Employment Law Update

Follow UsBlog: bassberrylabortalk.com              @BassBerryLabor

New & Proposed Regulations

Michael MoschelStephanie Roth

Agenda

DOL Guidance: Employee MisclassificationWhite Collar FLSA ExemptionsSexual Orientation & Title VII

DOL Guidance: Misclassification“In sum, most workers are employees”

Reason for GuidanceAccording to the WHD Administrator, misclassification of employees as independent contractors is found in an increasing number of workplaces, reflecting a larger restructuring of U.S. businesses.WHD continues to receive numerous complaints.Guidance serves as another tool in the

Department’s Misclassification Initiative.

Reasons (Cont.)Misclassification deprives employees of workplace protections such as minimum wage, overtime compensation, unemployment insurance, workers compensation and employer-sponsored health insurance coverage.Misclassification results in lower tax revenue for government.And an uneven playing field for employers who properly classify their workers

Economic Realities Test

Based on the “broad language” of the Fair Labor Standards Act, the WHD applies the Economic Realities Test to determine employee statusProvides a broader scope of employment than the common law “right to control” test

Economic Realities Test

Factors applied broadlyAll factors must be considered in each caseNo one factor is determinative (particularly the control factor)Ultimately, must determine whether worker is economically dependent upon the employer

Factors

Is the work an Integral Part of the Employer’s Business?Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?How Does the Worker’s Relative Investment Compare to the Employer’s Investment?

Factors (cont.)

Does the Work Performed Require Special Skill and Initiative?Is the Relationship Between the Worker and the Employer Permanent or Indefinite?What is the Nature and Degree of the Employer’s Control?

Is the Work Integral to the Business?

A “compelling” factorA true independent contractor’s work is unlikely to be integral to the employer’s business► Carpenters are integral to the work of a

construction company that frames residential homes

► In contrast, same company may contract with software developers to assist with tracking bids and scheduling projects and crew

Management Skills and Opportunity for Profit or LossFocus on managerial skills and not on ability to work more hoursDoes the exercise of managerial skill provide the opportunity for profit and loss even beyond the present job? ► e.g., decisions re: hiring, purchasing, and

advertisingOpportunity for loss is particularly telling

Relative Investment

What is the worker’s investment relative to the employer’s investment? ► If relatively minor compared with employer,

may suggest worker is economically dependent upon the employer

An independent contractor typically makes investments that support a business as a business beyond any particular job

Special Skill and Initiative

A worker’s business skills, judgment, and initiative, not his or her technical skills, will aid in determining whether the worker is economically independentEven specialized skills do not indicate that workers are in business for themselves, especially if those skills are technical and used to perform the work

Length of Work RelationshipIf permanent or indefinite, suggestive of employment relationship► A typical “at-will” employee has indefinite

employment► Seasonal employees: look to whether they work

the entire seasonA worker who is truly in business for him or herself will eschew a permanent or indefinite relationship with an employer and the dependence that comes with such permanence or indefiniteness

Employer ControlDo not overemphasize this factorTo be an independent contractor, the worker must control meaningful aspects of the work performed such that it is possible to view the worker as a person conducting his or her own businessAnd the worker’s control over meaningful aspects of the work must be more than theoretical—the worker must actually exercise it

Economic Realities Test

The ultimate determination is always whether the worker is economically dependent on the employer or truly an independent businessperson“In sum, most workers are employees under the FLSA’s broad definitions.”

