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Wednesday
Jun142017

Franchise Law: Burden of Joint Employer Just Got a Little Lighter

Franchise LawyerChair, Franchise & Distribution Practice Group

 

by Barry Kurtz

818-907-3006

 

 

Direct control, indirect control…these are the employment litigation phrases that had franchisors cowering in duck-and-cover positions over the last few years. But the Department of Labor just issued a statement to breathe new life into the franchise industry.

The dangerous era of joint employer litigation isn’t completely over yet. Franchisors should still take protective measures as they can. Still, there’s a glimmer of hope in the trenches:

Last week the DOL announced a retreat of sorts by withdrawing its interpretation of the Fair Labor Standards Act (FLSA). This January 2016 interpretation was the one that defined an employer as an entity or individual who has “indirect control” over an employee. In the franchise context, it meant courts were looking at whether or not an employee was economically dependent on the franchisor to determine whether that franchisor could be deemed liable for claims as a joint employer. (See our Franchise & Distribution Newsletters for more on Joint Employer Litigation.)

The NLRB was the first agency to take a broad stance on the issue of joint employment, most notably in 2015 in the Browning-Ferris Industries decision. In that case, the NLRB decided entities may be joint employers if:

(1) They are both employers within the meaning of the common law; and

(2) They share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors  consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. 

DOL’s rescinding of guidance on this issue doesn’t necessarily change the law, it simply reflects the current government’s friendlier attitudes towards business.

So franchisors, take a deep breath and relax a little. But not too much, as the war on joint employer liability still wages on.

Barry Kurtz is a State Bar of California Certified Specialist in Franchise & Distribution Law.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Tuesday
Aug302016

The Curious Case of Employment Arbitration Agreements

Lawyer for EmployersLawyer for Employers

 

by Tal Burnovski Yeyni

818-907-3224

 

Oh boy, what a year 2016 is shaping up to be! Employers faced some daunting changes to: Sick Leave, California Minimum Wage, the DOL final rule  re salary thresholds and now – class action waivers. We feel like doing a Liz Lemon style “12 month rap wrap up”. But unlike Avery Jessup in 30 Rock, reading some US Weeklies won’t resolve the situation. (If you don’t understand, go watch ”The Return of Avery Jessup”. It’s hilarious!) 

Class Action LawsuitMeanwhile, in the real world, we noticed a trend in California to limit the scope of employment arbitration agreements. Two years ago the California Supreme Court ruled that PAGA (Private Attorneys General Act) representative claim waivers in employment arbitration agreements are unenforceable (Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348).

And last year the legislature attempted to pass AB-465 which would have prohibited employers from requiring employees to sign arbitration agreements as a condition of employment. Governor Brown however, vetoed the bill opining, in part, that “[A] blanket ban on mandatory arbitration agreements is a far-reaching approach...”

Last week the Ninth Circuit took part in the “arbitration debate” and held that Class Action Waivers in employment arbitration agreements are unenforceable. In Morris v. Ernst & Young LLP (9th Cir. 8/22/2016) No. 13-16599 plaintiffs brought a class action against the accounting firm Ernst & Young for misclassification,  FLSA (Fair Labor Standards Act) and California labor laws violations.

The professional services firm moved to compel arbitration pursuant to the arbitration agreements signed by plaintiffs, which contained a “concerted action waiver” requiring employees to pursue legal claims against E&Y exclusively through arbitration, and arbitrate only as individuals and in “separate proceedings.”  Plaintiffs argued the class action waiver was unenforceable as it violated the National Labor Relations Act (NLRA).

Section 7 of the NLRA guarantees the right of employees to engage in concerted activities. Section 8(a)(1) of the Act makes it an unfair labor practice for an employer "to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7" of the NLRA.

The Ninth Circuit in a majority decision agreed with plaintiffs and sided with the National Labor Relations Board (NLRB) position in Horton I, 357 NLRB No. 184, which held that an employer violates the NLRA “when it requires employees covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, arbitral or judicial.”

The Majority opined that a lawsuit filed in good faith by a group of employees to achieve more favorable terms or conditions of employment is “concerted activity” under Section 7 of the NLRA and reasoned that “an employer violates § 8 (...) by conditioning employment on signing a concerted action waiver.” [Emphasis added]. 

Employment ArbitrationWith this decision, the Ninth Circuit teamed up with the Seventh Circuit which recently held that a class action waiver in arbitration agreements was unenforceable as it violated employees’ rights under the NLRA. Other circuits (the Second, the Eighth and the Fifth) held to the contrary, validating class action waivers in employment arbitration agreements. Due to the circuit split, it is likely the matter will be taken up to the U.S. Supreme Court. 

It will be interesting to see how California courts would handle the matter (if at all). Notably, while the California Supreme Court prohibited PAGA waivers in employment arbitration agreements it rejected the argument that class action waivers are unlawful under the NLRA (Iskanian, supra, 59 Cal.4th at 372). “As the Fifth Circuit explained, neither the NLRA’s text nor its legislative history contains a congressional command prohibiting such waivers.” 

Thus, on its face, it appears the California Supreme Court position regarding the enforceability of class action waivers currently differs from the Ninth Circuit’s recent ruling.

To be continued . . .

