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In This Issue
March 2018 – May 2018 | Volume 6 Issue 2

 

Employee Benefit Satisfaction has Direct Relation to Job Fulfillment

by Nick Otto

A link between the satisfaction workers feel about their benefits — both employment based and voluntary — has a direct relation with retention opportunities for employers.

Eight in 10 employees who ranked their benefits satisfaction as extremely or very high also ranked job satisfaction as extremely or very high, according to Employee Benefit Research Institute’s recent 2017 Health and Workplace Benefits Survey. Additionally, nearly two-thirds of respondents who ranked benefits satisfaction as extremely or very high ranked their morel as excellent or very good.

“It is important for employers to understand that benefits continue to be valued by employees,” says Paul Fronstin, director of the health research and education program at EBRI. “Health insurance, retirement plans, dental, vision and life insurance continue to be highly important when making job change decisions.”

In fact, the survey finds that more than four in 10 respondents say they would forgo a wage increase to receive an increase in their work-life balance benefits, and nearly two in 10 state a preference for more health benefits and lower wages.

 

Employees continue to indicate benefits play a key role in whether to remain at a job or choose a new job. Since 2013, health insurance consistently remains one of the top benefits that employees consider in assessing a job change.

Last year, 83% say health insurance is very or extremely important in deciding whether to stay in or change jobs. A retirement savings plan is also one of the critical benefits, with 73% indicating it is extremely or very important in determining whether to stay in or switch jobs.

Although employees say they are generally satisfied with the employee benefits provide today, there is a growing concern benefit programs might start to dwindle. When asked, only 19% of respondents say they are extremely confident in what will be provided will be similar to what they have now in three years.

Other challenges remain

“The challenge is how employers can continue to provide the strong employee benefits package that employees want and need, while still controlling the costs of these benefits, particularly healthcare,” Fronstin notes.

Employee education on benefit offerings could use some beefing up. According to the study a little more than one-half (52%) of employees say they understand their health benefits and 43% indicate they understand their non-health benefits very/extremely well.

Some of this limited understanding of benefits may come from the lack — or perceived lack — of benefit educational opportunities that employees are receiving from their employer, according to the study.

Nearly one-third (31%) of employees indicate that their employer or benefits company provides no education or advice on benefits. Only 39% state that their employer provides education on how health insurance works, 24% say that their employer provides education on how a health savings account works, and 28% confirm that their employer offers education on how to invest money in their retirement plan.

In any case, Fronstin adds, “as employers weigh the future of benefits, they should consider that health insurance consistently remains one of the top benefits that employees consider in assessing a job change, with retirement savings plan also viewed as a critical benefit.”

*Original article

 

When a Third Party Becomes the Harasser: How the #MeToo Movement May Impact Your Workforce in the Most Unsuspecting Way

By: Jennifer L. Curry

In the whirlwind of #MeToo, employers are scrambling to be proactive and take control of sexual harassment issues among their workforces, but most are unprepared for how to handle sexual harassment from third parties. The most overlooked, and oftentimes misunderstood, legal obligations for employers arise when it’s a customer, client, or vendor who is the alleged harasser.

You’ve all heard this one before: a long-time client who is loyal to your facility has built a reputation among your staff as being flirtatious and “handsy.” Many of your female employees who interact with the client have complained about his behavior in the past, but you’ve overlooked it because, not only has he been a good client, but you just weren’t sure what you could do. Over the last year, the client’s behavior has become more aggressive (and concerning). Your employees are now more vocal about their complaints and refuse to serve the client. Or how about this one? Your facility has been getting deliveries from a particular food supplier for years. The supplier has recently hired a new delivery driver. Although you haven’t received direct complaints from any employees who were on the receiving end of the comments, you’ve heard that this new driver regularly makes lewd comments to your female employees. You know the client or delivery driver (or other third party) are wrong, but you’re not sure what to do. They aren’t your employees, so it’s out of your hands, right? As long as your employees are behaving themselves, you’ve done your job, right? Wrong.

Most employers know that they are required by law to protect their employees from harassment by a co-worker or supervisor, and they know what to do when one employee makes unwelcome sexual advances toward another employee. Most employers, however, do not know that they have a similar legal obligation to ensure that their employees are protected from such harassment by third parties.

