DOL Abrogates Obama Administration’s Efforts to Decrease Misclassification of Independent Contractors and ‘Joint Employment’ Standards:

Earlier this month, the U.S. DOL (Department Of Labor) announced that it was revoking the standards set for by the Obama Administration for when a company is considered to be a “joint employer” of contract and franchise workers. The prior administration’s regulations were designed to protect against employers’ misclassification of employees as independent contractors.

 The particular guidance letters that were removed included the 2015 “administrator’s interpretation” regarding the classification of independent contractors and 2016 “administrator’s interpretation” relating to joint employment. The 2015 “administrator’s interpretation” regarding the classification of independent contractors stated that “ most workers are employees” under the Fair Labor Standards Act (FLSA). The 2016 joint employment “administrators interpretation” presented guidance on joint employment under the FLSA and included a distinction between “horizontal” and “vertical” joint employment. The two letters, which were implemented by the Wage and Hour Division (WHD) administrator, were met with much controversy as the purpose of the letters was to decrease the number of instances in which a worker was misclassified and increase the number of situations in which a business may be considered a joint employer of a worker.

The 2015 “administrator’s interpretation,” titled “Administrator Interpretation 2015-1” construed the definition of an “independent contractor” in a more narrow context than previously used. This particular letter provided that the DOL would shift its focus from whether the business “controls” the operations of the individual’s work to the “economic realities” of the individual’s job situation and whether the individual is financially dependent on the employer. This shift in focus was a substantial change from the “controls test” which resulted in more workers falling under the “employee” classification than “independent contractor” classification. The significance of this result, i.e., of more workers being classified as employees, was that these workers became eligible for overtime compensation and other benefits that come with being considered an employee rather than an independent contractor.

 The 2016 “administrative interpretation,” titled “Administrative Interpretation 2016-1” issued guidelines on how the WHD would deal with the question of which employer has obligations owed to the specific worker. With the implementation of this particular letter, the WHD was to evaluate working relationships through a “vertical” analysis of the employment relationship. Vertical joint employment is when a worker has an employment relationship with one worker such as a subcontractor, labor provider, staffing agency or other employer and the “economic realities” show that the person is financially dependent on another employer who is involved in the work. This form of vertical joint employment analysis lead to a substantial increase in the chances of an employer being liable to workers that they secured through a third party. This analysis was designed to decrease employee misclassification as an independent contractor, particularly where there is joint employer relationship.

On June 7, 2017, the U.S. Secretary of Labor Alexander Acosta announced that these “administrator interpretation” letters regarding independent contractors and joint employment would be nullified. Acosta also stated in his announcement that “removal of administrative interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law.”

 The removal of these liability expanding guidance letters were met with high praise across the labor community including the National Association of Home Builders (NAHB). Chair of the NAHB and Texas-based builder Granger McDonald expressed his satisfaction with the removal stating “given that independent contractors and subtractors are critical to housing, we were very concerned about recent efforts attempting to limit their participation in the home building process. Withdrawing these documents will provide more certainty and clarity for home building firms and other small businesses who work closely with subcontractors and independent contractors.”

 The rollback of these guidance pieces should be encouraging to employers directly involved in work with independent contractors, leasing agencies, temp workers, and other potentially joint employment relationships. Additionally, the fact that Secretary Acosta wasted little time reversing these guidance pieces indicates that the reversal of other Obama-era enforcement strategies may be on the horizon. On the other hand, transient workers such as employees who gain employment by virtue of employment will see their protection from being misclassified as an independent contractor be vitiated by this change.

 Although the nonprofit worker advocacy group expressed its disappointment with the removal of these guidance letters, the removal has not done anything to alter the legal landscape regarding joint employment and independent contractor conflicts. In New York, the US Court of Appeals for the second circuit has ruled that joint employment should be evaluated on a case-by-case basis based on the totality of the circumstances. The Second Circuit has adopted two different tests for determining joint employer status, which depends on whether the court is looking at the employer’s formal or functional control over the employee.

