NLRB Strikes Again: Implements New Rules Making It Easier for Unions To Win Elections

Background

The NLRB has been debating implementation of so-called “quickie election” rules on and off since 2011.  Earlier this week, by a 3-2 vote, the NLRB finalized, and published in the Federal Register, its new election rules, which will become effective in April.  In announcing the adoption of the new election rules the NLRB stated: “The National Labor Relations Board has adopted a final rule amending its representation-case procedures to modernize and streamline the process for resolving representation disputes.”  The NLRB Chairman Mark Gaston Pearce stated: “I am heartened that the Board has chosen to enact amendments that will modernize the representation process and fulfill the promise of the National Labor Relations Act.”  

While the NLRB attempts to discuss the overall benefits of these new rules, what these amended rules do in reality is make it easier for unions to win elections by, among other things: (a) shortening the timeline between the election petition and the actual election, (b) making it easier for unions to communicate with employee voters, and (c) eliminating a number of methods employers had to challenge election issues before the election takes place.

New Procedures – Some Details

The NLRB has provided a very detailed “NLRB Representation Case-Procedures Fact Sheet” on its website.  This document describes the new procedures in detail and even provides a table that compares the current election procedures with the new procedures that will be effective on April 15.  To review this Fact Sheet, click here

Some of the key changes to the election procedures include the following:

Electronic Filing/Communications – Parties may file documents, such as petitions, electronically, rather than by fax or mail.   

Election Voter List/Expanded Excelsior List – The employer must include available personal email addresses and phone numbers of voters on the voter list (aka Excelsior list) in order to permit non-employer parties to communicate with prospective voters about the upcoming election using modern forms of communication.  Under current procedures, only a home address was required.  The timing for providing the list was also materially shortened.  Under the current rules, this list had to be provided to the NLRB seven days after the election agreement was approved or the regional director directed an election.  Under the new rules, this list will have to be provided within two business days of the same events.  In addition, employers should note that email addresses are now requested on the new I-9 form and thus employers will likely be required to review this form and other employee personnel records to determine if it has an email address for each employee in the bargaining unit before finalizing the Excelsior list.

Pre-Election Hearing -- Pre-election hearings will now be set 8 days after the hearing notice is served in almost all cases.

Early Identification of Disputed Issues – The employer will no longer be able to wait until the pre-election hearing to raise issues.  Under the new rules, the employer will be required to respond to the petition by filing a written Statement of Position.  In this submission, it must state its position on key issues before the pre-election hearing opens, and generally within 7 days of the pre-election hearing notice being served.  Issues not raised at that time by the employer will be barred from being raised at the hearing.  However, the union will be able to wait and can respond to the issues raised by the non-petitioning parties at the opening of the hearing.  In addition, as part of its Statement of Position, the employer must provide a list of prospective voters with their job classifications, shifts and work locations, to the NLRB’s regional office and the other parties.  This is a new requirement.

Litigation of Eligibility and Inclusion Issues – Generally, only issues necessary to determine whether an election should be conducted will be litigated in a pre-election hearing.  All other issues will now have to be deferred must be litigated post-election and then only if not moot. 

Earlier and more complete information to employees – Under the new rules, the employer will be required to post a Notice of Petition for Election containing more detailed information on the filing of the petition and employee rights within two business days of the region’s service of the petition for election.  This Notice of Election will provide prospective voters with more detailed information about the election and the voting process.

More Information

The NLRB shares significant information about these new election rules on its website.  For more information and background, you can click the following documents:  NLRB Press ReleaseNLRB Fact SheetNLRB Comparison Table (new and old rules).

