Employment Law

Does The ADEA Permit Disparate Impact Suits by Applicants? Eleventh Circuit Says Yes

Why it matters

The Eleventh Circuit Court of Appeals created a circuit split with a decision that the Age Discrimination in Employment Act (ADEA) allows disparate impact lawsuits by job applicants. Forty-nine-year-old Richard Villarreal applied for a position with R.J. Reynolds Tobacco Company but received no response. Approximately two years later, he filed a class action suit against the employer for allegedly violating the ADEA, claiming that R.J. Reynolds used unlawful age-related recruiting characteristics. A federal court judge dismissed Villarreal's disparate impact allegations, ruling that the ADEA permits such claims only from current employees. On appeal, a divided panel of the Eleventh Circuit reversed. Finding the language of the statute unclear, the majority deferred to the Equal Employment Opportunity Commission's (EEOC) interpretation of the law to hold the ADEA does allow disparate impact suits by applicants. The panel further ruled the plaintiff was entitled to equitable tolling of his claim because he hadn't learned about the age-related recruiting characteristics until after the statute of limitations had run. A dissenting opinion said the majority's decision "has the potential to create bad law in two important areas," noting that the majority reached a different conclusion than three other federal appellate courts to consider the issue.

Detailed discussion

In 2007, at the age of 49, Richard Villarreal applied for a Territory Manager position with R.J. Reynolds by submitting an online application. The company never responded. More than two years later, in May 2010, Villarreal filed a charge of unlawful discrimination with the EEOC alleging R.J. Reynolds had discriminated against him on the basis of age.

While his charge was pending, Villarreal applied for a Territory Manager position five more times and was rejected each time. He filed a federal class action lawsuit under the ADEA raising both disparate treatment and disparate impact claims.

For support, he pointed to "resume review guidelines" used to screen applicants to R.J. Reynolds, including an instruction for hiring managers to target candidates "2 to 3 years out of college" and another to "stay away from" candidates with 8 to 10 years of prior sales experience. Villarreal told the court he learned of these guidelines only one month prior to filing his EEOC charge and therefore the 180-day limitations period under the ADEA should be equitably tolled.

A federal district court judge dismissed the disparate impact claims entirely, finding that the ADEA allows such claims to be brought only by existing employees, and refused to toll the statute of limitations, dismissing the disparate treatment claims for any applications prior to 180 days before Villarreal filed his charge.

The plaintiff appealed to the Eleventh Circuit Court of Appeals and a majority of the panel reversed dismissal.

Section 4(a) of the ADEA makes it unlawful for an employer "(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age" or "(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age."

In 2005 the U.S. Supreme Court considered the two provisions in Smith v. City of Jackson, Miss., with the justices concluding that the ADEA authorizes disparate impact claims for both applicants and employees under Section 4(a)(1). However, Villarreal brought his disparate impact claims under Section 4(a)(2) and the parties disagreed about whether that provision applies only to employees or also encompasses job applicants.

Villarreal argued that Section 4(a)(2) covered his allegations, as the defendant "limited" its employees because it deprived an individual like him of an employment opportunity. R.J. Reynolds countered that Section 4(a)(2)'s reference to "any individual" applies only to the employer's existing workers, following the provision's earlier use of the term "his employees."

The Eleventh Circuit found both readings of the statute reasonable and turned to other interpretations of the statute. Congress amended Title VII to add the words "or applicants for employment" to language that parallels that found in the ADEA's Section 4(a)(2), the court noted, but did not amend the ADEA in a similar fashion. The court also recognized that two concurring opinions in Smith referenced the fact that only Section 4(a)(1) protects applicants but characterized the justices' comments as dicta in nonbinding concurrences.

Finally, the majority considered whether the agency tasked with enforcement of the ADEA has provided a reasonable reading of the provision at issue. Deferring to the EEOC's views, the panel found that the agency's regulations do not distinguish between prospective and existing employees and extends disparate impact liability to all "individuals within the protected age group." The EEOC first stated this view in 1981, confirmed it in a 1995 brief to the U.S. Supreme Court, and reiterated this interpretation in its amicus brief in the case at hand, the panel said.

