Joint Employment Update: NLRB Issues Final Rule; 17 States Sue to Enjoin New DOL Rule

By Timothy Long and Stacey Chiu on Posted in California L&E Group, Department of Labor, FLSA, Joint Employer, NLRB, Wage & Hour

On the heels of our reporting that new DOL joint employment regulations are set to take effect March 16, the NLRB jumped into the fray and issued a final rule effective April 27, 2020, restoring a joint employment standard that had been followed for several decades prior to the Browning-Ferris decision issued by the Obama-controlled NLRB in 2015. Under this “what is old is new again” rule, “a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees” to be considered a joint employer. The final rule defines “substantial direct and immediate control” as “direct and immediate control that has a regular or continuous consequential effect on an essential term or condition of employment of another employer’s employees. Such control is not ‘substantial’ if it is only exercised on a sporadic, isolated, or de minimis basis.” This is similar to the DOL’s new standard for joint employer status. The Board goes on to define “essential terms and conditions of employment,” such as hiring, firing, discipline, supervision, direction, wages, benefits, and hours of work. In order to provide greater clarity and remove a potential issue from litigation, the Board also clarified that this list is exhaustive. See the final rule on joint employer status under the Fair Labor Standards Act.

The electronic ink had hardly dried on the NLRB’s announcement, when the New York State Attorney General filed suit on Feb. 26 to enjoin the DOL’s new joint employment rule. According to the New York AG, the new DOL regulation narrows the joint employment standard under the Fair Labor Standards Act and undermines “critical workplace protections for the country’s low- and middle-income workers, [leading] to increased wage theft and other labor law violations.” The new DOL regulation will cost workers an estimated $1 billion annually, according to the complaint. The 17 plaintiff states, which include California, Pennsylvania, Delaware and Illinois, seek a judgment blocking the rule as arbitrary, capricious, and an abuse of discretion.

So while the wheels are turning in the courts and the administrative process, the immediate future is likely to be a bit uncertain for employers and practitioners alike. This is definitely a time for employers to stay abreast of developments and in close contact with trusted labor and employment counsel because the rain clouds could be swirling ahead.

Some Relief: DOL Provides Flexibility and Clarity With New Joint Employer Rules

By Timothy Long and Stacey Chiu on Posted in California L&E Group, Department of Labor, FLSA, Joint Employer, Wage & Hour

See our Feb. 28 update regarding the new joint employer rule.

On March 16, 2020, new rules on joint employment status under the Fair Labor Standards Act (FLSA) will go into effect. The new rules should provide clarity and relief for employers struggling to determine whether they would be treated as joint employers by the DOL.

The DOL’s final rule, first published on Jan. 16, 2020, announces a four-factor balancing test for determining joint-employer status when one employer “suffers, permits, or otherwise employs the employee to work, but another individual or entity simultaneously benefits from that work.” The test calls for consideration of whether the alleged joint employer has the power to:

  • hire or fire the employee;
  • supervise and control the employee’s work schedules or conditions of employment;
  • determine the employee’s rate and method of payment; and
  • maintain the employee’s employment records.

Other factors may be relevant, “but only if they indicate whether the potential joint employer is exercising significant control over the terms and conditions of the employee’s work,” according to the DOL. The appropriate weight given to each factor varies depending on the circumstances, and no single factor is determinative of joint-employer status.

The final rule contains other important points:

  • Simply reserving the right to control working conditions is not enough to find one employer the joint employer of another. An alleged joint employer must actually exercise control over the employee’s working conditions.
  • A potential joint employer’s contractual agreements with an employer requiring the employer to comply with its legal obligations or to meet certain standards to protect the health or safety of its employees or the public do not make FLSA joint-employer status more or less likely. Similarly, contractual agreements with an employer requiring quality control standards to ensure consistent quality of work product, brand, or business reputation do not make FLSA joint-employer status more or less likely.
  • Other factors given by the DOL that do not make joint-employer status more or less likely include providing a sample employee handbook, or other forms; allowing the employer to operate a business on its premises, including “store within a store” arrangements; or offering an association health or retirement plan. See Joint Employer Final Rule FAQs.

