EMPLOYMENT LAW UPDATE WAGE & HOUR OUTSOURCING / JOINT EMPLOYER ISSUES & MORE October 27, 2006 Presented by Nossaman Guthner Knox & Elliott, LLP Veronica M. Gray, Partner vgray@nossaman.com Channel Island Chapter Los Angeles San Francisco Irvine Sacramento Copyright, 2006 Nossaman Guthner Knox & Elliott, LLP. All Rights Reserved
What We Will Cover Recent Verdicts & Settlements The Exemptions - FLSA & California Preservation of Exempt Status Property Manager Description Job Classification Audits What If You Misclassify An Employee? Reclassification Issues Joint Employer Issues & Liability Other Issues Questions 2
Jury Of My Peers 3
Recent Settlements & Verdicts* $172M Wal-Mart $135M Gutierrez v. State Farm $120M Sekley v. Allstate Insurance $120M Bell v. Farmers Insurance Exchange $ 78M Wal-Mart $ 37M Burns v. Merrill Lynch $ 30M Butler v. Countrywide Home Loans $ 15M Kirschenbaum v. Electronic Arts $ 12M Wells Fargo *Class Actions 4
The Law 5
Two Sets of Laws Federal The Fair Labor Standards Act (FLSA) & The Department of Labor (DOL) [www.dol.gov/esa] State Labor Code & Industrial Welfare Commission Wage Orders (Wage Orders) [www.dir.ca.gov/lwc/wageorderindustries] There are 17 IWC Orders " or Wage Orders" which regulate the wages, hours, and working conditions in certain industries or occupations. 6
Division of Labor Standards Enforcement Division of Labor Standards Enforcement ( DLSE ) is an agency within the Department of Industrial Relations, which administers and enforces California s wage and hour laws. The DLSE s policies are contained in its 2002 Enforcement Policies and Interpretations Manual, available online at www.dir.ca.gov/dlse/manual-instructions.htm.* Pursuant to Executive Order S-2-03, the DLSE opinion letters and the Enforcement Policies and Interpretations Manual are currently under review to determine their legal force and effect and to ensure compliance with the requirements of the Administrative Procedures Act. 7
Best Practices Best Practices: Exemptions are narrowly defined and applied. The two laws are supplementary when they differ, comply with the one that is most generous to the employee usually California. 8
Exempt vs. Nonexempt Exempt No Overtime Exempt status deprives an employee of the right to overtime and to many of the other protections afforded to nonexempt employees by the Industrial Welfare Commission Orders. Nonexempt Overtime Nonexempt status means that the provisions of the Industrial Welfare Commission Orders cover an employee. 9
Relationship Between the FLSA & the Wage Orders The Wage Orders specifically provide [t]he activities constituting exempt work and non-exempt work shall be construed in the same manner as such terms are construed in the following regulations under the Fair Labor Standards Act effective as of the date of this order: [former] 29 C.F.R. Sections 541.201-205, 541.207 208, 541.210, and 541.215. 10
Relationship Between the FLSA & the Wage Orders (cont.) Although the 2001 IWC Wage Orders specifically incorporated federal regulations under the FLSA as interpretive guidance for California law, the Wage Orders did not adopt the FLSA standards for primary duty, nor adopt the federal law s lower salary basis test provisions. 11
Relationship Between the FLSA & the Wage Orders (cont.) Because the IWC derived the duties that meet the test for the administrative exempt from language in the federal regulations, with the exception of the primary duty phrase, the provisions of the CFR which are specifically referenced by the 2001 Wage Orders contain detail guidance about how to define the terminology used in defining the exemption and the types of duties that typically will be found to be exempt. 12
Relationship Between the FLSA & the Wage Orders (cont.) Because the FLSA regulations regarding exemptions/overtime have just been revised and went into effect August 23, 2004, California law will be compared/analyzed to the former FLSA long and short tests and the new FLSA standard test. Although both California and federal law have a salary and a duties requirement, there are critical differences between the two. 13
U.S. Department of Labor and CA Exemption Test Side-by-Side Comparison The following charts compare the current requirements for exemption under the Fair Labor Standards Act and California Wage Orders for an executive, administrative, professional, computer or outside sales employee. 14
Executive Employees Federal Standard (8/23/04) California Standard Salary $455 per week $540 per week Duties Primary duty consists of the management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision of the enterprise. Customarily and regularly directs the work of two or more other employees. Has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight. The management of the enterprise or of a customarily recognized department or subdivision. Customarily and regularly directs the work of two or more other employees. Has authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees will be given particular weight. Customarily and regularly exercises discretion and independent judgment. *Primarily engaged in duties that meet the test of the exemption. 15
