The National Labor Relations Board is signaling yet another change to the joint employer test in its recent issuance of a new proposed rule.  The Board has waffled back and forth on this important issue recently, creating a lot of uncertainty for employers.  Here’s an explanation of what has been going on and what is likely to come.

Remind Me: What’s Been Going On?

Many of you will remember the Board’s 2015 decision in Browning-Ferris Industries.  That decision rocked the labor world because it held that two or more companies are joint employers of the same employees if they “share or co-determine those matters governing the essential terms and conditions of employment.”  Our earlier coverage of that decision is here.

That new standard was a significant departure from the Board’s earlier, well-established precedent which held that a company must exert direct and immediate control over hiring, firing, discipline, supervision, and direction to be a joint employer.  Under Browning-Ferris, indirect control or a reserved—even if unexercised—right to control was sufficient.  The Board also expanded the “essential terms” to include scheduling, seniority, overtime, assigning work, and determining the manner and method of work performance.

Employers and management-side labor lawyers were obviously not happy with the Browning-Ferris decision, while employee and union-side folks were pleased.  Luckily, however, the decision had a relatively short (initial) lifespan.

The Board overturned Browning-Ferris in December 2017 in its Hy-Brand Contractors Ltd. decision.  That case adopted a test more closely resembling the pre-Browning-Ferris joint employer test, requiring proof that:  (1) a putative joint employer actually exercised control rather than merely had a (an unexercised) right to do so; (2) the control is direct and immediate (as opposed to indirect); and (3) the joint employer will not result from “limited and routine” control.

It looked like we’d gone back to the old standard and would have some stability on this issue.  But then some drama emerged at the Board.

Just a couple of months after the Hy-brand opinion’s publication, the Board’s Inspector General reported that new Board member William Emanuel should not have participated in the Hy-Brand decision because his former law firm represented one of the two alleged joint employers in the Browning-Ferris case.  Based on the report, the other four members of the Board then unanimously vacated Hy-Brand, effectively reinstating the Browning-Ferris standard.

And now there’s a new development.

What’s Happening Now?

On September 13, 2018, the Board released a draft rule to re-define the joint employer test.  Under the proposed rule, a company would only be considered a joint employer if it:  “possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine.”  Further, “[i]ndirect influence and contractual reservations of authority” will not establish a joint employer relationship under the proposed new rule.

The proposed new rule requires a 60-day public comment period. The Board will then consider the public comments prior to publishing a final version of the rule, which we probably won’t see until early- to mid-2019.

So, to recap (and to make sure we’re all on the same page): Browning-Ferris’s broad test is still in place for joint employer liability under current Board law.  It will remain that way – until it is either reversed (again) by another decision or a final rule is published by the Board setting a new standard.  Employers, therefore, need to continue to use caution when evaluating the extent to which their contractual relationships or actions might be interpreted as giving them indirect control over another company’s employees.  And, of course, keep paying attention here for the latest updates!

Employers are well aware of the requirement to post various notices from the EEOC, DOL, and other acronym-bearing state and federal agencies.  Unfortunately, many employers have a “post it and forget it” mentality and fail to regularly update those posters and required notices.

These agencies, however, are often issuing updated required postings and employers who fail to heed those requirements can be assessed fines and potentially face criminal charges.  In California alone, there were 40 mandatory changes in 2017 and more than 30 mandatory changes in the first seven months of 2018, with more on the way.

A few recent noteworthy changes for employers in California and New York City deserve attention:

  • The California Employment Development Department has made a mandatory change to the notice to employees that provides information about unemployment insurance, disability insurance, and paid family leave. The EDD released this new, mandatory posting on July 3, 2018, although the revision date is May 2018.

    California employers should print the updated notice and post it where employee notices are generally posted.  The new notice (EDD 1857A) is available in both English and Spanish and may be downloaded here.

  • Beginning September 6, 2018, the “Stop Sexual Harassment in NYC Act” requires all employers with employees working in New York City to post a formal notice in a conspicuous location on their premises and distribute a fact sheet to newly hired employees. These documents, issued by the New York City Commission on Human Rights, provide information on the Act, as well as on what constitutes sexual harassment, how to report sexual harassment, and where to find additional resources.

The NYC legal notice can be downloaded here.

The NYC fact sheet is available here.