The law generally requires that where an employee has been subjected to harassment by an outside party, the employer may be held liable if (1) the employee made an effort to inform the employer of the harassment, (2) the employer knew or should have known that the harassment was occurring, and (3) the employer failed to take prompt and appropriate corrective action that was reasonably likely to prevent the recurrence of harassment. This standard was highlighted in the 2011 lawsuit filed by the Equal Employment Opportunity Commission (EEOC) against the franchisee/owner of a Hurricane Grill and Wings restaurant. A group of female servers repeatedly complained to the restaurant manager about harassment from a regular customer, who happened to be a Palm Beach County Sheriff’s deputy. The servers relayed stories that the deputy commented on their bodies, groped them inappropriately, and solicited them for sex. Despite continuous complaints from the female servers, the manager took no action and, instead, fired one server after she contacted a private attorney to help her file a charge with the EEOC.

The EEOC took up the case on behalf of the restaurant’s female servers to file suit in federal court. The EEOC asserted that the franchisee/operator allowed a workplace environment that tolerated harassment in violation of the law and subjected its employees to severe emotional distress. According to the EEOC, instead of ignoring the complaints, the restaurant’s management should have acted quickly to stop the harassment, even if that meant prohibiting the sheriff’s deputy from returning, and should have made a clear statement that such behavior was not tolerated. Instead, the restaurant’s management allowed the harassment to continue and retaliated against one server for exercising her rights by seeking legal assistance. “All women deserve the right to work in an environment free of sexual harassment,” said Malcolm Medley, director of the EEOC’s Miami District Office. “The EEOC will take action against employers who fail to protect the work environment from such misconduct.” The suit was eventually settled for $200,000.

This standard was tested and confirmed in another suit filed by the EEOC, this time against Red Olive, a chain of restaurants. Shortly after a female server was hired to work at one of the chain’s locations, a male diner in his late sixties or early seventies began frequenting the restaurant where she worked and expressing his unwelcome affection for the server. The customer knew the server from her prior employment at another restaurant, where he regularly offered unsolicited comments on her body, and even touched her inappropriately. The server informed the manager at the prior restaurant, and the manager instructed the customer that the behavior was inappropriate and that he would be asked to leave and not return if he could not refrain from engaging in that behavior. When the customer found out that the server left the employ of that restaurant to work at Red Olive, he began visiting her there. During his visits to Red Olive, the customer brought the server flowers and cards, made inappropriate comments about her body, and described his sexual interest in her. When his behavior escalated to inappropriate touching, which included one incident that occurred in front of the manager, the server asked the manager for help. When the manager ignored her request, the server asked the owner of Red Olive to take action. Not long thereafter, she was fired.

The server sued Red Olive in federal court, where, after two years of litigation, Red Olive filed a motion for summary judgment. In April 2016, the court denied Red Olive’s motion and admonished the restaurant’s management and ownership. Specifically, the court found that compared to the actions taken by management at the server’s previous employer to confront the customer and end the harassment, the management and ownership at Red Olive displayed “irresponsible conduct” by failing to take any action to protect the server. The court allowed the case to proceed to a jury trial, where the parties settled just days before trial was set to begin.

As is evidenced by these cases, ignoring complaints about third parties can subject you to liability, especially in this time when new harassment suits are popping up daily, if not hourly. There are several steps you can take now to make sure that your employees and your company are ready to combat any discrimination or harassment issue thrown your way:

