Dorsey Work Watch

What happens when an employee starts yelling at the boss, makes profane social media posts about work, or engages in other “abusive conduct?”  In many cases, employers can follow their own policy and impose discipline if appropriate.  But, where profanity and heated outbursts come up in the context of complaints about the terms and conditions of the employee’s job, the issue quickly becomes far more complicated. On May 1, 2023, the National Labor Relations Board (“NLRB” or the “Board”) released a decision addressing employee outbursts in Lion Elastomers, LLC, 372 NLRB No. 83.  Overturning a 2020 decision which itself overturned several prior NLRB decisions on employee outbursts, the Board in Lion Elastomers, LLC reinstated a series of tests to determine when and how an employee’s workplace outbursts can be actionable. What employee rights were involved in the decision? Most employees have a right to engage in “concerted activity” under Section 7 of the National Labor Relations Act (“NLRA”).  That means employees have the right to, among other things, discuss the terms and conditions of their employment with others, engage in union-related activity, and, where appropriate, go on strike.  The rights afforded to employees under Section 7 are not, however, absolute.  A long line of cases address when an employee may lose the protection of Section 7 by engaging in “abusive conduct,” such as vulgarity, name-calling, or other outbursts.  For more information, see our prior posts on Concerted Activity in 140 Characters or Less, and a Profanity-Laden Rant Against a Supervisor (and others). How has the NLRB decides whether an employee outburst constitutes Section 7 concerted activity? Over time, the NRLB adopted a number of tests for determining when an employee steps outside of the protection of Section 7.  The prior tests, based on the decisions in Atlantic Steel, Clear Pine Mouldings, and Pier Sixty, sometimes considered the totality of circumstances, the nature of the outbursts, whether the outburst was provoked, or whether the outburst was coerced.  In 2020, however, the NLRB overruled these various tests and held that rather than examine the circumstances of the employee’s outbursts, the test should be the employer’s motive.  In that case, General Motors, LLC, 369 NLRB No. 127, the NLRB held that test that should be used is whether the employer was motivated by an anti-union animus or whether it merely sought to enforce its anti-profanity policies. One presidential transition and two NLRB appointments later, the Board shifted course.  The Board’s May 1, 2023 decision in Lion Elastomers, LLC overturned General Motors, LLC, in effect reinstating the Atlantic Steel, Clear Pine Mouldings, and Pier Sixty tests.  The Board’s lengthy explanation for its turn of course rejects General Motors as a sharp departure from federal law, and incongruent with the policy underlying the NLRA.  Specifically, the Board read heavily into language from the United States Supreme Court acknowledging labor disputes “are ordinarily heated affairs,” and that an employee’s Section 7 rights are not necessarily dependent on an employer’s anti-union bias. What is the NLRB’s current standard? So where does that leave employers today?  The NLRB’s Lion Elastomers, LLC decision provides a short rule: “[C]onduct occurring during the course of protected activity must be evaluated as part of that activity—not as if it occurred separately from it and in the ordinary workplace context.”  That means employers can’t strictly apply their profanity or obscenity policy as written if the conduct at issue touches on some conduct protected by the NLRA.  To provide an easy example: an employee who curses at the boss during a union negotiation meeting is probably engaged in protected activity, and therefore protected by the NLRA. Employers must examine what kind of protected activity is at issue.  For different situations—such as picketing, negotiations, or off-work social media usage—the NLRB has adopted different standards.  If employee conduct on the picket line is at issue, employers should consider whether, under all the circumstances, non-strikers would have been coerced or intimidated by the picket line conduct under the Clear Pine Mouldings standard.  If the issue involves outbursts towards management, the Atlantic Steel test requires employers to consider:  (1) the place of the discussion, (2) the subject matter of the discussion, (3) the nature of the employee’s outburst, and (4) whether the outburst was provoked by the employer’s unfair labor practices.  And, where the “abusive conduct” involves social media, employers need to consider “the totality of the circumstances” under Pier Sixty. What should employers do now? All this to say that employers should be cautious when dealing with potentially abusive conduct by an employee that could be part of NLRA protected activity.  To be proactive, employers should take a few key steps: Implement a Clear, Written Policy. As always, employers should have a written policy governing offensive or vulgar language in the workplace.  The policy should inform employees of the rules regarding the use of profanity in their interactions with customers, clients, or other members of the public, colleagues, and superiors, and the policy should make the consequences for violations clear. Enforce the Policy Consistently and Uniformly. Having a policy is great, but it’s just as important to implement the policy fairly.  Failures to enforce anti-profanity policies in the past can tie an employer’s hands when faced with conduct that may be clothed in NLRA protection.  Importantly, consistent enforcement includes ensuring managers and supervisors comply with the policy. Avoid Limiting Protected Activities: The enforcement of a policy against profanity in the workplace must be balanced against an employee’s right to engage in NLRA protected activity. For employers, that means carefully considering the context in which the objectionable conduct occurs: is there any angle of the conduct or language which touches on an employee’s Section 7 rights, or is the conduct unrelated and distinct from any concerted activity? NLRB rules generally go back-and-forth during different presidential administrations.  For now, the Board’s decision in Lion Elastomers, LLC restores the pre-2020 status quo for employers with respect to abusive employee conduct.  Once again, employers must ensure they balance their own interest in maintaining workplaces free of profanity or abusive conduct against the legitimate rights of an employee to engage in concerted (and sometimes heated) activity, which may involve profanity.  