In addition to making these required updates, all employers should develop and maintain a tracking system to regularly check for mandatory updates for both federal and state postings and replace any out of date notices.

A recent ruling by the California Supreme Court could have lasting consequences for timekeeping practices and the payment of wages for hourly employees. In the case of Troester v. Starbucks Corp., the court ruled on July 26, 2018 that Starbucks had to pay the plaintiff for time spent on regular, off-the-clock tasks. The court found that, at least in this particular case, plaintiff’s claims for unpaid wages were not exempt from payment under the FLSA de minimis rule and declined to apply the longstanding federal rule to California wage claims of the type raised by plaintiff. The court, however, did not entirely eliminate the possibility of the de minimis rule applying to state wage claims.

In Troester, the plaintiff routinely had to perform tasks related to closing the store after he had clocked out. These tasks included things like shutting down the computer system and locking the doors. Under the FLSA de minimis rule, infrequent and insignificant periods of work that occur outside work hours and cannot be precisely recorded need not be counted as work time. The court found that the routine, regular nature of the tasks performed by plaintiff was the crux of the issue: because employees are regularly doing these tasks, employees should be compensated for them and Starbucks’ argument that the time was de minimis was not accepted. Indeed, the court said: “The relevant statutes and wage order do not allow employers to require employees to routinely work for minutes off-the-clock without compensation.” (emphasis added).

Because this ruling applies to all hourly workers in California, the implications could be quite broad. Retailers will have to ensure that employees who open and/or close a shop have a consistent way to capture time spent doing the required tasks if those functions would normally not be recorded as hours worked. Employers will then need to go further and evaluate what sort of tasks are regularly expected from their hourly workers when they are off the clock, whether it’s opening/closing activities, bank deliveries, or other functions that may take place outside of work. Employers will need to determine whether these tasks are routine enough to devise a system to capture the time. For example, if an employer expects an hourly employee to routinely respond to emails or texts during off hours, there will need to be a way to capture this time and policies and procedures should be put in place to ensure that happens.

Currently, this ruling is limited to California, whose wage and hour laws do not make mention of a de minimis exception. However, this issue could potentially spread to other states with similarly drafted statutes regarding hours of work. Given the ubiquity of technology, and the increased pressure to stay connected to work via smartphones, VPNs, etc., it would be no surprise to see more and more plaintiffs attempt to use this ruling to work to capture what may have previously been considered de minimis time. Employers should be looking carefully at their policies and procedures for timekeeping and to help protect from any potential legal issues.

Last week, I attended the annual American Immigration Lawyers Association Conference in San Francisco with 3,500+ others from all over the country (and some from outside the U.S.).  The consensus from the conference reiterated that the immigration landscape is shifting rapidly, and employers must adapt to those significant changes.  Here are some of the most notable changes:

Imputing constructive knowledge to employers

The government is conducting more site visits, audits, and raids to go after undocumented workers and employers who hire them.  Sometimes, an employer may not have actual knowledge that an employee does not have proper authorization to work, but the government can argue that the employer had constructive or implied knowledge, defined as “knowledge that one using reasonable care or diligence should have, and which therefore is attributed to it by law.”  A recent record-breaking case offers a notable example.  A landscaping company was fined $95 million in civil and criminal penalties for ongoing employment of unauthorized workers, among other violations.  The company thought it could escape liability if just the lower-level foremen had knowledge that some of their workers had no proper work authorization.  The government did not buy that argument. So, employers who, using reasonable care or diligence, should know that there are employees in their workforce without proper work authorization, will not likely escape liability by explaining that they did not actually know what was going on.

The trickle-down effect of the Buy American, Hire American (BAHA) Executive Order

The BAHA Order has had an all-around, profound impact on the immigration landscape, and employers may see changes in the following areas:

  • Employees in H-1B status. The Immigration Service will no longer give deference to previously approved H-1B petitions, meaning any extensions or amended petitions will be reviewed as brand new, initial filings.  At the same time, the Service has been issuing more Requests for Evidence as well as denials (a huge 17% increase in denials last year).  As a result, instead of routine and rather “simple” extensions of an individual’s H-1B status, employers can expect an uphill battle in obtaining approvals, especially with certain entry-level positions.
  • H-1B employees’ spouses with H-4 work permit cards (EAD’s). The Service will likely get rid of the work permit currently available to certain H-4 spouses.  If you have anyone working with an H-4 EAD, they will soon need to find an alternative source of work authorization (but you cannot terminate them now for that reason!).  The exact timeline on when this will take effect is unclear, but it could be as early as later this year.
  • NAFTA (North American Free Trade Agreement) might be going away. Soon. NAFTA has made it relatively easy for Canadian citizens with qualifying credentials to obtain work authorization in the U.S. in TN status, but based on recent events, this might not be an option much longer for employers.  As with H-4 EAD’s, now might be a good time for employers to consider other ways to keep current TN employees, especially for prospective employees you might want to keep long-term.
  • Increasing pushback on Employers who have H-1B employees at end-user client sites. The Immigration Service has released a policy memo creating more hurdles to jump through to obtain an H-1B approval for an employee who will be stationed at a third-party site.  Moreover, the validity period of your H-1B employee will be limited to the end date of an existing Statement of Work or other similar agreement you will need to submit with the petition.  Whereas the Service used to approve such extensions for up to 3 years (presuming the employee had 3 years or more left on their H-1B status), the Service is no longer being that generous.  So, an employer may be required to file extensions more frequently (meaning more legal and filing fees).  Obtaining a SOW for a three-year period between you and the end-user client would be the surest way to obtain the maximum possible period on these extension filings.
  • Increasing H-1B denials on various job occupation codes. Various computer-related occupation codes have been met with extreme skepticism by the Service, requiring more proof than ever before that the position offered to the foreign national employee is indeed a specialty occupation level position requiring a minimum of a bachelor’s degree.  Computer Systems Analyst, Computer Programmer, as well as Software Developer codes have been hardest hit.  Pushback on business-related codes are also on the rise, and the Market Research Analyst code continues to be met with resistance by the Service.

Questions about any of the above changes or others on the horizon?  Contact immigration counsel right away.  These changes are very real and already very much affecting employers.

On May 21, 2018, a divided U.S. Supreme Court held that employers can force employees into individual arbitration and avoid class action lawsuits involving those same employees.

By way of background, in 1925, Congress passed the Federal Arbitration Act (“FAA”), which validated arbitration clauses.  In 1935, Congress passed the National Labor Relations Act (“NLRA”), which gave employees the right to work together for “mutual aid and protection.”  The case of Epic Systems Corp. v. Lewis shed some light on how those two laws are supposed to co-exist.

Epic and its two sister cases centered on employment contracts that contained arbitration clauses which required individual arbitration of all claims.  The employees in question wanted to bring both individual and class action claims in court against their employers. They argued their NLRA rights to group activity trumped the FAA, permitting them to avoid arbitration the clauses and proceed with a class action.

The Supreme Court majority ruled that the FAA required the enforcement of arbitration clauses, regardless of the NRLA.  The majority noted that it wasn’t until 2012 that the National Labor Relations Board began to argue that the NRLA’s right to group action nullified the FAA and prevented arbitration clauses that limit class claims – a 77-year delay in making the argument.  The Court’s majority read the NLRA’s “concerted activities” provision (known as Section 7) as giving employees the right to unionize and bargain collectively, but not to avoid the FAA or ignore arbitration clauses.

The dissenting opinion in the case criticized it as undermining federal law (the NLRA) meant to “advance the well-being of vulnerable workers.”  The dissent fears that arbitration clauses will chill employment claims if class actions are barred because an individual claim would either not be worth pursuing or the individual employee would fear retaliation.  The NRLA was designed to give employees an equal place at the table when setting the terms and conditions of employment, and, according to the dissent, this decision allowing arbitration clauses that forbid class claims undermines that purpose.

This Supreme Court ruling means that employers can continue to insert arbitration clauses forbidding class claims in written contracts.  The arbitration process is familiar to employers who have collective bargaining agreements with unions.  It, however, may not be as familiar to non-union employers.  If an employment contract has an arbitration clause, or an employee signs one as well at of employment, then typically all claims that arise from the contract or relationship subject to the clause must go to arbitration.   The selected arbitrator will then hold a hearing similar to a trial, but typically with more relaxed standards and often less discovery, and then will issue a ruling. This is certainly different in many ways from a class action or individual lawsuit filed in federal or state court.