What Should Employers Do

These new election rules will have a major impact on how employers can respond to union organizing activity and an election petition.  Employers will need to be more prepared in advance if they wish to effectively communicate their message in a timely manner in the event of union organizing.  Employers concerned about unionization should meet with their labor counsel to discuss their options and methods for combatting these new procedures.  However, below are some very basic tips that will likely be applicable to most employers with any concerns about union organizing and these new procedures:

  1. Employers should make sure that their views on unionization are made known to both management and non-management employees.  Employers should use labor relations experts/attorneys in this effort to make sure they do not say anything improper.
  2. Employers should make sure that their supervisors are trained to recognize the signs of union activity and who to notify if they suspect union activity, so that the employer can effectively recognize and deal with any campaign before it is too late to effectively do anything about it.
  3. Employers may want hire labor relations experts to audit their workforce to determine vulnerability.  This should only be done by a trained expert because the NLRA has very strict guidelines on what can be done to obtain certain information from employees. 
  4. Employers should consider interviewing and identifying attorneys and consultants in advance that it can use to help them in a union campaign, because under the new rules, there will be little time for employers to locate and hire these experts if it does not learn about the campaign until the time of the election petition.

California Paid Sick Leave Posting and Notice Requirements Take Effect January 1, 2015

As California employers know, California recently enacted a statewide paid sick leave mandate for California employers.  Although employers need not start providing paid sick leave benefits until July 1, 2015, the law’s posting and notice requirements take effect January 1, 2015, according to guidance published this month by the California Labor Commissioner’s office.  This means that beginning January 1, 2015, California employers must display a poster in the workplace informing employees of their paid sick leave rights under the new law.  The Labor Commissioner’s office has published a template poster that employers may use to satisfy the posting requirement.  The template poster is available here.  Note that in many instances, an employer’s paid sick leave policy (or a combined paid time off policy) may provide for more generous benefits than required under the new paid sick leave law.  In such circumstances, the employer may want to revise the template poster to accurately reflect the specific paid sick leave benefits the employer provides.  Alternatively, employers may consider posting the Labor Commissioner poster along with their own specific policy. 

In addition to the posting requirement, employers must also begin complying with the law’s notice requirement effective January 1, 2015.  Under the law, employers are required to provide non-exempt employees with information, upon hire, on their paid sick leave benefits as part of the Wage Theft Prevention Act Notice (Labor Code section 2810.5).  Post-hire, a revised notice is required to be provided within 7 days of any changes to the paid sick leave policy (this will also apply to employees hired prior to January 1, 2015 where the employer is adopting or modifying  paid sick leave policy).  Although this notice is only required to be provided to non-exempt employees, employers certainly are permitted to provide the notice to exempt hires as well.  The Labor Commissioner’s office has published a template notice that employers may use.  The template notice is available here.

Displaying the paid sick leave poster and providing notice of paid sick leave benefits beginning in January is likely to cause some confusion for employees whose leave entitlements will not begin until July 2015.  Where applicable, employers can modify the text of the Wage Theft Prevention Act notice to make clear that paid sick leave benefits do not begin accruing until July 1, 2015.

The Labor Commissioner’s office has also posted on its website some frequently asked questions and answers relating to the paid sick leave law.  California employers are encouraged to review this guidance here to ensure their paid sick leave policies and practices are in compliance with the new law, as interpreted by the Labor Commissioner.  

San Francisco Retail Employers Must Comply With New Retail Workers’ Bill of Rights in July 2015

Continuing its trend of enacting burdensome ordinances requiring employers with employees in San Francisco to comply with specialized wage and hour requirements, the San Francisco Board of Supervisors has now passed two ordinances aimed at providing wage and hour protections for employees of “formula retail establishments.”  These ordinances are collectively referred to as the Retail Workers’ Bill of Rights. These ordinances are effective January 4, 2015 but do not become operative until July 3, 2015.

The Retail Workers’ Bill of Rights applies to employers operating a Formula Retail Establishment with 20 or more employees in the city of San Francisco, including corporate officers and executives.  A “formula retail establishment” means a business located in San Francisco that falls under the San Francisco Planning Code’s definition of “formula retail use” (section 703.3) except that the business must have at least 20 retail sales establishments located worldwide.  Formula retail establishments are commonly referred to as “chain stores” and include, among other things, retail stores, chain restaurants, fast food restaurants, and bars.  Professional service establishments such as medical offices and/or salons/gyms are not considered formula retail establishments.