Administrative Employees Federal Standard (8/23/04) California Standard Salary $455 per week $540 per week Duties Primary duty consists of office or nonmanual work directly related to management policies or general business operations of his or her employer or his or her employer s customers; or the employee performs functions in the administration of a school system, an educational establishment, or institution that directly relate to the academic instruction or training of the establishment. Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. Performing office or non-manual work directly related to management policies or general business operations of the employer or the employer s customers; or performing functions in the administration of a school system or educational establishment or institution, or of a department or subdivision thereof, in work directly related to the academic instruction or training carried on therein; and Customarily and regularly exercises discretion and independent judgment; and Regularly and directly assists a proprietor or employee employed in a bona fide executive or administrative capacity; Performs specialized or technical work requiring special training, experience, or knowledge, under only general supervision; or Executes special assignments and tasks under only general supervision; and *Primarily engaged in duties that meet the test of the exemption. 16
Learned Professional Employees Federal Standard (8/23/04) California Standard Salary $455 per week $540 per week Duties Primary duty consists of the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. Licensed or certified by the State of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting; or Primarily engaged in an occupation commonly recognized as a learned or artistic profession; and Customarily and regularly exercises discretion and independent judgment in the performance of duties. 17
Creative Professional Employees Federal Standard (8/23/04) California Standard Salary $455 per week $540 per week Duties Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. [See Learned Professional Exemption] 18
Computer Employees Federal Standard (8/23/04) California Standard Salary $455 per week ($27.63 an hour) $47.81 per hour (1/1/06) Duties Employed as a computer systems analysis, computer programmer, software engineer, or other similarly skilled worker in the computer field. Primary duty of (A) application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional applications; or (B) design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or (C) design, documentation, testing, creation or modification of computer programs related to machine operating systems; or (D) a combination of duties described in (A), (B) and (C), the performance of which requires the same level of skills. Primarily engaged in work that is intellectual or creative and requires the exercise of discretion and independent judgment. Primary duty of: (A) application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications; (B) design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or (C) documentation,testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems. Employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering. A job title shall not be determinative of the applicability of this exemption. 19
Outside Sales Employees Salary None Required None Required Duties Primary duty consists of making sales or obtaining order or contracts for services or the use of facilities for which a consideration will be paid by the client or customer. Customarily and regularly engaged away from the employer s place or places of business. Customarily and regularly works more than half the working time away from the employer s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities. 20
Exemptions Administrative Executive Professional Computer Outside Sales 21
The Key Terms Defining the Administrative Exemption Salary Primary Duty Primarily Engaged In Work directly related to management policies or general business operations Exercises discretion and independent judgment 22
Salary - Minimum Wage The minimum amount of compensation per hour that an employer is required by law to pay an employee for all hours worked. ($6.75 since January 1, 2002.) AB 1835 - The minimum wage increases to $7.50 on January 1, 2007 and to $8.00 on January 1, 2008. 23
Salary - Minimum Wage - Impact Exempt Status -must pay at least twice the minimum wage - minimum salary will increase from the current: $540/week to $600/week to $640/week $2,340/month to $2,600/month to $2,773.33/month $28,080/year to $31,200/year to $33,280/year 24
