Uber Class Action Highlights "Sharing Economy" Classification Concerns

By Alexandra Shulman
September 11, 2015

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.

It's going to be more expensive to do business with the federal government

By Stacey Mark
September 8, 2015

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.

NLRB decision has implications for companies using staffing firms

By Leslie Bottomly
September 5, 2015

Startups and even established companies have increasingly turned to employee leasing companies, PEOs and staffing firms to supply workers. Some view this practice as a way to minimize potential liability for employment-related claims. The NLRB recently issued a decision changing its interpretation of the standard for "joint employment," potentially opening a company using a staffing firm to liability for the staffing firm's own violations. 

In short, although it may be easier to write a check to a staffing firm and receive services in return, doing so does not effectively absolve the entity of all employment-related responsibilities. Companies need to be aware of this, act accordingly, and be very careful that they hire reputable and compliant employee leasing companies, PEO’s and staffing firms. Arrangements and the underlying contracts should be carefully reviewed for indemnification and insurance provisions. 

Although the NLRB's decision is directly applicable only to the National Labor Relations Act, it reflects a general regulatory trend towards tighter enforcement of employment-related obligations.

Thinking about asking an employee when he or she plans to retire? Better think again....

By Stacey Mark
September 4, 2015

The Ninth Circuit recently found in France v. Johnson that an employee who was repeatedly questioned about his retirement plans was entitled to a trial on his claim for age discrimination. 

Plaintiff, a 54-year old border patrol agent, worked for the Department of Homeland Security. In 2007, the new Chief Patrol Agent for the sector, Gilbert, created a pilot program dividing Assistant Chief Patrol Agents (ACPAs) into two categories with different pay grades, GS-14 and GS-15.  Before the program, all of the ACPAs were at the GS-14 pay grade.

The 24 qualified ACPA candidates who applied for the new position ranged in age from 38 to 54 years old, with plaintiff the oldest.  Candidates were ranked based on their scores from the Border Patrol Agent Competency Based Promotional Assessments.  Gilbert then invited twelve candidates for interviews in Washington, D.C.  The panel selected six candidates for final consideration and Gilbert, who was on the interview panel, recommended four of the six to the Chief Border Patrol Agent, who in turn recommended the same four candidates to the Deputy Commissioner.  The four candidates ultimately selected for the GS-15 positions were the same four candidates recommended by Gilbert.  Those selected were 44, 45, 47 and 48 years old.

Plaintiff sued DHS, claiming that the promotion decision was based on age.  In opposition to DHS’ motion for summary judgment, plaintiff offered evidence that Gilbert had expressed his preference for "young, dynamic agents" to staff the GS-15 positions, and sought to promote younger, less experienced agents.  Plaintiff also submitted proof that Gilbert had repeated retirement discussions with him, despite plaintiff's clear indications that he did not want to retire.  For example, in June 2007, Gilbert asked if plaintiff was interested in teaching firearms as a "rehired annuitant" after retirement, and plaintiff said he did not want to retire. A few months later, Gilbert again asked what plaintiff wanted to do, and plaintiff said that he was not going to retire and intended to apply for the GS-15 position.  Plaintiff recalled that Gilbert had responded that if he were in plaintiff's position, he would retire as soon as possible.  DHS contended that plaintiff lacked the leadership, judgment, flexibility and innovation for the position.  Gilbert stated that plaintiff had a big mouth and did not know when to turn it on or off, and for these reasons failed at the interview.  The district court determined that while plaintiff established a prima facie case of discrimination, he did not establish a question of fact with respect to DHS’ legitimate, non-discriminatory reasons for not selecting him. The district court concluded that Gilbert's discriminatory statements were insufficient to create a genuine dispute of material fact because Gilbert had a limited role in the ultimate hiring decision.

