Employers should have background check forms reviewed immediately, especially in Ninth Circuit

In a surprising decision, the Ninth Circuit has issued a ruling that an employer violates both federal and California state background check laws when it uses relatively common language.

The federal law that governs background checks is the Fair Credit Reporting Act (FCRA). Its California equivalent is its Investigative Consumer Reporting Agencies Act (ICRAA). Both require certain content be included in the paperwork that goes to and must be signed by the candidate. Both state that nothing else may be set forth in those forms. This is called the “standalone requirement.” In other words, the requirement is that the background check forms be standalone documents; they cannot be part of a job application or the like.

In this case, the forms stated the information required by FCRA and ICRAA. Then they added similar language for four other states, with headers setting off the state-specific language like “Minnesota and Oklahoma applicants or employees only. Check this box if ….” and “New York applicants or employees only. By signing below, you also acknowledge ….”

The Ninth Circuit held those additional state-specific disclosures violated FCRA and ICRAA because they had nothing to do with the particular individual being asked to fill out the form (an applicant for employment, in this case) who lived and was applying to work in California. The Ninth Circuit said that this seemingly clear language was nonetheless “extraneous” and “as likely to confuse as it is to inform.” Therefore the Ninth Circuit held it violated both FCRA and ICRAA’s standalone requirement. 

Source: Gilberg v. California Check Cashing Stores, LLC, case no. 17-16263 (9th Cir. 1/29/19).

Rat balloon soon to be deflated by NLRB?

Bloomberg BNA reports that the NLRB General Counsel is looking to litigate one of organized labors’ favorite forms of protest: A giant inflatable rat. The effectiveness of the baloon is certainly questionnable, but it is equally undeniable that the presence of one draws attention. Often inflated in the back of a pickup truck, parked lawfully at a meter, or simply on the side of a street where a vehicle might otherwise park, these rats typically stand about twice as tall as a human: Usually under any local ordinance’s height limits.

The rats often draw much more attention than protesters might simply standing and handing out information to passersby, and that’s the point: Labor law generally distinguishes between handbilling and picketing. Handbilling is typically seen as pure speech, and as such, protected by the First Amendment, and subject to limited governmental constraints. Picketing is more easily constrained; picketing is subject to strict rules under the National Labor Relations Act for example.

In the NLRB’s 2011 Sheet Metal Workers Local 15, the Board held these rats were more like handbilling than picketing, and as such constitute symbolic speech within the First Amendment. Now, according to Bloomberg BNA, the NLRB General Counsel is looking to re-litigate that holding, contending that they should, instead, be subject to the picketing rules, and/or are at most a form of commercial speech. Commercial speech is generally afforded less protection under the First Amendment, though, in a perhaps curious twist, recent rulings by the Supreme Court seem to be suggesting the Court will afford put it on a higher constitutional footing.

 

Honored to be named in Chambers for 2019!

Honored to be named in Chambers for 2019!

California courts strike non-solicits

Two recent California decisions warrant immediate review by companies that might seek to enforce non-solicitation covenants. The two courts each struck covenants that prohibited former employees from soliciting the company’s employees. The first decision was announced by the California Court of Appeals, which summarized its analysis of the non-solicit at-issue, as follows:

Turning to the instant case, we independently conclude that the nonsolicitation of employee provision in the CNDA is void under section 16600. Indeed, the broadly worded provision prevents individual defendants, for a period of at least one year after termination of employment with AMN, from either “directly or indirectly” soliciting or recruiting, or causing others to solicit or induce, any employee of AMN. This provision clearly restrained individual defendants from practicing with Aya their chosen profession — recruiting travel nurses on 13-week assignments with AMN. (See Dowell, supra, 179 Cal.App.4th at p. 575 [finding a broadly worded nonsolicitation clause preventing employees from rendering any service to “any of the accounts, customers or clients with whom they had contact during their last 12 months of employment” void under section 16600]; D’Sa, supra, 85 Cal.App.4th at p. 930 [finding a provision in an employee confidentiality agreement was void under section 16600 because it prevented an employee from rendering “`services, directly or indirectly, for a period of one year after separation of employment with [employer] to any person or entity in connection with any [c]ompeting [p]roduct'”]; Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859 (Metro Traffic) [finding a broadly worded noncompetition provision void under section 16600 because it prevented an employee from working for a competitor for a period of one year after termination from the employer].)

