Pay Act.  The Ninth Circuit surprisingly (given its notoriously liberal bent) disagreed.

Factually, this case involved employees of the public schools in Fresno County (California).  Plaintiff, a female, was employed as a math consultant.  When she later discovered that certain male counterparts were being paid significantly more than her for the same work, she filed suit under the Equal Pay Act.  Prior to coming to work for Fresno County, Plaintiff was a teacher in Arizona and was paid $50K per year.  Fresno County had a set starting salary range for new math consultants of between $62K-$81K (based on 10 levels within that range).  The County’s policy was to pay the new hire 5% more than they were earning in their prior job.  However, 5% more than Plaintiff’s prior salary of $50K was less than the low end of the starting salary range the County used. As such, the County paid Plaintiff at the lowest end of its range, $62K (considered Level 1 of the range).  A few years into her employment, Plaintiff was having lunch with her male colleagues, when one of them (who had recently been hired) told her that his starting salary was at Level 9 of the range (a far greater salary than Plaintiff’s).  Plaintiff subsequently learned that all of her fellow math consultants (all of whom were male) were paid more than her.  Not good.

Plaintiff tried to resolve her outrage informally with the County by complaining internally about the pay disparity.  The County defended the pay disparity, explaining that all pay decisions had been properly made in accordance with the County’s standard operating procedure (i.e. pay the employee 5% more than his/her prior pay).  Plaintiff sued.

The district court agreed with Plaintiff that the pay practice was discriminatory and violated the Equal Pay Act.  The Ninth Circuit, however, reversed and issued a very wishy-washy holding, saying that use of prior salary is okay IF the employer demonstrates that its use of prior salary “effectuated a business policy” and that the use was “reasonable in light of its stated purpose as well as its other practices.”  Rather uselessly, the Court did not explain what this means or what type of evidentiary showing would suffice.  The County had offered four justifications for its policy:  (1) the policy is objective, in the sense that no subjective opinions as to the new employee’s value enter into the starting-salary calculus; (2) the policy encourages candidates to leave their current jobs for jobs at the County because they will always receive a 5% pay increase over their current salary; (3) the policy prevents favoritism and ensures consistency in application; and (4) the policy is a judicious use of taxpayer dollars.  Rather than opine on whether these justifications were sufficient to defend the use of prior salary and defeat the Equal Pay Act claim, the Ninth Circuit remanded the issue to the district court to decide.  Sufficed to say, this is not real helpful for employers who need clear rules they can follow in order to have any shot of avoiding being sued.

Now let’s discuss California Law! Effective January 1 of this year, prior salary alone cannot justify a pay disparity. Thus, regardless of the Ninth Circuit’s analysis of the issue under the federal Equal Pay Act, California employers should safely assume that any plaintiffs’ attorney who isn’t living under a rock will file a disparate pay claim in state court in California under California state law.  This means that it is not a good idea to use prior salary “alone” to justify pay disparities between similarly situated employees of different genders, ethnicities, or races.  Employers are also cautioned that even outside of California, several other courts (notably the Tenth and Eleventh Circuits) have held that prior salary alone cannot justify a pay disparity, and more and more states are enacting laws along similar lines, including laws that prohibit employers from even asking applicants to disclose their prior salaries.  Equal Pay Act claims are very likely to be an increasing focus of litigation in the coming years, so employers would be wise to review their pay practices now to protect against such claims.

Just another day in Paradise!

High Court Clarifies “Day of Rest Rules”!

May 15, 2017

The California Supreme Court issued an opinion in Mendoza v. Nordstrom, clarifying California’s day of rest requirements.  These requirements are set forth in Labor Code sections 551 and 552. Section 551 provides that “every person employed in any occupation of labor is entitled to one day’s rest therefrom in seven,” and Section 552 prohibits employers from “causing their employees to work more than six days in seven.”  However, Section 556 exempts employers from the duty to provide a day of rest “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”  While these provisions do not appear too complicated or hard to follow at first glance, compliance has been challenged in wage and hour litigation, raising several questions of what these provisions technically mean.  Questions that have arisen include the following:

  • What does it mean to “cause” an employee to work more than six days in seven?  Is it enough to “allow” the employee to work seven days in a row, or must the employer require the employee to work more than six days in a row to be found in violation of the statute?
  • Is the day of rest required for any consecutive seven-day work period on a rolling basis, or is it measured based on the employer’s workweek (the definition of which varies from employer to employer and may not match a calendar week)?
  • Does the exemption from the day of rest requirement apply where the employee works 6 or less hours on at least one day during the workweek, or must the employee’s hours be 6 or less every day of the workweek (and no more than 30 for the entire week)?

