November 2022 Employment Law Update
LEGISLATIVE AND ADMINISTRATIVE ACTIONS
Dept. of Labor Proposes New Independent Contractor Rules. The DOL has issued a proposed rule updating the standards it will use to determine whether a person providing services to a company as an Independent Contractor or should be deemed an employee who is subject to all employment laws, taxes, benefits, etc. The rule will use a six-factor “Economic Realities Test”, which calls for a more extensive evaluation than the couple of factors used under the last administration. This is actually more of a return to pre-2016 standards. The six factors are:
(1) the “opportunity for profit or loss depending on managerial skill”; (2) “investments by the worker and the employer”; (3) “degree of permanence of the work relationship”; (4) “nature and degree of control,” including “whether the employer uses technological means of supervision (such as by means of a device or electronically), reserves the right to supervise or discipline workers, or places demands on workers’ time that do not allow them to work for others or work when they choose”; (5) the “extent to which the work performed is an integral part of the employer’s business”; and (6) the “skill and initiative” of workers, referring to whether a worker uses specialized skills brought to the job or is “dependent on training from the employer to perform the work.” However, the proposed rule also states that “additional factors may be relevant” in the analysis. Note that the factors use of the terms “employer” and "employee” rather than “contractor” terms; thus implying a presumption that the relationship is one of “employment” and that one should be prepared to refute that presumption in order to show an Independent Contractor relationship.
EEOC’s New Poster
The U.S. Equal Employment Opportunity Commission released its new Know Your Rights poster, which is to be displayed in all workplaces covered by the federal anti-discrimination laws. It replaces and updates the older EEO Is The Law poster. The EEOC claims the new poster uses clearer language and is easier to understand as well as incorporating changes in the law. Employers should replace the old version with this new notice. See www.eeoc.gov for more information.
Civilian Reservist Emergency Workforce Act (CREWS) Extends USERRA Rights. President Biden has signed the Civilian Reservist Workforce Act which provides FEMA Reservists the same protections provided by USERRA when they are deployed to disasters and emergencies on behalf of FEMA.
Escalation of Litigation
The number and magnitude of employment related cases is showing a significant increase. The expenses of defending and of paying resulting awards or settlements are outstripping employers’ legal budgets and insurance limits. There was a slowdown of cases during the COVID-19 pandemic which seems to now have reversed course and is rising to new levels. Much of this is driven by a storm surge in class actions. These are highly expensive to defend and damage awards are paid to hundreds or thousands of employees or applicants. Settlements are likewise much greater than individual cases. Employers may also find their insurance is not enough to cover the higher awards for class actions or the increase in the number of individual cases. Employers can protect themselves by examining their Employment Practices Liability coverage. The best protection, however, is to examine one’s employment practices. Up-to-date, legally compliant and effective employment practices provide the best defense, are the least expensive to defend, and more importantly, can prevent cases from being filed at all.
Retaliation - Strangest Case of the Month
Stick in the Eye. Usually, retaliation cases involve an adverse employment decision such as demotion or discharge following an employee filing a complaint or engaging in other protected activity. In this case, an employee complained of unpaid wages. The business owner responded by saying he would not pay until he “felt like it!” When the employee said he would go to the Dept. of Labor if he did not get paid, the owner allegedly grabbed him in a headlock and repeatedly punched him. Then he shoved the employee to the ground, knelt on him and stuck his fingers in the employee’s eyes and wrenched his face. The employee went to the hospital and there was concern he could lose sight in an eye. The employee and the Dept. of Labor is pursuing an FLSA wage and retaliation case against the employer. Walsh v. Liams Home Furniture, Inc. et al (D. MA, 2022)
Taking Bribes Results in Prison Time for Manager. A Cargil manager has been convicted of wire fraud and sentenced to four years in prison plus $37 million in restitution. The manager arranged for a vendor to get business from Cargil and approved inflated billing for the goods and services. In exchange, he received over a million in cash plus gifts, opulent trips around the world and vacations on luxury yachts in the Caribbean. The vendor was also sued for racketeering and paid $105 million, and its owner was sentenced to five years in prison. U.S. v Kennedy (W.D. NC, 2022)
