Category Archives: Current Affairs

April 16, 2014

EEOC Loses Kaplan Credit Check Appeal

In 2010, the Equal Employment Opportunity Commission (EEOC) sued Kaplan Higher Education Corporation, claiming that Kaplan’s use of credit reports had a disparate impact on black applicants. The trial court threw out the EEOC’s suit because it used an invalid method for determining the race of Kaplan’s applicants. The EEOC appealed, and lost again. In a stinging opinion, the Sixth Circuit Court of Appeals agreed with Kaplan and rejected the methodology promoted by the EEOC’s expert witness. The Sixth Circuit’s opinion dooms the agency’s background check disparate impact lawsuit against Kaplan and slaps the EEOC for suing a private employer “for using the same type of background check that the EEOC itself uses.” The ruling also illustrates the EEOC’s failure to show that an employer’s use of neutral background checks results in a disparate impact on African-American applicants. EEOC v. Kaplan Higher Educ. Corp., No. 13-3408 (6th Cir. April 9, 2014).

Credit Checks Aimed At Preventing Employee Abuses

Kaplan is a for-profit test preparation and higher education provider. Because some Kaplan students receive financial aid, some Kaplan employees have access to students’ financial information, including information that is subject to the U.S. Department of Education confidentiality regulations. Years ago, Kaplan discovered that some of its financial-aid officers had stolen aid payments and some executives had engaged in self-dealing by hiring relatives as vendors for the company. To help stop these abuses, Kaplan began conducting credit checks on applicants for senior-executive positions as well as accounting, financial aid and other positions where employees have access to company or student financial information. Neither Kaplan nor its credit check vendor provided or linked the applicant’s race with the applicant’s credit report.

EEOC Alleges Kaplan’s Credit Checks Screen Out More African-Americans

Consistent with its efforts to target employers who use background check policies to screen applicants, the EEOC sued Kaplan alleging that Kaplan’s use of credit checks resulted in more African-Americans being rejected than whites, creating a disparate impact in violation of Title VII. To support its claim, the EEOC hired industrial and organizational psychologist Kevin Murphy to analyze Kaplan’s credit check data and offer an expert opinion based on the statistics. However, because the credit check information did not include the applicant’s race, Murphy and his team needed another method to determine race. They created a process that the EEOC called “race rating” in which a team of five “race raters” reviewed drivers’ license photos for a portion of the applicants to visually identify their race. Despite having credit information for 4,670 applicants, Murphy based his “expert” analysis on only 1,090 applicants, of whom 803 had been racially classified using Murphy’s “race rating” process.

“Homemade Methodology” Rejected by Court

The Sixth Circuit wholeheartedly rejected Murphy’s “race rating” process, stating that “[t]he EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.” The Court upheld the exclusion of Murphy’s testimony not only due to his faulty methodology, but also because the group of 1,090 applicants in Murphy’s statistical analysis was not representative of the applicant pool as a whole. Of Kaplan’s entire pool of 4,670 applicants, only 13.3% of the applicants were rejected on the basis of credit checks, but Murphy’s smaller pool of applicants had a fail rate of 23.8%. The Court found that Murphy’s unrepresentative sample might not equate to the respective fail rates of black versus white applicants and therefore, was an unreliable method for the EEOC to show disparate impact.

EEOC’s Own Background Check Policy Contradicts Its Attack on Private Employers For Use of Credit Checks

Although not central to the exclusion of the EEOC’s expert, the Court put the EEOC’s own background check policy front and center. Through the discovery process, Kaplan had successfully obtained information on the EEOC’s background check policies and pointed to the agency’s personnel handbook which states “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” To address those potential concerns, the EEOC runs credit checks for 84 of the 97 positions within the agency. The Court highlighted the disconnect between the EEOC attacking Kaplan for a credit check policy that the agency used itself.

Future EEOC Challenges to Employer Use of Credit Checks

The Kaplan decision is the latest in a string of EEOC losses in class actions alleging disparate impact based on an employer’s use of a neutral background check process. The EEOC seems unable to provide evidence to support a finding that African-Americans, Hispanics or other groups are being rejected for employment at higher rates than whites based on background checks. In addition, the EEOC’s own use of credit checks in hiring will be used against it in any future similar lawsuits. Although it remains to be seen whether the EEOC will back off of its systemic enforcement efforts related to the use of background checks, the trend for employers is positive.

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April 3, 2014

Severance Payments Are Wages Subject to FICA Tax

By Arthur Hundhausen and Mark Wiletsky

Employers offer severance payments to separating employees for numerous reasons, including rewarding long-time employees affected by a plant closure, to maintain goodwill, to secure a release and waiver of existing or potential claims, or to comply with company policies or agreements that require such payments. But whether the severance is dictated by policy or an individually-negotiated benefit, one sticky issue that employers may neglect to address is whether severance payments are subject to FICA taxes. The U.S. Supreme Court recently settled that issue by confirming that severance payments made to employees terminated against their will are taxable wages under FICA. United States v. Quality Stores, Inc., No. 12-1408, 572 U.S. ___ (2014). The Supreme Court’s ruling was consistent with the longtime IRS historical position on this issue.

