September 15, 2015

Wyoming Discrimination Charges: A Look at the Numbers

Mark Twain is credited with saying that “facts are stubborn things, but statistics are more pliable.” The Wyoming Labor Standards Division and the EEOC both keep statistics of the types of discrimination charges the agencies receive from Wyoming employees. When it comes to discrimination charges, the allegations are almost always pliable, but the statistics show us some interesting things for employers to ponder.

Wyoming Labor Standards Charges

The Wyoming Fair Employment Practices Act makes it unlawful for employers to discriminate on the basis of age, sex, race, creed, color, national origin, ancestry, pregnancy or disability. The Wyoming Department of Workforce Services’ Labor Standards Division is the state agency that processes and investigates most complaints of employment discrimination filed by Wyoming workers.

In 2014, the Wyoming Labor Standards Division received a total of 203 discrimination charges. It processed 182 of those charges and deferred the remaining 21 charges to the federal Equal Employment Opportunity Commission (EEOC) because they were either untimely under state law or contained allegations of Equal Pay Act violations. The Division reports the breakdown of 2014 charges by allegation as follows:

Type	No. of Charges	Percentage of Total Charges
Retaliation	76	41.8%
Sex	55	31.2%
Disability	46	25.3%
Age	33	18.1%
National Origin	27	14.8%
Race	21	11.5%
Religion	7	3.8%

You math wizzes in the audience have already exclaimed that the percentages exceed 100%, and the author must be numerically challenged. But, many charges include allegations of multiple types of discrimination. Indeed, charges often include an allegation of discrimination on the basis of protected class, and an allegation of retaliation in response to complaints about the discrimination. As you can see, Wyoming had more retaliation charges than any other type of charge. That mirrors the nationwide statistics where retaliation charges lead the list of most-filed charges. Not far behind are sex discrimination charges, with disability charges as the third most-frequently filed.

EEOC Charge Statistics for Wyoming Charges

The EEOC also maintains charge statistics for each type of discrimination that is alleged under the federal discrimination laws that it enforces, and annually publishes those statistics on a state-by-state basis.The EEOC count includes charges under Title VII, which prohibits discrimination on the basis of sex, race, color, religion and national origin, as well as charges under other federal discrimination laws such as the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Genetic Information Nondiscrimination Act.

The EEOC’s most recent data for fiscal year 2014 (Oct. 1, 2013 through Sept. 30, 2014) shows that the federal discrimination charges for Wyoming received by that agency track the Labor Standards Division’s statistics, with retaliation charges leading the list. With a total of 69 discrimination charges filed with the EEOC by Wyoming workers in FY2014, here are the numbers by type:

Type	No. of Charges	Percentage of Total Charges
Retaliation	30	43.5%
Sex	29	42%
Disability	25	36.2%
Age	20	29%
Race	14	20.3%
National Origin	6	8.7%
Color	4	5.8%
Equal Pay Act	3	4.3%
Religion	2	2.9%

Wyoming employers received significantly more sex discrimination charges in 2014 than compared to 2013. The percentage of sex discrimination charges filed with the EEOC went up from 29.2% in FY 2013 to 42% in FY2014. Retaliation charges topped the list in both FY2013 and FY2014. The full list of EEOC charge receipts for Wyoming for the last five years may be viewed on the EEOC’s website at http://www1.eeoc.gov/eeoc/statistics/enforcement/charges_by_state.cfm#centercol.

Lessons Learned

The charge statistics from the Wyoming Labor Standards Office and the EEOC reflect discrimination complaints filed by applicants and employees, not cases in which discrimination was determined to exist. Even so, the charge numbers for Wyoming suggest a number of action items for employers who want to avoid being included in next year’s statistics.

First, retaliation gets a lot less attention from employers than it should, as these numbers show. Whenever an employee complains about something at work that implicates a statutory right, like the right to be free from discrimination or harassment, or requests an accommodation or FMLA leave, the employee has engaged in protected activity. Most discrimination laws prohibit adverse actions because an employee has engaged in protected activity. And, it makes little difference whether the employee’s underlying complaint or request was valid – the employee is still protected against retaliation.

Employers need a strong, stand-alone anti-retaliation policy, not just a couple of sentences at the end of the policy prohibiting discrimination. Employers also need to train supervisors and managers about the significance of employee complaints, and how the law protects employees. And careful consideration should be given to any adverse employment action for an employee who has opposed discrimination in the workplace, been interviewed as part of an investigation, or participated in a discrimination proceeding.

Second, the prevalence of sex discrimination charges, which includes harassment charges, suggests that employers should review and update their discrimination and harassment policies, and continue periodic harassment prevention training. A strong harassment prevention policy, with understandable definitions and examples and multiple reporting options, is usually the best defense against a charge of sexual harassment. Of course, any observed or reported harassment must be investigated and any behavior which violates your policies must be stopped.

Finally, adopt a policy that guides employees who wish to request an accommodation, and train supervisors how to recognize employee requests that could be interpreted as a request for accommodation. Once a request is made, follow a thorough interactive process to explore reasonable accommodations that do not place an undue burden on your organization but will allow the person to perform their job. Only when you are absolutely sure that no reasonable accommodation is available should you terminate a disabled employee.

These action items will go a long way toward keeping you from becoming a statistic!

