Articles Posted in Employment Law

On April 30, 2018, the California Supreme Court sent shock waves through businesses using independent Contractors.  The Court substantially narrowed the existing 30 year old rule for classifying workers as independent contractors under California wage-hour law. In Dynamex Operations West, Inc., the California Supreme Court adopted the “ABC test” which greatly restricts when a worker qualifies as an independent contractor.

Image result for photo misclassification of independent contractor
Under the ABC test, it is presumed that all workers should be classified as employees. The hiring business can show that a worker qualifies as an independent contractor only if the business can show that the worker:

A) is free from the control and direction of the hiring business in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

Intellectual property is best described as the property of the mind. Typically, this includes ideas or designs that are sparked from an individual’s own thoughts and creative processes. For a fresh startup, intellectual property is certainly an important aspect of the business that sometimes gets overlooked during the early stages of development. However, make no mistake, intellectual property is absolutely critical and should be protected from the very beginning. It could make the difference between failure or success.

What Falls Under Intellectual Property?

As mentioned, intellectual property is generally a person’s innovative thoughts and ideas. Some things that can fall under intellectual property may include:

Businesses frequently enter into contracts, whether it is with employees, other businesses, or customers. It is easy to think that the power to contract gives a business the ability to set whatever terms it prefers for an interaction, so long as the other party agrees. However, state law puts some limits on the power of contracting. It is important to consult with an experienced business law attorney before adding new language to the contracts you use to be sure the terms will be enforceable down the road. One example of the laws you need to be aware of when drafting contracts has to do with non-disparagement clauses.

You Cannot Use Non-Disparagement Clauses in Consumer Contracts.

A non-disparagement clause can be extremely appealing to a small business owner. In this day and age, where potential customers rely heavily on online reviewing services, like Yelp, when making decisions about who to do business with, an unfair and unflattering review can sink a small business. To counter this problem, some businesses began including clauses in their contracts with consumers prohibiting the consumer from making negative statements about the company. However, California has now banned these clauses.

Los Angeles Mayor Eric Garcetti proposed this week that the city raise the minimum wage to $13.25 by 2017. The current minimum wage in Los Angeles is $9.00 per hour. This is the minimum wage for all of California, but some cities throughout the state have enacted even higher minimum wages. For example, San Diego has approved a minimum wage of $11.50, and San Francisco voters will decide later this year whether they want to increase that city’s minimum wage to $15 per hour. This potential wage increase of nearly fifty percent in Los Angeles carries with it serious pros and cons that have to be considered both by anyone planning on creating a new business in Los Angeles, or anyone considering expanding a business to Los Angeles.

How Would the Minimum Wage Increase Work?

According to USA Today, the proposed increase would make the minimum wage in Los Angeles one of the highest in the nation. Of course, the mayor cannot act unilaterally, and will need the approval of the City Council to make the increase law. As the proposal stands now, the increased would be gradually phased in. In 2015 it would jump to $10.25, then in 2016 it would increase to $11.75, and finally in 2017 it would increase to $13.75. Then, in the future, additional increases would be tied to the Consumer Price Index for urban wage earners.

A recent federal court ruling offers a good reminder of the many unique claims that may be made against employers by their unhappy employees. All Sacramento business owners–from established enterprises to start ups–should be familiar with their risks before trouble arises.

The Situation

Shaw Rahman was employed by Crystal Equation, a staffing company that assigned him to a job with AT&T. Rahman signed more than one document that specifically described his employment as “at-will,” and stated his employment could be terminated at any time.

Many business owners, particularly start-ups, remain unaware of the complex legal issues involved in employer-employee relationships. It is critical to have guidance on these matters, to understand your risks, rights, and obligation as an employer. Consider employer duties to accommodate employees with disabilities.

For example, a case recently passed through the federal district court system regarding an employer’s failure to accommodate an employee with a disability. The Americans with Disabilities Act (ADA) states that an employer must make reasonable accommodations for an employee with a disability, if such accommodations are possible and do not cause undue hardship. Common accommodations include providing wheelchair accessible offices or meeting spaces, modifying work equipment or schedules, and adapting training procedures or specific job duties. Reasonable accommodation must be made to allow employees to complete the interview process, training programs, and regular job duties.

Gooden v. Consumers Energy Co.

Gawker Media, LLC is an online media company and blog network based in New York City. Last summer, three former interns sued the online publisher in Manhattan federal court, alleging that it violated minimum-wage laws by requiring interns to work at least 15 hours per week without pay. The complaint, which was filed on behalf of all of the company’s unpaid interns and seeks unpaid wages and overtime under the federal Fair Labor Standards Act (FLSA), alleges that “Gawker employs numerous other ‘interns’ in the same way, paying them nothing or underpaying them and utilizing their services to publish its content on the Internet, an enterprise that generates significant amounts of revenue for Gawker.”

Last week, PandoDaily reported that Gawker has begun filing documents in response to the lawsuit, many of which paint the company in a very hypocritical light. In several affidavits, Gawker employees, including managing editors, avert that the interns were rewarded with valuable experience that was all part of an informal training process: “Simply observing what it is like to work at a place like Gawker is valuable, and internships at Gawker sites are good for a person’s resume.” The hypocrisy: Last August, Gawker castigated Facebook COO Sheryl Sandberg for having one of her employees advertise for an unpaid assistant to help Sandberg on her book tour.

