Employment laws regularly include record keeping requirements. And while these requirements are rarely front and center, they can rear their head and open companies to legal action. This month the EEOC filed suit in Philadelphia against a nationwide provider of janitorial and facilities management services for failing to maintain records and other information relating to how its employee selection procedures impact equal employment opportunities.
Under Title VII, covered employers must maintain records that disclose the impact that their selection procedures have on employment opportunities of individuals identifiable by race, sex, or ethnic group. In this lawsuit, EEOC claims that the company failed to make and keep records of applicants’ criminal background checks and criminal history assessments, information that they use to make ultimate hiring decisions. According to the EEOC, these records are necessary to show the impact that the company’s selection procedures have on individuals identifiable by race, sex, or ethnic group. The EEOC is seeking an injunction requiring the company to make and keep these records. This case is an important reminder for employers to ensure that they are properly making and keeping the records required by applicable federal, state, and local statutes and regulations.
Given the EEOC’s focus on records regarding criminal history and background checks, companies should also confirm compliance with federal, state and local laws regarding background checks, and how and when they are conducted and used. As we have previously discussed in this blog, a growing number of state and local governments have enacted “Ban-the-Box” legislation, putting restrictions on when criminal history information may be gathered. Companies that haven’t recently reviewed policies and procedures relating to retention of employee and applicant information, or that haven’t carefully considered whether their use of background checks is legally compliant, should do so.
Two recent developments are a good reminder that companies who have independent contractors are under increased scrutiny and face a high bar in establishing that independent contractors are properly classified as such — and not employees.
On July 15th, the Department of Labor issued a guidance saying that most workers qualify as employees under the Fair Labor Standards Act (FLSA) regardless of what the worker and the company may have agreed to. The guidance doesn’t announce a new test for independent contractor status. Instead, it starts with the “economic realities” test for independent contrator status that courts regularly use and a reads it together with a broad view of the FLSA’s definition of employ to reach a conclusion that most independent contractors are misclassified and should, instead, be treated as employees.
The DOL’s guidance was close on the heels of a decision by the Seventh Circuit Court of Appeals, which reversed the lower court and ruled that FedEx delivery drivers are employees under Kansas state law, not independent contractors. In making its decision, the 7th Circuit certified the question of whether the drivers were employees under the Kansas Wage Payment Act to the Kansas Supreme Court. The Kansas Supreme Court, applying a 20-factor test, found that the drivers were employees because FedEx, among other things, assigns drivers their routes; requires them to check in with FedEx managers at the start of their day; regulates their appearance; and decides whether to hire a driver after the driver submits resumes and references like any other employee.
So what are the consequences of misclassification? Companies that misclassify employees as independent contractors face penalties for failing to pay employment taxes, for failing to withhold taxes from pay, for failing to comply with wage and hour requirements (such as overtime), for failing to contribute to unemployment compensation, and for failing to comply with other employment-related laws. In addition, the Affordable Care Act opens companies that misclassify workers to significant penalties — both based on failure to offer coverage to the required portion of the workforce and where a misclassified worker obtains coverage on an exchange.
In light of these developments, we strongly recommend that any company that has independent contractors work with counsel to determine if these workers are properly classified. A thorough review now could save you lots of money, time, and aggravation later.
The NLRB’s “ambush election rules” – which became effective this Spring – continue to be challenged by business trade groups. See previous blog posts. These groups, however, have yet to persuade a court that the rules violate any laws. What that means is that employers should take precautionary steps to prepare for a union organization effort, rather than waiting for a petition to be filed. If you wait for that petition, you won’t have much time at all (as little as 10-21 days) to effectively communicate with your employees .
What can be done now?
- Training. Your managers/supervisors need to know how to detect union “storm warnings.” They should be aware – and immediately inform higher management – of:
- Employee complaints changing or increasing
- Employees being out of normal areas
- Employees being on premises while “off duty”
- Employees making unusual requests for information and materials concerning job descriptions, pay, benefits, compensation, policies, etc.
- Employees asking unusually aggressive or argumentative questions at group meetings
- Normally talkative and open employees avoiding speaking with managers/supervisors
- Employee group conversations quieting down when managers/supervisors pass by
- Lunchroom, locker room, and bathroom cartoons and graffiti
- Over-qualified job applicants with spotty backgrounds
- Employee complaints being made by groups of individuals
- Strangers on company premises
- Use of unusual technical language by employees
- Communicate now. Educate your employees on the company’s position on unions and unionization now. Make sure your managers/supervisors are maintaining an open door policy with their employees and continue to train them on effective communication.
- Review your policies and practices. Make sure all employment policies and practices are compliant with employment laws and the views of the NLRB.
- Develop campaign materials in advance if any “storm warnings” are detected. You want campaign materials at your fingertips when a petition is filed so you can start campaigning right away.
The future of the NLRB’s new election rules is unknown. But as of right now, they stand, and employers need to be prepared.