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CALIFORNIA ENACTS 22 NEW EMPLOYMENT LAWS, INCLUDING ONE THAT CREATES NEW PENALTIES AND A "PERP WALK" FOR MISCLASSIFYING WORKERS


CALIFORNIA ENACTS 22 NEW EMPLOYMENT LAWS, INCLUDING ONE THAT CREATES NEW PENALTIES AND A “PERP WALK” FOR MISCLASSIFYING WORKERS …(SIGH)

 

Governor Jerry Brown assured California’s position as one of the most regulated states for employers by signing 22 new employment laws earlier this month.  Most of the laws will take effect on January 1, 2012.  Some of the more significant of these new laws:

 

·                     Require that all new hires must be given a statement by the employer of their rate of pay, allowances that will be taken as part of the minimum wage (if any), the pay day, the name and address and telephone number of the employer and the name and contact information for the company’s workers’ compensation carrier.  In addition, employers will be required to notify existing employees of any change to any of the information within seven days of the effective date of the change.

 

·                     Prohibit credit checks on applicants for employment unless the job for which they are applying is within specified categories, largely either required by some other law or within a position of trust.

 

·                     Redefine “gender” for purposes of California’s discrimination laws to include gender identity and gender expression.

 

·                     Make it unlawful for any individual to prevent or attempt to prevent the exercise of rights under the California Family Rights Act.

 

·                     Enhances penalties for the denial of insurance coverage to same-sex domestic partners if the coverage would have been provided to spouses in different-sex unions.

 

·                     Requires paid leave for employees who become organ donors (30 days per year) and for employees who become bone marrow donors (5 days per year).

 

None of the new laws adds as many complexities or will have as significant an effect as S.B. 459, however.  This new law creates civil penalties of $5,000 to $15,000 per violation if a court or the California state enforcement agency concludes that an employer doing business in California has misclassified employees as independent contractors.  If the finding is that the employer engaged in a pattern or practice of willfully misclassifying employees, the penalties increase to as much as $25,000 per violation.

 

In addition to the financial penalties, the law would require employers who are found to have misclassified workers to do the functional equivalent of a “perp walk-” posting on the company’s website (or, if the company has no website, by written notice to employees and the public) a notice that the employer had been found to have “committed a serious violation of the law.

 

Employers in every state have been struggling with understanding the definition of an independent contractor.  Using independent contractors is substantially less expensive than having employees do the work.  With employees come taxes, workers compensation, overtime wages, retirement plans and health/disability insurance.  All of these can be avoided by using independent contracts.  As a bonus, employers have less emotional attachment to independent contractors, making a reduction force less costly, both financially and emotionally. 

 

Misclassifying an employee as an independent contractor, however, results in huge liability which not only will wipe out all cost savings but also result in penalties.  Complicating the decisional process is that various government agencies, both state and federal, use different tests to determine whether a worker is an independent contractor or employee.  Some agencies and courts have gone to the three factor test, while others continue to hang on to the IRS’s list of 22 factors. 

 

California, in its new law, had the opportunity to bring some clarity to the issue, at least in that state.  Unfortunately, the new statutory definition succeeds only to muddy the already opaque water by being not only imprecise but circular:  willful misclassification “means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”  Well, duh.

 

The best the California’s Division of Labor Standards Enforcement can do is say that the term “independent contractor” has no set definition and that the determination requires an examination of court decisions and guidelines from regulatory agencies.

 

Employers everywhere, not just in California, must be very careful when making a decision to classify a worker as an independent contractor because the stakes are so high and getting higher.  The slake of class actions alleging violations of the wage and hour law now popular among plaintiff’s lawyers is spreading full force into the area of misclassification of workers. 

 

Nowhere is the danger of private class, cooperative and representative lawsuits more extreme than in California because of that state’s Private Attorney Generals Act of 2004.  Under that law, private citizens (“bounty hunters”) may obtain 25% of the penalties assessed by the state agency for raising labor code violations.  As passed, S.B. 459 does not authorize private causes of action and it is not clearly covered by the Private Attorney Generals Act of 2004.  However, the failure to include the misclassification of workers as one of the labor code violations subject to the Private Attorneys General Act of 2004 may have been a legislative oversight, which may soon be corrected either by the legislature itself or the courts.  Without question, there will be plaintiffs’ lawyers who will try. 