As that quote suggests, the Court of Appeals noted that the non-solicit acted, for these individuals, who were recruiters, like a non-compete. If they could not solicit the company’s employees, the Court of Appeals reasoned, they could not compete, since recruiting was their business.

Would this analysis apply even where the individual was not a recruiter? It isn’t clear, but the second recent court decision suggests it might.

Employers should have their proprietary information agreements (and any other agreement containing covenants) reviewed by legal counsel, especially if California law may be implicated.

Source: AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., case no. No. D071924 (Cal.App. 11/1/18); Barker v. Insight Global, LLC, case no. 16-cv-07186-BLF (N.D.Cal. 1/11/19).

NLRB not done redefining independent contractors

According to Bloomberg BNA, NLRB Chair John Ring has said the Board may follow up on its recent decision with formal rule making that would produce regulations that detail its independent contractor test.

“I think codifying significant parts of our labor code into regulations is one way that we can provide some clarity and predictability,” Ring told a group of attorneys Jan. 28 at a conference in New York. “There’s the ability to take whole swaths of the law and put it into one comprehensive set of regulations.”

The board historically has answered legal questions through individual case decisions. Ring said regulations issued through the notice and public comment process bring some permanence because they’re harder for a new administration to undo. He also said the board can use rules to provide examples of how legal questions should be answered in various scenarios, rather than waiting for cases to reach the board one by one.

Source: www.bloomberglaw.com/exp/eyJjdHh0IjoiRExOVyIsImlkIjoiMDAwMDAxNjgtOTUwMi1kMmI1LWE5ZWItZjc1YWZmZmQwMDAwIiwic2lnIjoicEowQURONEVzenVtZWl6ZUVHUU94Q3o2NlhBPSIsInRpbWUiOiIxNTQ4NzExMjAwIiwidXVpZCI6Im51YnhOZzFiWVRBUGNsSkYyajNLTFE9PUtNbCtPS3dnMkVtc3Y2UGZ1U0Jlc0E9PSIsInYiOiIxIn0=

Board reverses course on Obama-era independent contractor analysis

Continuing a series of changes charted by the Trump Board, the NLRB has reversed course on the Obama Board’s approach to independent contractor analysis. In a case involving SuperShuttle drivers, the Board has made it easier for companies to use, and for entrepreneurs to become, independent contractors.

Whereas the Obama-era approach looked at whether the company had the ability to control a putative contractor. Now the Board will look to the exercise of actual control and specifically whether the exercise of actual control is sufficient to negate the contractor’s “entrepreneurial opportunity.”

The Board cautioned that a contractor’s “economic dependency on the company does not negate the existence of ‘economic opportunity.'” “(A)ny sole proprietor of a small business that contracts its services to a larger entity” is, the Board explained, economically dependent on that company. 

Large corporations such as Fed-Ex or SuperShuttle will always be able to set terms of engagement in such dealings, but this fact does not necessarily make the owners of the contractor business the corporation’s employees.

Additionally the Board cautioned that control, which is required by the government, should not be considered in this analysis.

(R)equirements imposed by governmental regulations do not constitute control by an employer; instead, they constitute control by the governing body.

Instead, the Board will focus its analysis on the 10 common law factors set forth in the Restatement (Second) of Agency, sec. 220, which the Board quoted in length, as follows:

In determining whether one acting for another is a servant or an independent contractor, the following matters of fact, among others, are considered:

(a) The extent of control which, by the agreement, the master may exercise over the details of the work.

(b) Whether or not the one employed is engaged in a distinct occupation or business.

(c) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.

(d) The skill required in the particular occupation.

(e) Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.

(f) The length of time for which the person is employed.

(g) The method of payment, whether by the time or by the job.

(h) Whether or not the work is part of the regular business of the employer.

(i) Whether or not the parties believe they are creating the relation of master and servant.

(j) Whether the principal is or is not in the business.

Additionally the Board will consider whether the putative contractor has “significant entrepreneurial opportunity for gain or loss.” Then, the Board will consider related relevant factors, as follows:

Related to this question, the Board has assessed whether purported contractors have the ability to work for other companies, can hire their own employees, and have a proprietary interest in their work.

