Passing AB 1897 Means Greater Liability for Employers Who Use Labor Contractors

Editor’s Note: The following post appears in the latest issue of the California HR Newsletter.

Passing AB 1897 Means Greater Liability for Employers Who Use Labor Contractors

The Issue:  Today, many employers rely on labor contractors or temporary employment agencies to sustain their operations.  Occasionally, however, labor contractors fail to comply with labor laws and regulations by failing to (1) pay wages; (2) report and/or pay all required contributions and personal income tax withholdings; and (3) secure workers compensation for subcontractors.  In such cases, are employers liable to subcontractors for these types of violations of their labor contractors?

The Solution:  Historically, for the most part, no.  However, California Assembly Bill (“AB”) 1897, a proposed law currently before the Assembly, would impose joint liability on employers for the violations of their labor contractors.

Analysis:  On April 24, 2014, AB 1897 was passed by the state Assembly’s Labor and Employment Committee and will soon be considered by the Assembly’s Committee on Appropriations.  The bill would greatly expand an employer’s duties by requiring employers to share with their labor contractors all responsibility and liability for the following: the payment of wages, the failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings, and the failure to obtain valid workers’ compensation coverage.  This could have a significant impact on employers who depend on labor contractors for any number of functions, e.g., to fill seasonal or short-term work schedules, cover for employee absences, avoid layoffs, and pre-screen employees.

While the law currently prohibits employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, if the employer knows or should know that the agreement does not include sufficient funds for the contractor to comply with laws or regulations governing the labor or services to be provided, AB 1897 would expand liability for the above mentioned violations to all industries and all individuals who contract for labor or services.  This bill would impose seemingly strict liability on any individual or entity that obtains or uses subcontractors from a labor contractor to perform work “within the usual course of business of the individual or entity.”  As such, if AB 1897 were to pass, it would particularly burden small businesses, those without dedicated human resource or legal departments, due to their heavy reliance on contract and temporary employees.

The silver lining is that AB 1897 would not prohibit employers from agreeing to any otherwise lawful remedies against labor contractors for indemnification from liability created by acts of the labor contractor. Employers cannot, however, shift to labor contractors any of their responsibilities under the California Occupational Safety and Health Act.  Labor contractors will also have the same opportunity to contract with employers for indemnification. Furthermore, the bill will provide that any waiver of its provisions is contrary to public policy and unenforceable.  If AB 1897 becomes law, employers should be especially cautious in selecting a labor contractor and determine what level of contractor evaluation may limit their risk for non-compliant contractors.  Unwary employers face the danger of liability for a labor contractor’s failure to meet these requirements.

No More No-Gossip Policies?

A National Labor Relations Board (NLRB) administrative law judge ruled recently that the “no-gossip” policy of Laurus Technical Institute, a for-profit technical school located in Georgia, broke federal law because it was overly broad, ambiguous and restricted employees from discussing or complaining about any terms and/or conditions of employment, even though nothing in Laurus’s policy directly addressed discussions about wages, hours or other employment terms and conditions.

Kate Gold, partner in the Los Angeles office, recently told Human Resource Executive Online during an interview on the topic of the Laurus decision and no-gossip policies for employers, “Though the NLRB has been focused on other policies that could violate an employee’s right to engage in protected concerted activity — such as social media or confidentiality policies — no-gossip policies can be especially problematic.”

Kate went on to say “I would not include it among the top 10 or even the top 20 essential policies an employer should include in a handbook or policy manual, such as an at-will, anti-harassment or reasonable accommodation policy. However, given the type of concern raised by a no-gossip policy, there could be other employer policies that are problematic for the same reasons. The issue raised by an overbroad no-gossip policy is whether it constitutes an unlawful restriction on an employee’s right to engage in protected concerted activity under Section 7 of the National Labor Relations Act.”

For the full text of the article click here.

President Obama Signs Two Executive Orders to Limit Workplace Discrimination

On April 8, 2014, at an event commemorating National Equal Pay Day (an annual public awareness event that aims to draw attention to the gender wage gap), President Obama signed two executive orders designed to limit workplace discrimination.  The first prohibits federal contractors from retaliating against workers who discuss their salaries with one another, while the second instructs the Department of Labor to establish new regulations requiring federal contractors to submit summary data on compensation paid to their employees, including breaking down the data by gender and race.

The protections offered by the anti-retaliation Order overlap with many already existing under state and federal law.  For example, the NLRA protects employees’ right to engage in “concerted activities” and thus already prohibits employer discipline against employees who discuss their wages.  Further, some state laws, such as California Labor Code §232, already preclude an employer from disciplining an employee who discloses the amount of his or her wages.  Nonetheless, the Order may add to these protections, such as by expanding them to management employees (who are not protected by the NLRA), and providing an alternative option for bringing retaliation claims (i.e., through the Office of Federal Contract Compliance Programs rather than the NLRB).

The effects of the Order requiring the collection of compensation data will be unclear until the regulations themselves are formulated.  Based on the Order’s mandate to “avoid new record-keeping requirements and rely on existing reporting frameworks to collect the summary data” and to develop regulations that “minimize, to the extent possible, the burden on Federal contractors and subcontractors,” it is possible that the federal government will require that the data be submitted along with a federal contractors’ annual EEO-1 Report.

