Today, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking the U.S. Department of Labor ("DOL") from implementing its latest revisions to the Fair Labor Standards Act ("FLSA").
In March 2014, President Obama issued a memorandum directing the Secretary of Labor to "modernize and streamline" the existing overtime regulations for executive, administrative, and professional employees. On May 23, 2016, the DOL published the Final Rule, increasing the salary level required to qualify for "white collar" overtime exemptions from $23,660 ($455 per week) to $47,476 ($913 per week). Additionally, the Final Rule increased the total annual compensation requirement for "highly compensated employees" from $100,000 to $134,000. The Final Rule was to take effect on December 1, 2016, with a mechanism for automatically updating the salary and compensation levels every three years.
A coalition of 21 states and more than 50 business organizations challenged the DOL's Final Rule in federal court, arguing that the Obama administration overstepped its authority. The court ultimately concluded that the states established a prima facie case that the DOL's salary level under the Final Rule and the automatic updating mechanism are without statutory authority and issued a nationwide preliminary injunction.
In June of this year, we reported that a judge in Texas issued a nationwide preliminary injunction blocking enforcement of the Department of Labor's controversial Persuader Rule, which would have required disclosures by any consultant -- including a company's attorney -- who engaged in activities for the purpose of directly or indirectly persuading employees in connection with their right to union representation. In a November 16 order, Judge Sam Cummings made the earlier injunction permanent, with nationwide effect. Judge Cummings' order notes that his preliminary injunction is currently on appeal to the U.S. Court of Appeals for the Fifth Circuit.
Given the upcoming change to a Republican administration, it seems unlikely that the Persuader Rule will be revived.
Our prior report on the Persuader Rule is available here.
The passage of Initiative Measure 1433 in Washington means that minimum wage workers who are at least 18 years old will see their wages increase from $9.43 to $11 per hour, effective January 1, 2017. Subsequent wage hikes each year will increase the minimum wage in Washington to $13.50 per hour by 2020, after which the minimum wage will be adjusted for inflation each year. Employers are precluded from counting any portion of tips or service charges toward the minimum wage.
In addition, beginning January 1, 2018, Washington employers will be required to provide paid sick leave to all employees. Sick leave will accrue at a rate of not less than one hour for each 40 hours worked by employees, who are entitled to carry over at least 40 hours of unused sick leave to the following year. Although employers are not required to pay out unused sick leave upon termination of employment, employees who terminate with sick leave on the books are entitled to have their unused balance restored if they return to work with the same employer within 12 months. Employers may permit the use of paid sick leave for other purposes. Consequently, an employer that provides more generous leave benefits may choose to modify its existing plan to cover paid sick leave obligations under the new law.
Competition is essential to a growing and healthy economy, which is widely said to benefit consumers. However, according to the White House, when companies compete, it also benefits workers.
Earlier this year, President Obama issued an executive order requiring executive departments and agencies to identify specific anti-competitive practices, such as blocking access to critical resources that may restrict meaningful consumer or worker choice or unduly stifle new businesses. Departments and agencies were also tasked with identifying potential actions to address those anti-competitive practices and promote more competitive markets.
In a separate statement, the White House cited research suggesting that low-wage workers without access to trade secrets are increasingly being required to sign non-competes, and that many workers are poorly informed about the existence and legal implications of their non-competes. The White House called for individual states to address the anti-competitive impacts of non-competes, noting that such agreements negatively affect worker mobility and bargaining power, constrict the labor pool, prevent workers from launching new companies, and may ultimately restrict consumer choice. The statement cited several examples of states, including Oregon, that have already taken steps to restrict the use and scope of non-compete agreements.
In furtherance of the President’s Executive Order, the FTC and the DOJ's Antitrust Division last week issued anti-trust guidance for human resource professionals and others who are involved in hiring and compensation decisions. The targeted conduct includes express or implicit agreements not to compete on terms of employment by agreeing on wages or other terms and conditions of employment, or entering into “no-poaching” agreements that would minimize competition between employers that would otherwise compete for workers. The guidance makes clear that “[a]ny company, acting on its own, may typically make decisions regarding hiring, soliciting, or recruiting employees. But the company and its employees should take care not to communicate the company’s policies to other companies competing to hire the same types of employees, nor ask another company to go along.”