On appeal, the Ninth Circuit first considered whether plaintiff established a prima facie case of failure to promote, which requires a plaintiff to show (1) he was at least forty years old, (2) qualified for the position sought, (3) denied the position, and (4) the promotion was given to a substantially younger person.  The first question was whether the selected candidates, who averaged eight years younger than plaintiff, were substantially younger.  Following a majority of other circuits that have considered the question, the Ninth Circuit adopted the rule that an average age difference of ten years or more between the plaintiff and the employee replacing plaintiff (or hired, as in this case) will be presumptively substantial, whereas an age difference of less than ten years will be presumptively insubstantial.  A plaintiff can rebut the presumption by producing additional evidence to show that the employer considered the plaintiff's age to be significant.

The Ninth Circuit also found that the district court erred in concluding that (1) creating a genuine issue of fact on pretext requires that the person making discriminatory statements be the ultimate decision maker, and (2) Gilbert had a limited role in the hiring decision.  Referencing the cat’s paw theory, the court reasoned that even if a subordinate employee with bias was not the final decision maker, the plaintiff can establish a causal link by proving that the biased subordinate influenced or was involved in the decision or decision making process.  Here, plaintiff provided sufficient evidence to create a question of fact as to Gilbert’s influence over and involvement in the hiring decision, and a reasonable jury could infer that Gilbert's role in the decision making process was significant and influential.  Moreover, the district court erred in disregarding evidence of Gilbert’s repeated retirement discussions with plaintiff in assessing whether Gilbert's articulated nondiscriminatory reasons were pretextual.  Although these retirement discussions, alone, were insufficient direct evidence of discrimination, this evidence was presented along with circumstantial evidence of timing:  the discussions concluded only a couple of months before the new positions, which Gilbert created, were posted. The close proximity in time could allow a reasonable jury to find that plaintiff's non-selection based on grounds other than age was pretextual.  Accordingly, the Ninth Circuit reversed, allowing plaintiff to take his case to the jury.

This case serves as reminder to employers that asking older workers about their retirement plans may be viewed as evidence of age bias.  Unless there is a legitimate reason to inquire, such as succession planning, it is better not to ask the question.  Even then, employers may want to consult counsel about the appropriate way to approach the issue.

Oregon Court of Appeals supports broad protection of "mediation communications"

By Lori Irish Bauman
July 27, 2015

The Oregon Court of Appeals last week reinforced the broad scope of Oregon's law stating that "mediation communications" are inadmissible in subsequent proceedings.

In Yoshida's Inc. v. Dunn Carney Allen Higgins & Tongue, the issue was whether emails related to a mediation could be admitted into evidence in a separate legal malpractice case.  The client in the malpractice case contended that the defendant lawyer had failed to provide a timely notice to terminate an equipment and software lease, resulting in an automatic renewal of the lease.  The client hired a different lawyer to resolve the matter with the lessor, and in a mediation the client agreed to pay a sum of money to terminate the lease and purchase the equipment and software from the lessor.  In the trial of the subsequent malpractice case, the trial court admitted into evidence emails associated with the mediation.  Defendant lawyer contended that the emails showed that the client suffered no damages as a result of the alleged negligence.  A jury entered a verdict in favor of the defendant lawyer.

The Court of Appeals held that it was reversible error to admit the emails.  ORS 36.222 states that "mediation communications" -- meaning all communications make in the course of or in connection with a mediation -- are not admissible in any subsequent proceeding, and on that basis the trial court had erred.

Department of Labor issues guidance on classifying employees and independent contractors

By Leslie Bottomly
July 15, 2015

Today the U.S. Department of Labor issued an Administrator’s Interpretation of the Fair Labor Standards Act, offering guidance on whether a worker should be classified as an employee or an independent contractor. The Administrator’s Interpretation signals the DOL’s desire to expand the reach of the FLSA to protect the largest possible group of workers. It rejects the common law “control test,” which analyzes whether a worker is an employee based on the employer’s control over the worker.  Instead, it focuses on a broad “suffer or permit” standard.

