$14.4 Million To FedEx Drivers Misclassified As Independent Contractors

This past week a referee appointed by the Los Angeles Superior Court recommended that the court award FedEx drivers in California $14.4 million for unreimbursed job-related expenses and accrued interest. This is the latest in a long-running nationwide battle between FedEx and its drivers over how they should be classified for employment law purposes. Other employers should learn from FedEx's experience. For information on this and other cases against FedEx, visit FedEx Drivers Lawsuit.

Last year, the California Court of Appeal had affirmed the trial court ruling that the drivers were employees, and not independent contractors. It explained that the test for determining employee status is "whether the principal has the right to control the manner and means by which the worker accomplishes the work." Even though FedEx's written agreements with its drivers stated that they were independent contractors, "FedEx’s control over every exquisite detail of the drivers’ performance, including the color of their socks and the style of their hair, supports the trial court’s conclusion that the drivers are employees, not independent contractors." The full text of the decision is available here.

Some employers think it is as simple as choosing between IRS Form 1099 reporting, and IRS Form W-2 Reporting. As the IRS explains in its "Independent Contractor or Employee ..." publication, the nature of the relationship, not the form, determines whether or not a person is an employee. Making the wrong choice can lead to serious consequences, such as liability for unreimbursed expenses as in the FedEx case, for overtime obligations, for employee benefits, for workers compensation premiums and penalties, and unpaid taxes.

What should an employer do to avoid difficulties like those encountered by FedEx? Begin with the assumption that any worker who is a regular part of your business is an employee. If you are convinced that the worker may have sufficient independence to qualify as an independent contractor, then conduct a thorough analysis. To assist you in that analysis, the California Employment Development Department publishes the Employment Determination Guide, which contains a thorough explanation of the subject, and a series of yes or no questions that explore the determinative factors.

If you determine after your analysis that the worker is indeed an independent contractor, document the relationship in a written contract. You can find some sample contracts through the Employment Forms page at FindLaw.

Wage/Hour Violations Continue To Cost Employers Millions

Almost every week brings word of a new verdict, court decision or settlement involving wage and hour violations. Many employers just do not seem to understand the federal and state statutes and regulations on these subjects mean what they say. The fact that you have not been caught so far does not mean that your policies and practices would pass muster with the enforcement agencies.

This week's news is a $2.5 million settlement of a class action against MJM, Inc., an insurance investigative company, on behalf of a class of 372 of its investigators. The settlement provided up to $1.7 million to settle claims for unpaid overtime and meal period violations, and $833,000 for attorney fees. The company had claimed that there were no meal period violations because the business realities of investigation work exempted it from providing meal breaks. Labor Code section 512 and the wage order provision contain no such exemption. Read the motion for preliminary court approval, which describes the background of the case and the details of the settlement.

Because the consequences of non-compliant practices can be so serious, employers should consider having an audit conducted of their wage and hour policies and practices. To set up an appointment to discuss the scope and cost of such an audit, send an email to calvin.house@gphlawyers.com. For further information, you will find a GPH Lawyers blog entry about recent developments in the law related to meal periods here, and a set of tips on how to avoid wage and hour violations here.

Election Day Reminders

Election Day is Tuesday, November 4, 2008, and with it come concerns for employers. Here are some things to keep in mind:

1. Employees are eligible for paid time off for the purpose of voting if they do not have sufficient time outside of working hours to vote. Since voting hours are from 7:00 am to 8:00 pm, most employees will be able to vote outside of working hours. Employees can be given as much time as they need in order to vote, but only a maximum of two hours is paid. Employers may require employees to give advance notice that they will need additional time off for voting. Employers may require time off to be taken only at the beginning or end of the employee's shift. Employers must post a notice of the time off entitlement 10 days before November 4. Sample notices are available in English and Spanish from the website of the California Secretary of State.

2. Labor Code sections 1101 and 1102 prohibit employers from trying to control their employees' political activities. They may not prevent employees from engaging or participating in politics, or control or direct the political activities or affiliations of their employees, or influence or attempt to coerce or influence their employees to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity by threat of discharge. While employers may prohibit employees from engaging in political activities while in the course of their employment, they may not attempt to influence activities outside the workplace.

3. In February 2006, a San Diego County employee filed suit under the Labor Code provisions. She alleged that her manager fired her after seeing a bumper sticker for "1360 Air America Progressive Talk Radio" on the woman's car. There have been no reports of the disposition of the case. An article on the lawsuit appeared in the North County Times on March 8, 2006.

4. In October 2003, the Second District Court of Appeal reinstated a newspaper columnist's claim under the Labor Code provisions. He alleged that he had been fired in retaliation for supporting Antonio Villaraigosa on a local radio show during the 2001 mayoral election, and criticizing Congresswoman Maxine Waters for supporting James Hahn. Although the newspaper could control what the columnist published in its pages, it could not subject him to adverse action for views expressed in other forums. Ali v. L.A. Focus Publication, Case No. B159820 (Cal. Ct. App. Oct. 31, 2003).

Liability For Bullying And Microinequities

Over the past few years, workplace bullying and microinequities not obviously based on protected characteristics have received much attention. Although the California Workers' Compensation Act preempts civil lawsuits for such claims unless a recognized exception to preemption applies, such conduct can pose liability risks. Such matters have been the subject of law firm commentary and an entire website.

The Workers Compensation Act preempts claims by an employee against the employer or a fellow employee for any injuries (including emotional injuries) that arise out of the employment relationship, even if based on conduct that is "manifestly unfair, outrageous, harassment, or intended to cause emotional disturbance resulting in disability." See Cole v. Fair Oaks Fire Protection Dist., 43 Cal.3d 148 (1987).

The Act itself expressly exempts some injury claims from preemption, such as those resulting from a willful and unprovoked physical act of aggression of another employee (Labor Code section 3603(a)(1)) and from failure to install or removal of a guard on a power press (Labor Code section 4558). The courts have determined that claims based on other conduct may survive preemption if the conduct contravenes fundamental public policy or exceeds risks inherent in employment relationship. See Livitsanos v. Superior Court, 2 Cal.4th 744 (1992). The most important court-created exceptions are for claims under the anti-discrimination laws, and for wrongful termination in violation of public policy. See City of Moorpark v. Superior Court, 18 Cal.4th 1143 (1998) and Shoemaker v. Myers, 52 Cal.3d 1 (1990).

Although these principles would appear to severely limit liability, the reality is that the plethora of protected characteristics in the anti-discrimination laws and the multitude of public policies that can provide a basis for wrongful termination claims make almost any workplace unpleasantness a potential source of civil liability.

If an employee treats female employees unpleasantly, but is neutral to male employees, there may be a sexual harassment claim, even if the conduct is not expressly based on sex. See EEOC v. National Educ. Ass'n, Alaska, 422 F.3d 840 (9th Cir. 2005). An employee who appears equally abusive to all will create liability for an unlawful hostile environment by letting one epithet slip, even though a single epithet alone would not create liability. See Dee v. Vintage Petroleum, Inc., 106 Cal.App.4th 30 (2003) ("it is your Filipino understanding versus mine" created liability for harassment when combined with other abusive behavior).

To limit the risk of liability for hostile environment claims, the employer must intervene when an employee makes life unpleasant for other employees. Any such situation may turn into an unlawful harassment claim. Preventing unpleasant conduct will also make the workplace more comfortable for all, and promote employee productivity.