R.J. Reynolds countered that the regulation was not relevant to the instant litigation because it interpreted a separate provision of the ADEA and did not squarely address the question presented by Villarreal. But the majority rejected this position, as "we still owe deference to the EEOC's view because the agency has reasonably and consistently insisted on this view for decades."

With the disparate impact claims back on the table, the panel next found that equitable tolling should apply to the disparate treatment claims dismissed by the lower court. Only once Villarreal engaged legal counsel did he learn about R.J. Reynolds' resume review guidelines and hiring practices, the majority said, and he could not have known about the discrimination until he acquired that knowledge.

The standard of a "reasonably prudent" person in ADEA cases does not require misrepresentation by the employer, the court added. "[T]here are circumstances other than concealment and misrepresentation which place relevant facts beyond the reach of a reasonably prudent victim of discrimination," the panel wrote. "In these cases the ultimate question is not whether an employer deliberately hid facts. Rather, we ask whether reasonable prudence would have resulted in the plaintiff uncovering hidden facts earlier."

Villarreal's failure to ask R.J. Reynolds why he was not hired in 2007 did not doom his claim, the court said, and his "mere suspicion" of age discrimination, unsupported by personal knowledge, did not trigger the limitations period. Instead, the clock began to run when he had enough information to support his cause of action, which occurred shortly before he filed his federal complaint.

A dissenting opinion criticized the majority for being the only court ever to find that Section 4(a)(2) authorizes disparate impact claims brought by job applicants, citing the Smith concurrences and decisions from the Seventh, Eighth, and Tenth Circuits as well as federal district courts in Illinois and Missouri for support. The dissenting judge also found the equitable tolling of the statute of limitations "contrary to well established law," and lowered the standards of what was supposed to be an "extraordinary remedy."

The majority opinion "has the potential to create bad law in two important areas," the dissent argued.

To read the opinion in Villarreal v. R.J. Reynolds Tobacco Company, click here.

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In New York City, Caregivers Are a Protected Class and Regulatory Guidance Released on Transgender Rights

Why it matters

The New York City government was busy over the holidays, with an amendment to the Human Rights Law establishing caregivers as a protected class and the Commission on Human Rights issuing guidance on transgender rights, among other developments. The City Human Rights Law defines a caregiver as "a person who provides direct and ongoing care for a minor child or care recipient," such as an individual with a disability who lives in the caregiver's household or a covered relative who relies on the caregiver for medical care or the needs of daily living. With the recent signature of Mayor Bill de Blasio, New York City joined Westchester County and Newark, New Jersey, among other jurisdictions, with caregiver protection laws.

Just prior to the end of the year, the Commission on Human Rights released "Legal Enforcement Guidance on Discrimination on the Basis of Gender Identity or Expression," offering specific examples of conduct considered to be unlawful along with tips for employer compliance. For example, employers that refuse to use a transgender employee's favored name, pronoun, or prefix or prohibit a transgender employee from using a single-sex bathroom or locker room violate the city's law prohibiting discrimination against transgender individuals, the Commission said. Employers in New York City should familiarize themselves with the new law and the new guidance. Companies with employees outside the city should also take note because the New York State Division of Human Rights recently issued a Notice of Proposed Rule Making containing similar gender-related protections under the state Human Rights Law.

Detailed discussion

The new year in New York City will bring more changes for employers, in particular with regard to the New York City Human Rights Law. Late in 2015 the New York City Council passed a bill that added caregivers as a protected class under the Human Rights Law, prohibiting discrimination against those who care for children, elderly parents, and other members of the household. Mayor Bill de Blasio signed the bill into law on January 5, 2016.

Defining a "caregiver" as "a person who provides direct and ongoing care for a minor child or care recipient," the statute explains that a "care recipient" includes an individual with a disability who "(i) is a covered relative, or a person who resides in the caregiver's household; and (ii) relies on the caregiver for medical care or to meet the needs of daily living." The definition of "care recipient" is very broad; the person being cared for need not be a member of the employee's family as long as the other requirements of the law are met. The new law does not define what constitutes "direct and ongoing care," however.