At Troutman Sanders, we have many attorneys experienced in arbitration in the employment context, and we would be happy to assist with any employment arbitration matters, involving both unionized and non-union workers.

Pay equity is a hot topic – and not just in employment and HR circles.  Both inside and outside of the courts, the issue has gained national attention and is spurring legislators in states across the country to act. Recent developments are a timely reminder to all employers to start thinking proactively about pay equity and ensure pay is based on proper criteria (performance, experience, effort, skills) and never gender or other protected characteristics.

For instance, in March, a California Court made headlines after allowing a class action complaint alleging systemic pay discrimination on behalf of women in thirty enumerated job positions employed by a high-profile technology company to proceed, in part based on allegations that the company had a business-wide policy of considering new hires’ previous salaries when determining starting salary and job level.  Additionally, in a case that’s grabbing attention from lawyers and non-lawyers alike, Rizo v. Yovino, the Ninth Circuit Court of Appeals reversed course from an earlier decision and held that the employer could not use a female employee’s prior salary alone as the basis for her current salary.

Outside the courts, this year saw even greater attention paid to Equal Pay Day, celebrated in 2018 on April 10 – a date which symbolized how far into the year women must work to earn what men earned in the previous calendar year.

On the heels of these court cases and increased attention, several states have taken it one step further by proposing, and enacting, new or enhanced legislation centered around pay equity.  California was among the earliest to adopt a state pay equity law, but the trend has continued to gain momentum with other states, such as Massachusetts, Delaware, Oregon, and, recently, Washington and New Jersey, following suit.

For example, last month New Jersey enacted what some consider to be one of the strongest pay equity measures in the country.  The law, which will go into effect on July 1, 2018, bans unequal pay for “substantially similar work” and allows victims of discrimination to sue for up to six years of back pay.  Successful employee claimants will have the opportunity to seek monetary damages of triple the amount lost.  New Jersey’s law is considered comparatively strong because it prohibits pay disparities based upon any characteristic protected by the New Jersey Law Against Discrimination—so it is not limited to gender alone.

Likewise, in March, Washington state enacted an updated Equal Pay Opportunity Act.  The law, effective June 7, 2018, prohibits discrimination in compensation based on gender (although pay differentials based on a job-related factor or factors that are consistent with business necessity are not prohibited).  Employers also may not limit or deprive career advancement opportunities based on gender and may not require nondisclosure of wages (or “wage secrecy”) as a condition of employment.

These are just two examples of new laws targeting unequal pay; other states may enact similar laws (or even laws providing broader protections) moving forward—and you can be sure your employees will be paying attention.  Prudent employers will review their pay structures now and regularly to avoid potential problems later.  If you would like assistance reviewing your pay structure, please reach out to your favorite Troutman Sanders employment attorney and we’d be more than happy to assist.

 

On Wednesday, May 23, from 3 – 4 pm ET, Troutman Sanders attorneys, Alan Wingfield, Wendy Sugg, and Meagan Mihalko will present a webinar discussing employment-purpose background screening laws. The federal Fair Credit Reporting Act imposes technical paperwork requirements on employers desiring to obtain background screenings, and many millions of dollars have been paid in individual and class actions based on alleged failures to comply. State analog laws to the FCRA impose their own procedural requirements. State and local “ban the box” laws regulate when and how an employer can request and use background reports on potential hires. The federal Equal Employment Opportunity Act has been used by regulators to attack employer screening policies that allegedly have a discriminatory effect against protected groups. Some states and localities regulate the type of background information, particularly criminal history, that can be collected and used. Meanwhile, tort law remains ready to impose large damages on an employer who is found, after the fact, to have not conducted an adequate background check on employees. Rather than digging deeply into a single legal aspect of background screening, this webinar is designed to give a holistic overview of the entire legal landscape affecting employment-purpose background screening. Companies and professionals who are charged with developing effective compliance strategies for their background screening activities need to have the entire legal context in mind, and our webinar is designed to survey that context and provide guidance for compliance.

One hour of CLE credit is pending.

To register, click here.

In a unanimous decision, the California Supreme Court embraced a standard that presumes workers in California are employees instead of independent contractors. The April 30, 2018 decision in Dynamex Operations West Inc. v. The Superior Court of Los Angeles County moves away from a more flexible classification test that had been in effect for nearly three decades, and it has the potential to upend businesses in the burgeoning gig economy and others whose business models rely on independent contractors.