The Retail Workers’ Bill of Rights imposes five main requirements on employers:

  1. Advance Notice of Work Schedules and Changes:  Prior to the start of employment, an employer shall provide a new employee with a good faith written estimate of the employee’s expected minimum number of scheduled shifts per month, and the days and hours of those shifts (not including on-call shifts).  The employee may request a modification in the proposed schedule, which the employer is required to consider (but not required to accept) and respond to prior to the employee’s start of employment.  Post-hire, an employer is required to provide employees with at least two weeks’ notice of their work schedules, by doing one of the following at least every 14 days:  (1) posting the work schedule in a readily accessible location in the workplace; or (2) electronically transmitting the work schedule to employees.  The work schedule must include any on-call shifts.  If the employer thereafter changes an employee’s schedule, the employer must give the employee notice of the change, along with “predictability pay” of one hour of pay at the employee’s regular rate for a change with more than 24 hours’ notice but less than 7 days’ notice.  If the employer makes a change with less than 24 hours’ notice, the employer must pay the employee 2 hours of pay for each changed shift of four hours or less, and 4 hours of pay for each changed shift that is more than four hours.  Predictability pay does not apply to on-call shifts, which are separately addressed below.  Predictability pay is not required if the change is necessitated by certain acts beyond the employer’s control (electric outage, etc.) or if (a) another employee previously scheduled to work the shift is unable to work due to illness or use of PTO and did not give the employer at least 7 days’ notice of the absence; (b) another employee previously scheduled to work the shift fails to report to work and/or is fired or sent home as a disciplinary action; (c) the change results only from an employer request to an employee to work overtime; or (d) the employee requests and/or causes the change to his or her own schedule.
  2. Pay for On-Call Shifts:  For each on-call shift that an employee is required to be available but is not called in to work (with less than 24 hours’ notice that the shift has been cancelled or moved to another date or time), the employee must be paid 2 hours of pay (regular hourly rate) for each on-call shift of 4 hours or less, and 4 hours of pay for each on-call shift of more than 4 hours.  The same exceptions to the predictability pay requirements also apply to the on-call pay requirements.
  3. Equal Treatment for Part-Time Employees:  Employers are required to provide part-time employees (those working fewer than 35 hours per week) with the same starting hourly wage as that provided to full-time employees (those working 35 or more hours per week) holding comparable positions.  However, pay differentials are permissible if based on considerations other than the part-time status of the employee.  Employers are also required to provide part-time employees with the same access to paid and unpaid time off offered to full-time employees of the same job classification.  However, a part-time employee’s eligibility for paid or unpaid time off may be pro-rated based on the number of hours that the employee works.  Employers must also provide part-time employees with the same eligibility for promotions as full-time employees of the same job classification, though the employer may condition promotion on the employee’s availability for full-time work and/or on reasons other than the part-time status of the employee.  Finally, the new ordinances require that if an employer has a need for additional workers, before hiring new employees or using contractors or a temporary staffing agency to perform work, the employer must first offer the additional work to existing part-time employees if the existing employees are qualified to do the work and the work is the same or similar type of work the employee already performs.  The employer is only required to offer the part-time employee the number of hours required to give the employee 35 hours of work per week.
  4. Sale of Business:  If a covered retail establishment is sold, the successor is required to retain the seller’s non-managerial incumbent employees who have been employed for at least 90 days prior to the sale.  The successor employer must retain these incumbent employees for at least 90 days and under the same terms of employment already in place (rate of pay, job classification, and number of work hours).  If the successor employer determines that it needs fewer employees than were employed by the prior owner, the successor employer must retain incumbent employees based on seniority and/or the terms of any applicable collective bargaining agreement.  During the 90-day retention period, the successor employer may not discharge a retained employee without cause.
  5. Notice and Recordkeeping:  Covered employers will be required to post a notice of employees’ rights under these new ordinances.  The San Francisco Office of Labor Standards Enforcement (“OLSE”) will prepare and publish the required posters for employer use.  Employers are required to retain pertinent personnel records for three years and these records are subject to inspection by the OLSE.

