UberBLACK Drivers Are Properly Classified as Independent Contractors

Q.  Have there been any new legal developments on whether gig economy workers can be classified as independent contractors?

A.  On April 11, Judge Michael Baylson of the U.S. District Court for the Eastern District of Pennsylvania became the first judge to grant summary judgment on the issue of whether UberBLACK drivers are employees or independent contractors under the Fair Labor Standards Act (FLSA). Judge Baylson concluded that Uber correctly classified the plaintiffs — drivers who provided “black car” limousine services for Uber — as independent contractors. Razak v. Uber Techs., Inc., No. 16-573 (E.D. Pa. 2018). The plaintiffs intend to appeal. Although the analysis of independent contractor classification is fact-intensive and varies depending on the type of claim asserted by the plaintiffs, gig economy employers will find the Razak opinion helpful in structuring their independent contractor relationships.

For the full article, click here.

Susan K. Lessack

United States Supreme Court Revises Standard for Review of Exempt Classification

Q.  I heard that the U.S. Supreme Court just issued a ruling finding that auto service workers are exempt from overtime pay. My company is not in the automobile industry. Will this opinion apply to us?

A.  The U.S. Supreme Court issued an opinion this week in Encino Motorcars, LLC v. Navarro, finding that auto service workers – those employees who interact with customers and sell them services for their vehicles – are exempt from overtime pay under the Fair Labor Standards Act (FLSA). While the decision directly impacts this small category of jobs, the opinion will have a much more far-reaching impact, since the Court rejected long-standing precedent that exemptions must be construed narrowly against the employer.

In a 5-4 opinion overturning the Ninth Circuit’s decision finding that auto service advisors were non-exempt, the Court expressly rejected the principle invoked by the Ninth Circuit and many courts before it that exemptions to the FLSA should be construed narrowly.  Instead, the Court observed that “[b]ecause the FLSA gives no textual indication that its exemptions should be construed narrowly, there is no reason to give them anything other than a fair (rather than a narrow) interpretation.” (internal quotations omitted).  The Court concluded that “exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement.  We thus have no license to give the exemption anything but a fair reading.”  Finally, the Court remarked, “even if Congress did not foresee all of the applications of the statute, that is no reason not to give the statutory text a fair reading.”

The dissent criticized the Court for rejecting the narrow construction principle for FLSA exemptions “[i]n a single paragraph . . . without even acknowledging that it unsettles more than half a century of our precedent.”

This is the second time that the Supreme Court ruled in this case. In 2016, the Court rejected a 2011 Department of Labor (DOL) regulation relied on by the Ninth Circuit in finding that service advisors were not exempt.  The Court noted in that opinion that the DOL had flip-flopped on the issue several times over the years.  In 1970, the DOL interpreted an exemption in the FLSA for automobile salesmen to exclude service workers.  The federal courts rejected this interpretation, however, and in 1978, the DOL issued an opinion letter agreeing with the courts that service advisors indeed were exempt.  In 2011, the DOL changed course again, issuing the regulation relied on by the Ninth Circuit that service advisors were not included in the exemption for salesmen.

In its 2016 opinion, the Supreme Court found that the 2011 regulation was not entitled to any deference because the DOL had issued it without a sufficiently reasoned explanation. The Court remanded the matter to the Ninth Circuit to consider the meaning of the statutory language without the regulation.  On remand, the Ninth Circuit again held that the service advisors were not exempt, and the case went back up to the Supreme Court, where it was overturned in last week’s opinion.

What This Means for Employers

This new standard – that exemptions should be given a “fair reading” – is a win for employers, as it should now be easier for companies to persuade courts that an employee’s job duties fall within one of the categories for exempt status under federal law. Prior to this ruling, an employer was unable to overturn the presumption of non-exempt status unless it could demonstrate that an exemption “plainly and unmistakably” applied.  Now, it is more likely that employers will be able to convince a federal court that the exemption applies if it is supported by a fair reading of the text.

Employers must continue to be mindful of state court interpretations of their overtime laws, however, which may construe their corresponding overtime exemption more narrowly than the SCOTUS interpretation.

–Tracey E. Diamond

 

 

Single Ageist Comment May Be Insufficient to Sustain Age Discrimination Claim

Q.  If a supervisor makes a comment about an employee’s age, will the company be liable for age discrimination?

A.  While ageist comments are never appropriate in the workplace, an Illinois federal court recently ruled that a single age-related comment was insufficient for an employee to prevail on an age discrimination claim.

In Maglieri v. Costco Wholesale Corp., No. 16-cv-7033 (N.D. Ill. Mar. 14, 2018), the plaintiff employee alleged, among other claims, discrimination and retaliation under the Age Discrimination in Employment Act (“ADEA”). The 54-year old plaintiff worked in a Costco bakery and was directly supervised by a 57-year old manager. According to the plaintiff, the manager repeatedly yelled at her in a “nasty” and “intimidating” voice about working faster. But according to a co-worker, the manager was mean and abrasive to all subordinates and would sometimes yell to motivate employees. The co-worker also testified, however, that she once recalled the manager stating she was “kind of surprised that [Costco] didn’t hire someone younger” when plaintiff was hired. All of the plaintiff’s performance reviews reflected the manager’s concerns with plaintiff’s work speed.  However, plaintiff was not terminated or demoted and did not otherwise experience a change in her job duties.

The ADEA protects employees age 40 and above from age-based discrimination in the workplace. Employers may not discriminate against employees in any manner on the basis of age, and employers may not retaliate against employees who oppose any practices made unlawful by the ADEA. The plaintiff in this case alleged that she was the victim of both discrimination and retaliation.

