Uber and Other Startups Facing Independent Contractor Disputes

taxisPerhaps the blurriest line in employment law is the difference between an independent contractor and employee. Companies prefer contractor status because it is cheaper and offers more flexibility. Contractors don’t receive benefits, can be relieved at any time with little to no liability, and the employer pays far less in employment taxes. In recent years, however, companies who use this model have faced increased litigation from workers looking for overtime and governments looking for unpaid taxes. 

The front line of these battles has historically been in the construction and delivery industries, but now that battlefront is shifting. Uber and similar technology start-ups are increasingly relying on a business model of “matching” workers with customers looking for a service. In Uber’s case, an “App” matches a driver with a customer needing a ride. Uber has enjoyed great success, and is now facing increasing litigation over whether its army of contractors who accept driving assignments using their personal vehicles are really employees. A Reuter’s story on the lawsuits can be found here.

This is a good example of how legal issues never really go away, they just morph and adapt to changes in the workplace. As a takeaway, every employer who uses contractors should remember that it is important that such relationships meet the legal test for contractor status, and that all contractors (preferably) sign a comprehensive agreement. Simply calling a worker an independent contractor is inadequate. Generally, the worker must retain control over the details of the work, be free to work for other parties, and not be engaged in the same type of work performed by employees.

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Posted in Labor & Employment, Wage and Hour

NLRB Looking to Undermine State Right to Work Laws

nlrbOn April 16, 2015, the National Labor Relations Board (NLRB) quietly issued a request for amicus briefing in a case it is currently waiting to decide on appeal. The case involves the question of whether a union can charge dues to employees in a “right to work” state who choose not to join the union. In recent years, Michigan and Wisconsin, two formally pro-union states, have passed Right to Work laws under Republican governors (bringing the total to 25 states), and the trend threatens to severely weaken unions across the country. 

The legal question arises out of the conflict between the union’s duty of fair representation and the state right to work laws. In a right to work state, an employee can choose not to join a union, but the union is nonetheless bound to represent the employee under the National Labor Relations Act. Unions claim it is unfair for employees to refuse to pay dues, then expect the union to represent them for free in an arbitration, for example, if they are terminated.

A link to the NLRB’s request for briefing on this issue can be found here.  Obviously, given the leanings of the current NLRB, it would appear that a new rule is coming, which would allow unions to require some form of payment in exchange for representation.  The big question is whether that rule will mandate full-blown dues (which would defeat the right to work law altogether) or some sort of “pay as you go” fee in exchange for union representation in grievances or arbitration.  If the NLRB chooses to change the decades old federal precedent in this area, it will certainly have a huge fight on its hands in the form of an appeal to federal court.

Posted in Uncategorized

Brace Yourselves: Major Overtime Regulations Coming Soon

The Department of Labor has been promising an overhaul of the white collar exemption regulations for over a year. The regulations were originally planned to be released in the Fall of 2014, but were pushed back to February 2015.  We are now in April, and the regulations have not yet been issued. All has been quiet recently, which probably means that the regulations will be coming any day. 


What to look for in the new regulations:

1)      Increased salary threshold:  Currently, the minimum salary for an employee to be exempt from overtime is $455 per week or $23,660 per year. The Department of Labor is expected to raise this threshold to $40,000 or even $50,000. Other ideas being considered include geographic thresholds (to account for different costs of living) and indexing the salary threshold to inflation.

2)      Changes to Duties Tests:  The white collar exemption regulations last received an overhaul under the George W Bush administration in 2004. The Obama administration is expected to undo some of these positions, and make it harder to satisfy the exemptions from overtime. One expected change would be to add a “percentage of duties” test, which would require the exempt employee to spend a majority of his or her time on exempt tasks. Currently, federal law only requires that the employee’s primary, or most important,  duties be exempt.

Depending on your company’s geographic location, and the nature of your business, an increase in the salary threshold could mean a significant shock to your company’s payroll costs. After all, if the minimum salary moves upward, this tends to have an inflationary ripple effect throughout the pay scale as companies strive to retain the differences in relative pay between workers.