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September 11, 2015

Broader Joint-Employer Test Leads to Teamsters Win At Browning-Ferris

By Steve Gutierrez

In a previous article, we noted that the NLRB’s recent Browning-Ferris ruling was significant for those employers who use temporary or staffing agencies to provide workers. The Board set a new, broader test for joint-employer status that does not require the purported joint employer to exercise control over the workers in question. Instead, if the company has the right to exercise control over the terms and conditions of certain workers, it can be deemed a joint employer even if it never actually exercises that control. Now we can see the significance of the impact.

Based upon the joint-employer determination, the impounded ballots of the workers of Leadpoint Business Services, the entity that staffed Browning-Ferris’s California recycling plant, were counted as part of the bargaining unit, which provided a 73-17 margin in favor of representation by the Teamsters. Depending on the outcome of any objections filed by the company, the NLRB will certify the union as the collective bargaining representative for the recycling center’s workers. This allows the unit to collectively bargain over the terms and conditions of employment at that facility.

Bargaining Over Terms Of Contingent Workers

Think about this: Browning-Ferris does not “employ” the workers placed at its facility by staffing agency, Leadpoint. It doesn’t hire, pay, provide benefits to, or fire them. Yet, it will be required to sit down at the bargaining table across from the Teamsters to negotiate the terms and conditions of employment of those contingent workers over which it retains authority to control. That is the result of being found a joint employer of the bargaining-unit workers.

Extension of Joint-Employer Test to Other Contexts?

Joint-employer status is a critical determination for companies that use contingent workers as well as for franchises. And, it can apply not only in the union context, but also in other employment law contexts, such as for pay purposes under the Fair Labor Standards Act or for discrimination under Title VII. Even though the standards and policy behind a joint-employer relationship under other employment laws may differ from those behind the National Labor Relations Act, this new, broader test will likely be asserted in these other contexts in order to bring in franchisors and companies that use contingent workers as potentially liable parties.

Appeal Over Joint-Employer Test Coming?

Because of the high stakes involved in this ruling, it would not be surprising if Browning-Ferris (which is part of Republic Services, Inc.) appealed the NLRB’s ruling, taking its case to the applicable court of appeals. Another option is that after the union is certified, Browning-Ferris could refuse to bargain with the Teamsters which would lead to more proceedings before the Board, and ultimately, the courts. Given that the Board has already ruled in favor of the union on this matter, the company will likely have a better chance seeking review by circuit judges. Either way, this matter is probably not over.

Stay tuned and we will let you know what develops further. What we do know, is the NLRB will not sit idle and we should expect it to use its power to push the envelope in favor of the nation’s unions.

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September 8, 2015

Colorado’s Parental Leave For Academic Activities Ended September 1

By Emily Hobbs-Wright

The school year is upon us and working parents will once again find themselves juggling job duties and school functions. The juggling may be a bit more difficult for some parents this year, as those that work for larger Colorado employers are no longer guaranteed time off to attend their kid’s school activities. As of September 1st, Colorado employers with 50 or more employees are no longer required by law to provide parents time off to attend academic activities for their school children. The Parental Involvement in K-12 Education Act (Academic Leave Act) automatically repealed on that date, relieving covered employers of providing that leave.

Colorado Senate Committee Shot Down Extension of Academic Leave Act

In effect since 2009, the Academic Leave Act required employers with 50 or more employees to provide its full-time employees up to 6 hours in any one-month period, and up to 18 hours per academic year, of unpaid leave from work to attend a child's academic activities. C.R.S. §8-13.3-101 et seq. Part-time workers were entitled to pro-rated leave based on the amount of hours worked. Covered academic activities included attending parent-teacher conferences, and meetings related to special education needs, truancy, dropout prevention and disciplinary concerns.

The 2009 law specified that it would repeal on September 1, 2015. This past legislative session, Representatives John Buckner and Rhonda Fields introduced a bill that sought to extend the Academic Leave Act indefinitely. House Bill 1221 also attempted to expand the law to:

include pre-school activities, rather than just K-12;
add more covered activities to include attending meetings with a school counselor and attending academic achievement ceremonies; and
require school districts and charter schools to post on their websites and include in their district/school-wide communications information to parents and the community at large about the leave requirement.

The bill passed the House and was sent to the Senate. The Senate committee to which it was assigned voted 3-2 to kill the bill. By doing so, the bill never got to a vote in the full Senate and died. The result is that the Academic Leave Act was not extended and the original repeal date of September 1, 2015 remains.

Action Items

With the repeal of the Academic Leave Act and no federal law mandating this type of leave, Colorado employers with more than 50 employees no longer need to offer parents of school-age children leave to attend covered school functions. You may, of course, choose to voluntarily continue to offer parents time off to attend their child’s school functions. If you do, decide whether you will continue to offer it under the same terms as was mandated by law or if you wish to set your own parameters about eligibility, amount of leave, notice requirements, whether documentation of the activity is required, etc. Then, update your policies and let employees know about any changes.

If you choose not to offer parents time off to attend their child’s academic activities, update your policies and procedures to delete that type of leave. Revise your employee handbook and any intranet policies to reflect that academic leave is no longer available. Inform supervisors and managers so that they know how to handle any requests or questions. Importantly, communicate to employees that the academic leave provision was repealed and let them know about any other time off policies, if any, that may apply to allow them to attend school functions.

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September 2, 2015

Utah Supreme Court: Misappropriation of Trade Secrets Presumes Irreparable Harm

By Bryan Benard

A Utah employer has dodged a $229,482 fee award and can continue its lawsuit against a former employee for misappropriation of company trade secrets and violation of a non-disclosure agreement. The Utah Supreme Court recently revived InnoSys, Inc.’s claims against a former engineer, Amanda Mercer, holding that the company established a prima facie case of trade secret misappropriation that gave rise to a rebuttable presumption of irreparable harm. The divided Court reversed the grant of Mercer’s summary judgment motion, allowing the company to take its claims to trial. InnoSys, Inc. v. Mercer, 2015 UT 80.