  • It may go without saying at this point, but you need to review your current written policies. Your policies on discrimination, harassment, and retaliation should not be restricted only to employees. Rather, they should state clearly and unequivocally that discrimination, harassment, and retaliation of any kind, whether from an employee or a third party, will not be tolerated and will be dealt with swiftly.
  • Along those same lines, you need to review your complaint procedure, assuming you have one. A complaint procedure shouldn’t just be words on a paper. It should have structure and guide employees on the steps you have made available to them for making complaints. It also should be realistic and take into account the avenues employees are most likely to take or seek when they have a complaint. If you don’t have a written complaint procedure, you need to develop one as soon as possible.
  • After making sure your policies and procedures satisfactorily address third-party discrimination and harassment, you must consider issues in your culture that may discourage employees from making complaints, or cause them to accept that harassment is part of their jobs, even if you have written policies. For example, managers are often trained to remind employees that the customer comes first. Although this is an ideal philosophy in the business atmosphere, lines must be drawn and policies must be implemented and enforced to maintain client and customer satisfaction only to the extent that they do not infringe on the rights of employees. Your culture should make clear that your employees are your number one priority, and their safety and health are of the utmost importance, even at the cost of potentially losing a customer or client.
  • The best way to promote your culture to employees is through training, training, and more training. Nothing says that the company cares about its workforce more than requiring sexual harassment training for all employees, even at the highest levels. That training needs to reinforce your policies against discrimination and harassment of all kinds, including from third parties, and carefully explain your complaint procedure. After an 18-month study, the EEOC found that the most effective training is live and interactive, led by someone with applicable experience. It is no longer acceptable to offer computer-based training that doesn’t allow for employees to ask questions or pose real-life scenarios. You should also require special training for your managers, supervisors, decision-makers, and executives – basically anyone who may receive complaints or may create liability for the company once they have knowledge of discrimination or harassment. These are the people who need to understand the importance of protecting employees, and who need to be able to adequately address complaints. Tell your employees that these individuals are required to attend this special training.
  • When you get a complaint of discrimination or harassment by a third party, act quickly. Your response will, of course, vary depending on the situation, but you need to consider every option with the goal of stopping the behavior and protecting your employee from further discrimination or harassment. In the most egregious circumstances, you should contact the local authorities to determine if a criminal action is necessary. At the very least, you should remove the employee or the third party from the situation immediately. In fact, sometimes the most appropriate solution to the issue is the temporary (or permanent) removal of the customer, client, or vendor. If the third party doing the discrimination or harassment is employed by a company with which you do business or have a contract, you should inform the other company of what’s been going on and the steps you are taking, and you should request that the other company take appropriate steps on its end. If you are the employer of a third party who is engaging in the harassment and you receive a complaint about your employee, you too should act quickly to address the situation.
  • Every complaint of discrimination or harassment requires an investigation. No complaint should be summarily dismissed or treated as too small, and every complaint should be taken seriously. The word “investigation” often has a negative or scary connotation, but an investigation is merely an employer looking into a situation or complaint. You just want to make sure it appropriately addresses the problematic situation.
  • Finally, consider retaining legal counsel to help you through this process. Whether this means creating or revising your policies, conducting training, or investigating a complaint, an attorney can protect you when you need it most. Legal insight into what you should and shouldn’t do as an employer faced with a discrimination or harassment complaint can be the difference between avoiding litigation and having your company name splashed across newspaper headlines.
  • Although the loss of a customer, client, or vendor can equate to a loss of revenue, the morale of your employees, the expense of litigation, and the potential media attention easily outweigh that loss. In the era of #MeToo, you simply can’t afford to ignore any complaint of discrimination or harassment. The costs for doing so could be staggering.

 

*Original article

 

State Data Breach Notification Laws: Overview of the Patchwork

By: Joseph J. Lazzarotti, Jason C. Gavejian, Maya Atrakchi, Jackson Lewis

The nation’s patchwork of state data breach notification laws is now complete. All 50 states, as well as the District of Columbia, Puerto Rico, Guam, and the Virgin Islands, have enacted breach notification laws requiring private organizations or government entities to notify individuals of a security breach involving their personally identifiable information.

The last two states, Alabama and South Dakota, enacted data breach notification statutes in March. The Alabama Data Breach Notification Act goes into effect on May 1, 2018. The South Dakota law will take effect on July 1, 2018.

Additionally, many other states, in response to trends, heightened public awareness, and a string of large-scale data breaches, have continued amending their existing laws. This means data breach notification laws change frequently and keeping up with them can be a challenge.

Requirements Vary

The first state data breach notification law was enacted in 2002 in California. It soon became the model for other states’ breach notification laws. In addition, the U.S. Department of Health and Human Services Office of Civil Rights (OCR) adopted a similar structure for covered entities and business associates under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

Common provisions among the breach notification laws include:

