Supreme Court decision announced in Pimlico Plumbers case

By Joanna Powis on 14 June 2018 Posted in Employment (UK), Gig Economy

The Supreme Court has delivered its ruling on the landmark Pimlico Plumbers case, upholding previous decisions that an ostensibly ‘self employed’ plumber was in fact properly classified as a ‘worker’ with valuable employment rights under UK law (including discrimination protection and holiday pay). The case has been closely monitored because of its impact on organisations engaging large numbers of individuals on a self-employed basis, including those operating in the ‘gig economy’.

The case centred on the employment status of Gary Smith, a plumber who worked on a self employed basis with Pimlico for approximately six years over 2005-2011. Both the Employment Appeal Tribunal and the Court of Appeal supported Mr Smith’s position that he was a ‘worker’ with limited (but often valuable) employment rights, including holiday pay. Pimlico Plumbers appealed the case to the Supreme Court. Pimlico Plumbers has lost that appeal, with the Supreme Court supporting previous rulings that key aspects of Smith’s working conditions meant he cannot be classed as an independent self-employed contractor for employment law purposes.

In the Supreme Court’s view, the fact that Pimlico exercised tight administrative control over Smith, imposed conditions around how much it paid him and on his clothing and appearance for work, and restricted his ability to carry out similar work for competitors if he moved on from the company, all supported the conclusion that he was a ‘worker’ and not genuinely self employed. It also noted that the dominant feature of his relationship with the company was that he would do the work personally, rather than pass it on to a substitute contractor, even though he did have the option to pass work to another Pimlico operative.

Decisions on employment status are always fact sensitive and therefore the precedent impact of this case for employers in the long run is not clear cut. However, the publicity surrounding the decision is likely to lead to future challenges by ostensibly self employed individuals looking to unpick those arrangements in the event of a dispute.

New Jersey Equal Pay Act effective July 1

By Melissa M. Ferrara on 6 June 2018 Posted in Employment & Labor (U.S.), Equal Pay, US Alert, Workplace Laws and Regulations

On July 1, 2018, the Diane B. Allen Equal Pay Act becomes effective in New Jersey. The law contains a myriad of requirements, including recordkeeping and anti-retaliation provisions, and it prohibits pay disparities based on an employee’s membership in a protected class (i.e., sex, race, color, age and religion). The law provides a six-year statute of limitations for pay equity claims (previously limited to two years).

In the absence of a seniority or merit-based system, an employer will not be able to pay different rates of compensation for substantially similar work unless the difference is based on legitimate, bona fide job-related factors that are also based on business necessities. These factors include training, education, experience or performance. However, these factors cannot perpetuate a differential in pay or be based on any protected class. Also, these factors must be reasonably applied and must explain the entire wage differential.

Lastly, an employer cannot claim that a factor is based on a business necessity “if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential.” An employer found in violation of the law is subject to treble damages, and a willful violation allows an employee to recover punitive damages.

U.S. Supreme Court Rules Class Action Waivers Are Enforceable

By John T. McDonald and Cheryl Blount on 21 May 2018 Posted in Employment, Employment & Labor (U.S.), US Alert, Workplace Laws and Regulations

On Monday, May 21, 2018, the U.S. Supreme Court ruled that agreements between employers and employees providing for individualized arbitration proceedings are enforceable. The decision came in a trio of cases, all raising the issue of whether the Federal Arbitration’s Act’s saving clause, which removes the obligation to enforce an arbitration agreement in certain circumstances, was triggered. The plaintiffs-employees argued that the saving clause applied because agreements requiring individualized arbitration proceedings violated the National Labor Relations Act (NLRA) by barring the employees from engaging in “concerted activity” through pursuing claims on a class or collective basis. The Court disagreed.

The decision ends a split that developed among the federal Circuits after the National Labor Relations Board’s 2012 decision in D.R. Horton Inc., which held that requiring employees to sign agreements precluding class or collective claims addressing employment issues violated the NLRA. In the three cases for which certiorari was granted, the Fifth Circuit rejected the Board’s position in Murphy Oil USA Inc. v. NLRB, while the Seventh and Ninth Circuits upheld it in Lewis v. Epic Systems Corp. and Morris et. al. v. Ernst & Young, LLP, respectively. Since the three petitions were granted, the Sixth Circuit joined the Seventh and Ninth Circuits, and the Second and Eighth Circuits joined the Fifth Circuit.