Employee Copied Sensitive Company Information to Thumb Drive and Personal Email Account

During her employment as an engineer for InnoSys, Mercer forwarded confidential company emails to her personal Gmail account. On the day that she was terminated for poor performance, Mercer copied the company’s confidential business plan onto a thumb drive.

Following her termination, Mercer filed a claim for unemployment benefits with the Utah Department of Workforce Services. After her claim was denied, she appealed, submitting a number of protected documents, including the confidential business plan and protected emails, into the administrative record. At that point, InnoSys began asking for details as to when and how she gained access to the confidential materials. Mercer then deleted all of the emails and InnoSys files. InnoSys filed a complaint in court, alleging that Mercer had breached her non-disclosure agreement (NDA), misappropriated company trade secrets in violation of the Uniform Trade Secrets Act (UTSA) and breached her fiduciary duty to the company.

Employee Changed Her Story But Still Won Judgment From Lower Court

Throughout discovery, Mercer changed her story regarding the use of her Gmail account and the timing of her acquisition of the company’s confidential business plan. Despite first claiming that she had IT’s permission to transfer company emails to her personal Gmail account, Mercer later admitted that she did not have anyone’s permission to do so. As to the business plan, Mercer initially testified in her deposition that she had copied the business plan onto a thumb drive because she had been asked to review the plan the day before her termination and was unable to access it via the company’s secure remote network. She later admitted that she copied it on the day of her termination and did not have it in her possession the day before she was fired.

Despite Mercer’s inconsistent statements regarding how she obtained the company’s confidential information, the district court ruled in Mercer’s favor on all of InnoSys’s claims. It did so after concluding that “there was no objectively reasonable basis to believe that Mercer had harmed InnoSys or was threatening to do so.” In addition to dismissing all of InnoSys’s claims against Mercer, the lower court also granted Mercer’s motion for sanctions against InnoSys and to collect attorneys’ fees as the prevailing party. The court ordered InnoSys to pay Mercer $229,481.58. InnoSys appealed.

Evidence of Harm

At the crux of the appeal was whether InnoSys needed to provide sufficient evidence of harm or threatened harm as a result of Mercer’s misappropriation and/or disclosure of company trade secrets to avoid summary judgment and proceed to trial. The lower court had found that InnoSys had not presented sufficient evidence that it had been harmed by Mercer’s admitted taking and disclosure of confidential company information and therefore, could not support its claims.

The Utah Supreme Court disagreed, holding that where a company establishes a prima facie case of misappropriation of trade secrets under the UTSA, it is entitled to a presumption of irreparable harm. The company was not required to produce evidence of financial damages as it also sought an injunction to prevent Mercer from further disclosing or using its confidential information.

The presumption of irreparable harm, as well as affirmative evidence of threatened harm, was also enough to keep alive the company’s claim for breach of the NDA. By reversing the grant of summary judgment in Mercer’s favor, the Court overturned the award of sanctions and attorneys’ fees against InnoSys.

Lessons Learned

First, put procedures in place to retain all signed employee agreements and documents. InnoSys initially could not find the NDA that Mercer had signed when her employment began. The lower court was hard on the company for that failure, and did not want to accept a copy of its standard NDA as evidence of what Mercer signed. The company eventually found the NDA signed by Mercer but the turmoil caused by its absence highlights the importance of strict record keeping for important employee agreements. Be certain to keep your signed agreements and acknowledgments in a secure location. You never know when you might need to enforce them.

Second, when employment ends for any reason, take steps to ensure that the departing employee returns all company information and property without retaining any copies. It is unclear from the opinion whether InnoSys asked Mercer for the return of any company materials when she was fired but it appears that it learned she had confidential company information after she submitted the company documents as part of her unemployment appeal. Don’t wait until after there has been a disclosure or further misappropriation but instead, proactively cut off access to company materials and seek the return of all company property. And remind departing employees of their continued obligations under confidentiality policies and NDAs.

Finally, enforce your NDAs to ensure continued protection of your company trade secrets and other proprietary information. Allowing a former employee to retain or disclose confidential information will undermine your future chances of arguing that such information is indeed a trade secret. You must continually guard that information or it will lose its protected status.

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August 28, 2015

NLRB Throws Out Years of Joint-Employer Precedent – Adopts Two-Part Test For Joint-Employer Status

By Brian Mumaugh

The National Labor Relations Board (NLRB or Board) has thrown employers a curve by overruling 30 years of long-standing decisions that narrowed the circumstances under which a joint-employer relationship could be found to exist. In a closely-watched decision, the Board revised its joint-employer standard, dictating a broader two-step test that will result in entities that use contingent workers more likely being deemed joint employers for union representation purposes. Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015).

Two-Part Joint Employer Test

In its 3-to-2 decision, the Board reaffirmed a 1982 joint-employer standard under which the Board will find that two or more statutory employers are joint employers of the same employees if they share or codetermine the essential terms and conditions of employment. First, the Board will determine whether the putative employer has a common-law employment relationship with the employees in question. If that relationship exists, the Board then will determine whether the employer possesses sufficient control over the employees’ essential terms and conditions of employment to permit meaningful collective bargaining.