In the Dynamex case, independent contractor delivery drivers filed a class action suit against their delivery company alleging that they were misclassified and should instead be considered employees, not independent contractors. As employers in California are aware, a finding of worker misclassification can result in awards of unpaid wages, as well as penalties, interest and attorneys’ fees – amounts that can be very significant depending on the number of individuals involved.

The California Supreme Court, in deciding what standard to use in determining whether the workers were employees or not, rejected the prior multi-part test that had been in use for nearly 30 years, but which had led to inconsistent outcomes. Instead, it adopted the “ABC” test used in a few other states, which presumes workers are employees instead of independent contractors for purposes of state wage orders — which govern items such as overtime and meal and rest breaks — and places the burden on employers to prove the workers aren’t employees.

The ABC test requires that for a worker to be considered an independent contractor, the business he or she works for must show that the worker:

(A) is free from its control and direction;

(B) performs work that is outside the usual course of the entity’s business; and

(C) is engaged in an independently established trade, occupation or business.

The alleged employer must prove each of these three elements as to the work for him or her to be considered an independent contractor for purposes of wage orders.

The Court provided an example of what it considered a qualifying independent contractor relationship: a plumber hired by a store to fix a bathroom leak. Conversely, it noted that a seamstress sewing at home using materials provided by a clothing manufacturer would probably be considered an employee, not an independent contractor.

This sea-change ruling raises questions about the potential viability in California of the business model for many gig economy companies that rely on workers to deliver goods or food, transport people, or handle to-do list tasks such as laundry or grocery shopping.  Previously, such companies have attempted to define themselves as “software companies” that only provide a platform for providers and customers to connect, or have argued that they do not exert sufficient “control” over the worker to be considered an employer; this new standard from the Dynamex case will make such arguments far more difficult.

Any California business that engages independent contractors in its core business functions or to accomplish tasks that are in the usual course of the company’s business should reassess those relationships under this ABC test and determine whether an employment relationship may be in effect. As these determinations can be tricky, and can have such a large impact on a business’s model and the financial risks associated with workers, in-house or outside legal counsel should be closely involved in these assessments.

About one year ago, President Trump signed the “Buy American Hire American” (BAHA) Executive Order to “create higher wages and employment rates for workers in the United States, and to protect their economic interests.”  Under the auspices of BAHA, the U.S. immigration landscape has seen many changes in rules, policies, and operations in the past year.  Below, are some of the key changes as well as anecdotal trends we’ve noticed so far.

  • There has been an increase in sharing of information between the Department of State, the Department of Labor, and the Department of Justice designed to combat and prevent immigration fraud. This is in line with the Administration’s goal to continue to streamline existing and new processes in the immigration system.
  • President Trump has mentioned a need to revamp the H-1B visa category. As such, USCIS has made available two email addresses, one for the H-1B category and the other for the H-2B category, encouraging anyone to report allegations of fraud.  This will likely lead to an increase in reports of alleged fraud (primarily by disgruntled ex-employees) and resulting investigations.  Due to the active information sharing between agencies, a case that begins with the U.S. Department of Homeland Security could lead to a second investigation started by another agency, such as the DOL, who could initiate a wage and hour investigation.
  • Pursuant to BAHA, there will be an increase in employer site visits to confirm H and L visa related jobs. USCIS has indicated it may expand the scope of their visits to include L-1B Specialized Knowledge petitions.  To start out, USCIS will focus on L-1B employees who will spend much of their time off-site at third-party client sites.
  • USCIS has been offering a wider variety of reports and data about work visas to the public in the interest of providing more transparency to U.S. workers.
  • In just one year, USCIS has issued five separate Policy Memoranda related to the H-1, L-1, and TN visa categories.
  • Regarding I-9 enforcement, more employers are expected to get a visit from the government for an audit of their Forms I-9. While anecdotal evidence does not yet point to a big surge in the number of audits this year, smaller companies are being targeted just as often as big companies.  Historically, the government tended to go after the bigger companies; however, a growing number of small- to medium-sized companies have reported being visited by the government within the last year.  This underscores that every employer is fair game, and should have a solid, compliant I-9 procedure in place before the government visits.
  • Anecdotal evidence also suggests an uptick in investigations coming out of the Immigrant and Employee Rights Section (IER), which investigates alleged unlawful discriminatory practices by employers. Note that once again small companies seem to be just as likely to be selected for an investigation.  Additionally, the IER appears to be focusing its investigations on claims of employer practices that seem to prefer certain categories of foreign workers over U.S. workers (e.g., H-2B workers).  Further, they are continuing to go after employers who have a high percentage of List A documents being presented by their employees during the I-9 process.  They receive this information through the E-Verify monitoring unit and have continued to actively pursue these cases.