White Collar ExemptionsOvertime Pay and More

White Collar ExemptionsIncludes:► Executive► Administrative► Professional► Outside Sales► Computer Employees

Requires:► Paid on a salary basis► Not less than $455/week► Certain job duties

Salary Level Test

Proposed increase to 40th percentile of weekly earnings for FT salaried workers► $970/week► $50,440 annually

Automatic increases to keep pace with inflation without requiring additional action by the DOL

Possible Effect for Employees Newly Eligible for Overtime PaySame hours, increase in pay based on hours worked in excess of 40/weekSame pay, decrease in total hours work due to shift of overtime hours to newly-created positionsPay increase to meet new threshold, job otherwise unaffected

Possible Effect for Employees Newly Eligible for Overtime PayDecrease effectively hourly rate to approximate salary before OT-eligible► If more OT than expected, employer eats cost► If less OT than expected, employee makes less

Potential changes in benefits► Some benefits available only to exempt

employees or calculated differently for non-exempt employees

Streamlined management structure

Job Basis Test

No proposed change at this timeConsidering an exempt-duties threshold► e.g., must spend at least 50% of work time

engaged in primary duty, not including time spent concurrently performing nonexempt work

• Soliciting comments as to whether currents tests are functioning effectively

Nondiscretionary Bonuses

DOL also considering permitting nondiscretionary bonuses to satisfy portion of salary level test

Sexual Orientation and Title VIINo More Price Waterhouse Games?

Discrimination on the Basis of Sex

Two modes of analysis under Title VII:► Discrimination because of sex (treating men

and women differently because of their sex)► Discrimination based on sexual stereotyping

- Price Waterhouse case- Not promoted because did not act and appear

“feminine” enough

Sexual OrientationCourts have largely agreed: sexual orientation is NOT a protected category under Title VIIBut Price Waterhouse opened the door for expansion of protection to:► Transgender persons► LGB persons discriminated against because they

were not conforming to sex-based stereotypes- Employer could legally discriminate against gay

employees for being gay but not because they were acting insufficiently masculine or feminine

EEOC DecisionJuly 15, 2015 EEOC decision ► “We conclude that sexual orientation is

inherently a ‘sex-based consideration,’ and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.”

► “Sexual orientation is sex discrimination because it necessarily entails treating an employee less favorably because of the employee’s sex.”

Does the Decision Have Legs?

Arose in the context of a federal employeeBut, position taken by EEOC is with respect to the appropriate interpretation of Title VII► Likely to seek to apply in public and private

sectorsUltimately, courts will determine how much deference to give the decision

FMLA & ADA

Tim GarrettBob Horton

Mary Leigh Pirtle

Scenario No. 1Tom works in the Finance Department. The Company is restructuring its finance operations while Tom is on FMLA leave and eliminates the Finance Department. Active Finance Department employees are offered the choice of a vacant position in another department or a severance package.When Tom returns from FMLA leave, what are the Company’s obligations? ► Must Tom be given his same job? Or, offered same

options as others in Department? ► Any ADA considerations?

Scenario No. 2Sally provides a doctor’s note stating she suffers from episodic migraines which may require the need for medical leave.After 3 months of leave in compliance with her medical certification, Sally used twice the provided-for-leave time in the past month, including every Monday morning that month.Her employer wanted to follow-up by having her recertify her need for leave, which it typically requires only every 6 months. Can it do so?

Scenario No. 2 (cont’d)The employer relied upon a 3rd Party leave administrator, Leave Co., to proceed with the recertification.Leave Co. sent and e-mail to Sally requesting she provide a re-certification within the next 3 weeks. Sally failed to comply and Leave Co. denied all leave occurring as of the date of the e-mail (approximately a 1 month period).

Scenario No. 2 (cont’d)Because Sally’s leave was denied, the leave she had taken that month – that she believed was covered FMLA leave – was not.This uncovered leave put Sally over her employer’s attendance points threshold.At no time during the period that Sally was accruing points unknowingly, did her employer speak with her directly about the denial of her FMLA.

Scenario No. 2 (cont’d)Leave Co. stated Sally put her contact settings as “e-mail only.”Sally says she did not approve FMLA-related correspondence by e-mail, she did not open the e-mail from Leave Co., and that Leave Co. had communicated with her in past by postal mail. She says she did not know to recertify.► Can the employer terminate Sally’s employment for

failure to comply with its absence policy?► Would postal mail have been sufficient?► Can Company simply blame Leave Co.?

Scenario No. 3

Dave fails to report to work and fails to call in to report his absence in violation of Company policy (“no call/no show”). Dave receives discipline.► Dave alleges that he failed to report/call

because he was having a panic attack.► What are next steps?