Minimum Wage (cont.) Commissioned inside sales are exempt from overtime if more than one-half of their compensation is from commissions and weekly earnings are at least 1 ½ times minimum wage (from $10.125 to $11.25 to $12) Tools & equipment - employees can be required to provide and maintain their own hand tools and work related equipment if their base pay is twice the minimum wage Increases in a host of labor related costs including workers compensation, unemployment insurance, social security, and state disability 25
Minimum Wage To Do List Best Practices: Assess impact on your compensation structure Review earnings of exempt employees and establish a plan for compliance Revise your wage and salary structure if it does not meet new minimum Revise budget Notify your payroll service Post new state minimum wage poster and wage order 26
Primarily Engaged In In California, each of the exemptions administrative, executive and professional require that the employee be primarily engaged in the duties which meet the test for the exemption. (Quantitative Analysis) The term primarily engaged in means that more than onehalf of the employee s work time must be spent engaged in exempt work. Federal law only requires that the primary duty of the employee falls within the exempt duties. (Qualitative Analysis) Query: What if one employee works less than one-half and another works more than one-half? 27
California Administrative Exemption The California Wage Order Nos. 1-2001 through 13-2001 and 15-2001 define a person employed in an administrative capacity as any employee who: Earns a monthly salary equivalent to no less than two times the state minimum wage for full-time employment (40 hours per week) ($540/week) ($28,080/yr); and 28
California Administrative Exemption (cont.) Whose duties and responsibilities involve either: The performance of office or non-manual work directly related to management policies or general business operations of his/her employer or his/her employer s customers; or The performance of functions in the administration of a school system, or educational establishment or institution, or of a department or subdivision thereof, in work directly related to the academic instruction or training carried on therein; and 29
California Administrative Exemption (cont.) Who customarily and regularly exercises discretion and independent judgment; and Who regularly and directly assists a proprietor, or an employee employed in a bona fide executive or administrative capacity (as such terms are defined for purposes of this section); or 30
California Administrative Exemption (cont.) Who performs under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge; or Who executes under only general supervision special assignments and tasks; and Who is primarily engaged in duties that meet the test of the exemption. 31
Work Directly Related to Management Policies or General Business Operations Work performed by employees who perform work of substantial importance to the management or operation of the business of his employer or his employer s customers. 32
Work Directly Related to Management Policies or General Business Operations (cont.) Must be directly related to assisting with the running or servicing of the business; i.e., advising management, planning, negotiating, representing the company, purchasing, promoting sales, business research, and control. Includes those whose work affects policy or whose responsibility it is to execute or carry it out. 33
Work Directly Related to Management Policies or General Business Operations (cont.) Does not include working on a production line or selling a product. Includes a wide variety of persons who either carry out major assignments in conducting the operations of the business, or whose work affects business operations to a substantial degree, even though their assignments are tasks relevant to the operation of a particular segment of the business. 34
Work Directly Related to Management Policies or General Business Operations (cont.) Includes persons employed as advisory specialists and consultants; i.e., credit managers, sales directors, claim agents and adjusters, wage-rate analysts, tax experts, account executives of advertising agencies, customers brokers in exchange firms, promotional persons, and others. May not not include persons employed as loan originators, automobile damage appraisers, escrow closers, and others. *The administrative/production dichotomy analysis is not a bright line test. 35
The Exercise of Discretion and Independent Judgment [With Respect To Matters Of Significance Or Of Consequence] Has The Authority To Make Choices Free From Immediate Supervision Or Direction. Involves The Comparison And The Evaluation Of Possible Courses Of Conduct And Making A Decision After The Various Possibilities Have Been Considered. 36
Factors to Consider in Determining Whether an Employee is Exercising Discretion and Independent Judgment Has authority to implement, formulate, or affect policy. Carries out major assignments. Affects business operations to a substantial degree. 37