Employee reductions and terminations are an unfortunate result of economic downturns. Even during good economic times, many companies face the need to reduce their workforce or terminate the employment of individual employees. In such circumstances, employers may seek to offer severance pay in exchange for certain releases and promises by the departing employee requiring a severance agreement. The drafting of severance agreements can be complex, given that there are various federal and state laws that prohibit or narrow the provisions that can be included in the severance agreement. The use of confidentiality and non-disparagement provisions has recently come under scrutiny again.  This article summarizes the legal issues that an employer must consider when deciding whether to include such provisions in a severance agreement. What is the impact of the National Labor Relations Board’s decision in McLaren On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision, McLaren Macomb, 372 N.L.R.B. No. 58 (2023), finding that an employer violated Section 7 of the National Labor Relations Act (“NLRA”) by offering employees a severance agreement containing provisions stating that the terms of the agreement were confidential and prohibiting the employee from making any disparaging statements about the employer.  Even if the employee ultimately did not sign the agreement, the NLRB found that the mere proffer of these terms to the employees as part of a severance package could be a violation of the NLRA.  Communications by covered employees are protected by Section 7 even if they contain comments that would be considered “disparaging” towards the employer. Does McLaren apply to non-union workplaces? Yes.  Section 7 of the NLRA protects employees’ right to engage in concerted activity for “mutual aid and protection,” which includes discussing the terms and conditions of their employment.  Section 7 applies in union and non-union workplaces. Does McLaren apply to all severance or separation agreements?? No. Only individuals who meet the statutory definition of “employees” – which does not include executives, supervisors, and most managers – have rights under Section 7 of the NLRA. Does the NLRB’s decision mean confidentiality and non-disparagement provisions can no longer be included in severance agreements? Not necessarily.  Employers will now, however, have to engage in a risk assessment in determining whether to include such provisions. For example, in reductions in force (“RIFs”) where the severance is formula-based, the need to include a confidentiality provision is diminished by the fact that there will be many departing employees. Therefore, prohibiting the departing employees from discussing their severance agreements with fellow co-workers who were selected for the RIF adds very little value to the employer. In contrast, where a severance agreement is presented to an individual employee as a compromise, employers may include a confidentiality provision with a definition of “Confidential Information” that is tailored to avoid implicating the terms and conditions of employment that are the core protections of Section 7 of the NLRA. Similarly, following the McLaren decision, employers that want to continue to include non-disparagement provisions in severance agreements could  do so only with specific language. Non-disparagement provisions should, for example, be narrowly tailored to prohibit defamatory statements in accordance with the defamation laws in the applicable jurisdiction to be permissible under McLaren. Is this the first time a federal agency has taken action with regard to provisions in these types of agreements?   No.  The Equal Employment Opportunity Commission (“EEOC”) is another federal agency keeping an eye on confidentiality and non-disparagement provisions in severance agreements.  The EEOC has taken the position that no agreement between a departing employee and an employer can limit the departing employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC.  In addition, the EEOC has stated that limiting an individual’s ability to file a charge or participate in an investigation constitutes retaliation in violation of federal employment law.  Any confidentiality or non-disparagement provision in a severance agreement that attempts to waive these rights is subject to challenge by the EEOC. Similarly, the Securities and Exchange Commission (“SEC”) prohibits employers from taking any action that impinges upon an employee’s ability to bring complaints to the SEC.  SEC Rule 21F-17, enacted under the Dodd-Frank Act, prohibits any action that would “impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement. . .with respect to such communications.” Indeed, the SEC has fined employers for using language that prohibits employees from speaking with the SEC without prior approval from the employer. Thus, employers may not use severance agreements with departing employees that prohibit or discourage departing employees from reporting alleged violations to the SEC. It is important to include language in each severance agreement, even for employers that are not publically traded, that states that the departing employee may speak freely with federal agencies such as the SEC without first seeking approval from the employer. Aren’t there also restrictions related to settlements of claims involving sexual harassment? Yes.  In response to #metoo, various states introduced or enacted legislation restricting the use of confidentiality provisions in agreements settling sexual harassment-related claims.  Each piece of legislation has its own nuances regarding the types of language which are prohibited and the consequences of violating the restrictions. These are just a few of the key issues to consider when drafting a severance or settlement agreement. It is always best practice to speak with an employment attorney when drafting severance agreements to ensure compliance with federal, state, and local laws.

