HLGR’s Quarterly Labor and Employment Law Bulletin- Winter 2013
Inside This Issue: Crime victim’s rights, NLRB guidance on atwill disclaimers, new FRCA forms, new posters,and independent contractor classifications. Employers with questions are encouraged to contact Sharon Rudnick or Kate Grado.
The EEOC Weighs In on Crime Victims’ Rights
Human Resource experts know that domestic violence, sexual assault, stalking, and harassment occurring in the personal lives of employees can have a significant impact on the workplace. In these situations, it can be difficult to balance employees’ personal privacy with the need for workplace safety and productivity. Employers must be careful to balance these competing concerns while maintaining compliance with state and federal laws.
Oregon employers must comply with the Oregon Victims of Certain Crimes Leave Act (OVCCLA), which requires employers to provide reasonable accommodations to victims of domestic violence, sexual assault, stalking, or harassment and also prohibits discrimination against domestic violence victims.
The EEOC (Equal Employment Opportunity Commission) recently published guidance that identifies two additional considerations when addressing employees who are victims of domestic or dating violence, sexual assault, and stalking: Title VII of the Civil Rights Act of 1964 (Title VII) and the Americans with Disabilities Act (ADA). Title VII and the ADA prohibit discrimination based on race, color, sex, religion, or national origin, and disability, respectively. Unlike Oregon statutes, Title VII and the ADA provide no specific protections for crime victims. However, the recent guidance suggests certain employer actions relative to crime victims could run afoul of Title VII and ADA in the following ways:
• The use of sex-based stereotypes — treating male and female victims differently on the assumption that men should be able to protect themselves better than women — can expose an employer to claims of unlawful discrimination under Title VII.
• An employer who is aware that a crime victim has received counseling for depression and subsequently decides not to hire her based on a concern that she may require future time off for continued depression could run afoul of the ADA.
Employers who have questions about appropriately responding to issues in the workplace involving employees who are crime victims are encouraged to contact our Labor & Employment Team.
A Win for Employers: New NLRB Guidance on At-Will Disclaimers
In our Fall 2012 issue of Chiefly L&E, we updated you about recent cases from the National Labor Relations Board (NLRB) which held that certain at-will employment policies violated the National Labor Relations Act (NLRA). The NLRB’s determination whether at-will employment disclaimers — common provisions in employee handbooks — may violate labor law represents another area in which the NLRB is recently asserting its authority.
However, in a win for employers, on October 31, 2012 the NLRB’s Division of Advice issued two advice memoranda recommending dismissal of unfair labor practice charges alleging that the employers’ at-will policies violated the NLRA. Both memos (Case 28-CA-084365, Rocha Transportation, and Case 32-CA-086799, SWH Corporation dba Mimi’s Café) dealt with policies that NLRB regional offices had alleged could chill employees’ exercise of their rights under the NLRA because they were overbroad. Both employers maintained policies with similar language. The at-will policy at issue in Rocha Transportation stated:
No manager, supervisor, or employee of [the Company] has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will. Only the president of the Company has the authority to make any such agreement and then only in writing.
The second employer, Mimi’s Café, maintained a similar policy:
No representative of the Company has authority to enter into any agreement contrary to the foregoing “employment at will” relationship. Nothing contained in this handbook creates an express or implied contract of employment.
The memos concluded that neither policy would “reasonably be interpreted to restrict an employee’s Section 7 right to engage in concerted attempts to change his or her employment at-will status” − and, unlike previous policies which had been declared to be in violation of the NLRA, NLRB’s Division of Advice concluded the at-will provisions of these policies did not violate the NLRA because they did not:
1. Require employees to refrain from seeking to change their at-will status, or
2. Require employees to agree that their at-will status cannot be changed in any way.
Instead, the policies simply prohibited the employers’ own representatives from entering into employment agreements that provide for other than at-will employment.
Importantly, the memos viewed the employer policies at issue in context, not isolation. Neither policy explicitly limited Section 7 rights. Further, there was no information that either employer had used their policies to interfere with employees’ Section 7 rights. Thus, in context, the Division of Advice determined that neither policy could be reasonably construed to prohibit or interfere with Section 7 activity.For employers and practitioners, the new memoranda provide some useful guidance:
• Employers should avoid requiring employees to sign acknowledgements or agreements stating that at-will status “cannot be changed in any way.”
