Saturday, January 26, 2019

The NLRB's New Employee-Classification Test

Yesterday, the NLRB issued a decision in the SuperShuttle DFW case, providing yet another analysis to determine whether an individual is an employee or independent contractor under the NLRA. The Board's new approach is basically just to adopt the D.C. Circuit's test from the 2011 FedEx case, which I've examined (and criticized) elsewhere. That test relies most heavily on whether the worker has "entrepreneurial opportunity."

As a preliminary matter, it is important to remember that the Supreme Court has held multiple times that when a statute lacks a meaningful definition of "employee," the common-law "right-to-control" test for determining whether someone is an employee or independent contractor should apply. The Court, in Roadway Systems, explicitly held that the NLRA is one of those statutes.  So the question for the NLRB is to determine what the common-law test requires. 

Note that the analysis is not referred to as the "common-law 'entrepreneurial opportunity'" test. That's because, for its long history, that test has stressed that the most important factor is the purported employer's right to control the manner and means of work of the purported employees. Entrepreneurial opportunity may be relevant, along are numerous other factors, but the right to control is the focal point of the test (I'm actually being generous here because entrepreneurial opportunity isn't explicitly a factor in the common-law test, although other factors hint at a similar concern).  In fact, in an ironic twist, the D.C. Circuit just last month stressed this exact point with regard to the NLRB's joint-employer test. In that case, the D.C. Circuit gave a pretty strong warning that the Board needs to be careful not to stray too far from the common-law's focus on right-to-control.

Despite all of this, in SuperShuttle, the NLRB adopted a D.C. Circuit test that makes entrepreneurial opportunity the overriding concern in the analysis. The NLRB downplayed that that's what the D.C. Circuit did, but that interpretation is just wrong. The court held, among other things, that it was "shift[ing the] emphasis’ away from the unwieldy control inquiry in favor of a more accurate proxy: whether the ‘putative independent contractors have significant entrepreneurial opportunity for gain or loss.’" And that shift, to my mind, is indefensible.

You'll note that SuperShuttle has exactly zero citations showing judicial support for the notion that entrepreneurial opportunity is an "important animating principle" of the common-law test other than the D.C. Circuit's decisions. Those decisions, in turn, elevated entrepreneurial opportunity based on an erroneous (one might even say disingenuous) interpretation of the common law. There is simply no reasonable way to say both that the NLRB uses the common law test and that the test's primary focus is entrepreneurial opportunity. The first proposition, as the Board majority itself acknowledges, is undoubtably true; the second is just as clearly untrue. (Member McFerran makes the same point in her dissent.) The common-law test simply does not consider entrepreneurial opportunity as a key principle. Indeed, a closer question is whether it considers it at all. Thus, the Board could reasonably argue that entrepreneurial opportunity should be the animating factor, but it can't make that happen without defying the Supreme Court's clear mandate that when Congress doesn't provide a meaningful definition of "employee," the common-law test applies.

As bad as the NLRB's and D.C. Circuit's manipulation of the common-law test's history is, if that's all that was going on, this might not have too big of an impact. But it's not. What I view as the biggest practical effect of the D.C. Circuit's standard is how it define entrepreneurial opportunity. In particular, the court would allow a business to classify a worker as an independent contractor based simply on theoretical entrepreneurial opportunity, even if it is virtually impossible to take advantage of in practice. This means that businesses can manipulate their agreements with workers to give the appearance of entrepreneurial opportunity, while ensuring that workers lack any genuine opportunity to act like anything but employees. In SuperShuttle, the Board didn't explicitly get into this question, so it's not entirely clear how close they're going to hew to that aspect of the D.C. Circuit's approach, although the Board implied that they were doing the same thing, particularly by failing look into whether drivers had any real ability to use their vans for other work. But the reason why they didn't address this issue may be more disturbing. The Board failed to consider whether the drivers had the option to sell their services to other business--something that is a key characteristic of an independent contractor. Instead, the Board merely stressed that the drivers had control over how much they would work for SuperShuttle and, therefore, how much they earn. You know who else controls how much they earn by determining how much they work? Virtually every hourly and piece-rate employee (albeit with varying ability to control their hours).

Finally, one other significant impact of SuperShuttle was to reject the Obama Board's test in another FedEx decision (see a trend here?), in particular its use of economic dependency. On this point, I'm in agreement with the current Board. While I prefer a more expansive test that considers economic dependency, that's not what the Board should be using. Again, the Court has said that statutes like the NLRA with no real definition of "employee" should use the common-law test. That test doesn't stress economic dependency, unlike the test under the FLSA and FLRA, which have statutory language that suggest a broader classification. So while as a policy matter I prefer using economic dependency, that's not what the NLRB should be doing. The way to fix this is for Congress to better define "employee" or for the Supreme Court to move away from its common-law default. 

