On September 25, 2018, the Ninth Circuit granted Uber’s motion to compel arbitration and decertified a class of 160,000 drivers alleging violations of California state law, including misclassification of the drivers as independent contractors. The decision does not come as a great surprise given the court’s 2016 ruling compelling arbitration in a related case, but it serves as a reminder to companies everywhere to re-examine their independent contractor agreements.
On August 28, 2018, the U.S. Department of Labor’s Wage Hour Division issued six new advisory opinion letters offering employers guidance on a range of leave and wage issues under federal law, including the application of the Family Medical Leave Act to organ donors and a no-fault attendance policy.
Today, the United States Supreme Court ruled in Epic Systems Corp. v. Lewis, No. 16-285 that employers could lawfully require employees to waive their rights to pursue employment-related class actions through arbitration agreements providing for individualized proceedings. In a 5-4 decision, the Court ruled that such waivers do not violate the National Labor Relations Act.
On April 30, 2018, the California Supreme Court substantially narrowed the class of individuals who qualify as independent contractors under California wage-hour law and paved the way for a new wave of class actions. In Dynamex Operations West, Inc., the Court adopted the restrictive “ABC test” used in other jurisdictions for determining when a worker qualifies as an independent contractor under California’s Industrial Wage Orders.
Under that test, the court presumes all workers qualify as employees. A hiring entity can prove that the worker qualifies as an independent contractor only if it can show that the worker:
A) 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 the work and in fact; and
B) performs work that is outside the usual course of the hiring entity’s business; and
C) is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
On Monday, April 2, 2018, the Supreme Court of the United States ruled that car dealerships do not have to pay service advisors overtime under federal law. In a 5-4 decision, the Supreme Court held that service advisors, like auto salespersons, partspersons, and mechanics, are exempt from the Fair Labor Standards Act’s overtime requirements.
On March 5, 2018, the California Supreme Court changed the test for factoring flat sum bonuses into the overtime rate in Alvarado v. Dart Container Corporation of California, ordering a calculation that will increase the costs of overtime for employers who pay such bonuses. Under the federal formula, an employer must divide an employee’s total weekly pay (including non-discretionary bonuses) by the total number of hours the employee worked in a week to get the regular rate; the employer then must pay time-and-a-half that rate for all overtime hours. But under the Alvarado court’s formula, the employer must divide the total weekly pay by only “the number of nonovertime hours the employee [actually] worked during the pay period.” That smaller divisor will lead to higher overtime rates.
Earlier this month, the Wage and Hour Division of the Department of Labor reissued 17 opinion letters from the Bush administration. The letters provide employers important guidance on a wide-range of issues under the Fair Labor Standards Act.
The reinstatement marks the first publication of opinion letters since the DOL announced last June that it would bring back that form of guidance. The Obama administration had eliminated the practice and withdrawn many existing opinion letters, including many of those reissued this month.
The reinstated letters do not upend any existing laws, but they provide important guidance and a possible safety net to employers facing similar situations. Many of the reinstated letters concerned application of Section 13(a)(1)’s overtime exemption for executive and administrative employees. The letters also discussed whether certain bonuses must be included in the regular rate for purposes of calculating overtime and whether certain on-call time qualified as compensable working hours.
The letters contain a cover letter noting that someone had specifically asked the DOL to reissue that particular opinion letter. Thus, employers who would like to rely on previously withdrawn opinion letters should consider asking the DOL to reissue them under its new policy.
The California Court of Appeals held late last week that a plaintiff does not have standing to pursue California Private Attorneys General Act (PAGA) claims on behalf of the state or other employees once he accepts an offer to settle his individual claims. The court in Kim v. Reins International California, Inc. B278642 (Dec. 29, 2017), held that once the plaintiff accepted the settlement offer, he no longer qualified as an “aggrieved employee” within the meaning of the statute. The case expands the potential impact of offers of judgment in California wage-hour class actions.
The Sixth Circuit yesterday outlined narrow circumstances under which an employer can show good faith reliance on a Department of Labor opinion letter in setting wage-hour policy. In Perry v. Randstad General Partner, No. 16-1010 (6th Cir. Nov. 20, 2017), the Court held the employer did not establish a good faith reliance defense despite undisputed evidence that the employer relied on a 2005 DOL opinion letter in determining that its employees met the administrative exemption of the FLSA. The opinion serves as a note of caution to employers relying on DOL opinion letters for wage-hour policies.
On October 3, 2017, California Governor Jerry Brown signed into law Senate Bill 306, dramatically limiting an employer’s right to defend itself against allegations that it retaliated against an employee for making wage claims. In short, the law makes it far easier for employees and the California Labor Commissioner to obtain injunctive relief in retaliation cases, potentially requiring employers to reinstate discharged employees before an employer can fully defend itself against the allegations. The law takes effect January 1, 2018.
The law allows the Labor Commissioner or an employee to obtain injunctive relief against an employer based on a mere showing that “reasonable cause exists to believe a violation has occurred.” That’s a far lower burden of proof than a court’s typical standard for injunctive relief, which requires a showing that (1) the employee will suffer irreparable harm, (2) the employee will likely succeed on the merits, and (3) the employee’s interests outweigh the employer’s. The law also requires a court considering a request for an injunction to evaluate “the chilling effect on other employees.”
Other features of the new law that restrict employers’ rights include:
- Authorizing the Labor Commissioner to seek injunctive relief before concluding its own investigation;
- Permitting the Labor Commissioner to initiate investigations on its own, “without a complaint,” if the suspected retaliation occurred during the adjudication of a wage claim or a field inspection, or in instances of immigration-related threats;
- Allowing the Labor Commissioner to issue its own citations ordering reinstatement or back pay, without going to court;
- Placing a heavy burden on the employer to challenge Labor Commissioner citations, including requiring the employer to post a bond equal to the total amount of back pay allegedly owed.
Key Takeaways: The new law increases the need for California employers to make careful, well-reasoned, and thoroughly-documented disciplinary and discharge decisions. Notably, when employees make wage claims, they often also simultaneously engage in protected concerted activity under Section 7 of the NLRA. Given the potential overlap between the Labor Commissioner’s jurisdiction and the NLRB’s jurisdiction, employers facing legal action under the new law should consider whether an NLRA preemption defense applies.