Factors to Consider in Determining Whether an Employee is Exercising Discretion and Independent Judgment (cont.) Has authority to waive or deviate from company policy. Has authority to negotiate and bind the company on significant matters. Provides consultation or expert advice to management. 38
Factors to Consider in Determining Whether an Employee is Exercising Discretion and Independent Judgment (cont.) Is involved in planning short- or long-term company goals. Represents the company in handling disputes. Makes recommendations to management regarding policies and procedures. 39
Final Decision is Not Necessary to Come Within the Term Discretion and Independent Judgment The decisions made as a result of the exercise of discretion and independent judgment do not need to be final decisions. The decisions made as a result of the exercise of discretion and independent judgment may consist of recommendations for action rather than the actual taking of action. 40
Final Decision is Not Necessary to Come Within the Term Discretion and Independent Judgment (cont.) The fact that an employee s decision may be subject to review and that, upon occasion, decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment within the meaning of the regulations. Nevertheless, the exercise of discretion and independent judgment must be done customarily and regularly, which signifies a frequency which must be greater than occasional but less than constant. 41
Frequent Misapplication of the Administrative Exemption Confusion between the exercise of discretion and independent judgment, and the use of skill in applying techniques, procedures, or specific standards. Misapplication to employees making decisions relating to matters of little consequence. Misapplication to employees engaged in production aspects of the employer s business as opposed to administrative functions. 42
California Executive Exemption Earns a salary of at least $28,080 a year ($540/week) based on 40 hours Is primarily engaged in these duties, and Manages the organization or a department or subdivision, and Directs the work of two or more other employees customarily and regularly, and Has authority to hire or fire employees, or give recommendations that are given weight, and Customarily and regularly exercises discretion and independent judgment 43
Common Misclassification of Executive Exemption Performs routine clerical or sales duties Performs the same type of work as subordinates [e.g., restaurant manager who waits on tables or cooks meals] Performs maintenance or repair work Assistant managers or trainees 44
California Professional Exemption Earns a salary of at least $28,080 a year ($540/week) based on 40 hours, and Customarily and regularly exercises discretion and independent judgment Licensed or certified to practice medicine, dentistry, optometry, architecture, teaching, engineering, accounting or law, or Is primarily engaged in a learned or artistic profession requiring advanced knowledge in a field acquired by a prolonged course of specialized study; or 45
California Professional Exemption Is engaged in work that is original and creative in a recognized field of artistic endeavor not including copy writers, graphic designers, photographers, or many artists who do not depend primarily on invention, imagination or talent Is engaged in work that is predominantly intellectual and varied in character and the output cannot be standardized in relation to a given period of time 46
California Computer Professional Exemption Must be primarily engaged in intellectual or creative work, and Requires exercise of discretion and independent judgment, and Primarily engaged in certain systems analysis techniques, computer system programming, and design of software and hardware, and Is highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming and software engineering, and Is paid at least $47.81 per hour or a salaried equivalent 47
Common Misclassifications of Computer Professional Exemption Employee merely repairs, maintains or manufactures computers or related equipment Trainees or entry-level positions Writers of documentation, instructions, promotional material, or content for the Internet or CDs Professionals whose work is very dependent upon computer or software and who is skilled in computer-aided software but who is not in a computer systems analysis or programming occupation 48
California Outside Salesperson Exemption Must be 18 years of age or older, and Spends more than 50% of their working time selling or obtaining orders, and Works at least 50% of their time away from the employer s place of business To meet the 50% requirement do not include time expended performing incidental deliveries, repairs or maintenance (Ramirez v. Yosemite Water (1999) 20 Cal.4 th 785) 49
The Basics of Association Management A Common Interest Development ( CID ) shall be managed by an association. An association ( HOA ) is a business and must be managed as such. Because association board members are volunteers and typically not familiar with the depth and extent of the laws governing associations they require industry professionals; i.e., a professional manager who is hired to assist the board of directors in the overall administration of the association. A managing agent exercises control over the assets of a CID and to whom the board of directors may delegate authority (without delegating ultimate responsibility). The managing agent will assign an employee to manage the association. 50