The final rule also identifies additional factors that may be relevant in determining joint-employer status as well as those not be considered when using the balancing test. Notably, an employee’s economic dependence on an employer is not determinative of whether the entity is a joint employer. In addition, just because an employer is a franchisee does not make it more or less likely that the franchisor will be considered a joint employer.

The final rule provides much needed guidance. The DOL has not formally revised the joint-employer standard in over 60 years. While time does not necessarily heal everything, the final rule should come as relief to many employers.

Employers Score Another Hit Against AB 51 as Preliminary Injunction Extends Prohibition on Enforcement by State of California

By Charles O. Thompson and Yoon-Woo Nam on Posted in AB 51, Arbitration, California, California L&E Group, Employment Agreement

In the span of five weeks, a coalition of plaintiffs representing national and state business organizations and employers, including the U.S. Chamber of Commerce and the California Chamber of Commerce, have gone two for two in challenging AB 51 to restore the previous status quo permitting the use of arbitration agreements with their employees. The case is Chamber of Commerce of the U.S.A., et al. v. Xavier Becerra, in his official capacity as the Attorney General of the State of California, et al, United States District Court, Eastern District of California, Case No. 2:19-cv-02456-KJM-DB.

AB 51, signed into law by Gov. Gavin Newsom on Oct. 10, 2019, prohibits California employers from requiring prospective and current employees to “waive any right, forum, or procedure” for a violation of the state’s equal employment opportunity law – the Fair Employment and Housing Act – and Labor Codes. On Dec. 30, 2019, just before it was set to take effect, AB 51 was temporarily restrained from enforcement pending a hearing on the plaintiffs’ preliminary injunction. Then, on Jan. 31, 2020, the chief district court judge of the Eastern District of California granted plaintiff’s preliminary injunction.

In her 36-page ruling granting the preliminary injunction, Chief Judge Kimberly Mueller concluded the plaintiffs met their burden of showing AB 51 is likely preempted by the Federal Arbitration Act. The court initially determined it had jurisdiction over the case before moving to the merits of plaintiffs’ argument. Subsequently, the court acknowledged that with AB 51, the state of California’s primary target is arbitration agreements, which subjects them to unequal footing as compared to other contracts, and places “uncommon barriers on employers” who include mandatory arbitration provisions in their employment agreements. Because AB 51 also imposes civil and criminal penalties, including a misdemeanor punishable by imprisonment and/or fine, that interfere with the Federal Arbitration Act, the court found the federal law preempted it. Finally, the court agreed with plaintiffs that employers would likely be irreparably harmed if AB 51 took effect because they would be forced to choose between risking civil or criminal penalties based on the law’s uncertainties, and not using arbitration agreements to avoid penalties.

The plaintiffs now have substantial momentum in their effort to permanently enjoin the state of California from enforcing AB 51.

Georgia Bill Would Require Employers to Provide Employee Breaks to Pump Breast Milk

By Natasha Wilson and Keshia M. Tiemann on Posted in Discrimination, GT Alert, State Law

On Jan. 29, 2020, Senate Bill 327, known as “Charlotte’s Law,” was introduced in the Georgia General Assembly, requiring employers to provide reasonable breaks for pumping breastmilk. The bill was inspired by a public school teacher whose supervisor would not allow her to pump during her planned break. The teacher was given an ultimatum to either stop pumping during the break or continue pumping during the break, so long as she stayed after work to “make up” for the time.

Through the Patient Protection and Affordable Care Act, the Fair Labor Standards Act (FLSA) was amended to require covered employers to provide reasonable, unpaid break time to an employee who needed to pump breast milk for a nursing child up to one year after the child’s birth. The FLSA, as amended, also requires that the employer provide these employees a place to pump breast milk that is not a bathroom, shielded from the view of others, and free from intrusion by co-workers and the public.

