What is happening to joint-employer status?

Quite a bit recently and something for all employers to take note of ... 

The National Labor Relations Board (NLRB) has a new standard for determining joint-employer status as a result of a controversial 3-2 decision.

In this decision  involving Browning-Ferris Industries of California, the Board created a new "indirect control" standard for determining joint employment under the National Labor Relations Act (NLRA).  The Board determined that if an entity affects the means and manner—either directly or indirectly—of the work terms and conditions of another entity's employees, it will be considered a joint employer with the other entity.

Who is the NLRB? -- By way of background, the NLRB is an independent agency of the United States government charged with conducting elections for labor union representation and with investigating and remedying unfair labor practices. 

What is the NLRA? -- Congress enacted the National Labor Relations Act ("NLRA") in 1935 to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.

Why do employers want to avoid joint-employer status? -- If two different businesses either hire or control the same employee, they may be joint employers.  Joint employment is risky because each joint employer is responsible for events even when they do not have control.  The “employers” of a worker make it more difficult it is for each joint employer to meet its responsibilities and limit its liability.

What is the new standard? -- This new standard is a big departure from the prior standard, in which joint employment was found only if the control exercised by the putative joint employer was actual, direct and substantial.  After returning from the August congressional recess, lawmakers were quick to introduce a bill that would negate the NLRB’S decision in Browning-Ferris.  

Is there legislation opposing this ruling? -- Yes, the Protecting Local Business Opportunity Act (H.R. 3459, S. 2015) would amend the NLRA to memorialize the prior long-standing joint employer standard. The provisions of the bill are brief and to the point. The measure would amend Section 2(2) of the NLRA by adding the following language: “Notwithstanding any other provision of this Act, two or more employers may be considered joint employers for purposes of this Act only if each shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate.”

What does this mean for me?  This decision answered whether a business had a duty to recognize and bargain with its staffing service's employees.  However, the decision could also apply in other contexts falling under the NLRB's jurisdiction.

The new standard could create new obligations and liabilities under other business models as well franchisor-franchisee relationships, venture capital companies, parent-subsidiary relationships, and independent contractors.  The indirect control standard may be used to weaken the position of companies such as Federal Express and Uber that treat their drivers as independent contractors. The ruling could spill over into other employment law arenas, including OSHA and Title VII (anti-discrimination statute).

TAKE AWAY TIP:  This case doesn’t decide whether any of these other industries are joint employers. Every case has to be decided on its own facts.  Continued vigilance in avoiding joint-employer situations is key:  clear agreements, no supervision of work if possible, no employment benefits, no training, no authority to hire, fire, promote.  However, the NLRB is sending a signal:  denial of joint-employer status is harder to demonstrate.  The question is whether that signal is widely received by others.

FLSA White-Collar Exemption Rules - What Should I Do While Waiting? ...

The federal wage and hour law, called The Fair Labor Standards Act ("FLSA"), is administered by the Department of Labor and governs how and when employees are paid overtime.  Changes to the "white collar" exemptions under the FLSA are coming, and fewer employees will qualify for exempt status.  Now is a good time to consider changes and review your exempt employees’ status.

On July 6, the Department of Labor (“DOL”) published a long-awaited notice of proposed rulemaking updating the FLSA overtime exemptions. The proposed rules would significantly increase the minimum salary threshold required to qualify for the FLSA’s so-called “white collar” exemptions for executive, administrative, and professional employees. The proposed rules do not contain any changes to the “duties” test, which determines whether salaried workers earning more than the threshold are exempt from the overtime requirements of the FLSA, but DOL has requested and will consider comments on these tests. If adopted, the revised rules would, according to DOL projections, bring nearly 4.7 million currently exempt employees within the scope of overtime protection.