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Posted in Federal Government, Labor & Employment, Wage and Hour

New FMLA Regulations Will Affect Texas Employers

Tex200px-US-DeptOfLabor-Seal_svgas does not recognize same sex marriage, so the natural thought would be to deny a request for an employee to take FMLA leave to care for his or her same sex “spouse” from a marriage in another state.  According to the Department of Labor (“DOL”), such a refusal would be against the law, starting March 27, 2015.

Specifically, DOL issued a final rule last month amending the definition of spouse from a “place of residence” test to a “place of celebration” rule.  For Texas, the old rule would mean no same sex spouses under the FMLA for employees who reside in the state.  Under the new rule, a Texas employee who flies away to another state for a lawfully recognized same sex wedding, and returns to Texas, has a “spouse” under federal law and is entitled to FMLA leave to care for that spouse, or a stepchild for example.

The big decision for employers going forward will be what level of documentation will be required of employees seeking FMLA leave in such instances.  Certainly, the employer would have a right to require documentation of a lawful wedding ceremony (i.e. a marriage certificate from the other state)  to confirm that a legitimate relationship exists.  Of course, such requests may be perceived negatively, and employers should make sure any requests for documentation are reasonable and not aimed at harassment or interference with an employee’s right to take the federally protected leave.  For more information about the rule change, please take a look at the firm’s update on the subject, which can be found here.

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Posted in Discrimination, Federal Government, Labor & Employment, Wage and Hour

EEOC Loses Another Background Check Case

The EEOC h200px-US-EEOC-Seal_svgas taken a lot of heat on its controversial stance of aggressively litigating adverse impact cases involving background checks.  In April, 2012, the EEOC issued a new enforcement guidance seeking to curtail the uses of criminal background checks in employment. That guidance resulted in the State of Texas filing a federal lawsuit challenging the EEOC’s authority over state agency hiring practices, and a series of EEOC initiated actions against large employers across the country.

On Friday, February 20, a panel of judges from the United States Court of Appeals for the Fourth Circuit, hammered the EEOC in a case involving an employer’s use of both a credit check and criminal background check during its hiring process. The lower court dismissed the case, and the appeals court agreed, noting that the EEOC’s statistics expert was “utterly unreliable” and “made a mind-boggling number of errors.” Remarkably, the court rebuked the EEOC’s continued use of this expert (who has been found to be biased in earlier cases) as “not serving the public interest well.” A copy of the decision can be found here.

This case is important because the EEOC’s enforcement position on the use of background checks rests almost exclusively on statistics. If the EEOC is willing to rely upon a biased manipulation of statistics, it is hard to imagine how  an employer will get a fair shake during the charge process. This case is also a bell-weather of how the EEOC’s aggressive position on background checks will be received by the courts. Thus far, the EEOC has enjoyed very little success on these types of claims.

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Posted in Federal Government, Labor & Employment

If You Are Planning Layoffs – Here Are Five Things You Need to Know

Unfortunately, when the price of oil goes down, the employment numbers also move downward in Houston. Many clients in the oil and gas industry are either planning or considering downsizing measures, which means that it is a good time to review your policies and procedures to make sure you adequately protect your business.

