Effective July 1, 2019, the District of Columbia minimum wage will increase to $14.00 per hour, from the current $13.25 per hour. The new rate will apply to all employers, regardless of size. The upcoming increase to the minimum wage is part of a series of increases that began with the passage of the District’s “Fair Shot Minimum Wage Amendment Act of 2016.” The rate will increase again to $15.00 per hour on July 1, 2020 and then increase in successive years starting in 2021 in proportion to the Consumer Price Index increase.

The base minimum wage for tipped employees also will increase on July 1 to $4.45 per hour. If an employee’s averaged weekly hourly tip earnings, added to the base minimum wage, do not equal the new minimum wage, the employer must make up the difference.

Approximately 20 states have increased or will increase their minimum wage rates in 2019, which follows similar increases in 2018. The District of Columbia’s minimum wage rate is among the highest rates in the country.

District of Columbia employers with minimum wage employees should adjust their practices as appropriate.

Many employers offer paid parental leave policies to employees, affording new parents paid time off to care for a new child. Though some employers offer paid parental leave to both new mothers and fathers of equal length, many others offer substantially longer leaves to primary caregivers. Bifurcated parental leave policies for primary and non-primary caregivers are not illegal per se. However, employers should be cautious to ensure that their policies do not rely upon sex-based stereotypes to make classifications and allocate benefits.

Title VII of the Civil Rights Act of 1964 (“Title VII”) makes it “an unlawful employment practice for an employer … to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s … sex.” In effect, Title VII prohibits employers from making classifications or implementing policies that intentionally discriminate based on sex, including any sex-based classifications or sex-based stereotypes exhibited through the administration of employee benefits, such as paid parental leave policies. Numerous states, including New York, California, and New Jersey, also have their own laws that prohibit discrimination against employees on the basis of sex with regard to compensation, terms, conditions, or privileges of employment.

There has been an uptick in lawsuits by male employees alleging that their employer’s paid parental leave policies unlawfully discriminate against fathers by presumptively offering longer periods of paid parental leave to mothers. An example of such a policy is where “biological mothers” are provided 10 weeks of paid parental leave and “biological fathers” only 2 weeks. Or, a policy that provides “primary caregivers” longer periods of paid leave than “non-primary caregivers” and assumes that the “primary caregiver” is a female. That is, a policy that puts a greater burden on a male to show that he is the “primary caregiver.” Why? Because such a policy presumptively qualifies women as a “primary caregiver,” and thereby allocates benefits differently based on the sex of the employee.

In light of the current climate, all employers should carefully examine their policies to ensure that they administer parental leave and related return-to-work benefits in a manner that ensures equal benefits for male and female employees and utilizes sex-neutral criteria and procedures. The Hogan Lovells employment team has extensive experience drafting and advising on employment policies, and is prepared to assist with any questions or concerns. For more information about the above, or any other legal issues in the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

In an Opinion Letter released on Tuesday, May 14, the Office of the National Labor Relations Board’s General Counsel opined that Uber drivers are not legal “employees” for the purposes of federal labor laws. This opinion, written by Associate General Counsel Jayme L. Sophir, comes less than a month after a similar Opinion Letter was issued by the Department of Labor signaling a trend in favor of federal agencies classifying gig economy employees as independent contractors. Applying the common-law agency test, the Office of the General Counsel concluded that UberX and UberBLACK drivers should be classified as independent contractors rather than employees. In explaining their decision, they noted that factors such as the “virtually unfettered freedom” that drivers had to set their own work schedules, that drivers chose their own work location by choosing where to log into the app, and that drivers could—and often did—work for competitors belied a finding that Uber maintained the sort of control over its drivers that is indicative of an employer-employee relationship.

This decision could significantly curtail certain protections afforded to Uber drivers under federal law including their ability to form a union. That being said, the opinion should not be looked at as precedent with respect to determining whether an employee is misclassified as an independent contractor. This is because many states, including California, Massachusetts, and New Jersey apply a much more employee-friendly standard when determining whether an employee is misclassified. As we have previously noted, this is a pivotal time for the shifting landscape of the gig economy and Tuesday’s Opinion Letter represents a victory for those who believe gig economy workers should be classified as independent contractors rather than employees. The Employment Group at Hogan Lovells is committed to following the latest developments in labor and employment law and will continue to provide updates as they occur.