The Management Agreement The Management Agreement defines the scope of work to be performed. The Management Agreement becomes in essence a job description for not only the management company but also the individual manager assigned to manage the association. 51
The Duties and Responsibilities of the Community Manager Legal Management Knowledge of federal, state and local laws and regulations. Knowledge of governing documents CCRs/agreements between developer and local municipality. Implementing resolutions and directives of the board of directors. Implementing provisions of governing documents; i.e., CCRs, by-laws, articles of incorporation, operating rules. Management of any litigation. Process violations. Legal education to board of directors. 52
The Duties and Responsibilities of the Community Manager (cont.) Financial Management Managing financial assets. Collection and deposit of assessments and delinquencies. Maintaining bank accounts. Reconciling bank statements. Working knowledge and application of general accounting principles. Maintaining accounting records. Payment of expenses. Tax payments/returns. Investment of funds. Asset protection. Preparation and maintenance of annual budget, financial records, and financial statements. 53
The Duties and Responsibilities of the Community Manager (cont.) Risk Management Manage all insurance needs of association. Communication Management Coordinate all aspects of communication between association, board of directors, and its members. Coordinate public relations internally and externally. 54
Job Description of Community Manager Each of the aspects of your job duties described below requires the exercise of discretion and independent judgment and is directly related to the management policies and general business operations of the association(s) to which you will be assigned. You will be advising the association s management (board of directors) by providing important legal, financial, administrative, and risk management information and advice. As the primary contact to the association and its board of directors, you will have the responsibility of assessing the association s needs on both a short and long term basis, assisting in the implementation of the association s goals and objectives, investigating and resolving disputes on behalf of the association, and evaluating alternative courses of action to present to the association. 55
Job Description of Community Manager (cont.) Legal Management/Compliance Responsible For: implementation and compliance with governing CCRs, statutes and regulations; implementation and compliance with board rules and directives; making recommendations regarding the above; management of any litigation; processing any violations; and providing legal updates and education to the board. 56
Job Description of Community Manager (cont.) Administrative Management Oversees Board of Directors Responsible For: preparation of and attending all board meetings; managing board and community relations; managing special projects; supervising and directing all related communications; supervising election process; negotiating and managing third party contracts; establishing policies and procedures; and making management recommendations to the board. 57
Job Description of Community Manager (cont.) Fiscal Management Responsible For: developing and preparing annual budget for board; preparing and reviewing financial statements; managing accounting needs including preparation and filing of tax returns, overseeing audits, tax payments, and financial compliance; managing collection of assessments, delinquencies, and chargebacks; managing and processing payments and receipts; and managing bid process regarding third party vendors. 58
Job Description of Community Manager (cont.) Risk Management Responsible For: managing all insurance needs of the association. Communication Management Responsible For: coordinating all aspects of communication between association, board, and homeowners (internal and external). 59
Job Classification Audit What You Need To Do & Ask Design the scope of your audit Determine when you will do it Determine how you will do it Determine who will do it Determine how you will address misclassifications 60
Job Classification Audit (What You Need to Do) Base the exemption on the actual work performed, not merely the job description; Maintain records of actual (exempt) work performed; Analyze/record how the employee spends his/her time (exempt v. nonexempt); 61