The California Supreme Court agreed to answer these questions at the request of the Ninth Circuit in Mendoza v. Nordstrom.  Here’s how the Court recently ruled on these issues:

  1. A day of rest is guaranteed for each workweek. Periods of more than six consecutive days of work that stretch across more than one workweek are not per se prohibited.
  2. The exemption for employees working shifts of six hours or less applies only to those who never exceed six hours of work on any day of the workweek. If on any one day an employee works more than six hours, a day of rest must be provided during that workweek, subject to whatever other exceptions might apply.
  3. An employer causes its employee to go without a day of rest when it induces the employee to forgo rest to which he or she is entitled. An employer is not, however, forbidden from permitting or allowing an employee, fully apprised of the entitlement to rest, independently to choose not to take a day of rest.

With respect to question (1), the Court held that the seven-day period is based on the workweek as defined by the employer. Thus, if the employer uses a calendar week, then the seven-day period (during which there should be one day of rest) is based on each calendar week.  If the employer defines its workweek differently, then the seven-day period designated by the employer controls.  However, the one-day-of-rest-in-seven provision does not apply on a rolling basis to every consecutive seven-day period.

With respect to question (2), the Court held that if an employee works more than 6 hours on any day of the workweek, the day of rest provision applies.  The Court rejected an interpretation that would exempt employers from providing a day of rest to an employee who works 6 hours or less on just one day of the workweek.  Thus, if an employee’s hours exceed 6 on any day of the workweek, the day of rest requirement will apply.  You now ask, “What if the employee does not work more than 30 hours per week?”  Unfortunately, the Court chose not to clarify whether the day of rest exception for employees working no more than 30 hours per week or 6 hours per day should be read in the conjunctive or disjunctive (because the Ninth Circuit did not expressly ask the Court to answer this particular question).  Thus, left for another day (and more litigation) is the issue of whether the day of rest requirement applies to an employee who works more than 6 hours one or two days of the workweek, but whose total hours for the workweek do not exceed 30. The conservative approach of course, it to provide the opportunity for a day of rest to any employee who works more than 30 hours per week and/or more than 6 hours in any one workday.

Finally, with respect to question (3), the Court held that an employer “causes” an employee to work more than six days in seven if it motivates or induces the employee to do so.  This does not mean that the employer is liable if it simply permits an employee to work more than six days in seven.  “[A]n employer‘s obligation is to apprise employees of their entitlement to a day of rest and thereafter to maintain absolute neutrality as to the exercise of that right. An employer may not encourage its employees to forgo rest or conceal the entitlement to rest, but is not liable simply because an employee chooses to work a seventh day.”  Based on this interpretation, an employer generally should not affirmatively schedule or require employees to work more than six days in seven, but it is okay to offer employees the opportunity to work more than six days in seven, so long as they are apprised of their entitlement to one day’s rest each workweek and notified that they will not be penalized for choosing to take a day of rest (nor rewarded, apart from being paid their earned wages, for not taking a day of rest).

While the Court’s opinion clarified some issues relating to California’s day of rest requirements, it also left an important one unanswered.  Specifically, California Labor Code section 554 provides an exception from the day of rest requirement where the “nature of the employment reasonably requires that the employee work seven or more consecutive days, if in each calendar month the employee receives days of rest equivalent to one day’s rest in seven.”  There is a lack of guidance on when the “nature of the employment reasonably requires” seven or more consecutive days of work so as to allow accumulated rest days to be taken at a different time during the month, and the Court’s opinion does not shed light on that subject.

California employers are advised to review their scheduling and pay practices to ensure compliance with California’s day of rest requirements, as clarified by the California Supreme Court.  Employers are further reminded that California has special overtime compensation rules that apply to work performed on the seventh consecutive day of a workweek (time and one half for the first 8 hours of work performed on the seventh consecutive day of the workweek, and double time for hours in excess of 8).

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