Tuesday, January 16, 2018

DOL Abandons 6-Factor Internship Test

The U.S. Department of Labor has updated its fact sheet on internship programs to adopt the
"primary beneficiary" test followed by the Second, Sixth, Ninth and Eleventh Circuit Courts of Appeals. It previously used a six-factor text that refused to allow unpaid internships under the Fair Labor Standards Act if the employer derived any immediate advantage from the relationship. The new seven-factor test adopts a flexible approach, with no single factor being determinative. The seven factors are:
  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
The Department relied on the following Court of Appeal decisions in formulating its test:

Solis v. Laurelbrook Sanitarium and School, Inc., 642 F.3d 518 (6th Cir. 2011).
Schumann v. Collier Anesthesia, PA, 803 F. 3d 1199 (11th Cir. 2015).
Glatt v. Fox Searchlight Pictures, Inc., 811 F. 3d 528 (2nd Cir. 2015).
Benjamin v. B & H Education, Inc., Case No. 15-17147 (9th Cir. Dec. 19, 2017).

Sunday, December 31, 2017

Wellness Programs May Have to Adjust

A federal district court decision may bring changes to employer wellness programs. Current federal regulations allow employers to offer an incentive of up to 30 percent off the employee portion of group health program premiums to employees who participate in a wellness program. See the EEOC rule and the joint rule promulgated by the IRS, the Employee Benefits Security Administration, and the Centers for Medicare & Medicaid Services.

Critics have charged that those rules are ineffective and unfair to employees with health problems. See, for example:

The AARP challenged the EEOC rule for failure to provide a reasoned explanation in support of its adoption. Judge John D. Bates of the United States District Court for the District of Columbia sustained the challenge in a decision on August 22, 2017, but initially declined to vacate the rule. In his latest ruling on December 20, 2017, Judge Bates ordered the rule vacated, but gave the EEOC until January 1, 2019, to develop a new regulation that satisfies his concerns.

Saturday, December 30, 2017

Joint Employment Revisited

A new California statute that imposes liability on general contractors for unpaid wages of their sub-contractors employees prompts us to revisit the principles of joint employment. For previous posts on the topic, click here.

The new statute, AB 1701, provides that, for contracts entered into after January 1, 2018, a "direct" contractor (as defined in Civil Code section 8018) is liable for for wages owed to a wage claimant that is incurred by a subcontractor, acting under the direct contractor, for the wage claimant’s performance of labor included in the subject of the direct contractor's contract with the property owner.

Usually, joint employment issues are determined by application of general principles governing the establishment of an employment relationship. This requires analysis of the various factor used by courts and administrative agencies to determine who is an employer. In any given situation it is possible that more than one person will be an employer of a particular worker. For an explanation of the standard that the Department of Labor uses to determine joint employment under the Fair Labor Standards Act see the Wage and Hour Division's Fact Sheet 35. For an application of joint employment principles in a Title VII case, see Peppers v. Cobb County (11th Cir. 2016) 835 F.3d 1289. For the allocation of responsibility for providing FMLA benefits, see 29 CFR section 825.106.  For an application of joint employment principles to a California wage and hour claim, see Guerrero v. Superior Court (2013) 213 Cal.App.4th 912. For a discussion of the dual employer principle under California worker's compensation law, see In-Home Supportive Servs. v. Workers' Comp. Appeals Bd. (1984) 152 Cal.App.3d 720.

Tuesday, December 19, 2017

California Ban the Box Law

The nationwide campaign to "ban the box" has borne fruit in California. AB 1008, which will become effective January 1, 2018, makes it an unlawful employment practice for an employer with 5 or more employees to include on an employment application any question that seeks the disclosure of an applicant’s conviction history, to inquire into or consider the conviction history of an applicant until that applicant has received a conditional offer, and, when conducting a conviction history background check, to consider, distribute, or disseminate information related to specified prior arrests, diversions, and convictions. The new statute adds Government Code section 12952 to the Fair Employment and Housing Act.

An employer who intends to deny an applicant a position of employment solely or in part because of the applicant’s conviction history to make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job. If an employer a preliminary decision to deny employment based on that individualized assessment, it must provide the applicant with written notification of the decision, and allow him or her 5 business days to respond to that notification before the employer may make a final decision. If the applicant notifies the employer in writing that he or she disputes the accuracy of the conviction history and is obtaining evidence to support that assertion, the employer must grant the applicant an additional 5 business days to respond to the notice. The employer must consider information submitted by the applicant before making a final decision.