By adding caregivers as a protected category under the city's Human Rights Law, the bill prohibits discrimination on the basis of caregiver status, actual or perceived, by employers, their agents, employment agencies, and labor organizations. Because the law does not specify what constitutes discrimination or an employer's obligations with respect to caregivers, it seems very likely that the Commission on Human Rights will weigh in on this issue. The bill will take effect on May 4, 2016, adding New York City to a growing list of jurisdictions (including multiple cities in New Jersey and Westchester County, New York) that have adopted similar caregiver protection laws.

In other developments, the New York Human Rights Commission released new guidance for employers with regard to transgender employees. The "Legal Enforcement Guidance on Discrimination on the Basis of Gender Identity or Expression" offers specific examples of actions that the Commission considers discriminatory as well as best practices to achieve compliance with city law.

The guidance begins with a glossary of terms, ranging from gender identity (a separate concept from sex assigned at birth and distinct from sexual orientation) to gender expression (the representation of gender expressed through pronouns, body characteristics, or hair, for instance) to transgender (a term used to describe a broad range of identity or expression for an individual who typically associates with the sex not assigned at birth).

Several examples of unlawful discrimination were set forth by the Commission, including failing to use an individual's preferred name, pronoun or title (repeatedly calling a transgender woman "him" or "Mr." after she has made clear she prefers a female pronoun and title) and refusing to allow individuals to utilize single-sex facilities and programs consistent with their gender (such as requiring a transgender individual to provide proof of his or her gender to access a restroom).

Sex stereotyping—including imposing different uniforms or grooming standards based on sex or gender—was also frowned upon by the guidance. The Commission will find a violation of law where dress codes or appearance standards impose different requirements for individuals based on sex or gender, with employers encouraged to create gender-neutral codes and standards.

Gender should not be a consideration when evaluating a request for accommodation and employee benefits should not discriminate based on gender, the guidance noted, with harassment and retaliation similarly prohibited.

It seems likely that employers elsewhere in the state will soon need to comply with similar (albeit less detailed) regulations proposed by the state Division of Human Rights.

To read the City Council's bill, click here.

To read the Commission's guidance, click here.

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No Monetary Loss, No FMLA Claim, Eighth Circuit Holds

Why it matters

Because the Family and Medical Leave Act (FMLA) limits damages to actual monetary loss suffered by the plaintiff, the Eighth Circuit Federal Court of Appeals affirmed summary judgment for an employer. Over the course of her employment, a registered nurse took FMLA leave on seven occasions. After undergoing neck surgery, the employee maximized her FMLA leave and was then unable to return to work, as she was physically unable to perform her job. She was terminated and responded with a lawsuit alleging that the employer interfered with her statutory rights and retaliated against her for taking FMLA-protected leave with a negative evaluation, corrective actions, and a paid suspension. A district court judge granted summary judgment for the employer and the federal appellate panel affirmed. The plaintiff received more than three times the amount of leave required by law prior to her termination, the Eighth Circuit noted, refuting her theory she was denied leave under the statute. Further, she failed to demonstrate actual monetary loss, as she was physically unable to perform her job after neck surgery and was paid for her suspension, leaving her without a loss.

Detailed discussion

Bonnie Hasenwinkel sued Mosaic, her former employer, for allegedly interfering with her rights under the FMLA and for allegedly terminating her employment in violation of the statute. Hasenwinkel worked as a registered nurse for the company, which operates group living and nursing care facilities for adults with intellectual disabilities.

During the course of her employment, Hasenwinkel obtained leave under the FMLA on seven occasions for knee surgery, to treat depression, undergo a heart procedure, and recover from neck surgery. She also took intermittent FMLA leave to attend physical therapy and care for her ailing father.

Mosaic never rejected an explicit request from leave. Hasenwinkel claimed that the employer forced her to return from FMLA leave and punished her for taking it when she was being treated for chronic depression. However, the record contained no evidence that she asked permission to be absent on the dates at issue. Not long after, Hasenwinkel received a "needs improvement" rating in one of 40 evaluative categories.

In addition to this unsatisfactory rating, she claimed that three formal corrective actions were taken against her as retaliation for taking FMLA leave. She was written up for failing to train staff members and for practicing on an expired nursing license and was suspended for one month for failing to follow the company's policy on reporting health concerns. A resident reported mold in the basement of a group home and instead of reporting it to Mosaic, Hasenwinkel used a petri dish to collect and culture the mold herself.