Writing for the majority, Justice Neil Gorsuch stated that “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.” Specifically, the Court held that the Arbitration Act’s saving clause, which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for revocation of any contact,” only recognizes general contract defenses, not interference with fundamental attributes of arbitration. Further, relying on the standard principles of statutory construction and the history of the NLRA, the Court held that there was no conflict between the Arbitration Act and the NLRA because “concerted activity” focuses on the right to organize unions and bargain collectively and does not include class and collective procedures.

The Court’s decision makes clear that, with some exceptions, employers may require employees to agree to forego class or collective actions, limiting them to individual arbitrations. The main exceptions to the Court’s decision are agency actions (such as actions brought by the Equal Employment Opportunity Commission) and certain types of state laws (such as California’s Private Attorneys General Act). Employers should review their current approach to arbitration agreements, weighing their benefits and costs, and determine whether the Court’s decision warrants a change in their approach.

For more information on developments in this area, please contact John McDonald at jmcdonald@reedsmith.com or the Reed Smith lawyer with whom you normally work.

California Supreme Court Holds Worker Classifications Easy As A-B-C

By Christina Tellado and Deisy Castro on 1 May 2018 Posted in California Employment Beat, Employment, Employment & Labor (U.S.), Wage and Hour, Workplace Laws and Regulations

The California Supreme Court handed down its highly anticipated decision in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, No. S222732 (Cal. April 30, 2018), adopting a new legal standard to be used in determining whether workers should be classified as employees or as independent contractors. Specifically, in the unanimous Dynamex decision, the Court professed adoption of a “simpler, more structured test” for determining whether a company “employs” or is an “employer” under the California Industrial Welfare Commission’s (IWC) Wage Orders. The Court not only adopted a new legal standard for worker classifications, but also set out an affirmative burden on a company to prove that workers are properly classified.

At issue in Dynamex was the scope of Martinez v. Combs, 49 Cal.4th 35 (2010), which held that the IWC Wage Orders embody three alternative definitions of “employ”: “(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” In particular, Dynamex challenged the trial court’s certification of a class of delivery drivers because of the trial court’s reliance upon the three alternative definitions of “employ.” Dynamex argued that the multifactor common law test from S.G. Borello & Sons, Inc. v. Dep’t of Industrial Relations, 48 Cal.3d 341 (1989), is the only proper test.

NY State of Mind: New State and City Laws (Part 4)

By Cindy Schmitt Minniti, Mark S. Goldstein and Laura Bedson on 13 April 2018 Posted in Employment, Employment & Labor (U.S.), New York Employment Beat, Sexual Harassment, Workplace Laws and Regulations

This is the fourth in a series of blog posts concerning recent employment law developments in New York State and City:

Legislation Update: New York State Legislature Passes Sweeping Anti-Sexual Harassment Legislation

The New York State Legislature has had an eventful year and is showing no sign of slowing down. Adding to the growing federal and state legislation stemming from the #MeToo Movement, on March 30, 2018, Governor Andrew Cuomo signed a Bill containing several changes to the law governing sexual harassment in the workplace.

First, the Bill prohibits mandatory arbitration of sexual harassment claims brought under Article 75 of New York’s Civil Practice Law and Rules (CPLR). Interestingly though – and unless the federal law changes – this provision will be preempted by the Federal Arbitration Act (FAA), which displaces any conflicting state law. The conflict between the two laws will undoubtedly create confusion and tension as the new Bill takes effect. Interestingly, however, there is currently a Bill pending in the Senate, which seeks to amend the FAA to prohibit arbitration clauses in agreements relating to sexual harassment claims. Should the Senate Bill be enacted, the preemption issues surrounding this new Bill will likely be resolved. The foregoing provision will become effective 90 days after the Bill becomes law.