When the subject of the National Labor Relations Act (the “NLRA,” or, more succinctly, the “Act”) is broached, employment lawyers often hear a familiar refrain: “The Act doesn’t apply to me because my employees are not unionized.” This widespread belief is incorrect. In actuality, all employers in the United States are subject to the Act in an important way that carries even greater significance when political and polarized societal issues find their way into the workplace. For those of you who may not have paid much attention to the NLRA before receiving this surprising news, Section 7 of the Act protects an employee’s right to self-organization, including to join a labor organization. Section 7 also shields an employee’s right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  Concerted activity (activity involving two or more employees or by one on behalf of others) that is for “mutual aid or protection” is interpreted broadly. It can range from an employee strike to potentially more nuanced instances, such as where employees post complaints on social media relating to their employment benefits, a conversation involving one speaker and one listener on a subject that relates to group action in the interest of employees, or even where multiple employees individually refuse to work overtime for the same reasons without group discussion, where their actions imply a common goal.  In tandem with Section 7, it is an unfair labor practice under Section 8(a)(1) for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act. In other words, an employer violates the Act if it interferes with an employee’s ability to exercise their Section 7 rights, even if that employee is not currently a member of a labor union. But the question remains: What does it mean for an employer to impermissibly interfere with an employee’s Section 7 rights? The applicable legal standard is complicated and was formed in a long string of cases by the National Labor Relations Board (“NLRB”) dating back nearly two decades. Beginning in 2004, the NLRB applied the standard set forth in Lutheran Heritage, under which an employer’s policy is unlawful if an employee would “reasonably construe” the policy as restrictive of their Section 7 rights or if the policy would “reasonably tend to chill” Section 7’s protected activities. Examples of where an employer may infringe on protected activities include, but are not limited to, threatening employees if they support a union or engage in concerted activity enforcing work rules that reasonably tend to inhibit employees from exercising their rights under the Act, and retaliating or taking adverse actions against employees who engage in protected or concerted activities. In 2017, under the Trump Administration, the NLRB articulated a more employer-friendly standard in Boeing Company. The Boeing Co. standard requires not only assessing the legality under Section 7, but also evaluating the employer’s justification for the policy or conduct. Now, the Biden Administration is poised to revert the NLRB to the pre-Boeing Co. standard. The NLRB’s General Counsel, Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases to her office for consideration relating to certain issues, notably including cases addressing the Boeing Co. standard. And in early 2022, Abruzzo filed a brief in the Stericycle, Inc. case before the NLRB in which she advocated for a return to the Lutheran Heritage standard. This issue often rears its head in two contexts. First, employers should be careful when drafting or enforcing policies or handbooks that constrain an employee’s ability to discuss the terms and conditions of their employment. For example, if an employer adopts a social media policy that contains content-based restrictions, or a policy that prohibits employees from making negative or disparaging statements about the company, those actions may be seen by the NLRB as prohibited by the Act. Second, employers should take Section 8 of the Act into account when considering whether and how to discipline an employee for verbal comments, violation of the company dress code, or other conduct related to an employee’s exercise of Section 7 rights. Since workplaces have existed, employees have been making statements that cause offense or discomfort to other employees. It can be hard to distinguish between statements that may implicate Section 7 rights and those that do not. As a recent example, although an employee’s comment to a co-worker about their personal views on abortion or the recent Supreme Court decision in Dobbs may not raise Section 7 rights, that employee’s comment about the company’s policy related to reimbursement of abortion-related expenses post-Dobbs is likely protected. Other topics, such as co-worker pay, are so closely related to the terms and conditions of employment that any action by the employer to restrict discussion may be considered by the NLRB to reasonably tend to chill concerted activity. If you are learning for the first time that you may be subject to the NLRA, or if you have policies in place that limit an employee’s speech or conduct in the office, now is the time to consult with your local Dorsey attorney. The NLRB has identified this as an enforcement priority, and employers would be wise to anticipate and fix any issues before the NLRB becomes involved.