Scenario No. 3 (cont’d)In requesting certification, what information MUST be put in writing?What if certification provides excuse for the absence but not for the failure to call in?What if Dave states that the panic attack stemmed from work-related harassment?

Can you still impose the discipline?What else should you do?

Scenario No. 4Lucy notifies her employer that she needs leave to care for her family member’s serious health condition.In the certification, you learn the family member needs surgery but lives overseas and is having surgery there.Must you grant the leave?

Scenario No. 4 (cont’d)What if the Lucy is attending a faith healing conference with the sick family member? Are you required to grant that time off?What if Lucy seeks leave to travel on a cruise with ill mother, doctor has suggested that mother cannot travel alone due to her going blind (i.e., macular degeneration), and needs child to accompany her to assist?

Scenario No. 5

Suzy is on FMLA leave, but the Company discovers that she is performing part-time work for another company while on FMLA leave.What if Suzy was given permission to do the part-time work before she went on FMLA leave?

Scenario No. 6 Todd goes to supervisor and complains that he missed work on Monday and Tuesday and is having trouble getting to work at his scheduled time because he pulled his back Friday at work and has had to start treatments.

Scenario No. 7A new employee, Emily, has informed her supervisor that she is pregnant. She has only worked for 10 months, but she will have reached the 12-month threshold by the time she delivers, barring serious complications.Soon after Emily’s announcement, you learn the company is instituting a reduction-in-force that will affect Emily’s department. Of the three people in her position, one will need to be let go.

Scenario No. 7 (cont’d)Of the three, Andy, is a long-term, high-performing employee.The remaining employee, Sarah, has been with the company for 2 years. Like Emily, her performance has been satisfactory and, if not for the reduction, the company would like to have her on board. Sarah has one disciplinary warning for repeated absenteeism from her first year, but she has resolved that issue. Emily has never been disciplined.

Scenario No. 7 (cont’d)Observing the decisions in other departments, it is clear that seniority is not the determinative criterion for selecting whom to include in the reduction.The department supervisor thinks Emily should be the person to go because she was the last one in the door, and Sarah seems committed to the job after her counselling last year.

Scenario No. 7 (cont’d)Management has come to you to advise on the risks of termination under the proposed RIF. How do you advise regarding the reduction in Emily’s department? Should you agree and lay off Emily?

Scenario No. 7 (cont’d)

What if Emily had come to your office the week before and requested time off for morning sickness? Would that matter?What are your obligations under the FMLA/ADA with respect to Emily’s request for intermittent leave if her morning sickness is severe enough to prevent her from working for a time?

Practical TipsKeep in mind the purpose of the statute in questionTake every opportunity to engage in the interactive process and hear the employee’s versionGet Help!

Employee Leaves of AbsenceState Law Considerations

Dustin CarltonLymari CromwellDavidson French

State Law Considerations, Generally

Laws governing paid leave can come in the form of statutes, regulations, case law, AG opinion letters, etc. Applicable laws can be at state level or local level (city or county ordinance)Stay on top of rules/laws governing not only pay for leaves of absence, but also paid sick leave, vacation, PTO, etc.

Potential Issues Under State Law

Some states prohibit “use it or lose it” policies► California, Montana, Nebraska, Colorado

Some states require pay-out of accrued PTO upon termination ► California, Illinois, Louisiana, Massachusetts,

Montana, Nebraska, Rhode Island, Maryland

A clear written policy is key!

