James R. Redeker

Governor Jerry Brown assured California’s position as one of the most regulated states for employers by signing 22 new employment laws earlier this month. Most of the laws will take effect on January 1, 2012. Some of the more significant of these new laws:

· Require that all new hires must be given a statement by the employer of their rate of pay, allowances that will be taken as part of the minimum wage (if any), the pay day, the name and address and telephone number of the employer and the name and contact information for the company’s workers’ compensation carrier. In addition, employers will be required to notify existing employees of any change to any of the information within seven days of the effective date of the change.

· Prohibit credit checks on applicants for employment unless the job for which they are applying is within specified categories, largely either required by some other law or within a position of trust.

· Redefine “gender” for purposes of California’s discrimination laws to include gender identity and gender expression.

· Make it unlawful for any individual to prevent or attempt to prevent the exercise of rights under the California Family Rights Act.

· Enhances penalties for the denial of insurance coverage to same-sex domestic partners if the coverage would have been provided to spouses in different-sex unions.

· Requires paid leave for employees who become organ donors (30 days per year) and for employees who become bone marrow donors (5 days per year).

None of the new laws adds as many complexities or will have as significant an effect as S.B. 459, however. This new law creates civil penalties of $5,000 to $15,000 per violation if a court or the California state enforcement agency concludes that an employer doing business in California has misclassified employees as independent contractors. If the finding is that the employer engaged in a pattern or practice of willfully misclassifying employees, the penalties increase to as much as $25,000 per violation.

In addition to the financial penalties, the law would require employers who are found to have misclassified workers to do the functional equivalent of a “perp walk-” posting on the company’s website (or, if the company has no website, by written notice to employees and the public) a notice that the employer had been found to have “committed a serious violation of the law.

Employers in every state have been struggling with understanding the definition of an independent contractor. Using independent contractors is substantially less expensive than having employees do the work. With employees come taxes, workers compensation, overtime wages, retirement plans and health/disability insurance. All of these can be avoided by using independent contracts. As a bonus, employers have less emotional attachment to independent contractors, making a reduction force less costly, both financially and emotionally.

Misclassifying an employee as an independent contractor, however, results in huge liability which not only will wipe out all cost savings but also result in penalties. Complicating the decisional process is that various government agencies, both state and federal, use different tests to determine whether a worker is an independent contractor or employee. Some agencies and courts have gone to the three factor test, while others continue to hang on to the IRS’s list of 22 factors.

California, in its new law, had the opportunity to bring some clarity to the issue, at least in that state. Unfortunately, the new statutory definition succeeds only to muddy the already opaque water by being not only imprecise but circular: willful misclassification “means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” Well, duh.

The best the California’s Division of Labor Standards Enforcement can do is say that the term “independent contractor” has no set definition and that the determination requires an examination of court decisions and guidelines from regulatory agencies.

Employers everywhere, not just in California, must be very careful when making a decision to classify a worker as an independent contractor because the stakes are so high and getting higher. The slake of class actions alleging violations of the wage and hour law now popular among plaintiff’s lawyers is spreading full force into the area of misclassification of workers.

Nowhere is the danger of private class, cooperative and representative lawsuits more extreme than in California because of that state’s Private Attorney Generals Act of 2004. Under that law, private citizens (“bounty hunters”) may obtain 25% of the penalties assessed by the state agency for raising labor code violations. As passed, S.B. 459 does not authorize private causes of action and it is not clearly covered by the Private Attorney Generals Act of 2004. However, the failure to include the misclassification of workers as one of the labor code violations subject to the Private Attorneys General Act of 2004 may have been a legislative oversight, which may soon be corrected either by the legislature itself or the courts. Without question, there will be plaintiffs’ lawyers who will try.

Also unknown is the probative effect of an employer’s entry into the current IRS voluntary settlement program. Under that relatively new program, an employer with workers which it suspects may be misclassified can avoid a significant part of the potential IRS back tax liability by agreeing to cure the difficulties and paying a small portion of the tax due. The new California law does not carve out special treatment for these employers and, as a result, plaintiff’s lawyers may attempt to use that voluntary act as, at least, an implied admission, if not a roadmap to an easy payday.