Major Changes — Increased Minimum Salaries for Exempt Employees

DOL’s proposed regulations address concerns that, if left unchanged, the salary level requirement’s effectiveness “as a means of determining exempt status diminishes as the wages of employees entitled to overtime increase and the real value of the salary threshold falls.” Thus, the agency is proposing the following reform measures, among others:

Standard Salary Level Update: The current salary threshold, set in 2004, is $455 per week ($23,660 per year). DOL proposes increasing the standard salary level requirement to an amount equal to the 40th percentile of earnings for full-time salaried workers, which is projected to be $970 per week or $50,440 per year in 2016, more than double the current threshold. This revision is motivated, in part, by the agency’s view that the 2004 threshold failed to adequately account for a relaxing of the “duties” test.

The 60-day comment period runs until Sept. 4, 2015. After that, the DOL will make final revisions, await clearance by the White House Office of Management and Budget, and then issue the final rule. It is expected that the rule will become effective sometime in 2016.

PRACTICE TIP:  Employers should begin their planning by internally analyzing exempt positions and identifying options to minimize negative impacts on employee relations, direct payroll costs, indirect administrative costs, and general operations.  In other words, start an internal audit and contact counsel before making changes.

I don't want to rain on your parade, but take another look at your employee handbook ...

Open up your employee handbook and take a look at your confidentiality & privacy policies.  Now take a look at any of your policies regarding government investigations.  Do they sound like the policies Macy's? (see below).  If so, no parade for you according to a recent NLRB recent ruling. 

An administrative law judge recently found several provisions in the Macy’s handbook to be unlawful, as employees would reasonably read them to restrict protected concerted activity under the National Labor Relations Act.  

The judge found that the handbooks’ restrictions on the release of personal information of the Macy’s employees, including their names and home and office contacts, “obviously restricts employees in their Section 7 rights to discuss their terms and conditions of employment with fellow employees, as well as their ability to notify a union of other employees of the Respondent who might be interested in participating in the union movement.”  The judge continued: “The fact that this restriction was repeated so many times in the Handbook further enforces the belief that employees could reasonably believe that it interferes with their Section 7 rights.”

In addition, the judge found the handbook’s restrictions on the use of information regarding customers and vendors over-broad.  Moreover, the judge invalidated a handbook provision prohibiting the use of the Macy’s “logo or other intellectual property” by others, finding: “[T]his prohibition could also be reasonably understood to limit its employees, or a union, from publicizing a dispute with the Respondent by employing its logo in its distributed information.  This could be an effective means of publicizing a dispute as the Respondent’s logo is well known and easily recognized.”  The judge also found that the Macy’s handbook violated the NLRA by requiring employees to notify Macy's management prior to participating in a governmental investigation.

Accordingly, as a remedy, the judge ordered Macy’s to rescind these provisions, notify all of its employees nationwide that it has done so and that these provisions are no longer in effect, and post a notice to its employees to this effect.  

PRACTICE TIP:  Employers should be mindful of the Board’s recent crusade against over-broad handbook provisions, and should review their policies—including those not typically associated with NLRB scrutiny (such as confidentiality and privacy policies).  It's all fair game, and a general disclaimer may not be enough to save the day.

The Macy’s privacy policy provided:

The Company has certain personal data of its present and former associates, customers and vendors.  It respects the privacy of this personal data and is committed to handling this data responsibly and using it only as authorized for legitimate business purposes.  What is considered personal data?  It is information such as names, home and office contact information … and other similar data. … We have a strict obligation to use such personal data in a manner that: … Respects the privacy of our co-workers and our Company’s customers and vendors.

The Macy’s use of company systems policy provided:

Any information that is not generally available to the public that relates to the Company or the Company’s customers, employees, vendors, contractors, service providers, Systems, etc., that you receive or to which you are given access during your employment or while you are performing services for the Company is classified as “Confidential” or “Internal Use Only” under the Macy’s Information Security Policy. … Company maintains certain information regarding its present and former associates, customers and vendors.  Company respects the privacy of this data where it includes personally-identifiable information (“Personal Data”).  Personal Data includes names, home and office contact information, social security numbers, driver’s license numbers, account numbers and other similar data.

Tips When Dealing With The IDES

It is a frustration for employers ... the inconsistency and red tape of the Illinois Department of Employment Security.

There are steps an employer can take when contesting a claim that will put it in the best position to win.