 

Also unknown is the probative effect of an employer’s entry into the current IRS voluntary settlement program.  Under that relatively new program, an employer with workers which it suspects may be misclassified can avoid a significant part of the potential IRS back tax liability by agreeing to cure the difficulties and paying a small portion of the tax due.  The new California law does not carve out special treatment for these employers and, as a result, plaintiff’s lawyers may attempt to use that voluntary act as, at least, an implied admission, if not a roadmap to an easy payday.

 

The California legislature also made it more difficult for employers to avoid liability for willful violations by asserting that they relied on the advice of an outside “expert.”  Indeed, finding an expert in California willing to take the risk of providing such advice may be difficult.  Under S.B. 459, anyone who is paid for an opinion that an individual is an independent contractor for the purpose of avoiding the costs attached to employment may be jointly and severally liable for the penalties assessed if the Division of Labor Standards Enforcement or a court concludes that the individuals were misclassified. 

 

California has just become less friendly to employers…even more less friendly. 

 

 
 
 
 

DOL and NLRB Propose Rule Changes to Silence Employers and Help Unions Organize Workers


BOTH THE OLMS AND NLRB PROPOSE SIGNIFICANT RULE CHANGES TO SILENCE EMPLOYERS AND HELP UNIONS ORGANIZE WORKERS

 

In a run-up to the 2012 election, organized labor will be pleased by two proposed rule changes, one by the Office of Labor-Management Standards of Department of Labor (OLMS)and one by the National Labor Relations Board, that will aid Unions in their organizing activities. 

 

OLMS proposes to narrow the advice exception to Section 203, LMRDA.

 

In 1959, Congress passed the Labor-Management Reporting and Disclosure Act (“LMRDA”).  Section 203(a) of the LMRDA requires employers to disclose in a public report filed with the OLMS any agreements or arrangements they may have with a labor relations consultant/lawyer to provide services that seek to directly or indirectly persuade workers in connection with a representation election or with regard, generally, to union organizing or bargaining.  Section 203(b) places a similar requirement on the consultant/lawyer.  Section 203(c), however, carves out an exception to the reporting obligation where the services rendered to the employer are for giving or agreeing to give “advice” to the employer regarding employee/employer rights with respect to union organizing or bargaining.

 

The extent and meaning of the advice exception has been hotly debated since the Acts passage.  Currently, and since 1962, OLMS’s interpretation and application of the exception has settled in to be that the only consultant/lawyer agreements and activities that have to be reported are those that involve direct contact with the employees…so-called “direct persuader” activities.  Advising an employer about union prevention and the engineering of a pre-election campaign, including the preparation of materials for use by the employer, are considered to be within the advice exception and not reportable, so long as the consultant/lawyer did not have direct contact with the employees and the employer had the right to accept or reject what the consultant/lawyer prepared.

 

It is this currently settled interpretation of the advice exception that OLMS seeks to change.  Under the proposed rule, any agreement with any consultant/lawyer for activities that include actions, conduct or communications on behalf of an employer that would directly or indirectly persuade workers concerning the employees’ rights to organize and bargain, regardless of whether or not the consultant/lawyer has direct contact with the employees or the employer has the right to reject the materials and activities provided by the consultant/lawyer, must be reported to the OLMS within 30 days from the date of the agreement.  The reports would be in the public domain and available on the OLMS’s website. 

 

OLMS, in a 160 page tirade against employers who seek to remain union-free, cites to numerous union-sponsored and academic studies that detail employer abuses as justification for the draconian narrowing of the advice exception it is proposing.  The premise underlying the entire report is the myopic view of organized labor that any effort by an employer through the use of external advice to remain union-free is an “interference” with the right of employees to engage in union or other concerted activity.  In reading the report, I was unable to find any recognition that many consultants/lawyers assist employers to create workplaces that are good places to work where employees feel no need for third party representation.  Further, I was unable to find any recognition that one of the services provided by the consultants/lawyers is to educate employees regarding what unions are, what unions can do and what unions cannot do as a counter weight to the propaganda and misstatements by union organizers. 