Merely sharing information with competitors about terms and conditions of employment can run afoul of the anti-trust laws. Even if an individual does not agree explicitly to fix compensation or other terms of employment, the exchange of competitively sensitive information could serve as evidence of an implicit illegal agreement. The DOJ stated that it intends to criminally investigate and proceed against parties who enter into naked “no-poaching” and wage-fixing agreements, which are per se illegal under anti-trust laws. The DOJ is empowered to criminally prosecute individuals, the company, or both. Both the DOJ and the FTC may bring civil enforcement actions, and a private party injured by an agreement that violates anti-trust laws may bring a civil lawsuit for treble damages.
Not all information exchanges are illegal, however. Parties may lawfully exchange information for legitimate purposes through a third party aggregator (e.g., a compensation survey), or in the course of determining whether to pursue a merger or acquisition. Human resources professionals are often in the best position to identify and address practices that may cross the line.
Employers need to stay abreast of the rapidly changing legal landscape as it pertains to anti-competitive conduct and agreements, as mistakes in this area of the law can have unintended, and sometimes devastating consequences. To that end, employers should update their employee non-compete, non-solicitation, confidentiality, and assignment of rights agreements annually.
The employment lawyers at Ater Wynne LLP are available to answer questions and help you stay current.
Many of our clients have been contacted by law firms seeking to enter into agreements designed to avoid the effect of the Department of Labor’s Final Persuader Rule, which was scheduled to go into effect on July 1, 2016. The Final Rule interprets the Labor-Management Reporting and Disclosure Act of 1959, which requires disclosure of consultant activities undertaken with an object, “directly or indirectly,” to persuade employees with regard to their right to choose union representation or engage in collective bargaining. Employers and consultants previously were not required to file a report covering services that qualified only as “advice.” The DOL’s Final Rule significantly expands the scope of labor services that must be reported and narrows the exception for legal advice. However, the DOL said it would not apply the Final Rule to arrangements or agreements entered into prior to July 1, 2016.
On June 27, 2016, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction against the Persuader Rule. If that injunction is lifted or reversed, there could be an extension of time for employers to get an agreement in place, but employers cannot count on that happening. Therefore, it may be prudent to sign an agreement prior to July 1 to avoid the uncertainties surrounding the application of the Final Rule.
The employment lawyers at Ater Wynne LLP are available to answer questions about the Persuader Rule.
In a major policy shift, the EEOC recently announced that it will release Respondents' position statements and non-confidential attachments during an investigation upon request by Charging Parties or their representatives. The procedure applies to requests for position statements made to Respondents on or after January 1, 2016. Charging parties will be notified at the time they file a charge that they may obtain a copy of the Respondent's position statement. Charging parties will then have 20 days to respond to the position statements.
In contrast, the EEOC will not release the Charging Party's response to Respondents during the investigation. Consistently with past practice, Respondents will receive only a copy of the Charge until the EEOC has closed the file. This means that Respondents must continue to use a FOIA request to obtain copies of the Charging Party’s submissions after the EEOC provides notice that it has closed the file.
The EEOC’s new procedures afford Charging Parties a significant tactical advantage over Respondents in the investigation process, as well as a head start in litigation. While a Charge typically contains a minimum of facts about the Charging Party's claim, the Respondent will ordinarily provide facts about the company, its policies, and the circumstances, both for context and to directly meet the specific allegations in the Charge. Knowing that information will now be shared with the Charging Party and possibly the public, Respondents will need to carefully evaluate which facts, witnesses, and documents to identify in their position statements. For example, Respondents will need to consider whether to provide confidential data about the company and whether to require the EEOC to issue a subpoena before producing information pertaining to individuals other than the Charging Party. Respondents that historically prepared their own responses should now consider involving counsel in the process.
The EEOC announcement is available here.
Last week the Oregon Supreme Court held that taxi cab drivers are employed by the cab company and are not independent contractors for purposes of the unemployment tax.
In Broadway Cab LLC v. Employment Department, the Court first applied the Employment Department statute that defines "employment" as "service for an employer" that is "performed for remuneration." ORS 657.030(1). The Court held that the facts supported the conclusion that the cab company and drivers were in an employment relationship. First, although the drivers weren't required to drive any particular hours for the cab company, as a practical matter they had to drive in order to pay the large fees they owed for the privilege of driving. Second, although the passengers paid the drivers and not the cab company, the services were nonetheless performed for the cab company, not just for the passengers. The Court rejected the notion that pay must come directly from the employer, drawing a comparison to newspaper distributor arrangements that have been held to be employment despite the fact that subscribers, not the newspaper, paid the distributor.