Click here to read the full GT Alert, “Georgia Bill Would Require Employers to Provide Employee Breaks to Pump Breast Milk.”

Coronavirus and the Occupational Safety and Health Act: What Employers Need to Know

By Michael Taylor, Genus Heidary and Adam Roseman on Posted in GT Alert, OSHA, Workplace Safety

As the novel coronavirus (Coronavirus) continues to spread in China and around the world, employers may want to consider steps to take in addressing the Coronavirus in the workplace. The Occupational Safety and Health Administration (OSHA) recently published a webpage that provides workers and employers with interim guidance and resources for preventing exposure to the Coronavirus. See the OSHA 2019 Novel Coronavirus webpage.

Because few cases have been reported in the United States, the first question employers should consider is whether they have a duty to take any measures to prevent or reduce the likelihood of employee exposure to the Coronavirus. That is, do their employees have any risk of exposure? Unfortunately for employers, the short answer is: It depends. (We recognize that non-lawyers despise this answer, but in this case, it’s true!) If an employer has no basis to believe that its employees are at risk of exposure to the Coronavirus, then the Occupational Safety and Health Act (the Act), does not impose any affirmative duties on an employer to engage in abatement or prevention efforts.

Click here to read the full GT alert, “Coronavirus and the Occupational Safety and Health Act: What Employers Need to Know.”

New York, New Jersey Employers Now Prohibited From Inquiring About Salary History

By Robert Bernstein, Jerrold Goldberg, Katarina S. Kingston and Ryan P. O'Connor on Posted in GT Alert, Labor & Employment, Litigation, New Jersey, New York, salary history, wages

As noted in our 2019 legislative update, New Jersey and New York have joined a growing number of states in prohibiting employers from asking job applicants about their salary history. Both states’ legislation became effective earlier this month after being signed into law last year. As of January 2020, other states that prohibit all private employers from inquiring into an applicant’s salary history include Alabama, California, Connecticut, Delaware, Hawaii, Illinois, Maine, Massachusetts, Oregon, Vermont, and Washington.

Click here to read the full GT Alert, “New York, New Jersey Employers Now Prohibited From Inquiring About Salary History.”

D.C. Circuit to Take on OSHA Authority to Regulate Workplace Violence

By Michael Taylor and Genus Heidary on Posted in GT Alert, OSHA, Workplace Safety

On Jan. 9, 2020, the U.S. Court of Appeals for the District of Columbia heard oral argument in BHC Nw. Psychiatric Hosp. LLC v. Sec’y of Labor, a case that asks the court to decide how far the Occupational Safety and Health Administration (OSHA) can go when directing a hospital to put in place measures to protect nurses and other staff members from patient attacks.

The hospital appealed to the D.C. Circuit, challenging an order from the Occupational Safety and Health Review Commission (Commission), in which Chief Judge Covette Rooney found that the hospital breached the OSHA general duty clause because (1) its measures for addressing patient on staff violence were insufficient, and (2) the hospital had not taken feasible measures to materially reduce the recognized hazard.

Click here to read the full GT Alert, “D.C. Circuit to Take on OSHA Authority to Regulate Workplace Violence.”

OSHA Is Raising Its Maximum Penalty Amounts, Again!

By Michael Taylor and Adam Roseman on Posted in GT Alert, OSHA

On Jan. 10, 2020, the U.S. Occupational Safety and Health Administration (OSHA) announced another increase in the maximum civil monetary penalties for violations of federal Occupational Safety and Health standards and regulations. The new monetary penalties will be nearly 2% higher than the current maximum penalty amounts.