 When determining the issue of whether the secondary employer exercises sufficient functional control over the relevant employees to be considered a joint employer, the Second Circuit applies a six part test which looks at: whether the employee at issue used the secondary employer’s premises and equipment, whether the primary employer had a business that may or did shift as a unit from one secondary employer to another, the extent to which the employees performed a job that was integral to the secondary employer’s production process, whether one subcontractor may pass responsibility under the contracts to another subcontractor without material changes, the degree to which the secondary employer or its agents supervised the employee’s work, and whether the employees worked exclusively or predominantly for the secondary employer. There are also other factors that may be considered when addressing this issue of functional control as long as those factors are pertinent to the court’s assessment of economic realities. The issue of joint employment is a mixed question of both law and fact that is properly decided by a jury.

 Another approach that may be used by courts in the Second Circuit is focusing the analysis on whether the secondary employer exercised sufficient formal control over the employees at issue. When using this type of analysis, courts in the Second Circuit apply a four-factor test that focuses on whether the secondary employer had the power to hire and fire the employees, supervise and control employee work schedules or conditions of employment, determine the rate and method of employment, and maintain employment records.

 Despite the removal of these particular guidance letters, these second circuit tests regarding joint employment issues that govern the Fair Labor Standards Act and New York Labor Law remain in tact and unaffected by the recent removal of these guidance letters.

Contributed by Richard (R.J.) Cherpak

If you have questions regarding misclassification and/or New York Labor Law, call Gilbert Law Group today at (631) 630-0100.

Federal Court Affirms NLRB’s Change In Calculation For Job Search Expenses In Wrongful Termination Cases

The U.S. Court of Appeals for the District of Colombia Circuit just recently upheld the National Labor Relations Board’s (NLRB) decision for a change in its method of calculation for how unlawfully discharged employees should be compensated by their former employers. The NLRB will now allow employees who were wrongfully discharged to seek out compensation for the costs they incurred while searching for a new job. This change can have a significant impact on wrongful termination cases.

The decision leading to this change involved grocery store chain King Soopers, a division of Kroger Co. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the Service Employees International Union, and an International Brotherhood of Electrical Workers local in Kansas all filed amicus briefs in favor of the proposed changes. The majority opinion was written by NLRB chairman Mark Gaston Peirce, NLRB member Kent Y. Hirozawa and NLRB member Lauren McFerran.

Previously, the NLRB had not awarded these job search costs to employees who claimed that they were unlawfully terminated as these expenses were only used to offset the interim earnings which limited the back pay to which an employee would be entitled to. As a result of this previously used policy, the compensation that a worker could be awarded was limited.

To illustrate the method historically used by the NLRB, say the plaintiff bringing suit has incurred $250 in expenses searching for a new job and has also lost $5,000 in gross earnings from his employer while failing to secure another job in the interim meaning that he has $0 in interim earnings. Under the traditional approach, the Board would award the plaintiff $5,000 in back pay which in reality would only result in the plaintiff recovering $4,750 once you subtract the $250 the plaintiff spent job searching. In this situation using the traditional approach, the plaintiff would not receive the $250 incurred in job search expenses because traditionally this amount was only awarded as an offset against interim earnings. Therefore, under the traditional approach, the only circumstance under which one could recover the expenses they incurred in job searching was if they were able to secure interim employment. Now, under this change in direction by the NLRB, the plaintiff will be able to be compensated for their job search expenses even if they are unable to secure interim employment.

Despite a strong showing of support for this change, NLRB member Phillip A. Miscimarra, who concurred in part and dissented in part, made some intriguing points in support of the traditional approach in his dissent. He felt that the traditional method of calculation was an effective method in most cases stating it “makes claimants whole in most cases, and the change adopted by my colleagues will result in greater than make-whole relief in other cases.” He continued to explain his worries regarding the change in approach stating “I do not discount the fact that parties and claimants experience substantial, often oppressive non-monetary consequences as the result of unfair labor practices, nonetheless, the [National Labor Relations Act] only permits the Board to award the relief that is remedial” not relief that compensates the plaintiff for everything they have lost. Additionally, he explained that the change in approach would open the door for “protracted board litigation” over job search expenses and that this newly adopted approach does not correlate with the method of calculation used by other statutes when calculating back pay.

