employment law

DOL offers new guidance on old question of employee or independent contractor

For the last few years, one of the top priorities for the Department of Labor (the “DOL”) has been the fight against the misclassification of employees as independent contractors. In the agency’s latest effort, it released new guidance for employers when classifying workers, using six factors to consider.

The Administrator’s Interpretation 2015-1 focuses on the issue of whether the worker is “economically dependent on the employer or truly in business for him or herself.” The more the worker relies upon an employer for income stream, business skills, and supplies, the more likely he or she is an employee – and entitled to all of the benefits included in that classification, such as overtime or worker’s compensation.

In “The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors,” the DOL started with the Fair Labor Standards Act’s (the “FLSA”) definition of “employ:” “to suffer or permit to work.” Under this broad definition, “most workers are employees,” the agency stated unequivocally.

With that in mind, the DOL turned to the six factors of the economic realities test commonly used by courts when considering whether a worker is an employee or an independent contractor. The agency noted that the labels used by an employer are not determinative of the nature of the relationship and neither are tax filings.

“All of the factors must be considered in each case, and no one factor (particularly the control factor) is determinative of whether a worker is an employee,” the DOL wrote. “Moreover, the factors themselves should not be applied in a mechanical fashion, but with an understanding that the factors are indicators of the broader concept of economic dependence. Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).”

Is the work an integral part of the employer’s business? If a worker is economically dependent upon the employer, he or she is likely an employee, while a “true independent contractor’s work, on the other hand, is unlikely to be integral to the employer’s business.” Recognizing the increasing use of telecommuting and other flexible work schedules in today’s economy, the DOL added that work can be integral even if it is performed away from the employer’s premises.

The second factor considers whether the worker’s managerial skill affects the worker’s opportunity for profit or loss. A worker in business for him or herself not only has the opportunity to profit but also to experience a loss, the DOL explained. The question isn’t whether a worker is on the job more hours or earns more money but if the worker makes decisions and exercises skill and initiative – hiring other workers or advertising his services, for example – to move the business forward.

In the third factor, the worker’s relative investment as compared to the employer’s investment should be evaluated. “The worker should make some investment (and therefore undertake at least some risk for a loss) in order for there to be an indication that he or she is an independent business,” according to the guidance. Simply purchasing tools or other equipment may not constitute an investment, the agency added, when considered relative to the employer’s investment.

Fourth: does the work performed require special skill and initiative? Technical skills alone will not indicate that a worker is an independent contractor, the DOL said. Instead, business skills, judgment, and initiative should be evaluated. For example, a highly skilled carpenter who provides his services to a construction company may simply be providing skilled labor as an employee. On the other hand, if the carpenter decides which jobs to take, advertises his services, and determines what materials to order, he is more likely to be classified as an independent contractor.

The length of the relationship between the worker and the employer is the focus of factor five. A permanent or indefinite relationship signals an employee, the DOL said. “After all, a worker who is truly in business for him or herself will eschew a permanent or indefinite relationship with an employer and the dependence that comes with such permanence or indefiniteness,” the agency wrote. The length of time should be considered in the context of the industry, however – seasonal positions may not always indicate an independent contractor relationship, for example.

In the sixth factor, the DOL advised employers to think about control. While the control factor should not receive more weight than the other factors in the economic realities test, the nature and degree of the employer’s control should be considered in light of the ultimate determination whether the worker is economically dependent on the employer or an independent contractor. Employers do not need to look over a worker’s shoulder every day to make them an employee, the guidance cautioned, as technological advancements permit many employees to work off-site and unsupervised.

Employers should review the new guidance and be prepared for agency oversight on the issue of worker classification, keeping in mind that the DOL repeatedly emphasized that “most workers are employees.”

Read the Administrator’s Interpretation No. 2015-1.

September 23rd, 2015|Educational Series, Employment Decisions|

Revised FCRA Summary of Rights form released

Did you know that a revised version of the Fair Credit Reporting Act (the “FCRA”) Summary of Rights form was released a few months ago?

If the answer is “no,” don’t worry. The form was not published in the Federal Register and appeared under the radar without an announcement.

The FCRA mandates that employers are required to provide a disclosure and obtain written authorization from any applicant or employee prior to conducting a background check. If the employer decides to take an “adverse action” against the applicant or employee based on the results of the background check, the employer must provide the individual with a copy of the background check and the Summary of Rights form under the FCRA.

The revised form does not require a lot of adjustments for employers. Some of the government addresses found on the last page were changed and all references to Maine’s laws were removed. Earlier this year, the state repealed its mini-FCRA to adopt the federal FCRA.

View the new Summary of Rights form.