Up to 20 Years in Prison and $3 Million in Fines and Penalties for Forced Labor of Migrant Workers. The owner of a food harvesting and processing plant has pleaded guilty to charges under the Racketeer Influential and Corrupt Organizations Act for conspiracy to commit forced labor. He and his associates subjected migrant workers to extreme hours with minimal pay, confiscated their passports, threatened them, forced them to remain and work after their H-2 Visas expired and forced them to live in squalid, unsanitary conditions. The other “associates”, along with the owner, ran a contracting company which charged exorbitant amounts to the workers for them to come to the U.S., paid them too little to pay the debt and “used debts to control them” and prevent them from leaving. The Dept. of Justice described this as a criminal enterprise. U.S. v. Mareno, et al. (M.D. Fla, 2022)
Largest Ever Whistleblower Award $250 Million. A former Biogen manager has been awarded $250 million as a portion of the $900 million settlement the government collected in an anti-kickback statutes’ suit for the company’s alleged sham payments to doctors and medical providers to direct business its way. The whistleblower awards are based on a percentage of the recovery, and the difficult litigation the whistleblower had to endure against a huge company. The prior largest award to a single whistleblower was $95 million. U.S. v. Brogen, Inc. (D. Mass., 2022)
International Business – The Long Reach of the Law. The International scope of business can create unusual cases. We sometimes forget that the U.S. is not just 50 states, and U.S. laws can reach halfway around the world, even when none of the parties involved are U.S. citizens. In this case of wage discrimination, Turkish workers claimed that a Hong Kong owned casino paid them less than Taiwanese and Italian employees. The casino is located on Saipan in the U.S. Northern Mariana Islands Territory. They alleged they had the same skills as the other H-2B Visa workers but received substantially less pay. The U.S. District Court on Saipan found that the plaintiffs could not establish that they were performing the same or substantially similar work as the other employees. Thus, they were not similarly situated, as is required for a viable discrimination case. Genc, et al. v. Imperial Pacific International, LLC (D.C. N. Mariana Is, 2022). As business becomes more international and diverse, more interesting employment issues arise.
Managers’ Stereotypes and Unfounded Assumptions Lead to $175,000 Liability. A dispatcher for a construction company was hired through a temp-to-hire agency. She performed well and was told she would be hired as a regular employee. The employee then disclosed to her supervisor that she was taking medication to deal with a PTSD condition and panic attacks. The supervisor then contacted the staffing company and requested the employee be removed and replaced because of her prior “nervous breakdowns.” The supervisor confirmed that the employee had no performance problems but felt the dispatcher job and environment were too stressful for her. The staffing agency informed the supervisor that terminating the employee based on a medical condition which did not affect job performance could violate the discrimination laws. Nonetheless, the supervisor ended the placement. The staffing agency was right. Terminating employment without showing job-related issues and engaging in the required interactive process does violate the ADA. The EEOC brought suit on behalf of the employee. Unfairly stereotyping an individual’s mental health impairments “treating them as fragile or incapable regardless of how successfully they have fulfilled their role” violates the law. The company “punished a good employee for doing nothing other than informing her supervisor about her condition.” The company settled, paying the employee $175,000, plus agreeing to train all supervisors. EEOC v. Pivitol Home Solutions (D.N. Ill, 2022) Staffing agencies and their clients are often held to be joint employers, when the agency collaborates with its client in a discriminatory decision. However, in this instance, the agency had no such liability because it objected to the supervisor’s stereotypes rather than collaborated. The agency had no power to force the company to keep the worker, despite the objection.
Good Harassment Policies and Procedures Make or Break the Case. Employer Wins Case due to Well-Designed Policy. In Banks et al v. City of Atlanta (11th Cir., 2022), the Federal Court of Appeals confirmed dismissal of a case by four employees who alleged sexual harassment by another worker. The court ruled they had not properly availed themselves of effective process and remedies available through the city’s policy. The city had a well disseminated anti-harassment policy. It contained multiple and easy to use reporting mechanisms. All employees received the policy in new hire orientation and received updates when issued. Thus, the city exercised reasonable care to prevent and address incidents of harassment. The plaintiffs sued over unwelcome sexual attention which had occurred for many months before they finally used the policy to make a complaint. Then the city promptly addressed the issues and fired the accused worker. The plaintiffs could not hold the city liable when they had failed to use the readily available and effective policy. [For information on how to design and operate an effective Anti-Harassment Policy and process, request the article Harassment Policy and Procedure by Boardman Clark LLP]
OTHER RECENT ARTICLES
These additional, recent articles can be found at BoardmanClark.com in the Labor & Employment section:
Code Section 457 (f) Potential Timing Trap for Non-Profit Employers and Employees,
by Attorney Jeff Storch, Boardman & Clark