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.
Last week the Oregon Court of Appeals filled a gap in state law on long-arm personal jurisdiction. In Swank v. Terex Utilities, Inc., the court’s focus was ORCP 4D, which provides grounds for personal jurisdiction when an injury within the state arises from an act or omission outside the state. In Swank, plaintiff was injured when a crane owned by his employer collapsed. Plaintiff claimed that out-of-state defendant Manitex was negligent in conducting a retrofit campaign to address a known defect in the crane. Manitex disputed that it was subject to personal jurisdiction in Oregon.
To support long-arm jurisdiction, ORCP 4D provides that, in addition to the in-state injury, there must be evidence that the defendant had some contact with the state. That contact can include defendant’s solicitation or service activities under ORCP 4D(1), or use within the state of products manufactured or serviced by defendant under ORCP 4D(2).
Addressing an issue of first impression, the Court of Appeals held that there must be a link between the injury to plaintiff and defendant’s direct contacts with the state. Judge Armstrong, writing for the court, stated that to comport with due process standards, plaintiff’s claim “must arise out of or relate to at least one of the defendant’s in-forum contacts” listed in ORCP 4D(1) and (2).
Accordingly, defendant’s general sales and solicitations to customers in Oregon did not support personal jurisdiction because the personal injury to plaintiff did not arise from those contacts. However, plaintiff’s claim did relate to and arise from defendant’s efforts to retrofit the defective cranes in Oregon. On that basis, defendant was subject to personal jurisdiction.
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.
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.
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.
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.
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.
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.