Employer Need Not Exercise Control Over Employees

Over the past 30 years, joint-employer cases have defined the degree of control that an employer must assert over the workers to be deemed a joint employer. Those cases, including Laerco and TLI, required that the putative employer actually exercise control over the terms and conditions of employment to be deemed a joint employer. In addition, exercising that control had to be direct and immediate, not of a limited and routing nature. Simply possessing the authority to exercise control, without actually exercising that control, was not enough under long-standing Board law.

That requirement is now gone. The Board ruled, in Browning-Ferris, it will no longer require that a joint employer exercise its authority to control the terms and conditions of the employees’ employment. The proper inquiry will be whether the statutory employer “possesses sufficient control over the work of the employees to qualify as a joint employer with” another employer. In addition, control exercised indirectly, such as through an agent or intermediary, may be sufficient to establish joint-employer status.

BFI Deemed A Joint Employer With Temp Agency

After articulating its revised test, the Board applied it to the BFI case at hand. The case arose after a union sought to include certain workers at the BFI Newby Island Recyclery in a bargaining unit during a union election. The workers were employed by Leadpoint Business Services, a temporary labor services agency, and were assigned to work at BFI’s recycling plant as sorters, screen cleaners and housekeepers. The contract between BFI and Leadpoint specifically stated that Leadpoint was the sole employer of the workers and there was no employment relationship between BFI and those workers.

The Board concluded that BFI was a joint employer of the workers with Leadpoint. Contributing factors leading the Board to determine that BFI is a common-law employer and shares or codetermines essential terms and conditions of employment include:

BFI retained the right to require that Leadpoint meet or exceed BFI’s own standard selection procedures and tests, requires drug tests and prohibits Leadpoint from hiring workers deemed to be ineligible for rehire by BFI;
BFI retained the right to reject any worker that Leadpoint refers to its facility “for any or no reason” and to discontinue the use of any personnel that Leadpoint assigned to it;
BFI managers had requested the immediate dismissal of certain workers due to misconduct and Leadpoint dismissed them from BFI’s facility shortly afterward;
BFI controlled the speed of the material streams and specific productivity standards for sorting;
BFI managers assigned specific tasks that need to be completed, determined where workers are to be positions and exercised near-constant oversight of workers’ performance;
BFI identified the number of workers it needs, the timing of the shifts and when overtime is necessary, even though Leadpoint selects the specific employees who will do the work;
Despite Leadpoint determining pay rates, administering payroll and benefits and retaining payroll records, BFI prevented Leadpoint from paying employees more than BFI employees in comparable jobs and used a cost-plus model under the contract;
After a new minimum wage law went into effect, BFI and Leadpoint entered into an agreement for BFI to pay a higher rate for the services of Leadpoint employees.

As a result of finding that BFI was a joint employer of these workers, the Board ordered the Regional Director to open and count the impounded ballots cast by the employees in the petitioned-for unit. If the employees voted for union representation, BFI will have to collectively bargain over the terms and conditions of employment over which it retains the right to control.

Implications For Employers

The Board seeks to prevent companies from insulating themselves from the application of labor laws by using temporary or other contingent workforces and this new standard will further their goal. This new, broader standard for joint-employer status will make it easier for unions to include contingent workers into bargaining units at the facilities for which they are providing services. In addition, as pointed out by the dissent, this change “will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts and picketing.”

If your organization uses contingent workers, you should review your existing labor services agreements and, to the extent possible, renegotiate any terms that reserve your right to control the terms and conditions of the contingent workers’ employment. You also should attempt to eliminate any functional oversight and decision-making to ensure that you are not exercising any control, whether directly or indirectly, over the contingent workers. The reservation of the right to dictate any terms or conditions of employment, or the actual exercise of that control in any way, is likely to lead you to be deemed a joint employer of those workers.

We will keep you posted of further developments, including any appeals of this decision.

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August 24, 2015

Home Care Workers Entitled to Minimum Wage and Overtime

By Mark Wiletsky

Agencies that provide companionship or live-in care services for the elderly, ill or disabled will now have to pay their home care workers minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Reversing a lower court decision, the Court of Appeals for the District of Columbia upheld the Department of Labor’s (DOL’s) new regulations that removed those employees from the “domestic service” exemption. The Court also struck down the challenge to the DOL’s revised definition of companionship services that now places a duty restriction on workers who may be considered exempt.

Extension of FLSA Protections Is Reasonable

For years, individuals who provide companionship or live-in care services were exempt from the minimum wage and overtime rules under the FLSA, even if those individuals were employed by a third party. In 2013, however, the DOL reversed its prior interpretation of the domestic service exemption, adopting new regulations stating that third-party employers of companionship-services and live-in employees could no longer use the exemption to avoid paying minimum wage and overtime pay to their home care workers. The new regulations also narrowed the definition of companionship services: a worker providing exempt services can spend no more than 20 percent of his or her total hours worked on the provision of care, including meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care.

Before the new rules went into effect, trade associations representing third-party agencies that employ home care workers challenged the DOL’s new regulations in court and the district judge declared them invalid. The lower court ruled that the DOL’s decision to exclude a class of employees from the exemption because they were employed by a third-party agency contravened the plain terms of the FLSA. The court also threw out the DOL’s revised definition of companionship services, with its 20 percent limit on care-related tasks, as contrary to both the text and intent of the statutory exemption.

On August 21, 2015, the Circuit Court of Appeals for the District of Columbia disagreed and upheld the new regulations. The appellate court found that the FLSA exemption did not specifically address the third-party employment question and therefore, the DOL had the authority to create rules and regulations to fill in the gap.

