The Contingent Workforce in 2015: Understanding the Legal Exposures. Webinar, May 14, 2015

Transcription

1 The Contingent Workforce in 2015: Understanding the Legal Exposures Webinar, May 14, 2015

2 Before we begin... Reminder that phone lines are muted Direct your questions to the Chat box or the Q&A box (to host/presenters) we ll respond via after the event Any questions offline please We have HRCI credit approval to request your certificate of attendance, please with your request & contact info. (NOTE: You must be logged in via computer individually to have your attendance recorded)

3 Before we begin...cont. Sign up for Labor/Employment News or ACA News Check out our Blogs for recent news - Franchise Alchemy EPLI Risk ADA Musings And our latest Blog launched last week on data privacy, security and the legal implications of a data-driven economy Information Matters -

4 Today s Presenters Clint Robison Los Angeles, CA Tom Pitegoff New York, NY Joe Paranac Newark, NJ Brian Muse Williamsburg, VA Lisa Savadjian Newark, NJ Dan Blake Boston, MA Lauren Appel Boston, MA Phil Bonoli Los Angeles, CA Mike Barnsback Alexandria, VA Michael Caldwell New Haven, CT 4

5 Joint Employment in Franchising Thomas M. Pitegoff 5

6 NLRB developments Who s who - David Weil: DOL Wage & Hour Administrator - Richard Griffin: NLRB General Counsel - SEIU seeks to revive union membership Browning Ferris - GC s amicus brief urged new joint employer standard Would upend law developed over 30 years McDonald s complaints 6

7 Other developments Challenges - Awuah v. Coverall 2010 MA minimum wage laws Franchisees held to be employees - Seattle minimum wage law Confirming traditional employer analysis - Patterson v. Domino s 8/2014 Sexual harassment CA Supreme Ct 7

8 Threat to franchising Franchising creates opportunities - Franchisees own their business Joint employment kills incentives to franchise - both for franchisors and franchisees - Inconsistent with franchise agreements Franchising is important to the U.S. economy 8

9 What happens next? More hearings McDonald s will fight with IFA s help SEIU will continue to push the envelope Franchisors will take protective measures Hopefully, the franchise sector will continue to offer opportunities 9

10 NLRB Considerations Joseph P. Paranac 10

11 Definition of Joint Employer As defined by the NLRB, a joint employer is comprised of two or more employers who share or co-determine those matters governing essential terms and conditions of employment for bargaining unit employees. Those terms and conditions include hiring, firing, discipline, supervision and direction. 11

12 Bargaining in Joint Employment Situations In Oakwood Care Center, 343 NLRB 659 (2004), the NLRB held that: 1. A combined bargaining unit of jointly-employed and solely-employed employees is not permissible under the Act unless both employers consent. 2. Required consent must be clear and unequivocal, as manifested by express agreement or by actually entering into bargaining on a multi-employer basis. 3. This rule does not apply to units in which two or more employers jointly employ every individual in a unit. 12

13 ACA/Benefit Design and Insurance Aspects Brian G. Muse and Lisa L. Savadjian 13

14 Affordable Care Act and Contingent Employees The ACA large employer shared responsibility mandate requires employers with 50 (100 in 2015) or more full time and full-time equivalent employees to offer qualifying health coverage to at least 95% of their full-time employees and their dependents. Under the ACA employers must periodically determine: (1) How many employees they have; and (2) How many hours those employees routinely work. 14

15 The ACA Uses the Common Law Control Test The ACA s regulations have adopted the common law control test to determine whether an individual is an employee. Treas. Reg (c) 1(b). What factors determine an employer/employee relationship: 1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? 2. Financial: Are the business aspects of the worker s job controlled by the payer (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)? 3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? 15

16 Issues with Franchisor/Franchisee Relationship Aggregation of Affiliated Entities : The ACA aggregates corporations that are affiliated (group) for many purposes, including determining whether an employer qualifies as a large employer. - The common ownership rule says that if a group of companies has the same or similar ownership, it will be treated as the same company when assessing employee numbers. What does this mean for franchises? - A recent NLRB decision held that McDonalds can be considered a joint employer along with its franchisees and can be judged jointly accountable for workplace conditions. 16

17 Avoiding the Employer-Employee Relationship Who has liability? - It should be clearly addressed in any contingent workforce agreement - Consider becoming a third party beneficiary on the staffing company s insurance policy - Indemnification: Review and revise staffing agreements to provide defense and indemnity where possible. 17

18 Avoiding (cont.) Differentiate Workers- set up clear differences between temporary and permanent staff Employers should relinquish control to staffing agencies and let the agency implement all employment actions such as recruiting, training, job assignments, firing, raises and payroll issues Do your due-diligence on the staffing company before contracting - What happens when Staffing Company goes under? 18

19 State Wage and Hour and Staffing Agency Aspects Daniel J. Blake, Lauren A. Appel, Philip J. Bonoli 19

20 Understanding and Defending Wage and Hour Claims General Info/FLSA Wage & Hour Employer Mistakes Employees v. Independent Contractors Claims and Penalties Exempt Employees Defenses to Wage & Hour Claims Federal v. State Wage & Hour Issues 20

21 Wage and Hour Traps to Avoid A Worker Is an Employee Unless: The individual is free from control and direction in connection with the performance of the service; and The service is performed outside the usual course of the business of the employer; and, The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. Some states also use this test, such as Massachusetts. New Jersey has recently by case law (Sam Hargrove et al v. Sleepy s LLC) 21

22 Indemnification Issues Staffing companies should avoid broad, boilerplate indemnification clauses covering risks beyond their control A good agreement makes party causing harm responsible for compensating for harm Tailor an indemnification agreement to services provided Some EPLI policies contain FLSA exclusions - New Hampshire Ball Bearings, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 2014 WL (C.D.Cal.) 22