The Retail Workers’ Bill of Rights provides for administrative investigation and enforcement by the OLSE.  Additionally, the City Attorney’s office may file civil actions against non-compliant employers.  Retail employers covered by these new ordinances should review them promptly and take action to ensure compliance before the operative date of the ordinances, which is July 3, 2015.  The text of the ordinances is available here and here

2015 Standard Mileage Rate Announced

Earlier this week, the IRS issued the 2015 optional standard mileage rates used to calculate the costs of operating a vehicle for business, charitable, medical or moving purposes.  Beginning on January 1, 2015, the standard mileage rates are as follows:

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014;
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014; and
  • 14 cents per mile driven in service of charitable organizations.

Under California Labor Code section 2802, California employers are required to reimburse employees for reasonable expenses necessarily incurred in the performance of their job duties.  This includes expenses associated with the use of their personal vehicles for business purposes.  Most employers use the standard mileage rate to satisfy their obligation to reimburse employees for expenses associated with using their personal vehicles for business travel.  Although employers are not required to use the IRS optional standard mileage rate, and can instead try to calculate an employee's "actual" expense associated with personal vehicle use (which includes more than just the cost of gas, but also the cost of wear and tear, etc.), the latter method carries risk of being challenged for not providing adequate reimbursement.

NLRB Says Employees Have Right to Use Employer Email for Union Organizing Activities

Yesterday, the NLRB issued a controversial 3-2 decision (divided on partisan lines) in Purple Communications, holding that employees are entitled to use an employer's email system for activities covered by Section 7 of the National Labor Relations Act (NLRA).  Section 7 protects employees' right to engage in concerted activity for mutual aid and protection (including, but not limited to, union organizing activity).  The NLRB reasoned that in the modern workplace, electronic communications are the functional equivalent of yesterday's "water cooler" conversations. The NLRB held that employees "presumptively" have a right (during nonworking time) to use the employer's email system to communicate about Section 7-covered topics if the employer gives them access to the email system for business purposes.  

Can this ruling be circumvented by imposing a total ban on nonwork-related use of email (whether for Section 7 purposes or other personal, nonwork-related purposes)?  One would think so, but the NLRB addressed this and basically said no.  According to the NLRB, an employer may only impose a total ban on nonwork use of email (or some lesser restriction on nonwork use of email) if special circumstances make the ban necessary to maintain production or discipline (whatever that means, conveniently undefined).  

As noted above, the Purple Communications decision was decided on a partisan basis with three Democrats on the NLRB issuing the decision.  Two Republican members filed dissents, reasoning, among other things, that the majority's holding was an unwarranted intrusion on employers' property rights and interests.  Notably, the partisan decision overrules an earlier 2007 decision, Register Guard, that had been decided by a Republican majority and held that an employer does not have to allow its email system to be used by employees for Section 7 activities.

Stay tuned for likely appeals in this case.  In the meantime, employers should exercise caution in issuing any discipline and/or corrective restrictions based on employee use of email for Section 7-covered communications.  The Purple Communications decision is available here.  

Supreme Court Unanimously Rules That Security Screening Time Is Not Compensable

Today the U.S. Supreme Court issued its decision in Busk v. Integrity Staffing Solutions, Inc., unanimously holding that time warehouse employees spent waiting to go through security checks and undergoing those checks at the end of their shift was not compensable time.  The decision overrules a contrary conclusion that the Ninth Circuit Court of Appeals reached earlier in the case.

The employees at issue in Busk were hourly warehouse employees whose job was to retrieve products off shelves and package them for Amazon customers.  Their employer required them to undergo an anti-theft security check at the end of their shifts before allowing them to leave for the day.  During this process, employees had to remove items such as belts, keys, and phones from their persons and go through a metal detector.  The employees were not compensated for the time they spent waiting in line for the security checks and undergoing the checks, which they alleged took up to 25 minutes each day.  The employees filed a class action lawsuit seeking to recover unpaid wages for this time.  The trial court dismissed the employees’ claim, holding that the security check time was not compensable time under the Fair Labor Standards Act.  The employees appealed to the Ninth Circuit, which reversed the district court’s ruling and held that the employees could proceed with their claim because the security checks were required by the employer and if they actually took as much as 25 minutes per day, that time would not be de minimis but instead would be compensable under the FLSA.  The U.S. Supreme Court granted Integrity Staffing Solutions’ petition for review.