As part of the international commitments recently assumed by Mexico, on April 29, 2019, the Chamber of Senators approved the Bill through which Several Provisions of the Federal Labor Law and certain secondary laws in matters of Labor Justice, Freedom of Association and Collective Bargaining are amended (the “Reform“). The Reform will enter into force as soon as it is published in the Federal Official Gazette.

Below please find the most relevant pieces of the Reform.

1.  LABOR AUTHORITY

  • The Conciliation and Arbitration Labor Boards (the current labor authority) are eliminated. Labor disputes will be resolved by the Courts which depend on the judicial branch (Labor Courts).
  • The Conciliation and Registry Labor Centers (“the Labor Centers”) will be the Conciliatory Authority in which the parties must appear before starting a labor conflict. Collective Bargaining Agreements at both federal and local levels must be registered before the Federal Conciliation and Registry Labor Center.
  • Modifications to the labor procedure are established, such as: a mandatory initial conciliation stage, new rules for offering and presenting evidence, procedures for the deposit of severance before the Court in the event that a reinstatement is not applicable, rules for the burden of proof, use of technologies during the procedure, among others.
  • The following actions will be considered inappropriate: to require the execution of blank papers at the time of hiring, alteration of a document signed by the employee, and demand the ownership of a collective bargaining agreement without having any workers affiliated to the corresponding Union, among others.
  • The Local and Federal Conciliation Courts and Centers should begin its duties in three years and four years respectively, as of the effective date of the Reform. The registration activities of the Conciliation Centers will begin in the following two years as of the effective date of the Reform.
  • The matters currently in process before the Ministry of Labor and the Labor Boards will be concluded before these authorities, in accordance with the law in force at the time of the beginning of such matters. Likewise, the Labor Board will resolve all the labor processes that begin after the effective date of the Reform until the Labor Courts enter into their duties.

2.  FREEDOM OF ASSOCIATION AND COLLECTIVE NEGOTIATION

  • Unions must adapt their statutes to guarantee union democracy, including the election of the board members through a personal, direct, free and secret vote. The aforementioned must be done within one year as of the entry in force of the Reform.
  • The Federal Conciliation Center will establish a consultation procedure on collective bargaining agreements and the negotiation of annual reviews, including a record of representativeness of the Union, the distribution of such consultation in the workplace and the worker’s approval to the negotiations through a personal, free and secret vote.
  • The collective bargaining agreements currently in place should be reviewed at least once a year during the next four years following the entry into force of the Reform. If this revision is not made within such period and in accordance with the new consultation processes by the workers, the agreement will be terminated.
  • Employers are prohibited from interference with the decision of workers with respect to who should represent them in collective bargaining, or perform any act to exercise control over the union to which the workers belong.
  • If unions incur in extortion acts against employers in order to desist from a strike or claim of ownership, this may result in the cancellation of the union registration, among other penalties.
  • Exclusion clauses for separation of the Union in collective bargaining agreements are prohibited.

3.  NEW EMPLOYER OBLIGATIONS

  • The main obligations for employers effective as of the entry into force of the Reform are the following:
  • Include in the individual employment contracts the beneficiaries of the employees in case of death or disappearance, in terms of the Law.
  • Delivery of salary receipts to workers in printed form, including the breakdown of the earnings and deductions for the time worked, which must be signed by the employees. However, these can be replaced by digital tax receipts (CFDI) and will serve as evidence if they are verified in the Tax Administration Service website.
  • Provide employees with a copy of the collective bargaining agreement and its annual reviews within 15 days after its filing it in the Federal Conciliation Center. The delivery can be evidenced with the signature of receipt of the employee.
  • Implementation of a protocol of anti-discrimination, workplace violence and sexual harassment.
  • Establish and distribute in the work center the procedure requested by the Federal Conciliation Center regarding the consultation of collective agreements and the procedure requested by the Union regarding the negotiations of collective bargaining agreements.
  • New obligations are established for employers in special jobs, such as jobs in the mining industry, crew and aeronautics, field workers, etc.
  • Employers must register domestic workers in the compulsory social insurance regime, once the necessary regulatory adjustments are approved and entered into force.