  • Notification to affected state residents without unreasonable delay;
  • Notification to certain agencies including state attorneys general and/or consumer reporting agency under certain circumstances;
  • Notification exceptions for good-faith access by an employee, encryption of the data, and determinations of low risk of harm;
  • Specific requirements for the content of the notification; and
  • Civil penalties enforced by the state’s attorney general. While all states require notification “without unreasonable delay,” some states provide a specific timeframe by which notification must be made to affected individuals following discovery of the breach (e.g., within 30, 45, or 60 days).Businesses operating in multiple states must be alert to the requirements in the various jurisdictions and the growing trends in recent amendments. This chart provides a brief summary of some of the key features of state breach notification laws and the states with those features.
  • Selected State Provisions
  • Further, in some states, only the state’s attorney general may institute an action for a violation of the state’s law, while other states permit a private cause of action by an affected individual.
  • Despite these common threads, abundant variations exist among state law provisions. For example, in some states, notification to state agencies is required only when a certain number of residents of the state are affected by the breach. In other states, notification to state agencies is required regardless of the number of affected residents.
Selected Provisions States/Jurisdictions
Expanded definition of personal information Alabama, Alaska, California, Connecticut, Delaware, Florida, Georgia, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Virginia, Wisconsin, Wyoming, District of Columbia, and Puerto Rico.
Content requirements for notifications Alabama, California, Florida, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Michigan, Missouri, Montana, New Hampshire, New Mexico, New York, North Carolina, Oregon, Rhode Island, South Carolina, Vermont, Virginia, Washington, West Virginia, Wyoming, and Puerto Rico.
Notification to state agency required (requirements in some states may depend on minimum number of residents affected by the breach) Alabama, Alaska, California, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Virginia, Washington, Wisconsin, and Puerto Rico.
Credit monitoring required California, Connecticut, and Delaware.
Risk of harm Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

 

Trends in State Statutory Amendments

Expanded definition of personal information

Generally, the notification obligations of state data breach statutes are triggered when a “breach of security” affects “personal information,” as defined in the statute.

Personal information commonly is defined as an individual’s first name or first initial and last name in combination with an additional data element, such as a Social Security number, driver’s license number, or financial account information with the applicable PIN or access code for same. Recently, however, many states have amended their statute’s definition of “personal information” to include additional data elements, such as biometric and health information and user name or email address and password.

For example, IllinoisOregon, and Rhode Island have expanded their definition of personal information to require notice when certain forms of health insurance, medical, and/or biometric (e.g., retina and fingerprints) data are compromised. The newly enacted South Dakota law also includes both health and biometric data in its definition of personal information. New Mexico’s new law includes biometric data. The new Alabama law also includes certain kinds of health information.

Moreover, California and Florida had been the only two states to require notice when an individual’s user name or email address and password were compromised. Now, Alabama, Illinois, Nebraska, Nevada, Rhode Island, South Dakota, and Wyoming have joined them in adopting such requirements.

Implementation of reasonable security measures

Designed to prevent data breaches in the first place, and likely to become more prevalent due to concerns over recent large-scale data breaches, at least 15 states have some form of a generally applicable “reasonable safeguards” requirement. This is a requirement that organizations implement reasonable security measures to enhance protection of personal information from unauthorized access, acquisition, use, or disclosure. Such obligations require significant efforts, reaching most, if not all, parts of an organization, remaking data breach response measures into preventive measures.

Massachusetts regulations, considered the benchmark for state data security obligations, go further than a general requirement to have reasonable safeguards. The regulations set out specific safeguards in order for organizations to be in compliance. These include maintaining a written information security program, conducting a risk assessments, ensuring third-party service providers are safeguarding personal information, and encrypting personal information on portable data storage devices. New York and North Carolina are considering updates to their respective laws that would impose similar data security requirements as Massachusetts’.

California law, on the other hand, includes a more general requirement that entities that own or license personal information about California residents implement and maintain reasonable security measures and procedures to protect that information. The recently enacted New Mexico and Alabama laws include similar provisions, and Illinois had amended its law to include such a provision as well. Other states with reasonable-security-measure requirements include: Arkansas, Delaware, Florida, Nevada, Indiana, Maryland, Connecticut, New Jersey, Oregon, Rhode Island, and Utah.

In February 2016, California’s then-Attorney General Kamala Harris issued the California Data Breach Report, which analyzed the data breaches reported to her office from 2012–2015. Perhaps the most consequential part of the Report for businesses is that it established a floor of controls (i.e., compliance with the Center for Internet Security’s Critical Security Controls). A business must implement these controls to be considered to have adopted “reasonable safeguards” to protect personal information.

Takeaways

Today’s nationwide patchwork of state breach notification laws require data holders operating in multiple states or maintaining personal information of residents of multiple states to keep up with the requirements across many jurisdictions.