As many states progress through different phases of reopening, companies are preparing for their employees to return to work. Employers are also noting, however, that some states are seeing COVID-19 cases surge.  This has generated some concerns from employees who do not want to return to the work place. Can employers require employees to return to work if the employees are not comfortable returning based on fear of exposure to COVID-19 in the workplace? Often, the answer is yes.  Employers generally can require a non-high risk employee to return to work where there hasn’t been any cases in the employee’s particular workplace. But as with many broad employment questions, there is no universal answer that covers all cases and employers must look to both federal and state law, and in some instances, local law, to determine whether a particular employee can be required to return to work. For example, under federal law, employees can refuse to work under certain, narrow circumstances. In these situations, employers must proceed with caution or they risk retaliation claims. It is important to note, however, that a generalized fear of infection alone is usually not enough to permit an employee to refuse to return to work. Employers must be aware of COVID-19 related protections existing for employees and understand what rights they have in the face of an employee’s refusal to return to work. This post does not cover alternative avenues such as local, state, and federal law governing protected leave, including the Families First Coronavirus Response Act. These rights and protections vary with each state, so employers should review the most recent return-to-work orders. Americans with Disabilities Act Per EEOC guidance, the Americans with Disabilities Act (“ADA”) requires an employer to work with employees at high risk of serious health complications related to COVID-19 (as determined by guidance from the Centers for Disease Control and Prevention (“CDC”)) to provide reasonable accommodations like teleworking or taking leave. To avoid the risk of discrimination claims, employers should communicate alternative options to all employees, rather than directly reaching out to employees who have not yet requested an accommodation. As a general matter, employers should work with employees and offer alternative work arrangements where possible. Occupational Safety and Health Act Employers who are following current guidelines for safe workplaces – under the CDC or state health departments – would generally be able to require non-high risk employees to return to work without running afoul of safety standards, especially where there have not been any cases of COVID-19 in the employee’s workplace. The Occupational Safety and Health Act (“OSHA”) creates a general duty for employers to maintain safe workplaces and mitigate any health or safety hazards but as of the date of this posting has not issued any regulations specifically covering COVID-19 safety requirements.  Importantly, for “medium risk” employers (such as retailers and other workplaces open to the public) OSHA’s Interim Enforcement Response Plan for Coronavirus Disease 2019 focuses on incidences of actual exposure rather than the general risk that someone might catch COVID-19 in the workplace because the disease is spreading in the community. https://www.osha.gov/memos/2020-05-19/updated-interim-enforcement-response-plan-coronavirus-disease-2019-covid-19. However, it is important for employers to understand that under certain narrow situations, OSHA also permits an employee to refuse to perform unsafe work. The employee may refuse to perform a specific task when all of the following conditions are met: (1) the employee “asked the employer to eliminate the danger, and the employer failed to do so”; (2) the employee “genuinely believe[s] that an imminent danger exists”; (3) “a reasonable person would agree that there is a real danger of death or serious injury”; and (4) the urgency of the hazard does not allow correction through “regular enforcement channels, such as requesting an OSHA inspection.” National Labor Relations Act Employers must also be on the lookout for employee conduct that constitutes protected concerted activity under the National Labor Relations Act (NLRA). Section 7 of the NLRA guarantees unionized and non-unionized employees the right to engage in concerted activities for the purpose of “mutual aid or protection.” In the context of COVID-19, protected concerted activity could occur when two or more employees (or one employee acting on behalf of others) address issues such as safe working conditions and the steps their employers are taking to prevent the spread of the virus. State Guidance and Return-to-Work Orders In Minnesota, all critical and non-critical sector employees who are able to work from home must continue to do so. (Stay Safe Minnesota). Emergency Executive Order 20-54 protects employees for raising concerns about unsafe conditions related to COVID-19. The order extends existing state law protections to COVID-19: employers cannot discriminate or retaliate against an employee for exercising any right under the Minnesota Occupational Safety and Health Act. In contrast, California workers are protected by the state’s Resilience Roadmap because the stay-at-home order is still in effect. If an employer does not provide essential services or is not in an industry allowed to reopen in Stage 2 (or the current stage of the plan), an employee would have good cause to refuse to return to the workplace. Employers should also