Applying this test to the SuperShuttle drivers, the Board held they are properly characterized as independent contractors. The Board noted that franchisee-drivers own their own vans. They control “their daily work schedules and working conditions, and the method of payment, where  franchisees pay a monthly fee and keep all fares they collect.” Additionally, “SuperShuttle has little control over the means and manner of the franchisees’ performance while they are actually driving and that SuperShuttle’s compensation is not related at all to the amounts of fares collected by the franchisees.” Their “Unit Franchise Agreement” states they are independent contractors.

The case will have major impact for companies of all kinds, not just franchisees. 

Source: FedEx Home Delivery, 361 NLRB No. 55 (

DOL lifts its 80-20 rule for tipped employees

The Fair Labor Standards Act sets a minimum wage, but it allows employers to take a credit, i.e., pay below the minimum wage, for tipped employees.

To prevent abuse of the tip credit, the DOL under President Obama announced its 80-20 rule, which provided that the tip credit was not available, i.e., the tipped employee must be paid the full minimum wage, if 20% or more of their time is spent performing non-tippped work.

Now, instead of placing a time limit on non-tipped work, the DOL will permit a tip credit if non-tipped work is “performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

Source: DOL opinion letter no. FLSA2018-27 (11/8/18).

Honored to be named in Best Lawyers for 2019!

Honored to be named in Best Lawyers for 2019!

Reminder to provide compliant sexual harassment and other EEO-related training

As the new year begins, employers should consider reviewing their training regimen. A number of jurisdictions require sexual harassment and/or EEO-related training, including California, Connecticut, Delaware, Maine, New York State, and New York City. Even more encourage employers to provide training, and in all 50 states and the federal judicial system, training is a vital component of a possible defense in the event of litigation.

Employers are reminded not to simply engineer their own training programs, as some jurisdictions, such as California, specify minimum content and training qualifications.

Likewise, employers should not assume that recent training will suffice. For example, in 2018 California, which has confirmed it requires such training for both non-supervisors and supervisors, amended its 2004 sexual harassment training law, to require training, at least every two years, to all new and current employees, starting in 2019, even if the employee was also trained on sexual harassment in 2018.

FLSA’s anti-retaliation provisions permit lawsuits against persons, including entities, even if not enterprises within interstate commerce

The Tenth Circuit held that, unlike its other provisions, FLSA’s anti-retaliation provision applies to persons whether or not they are engaged in interstate commerce. In the case, two workers became convinced that their employer owed them overtime under federal law (FLSA, the Fair Labor Standards Act). They complained to the DOL, were fired and the DOL sued the company alleging that the discharges were retaliation for cooperating with the DOL’s investigation.

FLSA’s overtime (and other provisions) apply only to employers who are engaged in interstate commerce. Here the company argued it had established it was not. The Tenth Circuit held that, whether it was or wasn’t was irrelevant in a retaliation claim. The court held that, as written, FLSA’s anti-retaliation provisions do not require proof that the defendant is engaged in interstate commerce. The court held, therefore, the company could be sued for retaliation, whether or not it was engaged in interstate commerce.

Source: Acosta v. Foreclosure Connection, Inc., case no. 17-4111 (10th Cir. 2018).

NLRB GC sets goal for 5% reduction in across-the-board casehandling time

NLRB General Counsel Robb announced a goal of reducing Board processing times by 5%. This goal applies to all aspects of the Board’s activities.

I am pleased to announce that the Agency has adopted a Strategic Plan calling for a 5% reduction per year in case processing time. This reduction includes not only case handling in the field, but also applies to the time between issuance of an Administrative Law Judge’s decision and Board Order, and to issuance of a Board Order and closure of the case.

All General Counsel side divisions are subject to this 5% reduction goal, including the Divisions of Advice, Legal Counsel, Enforcement Litigation,1 and Operations-Management in connection with case processing in Regional offices, where a significant number of cases will be affected.

The NLRB GC left it to the Divisions and Regions to determine for themselves how best to reach the 5% goal.

In that regard, I am vesting the Divisions and the Regions with wide discretion to develop systems and processes they believe will enable them to meet the Agency’s strategic goal.

Source: NLRB General Counsel memo no. GC 19-02 (12/7/18).