In reversing the Ninth Circuit’s decision and holding that the security check time was not compensable, the U.S. Supreme Court held that the claim was governed by the standards set forth in the Portal to Portal Act and the reasons that the Act was initially enacted.  The Portal to Portal Act was enacted after several court decisions came out interpreting the FLSA to broadly require payment for preliminary and postliminary activities (including a plaintiffs’ counsel fave – Anderson v. Mt. Clemens Pottery), which in turn resulted in a flood of litigation by employees seeking pay for such activities.  In response to these decisions expansively interpreting the FLSA, Congress enacted the Portal to Portal Act to define “work” that is compensable and activities that are not compensable under the FLSA.  The Portal to Portal Act thus expressly excludes the following activities from compensable time:

  1. Time spent walking, riding or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform; and
  2. Activities which are preliminary to or postliminary to said principal activity or activities which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity or activities.

The term “principal activity or activities” means activities that are an “integral and indispensable” part of the principal activities the employee is hired to perform.  Based on these definitions, the Court held that time Integrity Staffing’s employees spent undergoing security checks was non-compensable postliminary work.  The Court reasoned that end of shift security checks were not the employees’ principal activity because the employees were not employed to undergo security checks; rather, they were employed to retrieve products in the warehouse and package them for customers.  Furthermore, the security checks were not an “integral” or “indispensable” part of the employees’ packaging activities.  The security checks were not necessary in order for the employees to perform their packaging duties, and the mere fact that the employer required the screenings does not change the nature of the screenings as being separate from the employees’ principal activities.  Indeed, the employer hypothetically could eliminate the security check requirement and this would have no impact on the employees' ability to perform their principal activities, thus demonstrating that the security checks were not an integral or indispensable part of the employees' duties.  The Court contrasted this type of activity from different types of preliminary or postliminary activity that would be compensable under the FLSA, such as time an employee spent donning required protective gear needed to perform job duties or removing contaminated clothing at the end of a shift in order to safely leave the worksite. Finally, the Court held that the Ninth Circuit erred in focusing on whether the time was de minimis or not in assessing whether it was compensable under the FLSA.  The Court held that the Portal to Portal Act definitions focus on the nature of the activity and its relation to the employees’ principal activities – not on how much time the activity takes the employee to complete. 

The Busk v. Integrity Staffing Solutions decision is a great one for employers fighting wage and hour lawsuits based on unpaid preliminary and postliminary activities brought under the FLSA.  California employers are cautioned, however, that the Busk decision is based solely on the FLSA/Portal to Portal Act and is not an interpretation of California law.  California courts interpreting California’s Labor Code and Wage Orders have applied a much broader definition of compensable work time to include all time that an employee is subject to the control of the employer.  Thus, even though an employer may be able to defeat a claim for compensation for preliminary/postliminary work under the FLSA, the result may not be the same under California law.  Employers seeking guidance on whether preliminary or postliminary activities performed by California employees are compensable should consult California employment law counsel.

The Busk decision is available in full here.

Hot off the Press – New Statewide Minimum Wage Increase Proposed On First Day of California Legislative Session

The action continues on the minimum wage front in December.  Earlier today, State Senator Mark Leno introduced a bill to accelerate the proposed increase to California’s statewide minimum wage.  Leno has been a strong proponent of an increased statewide minimum wage.

Today was the first day of the California legislative session so it is very difficult to tell what will happen with this bill.  However, the bill, as introduced, would raise California’s minimum wage to $11 in 2016 (instead of $10 under current legislation passed in 2013) and $13 in 2017.  After 2017, the bill calls for regular minimum wage increases indexed to inflation. 

Senator Leno introduced a similar bill last year, but it died in committee.  Given the current climate on minimum wage, this year’s version likely has a better chance of ultimate success.  We will continue to keep you posted on the progress of this and other employment-related bills as they are introduced and move forward during the legislative session.