The court also determined that the DOL’s new interpretation was “entirely reasonable.” The DOL explained that its change in policy was due to the change in the market for home health care. In the 1970’s, professional care for the elderly and disabled was primarily provided in hospitals and nursing homes so that services in the home were largely that of an “elder sitter” or companion. More recently, however, individuals needing a significant amount of care were now receiving that care in their own homes, provided by professionals employed by third-party agencies rather than by workers hired directly by care recipients or their families. These changes, as well as Congress’s intent to bring more workers within the FLSA’s protections, convinced the court that the DOL’s changed interpretation was reasonable.

Potential Adverse Effects of FLSA Coverage Unfounded

The third-party agencies challenging the DOL’s regulations argued that requiring minimum wage and overtime pay for home care workers would raise the cost of their services, making home care less affordable and creating a “perverse incentive for re-institutionalization of the elderly and disabled.” The DOL countered by pointing to fifteen states where minimum wage and overtime protections already extend to most third-party-employed home care workers and noted that there was no reliable data that these pay protections led either to increased institutionalization or a decline in the continuity of care. The DOL also cited the industry’s own survey that indicated that home care agencies operating in those fifteen states had a similar percentage of consumers receiving 24-hour care as those agencies in non-overtime states.

The DOL further argued that the new rules would improve the quality of home care services, thus benefitting consumers, because the revised regulations would result in better qualified employees and lower turnover. It would also reflect the reality that home care workers employed by third-party agencies are professional caregivers, many of whom have training or certifications, who work for agencies that profit from their employees’ services. The appellate court found the DOL’s position reasonable, upholding its regulations.

No Standing to Challenge Narrowed Definition of Companionship Services

By ruling that the third-party agencies could not use the domestic services exemption, the court removed the ability of those agencies to use the companionship services definition to exempt home care workers from minimum wage and overtime protections. As a result, the trade associations’ members challenging the new, narrowed definition of companionship services would not be directly harmed by the revised definition. Because they would not suffer any injury from the narrowed definition, the challengers lacked standing to oppose the revision, denying the court of jurisdiction to resolve that issue. Consequently, the court ordered that judgment be entered in favor of the DOL.

Practical Effect for Home Care Employers

Pending any appeals, the DOL’s new regulations removing the ability of third-party home care agencies to exempt their home care workers from FLSA minimum wage and overtime pay will go into effect. Employers of home care workers should take steps now to ensure that they comply with the FLSA minimum wage requirement for all hours worked as well as paying an overtime premium for all hours worked over 40 per week. In addition to updating your pay practices, be sure to revise any affected policies and statements in your employee handbook, operational manual, timekeeping procedures, job advertisements and recruiting materials.

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August 18, 2015

NLRB Unanimously Declines Jurisdiction Over Northwestern University Football Player Union Petition

By Steve Gutierrez

The National Labor Relations Board (NLRB or Board) declined to assert jurisdiction over the petition filed by a union seeking to represent Northwestern University’s scholarship football players. In 2014, the Regional Director for the Region covering Northwestern University found that Northwestern’s football players who received grant-in-aid scholarships were employees within the meaning of the National Labor Relations Act (NLRA or Act) and were entitled to petition for union representation. In its unanimous decision announced yesterday, the Board dismissed that union petition, deciding that it would not assert jurisdiction over these specific college athletes as doing so would not promote stability in labor relations or further the purposes of the Act.

Board Refuses to Decide Whether College Athletes Are Statutory Employees

After considering the positions of the union seeking to represent Northwestern’s football players, the University, who contended that its scholarship players were not statutory employees, and the many interested parties who submitted briefs, the Board refused to decide the controversial issue raised by the Regional Director’s 2014 decision, namely whether Northwestern’s grant-in aid scholarship football players are employees under the NLRA. Instead, by refusing to assert jurisdiction, the Board dismissed the union’s petition to represent this group of college athletes, effectively nullifying the impounded ballots that had been cast in the union election in April 2014.

Single Team Athletes Unlike Other Covered Cases

The Board distinguished this group of athletes from other types of students and athletes for which the Board has asserted jurisdiction. First, the Board focused on the nature of the college sports leagues and structure of college football bowl divisions. It noted that the National Collegiate Athletic Association (NCAA) and the Big Ten Conference (to which Northwestern University belongs) dictate eligibility requirements, minimum academic standards, scholarship terms, amateur status, mandatory practice hours and other rules under which the scholarship athletes may compete. The Board saw these rules as distinguishing the scholarship players from graduate student assistants or student janitors and cafeteria workers whose employee status the Board had considered in other cases.

The Board then distinguished Northwestern’s scholarship players from professional sports leagues, which are covered by union contracts. Previous Board cases involving professional sports have involved leaguewide bargaining units that cover all players across the league. Here, the union sought to represent players from a single team. The Board cannot assert jurisdiction over the majority of colleges and universities that make up the college football divisions as the vast majority are public institutions which are not employers under the Act. Consequently, the Board could not assert jurisdiction over most of Northwestern’s primary competitors. The Board found that asserting jurisdiction over a single team, rather than across an entire league, would not promote stability in labor relations.

Rare Limit On Board’s Reach

In recent years, the Board has extended its reach, offering NLRA protections in expansive ways and revising rules to make it easier for unions to win elections. Today’s ruling is a rare exception to that expansive trend, curtailing the reach of the NLRA to the scholarship football players at a private university. The Board did, however, express the limited nature of this decision, noting that changed circumstances may prompt a reconsideration of this issue in the future. We’ll have to wait to see if unions try again to organize scholarship athletes under different conditions.