Involuntary Terminations Due to Bankruptcy Triggered Severance Payments

Quality Stores terminated thousands of employees in connection with its involuntary Chapter 11 bankruptcy filing in 2001. The employees received severance payments under one of two plans, ranging from six to eighteen months of severance pay. Initially, Quality Stores reported the severance payments as wages for FICA purposes on the Forms W-2 filed with the IRS and the employees. Consistent with such reporting, Quality Stores paid the employer’s required share of FICA taxes and withheld the employees’ share of FICA taxes as well. Quality Stores then decided to file FICA tax refund claims with the IRS, totaling over $1 million in paid FICA taxes. The IRS neither allowed nor denied the refund claims, so Quality Stores sought a refund as part of its bankruptcy proceeding. Both the District Court and the Sixth Circuit Court of Appeals concluded that severance payments were not “wages” under FICA, meaning Quality Stores and its affected employees were entitled to a refund of the FICA taxes paid.

The Sixth Circuit’s decision, however, directly contradicted rulings by other Courts of Appeals, which concluded that at least some severance payments constitute “wages” for purposes of FICA taxes. The U.S. Supreme Court agreed to review the issue to resolve the split among the courts.

FICA’s Broad Definition of Wages Includes Severance Payments

FICA defines wages as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” Under the plain meaning of this definition, the Court found that severance payments made to terminated employees constitutes “remuneration for employment.” The Court noted that severance payments are made to employees only, often will vary depending on length of service, and are made in consideration for past services in the course of employment.

Looking at statutory history, the Court noted that in 1950, Congress repealed an exception from “wages” for “[d]ismissal payments which the employer is not legally required to make” from the Social Security Act and since that time, FICA has not excepted severance payments from the definition of “wages.” Agreeing with the government’s position in the case, the Court ruled that severance payments are taxable wages for FICA purposes.

Implications for Employers

The Court’s ruling confirms that employers are obligated to pay their portion of FICA taxes and withhold the employees’ portion of FICA taxes from severance payments. Depending on the amount of the severance at issue, this FICA obligation can greatly change the total payout amount for the employer. It also can catch unknowing employees off guard if they are expecting to receive a higher severance payment without FICA taxes being withheld. Employers should factor the FICA tax obligation into any severance offer to ensure that both the company and the separating employee understand the total amount that is at issue and the final amount that the employee will receive. In addition, employers offering severance payments should review their policies and practices to ensure that proper tax payments are made.

If employers identify past severance payments where no FICA taxes were paid or withheld, such employers should consult with their tax counsel to determine whether any corrective steps are required. In general, the applicable statute of limitations for an employer’s payroll tax liability begins on April 15 of the year following the year in which wages are paid (when prior year payroll tax returns are “deemed” to be filed), and expires after three years. For example, the applicable statute of limitations for payroll taxes owed for 2010 began on April 15, 2011 and expires on April 15, 2014.

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March 25, 2014

2014 Wyoming Legislature Keeps Status Quo, But Changes On The Horizon?

By Brad Cave

The 2014 session of the Wyoming Legislature did not pass any significant employment legislation, but the Legislature’s actions on some of the measures it did consider could portend a much more interesting 2015 legislative session.

Independent Contractors. The issue of independent contractors garnered the most legislative attention of any employment issue in the 2014 session. In February, we reported on House Bill 16 which would have created misdemeanor criminal penalties for “knowingly failing to properly classify an individual as an employee” leading to a reduction in unemployment contributions or workers compensation premiums or benefits. (A companion measure, Senate File 112, was introduced in the Senate but failed to get sufficient votes for introduction.) This measure was sponsored by the Joint Corporations, Elections and Political Subdivisions Interim Committee. Although it failed to garner the two-thirds vote required for introduction during a budget session, a majority of the representatives in the House voted in favor introduction in the 32-26 vote. This bill may rear its ugly head again in the 2015 general session, where introduction requires only a majority vote.

On the bright side of the independent contractor issue, Senate File 96 proposed an amendment that would have relaxed the definition of independent contractor in the unemployment and workers compensation statutes. Those two identical definitions currently require that a person classified as an independent contractor meet three requirements:

The person is free from control or direction over the details of the performance of services by contract and by fact;
The person represents his services to the public as a self-employed individual or an independent contractor; and,
The person may substitute another individual to perform his services.