Due to the impact of this decision, workers who are discharged and later ordered to be compensated with back pay will likely be awarded with greater amounts of money. However, it is still up in the air as to how much of an impact this change by the NLRB will truly have as David Rosenfeld, of Weinberg, Roger & Rosenfeld who also filed an amicus brief stated that job search expenses is a scarcely addressed topic in unfair labor practice cases. In an interview with Bloomberg BNA, Rosenfeld explained “people do find jobs, often they do find jobs that are the equivalent of what they lost, so there isn’t a lot of back pay.” In the majority opinion, the board wrote “Board proceedings have rarely involved litigation over search-for-work and interim employment expenses.”

If you have questions regarding a labor or employment issues, call Gilbert Law Group today at (631) 630-0100.

Contributed by: Richard (R.J.) Cherpak

EEOC: Employers, be Proactive vs. Workplace Harassment

Thirty years ago, the U.S. Supreme Court held in the landmark case of Meritor Savings Bank v. Vinson that workplace harassment was an actionable form of discrimination prohibited by Title VII of the Civil Rights Act of 1964. Several examples of common harassment and discrimination that take place in the workplace are sexual harassment, pregnancy discrimination, racial discrimination, and age discrimination (under the Age Discrimination in Employment Act or ADEA). Recently, the EEOC issued a report encouraging employers to be more proactive in preventing workplace harassment.

In January 2015, the Equal Employment Opportunity Commission created a Select Task Force on the Study of Harassment in the Workplace (“Select Task Force”). This Select Task Force spent  18 months examining the myriad and complex issues associated with harassment in the workplace. In June 2016, the Select Task Force  published its findings. The report calls for employers to “reboot” workplace harassment prevention methods. The report also outlines statistics, risks and administrative recommendations.

The study encourages employers to assess their workplaces for the risks associated with harassment, survey employees. Further, the report urges employers to hold accountable managers and supervisors for preventing and reacting to grievances while also actively promoting diversity.

Interestingly, the report also states that employers should be wary of “zero tolerance” anti-harassment policies that are used as a one-size fits all model. Rather, any discipline that might result from such policy violations should be proportionate to the offense.

Additionally, the report finds that employers should also consider including a social media policy that ties into their anti-harassment policies.  The downside to this however is that the National Labor Relations Board has released guidelines on drafting and updating social media policies. Some cases have held that such a policy may violate an employee’s right to engage in protected concerted activity.

In conclusion, the findings state that the name of the game is truly harassment prevention. This may prove challenging as labor and employment laws are not logical and often do not follow common sense. To this end, seeking experienced legal counsel is critical.

Should you have questions, or wish to seek counsel, call Gilbert Law Group today at (631)630-0100.

NLRB Expands Concept of Protected Concerted Activity

On April 30, 2015, the National Labor Relations Board handed down a decision which expanded upon a prior theory of protected concerted activity. It had already expanded the concept of protected concerted activity in the past by classifying communications which are “inherently concerted” despite not being designed to engender “group action.” This case was brought before the Board as a result of an employee being terminated after discussing her job security with another employee.

The concept of protected concerted activity gives employees the right to act together to try to improve their pay and working conditions, with or without a union. If employees are fired, suspended, or otherwise penalized for taking part in protected group activity, the National Labor Relations Board will fight to restore what was unlawfully taken away. Historically this concept as only applied to group action.

In Sabo, Inc., however, the Board determined that the discussion between the two employees was “inherently concerted” because job security “[is] a vital term and condition of employment and the ‘grist on which concerted activity feeds’” and concerns about job security have a powerful impact on the rest of a work force and are protected whether or not engaged in for the purpose of inducing group action. In the past, only such communications regarding wages were extended this protection. Now it is extended to job security. Employers should anticipate that the current Board will find other subjects of concern to employees to be likewise protected.

Should you be experiencing an issue involving protected concerted activity, call Gilbert Law Group today.