consult local public health ordinances. Some localities, like the City of Los Angeles, require employers to provide face coverings for all employees. Some states mandate additional protections for employees at high risk for severe COVID-19 complications. Washington Governor Jay Inslee issued Proclamation 20-46.1, in effect through August 1, amending Proclamation 20-05 to require employers to offer high-risk employees alternative accommodations. If alternative options are not feasible, the employee must be allowed to use accrued leave or seek unemployment relief while the employer maintains health insurance benefits. The order also prohibits employers from permanently replacing high-risk employees and requires employers to maintain high risk employees’ health benefits. Other states mandate employer responsibility for providing protective equipment to its employees. In New York, Executive Order 202.16 requires essential employers to provide face coverings to employees in direct contact with members of the public. Empire State Development also released guidance for determining whether a particular enterprise is subject to workforce reductions under relevant executive orders. If an employee works for a non-essential New York business that is not encompassed by its region’s current phase of reopening, they cannot be forced to come into work. Employers are encouraged to work with employees who have concerns about working safely under applicable state orders and federal guidance. Although an employee may bring safety or retaliation concerns directly to their local OSHA office or to the state department of labor, proactive efforts to discuss a safe workplace can help minimize this risk. Finally, it may behoove employers to understand when an employee could secure unemployment benefits for refusing to return to work.  Generally, a refusal to work disqualifies an individual from unemployment benefits.  But in the current COVID-19 pandemic, many states have relaxed the criteria to allow for continued benefits when the refusal to work is because of a personal situation exacerbated by COVID-19. Unemployment Insurance Benefits Minnesota The Minnesota Department of Employment and Economic Development (“DEED”) says that employees offered a suitable opportunity to return to work, and who are not subject to an exemption under Executive Order 20-05 or state law, may not continue receiving unemployment benefits. If an employee refuses a suitable offer of employment, they can be held overpaid for unemployment insurance benefits received. DEED clarified that if an employer cannot provide reasonable accommodations upon an employee’s request, they might still be eligible for unemployment benefits. Additionally, Executive Order 20-54 provides that the failure of an employer to implement a COVID-19 Preparedness Plan constitutes an adverse work environment that could qualify a complaining employee to receive unemployment benefits. Washington The Employment Security Department (“ESD”) released guidance stating that individuals receiving unemployment benefits must be available for “suitable work,” including any offer to return to previous employment after a layoff caused by COVID-19. Individuals must have good cause to refuse an offer to return to work and continue receiving unemployment benefits. Good cause may apply to those considered high risk by the CDC and those living in a household with a person at high risk. School or daycare closures, providing care for a family member, employer noncompliance with worksite safety guidelines, or a substantial change to the job may also be accepted as good cause. Employees may not refuse work and retain unemployment benefits because they make more on unemployment or because of a fear of returning to work without having good cause to refuse. California The Employment Development Department (“EDD”) released guidance emphasizing that employees that refuse to accept “suitable” employment when offered are ineligible for unemployment benefits. The EDD considers factors such as the degree of risk involved to the individual’s health and safety when determining if particular work is “suitable.” If an employer has complied with state requirements and safety regulations for reopening, an employee may not have good cause to refuse to return to work. If an employee indicates on their certification for continued benefits that they refused work, the EDD will investigate accordingly. New York If an employee refuses an offer to return to their previous position, they will likely lose eligibility for unemployment benefits unless they have good cause as defined by Section 593.2 of the Unemployment Insurance Law. Employees may not turn down offers of employment based on a general fear of exposure to COVID-19 and still receive unemployment benefits. (Returning to Work). However, in some circumstances an employee could continue receiving benefits if the employee’s situation meets Pandemic Unemployment Assistance (PUA) eligibility criteria. Employers that are following CDC and state and local guidelines regarding social distancing and other precautions in the workplace will often be allowed to require non-high risk employees to return to work when there are no cases of COVID-19 in the employer’s workplace. However, like so many employment related legal issues, the devil is in the details and exceptions abound. When employees refuse to return to work and challenge their employer’s ability to compel them to do so employers should consult with knowledgeable counsel to make sure they are on solid ground.