August 11, 2015

Misclassification of Independent Contractors Under Increased Scrutiny

By A. Dean Bennett

The Idaho Department of Labor is stepping up efforts to identify companies that misclassify employees as independent contractors. It recently signed a memorandum of understanding with the U.S. Department of Labor to work together to help prevent the misclassification of workers. In doing so, Idaho joins 23 other states who have signed similar agreements, including Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Rhode Island, Texas, Utah, Washington, Wisconsin and Wyoming.

Why Focus on Independent Contractor Status?

Federal and state labor agencies care whether workers are classified as employees rather than independent contractors because the classification can determine whether the individual is entitled to important workplace benefits and protections. Many employment laws, such as those governing minimum wage and overtime pay, meal and break periods, family and medical leave, workers’ compensation, unemployment compensation, employment taxes and anti-discrimination, apply only to employees, not independent contractors. Consequently, if an employee is misclassified as an independent contractor, he or she misses out on the protections and benefits provided by such laws.

Another reason cited by David Weil, Administrator of the U.S. Department of Labor Wage and Hour Division, is that employers who follow the law by properly classifying workers as employees often cannot compete on a level playing field with employers who misclassify their workers as independent contractors. Companies who misclassify workers often avoid the added costs of properly paying, insuring and withholding employment taxes for workers who should be treated as employees. According to the DOL, this lower cost of utilizing independent contractors may give non-compliant companies an unfair advantage in the marketplace. For these reasons, remedying misclassifications is at the forefront of the agencies’ enforcement efforts.

What’s At Stake For You?

Companies that misclassify employees as independent contractors face substantial liability. Ken Edmunds, Director of the Idaho Department of Labor, suggests that even though businesses often use independent contractors because they think it will save them money, in the end, misclassifications can cost them “a whole lot more,” with the potential for severe monetary fines and even criminal charges.

The Internal Revenue Service (IRS) and state tax entities will pursue back taxes with interest based on the employer’s failure to withhold income taxes and make FICA contributions. Employers also remain liable for unemployment taxes related to the misclassified workers. In addition to the back taxes, employers may face criminal and civil penalties.

Employers also face wage claims for unpaid overtime pay that would have been due to the worker if properly treated as an employee. If the misclassified individual was denied leave under the FMLA or participation in a group benefit plan, the employer may face claims under those respective laws. Failure to complete I-9 forms or other employment eligibility requirements may result in additional liability. In short, you may become liable for failing to comply with or offer any benefit or protection that was denied to the individual because of the misclassification.

What Should You Do?

If your company uses independent contractors in your workforce, take steps now to audit whether those workers meet the tests for independent contractor status. Remember, you do not escape liability if the individual asks or agrees to be treated as an independent contractor. You must analyze whether the individual meets the requirements for that classification.

Although numerous factors go into determining whether a worker is an independent contractor, the Idaho Department of Labor lists two criteria that must be met:

The worker must be free from the right of direction or control in performing work, both under a contract of service and in fact; and
The worker must be engaged in an independently established trade, occupation, profession or business.

A fact sheet titled “Independent Contractor or Employee?” provides additional detail to help you determine the proper classification of workers and is available on the Idaho Department of Labor’s website. A similar fact sheet on Employment Relationships Under the Fair Labor Standards Act (FLSA) is available from the U.S. Department of Labor, Wage and Hour Division.

With both the federal and state labor departments stepping up efforts to audit companies to discover employee misclassifications, taking steps now to avoid the associated liability is warranted. It also will help your organization avoid costly lawsuits filed by independent contractors who missed out on overtime pay and other employee benefits.

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July 23, 2015

EEOC Concludes Sexual Orientation Discrimination Violates Title VII – Will Courts Agree?

By Dustin Berger

According to an opinion from the Equal Employment Opportunity Commission (EEOC) last week, Title VII’s bar on sex discrimination also forbids employment discrimination based on sexual orientation. It is unclear, however, whether courts facing Title VII sexual orientation or gender identity discrimination claims will agree with the EEOC’s conclusion.

Federal Employee Alleged He Was Denied Permanent Position Because He Is Gay

An employee of the Federal Aviation Administration (FAA) filed a complaint alleging that he was denied a permanent position as a Front Line Manager at the Miami Tower TRACON facility because he is gay. He alleged that his supervisor, who was involved in the selection process, had made several negative comments about his sexual orientation, such as “We don’t need to hear about that gay stuff.”

The FAA declined to process the employee’s claim under rules that govern federal employee complaints of Title VII. The employee appealed to the EEOC. This teed up the issue of whether Title VII covers claims of sexual orientation discrimination.

Three Reasons Why Sexual Orientation Already Covered As Sex Discrimination

In its decision, the EEOC details three reasons why it concludes that sexual orientation discrimination is sex discrimination prohibited by Title VII:

Sexual orientation discrimination necessarily entails treating a worker less favorably because of that person’s sex. As an example, the EEOC states that if an employer suspends a lesbian employee for having a picture of her female spouse on her desk but does not suspend a male employee for displaying a photo of his female spouse, the employer took an adverse action against the lesbian employee that it would not have taken if she were male.
Sexual orientation discrimination is associational discrimination on the basis of sex. The EEOC views sexual orientation discrimination as treating a worker differently for associating with a person of the same sex. It opines that if associating with a person of a different race, such as an interracial marriage or a biracial child, constitutes race discrimination, as numerous courts have ruled, then discrimination based on associating with a person of the same sex constitutes sex discrimination.
Sexual orientation discrimination involves discrimination based on gender stereotypes. In its 1989 Price Waterhouse v. Hopkins decision, the U.S. Supreme Court ruled that Title VII prohibited an employer from discriminating against a female employee who the employer deemed was not “feminine enough” and did not conform to the female stereotype. Pointing to numerous court cases from the past decade, the EEOC stated that discrimination against LGBT employees based on gender stereotypes constitutes prohibited sex discrimination under Title VII.