Effective Jan. 15, 2020, the maximum penalty for “Willful” or “Repeated” violations is $134,937, a more than $2,000 increase from the 2019 maximum for the same kinds of violations. The maximum penalty for “Failure to Abate” violations is $13,494 per day after the abatement date. Finally, the maximum penalty allowed for “Serious,” “Other-Than-Serious,” and “Posting Requirements” violations is $13,494, an increase of over $200 from the 2019 maximum amounts. Importantly, states that operate their own Occupational Safety and Health plans are required to adopt maximum penalties levels that are at least as effective as federal OSHA’s.

Click here to read the full GT Alert, “OSHA Is Raising Its Maximum Penalty Amounts, Again!”

AB 5 Update: The California Supreme Court Will Likely Decide if Dynamex Is Retro in 2020

By Charles O. Thompson and Yoon-Woo Nam on Posted in AB 5, California, California L&E Group

On Jan. 15, 2020, the California Supreme Court granted, and then deferred further action on, the appeal of a lower appellate court’s opinion in Gonzales v. San Gabriel Transit, Inc. pending its disposition of Vazquez v. Jan-Pro Franchising Int’l, Inc., which takes up the common issue of whether the Dynamex decision applies retroactively.

Last year, the governor of California signed Assembly Bill 5 (AB 5) into law, which codified and clarified the California Supreme Court case Dynamex Operations West, Inc. v. Superior Court of Los Angeles. The ABC test established in Dynamex dramatically changed the standard for determining whether workers in California should be classified as employees or as independent contractors. Under the ABC test, a hiring entity must prove that a worker is in fact an independent contractor by demonstrating: (A) the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) the worker performs work that is outside the usual course of the hiring entity’s business, and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. San Gabriel Transit, Inc. is one of several AB 5-related cases before state and federal courts in California that have workers, employers, and trade associations hotter than 1.21 gigawatts. While lawsuits filed by “gig economy” drivers, truck drivers (CTA preliminary injunction granted in USDC- Southern District) and freelance journalists (American Society of Journalists and Authors, Inc. and National Press Photographers Association lawsuit filed in USDC- Central District) present an existential threat to AB 5 in the long run, the California Supreme Court will likely decide the retroactivity issue in Jan-Pro Franchising Int’l and San Gabriel Transit, Inc. this year. The impact of the rulings in both cases will extend up and down the Golden State, and employers, especially franchisors (See GT Alert, AB 5 Update, Sept. 24, 2019), and their counsel should be prepared. Continue Reading

First Circuit Concludes That Two Private Equity Funds Were Not Liable for Pension Fund Withdrawal Liability of Portfolio Company

By Steven B. Lapidus and Ian A. Herbert on Posted in Benefits, ERISA & Employee Benefits Litigation, GT Alert, Litigation, Retirement

In its recent decision in Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund, the First Circuit Court of Appeals decided that two investment funds established by a private equity firm to acquire and provide management services to various portfolio companies were not liable for the withdrawal liabilities for unfunded benefits under a union pension plan contributed to by one of their portfolio companies. Under the Multiemployer Pension Plan Amendment Act of 1980 (MPPAA), all “trades or businesses” under “common control” are jointly and severally liable for the withdrawal liability of any member of that controlled group. The First Circuit held that neither of the funds were under “common control” with the portfolio company, since neither separately owned 80% or more of the stock of the portfolio company, and based upon the facts and circumstances, the funds had not formed a de facto partnership to acquire and own the stock.

The decision suggests that if the facts are right, bifurcating ownership to keep a fund’s ownership of the portfolio company below the 80% “common control” threshold may still be a viable approach to prevent a fund from being obligated to pay the withdrawal liability of the portfolio company. The summary that follows of the facts and circumstances involved in this case, and the court’s analysis of those facts, are instructive for those private equity firms wishing to follow this approach. The First Circuit’s analysis of the “trade or business” prong of the controlled group test also is important for any private equity fund that owns 80% or more of the portfolio company.

Read the full GT Alert.

LexBlog