On September 18, 2019, Governor Gavin Newsom signed into law Assembly Bill 5, which clarifies when workers should be considered “employees” under the California Labor Code and the California Unemployment Insurance Code, thereby entitling them to the protections afforded by those laws. The bill codifies the standard set out in last year’s California Supreme Court decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which narrowed the circumstances under which a worker can properly be classified as an independent contractor. Specifically, under the new law, in order for a worker to properly be classified an independent contractor, the employer has the burden of establishing the following three elements (commonly referred to as the “ABC” test): (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) The person performs work that is outside the usual course of the hiring entity’s business; (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Most of the provisions of AB 5 become effective on January 1, 2020. Below are some answers to frequently asked questions to help employers navigate this significant development. Is the law under AB 5 any different than the Dynamex ruling? Under Dynamex, the “ABC” test was limited to the resolution of the employee or independent contractor question in claims arising under California’s Wage Orders—for example, claims for failure to pay minimum wage, overtime, or failure to provide adequate meal and rest periods. AB 5 codifies the decision in the Dynamex case and expands the application of the “ABC” test not only for purposes of the Wage Orders, but also the Labor Code and Unemployment Insurance Code as well.  This means that the “ABC” test will apply to more claims, including failure to reimburse necessary business expenses, failure to provide accurate and complete wage statements, claims for waiting time penalties under Labor Code section 203, potential recovery of Private Attorney General Act (PAGA) penalties, and failure to provide workers’ compensation insurance.AB 5 also empowers the California Attorney General and specified local prosecuting agencies to pursue injunctions against putative employers suspected of misclassifying their workers. Are there any exceptions to the application of the new standard in AB 5? AB 5 provides an exemption for a number of industries and occupations, subject to licensing and other requirements, including: Insurance brokers Physicians, surgeons, dentists, podiatrists, psychologists or veterinarians Lawyers, architects, engineers, private investigators and accountants Registered securities broker-dealer or investment adviser and their agents and representatives Direct sales salespersons (if they meet certain factors) Commercial fishermen working on an American vessel (until January 1, 2023) Contracts for “professional services” such as marketing, human resources administration, travel agents, graphic designers, grant writers, fine artists (if they meet certain factors) Photographers, photojournalists, freelance writers, editors, or newspaper cartoonists (if they meet certain factors) Licensed estheticians, electrologists, manicurists (until January 1, 2022), barbers, or cosmetologists (if they meet certain factors) Real estate agents Licensed repossession agencies Bona fide business-to-business contracting relationships (under certain conditions) Construction subcontractors (for work performed after January 1, 2020, under certain conditions) Construction trucking services (until January 1, 2022) Tutors (if they meet certain factors) Motor club services For these occupations, the determination of employee or independent contractor status will be governed by the more flexible, multi-factor test outlined in the California Supreme Court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations. What effect does AB 5 have on an employer’s obligation to provide workers’ compensation insurance? The California Labor Code, at sections 3200 et. seq., requires employers to have workers’ compensation insurance covering their employees. AB 5 amends section 3351 of the Labor Code so that, for the purposes of determining the obligation to provide workers’ compensation coverage, the “ABC” test