The Hogan Lovells employment team in Mexico has extensive experience drafting employment and labor contracts, based on the specific needs of the business and the new legal framework. If your employment and labor agreements need to be reviewed in light of this Reform we are ready and able to assist. Should you require specific advice on this Reform and potential implementation, please feel free to contact us.

In Vazquez v. Jan-Pro Franchising Int’l, Inc., the Ninth Circuit revived a decade old wage and hour class action and simultaneously dealt a blow to many employers utilizing independent contractors by holding that California Supreme Court’s “ABC test,” as set forth in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, applies retroactively. We previously covered the prospective impact of Dynamex when the decision was announced just over a year ago.

In Dynamex, the California Supreme Court established a presumption that a worker is an employee unless the employer can show (a) the “worker is free from the control and direction of the hirer in connection with the performance of the work” under the contract and in fact; (b) the “worker performs work that is outside the usual course of the hiring entity’s business;” and (c) the worker is “customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

However, following the Dynamex decision, there remained an unsettled question as to whether Dynamex would only apply prospectively, or retroactively as well. The Dynamex Court previously denied an amicus petition by the California Employment Law Council, without comment, to modify the Dynamex opinion so that the ABC test would only apply prospectively. Today’s Ninth Circuit decision resolved any such ambiguity by holding the ABC test applies retroactively, potentially creating significant retroactive liability that even the most proactive post-Dynamex employer will not be able to avoid.

In its ruling, the Ninth Circuit stated that California has a well-established tradition that judicial pronouncements have a retroactive effect, with the exception being where the judicial decision “changes a settled rule on which the parties…have relied.” In holding the Dynamex decision applies retroactively, the Ninth Circuit held that Dynamex’s ABC test was a “logical extension” and “clarification” of existing law regarding the proper classification of contractors and that its holding was “faithful to the fundamental purpose of California’s wage orders.” The Ninth Circuit also pointed to the Dynamex Court’s decision to deny the amicus petition as strongly suggesting that the usual retroactive application should apply, rather than the exception.

It should be noted that even though there is a trend at the federal level in providing more latitude for employers to classify workers as independent contractors (i.e. the recent U.S. Department of Labor opinion letter finding that service providers in the “gig economy” were independent contractors under the Fair Labor Standards Act (“FLSA”) and not employees as we covered in a post earlier this week), Vazquez serves as a reminder that complying with the federal standard will not absolve companies of potential liability under state law.

Employers waiting with bated breath as to whether Dynamex’s ABC test would apply retroactively now at least have an answer, although certainly not one they were hoping for.

 

 

On May 21 at 1:00 p.m. eastern, the Employment and Executive Compensation Groups of Hogan Lovells will host a one-hour webinar to discuss pay equity laws and compliance issues. A hot-button issue, pay equity is regularly in the news and atop legislative and regulatory agendas in the employment sphere at federal, state and local levels.

Many well-intentioned employers have for some time been conscious of pay equity and are striving to achieve it. However, the issue’s increasing visibility and a recent flurry of legislation have created an aura of uncertainty in the law.

Our webinar – geared toward in-house counsel and human resources personnel but open to anyone – will address the state of pay equity laws and tips for compliance.

Specific topics will include:

  • Recent and potential future legal developments;
  • Application of pay equity laws beyond gender;
  • Ambiguities in the law likely to be litigated;
  • Responding to internal complaints;
  • The potential role of pay equity compliance audits; and
  • The role of the compensation committee.

We hope you will join us.