The ban the box campaign is aimed at encouraging employers to consider hiring those who have criminal convictions, and not to disqualify applicants automatically because of any criminal conviction.

Anti-discrimination laws banning employment practices that have a disparate impact on those with protected characteristics should already have made employers cautious about imposing blanket disqualification based on any conviction. Because studies have shown that such practices may result in a disproportionate number of minority applicants being disqualified, both the EEOC and the California Department of Fair Employment and Housing have made clear that employers risk liability for employment discrimination if they do not use a nuanced approach when considering the effect of convicitions on employment eligibility. See this enforcement guidance from the EEOC, and this recent regulation from the DFEH.

Restrictions on the ability to use criminal convictions for hiring decisions can put employers on the horns of a dilemma.
  • On one horn, employers may face liability for negligent hiring if they do not conduct a thorough background investigation. For example, the North Dakota Supreme Court affirmed a verdict against a vacuum cleaner manufacturer who employed door-to-door salesmen to sell its products. One of the salesman had been convicted of two assault charges and two weapons charges, and had a criminal sexual conduct charge pending when he was hired. The company had not conducted a background check. McLean v. The Kirby Company.
  • On the other horn, if the use of criminal background checks disproportionately disqualifies minority applicants, the employer may be liable for employment discrimination. For example, Pepsi Beverages had to pay $3.13 million to settle EEOC charges that criminal background check policy discriminated against African American applicants. EEOC press release.
Contact us if you have questions about what the new statute means for you.

Monday, December 11, 2017

On Call

Is an employee who is sitting around waiting to be called into work, "working"? A recent decision by a Los Angeles Superior Court judge prompts us to examine the applicable principles.

In a scenario that has been common in retail and food service establishments, an employer tells its employees that fluctuating demands make it necessary for some employees to be placed on call to await a summons to work, if they are needed. The employees are not paid unless they are actually called in to work. Although resistance from employees and state enforcement authorities has led some employers to back away from the practice, it is still fairly common and is the subject of several pending lawsuits. For example, see this article from the December 31, 2016 Forbes Magazine issue, which reports the announcement that several national retailers have abandoned the practice.

Under the federal Fair Labor Standards Act, employers must include all "hours worked" in their calculations to determine whether an employee is entitled to overtime. The Department of Labor's regulations on hours worked explain that "all hours are hours worked which the employee is required to give his employer." Those regulations describe the application of that definition to on call time as follows: "An employee who is required to remain on call on the employer's premises or so close thereto that he cannot use the time effectively for his own purposes is working while 'on call.' An employee who is not required to remain on the employer's premises but is merely required to leave word at his home or with company officials where he may be reached is not working while on call."

A 2008 opinion letter from the Wage and Hour Division provides additional guidance on the subject. In that letter, the Division opined that an employee would not be working while on call if the employer's policy provided only that the on-call employee must be reachable at all times, abstain from alcohol or other substances, and report to work within one hour of notification, and if call-backs are rare.

The wage orders that regulate wage and hour condition in California define "hours worked" as "the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so, and in the case of an employee who is required to reside on the employment premises, that time spent carrying out assigned duties shall be counted as hours worked." In its Enforcement Manual, the California Division of Labor Standards Enforcement has explained that the application of that definition to on call situations depends upon consideration of the following factors:

"(1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee’s movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time."

The wage orders contain another provision that requires payment of wages when an employee is called to work, but not actually put to work, as follows: "Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee's usual or scheduled day's work, the employee shall be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay, which shall not be less than the minimum wage."

In the decision mentioned at the beginning of this post, Judge Elihu Berle denied an employer's motion to dismiss a claim by a potential class of employees of a Japanese-inspired fast food chain claimed that they were do reporting time pay under the California wage orders. That employer's policy required an employee who was scheduled to be on call to call a manager two hours before the his or her anticipated start time. If the manager directed the employee to go into work, he or she had to do so immediately. Failure to call in or to go into work if summoned subjected an employee to discipline. On the basis of those facts, Judge Berle concluded that it was possible for an employee to "report" to work by calling in.