  1. Get to know the OWBPA:   The Older Workers Benefits and Protection Act has a number of special requirements for a severance agreement which contains a release of an age discrimination claim. If you are terminating a single employee over 40 (not part of a broader layoff)  an employer must: advise the employee tlayoffso seek advice of counsel, provide up to 21 days to review the agreement, and allow up to 7 days to revoke the agreement after it is signed. For a layoff package offered to more than one person, the 21 day period is extended to 45 days. With a group layoff, the employer must also provide, in writing, detailed information about the persons being laid off, including their age and job titles. The purpose of this information is so employees over 40 can have all the facts and make a knowing waiver of a potential ADEA claim.
  2. Use Objective Criteria:  If you have 5 employees in a department and one of them has to go, you should expect the laid-off employee to ask, “Why me?” If that employee happens to be in a protected class, and all of the retained employees are not, the employer will have some explaining to do (especially if there is a pattern of such choices).  Using seniority is an easy way out of this conundrum, but most employers prefer to make selections on merit, not longevity. There is no law against using such a criteria, but it helps to formalize what “merit” means.  Does it mean good attendance, management reviews, or tangible work production? To avoid discrimination claims, it is best to formalize the selection process and not just rely on supervisor discretion on who should stay or leave.
  3. Beware Disparate Impact:  Even if you formalize your selection process and make good documented decisions, it is advisable to check your math. If the results have a clear bias against women, older workers, or a particular minority group, you should review your criteria and ensure that it is fair. Keep in mind that the law allows for employees to bring a case for discrimination where a facially neutral employment process has a disparate impact on a protected class.
  4. Don’t Forget Confidentiality:  Although most severance agreements insist upon the confidentiality of the amount paid to the employee, this agreement is also a good opportunity to include a broader confidentiality agreement governing trade secrets obtained during employment (if you don’t already have one). That employee will likely be getting a new job soon, and it might be with your company’s most bitter rival. This is your last opportunity to lock down your trade secrets and make sure the employee does not take things out the door to a competitor.
  5. Close Out Wage and Hour Suits:  Wage and hour claims are the prevailing type of class action plaguing employers. The law makes it difficult to obtain a release of a Fair Labor Standards Act claim in a severance agreement, but an employer can include a statement in a severance agreement noting that the employee has reported all of his or her time and been paid in full for all known overtime, bonuses, etc. This acknowledgment can be used against the ex-employee if he or she decides to later join a class action.
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Posted in Discrimination, Labor & Employment, Wage and Hour

If You Haven’t Already, It’s Time to Add Sexual Orientation and Trans-Gender to Your Discrimination Policy

On its face, federal law does not list sexual orientation or trans-gender status as protected categories. Some states or cities have passed their own laws offering such protections, leaving a patchwork of laws across the country.

For this reason, many employers have delayed adding to their handbook’s list of protected classifications for either political reasons or to avoid arguably granting more protection than required in those local jurisdictions without expanded coverage. Looking forward, 2015 is the year where I can say that such a position is no longer optional — all employers should formally list these protected classifications in their policies. First, the list of state and local governments who have passed laws protecting employees from discrimination on the basis of sexual orientation or trans-gender status continues to grow, and now covers the majority of the country. Houston, Texas joined the ranks of departofjustcities with such laws last year. Second, the United States Attorney General issued a little-publicized memorandum in December 2014, making clear the federal government’s enforcement position that Title VII of the Civil Rights Act of 1964 should be interpreted as covering trans-gender employees. A copy of the memo can be found here.

This Justice Department memorandum is not a new development in the law, and only formalizes a line of cases that have long made discrimination on the basis of “gender identity” or sexual stereotyping illegal. Since discrimination based on “sexual stereotyping” can be used as a proxy for sexual orientation discrimination as well, and the Supreme Court has already made “same sex” harassment actionable, there are no meaningful gaps left to fill under federal law. Without an amendment of Title VII, the law has slowly but surely been changed to include classifications not originally in the law, and which were even the subject of unsuccessful Congressional legislative efforts. One can argue about whether changing the law in such fashion is a good or bad thing, but the shift in the law is now undeniable, and prudent employers should modify their policies to adapt to the new legal landscape.

Posted in Uncategorized

Department of Labor Targeting Oil and Gas Contractors

200px-US-DeptOfLabor-Seal_svgOn December 9, 2014, the U.S. Department of Labor (“DOL”) announced that it had achieved $4.5 million dollars in settlements from private employers as a result of a two year investigation into contractors working in the Marcellus Shale region of Pennsylvania and West Virginia. The DOL press release can be found here.

This investigation highlights the increased scrutiny on employers in the oil and gas industry, and the importance of regular compliance audits of wage and hour practices. With a highly mobile workforce, operating under ever-changing working conditions and schedules, following complicated state and federal overtime regulations can be a nightmare.  The following are some important tips for maintaining compliance in this difficult area.