 

One of the most alarming aspects of the proposed expanded reporting requirement is that its application is not limited to consultants/lawyers who plan or orchestrate a campaign in response to active union organizing.  As is clear from the explanation, even such things as the cost of union-free training seminars, the development of personnel policies, and design of personnel systems at times when there is no active union organizing would be reportable as programs to avoid union organizing.  Only specific advice with regard to whether an identifiable course of conduct or employer-drafted policy/system comports with the law would be within the exception to the reporting rule.  The preparation of any document or speech intended in any form to be given to employees, together with the fees charged for such service or product, would have to be reported by both the employer and the consultant/lawyer, identifying each other. 

 

The Department of Labor OLMS takes particular aim at lawyers who engage in activities calculated to increase employee resistance to unions and specifically rejects the notion that an attorney’s business relationship with a client, as well as the identity of the attorney’s clients, is not covered by the attorney-client privilege. 

 

The stated justification for the need to change the OLMS’s interpretation of the statute is that the amount paid by an employer in union prevention activities and the source of the advice purchased by the employer will assist employees to assess the credibility/sincerity of the information, policy, or system and will enable the employees to make better and more informed decisions about union representation. 

 

If the proposed rule becomes a reality, unions will be able to publicize to the employees and the public any union avoidance efforts that an employer may undertake with the advice of a consultant/lawyer, the identity of both the employer and consultant/lawyer, and the amounts paid to the consultant/lawyer for his/her services in an effort to impugn the employer’s, the system’s and the material’s credibility.  Further, unions will be able to identify which consultant/lawyers are being used by which employers and seek, through publicity attacks, to interfere with what both the employer and the consultant/lawyer are seeking to accomplish.  By identifying the clients of specific consultant/lawyers, unions may launch negative campaigns against employers who use them for no better reason than that the consultant/lawyer has been effective and should be “shut down.”  By tracking the activities of specific consultant/lawyers, unions will gain information regarding employers that are engaged in activities that seek to neutralize the appeal of union representation.  Being thus “branded” as a “union-busting” employer, employers can be intimidated into ceasing such efforts and exposing their workforces to unopposed union organizing.

 

Of particular note is OLMS’s estimated cost of their proposed revision of the rule.  Currently, 191 employers file reports.  This number is estimated to swell to 2,601 employers.  930 consultants/lawyers file reports.  This number is estimated to become 3,414.  The time for completing the new and more involved report is estimated for employers to increase from 22 minutes to one hour and for consultants/lawyers from 35 minutes to 2 hours.  The cost to all employers is estimated to grow from $24,378 to $825,866.  Most staggering, however, is the increased cost to the government.  Currently, the Office of Labor-Management Standards spends about $6.5 million administering the collection and dissemination of all forms, including those filed by unions.  The cost of the new regulation for just the collection and dissemination of employer and consultant/lawyer forms is $185,719,212 due primarily to an increase in employee hours 4,420,458 hours, an FTE of 2,125 employees!

A failure to file the required reports carries criminal penalties and may subject the employer to civil enforcement.

A payback that keeps paying.

 

Public comments can be filed with the OLMS online at http://www.regulations.gov by August 22, 2011.

 

 

NLRB proposes rule to “streamline” and shorten union representation process:

 

On June 21, 2011, the majority of the National Labor Relations Board (Member Brian Hayes dissented) proposed what were termed “reforms” to the Board processes that are used to determine through a secret ballot election whether employees wish to be represented by a union.  The proposed reforms are intended to reduce “unnecessary” litigation, streamline procedures and facilitate efficiency by the wider use of electronic communications and filings.  What these reforms actually do is shorten the time between the filing of a petition for an election and the hearing to determine if an election should be held, increase the amount of information about the employees that an employer must give a petitioning union, shorten the time by which the employer must provide the information, limit the ability of employers to have issues resolved prior to the election and restrict access to the Board to review the issues decided prior to and after the election.

 

Electronic filings and transmittal of documents:  While we have found the practice of accepting documents electronically varies by Regions, the Board make the electronic acceptance of notices and documents, such as voter lists, to be standard at all Regions.  The most significant change here is with the filing of petitions and other notices.  Currently, petitions from unions seeking representation rights cannot be transmitted and filed electronically, although faxes may be used to send new petitions to employers.  Also, notices of hearings, both pre and post election, can be sent to the parties electronically.  Compelling electronic communications, the Board argues, will speed the process. 