In sum, SuperShuttle is a a vey poorly reasoned decision, no matter what you think the best test should be from a policy perspective. What will be interesting is to see how the SuperShuttle test fares in the circuit courts. I suspect some circuits are going to squarely reject the new rule, while some may approve. Even more interesting will be the D.C. Circuit's take. The court will have to grapple with its equally bad FedEx decision, which seems to run directly counter to its recent holding on the joint-employer issue, not to mention explicit Supreme Court precedent. 

-Jeff Hirsch

January 26, 2019 in Labor and Employment News, Labor Law | Permalink | Comments (0)

Tuesday, January 22, 2019

Noncompete Clauses as Tax Code Violations

MorrowRebecca Morrow (Wake Forest) has posted on SSRN an interesting approach to challenging noncompete violations -- as tax code violations. Her article is Noncompetes as Tax Evasion, 96 Wash. U. L. Rev. ___ (2018), and it caught my attention over at Tax Prof Blog. Here's an excerpt from the abstract:

Policymakers should use a [tax-violation] approach to curtail the excessive, exploitative, and anticompetitive use of employment noncompete agreements. Currently, nearly one in five (or thirty million) American workers is bound by an employment noncompete. Employers claim that they adequately compensate employees for noncompete restrictions with higher wages, bigger raises, and/or more generous bonuses. Policymakers scoff at this claim and use contract law to attack them. Unfortunately, employment noncompetes are like Al Capone in that they have flourished despite the law’s efforts to restrain them. Recently, the largest study of noncompetes in U.S. history paradoxically found that their prevalence is unaffected by their enforceability. In states like California that refuse to enforce employment noncompetes, they are as common as in states that uphold them. Contract law has proved ill-equipped to respond to the pervasive, expanding, and damaging use of noncompetes.

This Article is the first to shift the focus and to argue that employment noncompetes, as employers currently use them, constitute tax evasion and should be attacked as such. If employers pay employees for noncompetes through compensation, then by employers’ own account, this compensation is not purely an expense associated with immediate benefits; rather, it is an expenditure associated with future benefits — benefits that the employer will enjoy years after payment. Thus, the IRS should stop allowing employers to fully immediately deduct the compensation they pay to employees subject to noncompetes and instead should require that an adequate portion of total compensation be allocated to the noncompete and amortized over the restricted period, beginning when employment ends.

rb

January 22, 2019 in Employment Common Law | Permalink | Comments (0)

Friday, January 18, 2019

Union Density -- Including Public Sector -- Dropped Further in 2018

DownThe Wall Street Journal reports today that data from the Department of Labor show union density continuing to fall. Total density in 2018 was 10.5%, down from 10.7% in 2017. Density in the public sector fell from 34.4% to 33.9%). Here's a link to the DOL BLS press release with links to the relevant tables; below is an excerpt from the WSJ article:

The overall rate of union membership in the U.S. fell last year, largely reflecting a decline in the rate of state employees’ unionization, according to the latest Labor Department data.

The union membership rate, or the percent of wage and salary workers who were members of unions, dropped to 10.5% in 2018 from 10.7% a year earlier, the Labor Department said Friday.

The decline stems mainly from a decrease in union membership among state employees, whose membership rates fell to 28.6% in 2018 from 30.3% a year earlier.

rb

January 18, 2019 in Labor and Employment News, Labor Law, Union News, Workplace Trends | Permalink | Comments (0)

Thursday, January 17, 2019

More on New Prime

Arbitration-info-1


Rafael Gely (Missouri) has collected a series of essays on yesterday's New Prime decision and posted them over at Arbitration Info. As of this afternoon those essays include:

  • New Prime and the Gig Economy, Rick Bales (ONU).

  • New Prime and the Viability of State Arbitration Acts, Lise Gelernter (Buffalo, & NAA Member).

  • New Prime and Old Faults, Imre S. Szalai (Loyola New Orleans)

rb

 

January 17, 2019 in Arbitration | Permalink | Comments (0)

Tuesday, January 15, 2019

Independent Contractors = Employees in FAA "Transportation Industry" Exclusion

IndexTwo increasingly rare events occurred today in the same case: [a subset of] workers got a win, and the Supreme Court narrowed (yes, you read that correctly) the scope of the Federal Arbitration Act. Though the case at first blush appears narrow, it may have much broader implications in the Uber litigation.

The case is New Prime Inc. v. Oliveira. Dominic Oliveira was a truck driver for Prime under a contract calling him an independent contractor and containing an arbitration clause. Oliveira filed a class action alleging underpayment of wages. Prime moved to dismiss and send the case to arbitration, on two grounds: (1) the arbitration clause gave the arbitrator the authority to decide arbitrability issues -- so Prime argued the case should go straight to arbitration for the arbitrator to decide first the arbitrability issue and then, presumably, the merits; and (2) because Oliveira was an independent contractor, he was not covered by the FAA Section 1 exclusion of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Because, Prime argued, Oliveira wasn't excluded by Section 1, he was covered by the FAA, and his dispute should be subject to the same nearly irrebuttable presumption of arbitrability applied to all other contracts covered by the FAA.