When her suspension was concluded, Mosaic issued Hasenwinkel a written warning and reinstated her with back pay. A few months later, she underwent neck surgery and exhausted her FMLA benefits in the beginning of January 2012. A change in the company's method for calculating FMLA accrual kicked in that month and Hasenwinkel was granted an additional 12 weeks of FMLA leave. After exhausting the additional time, the company provided another 90-day medical leave of absence.

With Hasenwinkel still physically unable to perform her job, Mosaic terminated her employment. A federal district court judge granted summary judgment in favor of the employer and the Eighth Circuit Court of Appeal affirmed.

"[S]ummary judgment was proper because Hasenwinkel exhausted her FMLA benefits," the panel said. "Hasenwinkel does not dispute that Mosaic allowed her to take twelve weeks of FMLA leave. In fact, Hasenwinkel received more than three times the amount of leave required by law: she received a full twelve weeks that expired on January 8, 2012, an additional twelve weeks under Mosaic's revised FMLA accrual policy, and another ninety days (or, nearly thirteen weeks) of medical leave prior to her termination. Hasenwinkel exhausted her FMLA benefits and thus has not been denied any entitled under the statute."

As for interference with her rights by discriminating against her for taking FMLA leave, the court again sided with Mosaic. Hasenwinkel proffered three purportedly adverse acts: her termination, the one-month suspension, and generally unpleasant treatment by supervisors.

Termination is actionable under the FMLA only if the employee was discharged because of her FMLA leave, the Eighth Circuit said, and Hasenwinkel admitted that she was physically unable to return to work, conceding that she has not sought another job since leaving Mosaic and receiving an 80 percent disability rating from the Social Security Administration.

Turning to the suspension, the panel found Hasenwinkel failed to demonstrate actual monetary loss and was unable to recover under the statute. "The closest Hasenwinkel comes to alleging monetary loss is noting in her brief that 'missing a paycheck … can often spell disaster for employees,' " the court wrote. "Yet Hasenwinkel has acknowledged that she was made whole when Mosaic furnished backpay, and she presented no evidence that missing a paycheck caused her to suffer a 'disaster' or any other tangible harm. Because Hasenwinkel has not identified any monetary loss incurred as a result of her suspension, her argument that she is entitled to relief under the FMLA fails as a matter of law."

Finally, the court was not persuaded by Hasenwinkel's contention that she was ostracized by coworkers and treated unpleasantly by superiors. None of the slights she referenced rose to the level of a materially adverse employment action, the panel said, instead involving "petty slights or minor annoyances."

To read the opinion in Hasenwinkel v. Mosaic, click here.

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Tenth Circuit: Focus on Effect of Allegedly Discriminatory Comments, Not Intent

Why it matters

Reversing summary judgment in favor of an employer, the Tenth Circuit Court of Appeals instructed courts to focus on the "polluting effect on the workplace environment" of allegedly discriminatory conduct and not the intent behind it. The only African-American employee in her office, the plaintiff claimed that during her yearlong tenure she was subject to racial harassment in the form of comments such as a coworker who stated "we need to bring back lynching," her supervisor instructing her to "get ghetto," and use of the "n word" by multiple employees. When she was fired for excessive absences, the worker sued. A federal court judge dismissed her hostile work environment claims but the federal appellate panel reversed, finding that the lower court incorrectly focused on the intent of the speakers and whether they meant to cause harm. The appropriate inquiry was whether a jury could find the effect of the alleged harassment resulted in a hostile work environment, the Tenth Circuit said, reinstating the employee's claim.

Detailed discussion

Shawron Lounds began working at Lincare, a nationwide provider of at-home medical services, at a satellite facility in Wichita in September 2011 as a customer service representative. She was the only African-American employee at the location.

Lounds reported that she suffered a hostile work environment because of her race from the beginning of her employment, when her supervisor asked if her name was "Shaquita" and told coworkers, "I thought your name was Shaniqua!" When an unhappy customer called into the office, the supervisor instructed Lounds to give the customer attitude and "get ghetto" with him.