Arbitrator Holds Employer MLB Did Not Have Right To Suspend Josh Hamilton For Violating Employer’s Substance Abuse Policy

             In a stunning decision laid down on April 3, 2015, an independent arbitrator ruled that baseball athlete Josh Hamilton, an outfielder for the Los Angeles Angels, would not be suspended for self-reporting a drug relapse on February 25. Major Leave Baseball as a substantive substance abuse policy in its Collective Bargaining Agreement and the slugger’s contract had specific language not permitting him to drink alcohol or ingest drugs. The decision shocked Hamilton’s employer, perhaps because he had already been in a sports treatment program due to a history of drug and alcohol issues. Instead of being suspended, Hamilton will be eligible to play and will be able to collect $23 million as part of his salary with the Angels. The matter was submitted to an independent arbitrator after a treatment board created by Major League Baseball’s joint drug program could not determine whether Hamilton’s actions were a violation of his treatment program. The arbitrator did not give any reasons for finding in favor of Hamilton.

            Major League Baseball, the party advocating for his suspension, expressed disappointment with the arbitrator’s decision and in a statement said it would “seek to address deficiencies in the manner in which drugs of abuse are addressed under the program in the collective-bargaining process.” The current collective bargaining agreement is in place until after the 2016 baseball season.

            Employers who find themselves in a similar situation to that of the Los Angeles Angels should consult an attorney for counsel as to their collective-bargaining agreements contain controlling language when matters are left to independent arbitrators.

Under ERISA, Retiree Healthcare Coverage No Longer Guaranteed Unless Contract Is Clear

Contributed by Jonathan Sobel

On January 26, 2015, the Supreme Court released a decision altering the distribution of union retiree healthcare benefits. In M & G Polymers USA, LLC v. Tackett, the Court, citing ERISA as the controlling law, ruled that ordinary contract principles will be used by courts in determining whether retiree healthcare coverage under a plan for retired workers was meant to be vested for life. This rule invalidated an earlier judicial presumption, known as the Yard-Man presumption, stating that union health benefits would be presumed to be perpetual unless there was specific language stating the contrary in either a plan document or a collective bargaining agreement.

In this case, the employer M & G Polymers had entered into a pension and insurance agreement with the union representing its employees at a plant in West Virginia. In the agreement was a provision stating that the employer would contribute to the healthcare benefits of employees who retired after a certain date and had pension eligibility, with no cost to the employees, for a three-year term. After the agreement had expired, the employer announced that retirees would be required to contribute to the cost of their healthcare. The retirees then filed a lawsuit, alleging that the employer had breached the agreement and violated the Labor Management Relations Act (“LMRA”).

The Court noted that the Employee Retirement Income Security Act (“ERISA”) governs the rules for interpreting pension plans and welfare benefits plans, as applicable in this case. Under ERISA, a welfare benefits plan must be “established and maintained pursuant to a written instrument,” but “[e]mployers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans.” In doing so, the Court essentially has given employers carte blanche discretion to change healthcare coverage for its retired employees as it sees fit.

New Law Regarding Franchise Joint Employer Liability

The Office of the General Counsel of the National Labor Relations Board (NLRB) recently issued 13 complaints against McDonald’s franchisees as well as their franchisor, McDonald’s USA, LLC alleging various labor law violations.  The complaints follow the NLRB General Counsel’s announcement in July 2014 that McDonald’s USA may be held to be liable as a “joint employer” for unfair labor practices committed by its individual franchisees. This represents a departure from a long-standing precedent regarding franchise joint employer liability.

The 13 complaints allege that the individual franchises violated their employees’ right to engage in protect concerted activity. In other words, they took actions against them for engaging in activities aimed at improving their wages and other terms and conditions of their employment. This includes participating in nationwide fast food worker protests during the past two years. If successful, this would mean that under certain circumstances, a franchisor can be held liable for any unfair labor practices perpetrated by any of its franchisees. Such a precedent would have have a significant impact on franchise joint employer liability.

The NLRB posted on its website a “McDonald’s Fact Sheet” in which it  claims McDonald’s USA “through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees” sufficient to share liability for its franchisees’ violations of the National Labor Relations Act.