  1. Make sure that any salaried exempt managers or other professionals meet the duties tests under federal law. It is not enough to simply call an employee exempt and pay him or her a salary.
  2. If you classify an employee as exempt and pay him or her a salary – remember that the salary cannot change based on quantity or quality of the work performed. Before making any deductions, seek legal advice.
  3. For hourly employees, be wary of day rates and other flexible pay arrangements which conflict with the overtime rules. Federal law requires all non-exempt employees to be paid overtime for hours worked in excess of 40 in a work week, with rare exceptions.
  4. Federal law requires overtime to be paid at time and one half times the employee’s regular rate of pay for that work week. This rate must include all compensation, including bonuses, piece rates, and any other incentives.
  5. When you have employees living at or near the worksite (like in the shale regions) it is important to have clear policies prohibiting “off the clock” work, and trained supervisors to enforce such policies.  Supervisors should know whether and when employees are to be paid for safety training, waiting time, on call time, or other “gray areas” that are common in the industry.

Lastly, ensure you are fully and accurately recording all work time for non-exempt employees. Under federal law, it is the employer’s obligation to maintain accurate pay records, and such records are critical in providing a defense to government investigations or lawsuits.

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Posted in Discrimination, Federal Government, Labor & Employment, Wage and Hour

The Secularization of the Holidays

eggnogEmployers are under increased pressure to secularize religious holidays like Christmas.  No one wants to be the Grinch, but at the same time, many companies are concerned that they will being perceived as favoring Christian holidays over Muslim or Jewish ones.  I was interviewed for the linked article, which appeared on the Society for Human Resource Management’s (SHRM) website.  It addresses many of these concerns and adds some practical tips on navigating the holiday season without being sued for religious discrimination.

Posted in Discrimination, Labor & Employment

Election Brings New Wave of Minimum Wage Increases

Election day 2014 brought more than just a wave of new Republican politicians, it also brought a wave of minimum wage increases across the country. For employers with operations in multiple states, payroll just got more complicated. Five states approved minimum wage hikes, including Alaska, Arkansas, Nebraska and South Dakota.  Illinois approved  a non-binding measure which won’t immediately impact current law.

Alaska voted to raise its minimum wage to $9.75 by 2016; Arkansas will raise the minimum wage to $8.50 by 2017; Nebraska’s minimum wage will rise to $9.00 by 2016; and South Dakota’s minimum wage will increase to $8.50 by 2015. Illinois voters approved a non-binding measure to raise its minimum wage to $10.00. The cities are also getting into the game with San Francisco voting to increase its minimum wage to $15.00 by 2018, matching Seattle with the highest minimum wage in the country.

The takeaway from the election imaps that HR departments are going to have to work overtime to keep up with the patchwork quilt of minimum wage laws across the country. If you have employees who travel across state lines or into city limits with a higher minimum wage (even if they don’t live or office in those locations), you may have obligations under the respective laws. Also, the increases in minimum wage will have a ripple effect on wages in these regions. Employees who were comfortably above minimum wage may now find themselves working for slightly above the new rates, which will drive wage inflation up the chain.

Lastly, this election is likely not the end of the road for local minimum wage hikes. There have been 15 states with minimum wage ballot measures since 1996 and all 15 have passed. This trend is likely to continue and, if anything, only pick up steam.

Posted in Uncategorized
About HR Headaches
HR Headaches is a blog for Human Resources professionals, business owners, and in-house counsel to get the latest news, analysis and tips in the area of labor and employment law. Every day there are new court decisions, agency interpretations, and regulations which affect the workplace, making it difficult, if not impossible, for many employers to keep current. HR Headaches is dedicated to providing information in a practical, no-nonsense manner to help employers avoid legal disputes and keep policies up to date.
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The Editor

David L. Barron is a Board Certified labor and employment attorney from the law firm of Cozen O’Connor and part of the firm’s national labor and employment practice group. David brings a practical approach to solving workplace problems and is a sought after speaker by business and industry associations, media outlets and companies looking to provide training for its managers and supervisors.