Organizations should consider the following to help them meet the requirements by establishing good baseline policies and practices:

  • Develop a written information security program;
  • Train employees on data security;
  • Conduct regular data security assessments;
  • Run tabletop security exercises; and
  • Prepare breach notices templates in advance of any breach.
  • Please contact your Jackson Lewis attorney to discuss these developments and specific state breach notification laws and reasonable safeguard requirements.

*Original article

 

Effective October 29, 2018, New Jersey Enacts Statewide Paid Sick Leave

On May 2, 2018, New Jersey Governor Phil Murphy signed comprehensive statewide paid sick leave into law. The statewide law may be a welcome respite to Garden State employers who have been dealing with a convoluted patchwork of 13 different city sick leave ordinances throughout the state since 2014. That’s because, effective October 29, 2018, the state law will preempt these city ordinances and provide a unified sick leave standard across the state.

Covered Employers and Employees

The Act (NJ Rev. Stat. Sec. 34:11-56a et seq.) applies to all private employers with employees in the state of New Jersey, including temporary help service firms. Public employers already required to provide employees with sick leave pursuant to any other state law or regulation are not covered by the law.

With a few exceptions, the Act covers all employees engaged in service for compensation in the state of New Jersey. Excluded from the Act are construction workers covered by collective bargaining agreements, certain per diem healthcare employees, and public employees who already receive sick leave under other state laws.

Leave Entitlements

Covered employees will be entitled to 1 hour of paid sick leave for every 30 hours worked, up to an annual accrual, use, and carryover maximum of 40 hours. In lieu of the accrual method, employers may also frontload a year’s worth of leave for employees’ use. Employers may impose a 120-day waiting period before new hires use accrued leave.

The New Jersey law has some unique aspects. First, employers may choose the increment in which sick leave is used, provided that the largest increment is the number of hours the employee was scheduled to work during the missed shift. The law also specifically explains how it will apply to temporary help service firms—specifically, earned sick leave will accrue based on an employee’s total time worked on assignment with the temporary help service firm, rather than separately for each client to which the employee is assigned.

The New Jersey law also provides a framework for annual buyback programs for employers who opt to frontload leave.

Reasons for Leave

Following the example set by other state and city sick leave laws, sick leave may be taken for many of the expected purposes—the employee’s own mental or physical health needs; care of a covered family member; and needs related to domestic or sexual violence victim status—as well as some more permissive purposes, including school and work closures related to public health emergencies and attending school-related conferences and events.

Where family members are covered, the interpretation extends well beyond the usual spouse, parent, and child inclusions. Domestic partners, grandparents, and siblings are all included, as well as “any other individual related by blood to the employee or whose close association with the employee is the equivalent of a family relationship.”

Notice and Administration

Employers may require notice of the need for leave—up to 7 calendar days when the need is foreseeable, and as soon as practicable when the need is not foreseeable. Additionally, employees may be required to make a reasonable effort to schedule foreseeable leave in a manner that is not unduly disruptive to the employer’s operation. Employers may also require reasonable documentation of the use of leave for more than 3 consecutive days.

Employers with preexisting leave policies and combined paid time off (PTO) plans (including vacation, personal, and sick days) are not required to modify those policies or provide for additional leave as long as the leave provided under the PTO policy is at least equivalent to the minimum accrual and reasons for use set forth by the Act. Additionally, the Act does not restrict employers from providing more generous leave entitlements and benefits, nor does the Act prohibit employers from adopting leave donation programs.

Further, unless an employer policy or collective bargaining agreement provides otherwise, employees are not entitled to payment of unused earned sick leave upon separation from employment. However, if an employee is reinstated after discharge within 6 months, any unused accrued leave must also be reinstated.

Restrictions

As with many other states’ laws, employers may not require employees who are requesting earned sick leave to search for or find a replacement worker to cover the employee’s time off. Employers are also prohibited from taking retaliatory personnel action or discriminating against an employee because the employee requests or uses earned sick leave.

However, these restrictions do not prevent employers from taking disciplinary action against employees who misuse sick leave for purposes other than those permitted by the law.

Posters and Recordkeeping

Employers will be required to provide notice of employees’ rights under the Act within 30 days of the issuance of a sample notification from the Department of Labor and Workforce Development. Employers must also maintain records of hours worked and earned sick leave taken for a period of 5 years. Employers that fail to maintain records will be presumed to have failed to comply with the law, and applicable penalties will be assessed.