• Policies that focus on preventing waiver or alteration of at-will status, such as by stating that supervisors and managers do not have authority to make agreements with employees that would alter at-will status, are generally OK.
NLRA law remains unsettled and developing in this area. The Acting General Counsel has asked all Regional Offices to submit cases involving employer handbook at-will provisions to the Division of Advice for further analysis and coordination. We expect the Division of Advice to issue additional guidance regarding the lawfulness of at-will policies in the near future and will continue to keep you updated.
New FRCA Model Forms
The Consumer Financial Protection Bureau (CFPB) is the recently-appointed, key enforcer ofthe Fair Credit Reporting Act (FCRA). The FCRA requires employers who use consumer reports in employment decisions to comply with various notice requirements. When the CFPB took over enforcement of the FCRA in 2011, it revised the model FCRA forms to eliminate reference to FCRA’s previous enforcer, the Federal Trade Commission (FTC). However, the CFPB recently acknowledged that many of its revised forms included typographical and technical errors and therefore released a second set of revised model forms, including:
• Summary of Rights Under the FCRA
• Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA
• Notice to Users of Consumer Reports: Obligations of Users Under the FCRA Employers should verify that they are using these updated FCRA model forms, which are available in Appendices K, M, and N of Title 12 of the Code of Federal Regulations, Part 1022.
New Year. New Posters.
Effective January 1, 2013, Oregon’s minimum wage increased from $8.80 per hour to $8.95 per hour. Oregon employers should update their required State Minimum Wage workplace poster to reflect the increase. Click here for the 2013 Oregon State Minimum Wage poster.
Time to Re-Visit Your Independent Contractor Classifications (Again)
Minimum wage, overtime, workers’ compensation and other employment laws do not apply to independent contractors (ICs). Therefore, many employers seek to avoid the costs and responsibilities associated with employees by attempting to classify some workers as “independent contractors.” However, agencies that enforce employment laws do not rely on these labels. They take a close look at the realities of the relationship to determine whether a worker has been properly classified, using a variety of tests to evaluate IC status.
No single state or federal agency is directly responsible for ensuring proper worker classification. Recently, agencies across the board have renewed their focus on IC investigation and enforcement, and government agency audits are on the rise.
At risk when you misclassify an employee as an IC are federal and state tax liabilities, including penalties and interest, wage claims, unemployment claims, costly litigation over employment discrimination claims, and potential criminal prosecution. Employers must be proactive and diligent in structuring their business relationships with workers to avoid the risk of misclassification.
Over the last year, decisions from the Oregon Court of Appeals have highlighted the ongoing challenge faced by employers in properly classifying employees and ICs. These cases offer useful guidance in drawing the line between an IC and an employee.
These recent cases all arose in the context of unemployment claims filed by workers. The Oregon Employment Department has a stringent test to determine when an individual qualifies as an independent contractor rather than an employee. Under ORS 657.040(1), services for payment are deemed to constitute employment unless it is shown that the individual is an IC under the definition set forth at ORS 670.600(2)(a). Under this definition, workers may be classified as ICs if they are “free from direction and control” of the employer who has the right only to specify the desired result, are responsible for other licenses or certificates necessary to provide the services, AND are customarily engaged in an “independently established business.”
To be customarily engaged in an “independently established business,” the worker must meet three out of five of the following criteria:
1. Maintain a business location separate from the employer;
2. Bear the risk of loss;
3. Provide services for two or more customers per year, or routinely engage in business advertising;
4. Make a significant investment in the business; and
5. Have the authority to hire and fire assistants/employees in performing the services.
Case #1: Whitsett v. Employment Department:
Occasional Handyman Determined to be an Employee, Not an Independent ContractorThe key issue in Whitsett v. Employment Department, 251 Or. App. 699 (2012), was whether an occasional handyman was engaged in an “independently established business.”
In Whitsett, a laundromat paid a handyman to repair equipment and help maintain the property. The handyman did not work specific days or hours, but was paid $25.00 per hour when he did work. The Court of Appeals held that the handyman was not “customarily engaged in an independently established business,” and therefore could not be considered an IC, because the handyman could not meet more than two of the five criteria for an independently established business: (1) he testified that he would correct defective work, which may meet the “risk of loss” criteria, and (2) he once hired his brother to perform electrical work, which may meet the “authority to hire other persons” requirement. He did not, however, engage in marketing, work for other clients, have a business card, maintain a separate place of business or even a business name and did not make a significant investment in his business, which required only small tools and the occasional part paid for by the laundromat.