According to the DOL, an entity ‘suffers or permits’ an individual to work if, as a matter of economic reality, the individual is dependent on the entity, as determined by a multi-factor “economic realities” test. The factors typically include: (A) the extent to which the work performed is an integral part of the employer’s business; (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; (C) the extent of the relative investments of the employer and the worker; (D) whether the work performed requires special skills and initiative; (E) the permanency of the relationship; and (F) the degree of control exercised or retained by the employer.  While the Interpretation is not binding, the courts will generally defer to an agency's view of the law so long as it is not clearly erroneous.

Contact Ater Wynne's employment practice group for assistance in applying the DOL Interpretation to the circumstances of your business. 


Oregon Court of Appeals recognizes novel basis for wrongful discharge claim

By Lori Irish Bauman
July 14, 2015

While an at-will employee may generally be discharged for any reason, a discharge may be deemed wrongful -- and will form the basis of a common law wrongful discharge claim -- if it occurred because the employee fulfilled some important public duty.  Last month the Oregon Court of Appeals expanded the important-public-duty exception, holding that a domestic employee who is fired for reporting that the employer had committed a crime involving child abuse has a wrongful discharge claim.

In McManus v. Auchincloss, plaintiff was a domestic employee who reported to the police that defendant, his employer, possessed child pornography.  Defendant allegedly fired plaintiff in retaliation for the police report, and plaintiff sued for wrongful discharge.  The trial court dismissed, holding that the facts did not support a common law wrongful termination claim.  While a state statute prohibits an employer from terminating an employee in retaliation for making a good faith report of criminal activity, that statute expressly does not protect domestic employees.  Because the legislature omitted domestic employees from the statute, the trial court held that plaintiff had no common law claim based on performing an important public duty. 

On review, the Court of Appeals reversed.  The court noted that the legislature has expressed a general public policy in favor of protecting employees who report criminal activity.  That policy supports a common law claim by the plaintiff in this case, even though he was not protected by the express language of the legislation. 

Supreme Court reaffirms rule prohibiting royalties for expired patents

By Dan Larsen
June 24, 2015

Nearly 50 years ago, the United States Supreme Court held in Brulotte v. Thys Co. that a patent holder may not collect royalty payments from a licensee after the date on which the patent expires. Since that time, the so-called Brulotte rule has survived despite criticism and attacks by lower federal courts.   

In 2013, the Ninth Circuit begrudgingly applied the Brulotte rule in Kimble v. Marvel Enterprises, Inc., to void an agreement between a patent holder and Marvel. In that case, the court held that the agreement was unlawful because it required Marvel to pay royalties for patents and other know-how without a reduction in price after expiration of the patent.  According to the court, "a license for inseparable patent and non-patent rights involving royalty payments that extends beyond a patent term is unenforceable for the post-expiration period unless the agreement provides a discount for the non-patent rights from the patent-protected rate."  However, at the same, the court complained that the Brulotte rule is "counterintuitive" and "its rationale is arguably unconvincing." 

The Supreme Court then granted review, and on Tuesday the Court affirmed, declining to abrogate a half century of case law.  Accordingly, Brulotte is alive and well, and patent holders may not receive royalties for patent rights that have expired.  When licensing hybrid intellectual property rights, such as a combination of patent rights and trade secrets or know-how, the parties must agree to a reduction of royalty payments at the end of the patent term.

Caitlyn Jenner, Formerly Bruce Jenner, Spotlights Transgender Issues

By Leslie Bottomly
June 8, 2015

Given the awkward questions, gossip, and perhaps outright discrimination that may occur when an individual comes out as transgender on the job, it would be understandable if an individual decided to resign rather than continue working through the transition.  

With Caitlyn Jenner's public announcement that she is transgender, it is possible employees will be more comfortable transitioning without changing jobs. This means employers may increasingly grapple with how to accommodate an employee undergoing a transition. In some workplaces, the issues may not be particularly sticky. In others, such as workplaces in which the employees and/or customers are conservative, or in which many different cultures and religions are represented, where employees wear sex-specific uniforms, where employees share locker rooms, and where the employee bathrooms contain multiple semi-private stalls, the issues will be more numerous and more difficult.