Finally, upon the Act’s effective date, New Jersey counties and municipalities will be prohibited from adopting any ordinance, resolution, law, rule, or regulation regarding earned sick leave. Additionally, the Act will preempt any existing ordinance, resolution, law, rule, or regulation regarding earned sick leave. Thus, the multitude of city sick leave ordinances adopted throughout New Jersey will have no further effect.

*Original article

 

California Supreme Court Broadens Definition of Employee in Independent Contractor Analysis

By: Robert M. Pattison and Amelia L Sanchez-Moran, Jackson Lewis

Diverging from decades-old precedent, the California Supreme Court has broadened the definition of “employee” in the context of the State’s Industrial Work Commission (IWC) wage orders when undertaking the employee-versus-independent contractor analysis. Dynamex Operations West, Inc. v. Superior Court of Los Angeles County2018 Cal. LEXIS 3152 (Cal. Apr. 30, 2018).

Under the new standard, to establish that an individual is in fact an independent contractor, an employer must prove that:

  • It does not control how the individual performs the work;
  • The individual provides a service that is not part of the employer’s usual business; and
  • The individual customarily engages in an established business, trade, or profession that is independent of the employer’s business.

Control-of-Work Test

In expanding the definition of employee, the Supreme Court examined at length, but ultimately deemed as non-exclusive, the nearly 30-year-old analysis established in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 796 P.2d 399 (Cal. 1989), which it acknowledged was “the seminal California decision on the subject.”

In Borello, the Supreme Court had adopted, in the context of a workers’ compensation claim, the common law “control-of-work” test. The test asks “whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.”

The Court in Borello further identified several non-exclusive factors that inform the analysis, including:

  • The right of the employer to discharge the individual without cause;
  • Whether the individual is engaged in a distinct occupation or business;
  • Whether, in the location at issue, the work is usually done without supervision by the employer;
  • The skill required in the particular occupation;
  • Whether the employer or the individual supplies the necessary equipment, tools, and place of work;
  • The length of time for which the services are to be performed;
  • Whether payment is made by the job or by the time spent;
  • Whether the work is a part of the employer’s regular business; and
  • The apparent intent of the parties as to whether an employer-employee or independent contractor relationship exists.

ABC Test

Noting that the pertinent state wage order (covering matters such as minimum wages, maximum hours, and meal and rest breaks) defines the term “employ” as “to engage, suffer, or permit to work,” the Supreme Court concluded in Dynamex that, in light of the history and remedial purpose of the wage order, the more appropriate analysis for determining whether an employer-employee relationship exists is the “ABC Test” adopted by some other state courts.

Under the ABC test, a worker is presumed to be an employee unless the worker:

(A) Is free from the employer’s control and direction;

(B) Performs a service that is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

(C) Customarily engages in an independently established trade, occupation, profession, or business.

While recognizing the importance of the factors set forth in Borello, the Court concluded that Borello’s highly nuanced, multi-factor test “makes it difficult for both hiring businesses and workers to determine in advance how a particular category of workers will be classified, frequently leaving the ultimate employee or independent contractor determination to a subsequent and often considerably delayed judicial decision.” The result of such circumstances “often leaves both businesses and workers in the dark with respect to basic questions relating to wages and working conditions that arise regularly, on a day-to-day basis.” Moreover, the Court explained, application of a more complex, multi-factor test “affords a hiring business greater opportunity to evade its fundamental responsibilities under a wage and hour law by dividing its work force into disparate categories and varying the working conditions of individual workers within such categories.”

In adopting the simpler ABC test, the Court noted that, by being presumptively classified as employees, workers would have the benefits and protections of the wage order available to them, while companies would be protected against competitors who attempt to save costs by circumventing the wage orders’ obligations.

Next Steps

California employers who have entered into work arrangements with individuals other than those who traditionally have been deemed independent contractors (e.g.,electricians, plumbers, and HVAC professionals) should promptly and carefully review the status of those workers, particularly if the employer previously classified such individuals as employees.

The standard announced by the Supreme Court presumes that workers are employees subject to the requirements of the IWC wage orders. The Court makes clear that the employer has the burden of proving all three elements of the ABC test to establish independent contractor status.

Dynamex is certain to significantly affect companies in the Bay Area, Silicon Valley, and throughout California that rely on workforce configurations using independent contractors.

If you have any questions about Dynamex, the employee-versus-independent contractor analysis, or any other wage and hour issue, please consult the Jackson Lewis attorney with whom you regularly work.

*Original article