Late November Wage and Hour Developments in California

In case you were too busy eating Turkey and/or watching football, we wanted to make sure you were aware of two wage and hour developments in California from last week:

Premium Pay for Certain Holidays Being Proposed

First, San Diego Assemblywoman Lorena Gonzalez announced that she is going to introduce a bill that guarantees that all California workers (part-time and full-time) receive double their regular rate of pay if they are required to work on Thanksgiving or Christmas.  (Note: In Ohio, state representative Michael Foley already introduced a bill that would require stores in Ohio to pay triple the regular hourly rate for workers who are required to work Thanksgiving).  Assuming Gonzalez’ bill does get introduced, we expect it to have substantial support from her fellow lawmakers.  This bill would be introduced in next year’s legislative session (2015) and will not affect Christmas this month.  Currently, Gonzalez plans to only include Thanksgiving and Christmas as days requiring premium pay.  However, it is certainly possible that amendments to expand the scope of the bill are debated and that additional holidays or other dates (Black Friday, Christmas Eve etc.) are considered.

Sacramento Considering Citywide Minimum Wage Ordinance

Second, Sacramento Mayor Kevin Johnson has announced that he will put together a task force shortly after January 1 to consider the issues surrounding raising Sacramento’s minimum wage above the current state level ($9 currently increasing to $10 in 2016).  Mayor Johnson claimed that the task force will include representatives from the business community and from organized labor.  He announced that he will ask the group to look into a variety of issues surrounding a potential Sacramento minimum wage including whether to do it, the timing of it, and what if any exemptions should be provided.  The Mayor has not identified a particular dollar figure for the new minimum wage and that issue will likely also be considered and proposed by the task force.  We expect that any minimum wage increase is likely to be supported by the City Council and the citizens of Sacramento.

We will keep you updated on these issues as they develop.

California Court Complicates Determination of Independent Contractor Misclassification Claims

A decision earlier this month by a California Court of Appeal in Dynamex v. Superior Court greatly (and unnecessarily) complicates the determination of whether an employee is an independent contractor or an employee, and in some instances makes it extremely difficult for an employer to defeat class certification of an independent contractor misclassification claim. 

The plaintiff in the case was a delivery driver for Dynamex, a nationwide courier and delivery service.  Dynamex used to classify its drivers as employees, but in 2004 Dynamex converted its drivers to independent contractor status.  One driver thanked Dynamex with a lawsuit alleging that the reclassification to independent contractor status violated California law.  The plaintiff, who sought to represent a class of about 1,800 Dynamex drivers, alleged that due to their improper independent contractor classification, they were unlawfully denied overtime compensation and expense reimbursement.  The trial court ultimately certified a class.  Dynamex later sought to have the class decertified, arguing that the trial court applied the wrong legal standard for determining whether common issues predominated on liability.  The trial court applied the definitions of “employ” and “employer” found in the applicable IWC wage order (Wage Order No. 9, applicable to the transportation industry).  That wage order defines “employ” as “to engage, suffer, or permit to work,” and defines “employer” as any person “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”  Applying these definitions, the trial court concluded that determining whether the drivers were “employees” (as opposed to independent contractors) within the meaning of the wage order could be determined based on common proof and would not require numerous individualized inquiries.  As such, the trial court concluded that class certification was proper. 

Dynamex sought to have the court of appeal decertify the class, arguing that the trial court applied the wrong test for determining whether a worker is an employee or an independent contractor.  Dynamex argued that the multi-factor test set forth by the California Supreme Court in S.G. Borello & Sons v. Dep’t of Indus. Relations, 48 Cal.3d 341 (1989), applied and that under this test, liability could not be established based on common proof, but instead would require individualized inquiries concerning the degree of control Dynamex exercised over any individual driver, along with other individualized inquiries relevant to the Borello factors. 