The Supreme Court ruled 8-0 (Kavanaugh did not participate) for Oliveira on both counts. On the arbitrability issue, the Court characterized the "arbitrator decides arbitrability" clause as merely a specialized form of an arbitration clause. Like any other arbitration clause, the Court reasoned, this type of arbitration clause is not enforceable under the FAA if it's excluded by Section 1. And courts -- not arbitrators -- decide "substantive" arbitrability questions such as the scope of the Section 1 exclusion.

As noted above, Prime argued that the Court should interpret the FAA Section 1 exclusion as applying only to "employees", not to independent contractors. The Court, however, rejected that argument as inconsistent with the common understanding of those terms in the 1920s when the FAA was drafted and enacted. At the time, the Court said, "employment" was more-or-less a synonym for "work" -- and "work" is what Oliveira was doing regardless of whether he is today classified as an "employee" or an "independent contractor".

This is a rare win for workers under the FAA, but it's a narrow one. The Court already has restricted the Section 1 exclusion to transportation workers (Circuit City v. Adams). But Uber drivers are transportation workers, and there's a ton of pending litigation over whether they are employees or independent contractors. After New Prime, Uber drivers may be excluded by the FAA regardless of their legal designation.

rb

January 15, 2019 in Arbitration, Employment Common Law | Permalink | Comments (2)

NLRB Reexamines the Meyers Individual Concerted Action Rule

Among the many NLRB doctrines that have swung in various directions is the one in which an individual employee's actions or words may be concerted activity protected by Section 7 of the NLRA.  The Meyers I and Meyers II cases are the foundation for this doctrine, but we've seen many subsequent Board decisions applying the doctrine in different ways depending on the Board members involved. This week's decision in Alstate Maintenance continues that trend, as the full Board (well, the current four members at least) purports to "begin[] the process of restoring the Meyers standard." Maybe I'm missing something, but it seems to me that, purely from a doctrinal perspective, that statement is an overreach and the decision is a bit of tempest in a teapot.

Under the Meyers standard and related cases, the General Counsel can show that an individual employee is engaging in concerted activity if the employee was attempting to initiate or to prepare for group action, or if the employee was engaging with or on behalf of a group of employees  (there are other ways as well, such as enforcing rights under a collective-bargaining agreement). The Board doesn't attempt to alter these underlying rules, but instead goes all in for a stingy interpretation of individual-concerted activity.  In essence, the Board distinguished cases where it felt it could do so, and overruled the one case that it believed to be too much of an impediment (WorldMark by Wyndham). In particular, the Board rejected statements in that case that an employee who protests in a group meeting in engaging in concerted activity by attempting to intimate group action and that complaining in a group setting is necessarily concerted activity (the dissent disputes this characterization of WorldMark). Instead, the Board in Alstate reiterated the need to engage in a fact-specific inquiry under Meyers II. The money quote is:

Rather, to be concerted activity, an individual employee’s statement to a supervisor or manager must either bring a truly group complaint regarding a workplace issue to management’s attention, or the totality of the circumstances must support a reasonable inference that in making the statement, the employee was seeking to initiate, induce or prepare for group action. Consistent with Whittaker and Chromalloy Gas Turbine, relevant factors that  could tend to support drawing such an inference include that (1) the statement was made in an employee meeting called by the employer to announce a decision affecting wages, hours, or some other term or condition of employment; (2) the decision affects multiple employees attending the meeting; (3) the employee who speaks up in response to the announcement did so to protest or complain about the decision, not merely (as in WorldMark) to  ask questions about how the decision has been or will be implemented; (4) the speaker protested or complained about the decision’s effect on the work force generally or some portion of the work force, not solely about its effect on the speaker him- or herself; and (5) the meeting presented the first opportunity employees had to address the decision, so that the speaker had no opportunity to discuss it with other employees beforehand.[45]

[45]  We do not hold that all these factors must be present to support a reasonable inference that an employee is seeking to initiate or induce group action. In keeping with Meyers II, the determination of whether an individual employee has engaged in concerted activity remains a factual one based on the totality of the record evidence. . . . 