In Oregon, transgender employees are protected from discrimination in employment. Specifically, employers cannot discriminate based on sexual orientation. Sexual orientation is defined as including gender expression (meaning the manner in which an individual's gender identity is expressed, including, but not limited to, through dress, appearance, manner, or speech, whether or not that expression is different from that traditionally associated with the individual's assigned sex at birth) and gender identity (meaning an individual's gender-related identity, whether or not that identity is different from that traditionally associated with the individual's assigned sex at birth, including, but not limited to, a gender identity that is transgender or androgynous). ORS 659A.030; OAR 839-005-0003.

One of the most sensitive issues arises with bathroom use. In Oregon, it's pretty clear. Individuals must be allowed to use the bathroom consistent with their expressed gender.  OAR 839-005-0003. At times, transgender employees would prefer to make other arrangements (such as using  a private bathroom (assuming one is available) for a period of time). Employers may enforce valid dress codes provided they make reasonable accommodation of an individual based on the health and safety needs on a case by case basis. It seems likely that the Oregon Bureau of Labor & Industries will require an employer to allow a transgender employee to wear the uniform consistent with the gender they are presenting.

There are many resources available on the internet to assist employers and employees in the process of accommodating a transgender employee.

Typically these resources recommend a meeting or two with the individual to come up with a  plan of communication with co-workers and a date to announce the change. The employer may need to conduct training on diversity issues, including transgender transition, in order to proactively address concerns that may arise. Foreign language translators may be needed to convey complex issues.

It is advisable as part of this training to address some of the most common questions co-workers and manager may have, such as "What if I call him/her by the incorrect pronoun?" (It's understandable if it happens a few times - but not if it becomes routine. It's appropriate to apologize on-the-spot for doing it automatically out of habit). "My religion sees this as a sin, I cannot condone it" (what you believe in is up to you - we focus on behaviors in the workplace). "What if a customer makes a rude comment"? (Make note of the interaction and let your manager know immediately. We cannot allow customers to create a hostile environment).  "Is he or she undergoing sex reassignment surgery" (Sorry, as with any other medical issue, that is private). Stressing that joking and teasing are not tolerated is particularly important. Of course, checking in with the transgender employee from time to time is also helpful.

The Federal Government's own guide on accommodating an employee's transition is an example available to employers approaching this question for the first time.  View the guide here.

Some employers have been accommodating transgender employees in the workplace for years. Others are more recently being asked to help an employee stay on the job through this important life transition. Employers that are new to this process should seek out educational materials, consultants, and of course, their legal counsel, to ensure compliant and positive transition for all.

This blog post has been prepared for clients and friends of Ater Wynne LLP and should not be relied upon as legal advice. For more information please contact Leslie Bottomly, Partner, Ater Wynne Labor and Employment Group.  

1 The issue of whether transgender individuals qualify as "disabled" for purposes of accommodation under the Americans with Disabilities Act and the similar Oregon disability law, and issues pertaining to insurance coverage for medical treatment associated with sex reassignment are complex and beyond the scope of this article.

Oregon Court of Appeals rejects product line exception to successor liability

By Lori Irish Bauman
May 17, 2015

If the manufacturer of a defective product sells its assets and goes out of business, can a party injured by the product sue the purchaser of the assets on a products liability theory?  The general rule of successor liability is that purchaser is not liable for the debts and liabilities of the transferor, unless (1) the purchaser agreed to assume the liabilities, (2) the transaction amounts to a consolidation or merger, (3) the purchaser is a mere continuation of the seller, or (4) the transaction was entered into fraudulently to escape liability.

In Gonzalez v. Standard Tools and Equipment Co., the plaintiff sought to add a fifth exception to the no-liability rule, called the "product line" exception.  Courts in other states have adopted that exception, holding that, where a successor company continues to produce the same type of product as the original company, the successor assumes tort liability for defects in units from the same product line.  The Court of Appeals last month rejected plaintiff's argument, declining to add a new exception to the "long-established rule" of successor liability.