Click here to RSVP

In a lengthy April 29, 2019 Opinion Letter, the U.S. Department of Labor (“DOL”) examined the relationship between a virtual marketplace company (“VMC”) and its service providers.  Applying a six-factor test derived from U.S. Supreme Court precedent, the DOL opined that the service providers were independent contractors under the Fair Labor Standards Act (“FLSA”)—not employees.

According to the Opinion Letter, the VMC is an online/application-based “referral service that connects service providers to end-market consumers to provide a wide variety of services.”  Among other pertinent facts, the service providers (i) self-certify their experience and qualifications; (ii) are not required to interview or undergo training; (iii) can communicate directly with customers regarding scope, price or time for the project; (iv) can arrange for repeat business directly with the customer; (v) can use other VMCs (including competitors) to connect with customers; (vi) determine the tools, equipment and materials needed for their services; (vii) can hire their own personnel for the work; (viii) can accept as many or as few projects as they wish; and (ix) will only have their relationship with the VMC severed if they commit a material breach, including but not limited to inappropriate behavior, fraud or receiving an aggregate consumer rating below a certain minimum threshold.

Citing U.S. Supreme Court precedent dating back to 1947 (e.g., Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947)), the DOL viewed these facts through a six-factor rubric that holistically assesses the “worker’s degree of independent organization and operation”:

  1. The nature and degree of the VMC’s control;
  2. The permanency of the service provider’s relationship with the VMC;
  3. The amount of the service provider’s investment in facilities, equipment or helpers;
  4. The amount of skill, initiative, judgment or foresight required for the services;
  5. The service provider’s opportunities for profit or loss; and
  6. The extent of integration of the service provider’s services into the VMC’s business.

Noting that the weight assigned to each factor is fact-dependent and that other factors may also be relevant, the DOL found all six factors weighing in favor of independent contractor status.  While the Opinion Letter technically is limited to the facts supplied by the VMC who sought it, it nonetheless signals DOL enforcement priorities and presents a roadmap for other companies who contend that their workers are not employees, but economically independent contractors.

This Opinion Letter is consistent with a shift in policy from the prior administration to the current that began in June 2017, when Secretary of Labor Alexander Acosta withdrew Obama-era DOL guidance that was widely perceived as increasing the chances that courts would rule that gig economy companies employ their workers.  The Opinion Letter comes during a flashpoint for the status of gig economy workers, with a number of significant cases currently on appeal.  The Ninth Circuit and the Third Circuit, for instance, are each currently reviewing district court decisions that Grubhub and UberBLACK drivers, respectively, are properly classified as independent contractors.  See Lawson v. Grubhub, Inc., No. 18-15386 (9th Cir.); Razak v. Uber, No. 2018-01944 (3d Cir.).

Employers in Minnesota should be aware of a key difference between federal and Minnesota employment law. In McBee v. Team Industries, Inc., the Minnesota Supreme Court held that, unlike the federal Americans with Disabilities Act (ADA), the Minnesota Human Rights Act (MHRA) does not require employers to engage in an interactive process before deciding whether to accommodate an employee who claims to have a disability.

The interactive process is a duty that the ADA places on employers and employees alike. In order to discharge this duty, both employer and employee must engage in a good faith back-and-forth in order to determine whether there is a reasonable accommodation that the employer can grant a disabled employee to allow that employee to keep working.

In McBee, the Minnesota Supreme Court held that no such obligation extended to employers under the MHRA. The plaintiff in McBee worked as a machine operator in the defendant’s plant. This job required the plaintiff to regularly move and lift objects that weighed thirty-pounds or more. After sustaining an injury to her spine, the plaintiff’s doctor placed a ten-pound lifting restriction on the plaintiff. The day after informing the defendant of this restriction, the plaintiff met with human resources to discuss possible accommodations and—when none were found—the plaintiff was terminated. The plaintiff brought suit and, on appeal before the Minnesota Supreme Court, she argued that the MHRA required employers to engage in an interactive process and that the defendant failed to meet that requirement. The Minnesota Supreme Court rejected this argument, noting that the MHRA had no such requirement and was not similar enough to the ADA for an analogy between the two laws to be relevant.