These three factors have always been part of the commonly accepted definition of an independent contractor, as recognized by courts, other statutes and the Internal Revenue Service. But courts and the IRS weigh these and several other factors, without any single factor or group of factors controlling the determination. This approach permits employers to fashion independent contractor relationships under a variety of circumstances. Because of the “and” between the second and third factor, the Wyoming definition requires employers to meet all three of these factors, regardless of the other circumstances surrounding the independent contractor relationship. Add to that the fact that the second factor is wholly outside of the employer’s control, and you have a very strict and onerous definition.

Senate File 96 would have added a second test to the unemployment and workers compensation definitions to give employers two ways to prove independent contractor status. Under the second option, a person providing services would be properly classified as an independent contractor if the person:

is free from control or direction, asserted directly by the person or entity contracting for the services, over the details of the performance of services by contract and by fact; and,
has substantial investment used in connection with the performance of the services. The investment may include physical assets, financial assets, education, experience, intellectual property or any combination of these factors.

This proposed change would obviously open the door to a broader range of independent contractor relationships, and recognize the importance and prevalence of the sole proprietor independent contractor, particularly in technology services.

Senate File 96 passed the Senate with strong support, but the House defeated the measure by a vote of 54 to 6. Reasons for its demise may include timing – it was brought to the floor of the House on the last day for the entire House to consider new measures. Also, there may have been some confusion about whether the changes would be consistent with the IRS definitions of independent contractors and other statutory definitions. Because the House had little or no time to resolve these questions, the measure died. We encourage the Legislature to address this topic again next session.

Employer Access to Social Media Accounts. The surprise proposal of the session was Senate File 81, which would have put Wyoming on the bandwagon of other states which are restricting employer access to employees’ social media accounts. This proposal would have amended the Wyoming Fair Employment Practices Act to make it an unfair employment practice for employers to “request or require” any employee or applicant to disclose any username, password or other method of accessing personal social medial accounts. Social media accounts was broadly defined under the proposal, to include videos, images, blogs, podcasts, instant and text messages, email, internet websites or locations and other online services or accounts.

The measure included exceptions to the general restrictions for (1) access to employer social media accounts used for the employer’s business purposes; (2) when personal social media is reasonably believed to be relevant to an investigation of allegation of employee misconduct or violation of laws or regulations, if access is limited to the investigation or a related proceeding; (3) when conducting an investigation of an employee’s social media when required to comply with the requirements of state or federal law, or the rules of a self-regulating organization; or, (4) when an applicant applies for law enforcement employment.

Senate File 81 flew through the Senate with strong support, and started strong in the House, but was then defeated by a House vote of 36-16.

Our experience suggests that this is a solution in search of a problem. The huge majority of employers already avoid efforts to access employees’ social media because learning such information can cause all sorts of headaches for employers. In fact, employers usually learn about employees’ social media content when employees report to the employer some other employee’s bad behavior as described on social media, and usually expect the employer to do something about it. Although the exception for investigation-related access is helpful, even that language forces employers to couch their requests in terms that will simply raise the stakes of workplace situations.

Wyoming employers should pay attention next session to see if the Legislature takes up this topic.

Misconduct Disqualifications from Unemployment Benefits. Senate File 76 added a new definition of misconduct to the unemployment compensation statute to outline the circumstances under which a former employee may be disqualified from unemployment benefits. It was signed by Governor Mead on March 10, 2014, and will become effective on July 1, 2014.

The unemployment compensation statute already states that an employee will be disqualified from benefits if the Department of Workforce Services finds that the employee was discharged for “misconduct connected with his work” but does not define that phrase. To fill the gap, several years ago the Wyoming Supreme Court adopted a definition that required a showing of an act of the employee that indicated a disregard of the employer’s interests or the commonly accepted duties, obligations and responsibilities of an employee, to include carelessness or negligence of such a degree or recurrence as to reveal willful intent or intentional disregard of the employer’s interests or the employee’s duties and obligations. Violation of company policies or rules could qualify as misconduct under the court’s definition, provided the employee acted intentionally. The court’s definition also provided that inefficiency, failure of good performance due to incapacity or inability, ordinary negligence or good faith errors in judgment were not adequate to disqualify an employee.

The new definition of “misconduct connected with work” seems to adopt much of the Wyoming Supreme Court’s interpretation of the phrase. The phrase is now defined as “an act of an employee which indicates an intentional disregard of the employer’s interests or the commonly accepted duties, obligations and responsibilities of an employee.” The amendment also excludes from the definition of misconduct, (1) ordinary negligence in isolated instances; (2) good faith errors in judgment and discretion, and (3) inefficiency or failure in good performance as the result of inability or incapacity.

Because the new statutory definition is very similar to the definition the Supreme Court has used for years, we will need to see how the definition is applied by the Department and the courts to determine whether the misconduct standard has changed at all through this amendment.