The President’s signing of these Orders appears to tie into the White House’s previously announced plans to accelerate change in areas it believes are within the authority of the Executive Branch, without the need for legislation.  Indeed, the Orders’ provisions mirror parts of the Paycheck Fairness Act (“PFA”), a proposed piece of legislation that would add procedural protections to the EPA and the FLSA to address male–female income disparity.  (The PFA came up for a vote in the U.S. Senate on April 9, 2014, where it was blocked by a Republican filibuster).  Similarly, in February 2014, President Obama issued an Order raising the minimum wage for federal contractors, at a time when Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) were urging a bill to raise the federal minimum wage to $10.10 per hour and index it to inflation.  Then, in March 2014, President Obama directed the Labor Department to revamp regulations governing which types of employees business may classify as overtime-exempt “executives” or “professionals.”  With regard to the Order requiring the collection of compensation data, the OFCCP has been working internally on releasing a proposed compensation data collection tool for the past three years.  See http://www.dol.gov/ofccp/Presentation/Compensation_Data_Collection_Tool.htm (publicizing the OFCCP’s August 10, 2011 Advance Notice of Proposed Rulemaking regarding a new compensation data collection tool).

The high profile nature of the Orders provides yet another impetus for employers to evaluate their existing policies, and plan for the future.

What Happens at Work Stays at Work – The California Employer’s Approach To A National Program for Restrictive Covenants and Trade Secret Protection

Partners in the firm’s Los Angeles office recently presented to the Southern California Chapter of the Association of Corporate Counsel a program titled “What Happens at Work Stays at Work – The California Employer’s Approach To A National Program for Restrictive Covenants and Trade Secret Protection.”

The presentation, which was broadcast to in-house counsel viewing in three separate locations spread out around southern California, first looked at the California landscape, giving a refresher and update on non-competition agreements, customer and employee non-solicitation, identifying and pleading trade secrets and misappropriation.

The presentation then looked at considerations for a multi-jurisdictional approach to trade secret protection, including best practices for effective corporate policies and confidentiality and property protection agreements.

The presentation concluded by addressing social media in a trade secret protection program, including Twitter, LinkedIn, and BYOD, and making the most of choice of law and forum selection clauses in restrictive covenants.

A copy of the presentation can be downloaded here.

New Jersey’s Whistleblower Law Is Not An End Run Around Labor Law Preemption

New Jersey’s Appellate Division has rejected two Atlantic City nightclub workers’ attempts to artfully plead their way around preemption under the National Labor Relations Act (NLRA) and the Labor Management Relations Act (LMRA) by alleging a whistleblower claim under New Jersey’s Conscientious Employee Protection Act (CEPA). The case was brought by two “Tipped Floor Euros,” i.e., alcoholic beverage servers, who alleged retaliation and constructive discharge following their complaints regarding tip-pooling, wage payments and being forced to perform duties prohibited by the collective bargaining agreement (CBA). The case is O’Donnell v. Nightlife, et al. (April 17, 2014).

In rejecting the plaintiffs’ CEPA claims, the Appellate Division took a narrow view of the whistleblower statute, citing the standard that the conduct complained of must “pose a threat of public harm, not merely private harm or harm only to the aggrieved employee.” [Opinion, p. 11, available here, citing Mehlman v. Mobil Oil Corp., 153 N.J. 163, 188 (1988)] The Appellate Court agreed with the trial court that most of the plaintiffs’ complaints alleged violations of the CBA, not violations of law, and accordingly, not violations of CEPA.

The Appellate Division also took a broad view of preemption under the NLRA and LMRA. The Court gave credit to plaintiffs’ attempts to “artfully phrase” the language in the complaint – alleging that failure to pay the share of the nightly tip pool constituted “fraud” and failure to pay full minimum wage for non-tipped work constituted a “violation of [New Jersey] wage and hour laws.” However, the Appellate Division ultimately ruled that such state causes of action are presumptively preempted under NLRA and LMRA and were appropriately dismissed as preempted because they each ultimately asserted violations of the CBA or claims that required interpretation of the CBA.

Accordingly, based on this precedent, a unionized employee’s remedy lies not under CEPA but through the union grievance procedure and the relief available under Sections 7 and 8 of the NLRA.

Philadelphia Pregnancy Accommodation Law: Notice Requirement Begins on April 20, 2014

On January 20, 2014, Philadelphia Mayor Michael Nutter signed into effect an amendment to the city’s Fair Practices Ordinance: Protections Against Unlawful Discrimination that expressly includes pregnancy, childbirth, or a related medical condition among those categories protected from unlawful discrimination.

The city law covers employers who do business in Philadelphia through employees or who employ one or more employees.  Before this amendment, employers’ obligations under city, state, and federal antidiscrimination laws only required them to treat employees with pregnancy-related issues no worse than any other disabled employee with respect to accommodations.  Now employers are not only prohibited from denying or interfering with an individual’s employment opportunities on the basis of pregnancy, childbirth, or related medical conditions, but employers also are required to make reasonable accommodations on these bases to an employee who requests it.  The legislation’s non-exhaustive examples of reasonable accommodations include restroom breaks, periodic rest for those who stand for long periods of time, assistance with manual labor, leave for a period of disability arising from childbirth, reassignment to a vacant position, and job restructuring.  Employers have an affirmative defense under the law for failing to accommodate an employee if such accommodations would cause an undue hardship.

Employers should take note that this law increases the burden on them to provide reasonable accommodations, since examples like reassignment and job restructuring have traditionally not been required under similar federal and state laws that mandate accommodations for individuals with disabilities.  Thus, employers should review their policies and other written materials regarding employee accommodations to ensure that they reflect the increased protections afforded by the amendment.  Employers were required to provide written notice to its employees of the protections under this amendment by April 20th or post the notice conspicuously at its place of business in an area accessible to employees.  The Philadelphia Commission on Human Relations has provided a model notice to employees, which can be found at: http://www.phila.gov/HumanRelations/PDF/pregnancy_poster.pdf.

©2024 Faegre Drinker Biddle & Reath LLP. All Rights Reserved. Attorney Advertising.
Privacy Policy