Articles Posted in Employment Law

California is again making waves in the employment community with its new freelance law which took effect on January 1, 2020. The law, Assembly Bill 5 (“AB 5”), imposes several requirements on employers who hire freelancer workers.  While AB 5 has many supporters, including gig economy workers and Democratic lawmakers, it also has detractors including Uber, Lyft, and — somewhat surprisingly — some of the people the law is designed to protect.  Although the true effects this law will have are unclear, AB 5 demonstrates how states are grappling with protecting the rights of independent contractors in an ever evolving and expanding “gig economy.”

AB 5 creates a rebuttable presumption that a person is an employee rather than an independent contractor and places the burden on the employer to prove that a worker is an independent contractor.  The employer must do this by satisfying a three-part test. First, the employer must prove that the person “is free from the control and direction” usually associated with employment.  Second, the Employer must show that the “person performs work that is outside the usual course of the hiring entity’s business.”  Third, the Employer must demonstrate that the person “is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.” This high standard will likely result in the reclassification of many independent contactors as employees.  Such workers would, as a result, become eligible for benefits and protections including, among other things, the minimum wage protection and unemployment insurance.

Companies opposed to the legislation, including Uber and Lyft, are committed to fighting and overturning this legislation.  Those companies, which rely on independent contractors, see this law as a mortal threat to their businesses and say it will cause them to lay off thousands of drivers.  According to the New York Times, some companies pledged $90 million in support of a ballot initiative to exempt themselves from the legislation.  Uber and Postmates even filed for an injunction on December 30, 2019 to prevent the law from coming into effect.  Some drivers for the ride sharing companies opposed the legislation as well, noting that it would decrease the flexibility of their driving schedules.  Other professional organizations, including the National Press Photographers Association, filed suit against California arguing that the legislation is unconstitutional.  The legislation, on the other hand, is the result of concerns about worker exploitation through the independent contactor model.

In the aftermath of the two disasters involving 737 MAX aircraft which led to the tragic death of over 300 passengers, Boeing CEO Dennis Muilenburg was recently forced out in.  Despite the problems that have plagued Boeing under his management, Muilenburg is departing with a significant severance package – potentially upwards of $60 million -because of a “golden parachute” provision in his employment contract which is to provide a “soft landing” for the young CEO.

The amount of Muilenburg’s severance is largely dependent on how Boeing characterizes the context of his departure.  Muilenburg receives more if his departure is deemed to be a retirement or layoff, but he gets less if the departure is designated as a simple resignation.  Either way, according to public filings, Muilenburg may be entitled to a significant amount, including more than $20 million of vested stock, a pension worth more than $11 million, a severance payment approximately worth $7 million, and a benefit plan worth more than $30 million.[1]  This windfall is in addition to the over $70 million in compensation already pocketed by Muilenburg during his relatively brief tenure as Boeing CEO.

On December 23, 2019, Boeing announced that it intended to classify the CEO’s departure as a resignation, suggesting that Muilenburg’s severance will be more like a termination-based severance.  He would, as such, likely not receive the most lucrative of the severance benefits. Nevertheless, the news of this severance has stirred public outrage, especially among the families of those killed in the two 737 MAX crashes.  This anger stems largely from the fact that Muilenburg could potentially walk away with approximately 270 times what Boeing is paying to those families that lost a loved one in the crashes (on average these families receive a mere $144,000 as compensation for their loss).

California recently enacted legislation aimed at allowing collegiate athletes to make money off their images and likeness.  This legislation has the potential to upend the infrastructure of college sports, governed primarily by the National Collegiate Athletics Administration (“NCAA”), and the way amateur athletes both choose colleges or pursue professional careers.

By way of brief background, the NCAA, a non-profit organization, takes in revenue in the billions of dollars with some individual universities making tens or hundreds of millions of dollars in sports-related revenue.  Meanwhile, student athletes are prohibited from using their name, image, or likeness to earn compensation for themselves and are largely prohibited from earning income from their athletics while in school, other than scholarships and various stipends.

