Northwest Business Litigation

New Portland sick leave ordinance will go into effect January 1, 2014

Following in the footsteps of Seattle, San Francisco, and others, the City of Portland enacted a sick leave ordinance on March 13, 2013, applicable to employees who work at least 240 hours per calendar year within the City limits. Employees who work in the City intermittently accrue benefits under the ordinance only for the hours they are paid to work within the City.

The ordinance requires small employers – those with five or fewer employees – to provide one hour of unpaid sick time for every 30 hours of work performed by the employee. Employers of six or more employees must provide one hour of paid sick time for every 30 hours of work performed. Salaried executive, administrative or professional employees who are exempt from overtime under state and federal law are presumed to work 40 hours per week for purposes of accruing sick time under the ordinance, unless their regular work week is less than 40 hours.

Employees may accrue a maximum of 40 hours of paid sick time per year unless the employer provides or is contractually obligated to provide more. Employees may carry over up to 40 hours of unused sick time from year to year. An employer with an established sick leave or PTO policy that provides for the accrual of sick time that equals or exceeds the requirements of the ordinance need not provide additional time off.

Employees may use sick time accrued under the ordinance for:

• The diagnoses, care, or treatment of an illness, injury, or health condition, including pregnancy, childbirth and preventive care, of the employee or the employee’s family member.
• For protected leave under ORS 659A272 (covering absences due to domestic violence, criminal harassment, sexual assault , or stalking).
• Due to an ordered closure of a business, school or day care facility due to a public health emergency.
• Due to a legal requirement that the employee be excluded from the workplace for health reasons.
• To care for a family member of whose presence in the community would jeopardize the health of others, as determined by a public health authority.

The required sick time may be used for all of part of a shift in increments of no less than one hour, unless the employer allows a smaller increment to be used. Employees may not use sick time if the employee is not scheduled to work in the City for the shift for which the sick time is requested. Employees are also prohibited from using sick time in the first 90 days of employment, unless the employer allows it.

Employers must allow employees to trade shifts to avoid using sick time if the employer allows shift trading. Employees must otherwise use their accrued sick time whenever an absence qualifies for it.

Employees must notify employers of their need to use sick time. Employers are required to establish a written policy or standard to inform employees how that notice should be provided. For absences of more than three consecutive days, employers may require reasonable documentation that sick time has been used for a permissible purpose. Employers must pay the cost of any verification required from a health care provider that is not covered by insurance.

Employers are not required to pay employees for unused accrued sick time on termination of employment.

Employers may not count the use of sick leave toward as an unexcused absence under an attendance policy. In addition, employers are prohibited from interfering with or retaliating against employees who exercise or attempt to exercise their rights under the ordinance. Employers must post a notice informing employees of their rights under the ordinance.

The City has yet to adopt administrative rules for interpreting or implementing the ordinance, which will be subject to a public review process. Enforcement is likely to be governed by ORS Chapter 659A.800, which sets forth the procedures for enforcement and remedies for violation of many of Oregon’s employment-related statutes.

Employers have the rest of the year to beef of their sick leave policies or otherwise comply with the new ordinance. Stay tuned for further developments.

Employers must exercise caution when withdrawing offers of employment

The Oregon Supreme Court in Cocchiara v. Lithia Motors, Inc., (discussed in our earlier blog post here) opened up the possibility of a promissory estoppel or fraud claim against an employer who withdraws an offer of at-will employment. The Supreme Court found no conclusive presumption against recovery for lost at-will employment where the plaintiff was never hired or allowed to start work.  

The anomaly created by this case – and the one noted in other cases involving this issue – is that the employer may not have been subject to suit if it had allowed the employee to start work in the at-will position, and then terminated his employment soon thereafter. Short of that, employers seeking to avoid claims in connection with offers of employment will want to be clear about any contingencies that must be met before employment begins, and must insure that any representations they make to induce the employee’s reliance on a job offer are accurate.

Retracting an at-will job offer puts employer at risk for a tort claim

The Oregon Supreme Court this month held that a person offered at-will employment may be able to state a claim for promissory estoppel and fraud when the prospective employer retracts the offer. 