Job Classification Audit (What You Need to Do) Train employees on the difference between exempt and nonexempt work; Inquire into the realistic requirement(s) of the job, including how the employee should spend his or her time and whether the employee's practice diverges from the employer's realistic expectations; Determine whether the employer's expectation is realistic; i.e., that the employee will be primarily performing managerial duties; 62
Job Classification Audit (What You Need to Do) Make sure that the job description is based on "reality" and not "idealized;" Determine whether an employee is avoiding a valid exemption by his/her own substandard performance; and Determine whether the employee's practices diverge from the employer's realistic expectations. 63
Job Classification Audit (What You Need to Ask) 64
Job Classification Audit (What You Need to Ask) How much time is spent in the performance of managerial duties; What is the relative importance of the managerial duties as compared with other types of duties; 65
Job Classification Audit (What You Need to Ask) Does the employee carry out major assignments in conducting the operations of the business; Does the employee perform work that affects business operations to a substantial degree; Does the employee have authority to commit the employer in matters that have significant financial impact; Does the employee have authority to waive or deviate from established policies and procedures without prior approval; 66
Job Classification Audit (What You Need to Ask) Does the employee have authority to negotiate and bind the company on significant matters; Does the employee provide consultation or expert advice to management; 67
Job Classification Audit (What You Need to Ask) Does the employee become involved in planning long-or-short-term business objectives; Does the employee investigate and resolve matters of significance on behalf of management; Does the employee have personal responsibilities, troubleshooting or problemsolving activities on behalf of management; 68
Job Classification Audit (What You Need to Ask) Does the employee have the authority to handle atypical or unusual situations; Does the employee have authority to set budgets; Does the employee have responsibility for assessing customer needs; 69
Job Classification Audit (What You Need to Ask) Does the employee serve as a primary contact to public or customers on behalf of the employer; Does the employee have the responsibility for advertising or promotional work; Does the employee have the responsibility for coordination of departments, requirements, or other activities for or on behalf of employer or employer s clients; 70
Job Classification Audit (What You Need to Ask) Does the employee have the responsibility for the decisions made as a result of the exercise of discretion and independent; Does the employee represent the company in handling complaints, arbitrating disputes or resolving grievances. 71
Consequences of Misclassification And Do You Reclassify? 72
Consequences of Misclassification Unpaid overtime Civil Penalties Interest (10%) Attorneys fees Court costs Injunctive relief Statute of Limitations 4 years Potential exposure for individual liability 73
Individual Liability Are Individual officers/shareholders/directors liable for the employer s failure to pay overtime wages? No! Jones v. Gregory 137 Cal.App. 4 th 798 Reynolds v. Bement 36 Cal. 4 th 1075 But: Individual liability may exist for penalties in actions under Labor Code sections 558 & 2699. 74
Reclassification The Team Human Resources/Management/Finance/Legal Issues Are any of the employees improperly misclassified Do you need to revise the job descriptions Did any of the employees work overtime How will you determine the amount of overtime Will there be payments for back pay, penalties, and/or interest What/When will the employees be told Who will tell the employees 75
Reclassification (cont.) What about terminated employees What will be the effective date Will they continue to be salaried or converted to hourly Impact of increase in minimum wage Impact on any other compensation plans How will you maintain time records and record meal (and rest) breaks Advise payroll Training & Communication Evaluate all risk factors 76
Caveats Job titles are of no consequence. The actual determination of exempt or nonexempt status must be based on the nature of the actual work performed by the individual employee. A salaried employee does not necessarily mean an exempt employee. 77
Caveats (cont.) If you are required to comply with California and federal law, always follow the law most favorable to the employee. The employer always has the burden of establishing that a white collar exemption applies. 78
Caveats (cont.) Directly and Closely Related Work. Work which is directly and closely related to the performance of work which comes within the definition of administrative exemption is considered exempt work; i.e., routine/nonexempt in nature; [work without which the more important (exempt) work cannot be performed properly] -- note taking, typing own report, or preparing drawings. 79
Caveats (cont.) Communicate with the employees 80