This disparity has been a point of criticism for the NCAA for years, with critics noting that schools and businesses in the industry make millions off these student athletes, while the students themselves make nothing and may never earn if they do not go on to compete professionally because of injury or otherwise.  New legislation in California, home to some of the largest collegiate sports programs such as the University of Southern California, the University of California Los Angeles, and University of California Berkley, aims to allow students to profit, or at least earn some income, through their role as collegiate athletes.

On August 20th, New York Governor Andrew Cuomo signed a new law that will substantially expand employment discrimination protections for victims of domestic violence. These protections will take effect on November 18, 2019.

New York State Human Rights Law (“NYSHRL”) now defines “victim of domestic violence” the same as Section 812 of the Family Court Act, meaning any person over the age of 16 who is a victim of a crime committed by another family or household member that resulted in actual physical or emotional injury to the victim or created a substantial risk of such injury. This new 2019 legislation makes key changes to previous legislation in the area, including defining new actions taken by employers that will be considered unlawful discriminatory practices, increased requirements for reasonable accommodations for victims of domestic violence, and increased notice requirements.

The new law lists a variety of situations in which an employer must be more aware of and compassionate towards victims of domestic violence. Employers may not: (1) refuse employment because the applicant is a victim of domestic abuse, (2) advertise that they will not hire victims of domestic abuse, (3) use any employment application to discriminate against victims of domestic violence, (4) discriminate against a victim employee in some sort of manner (e.g., through wages, failure to promote, reduced privileges, etc.), or (5) terminate the victim upon learning he or she has suffered from domestic abuse.

In June 2019, Connecticut (similar to NY mentioned in our previous blog post) introduced new employment legislation.  Coined the “Time’s Up Act” this Act is aimed at combatting sexual assault and harassment and it has created significant changes to Connecticut’s employment laws. The Act attempts to create additional safeguards that will enable employers to better prevent sexual assault and harassment in the workplace.

The “Time’s Up Act” expands the sexual harassment training requirements for employers in Connecticut. Under this new Act, every employer in Connecticut will be required to provide sexual harassment training for supervisors and other management officials, regardless of the size of the business. This is a significant departure from previous legislation, which only required such training for employers with 50 or more employees.  Furthermore, the Act makes it mandatory for all employers with 3 or more employees to provide sexual harassment training to these employees. The Act requires this training to be provided at least every 10 years.

In addition to requiring more expansive training, the Act also expands notice and posting requirements already in the place. Under this new Act, an employer is now required to send documents relating to harassment to every employee within 3-months of her/his hiring.  Employers may comply with this new requirement by posting such information on their website(s) and proving their employees with a link to the Connecticut Human Rights and Opportunities (CHRO) website that describes harassment and ways to report it. If an employer fails to comply with this requirement it will be subject to a fine of up to $1,000.

At the completion of the 2019 session, the New York State legislature passed not just one but several bills that will have a significant impact on many New York employers – particularly those located outside of New York City.  Several of the new bills impacting the State parallel existing “employee-friendly” laws already in place in the City.

One new bill impacting the State now allows plaintiffs to recover punitive damages (damages awarded to an injured party to punish the reckless actions of a defendant) in claims of employment discrimination. Furthermore, if an employer is found to have engaged in unlawful discrimination, a plaintiff may be awarded attorney’s fees. This is a large departure from previous New York law which, until this year, neither authorized punitive damages for any kind of discrimination claims nor permitted an award attorney’s fees for any discrimination claim (with the exception of sex-based discrimination claims).

Additionally, the New York legislature has instituted a state-wide salary history inquiry ban. This means that during the job hiring process, a private employer cannot ask an applicant about prior salaries received by that individual. Furthermore, an employer cannot refuse to interview, hire, or retaliate in any away against an applicant or current employee based on his/her refusal to provide their salary history, or based on his/her current salary. Notably, the new law does not prevent an applicant or current employee from voluntarily disclosing their salary history. Several differences exist between this new bill and already existing laws relating to salary disclosure. For example, unlike similar laws in New York City, this new bill protects both applicants and current employees, not just applicants.