One thing that's odd about this case is that it involved not only an employee's comment (a skycap who initially stated that a group of skycaps had helped a similar group arriving at the airport previous and didn't receive a tip) but also a partial work stoppage (the employee and others refused to help the new group). Alas, the GC only focused on the comment, although one might wonder why the fact that group action actually occurred did play a bigger role in the Board's analysis. Nevertheless, I don't see Alstate as making any major, substantive changes to the Meyers standard. Rather, it seems to be an example of a restrictive reading of Section 7 that we'd except from a Republican Board, announced in a way to send a message to parties about what it's doing. That said, as Michael Duff emphasized to me, even if the doctrine isn't effected much, this can have real impacts on employees who are protesting conditions at work.

-Jeff Hirsch 

January 15, 2019 in Labor and Employment News, Labor Law | Permalink | Comments (0)

Is L.A. Teachers' Strike a Harbinger of Things to Come?

StrikeYes, says Erin McHenry-Sorber (Assistant Professor of Higher Education, West Virginia University -- and thanks to Paul Harpur for sending me the link). Here's an excerpt from her recent article in The Conversation:

The Los Angeles teachers strike suggests that the wave of teacher protests is not over.

Teacher strikes and work stoppages have been preceded by a nationwide teacher shortage that continues to grow across many states, which do not have enough certified math, special education, science, and in increasing cases, elementary teachers – to meet the needs of their students. In California 80 percent of districts reported a teacher shortage in the 2017 to 2018 school year.

Teacher shortages are most often blamed on low teacher pay, one of the commonalities across teacher strikes.  These shortages are arguably exacerbated by an increase in the “teacher pay penalty,” the term used to describe disparities in teacher salary compared to professions requiring comparable levels of education.

At the same time teachers find themselves increasingly undervalued, most states are still funding their public education systems at levels below that of the 2008 recession. This includes California, which is ranked 41st nationwide in per pupil spending when adjusted for cost of living. As long as public schools remain underfunded, the nation can expect to see more teacher strikes in other school districts and states in the near future.

rb

January 15, 2019 in Labor Law, Union News, Workplace Trends | Permalink | Comments (0)

Wednesday, January 9, 2019

Flake Advocates Interactive Process for Religious Accommodations

DallanMy prolific colleague Dallan Flake has just posted on SSRN his most recent article, Interactive Religious Accommodations. Some of you may have seen him discuss it at AALS. Here's the abstract:

This Article argues employers should be required to engage in the same interactive process with employees seeking religious accommodations as they are with employees seeking disability accommodations. The interactive process generally obligates the employer and employee to work together in good faith to determine whether the employee can be reasonably accommodated. Neither the Americans with Disability Act nor Title VII of the Civil Rights Act explicitly mandates the interactive process, yet courts routinely read this requirement into the former statute but not the latter. The practical effect of this distinction is that religious accommodations generally are more difficult to obtain, and employees seeking such accommodations have less control over the process and outcome. Consequently, employees may be forced to choose between their jobs and their religious beliefs—the very conundrum Title VII seeks to avoid.

The legal justification for mandating the interactive process for disability accommodations but not religious accommodations is uncompelling, prompting a handful of courts to require the interactive process for both types of accommodations. More courts should follow suit. There is considerable upside, and virtually no downside, to extending the interactive-process requirement to religious accommodations. It benefits employees and employers alike by increasing the odds of a mutually agreeable accommodation, which in turn reduces the risk of litigation. Moreover, good-faith participation in the interactive process better positions a party to prevail when litigation does ensue. The interactive process also benefits courts, not only by lightening dockets through reduced litigation, but also by providing a straightforward, highly adaptable, and familiar framework through which to more effectively evaluate accommodation claims. As religious-accommodation requests increase, both in number and types, the interactive process can help reduce conflict by ensuring employers and employees work together to determine whether a reasonable accommodation is possible.

rb

 

January 9, 2019 in Employment Discrimination, Scholarship | Permalink | Comments (0)

Wednesday, January 2, 2019

Federal Employees Sue for Being Forced to Work Without Pay During Shutdown

The American Federation of Government Employees has initiated a suit on behalf on of two federal corrections officers who have not received earned overtime pay. The class is likely to grow substantially if the shutdown continues past Jan. 5, as that's the next regularly scheduled payday. Indeed, it is estimated that over 400,000 employees have been deemed essential and are required to continue working during the shutdown.

Like a similar suit brought during the 2013 shutdown by the same law firm--Kalijarvi, Chuzi, Newman & Fitch--the employees are claiming FLSA violations. What I hadn't realized is that despite a win in the 2013 suit, 25,000 employees still haven't received damages (they were awarded liquidated/double damages). If anyone knows why, I'd love to hear it. In any event, the prospect of double damages for over 400,000 employees for heaven knows how many hours of work would, I hope, give politicians extra incentive to get this resolved. That said, no matter how big an FLSA award might be, it still pales in comparison to a $5 billion wall . . . .

-Jeff Hirsch

January 2, 2019 in Labor and Employment News, Wage & Hour | Permalink | Comments (0)