In Cocchiara v. Lithia Motors, Inc., according to the facts put forward by plaintiff in response to a summary judgment motion, plaintiff was a long-time employee of defendant who, after suffering a heart attack, asked defendant for a transfer to a less stressful position.  Defendant offered plaintiff a transfer to a new position, and plaintiff as a result turned down a job offer from another prospective employer. Soon thereafter, and before plaintiff made the transfer, the employer retracted the offer.  Plaintiff sued for promissory estoppel and fraud.

The trial court and Court of Appeals held that plaintiff could not state a claim as a matter of law.  Because the employment offered to him was at-will and could have been terminated at any time, those courts concluded he could not prove either reasonable reliance on the promise or damages.  The Supreme Court disagreed, finding nothing in the law to support the conclusion that "a promisee's reliance is per se unreasonable if the underlying promise is for a contract at will."  Reasonableness is an issue for the jury, considering all relevant circumstances.  Likewise, the fact that the offered job was terminable at will does not mean as a matter of law that plaintiff cannot prove associated damages.

(Mostly) Business as Usual after Voter Approval of Washington's Marijuana Initiative

On election day, voters in Washington decriminalized the production, processing, sale, and possession of marijuana under state law by approving Initiative Measure No. 502 (I-502). Effective December 6, 2012, Washington law will no longer prohibit the possession of specified amounts of marijuana by people who are 21 years of age or older. Adults in this age category will be permitted to possess not more than one ounce of dried marijuana flowers, 16 ounces of marijuana-infused products in solid form, or 72 ounces of marijuana-infused products in liquid form. Also effective December 6, 2012, the state’s driving-under-the-influence law will set forth a THC concentration limit for drivers who are 21 or over of 5.00 nanograms per milliliter of blood. There will be zero tolerance for drivers under 21.

I-502 does not set an effective date for the legalization of the production, processing, and sale of marijuana. Instead, the state liquor control board has until December 1, 2013 to adopt rules that will govern the market for recreational marijuana. These rules will, among other things, establish licensing requirements, marijuana inventory limits, and advertising restrictions.

Although the state liquor control board has more than a year to issue its rules, it is unclear how the board will go about its task given the fact that federal law, which supersedes state law, is inconsistent with I-502. In response to a similar initiative that passed in Colorado, the United States Attorney’s Office for the District of Colorado issued a statement that noted, “The Department of Justice’s enforcement of the Controlled Substances Act remains unchanged. In enacting the Controlled Substances Act, Congress determined that marijuana is a Schedule I controlled substance.” Under the Controlled Substances Act, Schedule I substances are those that have a high potential for abuse and no currently accepted medical use in treatment in the United States. Possession of a Schedule I substance is a federal crime, and a first conviction is punishable by up to one year in prison and a minimum fine of $1,000.

Most, if not all, prospective marijuana producers, processors, and retailers will likely stay out of the market for recreational marijuana as long as they face potential criminal prosecution by the federal government. This reality means that I-502 may end up having little practical effect on the availability of marijuana in Washington. The Department of Justice is reviewing both I-502 and the Colorado initiative and will presumably issue a report at the conclusion of its review.

Unless and until the federal government changes the classification of marijuana or the enforcement of the Controlled Substances Act, employers in Washington may continue to test applicants and employees for THC and take adverse employment actions based on the results of those tests. The possession of marijuana remains illegal under federal law, and I-502 does not require Washington employers to permit illegal drug use by their employees. That said, employers may consider whether their drug use policies should be amended to prohibit the use of any drug that is illegal under state or federal law. 

Oregon Court of Appeals dismisses age discrimination suit for failure to follow employer's ADR policy

Last week, the Oregon Court of Appeals upheld the dismissal of an employee’s age discrimination claim under state law for failure to comply with the employer’s grievance and arbitration procedure.  In Hatkoff v. Portland Adventist Medical Center, the employee had signed a written acknowledgement that he had received the employee handbook and was responsible for reading it and understanding its contents.  The acknowledgement also stated that in the event he was dissatisfied with any action taken by his employer, the employee would submit the matter to the employer's grievance and arbitration procedures. 

For employers that have a written grievance or other alternative dispute resolution procedure in their handbook, the case opens the door for a complete defense to a claim by an employee who fails to follow the procedure. 