The scope of the MHRA and the ADA are similar—but not coextensive—and this decision is particularly significant for employers covered only by the state law. The McBee decision does not impact the duties of employers under federal law, which still requires an interactive process. That being said, while the two statutes have a similar scope, their coverage is not coextensive. For example, the ADA only applies to employers with fifteen employees or more, whereas the MHRA extends to all employers. For those employers covered only by the state law, the McBee decision represents a wholesale change in their duties, not just their potential liabilities.

Following up on our prior posts here and here, after over a month of delays, a federal district court judge has ruled that employers with at least 100 employees (“covered employers”) must submit EEO-1 survey data on employees’ pay and hours worked in 2018 by September 30, 2019.

Judge Tanya Chutkan of the U.S. District Court for the District of Columbia also ruled that covered employers must turn over two years of pay data to the EEOC.  All covered employers will have to submit pay data for 2018 by the September 30, 2019 deadline, and the EEOC has the option to require the submission of 2017 pay data by the September 30 deadline or the submission of 2019 pay data during the 2020 reporting period.  The EEOC must decide by May 3.

As such, the schedule for covered employers to submit their EEO-1 Reports is as follows:

Component 1 (demographic data):  Covered employers must report Component 1 of their EEO-1 Reports by May 31, 2019.  Component 1 includes the number of individuals employed by job category, sex, race, and ethnicity.

Component 2 (pay data):  Covered employees must report Component 2 of their EEO-1 Reports by September 30, 2019.  Component 2 of the EEO-1 Report requires covered employers to report the total number of full-time and part-time employees by demographic categories in each of 12 pay bands listed for each EEO-1 job category based on W-2 earnings. Covered employers must also report the number of hours worked by all of the employees accounted for in each of the 12 pay bands.

 

The Supreme Court ruled on Wednesday that a court cannot force class arbitration unless both the employer and the employee clearly agreed to class arbitration.

In Lamps Plus, Inc. v. Varela, Frank Varela found out his employer Lamps Plus had been hacked and his tax information stolen, resulting in a fraudulent tax return filed in his name.  Varela sued his employer in California federal district court for poor data practices.  He brought a class action lawsuit for himself and the 1,300 other employees affected by the hack.

Lamps Plus moved to compel the case to individual, instead of class, arbitration in light of an arbitration clause in the employment agreement.  The district court agreed to send Varela’s case to arbitration, but rejected Lamps Plus’s request to dismiss his class claim.  Lamps Plus appealed the district court’s decision to authorize class arbitration and the Ninth Circuit affirmed.  Applying California contract law, the Ninth Circuit reasoned that since the contract was ambiguous and Lamps Plus had drafted the clause, any ambiguities should be construed against Lamps Plus and allowed the case to proceed as a class arbitration.

The Supreme Court reversed the Ninth Circuit.  The Court followed its previous Federal Arbitration Act (FAA) decisions in emphasizing that arbitration can only proceed where the parties have agreed to arbitration.  The Court pointed to arbitration’s procedural advantages as a reason to infer actual consent by the parties, but in cases involving class arbitration, the procedural advantages typical of arbitration disappear in the class setting and create the potential for “procedural morass” instead.  For this reason, the Court has looked for clear agreement in class arbitration cases.

For instance, in Stolt-Nielsen in 2010, the Court held that a court could not interpret silence on class arbitration to allow class treatment of individual claims.  Similarly, in cases like Concepcion in 2011 and Epic Systems in 2018, the Court repeated that arbitration only has power through consent and, therefore, parties could both agree to arbitrate claims and to waive class arbitrations without violating any state or federal laws. Here, the Court placed similar emphasis on actual consent and since the Court could not identify a clear agreement to allow class arbitration, it held that such ambiguity, much like silence, did not show a clear agreement to allow class arbitration.

This decision is a big win for employers seeking to avoid class arbitrations and sent a clear message that silence or ambiguity is not the same as consent and consent is needed before a class arbitration can proceed.