23 Employment Law Aspects and Legal Exposure and Indemnification Issues Michael E. Barnsback, Michael G. Caldwell 23

24 Federal Wage and Hour Aspects Department of Labor ( DOL ) perspective: - Contingent Workforce = Fissured Industries - In recent years, the employment relationship between workers and businesses receiving the benefit of their labor has fissured apart as companies have contracted out or otherwise shed activities to be performed by other businesses. 24

25 Aspects (cont.) DOL 2016 Budget request: - Increase of $31 million for enforcement - Add 300 FTE for enforcement Key Enforcement Initiative - Addressing the fissured workplace 25

26 Aspects Targeted Industries Targeted fissured industries: - Manufacturing - Retail - Health care and social assistance - Leisure and hospitality - Food services and drinking - Accommodation 26

27 Aspects DOL View on Franchises DOL view on franchises - Franchising provides a way for very large national businesses to benefit from investments in a brand (which convey larger margins), and at the same time move the problems arising from common wage policies out to a network of independent entrepreneurs. Improving Workplace Conditions Through Strategic Enforcement: A report to the Wage and Hour Division, David Weil, Boston University, May 2010, p

28 Aspects Joint Liability Basis for Joint Liability: - if the facts establish that the employee is employed jointly by two or more employers, i.e., that employment by one employer is not completely disassociated from employment by the other employer(s), all of the employee's work for all of the joint employers during the workweek is considered as one employment for purposes of the Act. In this event, all joint employers are responsible, both individually and jointly, for compliance with all of the applicable provisions of the act, including the overtime provisions, with respect to the entire employment for the particular workweek. 29 C.F.R

29 Aspects Joint Relationship generally A joint employment relationship generally will be considered to exist in situations such as: 1) Where there is an arrangement between the employers to share the employee's services, as, for example, to interchange employees; or 2) Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee; or 3) Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. 29 C.F.R (b) 29

30 Aspects Classification Definitions Employee v. Contractor Broad definitions favor classification as employee - Employer includes any person acting directly or indirectly in the interest of an employer in relation to an employee... (29 U.S.C. 203(d)) -... employee means any individual employed by an employer. (29 U.S.C. 203(e)) - Employ includes to suffer or permit to work. (29 U.S.C. 203(g)). 30

31 Aspects Meaning and Court Considerations These definitions broaden the meaning of employee to cover some [workers] who might not qualify as such under a strict application of traditional agency [or contract] law principles. In determining whether a worker is an employee covered by the FLSA, a court considers the economic realities of the relationship between the worker and the putative employer Schultz v. Capital Int'l Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006) 31

32 Aspects Economic Realities Test Economic Realities Test: - (1) the degree of control that the putative employer has over the manner in which the work is performed; - (2) the worker's opportunities for profit or loss dependent on his managerial skill; - (3) the worker's investment in equipment or material, or his employment of other workers; - (4) the degree of skill required for the work; - (5) the permanence of the working relationship; and - (6) the degree to which the services rendered are an integral part of the putative employer's business. United States v. Silk, 331 U.S. 704 (1947) 32

33 Joint Employer Liability in Discrimination Actions: Exposure and Indemnification Entity may be exposed to liability though it doesn t consider itself the employer Common settings: 1. Staffing agency - its client 2. Franchisor - franchisee 3. Parent subsidiary Variety of claims 33

34 Theories of Joint Employer Liability 1. Joint employer Usually applies to unrelated entities that jointly handle employment relations Test varies by circuit 2d Circuit test: a) hiring and firing; b) discipline; c) records/payroll/insurance; d) supervision; e) collective bargaining process 34

35 Theories (cont.) 2. Single employer Usually applies to related entities, but courts confuse it with JE theory Test: a) interrelation of operations, b) centralized control of labor rel ns, c) common management, d) common ownership/financial control 35

36 Theories (cont.) 3. Common law of agency Old test, still frequently applied to employer liability Reid factors Main factor is control over the employee s work 36

37 Theories (cont.) 4. Joint employer status under the FMLA A federal regulation creates a special JE theory for FMLA claims Entire relationship test JE will ordinarily be found in staffing contexts 37

38 Legal Exposure Back Pay/Front Pay, including fringe benefits & pre-judgment interest Compensatory Damages Punitive Damages Injunctive & Affirmative Relief Attorneys Fees 38

39 How to Protect Your Organization Contractual provisions Indemnification Defense Hold Harmless Simple statement that entity is not the employer is unlikely to work Clause dictates degree of liability of each party and ability to shift the risk 39

40 Thank you for attending. To contact us: Lauren Appel Michael Barnsback Daniel Blake Philip Bonoli Michael Caldwell Brian Muse Joseph Paranac Thomas Pitegoff Clint Robison Lisa Savadjian CALIFORNIA COLORADO CONNECTICUT GEORGIA MARYLAND MASSACHUSETTS MICHIGAN NEVADA NEW JERSEY NEW YORK PENNSYLVANIA TEXAS VIRGINIA WASHINGTON, D.C With 375 attorneys in a full range of practices, LeClairRyan is an entrepreneurial firm providing business counsel and client representation in matters of corporate law and litigation.

41 Disclaimer This slide show provides general information and is not legal advice and should not be used or taken as legal advice for specific situations. You should consult legal counsel before taking any action or making any decisions concerning the matters in this show. This communication does not create an attorney-client relationship between LeClairRyan, A Professional Corporation, and the recipient. Copyright 2015, LeClairRyan, A Professional Corporation. All rights reserved. 41