governs. Accordingly, workers who fall within the “ABC” test (and are not covered by an exception), should be covered by workers’ compensation insurance. Note that the narrowed definition of employee does not become effective until July 1, 2020 (with respect to the workers’ compensation provisions specifically). Will AB 5 affect an employer’s obligation to pay payroll taxes? The Unemployment Insurance Code imposes obligations on employers to pay certain amounts of Unemployment Insurance Tax and Employment Training Tax for its employees. Because AB 5 changes the definition of “employee” in the Unemployment Insurance Code, employers will have to pay these payroll taxes for workers who meet the definition of “employee” under the new test. Does AB 5 affect how much employers will have to withhold from employee’s paychecks? The Unemployment Insurance Code also imposes obligations on employers to withhold a portion of employees’ wages for State Disability Insurance and for California personal income tax. Accordingly, employers will have to make these withholdings for workers who meet the definition of “employee” under the new test. Does AB 5 affect an employer’s obligation to provide health insurance? Prior to AB 5, neither the California Labor Code nor the Unemployment Insurance Code imposed an obligation to provide health insurance to employees.  The amendments to these statutes pursuant to AB 5 do not add a requirement to provide health insurance to employees.  The federal Affordable Care Act sets up a scheme whereby “large” employers must either provide health insurance to a certain percentage of their employees, or pay specified penalties.  We have not yet seen any developments indicating whether the change in the definition of “employee” under California law will affect the determination of whether a worker is considered an “employee” under the federal ACA.  However, we are monitoring this issue closely.Note, however, that some jurisdictions in California, such as San Francisco, require certain employers to satisfy health care spending requirements for employees. The amount of required spending is based on the number of the employer’s employees, with small employers potentially exempt from the requirement. AB 5 could have an impact on how these requirements apply to employers. Can employers continue to pay workers who were formerly classified as independent contractors on a piece rate or project basis? AB 5 does not impact an employer’s ability to pay workers on a piece rate basis.   In order to properly do so, however, the employer must satisfy all requirements for paying employees by the piece or unit produced.   Namely, among other things, the employer must pay the employee not less than the applicable minimum wage for all hours worked in the payroll period, compensate employees for rest and recovery periods and for other nonproductive time separate from any piece-rate compensation, and ensure that piece-rate workers are paid overtime for hours worked in excess of eight in a day or forty in a week. What effect does AB 5 have on employers who hire temporary workers through a staffing agency? AB 5 does not have a direct effect on employers who hire temporary workers through a staffing agency, assuming the staffing agency categorizes those workers as employees of the staffing agency, and not independent contractors. If the staffing agency categorized those workers as independent contractors, and placed the workers at the contracting company’s site, arguably working subject to the control of the contracting company, there is a risk that the workers could make a claim of misclassification based on the “ABC” test against both the staffing agency and the contracting company. We recommend companies retaining temporary workers through a staffing agency confirm that the staffing agency classifies the workers placed as employees, unless they clearly meet the definition of an independent contractor. The decision as to whether to reclassify workers, and the changes to payroll and other benefits that may come along with it, continues to be nuanced. If you have independent contractors within your workforce, contact your Dorsey employment attorney for guidance.