Hopefully, all these changes and trends make clear that now is a good time to review your company’s immigration practices and procedures and get them in order, especially if you have foreign national workers with U.S. work visas.  Even if your company does not routinely hire foreign nationals, you are still subject to immigration laws that you must comply with, most notably the ones relating to the Form I-9.  Taking a proactive stance and consulting with a legal professional on what should be reviewed and put in order now is critical to avoiding bigger issues down the road.

Many employers require employees and applicants to take personality testing (think Myers-Briggs). Others are seriously considering adding this as a component of their hiring and employee engagement efforts. Companies want to get a sense of an individual’s opinions, attitudes, feelings, motivations, preferences, interests, emotional makeup, and style of interacting with others. This information, some believe, can help employers make predictions regarding job performance and success. At the very least, it allows employers to get to know an applicant through more than just the traditional interview process. These tests, however, raise many legal issues, particularly in the areas of potential discrimination claims and privacy concerns.

As an initial recognition, personality is not a protected class. Indeed, courts have routinely held that someone’s personality is a legitimate, nondiscriminatory reason to not hire an applicant or take adverse employment action against an employee. Yet personality testing still has the potential of violating the Americans with Disabilities Act (“ADA”), Title VII of the Civil Rights Act of 1964 (“Title VII”), and the Age Discrimination in Employment Act (“ADEA”). For example, if an applicant can show that the personality trait for which the employer screened was really a mask for discrimination of a protected class, the employer could be found to violate federal discrimination laws. So, if the employer is screening for a personality trait it connects with a protected class and makes its decisions based on that trait (possibly as a proxy or substitute for that class), that can constitute discrimination.

Furthermore, Title VII, the ADA, and the ADEA all have requirements for all employee testing that employers must adhere to when giving a personality test. For example, Title VII permits employers to administer professionally developed ability tests and take action based on the result. But, such tests must be implemented in a way that does not discriminate against protected classes, and ideally validated in advance as not having a discriminatory effect. Furthermore, employers are prohibited from adjusting the test scores based on an individual’s protected characteristics; using different cut-off scores for different protected classes; or otherwise altering the results of the test in any way. Lastly, the test must be job-related for the position at issue and consistent with a business necessity.

Testing clearly presents risks – of claims of discrimination, in addition to actual proof of such behavior. There have been numerous lawsuits related to personality testing under the ADA, Title VII, and the ADEA, with topics litigated including:

  • allegations of bias in determining traits important for the job
  • an employer purportedly asking questions that implicate protected characteristics
  • claims of bias in administration and scoring
  • whether the testing is a prohibited pre-offer medical examination
  • whether the test suggests a disability or a perceived disability based on the results, and
  • allegations of administering the test to discriminate based on age.

So, before you implement, add or change tests for employees or applicants, you will want to consider the risks they pose and balance that against the expected benefits of the testing.

Personality tests also raise potential privacy issues. While personality tests do not appear to violate the federal Employee Polygraph Protection Act, they may violate more restrictive state laws. For example, a Massachusetts law prohibits testing that renders an opinion on a job applicant’s honesty. Employers may also face claims based on the intrusiveness of the questioning (i.e., the questions are highly personal and/or offensive), or a failure to protect the privacy of the results. These state-law claims have thus far been brought have not seen notable success, but they have also not been tested nationwide, and new state and local privacy laws are enacted every year.

As personality testing becomes more and more popular among employers, interpretations of existing laws will inevitably become clearer and more settled. But new laws will likely join them, creating regular confusion and doubt. The best bet is to work your favorite employment counsel to help review and craft a personality testing policy that both conforms with existing law and is flexible enough to evolve as the issue changes over time.