Computer Trespass. Although not an employment measure, House Bill 178 created a new criminal offense that may give employers a new tool to help prevent employee sabotage. This measure, which passed both houses and was signed by Governor Mead, created the crime of computer trespass. A computer trespass occurs when a person knowingly and without authorization, with the intent to damage or cause the malfunction of a computer, system or network, sends malware, data or a program which alters, damages or causes the malfunction of the computer, system or network, or causes it to disseminate sensitive information.

The measure also created a civil remedy for computer trespass, and permits a person who suffers damage due to a trespass to sue the computer trespasser for damage to computers, systems, or networks, and the costs incurred because of the loss of use of those assets. The person brining the action can recover the damages caused by the trespass, as well as the costs incurred to identify the trespasser and to serve a complaint on the trespasser.

House Bill 178 was passed by both houses, and signed by Governor Mead on March 10, 2014. The new law will become effective on July 1, 2014.

This new law may be useful to employers if former or disgruntled employees attempt to misuse an employer’s computer systems. Employers should adopt and periodically review technology policies that carefully define when and how employees are authorized to use the employers’ computer, systems and networks. If an employee causes computer damage under questionable circumstances, such policies may help employers draw clear lines about when an employee’s access is unauthorized and pursue civil remedies under the statute.

And the Rest of the Pack. A few other employment measures never saw the light of day during the 2014 session. House Bill 45, which would have raised the minimum wage, and House Bill 57, which would have restricted employers’ ability to restrict the post-termination value of accrued vacation, both failed to get enough votes for introduction.

Bottom Line. The 2015 legislative session should be interesting, with the possible return of independent contractor and social media legislation. These are significant issues for Wyoming employers. We will keep you posted.

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March 5, 2014

NLRB GC Identifies Initiatives and Policy Concerns

By Steve Gutierrez

Richard Griffin, General Counsel for the National Labor Relations Board (NLRB) recently issued a memorandum that identifies his initiatives and the areas of labor policy and law that are particularly concerning to him. The memo informs the NLRB regions which cases must be submitted to the Division of Advice at the Board’s Washington, D.C. headquarters so that the General Counsel’s office may “provide a clear and consistent interpretation of the [National Labor Relations] Act.”

The list of mandatory advice cases is split into three categories: (1) matters that are particularly concerning to the General Counsel and involve his initiatives; (2) cases involving difficult legal issues that are relatively rare in the regions and issues where there is no established precedent or the law is changing; and (3) cases that have traditionally been submitted to headquarters for legal advice. A look at the issues identified in the first two categories provides employers with useful insight into areas that will be targeted for further legal scrutiny and possible reversal of existing labor precedent.

General Counsel Initiatives and Issues of Labor Policy Concerns

GC Griffin points out a dozen labor issues that are top initiatives for him, including the following:

The applicability of Weingarten rights in non-unionized settings. (Weingarten rights provide union employees the right to have a union representative present during an employer’s investigation interview that could result in disciplinary action against the employee. In 2004, the NLRB ruled that non-union employees are not entitled to have a representative present during such meetings. IBM Corp., 341 NLRB 1288 (2004)).
Whether employees have a right to use an employer’s e-mail system for union-related communications and the standard concerning discriminatory enforcement of company rules and policies. (In 2007, the NLRB established a narrow standard for discrimination regarding company rules about solicitation and communications, ruling that an employer could make distinctions in its rules that might adversely affect employees’ NLRB Section 7 rights so long as the policies (and enforcement of the policies) did not discriminate along union-related lines. Register Guard, 351 NLRB 1110 (2007)).
Whether a “perfectly clear” successor must bargain with a union before setting the initial terms of employment. (The NLRB takes the position that in cases when it is obvious that a new employer that acquired a unionized workplace will retain all of the employees in the bargaining unit, the successor employer is obligated to bargain even over the initial terms of employment – the so-called “perfectly clear” exception.)
Whether an employer violates the NLRA when it acts with an unlawful motive in hiring permanent strike replacements. (Under NLRB precedent going back to 1964, the employer’s motive for replacing economic strikers is essentially irrelevant. Hot Shoppes, 146 NLRB 802 (1964). The GC is likely looking for an appropriate case to overrule this long-standing decision so that an employer’s desire to defeat the economic strikers’ rights to reinstatement will be deemed unlawful.

Additional issues that are on the GC’s list include cases where the possible remedies for unfair labor practices related to an organizational campaign include access to nonwork areas, access to the employer’s electronic communications systems and equal time for the union to respond to captive audience speeches.

Difficult Labor Issues or Cases Without Clear Precedent

Griffin also instructs the regions to submit to headquarters cases that involve difficult legal issues or those without clear, established legal precedent. Some of those issues include:

Mandatory arbitration agreements with class action waivers not resolved by D.R.Horton
Cases involving “at-will” provisions in employer handbooks that are not resolved by existing advice memoranda.
Cases concerning undocumented workers where the issues are unresolved.
Union access to lists of employee names and addresses during an organizing campaign where the employees are widely dispersed or have no fixed work location.
The validity of partial lockouts.
Cases involving novel conduct, such as excessive use of loudspeakers, coordinated “shopping” or corporate campaigns.