September 23rd, 2015|Educational Series, Employment Decisions|

New law limits credit checks for New York City employers

New York City has joined the growing list of employers placing limits on credit checks. On April 16, the City Council overwhelmingly voted in favor of a bill prohibiting the use of credit checks in most employment situations. Mayor Bill De Blasio signed the legislation on May 6, amending the city’s Human Rights Law to make the use of credit history for hiring and other employment purposes, with certain exceptions, an unlawful discriminatory practice. Set to take effect on September 3, 2015, the law will have a sizable impact on employers in New York City. A review of current policies and procedures to determine if any exceptions apply is key, while employers with a statewide presence should consider whether to continue credit checks in other locations where they remain legal.

As defined by the law, “consumer credit history” means an individual’s credit worthiness, credit standing, credit capacity, or payment history, as indicated by: (a) a consumer credit report; (b) credit score; or (c) information an employer obtains directly from the individual regarding (1) details about credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or (2) bankruptcies, judgments or liens. The law further provides that “a consumer credit report shall include any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity or credit history.”

Importantly, employers are prohibited not just from the request or use of credit history for applicants, but also from using credit history as a factor in employment decisions for current employees in “compensation, or the terms, conditions or privileges of employment.”

When initially introduced, the proposal featured no exceptions to the ban on credit checks. But over the course of the past year, limited exceptions were added to the bill. As enacted, the legislation permits the use of credit checks for prospective employees of broker-dealers who must register with the Financial Industry Regulatory Authority (FINRA) as well as for police officers and other public officials in a position involving a “high degree of public trust.” Additional exceptions allow a review of credit history when required by state or federal law or regulations; for positions when an employee must possess a security clearance or has “regular access” to intelligence or national security information; for non-clerical positions with access to “trade secrets;” for computer security positions when the employee’s duties include the ability to modify digital security systems; and for employees with signing authority over third-party funds or assets greater than $10,000 or fiduciary responsibility to an employer with the authority to enter into financial agreements of $10,000 or more.

The law permits individuals to file a complaint of discrimination with the New York City Commission on Human Rights within a one-year period or a complaint in court, with a three-year statute of limitations. Remedies include back pay, reinstatement, compensatory and punitive damages, and attorney’s fees and costs.

New York City joins 12 other jurisdictions that have prohibited credit checks in employment-related decisions, including the city of Chicago as well as California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington.

Read the New York City legislation here.

June 12th, 2015|Legislation|

EEOC loses – again – in challenge to background checks

In the latest blow to the Equal Employment Opportunity Commission’s (the “EEOC”) attempts to regulate employers’ use of background checks, the Fourth U.S. Circuit Court of Appeals threw out a case in a scathing opinion that expressed disappointment in the agency’s litigation conduct.

The controversy began in April 2012, when the EEOC released guidance on the issue of criminal background checks for employers. The “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” emphasized that while the use of criminal history does not violate the statute per se, an employer may run afoul of the law if the checks result in systemic discrimination based on a protected category like race, color, national origin, religion, or sex.

As an alternative, the agency suggested employers strive to perform individualized assessments of prospective employees, and consider factors such as the nature of the crime and its relation to the potential job, as well as the individual’s rehabilitation efforts and the length of time that has passed since the conviction.

The EEOC then followed up with multiple lawsuits alleging that certain employers engaged in the discriminatory use of background checks, disproportionately screening out African-American workers in cases filed against BMW Manufacturing in South Carolina, Dollar General in Illinois, Kaplan Higher Education Company in Ohio, and Freeman Company in Maryland.

To date, all of the lawsuits have been dismissed and the agency has faced criticism about its efforts to pursue such cases from both industry and lawmakers. The most recent critic: the Fourth Circuit.

In the agency’s case against Freeman Company, the EEOC alleged the company’s use of criminal background checks for all applicants and credit checks for “credit sensitive” positions had an unlawful disparate impact on black and male job applicants. To support its case, the agency produced expert reports by an industrial/organizational psychologist. But the federal district court granted summary judgment for Freeman, finding the psychologist’s reports “rife with analytical errors” and “completely unreliable.”

The Fourth Circuit affirmed the ruling, identifying “an alarming number of errors and analytical fallacies” in the reports, “making it impossible to rely on any of his conclusions.” Freeman provided complete background screening logs for thousands of applicants to the EEOC but the psychologist “cherry-picked” data, the court said, omitting information from half of the company’s branch offices while purporting to analyze all the background checks, and further failed to utilize an appropriate sample size, selecting the vast majority of data to focus on before October 14, 2008.

Although the relevant time period extended to August 31, 2011 and Freeman conducted over 1,500 criminal checks and more than 300 credit reviews between October 14, 2008 and August 31, 2011, the psychologist used data from only 19 applicants during that time, just one of whom passed the check.