Supreme Court ruled driver wasn’t required to arbitrate

The Supreme Court held that a driver for a trucking company need not arbitrate wage and related claims, even though the driver is technically an independent contractor, not an employee. In reaching its holding, the Supreme Court, first, decided that such driving falls within the Federal Arbitration Act’s exclusion for transportation workers, meaning, the Court held, the FAA does not apply. The FAA is of course the federal law that permits the arbitration of federal lawsuits. Next, the Supreme Court held that the FAA’s exclusion applies not only to employees but independent contractors.

Applicability of the decision is expected to be argued in a number of pending cases, including lawsuits brought by independent contractors who drive for social media based delivery services.

Source: New Prime, Inc. v. Oliveira, case no. 17-340 (1/15/19).

NLRB requires unions to state explicitly that they will work not to harm neutral employers when threatening “area standards” picketing

When companies work at the same site or even just near each other, a union — unhappy with one of them — may come to feel that actions at that location — such as that particular employer’s wage or benefit levels — are depressing “area standards.” Unions (like everyone) have a right to protest actions that affect their community, even if for example none of their members work for that employer. That is often the case because that particular employer is often a non-union company that the union is trying to organize.

Before commencing their protest activities, the union may warn not only that employer but all the employers at that location. The Board calls those other employers “neutrals.”

The Board require unions who give such warnings to explicitly state that they will work to minimize the impact on neutrals.

A union’s broadly worded and unqualified notice, sent to a neutral employer, that the union intends to picket a worksite the neutral shares with the primary employer is inherently coercive. Without any details, such a notice is ambiguous about whether the threatened picketing will lawfully target only the primary employer or will unlaw- fully enmesh the neutral employer. The neutral would understandably question why the union is sending a strike notice to an employer with no role in the dispute, and this question would reasonably lead it to at least sus- pect, if not believe, that its business would be targeted by the picketing and that it would be prudent to cease doing business with the primary employer to avoid losses. It would be unrealistic to expect neutral employers, many with little experience in arcane common-situs picketing law, to assume the union would avoid enmeshing them in the picketing. Thus, an unqualified picketing threat communicated to a neutral at a common situs is an am- biguous threat, and such an ambiguous threat enables a union to achieve the proscribed objective of coercing the neutral employer to cease doing business with the prima- ry employer—the very object a union seeks to achieve when it makes a blatantly unlawful threat to picket or unlawfully pickets a neutral. Accordingly, as our dis- senting colleague refuses to acknowledge, it is reasona- ble to conclude that when a union sends to a neutral an unqualified and therefore ambiguous notice of its intent to picket a common situs, it does so with an object to coerce the neutral to cease doing business with the pri- mary employer. A union may still lawfully inform a neutral of its intent to picket as long as it qualifies the notice by clearly indicating that its picketing will comply with legal limitations on such picketing.

Source: Electrical Workers IBEW Local 357, N.L.R.B., Case 28-CC-115255, 12/27/18

Shutdown shuts down E-Verify

DHS has shut down E-Verify during the pendency of the current government shutdown. DHS explains:

E-Verify Accounts Inaccessible

While E-Verify is unavailable, employers will not be able to access their E-Verify accounts to:

  • Enroll in E-Verify;
  • Create an E-Verify case;
  • View or take action on any case;
  • Add, delete or edit any user account;
  • Reset passwords;
  • Edit company information;
  • Terminate accounts; and
  • Run reports.

Also, employees will be unable to resolve E-Verify Tentative Nonconfirmations (TNCs).

What’s an employer to do? For starters, DHS has suspended the 3-day deadline, which normally would require an E-Verify case to be commenced within the deadline for completing I-9’s, i.e., within the first three business business days following hire. Here is DHS’ list of accommodations and advice for employers during the shutdown:

  • The “three-day rule” for creating E-Verify cases is suspended for cases affected by the unavailability of E-Verify.

  • The time period during which employees may resolve TNCs will be extended. The number of days E-Verify is not available will not count toward the days the employee has to begin the process of resolving their TNCs.

  • We will provide additional guidance regarding “three-day rule” and time period to resolve TNCs deadlines once operations resume.

  • Employers may not take adverse action against an employee because the E-Verify case is in an interim case status, including while the employee’s case is in an extended interim case status due to the unavailability of E-Verify.

  • Federal contractors with the Federal Acquisition Regulation (FAR) E-Verify clause should contact their contracting officer to inquire about extending federal contractor deadlines.