NY State of Mind: New State and City Laws (Part 3)

By Cindy Schmitt Minniti, Mark S. Goldstein and Laura Bedson on 9 April 2018 Posted in Employment & Labor (U.S.), New York Employment Beat, Workplace Laws and Regulations

This is the third in a series of blog posts concerning recent employment law developments in New York State and City:

The New York City Council is at it again – enacting yet another groundbreaking law intended to create some of the broadest workplace protections in the nation. The law itself – an amendment to the Fair Workweek Law that took effect last fall – requires that Big Apple employers grant temporary schedule changes to employees for qualifying “personal events.” This temporary scheduling law goes into effect on July 18, 2018.

Specifically, the Bill entitles employees to a maximum of two requests for a temporary schedule change per calendar year for qualifying personal events. A qualifying “personal event” is defined as

i. The need for a caregiver to provide care to a minor child or care recipient;

ii. An employee’s need to attend a legal proceeding or hearing for subsistence benefits to which the employee, a family member or the employee’s care recipient is a party; or

iii. Any circumstance that would constitute a basis for permissible use of safe time or sick time pursuant to New York City’s Earned Sick and Safe Time Act.

As defined by the law, “temporary change” means “a limited alteration in the hours or times that or locations where an employee is expected to work, including, but not limited to, using paid time off, working remotely, swapping or shifting work hours and using short-term unpaid leave.” Each requested change can only alter the employee’s schedule as to one business day.

Supreme Court: Auto Service Advisors Exempt from FLSA Overtime Requirements

By Adam Weiner and John T. McDonald on 2 April 2018 Posted in Employment & Labor (U.S.), Wage and Hour, Workplace Laws and Regulations

Ruling has encouraging implications for all employers

Earlier today, the U.S. Supreme Court ruled that auto service advisors—employees at car dealerships who advise customers about repair work—are exempt from the Fair Labor Standards Act’s (FLSA) overtime requirements. The ruling reverses unexpected decisions by the Department of Labor and the Ninth Circuit that upended what had been standard practice at auto dealerships.

The 5-4 decision in Encino Motorcars, LLC v. Navarro turned on the interpretation of the FLSA’s exemption of “any salesman, partsman, or mechanic” who is “primarily engaged in selling or servicing automobiles.” Justice Clarence Thomas’ majority opinion determined that services advisors fall under the exemption because they are primarily engaged in servicing automobiles vis-à-vis their sales of those services.

Although the analysis of FLSA exemptions is highly fact-specific, the Encino Motorcars decision impacts all employers because the majority rejected the commonly-invoked principle that FLSA exemptions should be interpreted narrowly. Instead, the Court held that the “narrow-construction principle relied on the flawed premise that the FLSA ‘pursues’ its remedial purposes at ‘all costs’.” In other words, the majority established that a court’s objective in analyzing FLSA exemptions is to give them a fair reading, not a narrow one. This rejection of the “narrow reading” of FLSA exemptions means that employers seeking to apply the exemptions to their employees now face a more relaxed standard.

The Supreme Court’s decision affirms the established pay practices for service advisors at dealerships throughout the United States. Employers can now confidently treat these employees as exempt from overtime requirements under the FLSA. However, employers should make sure that they also follow any applicable state wage law requirements. Employers with employees who perform functions similar to auto service advisors should take this opportunity to re-examine those employees’ job duties, compensation, and classification to ensure compliance with federal wage and hour law.

If you have further questions about this issue, please contact John McDonald at jmcdonald@reedsmith.com.

New Jersey Legislature Considering Bill Prohibiting Waiver of Employees’ Rights Under Discrimination Laws

By Melissa M. Ferrara on 6 March 2018 Posted in Discrimination, Employment & Labor (U.S.), Workplace Laws and Regulations

The New Jersey Legislature is considering a bill with potentially far-reaching implications for employment contracts and agreements resolving discrimination, harassment or retaliation claims. Bill S121/A1241 precludes the waiver of rights or remedies related to any claim of discrimination, retaliation or harassment in “employment contracts,” and specifies that rights and remedies under the New Jersey Law Against Discrimination or any other statute or case law can only be waived prospectively. The bill exempts collective bargaining agreements (“CBAs”) from this waiver prohibition. Therefore, CBAs that contain discrimination or harassment clauses appear to be unaffected.