 

Time for initial hearing on the election petition is shortened dramatically:  Currently, the initial hearing concerning the petition must be conducted within 12 days from the date of the service of the petition, absent highly unusual circumstances.  The proposal is to reduce that time period to 7 days (5 business days, assuming no holidays).  This shortening of the time to have the initial hearing is significant because of the importance of the issues that may be raised and resolved in that forum.  The union’s petition will identify the unit of employees it wishes to represent.  The employer may believe that the requested unit is inappropriate.  At the hearing, the employer must put on the record for decision of the Regional Director the reasons why it believes the requested unit is inappropriate and the evidence that supports that position.  The description of the employee unit may spell the difference between winning or losing an election.  In the time between the petition and hearing, therefore, the employer must decide whether the requested unit is appropriate for bargaining, whether the correct employees are included or excluded from the requested unit, assemble the evidence to support its various positions and prepare exhibits and witnesses for litigation.  If, at the time of the receipt of the petition, an employer has yet to identify its lawyer or other representative for the hearing, the time to define the issues and positions and trial strategy may be so short that the employer may find it impossible to advance its legitimate positions effectively at the hearing.  For the unsuspecting, unprepared and untutored employer, the short time between receipt of a petition and the establishment of when critical issues are resolved and an election date is set will probably mean that the employer will not have an effective voice and the process will be driven almost exclusively by the Board and the union.  This is not surprising since Board Member Becker is already on the record saying that he does not believe an employer has any place at the table when the definition of the voting group and date and time of the election are decided. 

 

 

Date specified for post-election hearing:  As noted later, the Board is pushing as many issues that require resolution, particularly the identity of eligible voters and determination of who is who is not a supervisor, to after the election is over.  While objections and challenged ballots are now handled routinely post election, it is noteworthy that objections need not be filed for seven calendar days after the election.  Hearings on the objections are often delayed for weeks to permit the Board to investigate the charges and the parties prepare for the hearing.  The Board proposes to require post-election hearings on all unresolved issues, including challenged ballots and objections to the conduct of the election, within fourteen days after the election, significantly hindering an employer’s ability to do investigations, discover evidence and prepare witnesses to testify.

 

Creation of a “statement of position form:”  The proposed rule would require both the union and the employer to file with the Board a written statement of their positions on issues that may be in dispute, presumably appropriateness of target unit, who is and who is not a supervisor, voter eligibility and date/time/place of an election.  This statement of positions must be filed with the Board no later than the start of the hearing, prior to the presentation of any evidence.  The failure to raise an issue in the statement of position would, in all likelihood, preclude the employer from raising it earlier or, at least, prejudice the employer in raising the issue after the election.

 

Delay of voter eligibility issues to post-election determination:  At the initial hearing, employers currently will seek to have issues of voter eligibility resolved, particularly those concerning the supervisory status of questionable classifications of workers, such as leads and head nurses.  Whether an individual is or is not a supervisor is critical to an employer at the outset of a campaign because the employer needs to know how to converse with and treat the individuals.  If the workers are employees under the law, there are significant restrictions in what and how things can be said to or asked of them.  If supervisors are not employees under the law, these restrictions do not exist.  The wrong choice by an employer and treatment of an employee as if he/she were a supervisor may invalidate an election that had been won.  Further, dealing with workers as supervisors may result in their not voting and the loss of “No” votes.  Under the new rule, questions of voter eligibility involving 20% or fewer of the proposed unit would be deferred until after the election and then in the context of challenged ballots.  Ballots not cast, of course, cannot be challenged.  By doing this, the Board places on the employer the greatest risk.  Employers faced with this risk often choose not to treat any of the individuals at issue as supervisors, thereby hampering the employer’s ability to campaign effectively.