Mandated Paid Leave

Examples of states/territories:► California, Connecticut, Massachusetts,

Washington, D.C.Examples of cities/counties:► San Francisco, Philadelphia, Oakland,

Seattle, New York City

State ExamplesConnecticut – Service employee accrues 1 hour for every 40 hours worked up to 40 hours/year; paid leave for sickness of employee, spouse or child or to deal with issues arising from being victim of domestic violence or sexual assault Massachusetts – Employee accrues 1 hour for every 30 hours worked up to 40 hours/year; paid leave for sickness or routine exam of employee, parent, spouse, child or to deal with issues arising from being victim of domestic violence

City Examples Seattle – Hour accrual varies based on size of employer; paid leave provided for employees for sickness or preventative care for employee, child, parent, grandparent, spouse, domestic partner, parent-in-law or for issues related to being a victim of domestic violence or sexual assault or for closure of workplace or child’s school by public official due to infectious agent, hazardous material, biological toxin, etc.New York City - Employee accrues 1 hour for every 30 hours worked up to 40 hours/year; leave provided for employees for sickness or preventative care for employee, child, parent, grandparent, spouse, domestic partner, sibling, grandchild or for closure of workplace or child’s school by public official due to public health emergency

ComplexitiesState and local laws/ordinances have several complexities to consider, such as:► Who is a covered employee/employer?

- Rules/application may vary by industry!► Annual use limit?► When does leave begin to accrue? ► What are the notice requirements placed on the

employee for need for leave?► Potential penalties for employer’s failure to

comply?► Private cause of action?

Practice Pointers

Put your paid leave practices in writing, give to employees, and have employees sign form acknowledging receiptCheck state and local laws to ensure compliance ► Do not overlook case law, city and county

ordinances, etc.

Employees’ Extended Leaves of Absence: California and Its

Distinctions

Summary of Leave Afforded to California Employees

Protected Leave► Family and Medical Leave Act (FMLA)► California Family Rights Act (CFRA)► Pregnancy Disability Leave (PDL)► Kin Care► California Paid Sick Leave► San Francisco Paid Sick Leave► Oakland Paid Sick Leave

Unprotected Income Replacement► Paid Family Leave (through the Employment

Development Department)

The Big 3: FMLA, CFRA & PDLFMLA and CFRA► Provide eligible employees up to 12 workweeks of

unpaid leave in a 12-month period for:- birth of a child, - placement of a child with employee for adoption or foster

care, - to care for a family member with a serious health condition,

or - to care for one’s own serious health condition..

PDL► Provides up to 4 months of unpaid* leave for:

- pregnancy disability, - childbirth recovery, or - a related medical condition.

FMLA & CFRA Major DistinctionsFMLA• Pregnancy

considered a “serious health condition”

• Military Leavecoverage for a “qualifying exigency”coverage for seriously injured or ill service member (up to 26 weeks)

• Medical CertificationSecond Opinion if “reasonable doubt”May request clarification or authenticationInpatient Care requires overnight stay

• Limitations on LeaveSpouses working for same employer required to share

CFRA• Pregnancy

excluded under the definition of a “serious health condition” (covered by PDL)

• Military Leaveno coverage* for a “qualifying exigency”coverage for seriously injured or ill service member only if he/she is a covered CFRA employee (but limited to 12 weeks)

• Medical CertificationSecond Opinion if “good faith, objective reason”May request authentication onlyInpatient Care only requires an “expectation” that overnight required

• Limitations on LeaveSpouses working for same employer required to share only if leave for birth, adoption, etc.

FMLA & CFRA Major DistinctionsFMLA

Pregnancy► considered a “serious health

condition”Military Leave► coverage for a “qualifying

exigency”► coverage for seriously injured

or ill service member (up to 26 weeks)

Medical Certification► Second Opinion if “reasonable

doubt”► May request clarification or

authentication► Inpatient Care requires

overnight stayLimitations on Leave► Spouses working for same

employer required to share

CFRAPregnancy► excluded under the definition of a “serious

health condition” (covered by PDL)Military Leave ► no coverage* for a “qualifying exigency”► coverage for seriously injured or ill service

member only if he/she is a covered CFRA employee (but limited to 12 weeks)

Medical Certification► Second Opinion if “good faith, objective

reason”► May request authentication only► Inpatient Care only requires an

“expectation” that overnight required Limitations on Leave

► Spouses working for same employer required to share only if leave for birth, adoption, etc.