The case against Gawker was filed shortly after a federal judge ruled in favor of plaintiffs in a class-action lawsuit filed against Fox Searchlight Pictures in federal court in New York. In that case, two former interns who worked on the film “Black Swan,” claimed that Fox violated federal and state minimum wage and overtime laws. The plaintiffs alleged that they had the duties and responsibilities of regular employees, but did not receive adequate training and supervision, as required by the FSLA (an employer using unpaid interns must provide training and gain “no immediate advantage” from the interns, such as displacing a regular employee by performing his/her duties).

Last week, we discussed several alleged criminal situations involving drivers for California ride-sharing companies, Uber and Lyft, and how the misclassification of workers as independent contractors when they really perform as employees can result in significant legal trouble for your startup or small business. As promised, this week we will discuss what your startup or small business should know about screening applicants and current employees. This is important because, just as the misclassification of workers can result in headaches for your business, so too can bad hiring decisions. As mentioned in last week’s article, one of the Uber drivers who allegedly assaulted a passenger was a convicted felon, but that information never came up during a background search.

Negligent hiring lawsuits are on the rise. If an employee’s actions hurt another, the employer may be liable. Bad hiring decisions can also result in internal issues such as embezzlement or workplace violence against other employees. Thus, it is important for startups and small businesses to be cautious, and background checks are one way to gain some peace of mind. Background checks vary widely in quality, scope, and validity. The Federal Fair Credit Reporting Act (FCRA) sets the national standard for employment background checks. A background check under the FCRA is referred to as “investigative consumer report” and it is limited to personal interviews with friend, neighbors, and business associates. The FCRA applies only to background checks performed by outside companies. If you are a California employer, you are also governed by the Investigative Consumer Reporting Agencies Act (ICRAA), which is broader in scope than the FCRA, as it covers third-party employment screeners as well as employers conducting internal or in-house screenings. Under the ICRAA, the appropriate term for a background check is an “investigative consumer report.” An investigative consumer report includes information about a person’s character, general reputation, and personal characteristics, but does not include credit report information; in California, credit report information can only be requested for certain positions. California employers can delve into an applicant’s criminal history, but may only report criminal convictions dating back seven years, unless another law requires the employer to look further into an applicant’s background. This will depend upon the position.

Pursuant to the ICRAA, California employers must provide notice to individuals undergoing background checks, and the individuals must provide authorization before the employer conducts a screening. California employers must also provide to screened applicants copies of any public records gathered in the process of a background check. Note that the notice requirement under the ICRAA is greater than that required by the FCRA. Additionally, note that last March, a California court found the ICRAA unconstitutionally vague. An appeal of that case is pending, which could alter employer duties/requirements. We will update if necessary.

Last year, we featured several articles about California’s ride-sharing startups. Ride-sharing companies, such as UberX, Lyft, and Sidecar, are in the business of providing vehicles-for-hire. Using apps and other online programs, the companies connect those in need of rides with non-professional drivers driving their own cars. Two of the companies are making headlines, and the news is not so good. According to PandoDaily — the site of record for Silicon Valley — last month, a San-Francisco based Uber driver, Daveea Whitmire, allegedly verbally and physically assaulted one of his passengers who recorded some of the incident on his iPhone. Uber refused to investigate the matter, and insisted that Whitmire had passed the company’s standard background checks. Whitmire’s account has since been deactivated by Uber and evidence has emerged that Whitmire was a convicted felon.

Since Uber entered the market, its drivers have been accused of improper conduct at least three other times. The most recent incident involving an Uber driver occurred on New Year’s Eve, when an Uber driver hit and killed a 6-year-old girl who was crossing the street with her mother and brother. Uber instantly denied culpability. According to PandoDaily, “[i]n nearly all of [the] cases, Uber has responded in the same way, saying it’s not responsible for the conduct of its drivers.” In response to its decision not to investigate, Uber states that “we’re a technology platform that connects riders and providers, so it’s not our job to investigate.” Several Lyft drivers also have been accused of improper conduct, but, unlike Uber, the company apologized to its passengers and promised to investigate the situations; however, just like Uber, Lyft contends that it is not liable because it is merely a “technology platform.”

Uber and Lyft contend that they cannot be held liable for the drivers’ actions because their drivers are not employees but independent contractors. Last August, two Uber drivers filed a class-action lawsuit against the company, claiming that it is stiffing driver’s on tips. The suit addresses the very issue of worker misclassification and seeks recognition that Uber drivers are employees rather than independent contractors. Are Uber and Lyft correct when they say that they cannot be held liable for the actions of the drivers? Can they be sued for negligent hiring or vicarious liability? Even though we will not know the answers to these questions until a court rules, the headlines discussed above raise very important issues for startups and small businesses regarding the classification/misclassification of workers as employees or independent contractors and the importance of properly screening individuals before hire.

With so many items on the “to do” list, new employees at start ups are often immediately thrown into the fire. Everything seems to move at a quicker pace for new companies, and it is common for employees to simply learn as they go and for problems to be ironed out as they arise. It is natural for new workers at these companies to operate differently than those in large, established companies. However, there may be some basic protocols that even brand new companies should take from their established rivals, like decent employee training. The cost in money and time at the outset often proves to be a lifesaver for new businesses down the road. justice.jpg

Lessons from the Mayor

One of the most high-profile California stories this month involved lawsuits filed against San Diego Mayor Bob Filner. As many know, several female staff members recently came forward, claiming that the Mayor engaged in egregious conduct and sxual harassment. The case took on unique legal arguments when Filner’s own attorney argued in a letter to the San Diego attorney, that the city lawyer should defend the suit with public funds, because the city failed to provide the Mayor with sexual harassment training.