No New Protected Class Needed

The EEOC acknowledges that Title VII does not specifically prohibit employment discrimination based on sexual orientation. It doesn’t have to, says the EEOC.

The EEOC asserts that interpreting Title VII as not covering sexual orientation as part of prohibited sex discrimination would insert a limitation into the text of Title VII that Congress had not included. It suggests that nothing in the text of Title VII supports the conclusion that Congress intended to “confine the benefits of [the] statute to heterosexual employees alone.” Instead, the EEOC states that even if Congress did not envision the application of Title VII to protect LGBT employees, the interpretation of the law should not be limited only to what Congress had in mind when it passed the law in 1964.

To dispel claims that the EEOC’s interpretation creates a new class of covered persons, the EEOC points to other expanded interpretations of Title VII which did not result in a new protected category. For example, when courts held that Title VII protected employees based on their association with persons of a different race, it did not create a new protected class of “people in interracial relationships.” Similarly, when the Ninth Circuit ruled that religious discrimination under Title VII extended to protect an employee who lacked religious beliefs, no new class of “non-believers” was created. Instead, the EEOC asserts that “courts have gone where the principles of Title VII have directed.”

What Does This Mean?

Sexual orientation and/or gender identity discrimination is already prohibited by law in many states and municipalities. In addition, federal contractors are prohibited from discriminating on those bases as well. If your organization is a federal contractor or is covered by a state or local law prohibiting employment discrimination on those grounds, you should already have updated your equal employment opportunity policies and practices to prohibit harassment, discrimination and retaliation based on sexual orientation and gender identity.

If your organization is not covered by those laws, but is subject to Title VII (which covers employers with 15 or more employees), consider whether to adopt the EEOC’s position. The courts may interpret Title VII differently and ultimately may reject the EEOC’s inclusion of sexual orientation as a form of sex discrimination.

Indeed, for many years, as advocates of the right to same-sex marriage pressed their cases in courts, many courts rejected the argument that discrimination based on sexual orientation was a form of discrimination based on sex. However, as the EEOC observes in its opinion, many courts that have taken up this question more recently have been willing to conclude that discrimination based on sexual orientation is a form of sex discrimination. The EEOC points to both the Ninth Circuit’s landmark Perry decision and the U.S. Supreme Court’s recent same-sex marriage decision in Obergefell as signaling that courts are ready for this interpretation.

While it may take some time for the federal appellate courts to provide more definitive rulings, be aware that the EEOC will pursue claims on behalf of, or in support of, allegedly aggrieved LGBT employees and applicants. You’ll need to weigh your risk tolerance to determine how to respond. We will keep you posted on further developments.

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July 20, 2015

Unpaid Internships Permitted Under New Test

By Brad Williams

A federal circuit court has adopted a new test permitting employers to use unpaid interns where the “tangible and intangible benefits provided to the intern are greater than the intern’s contribution to the employer’s operation.” In Glatt v. Fox Searchlight Pictures, Inc., 2015 WL 4033018 (2nd Cir. July 2, 2015), the U.S. Court of Appeals for the Second Circuit rejected a stringent and outdated six-part test promoted by the Department of Labor (DOL) for determining whether “interns” are actually “employees” within the meaning of federal wage and hour law. Glatt will have a significant impact on intern-initiated litigation, including by making class or collective actions more difficult to prosecute in jurisdictions that adopt the test.

Background to Glatt

Internships have become a hot-button topic in recent years. In 2010, the DOL issued “Fact Sheet #71” to educate private sector, for-profit employers about unpaid interns and to dissuade their use. Derived from a 1947 U.S. Supreme Court case that addressed the use of “trainees” hoping to become railroad brakemen, the Fact Sheet listed six criteria that the DOL believed must be satisfied for interns to be excluded from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements. Most notably, these criteria included requirements that employers derive “no immediate advantage” from interns’ activities and that interns not “displace” regular employees (e.g., by preventing their hiring, or by absorbing overtime hours). The DOL took the position that all six criteria must be satisfied for the “trainee” / “intern” exception to apply. However, because most employers receive at least some benefit from unpaid interns, the DOL’s rule would effectively preclude all private sector, for-profit businesses from using unpaid interns, except in unusual cases involving bona fide educational programs and job shadowing.

Based largely on the DOL’s position, interns initiated a wave of class and collective actions across the country alleging that they had been wrongly classified as “interns” rather than “employees.” Despite ambiguity in the controlling case law, employers settled many of these lawsuits at great expense and out of fear that satisfying the DOL’s six-factor test would prove impossible. For instance, Condé Nast settled a class action involving 7,500 interns for $5.8 million in 2014, and Saturday Night Live settled a similar lawsuit involving thousands of interns for $6.4 million that same year. Other employers elected to discontinue their internship programs altogether to avoid the threat of litigation.