Tal Burnovski Yeyni is an attorney in our Employment Practice Group

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
May182016

Wage & Hour: DOL Doubles Down on Salary Threshold 

Lawyer for EmployersAttorney for Employers

 

by Tal Burnovski Yeyni

818-907-3224

 

White Collar Overtime ExemptionConsidering all of the political movements regarding minimum wage, equal pay and other wage and hour concerns over the past few years, most employers could read the handwriting on the wall regarding overtime rules. That handwriting has now become official:

The Department of Labor Final Rule regarding the minimum salary level required for the exemption of executive, administrative and professional employees was released today.

In the event of a conflict between federal and state laws, employers must comply with the rule most favorable to employees.  Prior to today’s Final Rule, an employee designated exempt under Federal law must have made at least $455 per week ($23,660 annually). This amount is substantially lower than the minimum salary required for exemption under California law, thus requiring California employers to comply with the state salary level test for exemption.

Here are the key changes: 

  • DOL Final Rule: Effective December 1, 2016, the "standard" salary level will increase to $913 per week (equivalent to $47,476 annually for a full-year employee), nearly double the current federal weekly threshold.  The DOL launched a Frequently Asked Questions page here.


  • California Employers: In this state, the current threshold is $41,600 ($3,466.67 monthly; $800 weekly), so California employers must comply with the higher Federal salary level (for exemption purposes) as of December 1st.  


  • Use of Bonuses to Satisfy the Test: Nondiscretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10 percent of the standard salary test requirement.

    Moreover, if an employee does not earn enough in nondiscretionary bonuses and incentive payments (including commissions) in a given quarter to retain their exempt status, the DOL now permits a "catch-up" payment at the end of the quarter. If the employer chooses not to make the catch-up payment, the employee would be entitled to overtime pay for any overtime hours worked during the quarter.


  • Automatic Updates: To ensure effectiveness of the salary level test, the DOL will update the standard salary compensation requirements every 3 years, with the first update taking effect on January 1, 2020.


  • Increase in California Minimum Wage Requirements: Note that last month, Governor Jerry Brown signed into law a bill gradually increasing California’s minimum wage to $15.00 per hour by January 1, 2022 (for employers with 26 or more employees).  As the salary level for exemption is an extension of California’s minimum wage (two times the state’s minimum wage), employers must pay close attention to the automatic updates of the DOL and the increase in California’s minimum wage, to determine which salary test they must comply with for the exemption. 

Here’s California’s newly approved Minimum Wage Schedule:  

Wage and hour and other employment laws can become very confusing given how state and federal regulations can trump one another. Employers should seek the advice of experienced employment counsel to stay compliant.

Tal Burnovski Yeyni is an attorney in our Employment Practice Group

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Mar192014

Bridging the Pay GAP

Lawyer for EmployerWage and Hour Defense

 

by Nicole Kamm
818.907.3235

 

Last week, GAP announced it would be increasing its minimum wage to $9 in 2014 and $10 in 2015 for employees nationwide. In its press release, GAP’s Chairman and CEO, Glenn Murphy, stated the clothing company “did this because it is right for our company and right for our people.”

Just one step behind, President Obama is continuing to push efforts to increase federal minimum wage to $10.10 per hour – more  than a dollar higher than the $9 proposal made in his 2013 State of the Union address. Federal minimum wage has not increased since 2009. In states that don’t mandate a higher rate, federal minimum wage remains $7.25 per hour.

Also last week, President Obama directed the Department of Labor to propose revisions to the Fair Labor Standards Act (FLSA) regulations regarding overtime exemptions. The President asked the Labor Secretary to consider: 

  1. How existing protections can be “modernized” to conform to the intentions of the FLSA

  2. The changing nature of the workplace 

  3. Simplifying regulations to make them easier to understand by both employees and employers, and easier for employers to apply 

This has been interpreted to mean we can expect a proposed: 

  1. Increase in minimum salary paid to an employee for the employee to qualify as exempt (currently, $455 per week); and

  2. Replacement of the FLSA “primary duty” test with a more substantive test to require an employee to spend a certain percentage of his/her time on exempt duties to qualify for exempt status. 

Both of the above changes would substantially decrease the number of employees who qualify under the federal exemption test.

 

What Does This Mean for California Employers?

 

Bottom line – not much.

California minimum wage is already going up to $9 per hour as of July 1, 2014, and $10 per hour as of January 1, 2016. Now is a good time for California employers to start gearing up for the increase, including issuing new wage notices pursuant to Labor Code section 2810.5, adjusting overtime calculations, and reviewing exempt employee salaries to ensure they are at least two times the minimum wage ($37,440 as of July 1st).

As for the proposed FLSA changes, California employers are already subject to more narrow overtime exemptions requirements under state law. Among other things, to qualify as exempt in California, an employee must be paid a salary of at least $640 per week ($720 as of July 1st). California employees must also spend more than 50 percent of their weekly work time on exempt duties.

Though there is much debate over proposed changes in federal employment laws, California employers can take some comfort knowing that - in most cases - they are already required to comply with what may be implemented on a national level. Somewhat surprisingly - it would appear California is a trendsetter these days when it comes to changes in national employment law.

 

Nicole Kamm is a Wage and Hour Defense Lawyer at our firm. She can be reached via email: nkamm@lewitthackman.com

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
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