The results of these complaints will not be determined for some time. Franchisors should take note, however, there are steps a franchisor can take to mitigate its risk of being declared a joint employer of its franchisees’ employees under the current law, as well as potentially under any new law.  These steps will also lessen the risk of a finding of common law vicarious liability for a franchisee’s employment practices in most states.

For more information regarding franchising and/or ways to avoid being declared a joint employer and therefore avoid liability for a franchisees’ employment issues call Gilbert Law Group today. 631-630-0100.

Labor Law Update: Independent Contractor Status

The National Labor Relations Board has “redefined” the test it uses for determining whether workers performing services for an employer are to be considered employees, who are covered by the National Labor Relations Act, or independent contractors, who are not.  The case is FedEx Home Delivery, 361 NLRB No. 55 (2014). This is a significant decision because of its broad application in labor law in determining the status of workers in both representation cases and in unfair labor practice cases.

The Board took the opportunity in this case to make some key legal points about the evidence of economic opportunity for gain or loss from the perspective of the worker:

(1)  The multifactor test articulated in the Restatement (Second) of Agency § 220 (1958) has traditionally been employed by the NLRB and the courts in making and reviewing employee/independent contractor determinations under the NLRA. The Board stated that it would simply consider entrepreneurial opportunity along with the Restatement factors, but would not grant it overriding “animating” importance, as it accused the DC Circuit of doing.

(2)  The Board further held that any claimed entrepreneurial opportunity of the individuals in question must be real, not merely theoretical.  The Board will look at employer imposed and other structural factors which act as an impediment to the genuine existence of entrepreneurial opportunity.  Further, in representation cases, the Board will consider evidence regarding only the individuals in question (here, those in a requested bargaining unit), and not system wide or extra-unit evidence.  (It is to be expected that a similar limitation will be imposed in unfair labor practice proceedings where no bargaining unit issue is in play.)

(3)  Finally, Board said that it will look at the work being done by the individuals in question and ask whether they are truly performing it in the same way as a bona fide independent business would.

Can An Employee be Fired for Marijuana Use?

With marijuana use becoming legal in an increasing number of states, the courts will become the battleground for deciding whether an employee may be fired for marijuana use. In fact, Colorado’s highest court will decide that very issue in a state where both medicinal and recreational marijuana use have been legalized. The issue: whether a workers’ off-duty, off work-site use of medical marijuana is protected by law. The facts: Brandon Coats is a quadraplegic medical marijuana patient who was terminated from Dish Network after failing a drug test in 2010. Coats never got high at work, but pot’s intoxicating chemical, THC, can stay in the system for weeks. The employer claims that it has a zero-tolerance drug-free workplace policy, and it is therefore irrelevant if Coats was impaired at work.

Coats, 35, was paralyzed in a car accident as a teenager. In 2009, he found that pot helped dissipate violent muscle spasms. Coats was a telephone operator for Dish for three years before he failed a random drug test. He told his supervisors in advance that he would probably fail the test. The lower courts upheld the firing, holding that pot use cannot be considered lawful so long as it violates federal law.

Aside from the narrow issue of state law, there are several important issues in this case. Colorado, like New York and several other states, has a Legal Activities Law which prevents employers from discriminating against employees who engage in off-duty, off work-site activities which are legal. New York also recently made legal the medicinal use of marijuana under certain conditions. Also, under the Americans With Disabilities Act (ADA) as well as New York’s Human Rights Law, Dish’s termination of Coats may constitute unlawful disability discrimination based on his disability.  There is also the issue of reasonable accommodation of Coats’ disability.

It would appear that where workers are employed in nonhazardous jobs, unless there is some negative impact in the workplace, an employee’s marijuana use may not serve as a basis for discharge. Negative impacts may include smoking or ingesting at work, impairment or being ‘hung over’ at work, poor performance linked to the use, or time and attendance issues.

Also, if the employer receives federal funding, condoning known pot use may jeopardize a federal subsidized project, contract, continued receipt of federal funds, or status as a federal agency employer inasmuch as federal law still prohibits pot use.

This case clearly has nationwide implications as it will impact how companies and other employers treat employees who use the drug both medically and recreationally. It will therefore be interesting to see how Colorado’s Supreme Court rules. Stay tuned.