On another occasion, a group of employees were discussing an African-American man who had killed his wife. One coworker stated, "[W]e need to bring back lynching, because we have enough trees," clarifying to Lounds that he was "not racist" and was not trying to offend her. When she objected, he told her not to be so sensitive.

Other instances cited by Lounds included a different coworker entering the office calling out "Boom, Nigga!" after she said she had just come back from the "hood" visiting a patient and her supervisor instructing the employees to address a company vice president visiting the Wichita office by saying, "Yes, massa."

Lounds reported the incidents and her supervisor and two coworkers were written up and provided with additional human resources training. But Lounds said the racial comments continued, with the supervisor asking her why African-American parents choose names like "Roshonda" and "Shawron" for their children and a comment from a visiting customer on a picture of a garden that it "probably took a lot of slaves" to make the garden look good, although "nowadays it's wetbacks that do that." She also complained that coworkers now warned of her presence and cautioned each other about speaking in front of her.

During this time, Lounds had several unexcused absences and received a documented counseling, a verbal warning, and a final warning about her excessive absenteeism and how she violated company policy by texting in her absences. Although first-year employees at Lincare are entitled to five vacation days, by the time she was terminated in September 2012, Lounds had missed 34 days of work, more than 20 of which were unscheduled.

Lounds filed suit under Title VII alleging that she was subject to a hostile work environment and that Lincare retaliated against her after she reported the inappropriate racial comments by terminating her. A federal district court judge granted summary judgment for the employer.

On appeal, the Tenth Circuit Court of Appeals affirmed dismissal of the retaliation claim but reversed on the hostile work environment claim, writing that the lower court reached the wrong outcome by relying on an improper analysis.

Instead of focusing on the intent of the speakers—noting that the coworker speaking about lynching told Lounds he wasn't trying to offend her, for example—the district court should have examined the effect of such comments on the workplace, the panel said.

The lower court "discounted the offensiveness of key elements of the conduct based on its conclusions regarding the ostensibly benign intent of the alleged harassing actors," the federal appellate panel wrote. "A district court's assessment on summary judgment of whether a workplace environment is sufficiently polluted for purposes of a Section 1981 claim should not be based on whether an alleged harasser possessed the motivation or intent to cause discriminatory harm or offense."

Construing the facts in the light most favorable to Lounds, the term "nigga" was repeatedly uttered at Lincare within her earshot. While the district court wrote that the term was not used for the purpose of offending the plaintiff and not made directly to her, "whether the alleged harasser's purpose or intent was to do harm … is legally immaterial," the Tenth Circuit said. "The important question is whether the repeated utterance of this term had the effect of contributing to the creation of a racially hostile work environment."

By improperly focusing on the harasser's motivation, "the district court mitigated the environmental effect of what historically has been a powerfully potent discriminatory race-based term." For a second example, the panel referenced the coworker's comments about lynching, where the district court noted the speaker's comment that he was not trying to offend Lounds. Again, this perspective resulted in an undue minimization of the significance of the harassing conduct in the pervasiveness inquiry, the court said.

"In the end, the district court committed legal error by focusing on whether the alleged harassers intended to be offensive or to cause harm – especially to Ms. Lounds – rather than on whether a reasonable jury could find on this record that the subjective and objective effect of their conduct was to pollute the environment with harassing conduct that was … racially humiliating, offensive, or insulting," the Tenth Circuit wrote. "This legal error was bolstered by the court's not infrequent disregard for the legal directive on summary judgment to construe the facts in the light most favorable to Ms. Lounds."

Affirming dismissal of the plaintiff's retaliation claims, the court said Lincare clearly informed employees that attendance is vital to its business model and strongly disfavored absenteeism. Further, the company communicated to Lounds its position that her absences and texting practices were unacceptable, and she failed to provide any evidence to support the contention that the company enforced the disciplinary policy against her as a pretext.

To read the opinion in Lounds v. Lincare, Inc., click here.