This case is a reminder that intermittent employment, even with freedom from supervision, does not necessarily mean that a worker will qualify as an IC.
Case #2: Avanti Press v. Employment Department: Sales Representative of Greeting Card Company Held to be an Independent Contractor
The key issue in Avanti Press v. Employment Department, 248 Or. App. 450 (2012), was whether a sales representative was “free from direction and control over the means and manner of providing the services.” If so, then she was an IC.
In Avanti, the sales representative maintained a home office, used her own vehicle, set her own work schedule and was paid purely on commission. Avanti set the prices and targets, and provided the representative with some limited training and sales policies. The representative carried business cards with the Avanti name, and, for a while, she did not represent any other businesses. Eventually she began representing two other manufacturers and listed them on her business cards.
The court found it important that the representative set her own schedule, and the company’s expectations revolved around results rather than methods used to obtain those results. Avanti “’kept its hands off” day-to-day activities as long as she met her sales goals and no issues arose relating to any orders she secured. The court emphasized that the right to control test has never required that an IC be free from all direction and control. Rather, the question is whether the party contracting for services maintains control over the “means and manner” of performance or, instead, gives more generalized instructions connected to specifying the desired results.
Given regulators’ aggressive pursuit of misclassification claims, the line that Avanti draws between employee and independent contractor status is helpful.
Case #3: Compressed Pattern, LLC v. Employment Department Tax Section: Architectural Drafting Professional was Held to be an Employee, not an Independent Contractor
In Compressed Pattern, LLC v. Employment Department Tax Section, 253 Or. App. 254 (2012) published October 31, 2012, the Employment Department and court of appeals focused on the “customarily engaged in an independently established business” requirement of Oregon’s IC statute — specifically, whether the worker “maintained a separate business location.” In 2009, a design company retained a recently laid off architectural intern to provide drafting services on certain projects for $35.00 an hour, and paid him periodically based on invoices he prepared and submitted. Compressed Pattern provided him with design specifications and general deadlines, but the drafter set his own hours. Compressed Pattern did not provide him with any office space and materials. The drafter simultaneously performed some drafting work for others besides Compressed Pattern.
The Oregon Employment Department sent Compressed Pattern a notice that it was past due on its employment tax payments on the amounts it paid the architect-intern. Compressed Pattern argued that it didn’t owe employment taxes for the architect-intern because he was an IC under ORS 670.600.
Looking at the “independently established business” requirement, the court ruled that the drafter did not maintain a separate business location, despite the fact that he worked separately from Compressed Pattern’s place of business. The court focused on the word “maintain” and concluded that borrowing, for free, workspace and equipment at another company did not constitute “maintaining” a separate business location. Regarding the “risk of loss” criteria, the court held that the drafter’s willingness to correct mistakes for free did not mean that he would have been required to do so — he was paid an hourly fee and had no liability insurance or performance bond. Further, the court found that there was no significant investment in the business, as drafting does not require licensing, and the drafter did not purchase or pay for the equipment that he used. Ultimately, the court agreed with the administrative law judge’s finding that Compressed Pattern improperly classified the drafter as an IC.
This case demonstrates that workers who appear to be extremely independent — setting their own hours, taking discrete projects, and working from remote locations — still may not be classified as an employee under the criteria of the Employment Department’s IC test. Employers who hire workers to perform tasks that can be done without significant investment, financial risk, licensing, or a permanent workspace will have particular difficulty in meeting the Employment Department’s criteria.
Employers who use ICs should conduct regular audits to ensure proper classification and to avoid the heavy penalties that can result from IC misclassification. If you’re unsure whether your relationship with an IC will meet the various statutory tests, contact legal counsel. Based on how narrowly the Court interpreted the requirements in the Compressed Pattern case, an employer should assume that in a close case, it is likely the Employment Department will get the benefit of the doubt and an employment relationship, rather than independent contractor status, will be found.
Nothing in this communication creates or is intended to create an attorney-client relationship with you, constitutes the provision of legal advice, or creates any legal duty to you. If you are seeking legal advice, you should first contact a member of the Labor and Employment Team with the understanding that any attorney-client relationship would be subsequently established by a specific written agreement with Harrang Long Gary Rudnick P.C. To maintain confidentiality, you should not forward any unsolicited information you deem to be confidential until after an attorney- client relationship has been established.