A “mind-boggling number of errors and unexplained discrepancies” existed in the psychologist’s database, the panel added, rejecting the EEOC’s argument that the mistakes originated in Freeman’s data. The psychologist introduced the errors, the court said, and further managed to introduce fresh errors when he tried to supplement his original reports with corrections.

“The sheer number of mistakes and omissions in the analysis renders it “outside the range where experts might reasonably differ,” the three-judge panel wrote. One of the panelists added a concurring opinion expressing concern with the “EEOC’s disappointing litigation conduct” and continued efforts to defend the psychologist’s work despite other courts reaching similar conclusions about his reports.

“The Commission’s conduct in this case suggets that its exercise of vigilance has been lacking,” according to the concurring opinion. “It would serve the agency well in the future to reconsider how it might better discharge the responsibilities delegated to it or face consquences for failing to do so.”

With public criticism, zero litigation victories, and a counterargument from one defendant that its background check procedures are the same as those conducted by the agency itself, the Fourth Circuit’s decision does not bode well for the future of EEOC challenges to background checks. That said, employers should still be cautious and utilize background reports in a non-discriminatory manner.

Read the EEOC guidance.

Read the opinion in EEOC v. Freeman.

May 8th, 2015|Employment Decisions|

No number, no lawsuit

Tossing a lawsuit alleging religious discrimination, the Sixth U.S. Circuit Court of Appeals found that an applicant could not sue after refusing to provide his Social Security number to a prospective employer. The plaintiff, an applicant for a position with an energy company, claimed that he had no number because he “disclaimed and disavowed it” on account of his sincerely held religious beliefs.

The company’s refusal to hire the plaintiff violated Title VII and Ohio state law, the complaint charged, requesting both injunctive relief in the form of a job and monetary damages. A federal district court judge dismissed the lawsuit, and the federal appellate panel affirmed.

Courts considering the issue apply a two-step analysis, the Sixth Circuit explained. First, the court determines whether the plaintiff established a “prima facie case of religious discrimination,” which requires proof that the plaintiff “(1) holds a sincere religious belief that conflicts with an employment requirement; (2) has informed the employer about the conflicts; and (3) was discharged or disciplined for failing to comply with the conflicting employment requirement.” If the plaintiff manages to establish a prima facie case, the burden shifts to the employer to show it could not “reasonably accommodate” the religious beliefs without “undue hardship.”

This suit failed under the first step, the panel said, because the Internal Revenue Code mandates that employers collect and provide the Social Security numbers of their employees. Because the company’s collection of the plaintiff’s number was a “requirement imposed by law” and not an “employment requirement,” the court had no need to consider the sincerity of the plaintiff’s beliefs.

The panel also noted that every other federal appellate court to consider the issue has concluded “that Title VII does not require an employer to reasonably accommodate an employee’s religious beliefs if such accommodation would violate a federal statute,” citing decisions from the Fourth, Eighth, Ninth, and Tenth Circuits, as well as federal district courts in Michigan and Virginia.

All of the courts have arrived “at the same, sensible conclusion: ‘

[A]n employer is not liable under Title VII when accommodating an employee’s religious beliefs would require the employer to violate federal … law,” the Sixth Circuit wrote. “This conclusion is consistent with Title VII’s text, which says nothing that might license an employer to disregard other federal statutes in the name of reasonably accommodating an employee’s religious practices.”

For employers, the decision provides even greater peace of mind. With five federal appellate courts in agreement that a religious discrimination claim will not stand against an employer that complies with federal requirements to collect an applicant’s Social Security number, companies do not have to worry about the merits of a Title VII lawsuit under such circumstances.

Read the opinion.

May 8th, 2015|Employment Decisions, Judgment, Legislation|

New York City’s new bill would restrict using credit reports for employment decisions

Last month, the New York City Council’s Committee on Civil Rights held a hearing on a bill that would amend the city’s administrative code, prohibiting employers from using consumer credit reports for personnel decisions. Although the hearing ended without a disposition, it is expected that this bill will pass in some form in the near future. The Committee is holding a separate hearing in December on a bill that would prohibit employment discrimination based on an applicant’s or employee’s criminal history.

October 15th, 2014|Employment Decisions, Legislation|

New Jersey’s new ban-the-box law goes into effect March 1, 2015

Signed into law last month, The Opportunity to Compete Act will effect March 1, 2015, preventing many private employers in New Jersey from asking job candidates about their criminal history on the initial job application. In “banning the box” for private employers, New Jersey joins the District of Columbia, Hawaii, Illinois, Massachusetts, Minnesota, Rhode Island, and cities of Philadelphia (PA), Newark (NJ), Buffalo (NY), Seattle (WA), San Francisco (CA), Baltimore (MD), and Rochester (NY)) in postponing inquiries about criminal record information until later in the hiring process, and imposing other requirements on the use of such records in employment decisions.