Source: See the DHS’ web page regarding the impact of the current shutdown on E-Verify, https://www.e-verify.gov/e-verify-and-e-verify-services-are-unavailable

Tenth Circuit holds that the False Claims Act protects only individuals who are employed at the time of retaliation

The Tenth Circuit held that the False Claims Act (FCA) protects only individuals who are employed at the time of the alleged retaliation. In this case, the employee left the employer complaining of what she believed were violations of the False Claims Act. She then entered into a settlement, in which she promised not to disparage her former employer. The company believed she proceeded to do just that — disparage it — and sued. She responded by, well, suing, alleging that the company’s lawsuit against her was retaliation prohibited by the FCA. The Court held that the FCA did not apply to her claims. The Court held that that FCA protects “only persons who were current employees when their employers retaliated against them.” Since, by that point, she was a former employee, she was no longer protected by the FCA; even if the company’s lawsuit were construed as retaliation, it was not retaliation prohibited by the FCA.

However, the Tenth Circuit cautioned that its ruling doesn’t mean all “former employees” lack FCA protection. Instead the question is whether the individual was employed at the time of the alleged retaliation. “If that condition is met, it doesn’t matter whether the employee remains a current employee of the employer when suing.”

Source: Potts v. Center for Excellence in Higher Education, case no 17-1143 (10th Cir. 2018)

Impact of Supreme Court’s Janus decision continues to expand, even beyond labor law

Bloomberg BNA published an interesting article looking at the expanding reach of the Supreme Court’s Janus decision in 2018, which held that public employers could not, under the First Amendment, be required to pay union dues or even a service fee. Many have predicted that Janus will have a major impact on unions in America. Its application to unionized workforces in the private sector is already being litigated. Bloomberg BNA’s article notes that its impact is expanding even beyond labor law:

  • Legal commentators are debating whether it has heightened the protections afforded commercial speech under the First Amendment. Historically commercial speech has of course enjoyed less protection than political speech.
  • It may have rendered unconstitutional laws in states that require attorney bar membership.
  • It may mean that statutes, like Title VII, which require one party to pay the other’s attorney fees are unconstitutional.
  • It may have rendered the NLRB’s longstanding rules that require, within limitations, that employers sometimes allow workers to wear political or pro-union buttons in the workplace.

D.C. Circuit confusingly has affirmed the Obama Board’s Joint Employer doctrine

The D.C. Circuit has affirmed the Obama Board’s Joint Employer doctrine, which holds that “indirect” control is sufficient to establish Joint Employer status. The rule has proven to be exceptionally controversial and politically sensitive, so much so that the Trump Board has already announced it will be issuing a formal regulatory rule to address the issue.

While the dissent in the D.C. case would have preferred to remand the case and let the Board issue its own rule, the majority decided to tackle the issue head on, or nearly so, or actually not at all head on. Rather the D.C. Circuit’s decision has left employers, unions and individuals more confused than ever over the current status of the law.

The majority held that, as a general principle, the Obama Board had been within its rights to re-articulate the Joint Employer rule in a way that made “indirect” control sufficient to establish Joint Employer status.

We hold that the right-to-control element of the Board’s joint-employer standard has deep roots in the common law. The common law also permits consideration of those forms of indirect control that play a relevant part in determining the essential terms and conditions of employment. Accordingly, we affirm the Board’s articulation of the joint-employer test as including consideration of both an employer’s reserved right to control and its indirect control over employees’ terms and conditions of employment.

What exactly is “indirect” control? That’s been the issue throughout the evolution of this controversial issue, and unfortunately the D.C. Circuit offered no guidance. It simply chided the Board for not, itself, having offered such “legal scaffolding” and suggested that an appropriate standard will somehow distinguish between control over the “matters governing essential terms and conditions of employment” versus “those types of employer decisions that set the objectives, basic ground rules, and expectations for a third-party contractor.”

Employers, unions and individuals are left now to wait for the NLRB to issue its own rule. When the NLRB develops its own rule, one thing seems clear from the D.C. Circuit’s decision, it cannot simply ignore “indirect” control.

A categorical rule against even considering indirect control—no matter how extensively the would-be employer exercises determinative or heavily influential pressure and control over all of a worker’s working conditions—would allow manipulated form to flout reality.