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Uber's Legal Issues Continue With Drivers in California and Florida

Why it matters

The question of whether drivers for the ride-sharing app Uber are employees or independent contractors continues to keep courts and regulators across the country busy. While the Florida Department of Economic Opportunity determined that drivers are independent contractors—reaching a contrary conclusion from similar authorities in California and Oregon—a federal court judge in California has certified multiple classes of roughly 160,000 drivers in a wage suit. A group of drivers sued Uber for tips and expense reimbursement under state law and moved to certify the class. The judge had earlier certified a class seeking tips the plaintiffs alleged Uber withheld, and in the latest ruling, certified a subclass of drivers seeking reimbursement. In addition, the court rejected the employer's attempt to enforce an arbitration agreement, ruling that it was unenforceable because it contained a non-severable waiver of Private Attorney General Act (PAGA) claims. Litigation looks to continue through 2016, with Uber already filing an appeal of the California decision and the Florida driver appealing the state agency's ruling.

Detailed discussion

Ride-sharing company Uber Technologies ended 2015 on a litigious note, with the issue of whether its drivers are independent contractors or employees, a hot topic for courts and regulators alike.

Several California drivers filed a putative class action alleging they were misclassified as independent contractors, requesting reimbursement for "all necessary expenditures or losses incurred … in direct consequence of the discharge" of their duties, as well as for the entire amount of any tips or gratuities "paid, given to, or left" by a patron.

In September, U.S. District Court Judge Edward M. Chen certified a class of approximately 160,000 Uber drivers seeking tips but denied certification on the claim for reimbursement.

The court also limited the time period for the class, expressing concern about drivers who signed an arbitration agreement in 2014 and 2015 that waived claims under the Private Attorney General Act (PAGA) and whether an individualized assessment of the economic means of the driver and the circumstances under which he or she accepted the arbitration agreement was necessary.

But subsequent case law changed Judge Chen's position. Based on the California Supreme Court's decision in Sanchez v. Valencia Holding Co., the court concluded that the PAGA waiver found in Uber's arbitration agreement was unenforceable on public policy grounds. As for the 2014 and 2015 agreements, the non-severable PAGA waiver rendered the entire arbitration agreement unenforceable, the judge added.

Uber argued that the non-severable PAGA waiver didn't ban all PAGA claims but only prevented such claims from being arbitrated, with the blanket PAGA waiver found in a different section that was severable. But the court found this contention circular, as "it is impossible to grammatically or linguistically sever the PAGA claims waiver without completely undermining arbitration itself." Because of the non-severable section of the agreement, the PAGA claim cannot be brought in arbitration, resulting in a driver having no forum in which to bring a PAGA claim, Judge Chen explained.

The court also found that severance would not be permitted as a matter of equity. "This is not a case where there has been performance, and voiding the contract will result in one party receiving an unfair windfall," the court wrote. "Instead, Uber has drafted a contract that deters ab initio drivers from bringing representative actions. Any driver who reads the arbitration agreement will be misled into believing that they have no right to bring a PAGA claim, as the arbitration agreement not only outright prohibits representative actions, but requires that all disputes be arbitrated on an individual basis."

Uber told the court that the 2014 and 2015 arbitration agreements featured an opt-out provision and that drivers who failed to exercise this choice should not be permitted to avoid the results. But Judge Chen again disagreed. "Absent California authority to the contrary, the Court concludes that the PAGA waiver is an unenforceable pre-dispute waiver despite the opt-out provision," he wrote. "As a valid waiver can only be made after a dispute has arisen, the PAGA waivers contained in the 2014 and 2015 agreements are unenforceable against the subclass of drivers that the Court will certify in this order."

The court then certified a subclass of drivers seeking reimbursement for vehicle-related and telephone expenses. Such expenses constitute the majority of the money spent by drivers, the plaintiffs asserted, and will not cause individualized issues to predominate, even where drivers have unlimited data plans for their phones, the judge said.

Uber has already filed an appeal.

Taking a different approach to Uber's business model, the Florida Department of Economic Opportunity (DEO) sided with the ride-sharing company to find that drivers are independent contractors—and therefore not entitled to unemployment insurance from the state.

Considering the case of former driver Darren McGillis, the agency emphasized that Uber operates not as an employer but as a middleman or broker for transportation services.

"Uber is no more an employer to drivers than is an art gallery to artists," DEO Executive Director Jesse Panuccio wrote. "Just as technological advances have amplified the reach of social networks, [s]uch advances have also amplified the reach of commercial relationships through applications like Uber, [S]tubHub, Airbnb. . . . None of these commercial platforms would be in business without the goods and service providers who use the platforms, but that does not mean the providers are automatically employees of the platform company."