The court of appeal agreed with Dynamex – well, sort of.  With highly questionable reasoning, the court essentially held that the test for independent contractor vs. employee status varies, depending on what wage and hour violation is being alleged.  Thus, if a worker is alleging that the employer violated a provision of an applicable wage order, then the wage order definitions of “employer” and “employ” apply to determine whether the worker is an employee.  However, if the worker is alleging wage and hour violations that are not based on violation of a wage order but rather on some other provision of law (e.g. a Labor Code requirement that is not also set forth in the wage order), then Borello’s multi-factor common law test for employee/independent contractor status applies.  Thus, the court looked at the claims alleged by the drivers against Dynamex and held that to the extent the claims were based on violations of the wage order (e.g. the overtime claim), the trial court had properly applied the definitions of “employ” and “employer” set forth in the wage order to grant class certification.  However, the court held that to the extent the drivers’ other claims did not fall under the wage order, the trial court would need to reconsider whether class certification was appropriate based on application of the Borello test.  More specifically, the court explained that the wage order expressly covers expense reimbursement of certain types of expenses (e.g. tools, uniforms), but may not cover all of the types of expenses for which the driver class was seeking reimbursement (e.g. rental or purchase of personal vehicles).  On remand, the trial court will have to consider which of the expense claims are for expenses covered by the wage order and which are not, and for claims that fall outside the wage order the trial court will have to re-assess the propriety of class certification using the multi-factor Borello test.

The Dynamex decision is a bad one for employers defending class claims for independent contractor misclassification for two important reasons.  First, as a practical matter, application of the wage order definitions of “employ” and “employer” makes it virtually impossible for an employer to prevail in establishing that a worker is an independent contractor because all workers are "engaged" and "permitted to work" which makes the hiring entity an "employer" under the wage order, as interpreted by the Dynamex court.  Second, the Dynamex decision makes it much easier for a class to be certified in an independent contractor misclassification case because the wage order definitions of "employ" and "employer" are much more susceptible to common proof than the Borello factors.  For these reasons, the decision magnifies the risk of classifying workers as independent contractors in California.  In this author’s opinion, the Dynamex decision is questionable because it relies predominantly on caselaw applying the wage order definitions to determine whether an third party could be held liable for wage and hour violations as a “joint employer.”  Joint employer analysis has nothing to do with independent contractor classification analysis.  It seems likely that this issue will end up before the California Supreme Court.  In the meantime, however, California employers should tread cautiously and carefully in classifying workers as independent contractors because the court decision trend in this area has been largely unfavorable for employers -- with several recently publicized cases finding employers liable for misclassification of workers as independent contractors and now the Dynamex court holding that an "employee" includes any worker "engaged" or "suffered or permitted" to work.

Sacramento Trial Court Holds That Sacramento Bee Newspaper Carriers Were Misclassified as Independent Contractors

On September 22, after a court trial before the Honorable Gerrit W. Wood of the Superior Court of Sacramento County, the court, in an unpublished opinion, found that a class of newspaper carriers working for the Sacramento Bee from 2005 through 2009 were improperly classified as independent contractors.  Utilizing the standards articulated by the California Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Ind. Relations, 48 Cal. 3d 341 (1989,) and more recently in Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522 (2014), Judge Wood held that the Bee’s parent company, McClatchy, maintained such control over the means in which the newspapers were delivered that it could not properly classify the carriers as independent contractors.  The individual class action plaintiffs are now demanding that McClatchy reimburse them all of their mileage expenses in accordance with section 2802 of the California Labor Code, which requires that employees be reimbursed all reasonable expenses incurred in the course of their employment.  It remains to be seen if McClatchy will appeal the decision. 

Although this decision is not a precedential one, it is important nonetheless as it illustrates the increased focus and scrutiny by plaintiffs’ attorneys and certain government agencies on individuals who are working as independent contractors.  California businesses who utilize independent contractors are cautioned to carefully review the circumstances of these workers to make sure that they can make a strong legal argument, under both federal and California law, that the classification is an accurate one.  The consequences for misclassification can be broad and include such items as tax liability, liability for unpaid workers’ compensation premiums, liability for stock options and benefits and other entitlements that similarly situated employees receive but independent contractors do not, and liability for unreimbursed expenses.  

Editor
Cal Labor Law

Robin E. Largent is a Partner in CDF’s Sacramento office and may be reached at 916.361.0991 or rlargent@cdflaborlaw.com BIO »

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