Employer confidentiality policies may be unlawful

Earlier this year, the NLRB Office of General Counsel issued OM 12-59, its third memo on employer social media policies, addressing whether such policies violate an employee’s right under Section 7 of the National Labor Relations Act to engage in “concerted activities.”  At times the difference between what the NLRB concluded is and is not unlawful came down to wordsmithing.  For example, while it was permissible for an employer to suggest that employees address concerns through internal procedures, it was unlawful to say that employees are encouraged to use such resources rather than social media.  A particularly disconcerting issue for employers is the NLRB’s finding that a policy restricting the release of  "confidential information" about the company, co-workers or guests, and restricting sharing confidential information with co-workers, was unlawful.

On July 30, the NLRB issued an opinion in Banner Health System, also related to confidentiality, in connection with its investigation of an unfair labor practice charge.  The NLRB found that the employer violated employees’ rights under Section 7 by routinely asking employees who lodged a complaint not to discuss the matter with coworkers while the employer was investigating the complaint, so as to protect the integrity of the investigation.  The NLRB further stated that to impose such a restriction, the employer must first determine in each case whether witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.

Last month, a post on the One Mediation blog reported a crackdown on an employee confidentiality policy by the EEOC.  It stated that that the Buffalo, NY office of the EEOC issued a letter to an employer disapproving its written policy warning employees who participate in an internal investigation not to discuss the investigation, and stating that a violation of the policy may result in discipline.  It called the policy a “flagrant violation” of Title VII and itself an adverse employment action, because it interferes with the employee’s right to “oppose” discrimination.  The full text of the EEOC’s letter has not been published, but the blog reported that the case was believed to involve allegations of sexual harassment.

Given the prevalence of policies restricting the disclosure of confidential information and limiting discussion of internal complaints of harassment or discrimination, employers should consider reviewing their employment policies with counsel to see what risks are present and whether any changes are necessary.

Occasional handyman is an employee for Oregon unemployment tax purposes

Last week, the Oregon Court of Appeals held that a handyman was an employee, and not an independent contractor, for unemployment tax purposes.  Under Oregon law, an independent contractor must be both "free from direction and control over the means and manner of providing the services, subject only to the right of the person for whom ther services are provided to specify the desired results" and  "customarily engaged in an independently established business."  ORS 670.600(2).

According to ORS 670.600(2)(b) and (3), the employing entity has the burden to demonstrate that the purported independent contractor is customarily engaged in an independently established business by showing that the person meets three of the following five requirements:

(a) The person maintains a business location:
(A) That is separate from the business or work location of the person for whom the services are provided; or
(B) That is in a portion of the person’s residence and that portion is used primarily for the business.

(b) The person bears the risk of loss related to the business or the provision of services as shown by factors such as:
(A) The person enters into fixed-price contracts;
(B) The person is required to correct defective work;
(C) The person warrants the services provided; or
(D) The person negotiates indemnification agreements or purchases liability insurance, performance bonds or errors and omissions insurance.

(c) The person provides contracted services for two or more different persons within a 12-month period, or the person routinely engages in business advertising, solicitation or other marketing efforts reasonably calculated to obtain new contracts to provide similar services.

(d) The person makes a significant investment in the business, through means such as:
(A) Purchasing tools or equipment necessary to provide the services;
(B) Paying for the premises or facilities where the services are provided; or
(C) Paying for licenses, certificates or specialized training required to provide the services.

(e) The person has the authority to hire other persons to provide or to assist in providing the services and has the authority to fire those persons.

In Whitsett v. Employment Department, a laundromat intermittently paid the handyman to repair equipment and help maintain the property.  The handyman did not work specific days or hours, but was paid $25 per hour when he did work.  During the time at issue, he did not engage in similar work for any other businesses, nor did he engage in marketing to obtain other clients.  He was not licensed by a state board, which is also a requirement for independent contractors performing work which requires a license; the laudromat argued that he was exempt from such licensing requirements.

The Court of Appeals held that the handyman was not "customarily engaged in an independently established business," and therefore could not be considered an independent contractor.  The court held that the handyman met not more than two of the five criteria for an independently established business:  (1) there was testimony that he would correct defective work, which may meet the "risk of loss" criteria and (2) he once hired his brother to perform electrical work, which may meet the "authority to hire other persons" requirement.  He did not, however, engage in marketing; work for other clients; have a business card, maintain a separate place of business or even a business name; or make a signficant investment in his business, which required only small tools and the occasional part paid for by the laundromat.