Don’t Be The Precedent Setting Case

Employers should review and become familiar with the GC’s list of priority issues. If any of the noted issues arise in your workplace, you’d be wise to consult with legal counsel early on because if the NLRB gets involved, the regional directors and officers will be forwarding your case to Washington for advice from the GC’s office. Proper handling of the matter from the start may help avoid your case being the conduit for the GC to establish new precedent that furthers his initiatives.

A copy of the memorandum may be found here.

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February 20, 2014

EEOC Challenges Separation Agreements

By Mark Wiletsky

If you use standard separation agreements to secure a release and waiver of claims from employees who are laid off, fired, or who otherwise threaten a claim, you might want to review your agreement. In a lawsuit filed recently in Illinois federal court, the EEOC alleges that a company with national operations interfered with its employees’ right to file charges with the EEOC and state fair employment practices agencies by conditioning the employees’ receipt of severance pay on signing an overly broad separation agreement.

According to the EEOC, five separate paragraphs (which are commonly found in separation agreements) are improper:

Cooperation: Employee agrees to promptly notify the Company’s General Counsel by telephone and in writing if the employee receives a subpoena, deposition notice, interview request or other process relating to any civil, criminal or administrative investigation or suit.
Non-Disparagement: Employee will not make any statements that disparage the business or reputation of the company or any of its officers or employees.
Non-Disclosure of Confidential Information: Employee agrees not to disclose to any third party or use for him/herself or anyone else Confidential Information without the prior written authorization of the company.
General Release of Claims: Employee releases company for any and all causes of action, lawsuits, charges or claims, including any claim of unlawful discrimination, that the employee may have prior to the date of the agreement.
No Pending Actions; Covenant Not to Sue: Employee represents that he/she has not filed or initiated any complaints prior to signing the agreement and agrees not to initiate or file any actions, lawsuits or charges asserting any of the released claims.

Disclaimer Allowing Workers to Bring Claims to the EEOC Not Enough

Recognizing that employers may not prevent workers from filing charges with the EEOC or participating in EEOC or state agency investigations, the paragraph containing the covenant not to sue contained a sentence stating “[n]othing in this paragraph is intended to or shall interfere with Employee’s right to participate in a proceeding with any appropriate federal, state or local government agency enforcing discrimination laws, nor shall this Agreement prohibit Employee from cooperating with any such agency in its investigation.” In its complaint, the EEOC says this disclaimer is insufficient as it is contained in only one of the paragraphs that contain limits on the employees’ rights.

What does this mean for employers?

It’s important to remember that the Court has not agreed with the EEOC’s allegations—and, in fact, it might reject them outright. Regardless, the risk of such actions is enough to justify a closer look at your standard separation or release agreement. Even an agreement that has been repeatedly reviewed and revised can likely be improved for clarity. Make sure the agreement is understandable, does not contain excessive “legalese,” and it should not contain provisions that interfere with an employee’s right to file a charge with the EEOC or state agency.

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February 19, 2014

Utah Rejects Multi-Employer Worksite Doctrine: General Contractor Not Responsible for Occupational Safety of All Workers on Worksite

By Cole Wist (formerly of Holland & Hart) and Trey Overdyke

In a significant break from federal rulings, the Utah Supreme Court recently rejected the multi-employer worksite doctrine as incompatible with the Utah Occupational Safety and Health Act (UOSH Act). Hughes General Contractors, Inc. v. Utah Labor Comm., 2014 UT 3. Generally, the multi-employer worksite doctrine makes a general contractor responsible for the safety of all workers on a worksite, including the safety of employees of subcontractors and other third parties. In rejecting the legal doctrine (which has developed under the federal Occupational Safety and Health Act (OSH Act)), the Utah Supreme Court held that Utah’s state occupational safety and health law regulates conduct between employers and employees and does not permit a general contractor to be held liable for the safety violations of a subcontractor.

General Contractor Appealed Safety Violations by Subcontractor

Hughes General Contractors oversaw a construction project at Parowan High School involving over 100 subcontractors. One of the subcontractors, B.A. Robinson, performed masonry work on the project. The Utah Occupational Safety and Health Division found that scaffolding used and erected in connection with the masonry work violated the UOSH Act. The UOSH compliance officer determined that Hughes was responsible for the safety conditions for B.A. Robinson’s employees under the multi-employer worksite doctrine. The Division cited and fined both Hughes and B.A. Robinson for the scaffolding violation.

