Topic 1
Regulation of the Employment Relationship [Ch. 1]
Q: Why is the regulation of employment necessary? [See generally text at p. 5]
A: To prevent potentially wrongful conduct in employment due to unequal bargaining power
Employee vs. Contractor Status and Dangers of Misclassification*
*One mistake may trigger violations of wage laws, anti-discrimination provisions, others
1) Employee versus Independent Contractor Status [See generally text at pp. 6-18]
Common Law Agency Test [“Control”] vs. “Economic Realities”
*IRS "20-factor" analysis, [also text at pp. 14-16]
*Illustrative case law, and California application:
- Friendly Cab (pdf version)
- Murray ; see also 2014 FedX case; for Friendly Cab Word version -> click here
- A California case applying state version of IRS 20 factors: see Varisco case [in class]
- Implications of Dynamex case [CA Supreme Court, 4-30-18] and the "ABC" test
-Uber? Comparative international analysis [e.g., "dependent contractors"] & new research
*Dr. Malos' article on Uber drivers, ethics, and Corporate Social Responsibility [CSR]
-Your turn; how about exotic dancers?! Show of hands? Analysis?
-SHRM weighs in citing 4th Circuit case https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/exotic-dancers-misclassified.aspx
1A) 2012 CA law related to Contractor status [SB 459—in class]
-Penalties of $5-15K per misclassification
-Penalties of $10-25K per pattern of misclassification
-Requirement to publicize violations on E-r website!
1B) Effective 1/1/20, California AB-5 codifies the ABC test from Dynamex, witih limited exceptions, but application remains somewhat unclear in various situations; additional legislation is under consideration to try to clarify AB-5
2) Contingent workers [text at p. 16] and "de facto" employee status
*[Microsoft v. Vizcaino--will be discussed in class]
*Joint employment and control [text at pp. 16-18]
*Compare long-term use of contractors/temps vs. employees of staffing agencies
Analogous Compensation Issues related to Employee Status and further
Dangers of Misclassification
1) Basics of Fair Labor Standards Acts (FLSA), State and Federal [see generally text at pp. 776-788]
*Governs wages, hours, and employment of minors; requires equal pay for both genders
*Employers must pay covered employees at least minimum wage [higher of federal, state, or local “living wage” figures]
-Federal minimum wage currently $7.25/hr for most workers
-Federal contractors [per executive order] now get minimum of $10.20/hr
-Numerous CA cities now have their own minimum "living wage" levels that continue to increase in a confusing patchwork statewide; consult your HR folks if you are multi-site
*Higher California minimum wage now $13.00/hr [see below; as of 1/1/20, SJ living wage: $15.25/hr; SF: $15.59/hr--will increase per CPI on 7/1/20; others around the state].
•Senate Bill 3 increases state minimum wage for employers with 26 or more employees
-Federal covered [non-exempt] employees must be compensated at a rate of time and one-half their normal rate of pay for hours worked over 40 hours in one week; new exemptions in 2020 for white collar workers [minimum annual salary of $35,568] and "highly compensated" workers [minimum annual salary of $107,432]
-California covered [non-exempt] employees must be compensated at a rate of time and one-half their normal rate of pay for hours worked over 8 hours worked in any single day; double time after 12 hours worked in any single day or for the 7th day in the work week [http://www.dir.ca.gov/DLSE/AB60update.htm].
Employment Laws related to new Employee notifications
… CALIFORNIA LABOR COMMISSIONER PUBLISHES MANDATORY NEW-HIRE NOTICE TEMPLATE
California Labor Code Section 2810.5 requires employers to provide a written notice with a wide range of information to new hires. The California Labor Commissioner has published its approved template for this notice. You may access the template here: http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html. Employers are not required to provide the notice to employees validly classified as exempt from overtime [more below].
*Federal Minimum Salary for Exempt Employees Increased From $23,660 to $47,476 Annually effective 12-1-16; more on the way?
*California Minimum Salary for Exempt Software Professionals
The term "software professionals" covers positions such as software engineers, analysts, programmers, developers, and others classified as exempt based upon their software-development-related work. California's computer software professional exemption is one of the few overtime exemptions that also permits exempt status with pay on an hourly basis.
Importantly, employers must satisfy not only the pay requirements, but also strict tests regarding the employee's duties in order to classify employees as exempt computer software professionals. For example, regardless of pay level, the exemption does not apply to entry-level software industry positions, or to an employee who has "not attained the level of skill and expertise necessary to work independently and without close supervision." The consequences of failure to satisfy either the compensation or duties requirement for exempt status are substantial: the positions affected would be deemed non-exempt, and the employer would be liable for overtime back pay (and other amounts).
2) Who is "exempt"? [Generally, salaried managerial/professional employees; but, titles not determinative!]
*California two-part test: In order to be exempt from the overtime and minimum wage provisions, the person:
a) Must spend > 50% of time in managerial/professional activities involving the use of judgment and discretion; and
b) Must be paid a salary which is at least double the minimum wage for a standard 40-hour week [2,080 hours/year; this was $41,600 as of 1/1/16; but note above periodic and future increases in CA minimums--e.g., as of 1/1/20, this is $54,080]
For ongoing developments, check with the California Department of Industrial Relations, which handles most State Wage and Hour issues http://www.dir.ca.gov/ along with Workers Compensation, OSHA [Occupational Safety and Health] and Labor Relations matters.
3) Amusing (?) reversal of roles for exempt status litigants [e.g., Nordquist v. McGraw-Hill—in class]
4) Not-so-amusing [for employers] trend toward huge class action settlements and awards of back overtime pay and penalties for those misclassified as “exempt” [issue may relate to changing job duties/descriptions and murky performance criteria, and is exacerbated by 4-yr SOL for wage claims and related employer issues re record keeping]
At-Will/Ethics Paper due next class [see Course Writing Assignments link on main course web page; note that the paper's length has been increased from 2 pages to 3 pages in order to permit greater consideration of ethical issues. The format is now: Page 1, advantages; Page 2, disadvantages; Page 3, your job and its appropriate form]