Relationship Between CFRA & PDL

Right to (12 weeks of) CFRA leave is separate and distinct from right to (4 months) of PDLAt the end of the employee’s period(s) of pregnancy disability, or at the end of the four months of pregnancy disability leave, whichever occurs first, a CFRA eligible employee may request CFRA leave of up to 12 workweeks for reason of the birth of a child.There is no requirement that either the employee or child have a serious health condition.There is also no requirement that the employee no longer be disabled by her pregnancy, childbirth, or related medical conditions.Where an employee has utilized 4 months of PDL prior to the birth of her child and her health care provider determines that a continuation of the leave is medically necessary, an employer may, but is not required to, allow an eligible employee to utilize CFRA leave prior to the birth of her child. No employer shall, however, be required to provide more CFRA leave than the amount to which the employee is otherwise entitled.**

Summary: Interplay Between FMLA, CFRA & PDL

The General Rules► FMLA and CFRA leave may run concurrently.► FMLA and PDL leave may run concurrently.► PDL and CFRA may not run concurrently.

California Mandatory Paid Sick Leave

Employee Eligibility► Workers employed for 30 or more days are

entitled to paid sick leave.► But

- paid sick leave must begin accruing on the date of hire

- and not entitled to use accrued, paid sick leave until satisfying the 90 day employment period

California Mandatory Paid Sick Leave

Accrual and Carry Over Requirements► Paid sick leave must accrue at a rate of 1 hour for every

30 hours worked► Unused paid sick leave must carry over to the next year► But

- employers may cap the number of accrual hours to 6 days / 48 hours

Exception to Carry Over Requirement ► An employer is exempt from mandatory accrual and carry

over requirements if the employer provides, at the beginning of each 12 month period, an entitlement to a minimum of 3 days / 24 hours of paid sick leave.

Limitation on Exception

California Mandatory Paid Sick Leave

Usage► Employers may limit the number of hours that

employees may use each year.► But

- employees must be able to use a minimum of 3 days / 24 hours per year

California Mandatory Paid Sick Leave

Notice Requirements► The employer must provide the employee with

written notice of the amount of paid sick leave available on either the employee’s itemized wage statement or a separate writing with the employee’s paycheck.

► The employer must display a poster stating that:- an employee is entitled to accrue, request, and use sick

leave- that retaliation or discrimination is prohibited, and- that employees may file a complaint with the Labor

Commissioner for violations).

California Mandatory Paid Sick Leave

Interplay with Employer PTO Policies► If an employer has a paid leave policy or paid

time off policy, the employer is not required to provide additional days so long as the policy meets the requirements for accrual, carry over, and usage and provides no less than 3 days / 24 hours per year.

► Unlike PTO and Vacation policies in CA, employers are not required to pay out accrued but unused sick leave upon termination (unless company policy states otherwise).

Oakland and San Francisco Paid Sick Leave

OaklandEligibility► Work min. of 2 hours w/in

boundaries of City of Oakland

Accrual► 1 hour / 30 hours worked► Begins to accrue

immediately but can’t be used until after 90 days

Usage► No annual limit

Accrual Cap► 72 hours (10 or more

employees) or 40 hoursCarry Over► Accrued hours never expire

San FranciscoEligibility► Perform work in S.F.

Accrual► 1 hour / 30 hours worked► Begins to accrue after 90 days

Usage► No annual limit

Accrual Cap► 72 hours (10 or more employees)

or 40 hours

Carry Over► Accrued hours never expire

Multi-State Sick Leave Policies

Interplay Between States and Cities with Paid Sick Leave Laws► A single, uniform policy may be problematic

depending on where your company is located.

Dustin Carlton – dcarlton@bassberry.comLymari Cromwell – lcromwell@bassberry.com

Tim Garrett – tgarrett@bassberry.comBob Horton – bhorton@bassberry.com

Michael Moschel – mmoschel@bassberry.comMary Leigh Pirtle – mpirtle@bassberry.com

Stephanie Roth – sroth@bassberry.com

Follow Us@BassBerryLabor

Blog: bassberrylabortalk.com

70