Hughes contested the citation, arguing against the legal viability of the multi-employer worksite doctrine under the UOSH Act. An Administrative Law Judge upheld the citation under the doctrine and the Utah Labor Commission’s Appeals Board affirmed. The Appeals Board looked at the governing Utah statute, section 34A-6-201, found that it “mirrored its federal counterpart” and applied federal case law that recognized the multi-employer worksite doctrine to hold Hughes liable for the safety violations of a subcontractor. Hughes appealed to the Utah Court of Appeals which asked the Utah Supreme Court to decide the applicability of the multi-employer worksite doctrine under the UOSH Act.

Workplace Safety Obligations Extend Only to Employers under the UOSHA

Similar to its federal OSHA general duty clause counterpart, the UOSH Act requires each Utah employer to provide “a place of employment free from recognized hazards that are causing or are likely to cause death or physical harm to the employer’s employees and comply with the standards promulgated under this chapter.” Utah Code § 34A-6-201(1). At the trial level, the Utah Labor Commission read this provision broadly to extend the safety responsibilities to anyone with supervisory control over a particular worksite. The Utah Supreme Court instead interpreted this provision as focused on the employment relationship. The Court held that the duty to furnish a workplace free from recognized hazards and to comply with the UOSH Act standards is one that extends between employer and employee. The Court stated “the relevant control is not over the premises of a worksite, but regarding the terms and conditions of employment.” In determining whether an employment relationship exists, the relevant factors include the existence of covenants or agreements, the right to direct and control the employee, the right to hire and fire, the method of payment (i.e., wages versus payment for a completed job or project) and the furnishing of equipment.

Applying its analysis, the Court found Hughes was not an “employer” in connection with the work done by B.A. Robinson’s workers. B.A. Robinson was the sole employer involved in the masonry work and controlled the workers involved in the scaffolding problems that resulted in the citations. Hughes did not have any of the rights of control that would deem it an employer in connection with the work done by B.A. Robinson’s employees (e.g., no right to hire or fire, no payment of wages, etc.).

Utah Safety and Health Act Distinguished from Federal Law

Numerous federal courts have recognized the multi-employer worksite doctrine under the federal OSH Act. However, the Utah Supreme Court analyzed the structure of the federal OSH Act and found that it sets forth the duty to comply with certain safety standards in separate sub-sections of the statute. By contrast, the Court held that Utah law requires “each employer” to provide a safe workplace and to comply with promulgated standards in a single provision of the statute.

Second, the Utah Supreme Court distinguished its decision because of the lack of administrative deference that applied in interpreting Utah law. The Court noted that when federal courts resolve ambiguity in a statute, the courts look to the interpretation of the statute provided by the relevant federal agency and defer to the agency’s viewpoint as long as it is based on a permissible construction of the statute. The Court wrote that federal courts typically have not rendered an independent assessment of the meaning of the relevant OSH Act provision and instead have deferred to the federal agency’s regulation that construes the statute to allow for the multi-employer worksite doctrine. However, Utah has not adopted a similar standard of judicial deference to an agency’s resolution of a statutory ambiguity so the Court conducted its own independent determination to find that the Utah law did not allow for the multi-employer worksite doctrine.

Important Victory for General Contractors

It is unclear what broader impact this decision may have. For now it is a significant victory for general contractors overseeing projects in Utah. Time will tell if state courts in other occupational safety and health state plan jurisdictions will follow Utah’s lead in rejecting the multi-employer worksite doctrine. Should these courts flirt with the idea, they may find the Utah Supreme Court’s analysis to be a helpful road map. Further, it will be interesting to watch the impact this may have on the multi-employer worksite doctrine in federal OSHA jurisdictions. We will keep you posted on any new developments on this issue.

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February 12, 2014

Wyoming Legislature Convenes, Again!

By Bradley T. Cave

The Wyoming Legislature convened its 2014 Budget Session on February 10. Most of the Legislature’s time will be consumed with the state’s finances, but a few significant employment measures have been proposed. If any of these bills can obtain the two-thirds vote required for introduction of non-budget bills, Wyoming employers may need to call their legislators!

Criminal Penalty for Misclassification of Employees as Independent Contractors. House Bill 16 is the most concerning measure proposed this session, and it is a surprise that the measure was approved by the Joint Corporations Committee. It would create a misdemeanor criminal penalty for “knowingly failing to properly classify an individual as an employee” to reduce the employer’s unemployment contributions or to reduce or avoid the payment of benefits to an employee. The offense would permit a sentence of up to 90 days in jail and a fine of up to $750.00. The measure would add the same language to the workers compensation statute, making it a misdemeanor offense to knowingly fail to properly classify an employee on a workers compensation payroll report or generally in connection with workers compensation coverage.