The California legislature also made it more difficult for employers to avoid liability for willful violations by asserting that they relied on the advice of an outside “expert.” Indeed, finding an expert in California willing to take the risk of providing such advice may be difficult. Under S.B. 459, anyone who is paid for an opinion that an individual is an independent contractor for the purpose of avoiding the costs attached to employment may be jointly and severally liable for the penalties assessed if the Division of Labor Standards Enforcement or a court concludes that the individuals were misclassified.

California has just become less friendly to employers…even more less friendly.

About James R. Redeker
James R. Redeker represents both organized and unorganized companies in their personnel and labor relations. In that connection, he becomes directly involved in equal employment, wage and hour, occupational safety and health, collective bargaining, contract administration and National Labor Relations Act issues, representing companies before all enforcement agencies concerned with these matters as well as the courts.
Jonathan A. Segal

Last night’s show on bulling on CNN,  AC 360, was remarkable.  It involved bullying in the schools.

But it does not stop there. It continues in our workplaces.

Sometimes, it is unlawful; for example, if an employee is bullied because of his or her race or sex.

Sometimes, it is lawful, because it does not relate to a protected group.

For example, except for morbid obesity, weight is not protected in most jurisdictions. Yet, heavy people are bullied in school and experience bias in workplaces.

Another example: discrimination based on sexual orientation is still lawful in the majority of states.  So, in PA, except for a few counties, bullying based on sexual orientation is lawful too.

In all cases, bullying is hurtful not only to the victim but also to the workplace.

Bullies not only hurt their victims but also create a climate of fear in which the focus is less on the organization’s mission and more on self-preservation.

Bulling is particularly dangerous in health care.  It is inconsistent with a culture of safety where patients may become the victims too.

But how do you define bullying?   Where does pushing appropriately hard become inappropriate bullying?

Are there dangers in having a policy?  What if you don’t live up to what you promise?

Employers cannot ignore the issue. But we cannot prohibit any and all behavior that anyone might find intimidating or offensive.

The Supreme Court Justices once failed to define obscenity, instead saying they would know it when they saw it.  Not the clearest of guidance but perhaps the most honest answer possible.

The same is true of bullying.  There are dangers in defining it too distinctly.  But not as great as ignoring it.

Bullies are co-dependent.  They need victims to feed their self-esteem.

They will not derive the same satisfaction they need if bystanders don’t stand by.  To do nothing is to condone.

Employers should deal with bullying as part of harassment prevention training, making clear that, regardless of whether it is lawful, it is unacceptable.

Refraining is not enough; to date myself, if you are not part of the solution you are part of the problem.

This blog should not be construed as legal advice, as establishing an attorney-client relationship or as applying to specific factual situations.

About Jonathan A. Segal
Jonathan A. Segal is a partner at Duane Morris LLP in the Employment Group. He is also the managing principal of the Duane Morris Institute. The Duane Morris Institute provides training for human resource professionals, in-house counsel, and other leaders at client sites and by way of webinar on myriad employment, leadership labor, benefits and immigration topics. Jonathan has served intermittently as a consultant to the Federal Judicial Center in Washington, D.C. for more than 20 years, providing training on employment issues to federal judges around the country. Jonathan also has provided training on harassment on behalf of the EEOC as well as providing training on diversity to members of the United States intelligence agencies. Jonathan is also frequently a featured speaker at national, state and local human resource, business and legal conferences, including conferences sponsored by the Society for Human Resource Management and the Pennsylvania State Chamber of Business and Industry. Jonathan’s practice focuses on maximizing compliance and minimizing legal risk. Jonathan’s particular areas of emphasis include: equal employment opportunity in general and gender equality in particular: social media; wage and hour; performance management; talent acquisition; harassment prevention and correction; and non-competes and other ways to protect your business. You can find him on Twitter @Jonathan_HR_Law .