September 19th, 2014|Employment Decisions, Legislation|

Reminder: San Francisco’s tough ordinance that restricts asking about and using criminal records in employment and housing decisions starts August 13, 2014

Effective August 13, 2014, the Fair Chance Ordinance (the “FCO”) (see also the FCO FAQs) requires covered employers, contractors, and housing providers to review an individual’s qualifications before inquiring about his/her criminal history and follow strict rules for using the information.

The FCO applies to private employers that are located or doing business in the city and county of San Francisco, and employ 20 or more persons worldwide. This 20-person threshold includes owner(s), management, and supervisory personnel. The FCO covers positions (including contractor and other status) located within San Francisco, regardless of where the employer is located, as long as the position is “in whole, or in substantial part, within the city.” San Francisco’s Office of Labor Standards Enforcement (the “OLSE”) interprets “in substantial part” to mean an average of eight hours of work performed per week in San Francisco.

Along with banning inquiries about a criminal history or pending charges on the job application or during the first live interview, the FCO prohibits asking about six categories of criminal record information altogether, and mandates significant measures for individualized assessment, including considering only “directly-related convictions that have a direct and specific negative bearing on the

[applicant’s] ability to perform the duties or responsibilities necessarily related to the position,” the time elapsed since the conviction, evidence of inaccuracy, evidence of rehabilitation and/or other mitigating factors.

An aspect of the ordinance that is especially noteworthy is that employers are prohibited from inquiring about or considering convictions that are more than seven years old, with “the date of conviction being the date of sentencing.” Under California law, there already is a seven-year limitation on such records, but the look-back period starts from the date that a person is released from custody. Also of note is that before taking any adverse action based on a criminal record, the ordinance requires that the employer wait seven days (from the date of the potential adverse action notice) before taking such action. If during the seven-day waiting period the individual gives the employer notice, orally or in writing, of evidence of an inaccuracy, rehabilitation, or any other mitigating factor, the employer must delay the adverse action for a “reasonable” time to reconsider the action.

Employers must also ensure that criminal background inquiries later in the process comply with the notice guidelines published by the OLSE, as well as with the already existing background check disclosure/authorization requirements under California’s ICRAA and the FCRA. Highlighted below are the ordinance’s more significant notice requirements:

Covered employers must post, in a conspicuous place at every workplace, including a temporary site, or other location in San Francisco under the employer’s control where applicants or employees visit, a notice of rights provided by the OLSE. The notice must be posted in English, Spanish, Chinese, Tagalog and any other language spoken by 5% or more of the employees in the workplace, job site, or other location. (Translations of the notice in Chinese, Spanish, and Tagalog are available on the OLSE website.)
Employers must state in all job solicitations or advertisements that are reasonably likely to reach potential applicants seeking employment in San Francisco that the employer will consider qualified individuals with a criminal history.
Employers mustsendthe notice toeachlaborunionorrepresentative withwhomtheemployerhasacollectivebargainingagreementorotheragreementthatisapplicabletoemployeesinSanFrancisco.
Prior to any criminal history inquiry, including from procuring or conducting a background check, an employer must provide this notice to an applicant or employee when he/she is given the required FCRA/ICRAA disclosure and authorization form to sign.

August 8th, 2014|Legislation|

New law bans California employers from asking about dismissed criminal records

Effective January 1, 2014, SB 530, will ban most California employers from asking employees or applicants about arrests that did not result in conviction (except for arrests for which the individual is still awaiting trial) or about participation in a pretrial or post trial diversion program. Generally, the new law prohibits most employers from asking applicants to disclose, or use as a factor in employment decisions, any information concerning a conviction that has been judicially dismissed or ordered sealed.

December 10th, 2013|Employment Decisions, Legislation|

New York joins in efforts to root out misclassification of independent contractors

On November 18, 2013, New York’s attorney general and the state labor department entered into agreements with the U.S. Department of Labor’s Wage and Hour Division to coordinate investigations, make referrals, share data and take other actions to combat worker misclassification. Fourteen other states (California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington) already participate in this national “misclassification initiative” that is a collaboration between the U.S. Department of Labor and the Internal Revenue Service.

An employer that misclassifies an employee as an independent contractor faces significant consequences that can include the payment of back taxes plus interest, overtime and state workers’ compensation, and the provision of health and welfare benefits.

December 9th, 2013|Educational Series|

Previous 23

This is the development site for Scherzer International and the information may not be up to date.Please visit our production website.

employment law

This is the development site for Scherzer International and the information may not be up to date.
Please visit our production website.