Employers should aggressively resist this proposal because it would greatly raise the stakes of classification decisions that are rarely clear cut. One of the three factors in the definition of an independent contractor for unemployment and workers compensation purposes – whether the individual “represents his services to the public” – is not even in the employer’s control, and could change without the employer’s knowledge. A second factor in the definition – whether the worker is free from control or direction over the details of performance of the services – often depends on the perspective of the person looking at the relationship. Independent contractor relationships are not “check the box” decisions. While an employer could not be convicted of the proposed crime unless they “knowingly” misclassified an employee, the determination of whether a decision was “knowingly” incorrect is the stuff of jury trials. Also, the measure is not needed. Employers already face aggressive auditing by the Employment Tax Division about the independent contractor classification of workers, and audits can result in civil liability and substantial administrative costs.

Finally, don’t buy the argument that the criminal penalty will only be pursued in the worst cases – if a criminal penalty for misclassification is adopted, it will remain a subtle and unspoken threat to employers whenever the Department of Workforce Services conducts an audit and questions independent contractor relationships, and employers may need to “lawyer up” and protect themselves at an entirely new level whenever the Department audits those relationships.

Update: Although House Bill 16 failed to get the two-thirds vote needed to be introduced during the budget session, it was proposed by the Joint Corporations committee and is likely to be raised in future legislative sessions.

Minimum Wage Increase. House Bill 45 is a perennial attempt to raise the minimum wage for employees not covered by the federal Fair Labor Standards Act. The measure would increase the standard minimum wage from $5.15 per hour to $9.00 per hour, and increase the minimum hourly wage for tipped employees from $2.13 to $5.00. As in past years, this bill is not likely to make much progress.

Repeal of Vacation Pay Amendment. Last year, the Legislature amended the wage collection statute to give employers the flexibility to offer paid vacation that was forfeited upon termination of employment, rather than being considered unpaid wages which were required to be paid out after termination. House Bill 57 would repeal the language adopted last year. We expect this measure also has a dim future.

Bottom Line. Employers should pay attention to House Bill 16 and watch if it is proposed again in future legislative sessions. If it makes any progress, employers will want to contact their legislators. You can track the progress of these and all the measures before the Legislature here through the link entitled “2014 Bill Tracking Information.”

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February 7, 2014

NLRB Again Proposes Rules to Speed Union Elections

By John M. Husband

After dropping its appeal of a District Court ruling that invalidated its “ambush election” rules, the National Labor Relations Board (NLRB or Board) has proposed those rules again. By a vote of 3-2, the Board reissued proposed amendments to its representation case procedures. The Board states that the amendments are designed to remove unnecessary delays and inefficiencies in representation case procedures. The effect, however, is expected to be an increase in union wins as the union election procedures are streamlined and votes occur quicker.

Board Lacked Quorum When Rules Adopted in 2011

The NLRB first proposed its rules to speed up the union election process in June of 2011. At the time, the Board had just three members as two positions were vacant. Despite an outcry by the business community and receipt of almost 66,000 comments, two of the three Board members voted to adopt the rules. The final rules were published in December of 2011 and went into effect on April 30, 2012.

The U.S. Chamber of Commerce and other interested groups sought to stop the implementation of the ambush election rules by suing the NLRB in federal court in the District of Columbia. Just two weeks after the rules went into effect, the judge in the case invalidated the rules, finding the Board lacked a three-member quorum needed to pass the rules. Although two of the Board members voted in favor of the rules, the third Board member, the sole Republican, did not participate in the vote. Finding that the rules were invalid for lack of the statutorily-mandated quorum, the judge did not need to address the challenge to the rules’ constitutionality and the lack of authority of the NLRB to adopt the rules. In a distinct incident of foreshadowing of this week’s events, the judge specifically stated “nothing appears to prevent a properly constituted quorum of the Board from voting to adopt the rule if it has the desire to do so."

The NLRB appealed the District Court’s decision, asking the U.S. Court of Appeals for the District of Columbia Circuit to reverse the lower court’s ruling. On December 9, 2013, the NLRB withdrew its appeal pursuant to a joint stipulation by the parties. It did so in anticipation of doing exactly what the District Court judge had suggested, namely proposing the rules again so that a properly constituted quorum of the Board can vote to adopt the rules. Board Chairman Mark Gaston Pearce and Board members Kent Y. Hirozawa and Nancy Schiffer approved the re-issuance of the proposed rules.

“Ambush Election” Rules Would Speed Union Election Process

Published in the February 6, 2014 Federal Register, the proposed changes are virtually identical to those proposed in 2011. Highlights of the proposed amendments include:

A union may file its representation petition electronically, rather than by hand or regular mail.
A hearing must be held within 7 days of the union filing its petition.
Employers must provide a comprehensive “statement of position” on the union’s representation petition in advance of the hearing; any issues not included in the statement are waived.
Pre-election hearing is to determine only whether a question concerning representation exists; issues related to individual voter eligibility may be deferred to post-election procedures.
The parties right to file a post-hearing brief is discretionary as allowed by the hearing officer.
Deadline for employer to provide voter eligibility list is shortened from 7 work days to 2 work days from the Direction of Election.
Employer must provide email addresses and telephone numbers for employees eligible to vote in addition to the required names and home addresses.
Election need not wait for 25 days after the issuance of a Direction of Election.
Pre-election appeals to the Board are eliminated, leaving only a discretionary appeal of both pre- and post-election issues after the election occurs.