While the waiver prohibition applies only to “employment contracts,” the bill’s proscription of commonly used confidentiality clauses applies to “any employment contract or agreement.” The bill does not define or explain the difference between a contract or agreement. Additionally, the bill does not clearly define what circumstances give rise to the confidentiality clause limitation, rendering unenforceable any provisions designed to conceal “the details relating to a claim of discrimination, retaliation or harassment.”

The bill also contains an anti-retaliation provision, protecting applicants and/or employees who refuse to enter into an agreement or contract that contains a prohibited provision.

The bill provides for a two-year period for employees to bring claims in the New Jersey Superior Court, and prevailing employees would be entitled to their attorney’s fees and costs. In addition to the typical fee-shifting structure, an employer would also be liable for the fees and costs that an employee incurs if the employer attempts to enforce a prohibited provision of an agreement or contract (i.e., a confidentiality clause).

If enacted as drafted, the law would take effect immediately and apply prospectively.

Second Circuit Holds Title VII Prohibits Sexual Orientation Discrimination, Advancing the Circuit Split

By Miriam Edelstein on 27 February 2018 Posted in Discrimination, Employment & Labor (U.S.), Workplace Laws and Regulations

In a recent en banc decision issued on February 26, 2018, the U.S. Court of Appeals for the Second Circuit held that Title VII of the Civil Rights Act of 1964’s prohibition against sex discrimination in employment includes discrimination based on sexual orientation. The case, Zarda v. Altitude Express, makes clear that employees working within the Second Circuit (New York, Connecticut and Vermont) have access to the remedial measures and administrative process under Title VII, a federal law. It is worth noting that employers in these states were already prohibited from discriminating on the basis of sexual orientation under express provisions of each state’s laws. Nonetheless, this decision is significant because it advances the split in federal circuit courts of appeal on this issue, making review by the U.S. Supreme Court more likely.

By its holding in Zarda, the Second Circuit joined the Seventh Circuit’s decision in Hively v. Ivy Tech. Comm. Coll., reversing relatively recent precedent finding sexual orientation to be beyond the reach of Title VII. These decisions are directly at odds with a recent decision by the Eleventh Circuit, Evans v. Georgia Regional Hospital, upholding its prior precedent, ruling that Title VII does not prohibit sexual orientation discrimination. With an additional court of appeals joining the split on this hot-button issue, the road to Supreme Court review seems likely to get shorter.

Employers should be aware that even in circuits where the court of appeals has not recently revisited this issue, some district courts have also changed course in this area, and many individual state and municipal laws prohibit this same conduct. With some federal courts changing their view on the breadth of Title VII’s protections, employers should take time to review their anti-discrimination policies to make sure they are in line with the law governing jurisdictions where they operate.

Controlled Substances Act Does Not Shield Marijuana Businesses from FLSA or Other Claims

By Melissa M. Ferrara on 12 February 2018 Posted in Wage and Hour, Workplace Laws and Regulations

An employee of a marijuana dispensary in Colorado filed a claim in federal court alleging that he was not paid overtime in violation of the federal Fair Labor Standards Act (FLSA). The dispensary attempted to dismiss the case by arguing that its business is illegal under federal law and, therefore, typical legal protections are unavailable to its employees. The district court rejected this argument. Relying on a prohibition era case, the court explained that employers are not excused from complying with federal laws, including the FLSA, simply because their business practices may violate federal law. Thus, despite its admission that it is an illegal enterprise under federal law, the dispensary is still subject to the suit and must incur the expense of litigation. Moreover, as an employer the dispensary carries the burden of establishing that the employee was not entitled to overtime. If it cannot meet that burden, then the employee is entitled to his back pay, an equal amount of liquidated damages, and his attorney’s fees and costs.

The takeaway is that the Controlled Substances Act may not shield dispensaries and other marijuana businesses from the FLSA or other claims from their employees. Therefore, such businesses must ensure that their policies and practices comply with both federal and state employment laws.

Please read the full text of the opinion here.

For more information on developments in this area, please get in touch with Melissa Ferrara at mferrara@reedsmith.com or the Reed Smith lawyer with whom you normally work.