After concluding that the relationship was one of employment, the Court next analyzed whether the cab drivers fit within the independent contractor exemption under the Employment Department test. This test requires, among other elements, that the individual is customarily engaged in an independent business as shown by meeting three of five listed criteria.
The Court discussed only two of the criteria: whether the cab drivers maintained a separate business location, and whether they could hire and fire others to perform the services. The Court rejected the cab company's argument that the taxi cabs each consisted of the driver's separate business location. Instead, the Court held that the cab company was in the business of providing cab service and, therefore, the cabs were part of the cab company's business location, wherever they may be. Next, the Court held that because each driver signed an agreement giving the cab company the authority to determine who drove the cab, the drivers did not have the required authority to hire and fire others.
Although the wording of the statute defining employment has not changed, the Oregon Supreme Court's decision is part of a trend among courts and administrative agencies to apply a narrow interpretation of the independent contractor classification.
Today, the Oregon Bureau of Labor and Industries issued an advisory opinion concluding that, under Oregon law, Uber drivers are properly classified as employees, not independent contractors. Although to date no case challenging the classification of drivers for Uber or any other transportation network company has been filed with BOLI, the opinion sets out how the agency will approach the question during any future investigation.
Applying the "economic realities" test adopted by courts under the Fair Labor Standards Act, BOLI concluded that Uber drivers "are not operating their own separate businesses with the degree of autonomy one expects with an independent contractor."
Finally, BOLI noted that while Oregon's minimum wage laws exempt "taxicab operators," the term is based on a traditional understanding of a taxicab driver and may not apply to Uber drivers.
Earlier this month, Judge Edward M. Chen of the Northern District of California granted class action status to the plaintiffs in the on-going litigation against the popular ride-sharing app, Uber Technologies, Inc. The lawsuit was originally brought on behalf of three Uber drivers who claimed that Uber misclassified them as contract workers and improperly denied them employment-related benefits. The court's recent ruling expanded the lawsuit from three individual drivers to all Uber drivers in California, with the exception of those who executed a waiver of class action rights.
In opposition to the plaintiffs' motion for class certification, Uber argued that the drivers' employment classification cannot be adjudicated on a class-wide basis. Uber maintains that its right of control over its drivers, as well as the day-to-day reality of its relationship with them, are not sufficiently uniform across the proposed class. The court found that there was an inherent tension in Uber's argument -- on one hand, Uber claims that it has properly classified every single driver as an independent contractor, but on the other, Uber claims that each driver has a unique relationship with Uber such that the Court cannot make a class-wide determination of its drivers' proper job classification.
This high-profile decision highlights the increased scrutiny that is being placed on "sharing economy" companies that classify their workers as independent contractors rather than employees.
Yesterday, President Obama signed an executive order requiring federal contractors to provide their employees with up to seven days of paid sick leave per year, accruing at the rate of one hour for every thirty hours worked. The sick leave will reportedly carry over from year to year and will be reinstated for any employee rehired by a covered contractor within 12 months of a separation. In addition, employers will not be able to require as a condition of using paid sick leave that the requesting employee find a replacement worker to cover the time missed.
The executive order will apply to new federal contracts starting in 2017. Although the White House has not yet quantified the cost to federal contractors, the administration said the cost would be offset by reduced attrition and improved employee loyalty and efficiency. The new benefit will affect approximately 300,000 workers currently without any sick leave benefits.
This news comes on the heels of the Department of Labor's (DoL) proposed new overtime regulations that would increase the minimum salary required to qualify for exemption from overtime by more than one hundred percent, from $455 per week/$23,660 per year to about $970 per week/$50,440 per year in 2016. The proposed rule would set minimum salaries for exempt employees at the 40th percentile for full-time salaried workers. The DoL also proposes to increase the annual compensation requirement for highly compensated workers to $122,148, which is the 90th percentile of weekly earnings of full-time salaried workers for 2014. The DoL's proposed new rules would apply to all employers subject to the Fair Labor Standards Act.
Paid sick leave and increased minimum salaries are only two issues on the President's employment agenda. We will likely see additional changes before the President leaves office.