Case Law Response to DOL’s Six-Factor Test

Despite employers’ capitulation in the face of class and collective action threats, the actual test for distinguishing between “interns” and “employees” under the FLSA has always been ambiguous. Although the DOL has long promoted its six-part test, it has vacillated in opinion letters and other administrative guidance regarding whether all six criteria must be satisfied. For their part, courts have afforded the DOL’s test some deference, but have rarely held that all six criteria must be met. Instead, they have considered the “totality of the circumstances” or the “economic realities” of interns’ and employers’ relationships in determining whether interns (or similar workers) are actually “employees.” Many of these cases are based upon U.S. Supreme Court cases like Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947), and Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290 (1985). Other courts – most notably the U.S. Court of Appeals for the Sixth Circuit in Solis v. Laurelbrook Sanitarium & Sch.. Inc., 642 F.3d 518 (6th Cir. 2011) – have eschewed the DOL’s six-part test altogether, favoring a “primary beneficiary” test which looks at which party receives the primary benefit of an internship. In Solis, the Sixth Circuit concluded that the “primary beneficiary” test was supported by Walling v. Portland Terminal Co., 330 U.S. 148 (1947), the very same 1947 U.S. Supreme Court case on which the DOL purported to base its six-factor test.

District Court Decisions in Glatt and Hearst

The Glatt case was originally filed in 2011 in New York by former interns of Fox Searchlight Pictures who had worked on the film Black Swan. A similar lawsuit was filed in 2012 in New York by former interns of Hearst Corp. who had worked on magazines including Harper’s Bazaar and Marie Claire. Both cases were high-profile and amongst the first wave of intern-initiated lawsuits to work their way through the courts. Both were closely watched by employers concerned about the legality of internships.

In 2013, the district court in Glatt held that two of plaintiffs were “employees” rather than “interns”/ “trainees” under the FLSA and state law. The court applied a version of the DOL’s six-factor test but did not expressly hold that all six factors must be satisfied. The court also granted class and conditional collective action certifications to a third plaintiff.

Also in 2013, the district court in Hearst held that the magazine interns were not “employees” under the FLSA and state law based on a “totality of the circumstances” test. The court denied the plaintiffs’ motion for class certification. Because Glatt and Hearst addressed the same issues, but reached different results, they were eventually consolidated for argument on appeal to the U.S. Court of Appeals for the Second Circuit.

Second Circuit’s Adoption of “Primary Beneficiary” Test in Glatt

On July 2, 2015, the Second Circuit issued its long-awaited decision in Glatt. That same day, it issued a summary order in the companion case, Hearst. In Glatt, the court rejected both the DOL’s six-factor test, and the plaintiffs’ insistence that they were automatically “employees” of Fox Searchlight Pictures because the company had received an “immediate advantage” from their work. The court found the DOL’s six-factor test unpersuasive, and afforded it virtually no deference because it was based upon the DOL’s reading of Walling, which the Second Circuit concluded it was equally competent to construe (along with other U.S. Supreme Court cases).

Accepting Fox Searchlight Pictures’ argument, the Second Circuit adopted a “primary beneficiary” test, holding that “the proper question is whether the intern or the employer is the primary beneficiary of the relationship.” Although not fully articulated in the court’s decision, this test is supported by both a defensible reading of Walling, and later U.S. Supreme Court cases mandating consideration of the “totality of the circumstances” and the “economic realities” of the parties’ relationships. To help lower courts apply the new test, the Second Circuit listed seven non-exclusive factors to consider in determining whether an intern or an employer is the “primary beneficiary” of an internship:

The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Because the district court in Glatt had not expressly considered these factors, the Second Circuit vacated the lower court’s decision and remanded for further proceedings. Given its holding in Glatt, the Second Circuit also vacated the district court’s decision in Hearst and remanded for further proceedings.

Glatt’s Impact in the Second Circuit and Beyond

Glatt’s “primary beneficiary” test is more favorable to employers than the DOL’s six-factor test. The fact that employers receive some benefit from interns’ work no longer means that internships are automatically illegal. In addition, the individualized assessment required to determine whether an intern – as opposed to an employer – benefits more from an internship under the test means that class and collective actions might now prove impossible to certify. In fact, the Second Circuit vacated the district court’s class and conditional collective action certifications in Glatt, and affirmed the district court’s denial of class certification in Hearst. This strongly suggests that class and collective actions may no longer be appropriate vehicles for resolving intern classification disputes in jurisdictions that apply the new test. To the extent that Glatt or Hearst proceed in the courts below, the defendants will likely face liability only as to individual interns, not entire classes.

Glatt’s new test is currently only the law in the Second Circuit, which covers Connecticut, New York, and Vermont. However, the test for distinguishing between “interns” and “employees” remains in flux in many jurisdictions, and other federal circuit courts may adopt similar tests as more intern-initiated lawsuits work their way through the courts. For instance, the U.S. Court of Appeals for the Tenth Circuit – which covers Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming – currently applies a “totality of the circumstances” test based on Reich v. Parker Fire Prot. Dist., 992 F.2d 1023 (10th Cir. 1993). However, like Glatt, Reich recognized that the DOL’s six-factor test was unpersuasive, and the case contains language consonant with Glatt’s “primary beneficiary” test.
The Tenth Circuit may eventually adopt a more favorable standard if and when it revisits intern classification. Regardless of how the case law develops, however, Glatt plainly illustrates the weakness in the DOL’s six-factor test, and shows that employers may profitably resist intern class or collective actions, even when it requires making new law.

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