In a hearing where misconduct is claimed, the burden of proof is on the employer to prove misconduct. Although an employee may very well have made a mistake during his/her employment that led to the employer terminating that employee, the employer needs to show not merely that the employee was negligent but rather that the employee’s conduct rose to the level of constituting misconduct - which is a substantially higher burden.

In resignation cases, the burden of proof is on the employee to prove that the employee’s leaving of his/her employment was for good cause attributable to the employer.

Individuals should realize that the Referee Hearings are actual hearings with evidence taken and with there being numerous unwritten (or difficult to find) rules for how the hearings are conducted. The employer should be represented by an attorney or representative to position the employer in the best light.

Practice Tip:  Use the forms provided by the IDES and keep it simple.  The clearer you can be in contesting the claim (if it should indeed be contested), the better result you may get.  Keep your argument free from unneeded details and ensure that your arguments mirror the language of the regulations.  Negligence of a former employee is not enough ... it must be a purposeful violation of a work rule.

How Legal Is Your Employee-Wellness Program?

The Equal Employment Opportunity Commission (EEOC) has recently issued much anticipated guidance on wellness programs and how an employer’s obligations under the Americans with Disabilities Act (ADA) interact with its rights and obligations under the Health Insurance Portability and Accountability Act (HIPAA) (as amended by the Affordable Care Act).  The EEOC issued a proposed rule on April 20.

What problem is the EEOC trying to resolve?

There is a conflict between the ADA rules on employer “medical inquiries,” on the one hand, and the “wellness program” provisions of the HIPAA/ACA, on the other.

Title I of the ADA (the part of the ADA that applies to private sector employers) generally prohibits employers from making “medical inquiries” of current employees unless the inquiries are “job-related and consistent with business necessity.” The general rule is that employers are not supposed to be asking for medical information from current employees.

There are some limited exceptions to this rule, including an exception for medical inquiries made in connection with a “voluntary wellness program.”  Many employers offer specific rewards or penalties to employees based on whether they participated in these wellness programs and even on whether they achieved certain “results.”

The EEOC's proposed rule says that a wellness program can still be “voluntary” for ADA purposes if the program provides “incentives” for employees (both rewards and penalties), as long as the employer complies with the wellness incentive requirements of the HIPAA/Affordable Care Act.

The proposed rule describes certain employer “best practices,” as follows:

• Employers should ensure that employees who handle medical information know their obligations under the laws.
• Employers should adopt privacy policies for collection and handling of employee medical information, assuming that they have not already done so.
• If medical information is stored electronically, it should be encrypted and other security measures implemented such as password protection and firewalls.
• If possible, employees who handle medical information should not be “making decisions related to employment, such as hiring, termination, or discipline.” If this is not possible, then the employer should ensure that there is no discrimination based on an employee’s disability.
• Breaches of confidentiality should be promptly and effectively addressed, and the affected employees should be informed immediately.
• Employers should take appropriate action against an employee who breaches confidentiality, and should “consider discontinuing” their relationships with vendors who breach confidentiality.

PRACTICE TIP:  Take a conservative approach in light of the uncertain legal landscape. A wellness plan is generally considered legal if it creates incentives instead of penalizing, but again the details of this have yet to be completely ironed out.  A wellness program has to comply with the ADA and thus refrain from requiring employees to meet specific health standards. Otherwise, it could be considered discriminatory.   Provide reasonable alternatives to achieve incentives and provide adequate notice of those alternatives. 

Is Telecommuting a Reasonable Accommodation Under the Americans with Disabilities Act?

A recent Sixth Circuit ruling that nixed a U.S. Equal Employment Opportunity Commission suit against Ford Motor Co. shows companies can say no to workers seeking telecommuting arrangements to accommodate a disability without violating the law, but lawyers warn employers still have to consider telecommuting as a reasonable accommodation depending on the job.

The Court applied a “common sense” approach to decide that “regular on-site attendance is required for interactive jobs, and that “regular, in-person attendance is an essential function … of most jobs….”