Reversing a determination from the Department of Revenue finding McGillis to be an employee of Uber, the agency said Florida law begins with review of the contract between the parties, which in this case specified that the driver was an independent contractor. The actual practice of the parties did not belie the agreement, the decision found.

While Uber requires some basic conformity from drivers (such as using a car less than 10 years old), "the Driver maintains autonomy over the most significant details of the engagement," such as when to work, what car to use and how to present it, how to choose passengers, and the speed and the route taken when driving.

"As a matter of common sense, it is hard to imagine many employers who would grant this level of autonomy to employees—permitting work whenever the employee has a whim to work, demanding no particular work be done at all even if customers will go unserved, permitting just about any manner of customer interaction, permitting drivers to offer their own unfettered assessments of customers, engaging in no direct supervision, requiring only the most minimal conformity in the basic instrumentality of the job (the car), and permitting work for direct competitors," according to the order.

Other factors—which party provides the instrumentalities and how drivers are paid—also pointed to independent contractor status. Although Uber is in business and provides lead generation for transportation services, it does not provide transportation services, the agency said. "Essentially, Uber is a middleman or broker for transportation services," Panuccio wrote. "This is related to and dependent upon provision of transportation services, but it is not the same thing. A broker is a distinct and common profession in the American marketplace."

The order distinguished contradictory decisions from California and Oregon based on differences in case law and a failure to recognize that "[t]echnological advances like the Internet and smartphones have provided new platforms for middlemen."

McGillis filed an appeal the following day.

To read the order in O'Connor v. Uber Technologies, click here.

To read the final order from the Florida Department of Economic Opportunity, click here.

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Employers, Beware: California Broadens Successor Liability for Wage and Hour Violations

Why it matters

The California Legislature ended 2015 by enacting a new bill that could significantly impact merger and sales agreements by broadening successor liability for wage and hour violations. Dubbed A Fair Day's Pay Act, the legislation was intended to counter concerns about employer wage theft, establishing bond requirements for employers that fail to pay owed wages to workers. But the new law also permits the Labor Commissioner to look to successor employers for payment where "substantially the same work in substantially the same working conditions under substantially the same supervisors" occurs or the employer "produces substantially the same products or offers substantially the same services, and has substantially the same body of customers." SB 588 further allows individuals to be held personally liable for conduct of an employer, granting the Commission the power to levy accounts or property. Signed by Governor Jerry Brown, the new law took effect on January 1.

Detailed discussion

To address concerns about wage theft, California Sen. Kevin De Leon introduced SB 588, A Fair Day's Pay Act. The bill empowered the state's Labor Commissioner with the ability to use any existing remedies available to judgment creditors to act as a "levying officer" to enforce claims of wage theft.

For example, if a worker successfully brought a wage claim against an employer, the Labor Commissioner now has the power to place a lien on the employer's property or levy the company's bank accounts, including any amounts attributable as attorneys' fees awarded to the employee. These provisions also apply on an individual basis to those who act "on behalf of" the employer. The same remedies are available, meaning that the Labor Commissioner can levy the personal property or bank accounts of a company owner found to have violated state wage law.

To address problems with employers that might close down business and then reopen with a new name in an attempt to dodge debts owed to workers or liens, SB 588 also provided workers with the ability to chase down new entities. However, the changes resulted in significantly broader successor liability for employers.

Specifically, the law now provides for liability for any new business that is "similar in operation and ownership" to the prior employer for the wages owed. A new business will be considered the "same employer" in two situations: if the employees of the successor employer are engaged in "substantially the same work in substantially the same working conditions under substantially the same supervisors" or where the new company has "substantially the same production process or operations, produces substantially the same products or offers substantially the same services, and has substantially the same body of customers."

The law also requires that in order to remain in business, an employer must post a bond based on the amount of wages at issue, ranging from $50,000 up to $150,000, with potential civil penalties and the possibility of attorneys' fees as well. Employers that fail to post the bond can have their business license revoked.

To read SB 588, click here.

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