This case is reminder that intermittent employment, even with a certain freedom from supervision, does not necessarily mean a worker is an independent contractor.  

 

 

Supreme Court agrees with Ninth Circuit that drug company representatives are ‘salesmen’

Last week the Supreme Court affirmed a decision of the Ninth Circuit holding that pharmaceutical sales representatives are not entitled to overtime under the Fair Labor Standards Act because they are covered by the FLSA's "outside sales" exemption.  In Christopher v. SmithKline, the Court issued a 5-4 decision, with the majority reasoning that "[the representatives were] hired for their sales experience. They were trained to close each sales call by obtaining the maximum commitment possible from the physician. They worked away from the office, with minimal supervision, and they were rewarded for their efforts with incentive compensation.”

The dissent agreed with the Obama administration that the "outside sales" exemption does not apply to pharmaceutical sales representatives because the representatives do not actually sell the drugs.  Writing for the dissenters, Justice Stephen G. Breyer wrote, “At most [the sales representative] obtains from the doctor a ‘nonbinding commitment’ to advise his patient to take the drug (or perhaps a generic equivalent) as well as to write any necessary prescription.”

See our earlier coverage of Christoper v. SmithKline here.

Ninth Circuit won't criminalize violations of computer use policies

The federal Computer Fraud and Abuse Act, 18 USC sec. 1030, imposes criminal liability for unauthorized access to a computer, or for exceeding authorized access. An en banc panel of the Ninth Circuit last month narrowly interpreted the CFAA, holding that it does not apply to violations of private computer use policies. The opinion sets up a conflict with other federal circuit courts that may end up being resolved by the US Supreme Court.

In US v. Nosal, the defendant was convicted of aiding and abetting a violation of the CFAA after he convinced employees of an executive search firm to give him confidential client information from the firm's database. While the employees were authorized to access the information, their employer's policy prohibited disclosing confidential information to persons outside the company. The validity of the conviction turned on the meaning of the phrases "without authorization" and "exceeds authorized access" in the CFAA.

Defendant argued that the CFAA was intended to criminalize hacking -- unauthorized access to computers -- but not unauthorized use of data that is obtained from a computer through authorized access. The Ninth Circuit agreed that persons with authorized access who violate private computer use policies should not be subject to criminal liability. Judge Alex Kozinski, writing for the majority, set out a "parade of horribles" to justify a narrow reading of the statute, noting that innocent violations of terms of use occur every day: "Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by g-chatting with friends, playing games, shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use policies . . . [and] under the broad interpretation of the CFAA, such minor dalliances would become federal crimes."

The opinion acknowledges that the result creates a conflict with the Fifth, Seventh, and Eleventh Circuits. A dissent by Judge Barry Silverman and Judge Richard Tallman argues that the majority improperly ignores the plain wording of the statute. Further, according to the dissent, criminalization of innocent violations of corporate terms of use is unlikely because the CFAA explicitly requires an intent to defraud.

 

D.C. Circuit enjoins NLRB's rule requiring notice of employee union rights

On April 17, 2012, the D.C. Circuit issued an injunction blocking the National Labor Relation Board's controversial rule that would have required most private sector employers to post a notice of employee rights under the National Labor Relations Act. The rule is controversial because some organizations, such as the National Association of Manufacturers, see it as an unauthorized effort by the NLRB to encourage union membership. To be sure, the NLRA does not expressly grant the NLRB the authority to require employers to post notices of employee rights. The NLRB, however, argues that the NLRA's rulemaking provision authorizes the NLRB to issue the rule. Moreover, the NLRB believes that employees' ignorance of their rights under the NLRA is a major impediment to the exercise of those rights.

The rule was supposed to go into effect on April 30, but the D.C. Circuit's injunction will put the rule on hold pending the appeal of a lower court decision that found the NLRB had only limited means to enforce the rule. The injunction also comes on the heels of a ruling by a federal judge in South Carolina that the NLRB did in fact exceed its authority by issuing the rule. The NLRB stated in a press release that it will not implement the rule until the courts resolve the pending legal issues.