Despite advances in technology and remote work and depending on the employee’s job duties, an employee may not be “qualified” within the meaning of the ADA if the employee can’t come to work (as was the case with the Plaintiff and her irritable bowel syndrom).  Because the employee in this case was not “qualified,” the majority did not even get to the issue of reasonable accommodation.

The dissent discussed its perception of Ford’s failings in this regard at great length, and in this writer’s opinion, completely disregards all the things Ford did do, focusing instead only on the last proposal from the plaintiff -- that she be allowed to work for “up to four days a week” from home. By the time this came to the table, Ford had worked with her for years as her attendance got worse and her job performance deteriorated.

PRACTICE TIP:  Before the issue of accommodations are addressed, the first examination is whether the employee is qualified.  Look at your job descriptions and determine whether the essential functions are really "essential."  If the functions are not really essential, then denying an employee an accommodation because he or she cannot do them may run afoul of the ADA.

Three Contract Agreements You Should Have

While it might be tempting to seal a deal with a handshake or assume that "everything will probably be ok," those assumptions can get a small business into trouble.  When you make a contract, proper documentation will give you and your business solid legal protection should the need arise.

While specific business needs vary, below are three common legal contracts you should draw up for your business.

1. Partnership Agreement

If you’re starting or running a business with someone else, you need some kind of agreement in writing. Even if your business partner is your spouse, best friend or sibling, having some kind of partnership agreement in place from the start can be a helpful to figure out the inevitable issues that come up during the course of running a business.

The partnership agreement should contain the following:

• Define who contributes what: Discuss what you and your partner will be bringing to the table in terms of labor, time, cash, property, customers, etc. Who plans on working on the business full-time, part-time or just acting as a silent partner?
• Define who gets paid what: Outline how profits will be distributed. Will each partner be paid a salary for his or her role in the business? How much? What about any extra profits for the year?
• Define how decisions get made: What type of decisions require unanimous votes, and what type of daily decisions can be made by a single partner? Discuss these matters upfront and decide what decision-making structure will let your business run the most effectively while making sure that no one feels left behind.
• Define what happens to ownership interests: Decide what happens if/when someone dies, retires, goes bankrupt or just wants out. Maybe add in a non-compete clause to protect against a partner leaving, taking your customers and setting up a competing business.
• An Internet search for “partner agreement template” will turn up numerous partnership contracts you can use.

Remember that while you may think you’re on the exact same page as your partner(s) today, situations can easily change over the course of a few years. A few conversations and a little administrative work to make a contract at the start can save you major headaches and potential legal battles down the road.

2. Non-Disclosure Agreement (NDA)/Confidentiality Agreement

Whenever you’ll be sharing your company’s proprietary information with somebody, you should ask them to sign a non-disclosure agreement (NDA). Your company’s proprietary info can be anything from the code written for a mobile app product, your business plan, marketing plan, forecasts or financial numbers, as well as your client and customer list. For example, if you partner with a vendor or freelancer for a marketing project, you should draw up an NDA to make sure your customer list is protected.

3. Independent Contractor Agreements

For many small businesses, outsourcing to independent contractors is a great way to get some added help, fill a specific need or bring in specific expertise. It’s a flexible arrangement, and you don’t have to pay workers’ compensation, payroll taxes or employee benefits for contractors and freelancers. However, be aware that the IRS is now on the lookout for employers who misclassify their workers as independent contractors to avoid paying payroll taxes, etc.

For this reason, it’s smart to make a contract.  Create an independent contractor agreement that explicitly defines the relationship between you and the worker. Make it clear that you intend the worker to be an independent contractor who is responsible for his or her own taxes. In addition, the agreement should not exert much control over how work will get done. Don’t set specific hours for when they need to work, or where.

While having this agreement isn’t going to protect you 100 percent from an IRS audit or misclassification ruling, it does provide evidence that you intended to hire an independent contractor.
For these three contracts, as with any legal formality, it’s always best to invest a little time. Make a contract and get it squared away upfront, rather than waiting until you actually need the contract. By then, it’s typically too late.

Your best business is worth it.