In order to prove an age discrimination claim, plaintiff needed to show that her employer subjected her to an adverse employment action (such as termination, change in job duties, or a hostile work environment) because of her age. As the Court noted, “not everything that makes an employee unhappy is an actionable adverse action.” Although the manager’s yelling and alleged abrasiveness could present a Human Resources problem, merely being mean or raising one’s voice does not constitute a violation of the law.

The Court observed that plaintiff did not suffer termination or a change in job duties and also concluded that plaintiff was not the victim of an age-based hostile environment. According to the Court, it is not enough that an employee subjectively believes an employer’s conduct to be discriminatory. To prevail on a hostile environment claim, a plaintiff must show that the complained of behavior was both subjectively and objectively offensive. The evidence in this case showed that there was only one comment about age (the manager’s comment that she was surprised Costco did not hire someone younger). The Court found that “this sole age-based comment, which was not directed at [plaintiff] and did not contain any prejudiced views or derogatory slurs, is not enough to establish that [the manager] harassed [plaintiff] . . . because of [her] age.”

The Court concluded that the manager’s criticism about “slowness” and “lack of urgency,” were not a veiled way of harassing plaintiff about her age. While the ADEA prohibits employers from relying on age as a proxy for an employee’s work-related characteristics—such as productivity—the ADEA does not bar employers from focusing on the work-related characteristics themselves. According to the Court:  “Not completing work quickly enough is a legitimate workplace criticism.”

Employers should be aware that a single comment that is discriminatory on its face, such as a racial slur, could be sufficient to establish a hostile work environment.  In fact, courts have concluded that such singular comments are sufficient to bring a claim under various state and federal employment discrimination laws.

Although the employer in the above-referenced case managed to avoid liability, all employers would be well-served to conduct non-discrimination and anti-harassment training in the workplace that focuses not only on age-based discrimination and harassment but also on other forms of harassment based on sex, race, disability, and other protected traits. Pepper Hamilton’s Labor and Employment Practice Group can conduct anti-harassment training sessions for both your managers/supervisors and rank and file employees. Contact a Pepper Hamilton Labor and Employment attorney to discuss how we can tailor a training program to the needs of your workforce.

Lee Tankle

A Win for MA Employers, Sick Pay Does Not Constitute Wages

Q. I have employees in Massachusetts.  Do I need to pay for accrued sick leave upon termination?

A.  In a recent opinion, the Massachusetts Supreme Judicial Court followed the lead of most other jurisdictions in finding that sick pay does not constitute wages under the Massachusetts Payment of Wages Law.  Unlike accrued and unused vacation, which is considered to be wages and must be paid at termination, Massachusetts employers are not required by statute to pay out accrued but unused sick pay to employees upon termination of employment.

Although the Massachusetts statute does not explicitly exclude sick pay from the definition of wages, the Court reasoned that “employees do not have an absolute right to spend down their sick time,” it must be used only when the employee or a family member is sick.  Further, the Court noted that it is not customary for employees to be compensated for accrued but unused sick time, and it is common for employers to have a “use it or lose it” policy regarding sick leave.  Accordingly, the Court limited the definition of “wages” under the Massachusetts Payment of Wages Law to include only hourly and salaried pay, accrued and unused vacation time, and certain commissions that have become due and payable to the employee.

Despite this win for Massachusetts employers, companies should continue to remain vigilant about compliance with the Wage Payment statute upon an employee’s termination.  An employer that fails to comply with the statute may be liable for mandatory awards of treble damages and attorneys’ fees.  In particular, keep in mind that employees who are terminated must be in paid in full on the day of discharge and those who resign must be paid in full by the next regular pay day.

Rebecca Alperin

 

FLSA Implications When Telecommuting Due to Illness

Q: I received an email from an employee stating that he is sick, but will be working from home.  Should I allow my employee to work remotely while sick?  What are the FLSA implications of allowing an employee to work from home while sick?

A: The practice of working remotely or telecommunicating has become increasingly popular given technological advancements like smart phones, videoconferencing, and instant messaging services.  While telecommuting provides several benefits for employers and employees, it can also create new challenges such as when employees opt to work from home while sick.

The Fair Labor Standards Act (FLSA), requires employers to pay employees for all time spent completing productive work, regardless if the employer knew that the work was being performed. Although this rule applies to both exempt and non-exempt employees, an employee’s exempt status determines how one’s payment will be calculated when he or she is working from home while sick.

If an exempt employee works remotely while sick, then the employer must pay the employee for a whole day of work, even if the employee only works for an hour or two. However, if a non-exempt employee works from home while sick, then the employer is only required to pay the employee for the actual amount of time worked.  Thus, under the FLSA, even if an employer prohibits employees from working from home while sick, employees must be paid for any productive work they complete.

Whether a company should allow its employees to work remotely while sick depends on a number of factors, including but not limited to the extent of the employee’s sickness and the nature of the employee’s work. For example, working from home with a sprained ankle is different from working with the flu.  Moreover, certain jobs do not lend themselves to working from home, such as face-to-face customer service, working a cash register, working at a food establishment or a construction site.

If an employer decides to allow employees to work from home when they are sick, it is recommended that the employer create and implement a remote work sick policy. This policy should discuss when a sick employee can work from home, which positions the policy applies to, the types of assignments that can be worked on (i.e. responding to emails, or participating in conference calls), and how employees should track their time.  It is also recommended that the employer include language in the policy that gives it the discretion to limit an employee’s ability to work from home if the employee submits subpar work.  If an illness turns into a qualified disability under the ADA, the employer would need to engage in the interactive process to determine whether a telecommuting arrangement would be a reasonable accommodation.  For more information on telecommuting as a reasonable accommodation, see our blog post here.

For assistance drafting a remote work sick policy, contact a labor and employment attorney.

Renee C. Manson