 

Requests for review of Regional Director decisions:  Currently, if a Regional Director makes a decision at the initial hearing, for example a decision about the appropriateness of a unit for voting, the employer may appeal to the Board for a review.  Typically, an election will be delayed for a short time to permit the Board to rule on the appeal, even though an election date is set.  Under the proposed rule, all requests for review of Regional Director decisions would have to be delayed until post-election proceedings.  Consequently, employers will be denied certainty on important issues before employees vote on the question of representation. 

 

Board will have discretion not to review post-election decisions:  Not only would employers be required to wait until after an election to have Regional Director decisions reviewed, under the proposed rule the Board will have the discretion to refuse to review all pre and post election decisions by a Regional Director, effectively denying employers recourse to a review on the merits and leaving the only method of challenge to the expensive unfair labor practice process following a refusal to bargain.

 

The Excelsior List must include employee phone numbers and, when available, email addresses and must be supplied electronically within two days:  Currently, employers are obligated to provide to the Regional Office within seven days from the date of the direction of an election (or stipulation for a consent election) a list of employees in the proposed unit with their mailing addresses.  This list is then communicated by the Board to the union to enable the union to contact employees in their homes.  The proposed rule will not only require the employer to include in the list the employees’ telephone numbers and, when available, email addresses, but also require that the list be transmitted electronically to the Region within two days from the direction of an election (or stipulation to have an election).  The effect of this rule change is obvious: unions will have the list of employees earlier and be given an enhanced ability to campaign to employees in their homes. 

 

*******

 

The take-away from both the OLMS and the NLRB proposed rule changes for employers is that both government agencies are intent on making union avoidance harder and union organizing easier.  What is most alarming, especially with the OLMS proposal and supporting material, is this apparently philosophical underpinning that any effort by an employer to create policies, systems or materials in an effort to educate employees about unions and to make unions unnecessary is, at its core, an effort to interfere with the right of employees to engage in union activity.  This apparent belief is not only wrong, but also is an outrageous denigration of the good faith and honest activities of employers who wish to build workplaces free of the economic drain and adversarialism that often accompanies unionization. 

 

Employers and employer organizations need to be vigilant and vocal about the further erosion of employer rights and the continuing interference in the way they choose to do business within the law.  Clearly, it is incumbent on employers to redouble their efforts to create personnel systems to educate employees about and to neutralize any interest employees may have in union representation.  If the employees see no value to union representation, the OLMS and Board processes are rendered irrelevant. 

 

 
 
 
 

WEBINAR: NLRA for Non-Union Employers


 

 

 

 

 

 

You are invited to my Webinar on the application of the National Labor Relations Act to Non-Union employers on Thursday, June 16. 

 

 

The html for the Webinar is below.    To register, click on Register:  Union-Free Strategies or go to the Duane Morris Institute website, click on Seminars/Webinars and click on the Webinar.

 

Duane Morris Institute presents the webinar
NLRA for Non-Union Employers

 

 

 

 

 

Thursday, June 16, 2011

 

 

 

 

 

 

 

 

Pacific: 10:00 a.m. to 11:00 a.m.
Central:
12:00 p.m. to 1:00 p.m.

 

 

Mountain: 11:00 a.m. to 12:00 p.m.
Eastern: 1:00 p.m. to 2:00 p.m.

 

 

 

 

 

Presented by
James R. Redeker

 

 

 

 

 

This webinar is approved for CLE credit in the following states:
PA, NJ, NY, CA and FL
1.0 HRCI

 

 

 

 

 

 

 

 

ABOUT THE WEBINAR

 

 

The Chairman of the National Labor Relations Board has stated that most non-union employers “don’t have a clue” that the National Labor Relations Act applies to them. This webinar is more than just a clue; it is an organized explanation not only of the NLRA and its application to non-union employers, but also a detailed discussion of the Labor Board’s “hot buttons,” including rules about social media, codes of conduct that chill union activity, access to the employer’s property by off-duty employees, and “nip-in-the-bud” cases.

 

 

 

 

 

 

 

 

 

 

For more information on financial assistance, please contact Deborah Margulies at dlmargulies@duanemorris.com or (215) 979-1957.

 

 

 

 

 

 

 

 

www.duanemorrisinstitute.com

 

 

 

 

 

 
 
 
 
 

James Redeker

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© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.
The opinions expressed on this blog are those of the author and are not to be construed as legal advice.