Two Board Members Dissented

Board members Philip A. Miscimarra and Harry I. Johnson III are not in favor of the proposed rules. Although stating that they share in the majority’s desire to protect and safeguard the rights and obligations of those subject to the National Labor Relations Act, they do not believe it necessary to adopt a “wholesale rewrite” of the Board’s election procedure.

Interested parties and the public may submit comments on the proposed rules until April 7. Electronic comments may be submitted through http://www.regulations.gov. Comments may also be mailed or hand delivered to: Gary Shinners, Executive Secretary, National Labor Relations Board, 1099 14th Street NW., Washington, DC 20570. The Board intends to hold a hearing on the amendments during the week of April 7. We will keep you informed of developments on this issue.

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February 4, 2014

Colorado General Assembly Considers Labor and Employment Bills

By John Karakoulakis

Colorado’s 2014 Legislative Session began on January 8th and nearly 400 bills have been introduced already. Below is a description of proposed legislation impacting labor and employment issues for Colorado employers. The proposed changes to the workers’ compensation system could result in one of the more controversial bills this session. We will keep you apprised of these and any other bills affecting employment matters as they progress through the legislative process.

2014 Labor & Employment Legislation

Number	Title	Summary
Draft	Workers’ Compensation Benefits	The bill seeks to make changes to the following three areas of the workers’ compensation system: 1) Allow for more doctor choice for workers; 2) Address the issue of job separation when a claim is made; and 3) Add a penalty provision for employers that willfully placed employees in a dangerous situation. This last provision is drawing the most concern because it is seen as overly broad and would expose employers to litigation.
Draft	Worker Access to Employment Records	Would allow employees to have access to their personnel records and provide written rebuttal information to be added to their file. Creates a new civil cause of action for an employee to file against an employer for not complying with the provisions of the bill. The employee can seek actual damages, back pay, reinstatement, or other equitable relief, and reasonable attorney fees and costs.
SB-005	Wage Claims	Reintroduced this year after significant changes from the version of the bill that was killed by the business community last year. The bill speeds up the process by which workers can claim they did not get their full wages and creates a process by which the Colorado Department of Labor and Employment can adjudicate those claims. These changes which remove last year’s criminal penalties and a provision to require claims to be settled in district court resulted in most business associations taking a neutral stance on the bill, so it is now expected to pass.
HB-1033	Regulatory Reform	Provides relief for business under 100 employees that unknowingly violate a regulation that was put in place within the prior year and one that is defined as a “minor violation” which is mostly clerical in nature and does not affect the life safety of the public or workers. The first violation of such a rule will result in a warning and written education sent to the business.
HB-1040	Drug Testing Criminal Provisions	Establishes a level 1 drug misdemeanor for an employee who is legally required to undergo drug testing as a condition of the person's job and who uses a controlled substance without a prescription; or knowingly defrauds the administration of the drug test. Also establishes a level 2 drug misdemeanor for any other person who knowingly defrauds a drug test.

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January 30, 2014

Firing for Off-Duty Medical Marijuana Use to be Reviewed by Colorado Supreme Court

By Emily Hobbs-Wright

The Colorado Supreme Court announced that it will review last year’s lower court decision that upheld the termination of an employee who tested positive for marijuana but was unimpaired at work following his off-duty marijuana use for medical reasons. As we previously wrote on this blog (see this post), last April, the Colorado Court of Appeals ruled that using pot during non-working hours is not a “lawful activity” under the state’s lawful off-duty activity statute (C.R.S. §24-34-402.5). Coats v. Dish Network LLC, 2013 COA 62. The Court of Appeals reached its decision by relying on the fact that marijuana use remains illegal under federal law and therefore, medical marijuana use, though legal in Colorado, was not “lawful” for purposes of the Colorado lawful off-duty activity statute.

The Colorado Supreme Court will review two questions:

1. Whether the Lawful Activities Statute protects employees from discretionary discharge for lawful use of medical marijuana outside the job where the use does not affect job performance; and

2. Whether Colorado’s Medical Marijuana Amendment makes the use of medical marijuana “lawful” and confers a right to use medical marijuana to persons lawfully registered with the state.

Over the next few months, the parties will submit written briefs to the Court presenting their positions on these two questions. With the importance of this case for both Colorado businesses and the marijuana industry, watch for additional groups to ask permission to submit briefs advocating their respective viewpoints. Though the case before the Colorado Supreme Court deals with medical marijuana, the Court’s decision could establish precedent that would apply to the legal use of recreational marijuana. We will watch this case very closely and will report on any new developments as they occur.

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