Many U.S. employers have recently experienced frustration over legal obstacles to keeping high quality foreign-national employees. These valuable employees have often been with the company since finishing a degree and sometimes even interning with the employer. Other employers experience delays in hiring foreign nationals needed for specialized positions despite the obvious qualifications of the candidate. These employers’ frustrations reflect the current climate of immigration law and policy. The standards applied by the U.S. Citizenship and Immigration Service (USCIS) in adjudicating H‑1B temporary work visa petitions have been shifting, both formally and informally, to the detriment of businesses seeking to hire or retain noncitizen professionals in specialty occupations—as well as those they would seek to employ. This, along with other similar trends in how the executive branch enforces immigration laws, requires that employers and their legal advocates test new strategies on behalf of their clients. If USCIS denies your H-1B petition and your awesome employee may have to leave the country, what options do you have? Immigration lawyers, who typically fight their battles within administrative agencies, are increasingly looking to federal courts for judicial review of agency actions. One recent case highlights that strategic litigation can have a powerful impact, and suggests that specialized litigators may be a vital addition to the legal toolbox for businesses that depend on international hiring. See RELX, Inc. (d/b/a LexisNexis USA) v. Baran, 2019 U.S. Dist. LEXIS 130286. Subhasree Chatterjee earned her bachelor’s degree in computer science and engineering in her home country of India in 2011, and her master’s degree in business administration and analytics in the United States, from the University of Ohio, in 2016. She also has several years of professional experience in data analytics in both India and the United States. Chatterjee began working as a data analyst for LexisNexis at its Raleigh, North Carolina Center for Excellence in 2017, at which time she was authorized to work in the United States because of the Optional Practical Training (OPT) associated with her F-1 student visa. But Chatterjee’s student visa and OPT was set to expire on August 3, 2019. Lexis filed a petition for Chatterjee to remain in the United States through the H-1B nonimmigrant visa program so that she could continue in her role as data analyst supporting the company’s “flagship” product, LexisAdvance. The government denied the petition on the grounds that the data analyst position was not a “specialty occupation.” By statute, a specialty occupation is “an occupation that requires theoretical and practical application of a body of highly specialized knowledge; and attainment of a bachelor’s or higher degree in the specific specialty (or its equivalent) as a minimum for entry into the occupation in the United States.” 8 U.S.C. § 1184(i)(1).   And by regulation, the position must meet at least one of four criteria to qualify as a specialty occupation: (1) a baccalaureate or higher degree is normally the minimum requirement for entry into the particular position; (2) the degree requirement is common to the industry in parallel positions among similar organizations or the position is so unique or complex that only an individual with a degree can perform it; (3) the employer normally requires a degree or its equivalent for the position; or (4) the nature of the specific duties are so specialized and complex that the knowledge required to perform the duties is usually associated with attainment of a baccalaureate degree or higher.  8 C.F.R. § 214.2(h)(4)(iii)(A). In support of the H-1B petition, Lexis and Chatterjee submitted what the court would later call a “mountain of evidence” on three out of these four regulatory grounds, any one of which would have been sufficient to qualify the data analyst position as a specialty occupation. They responded to a request for redundant evidence and, following an initial denial, pursued administrative reconsideration. These efforts were unsuccessful. To justify its denial, the government asserted, contrary to its regulations and past practices, that a specialty occupation is one requiring a degree from a particular academic discipline. In other words, for example, if the position could be filled by someone with a degree in computer science or engineering, then it could not be a specialty occupation. Exactly one month before Chatterjee’s work authorization would expire, she and Lexis filed a lawsuit in federal district court in Washington D.C., serving USCIS, the Department of Homeland Security, and leaders of each, challenging the denial as a violation of the federal Administrative Procedure Act (APA) and seeking a preliminary injunction. Given the extremely short timeline before Chatterjee’s status would expire, the court placed the case on an expedited schedule to resolve the matter on its merits, skipping over the motion for preliminary injunction. Plaintiffs moved for summary judgment. The government spontaneously reopened the H-1B petition and then moved to dismiss the lawsuit, arguing that the reopening deprived the court of jurisdiction because plaintiffs’ claims were no longer ripe. On August 1-2 (the two days immediately preceding the expiration date of Chatterjee’s work authorization), the court held a hearing on both motions. The government’s motion was denied from the bench. In a subsequent memorandum, District Judge Emmet Sullivan concluded that the government’s “position [was] untenable,” that the “decision was not based on a consideration of the relevant factors and was a clear error of judgment,” and that “USCIS acted arbitrarily, capriciously, and abused its discretion.” RELX, Inc., 2019 U.S. Dist. LEXIS 130286, *28, 31 (quotations omitted). At the same time, plaintiffs’ summary judgment motion for an order directing USCIS to grant Lexis’s petition and place Chatterjee on H-1B status was granted—and just in time. Chatterjee was able to keep her job and remain in the United States, and Lexis continued business as usual with its data analytics team at full strength. In the current market, employers and their legal counsel need to use all avenues available under the law to help hire and retain top talent. Litigation is not only an option, but may be a necessary addition to the overall toolbox of talent management strategies, especially when it comes to international hiring.