Outsourcing: Avoiding The Pitfalls So An Asset Does Not Become A Liability Current Cases An Overview Zavala et.al. v. Wal-Mart Stores, Inc. (2005) 393 F. Supp.2d 295. 11 Million Dollar Settlement Class Action Lawsuit Holding Wal-Mart Liable for Its Contract Janitorial Firms' Violations of Federal Immigration and Labor Laws. The illegal immigrant janitors were employed by Wal- Mart's contract janitorial services companies. Wal-Mart was liable as a joint employer with 12 contract janitorial services firms. The janitorial firms were charged with criminal violations and were fined $4 million. 81
Current Cases (cont.) Dunkin' Donuts Mid-Atlantic Distribution Center Inc. v. NLRB (D.C. 2004) 363 F.3d 437 The Aldworth Company leased drivers and warehouse employees to Dunkin' Donuts. Because the evidence showed common control by Dunkin Donuts and Aldworth and Dunkin Donuts played a key role in some of the events that the NLRB found to be unfair labor practices, the Court of Appeals affirmed the NLRB holding that Dunkin' Donuts and Aldworth Co. were joint employers. 82
Current Cases (cont.) Moreau v. Air France (9th Cir. 2004 ) 343 F.3d 1179 Air France had one flight per day in and out of the San Francisco International Airport and contracted with outside entities for ramp and towing service, cargo and baggage handling, and food preparation. Although Air France had less than 50 employees, it would be subject to FMLA/CFRA if it was considered a "joint employer" of the workers performing these services. The 9th Circuit held that Air France was not a "joint employer" of the other firm s employees and thus did not have to provide FMLA/CFRA leave to an Air France employee. 83
Current Cases (cont.) Vizcaino v. Microsoft Corporation (9th Cir. 1997) 120 F. 3d 1006, cert. denied, 118 S. Ct. 899 (1998). The Ninth Circuit, sitting en banc, affirmed in part a decision allowing some Microsoft employees, whom Microsoft classified as independent contractors, to participate in Microsoft employee benefit plans during the time they were classified as independent contractors. [The plaintiffs had worked on the same teams as regular Microsoft employees, shared the same supervisors, performed identical functions, and worked the same hours.] 84
Joint Employer Common Examples Of Contingent Worker Arrangements Temporary Staffing Agencies staffing firm supplies its employees to your company. Temporary Employees supports your own workforce during employee absences, temporary skill shortages, seasonal workloads, and special assignments. Leased Employees your employees are transferred to the payroll of an employee leasing firm, which then leases the employees back to your company. The leasing company performs and is responsible for most - if not all - of the human resources functions. Independent Contractors an individual consultant with expertise in a specific area, with a high degree of skill, and exercising independent judgment and discretion. Outsourced Workers an outside firm with expertise in a specific such as security, landscaping, maintenance, engineering and agrees to take full operational responsibility for performing the specific function 85
Common Liability Issues Discrimination /Harassment Wage and Hour Family and Medical Leave Workplace Safety (OSHA) Employee Benefits Employment Taxes Immigration 86
Additional Liability California Labor Code 2810 - Contracting for labor or services with construction, farm labor, garment, janitorial, or security guard contractors. To avoid liability, you must not enter into a contract for labor or services where you know or should have known that the contract does not provide for sufficient funds to allow the contractor to comply with all local, state, and federal law governing the labor or services to be provided. To avoid liability, the contract should adequately identify or describe the following: the contractor, the services/labor to be provided, employer ID number, the workers compensation insurance policy number and carrier, vehicle identification number and insurance policy and carrier regarding any relevant vehicles, address of any relevant real property, the total number of workers, the amount of wages and date of payment, the amount of commission, total number of persons to be working, and all required license information 87
Best Practices In Contracting For Services Due Diligence - selection of outside firm - reputation, references, financial stability Clearly define the responsibility of legal duties, liability, and control Review and address employment related policies and procedures; i.e., employee handbook, policies & procedures, equal employment opportunity, harassment, and grievance policies, immigration compliance Insurance - CGL/EPL - coverage for temporary, leased, and outsourced workers Indemnification Non-disclosure Agreements, Confidentiality, and Restrictive Covenants Dispute Resolution 88
What s Next? 89
Final Word TO SECURE OURSELVES AGAINST DEFEAT LIES IN OUR OWN HANDS. SUN TZU - ART OF WAR 90