Labor & Employment Archives - General Counsel Law.

New Year’s Resolutions for Employers

Happy New Year. A new year is a good time to review and update human resources / employment policies and procedures. Provided below are eight (8) topics that all employers should review.

Review and Plan: Most employers understand that HR problems can derail a business operation. Accordingly, business owners/managers should conduct a review of 2018 HR issues/problems and develop a plan for successful 2019 HR management.
Review/Update Employee Handbook and other Employment Documents: Employment laws are constantly changing. Your business is changing. If you have not reviewed and updated your Employee Handbook, job application, offer letters and other employment-related documents in the past few years, they are likely out of date (and potentially legally insufficient or illegal).
Conduct Harassment Training and Ensure all Employees have Acknowledged Receipt of Policy: The U. S. Supreme Court has provided employers an affirmative defense to harassment/discrimination charges (in certain circumstances) if an employer has a proper anti-harassment/non-discrimination policy in place, that has been effectively communicated to employees, and the complaining employee has not utilized such procedures. Accordingly, all employers need to: (a) ensure that they have well drafted harassment/non-discrimination policy; (b) make sure employees sign receipt that they have received such policy; (c) provide training to all employees and managers about such policy. This should be done annually and for all new employees.
Review/Update/Implement Confidentiality and Non-Competition Agreement: Your business trains employees, introduces them to your clients and vendors, provides them access to your technology and trade secrets, if your business does not have a Confidentiality/Non-Compete Agreement in place, it should. Further, if you have an existing Non-Compete Agreement in place, unless drafted by an attorney and reviewed/updated in past few years, it could be outdated and unenforceable. A good agreement should: (a) protect Confidential Information/Trade Secrets; (b) provide intellectual property rights for employer through “work for hire” provisions; (c) prohibit former employee from recruiting your employees/contractors; (d) prohibit former employee from soliciting clients/prospective clients; and (e) depending on your business, prohibit your former employee from competing with your business on limited (duration and geography) basis.
Review Employee/Contractor & Exempt/Non-Exempt Classifications: First, make sure you have employees and independent contractors properly identified. If your business controls the when, where and how of the relationship, the person is likely an employee and, as such, must be paid on W-2 basis. If person has their own business, works for multiple companies, has his/her own equipment, carries business insurance, has website, he/she is likely independent contractor and can be paid on 1099 basis. If any confusion, ask your attorney. Second, the Fair Labor Standards Act (“FLSA”) defines exempt and non-exempt employee categories. Exempt employees do not need to be paid overtime for work over 40 years in a week. If you have not done so in past year (with a knowledgeable attorney or HR professional), review all employment positions and ensure that employees are properly classified. Finally, make sure your business understands the FLSA rules with regard to payment obligations.
Review/Update Performance Evaluation Process: Effective HR management generally leads to hard-working employees striving to help their employer grow and succeed. Without an effective performance evaluation process (“PEP”), employees are often confused, frustrated and unsatisfied. Further, and from a legal perspective, without an effective PEP, an employer may not have a documented paper trail to substantiate employment termination decisions when faced with a discrimination charge. Accordingly, at a minimum, all employees should undergo formal PEP on an annual basis (it is recommended that there also be semi-annual mini-PEP). Further, any time employees make mistakes or are reprimanded, there should be formal documentation of such actions. When an employer has effective communication with employees through PEP and documentation of any mistakes/reprimands, not only are employees more likely to succeed, but also, if such employee needs to be terminated, the employer has strong evidence supporting the employment termination decision.
Fire Problem Employee(s): You likely have heard the express “hire slow, fire fast.” It is true. Unfortunately, too often employers don’t want to fire problem employees for a myriad of reasons. And, too often such problem employees are not only putting a tremendous operational drain on the business, but also they are the employee who is likely to file a discrimination lawsuit when finally fired. So, resolve in 2019 to fire (as soon as possible) your problem employees. Make sure you have documentation and substantiation for termination decision. Fire them. It is amazing how often times after a problem employee is terminated there is general improvement in morale and productivity in a business.
Make Sure Your Business Has A Good Employment Law Attorney: Finally, when your business is getting ready to make an employment-related decision, whether hiring, granting leave, or a termination decision, you should not make the decision without legal counsel. You should have a good employment law attorney you can call to make sure that you are not missing any landmines. Merritt Green and Amy Muhlendorf with General Counsel, P.C. both have over twenty years of experience helping employers and would be pleased to assist.

Caution When Giving Employees Holiday Bonuses

With Christmas around the corner, employers may be thinking about holiday bonuses for their employees.

While such bonuses can help employers show employees appreciation, boost morale, and motivate employees, they may also have unexpected consequences.

The biggest concern that may arise from employer holiday bonuses relates to the overtime pay rate for non-exempt employees.

Under the Fair Labor Standards Act (“FLSA”), a covered, nonexempt employee must receive overtime pay for any hours over 40 worked in a workweek. To calculate an employee’s overtime compensation, you must first determine the employee’s “regular rate of pay.” The regular rate is calculated by dividing the total pay in any workweek by the total number of hours worked.

Where employers must be careful is that total pay is not simply the wages or salary paid to the employee, it also may include bonuses, which can in turn affect that employee’s regular rate and overtime rate.

Under the FLSA, an employee’s regular rate of pay is based on the total compensation for hours worked.

On its face, this would seem to include all bonuses received. However, the FLSA excludes certain types of payments from an employee’s regular pay rate, including discretionary bonuses and gifts.

Specifically, the FLSA excludes “sums paid as gifts” and “payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency.”

To be excluded as a gift, the amount of a holiday bonus cannot be dependent on hours worked, production, or efficiency. A bonus may still be considered a gift, even if the amounts paid to employees vary, as long as the amounts are not specifically measured by or dependent on hours worked, production, or efficiency.

Additionally, a bonus is discretionary, and thus excluded from an employee’s regular rate of pay, if: (1) the fact that the payment is to be made and the amount of the payment is in the employer’s sole discretion; and (2) the payment is not pursuant to any prior contract or agreement with the employee, causing the employee to expect such payments regularly.

Both the decision to make the payment and the amount of the payment must be wholly discretionary. If the employer previously promised to pay a bonus, but had discretion to choose the amount, or conversely had discretion to pay a previously agreed upon amount, then the bonus would not be considered discretionary and would not be excluded from the employee’s regular rate.

The Department of Labor Regulations note that a one-time holiday bonus of two weeks’ salary for all employees would be a discretionary bonus, as long as it wasn’t given pursuant to a prior agreement.

However, production bonuses, sales incentives, and attendance bonuses would not fall under this exclusion, since they are all dependent on an employee’s hours worked, production, or efficiency. Such payments are considered nondiscretionary bonuses and must be included in the employee’s regular rate for overtime rate calculation purposes.

Failure to pay employees the appropriate overtime rate may constitute a violation of the FLSA, which can result in overtime wage liability or other damages. This potential liability makes it crucial that employers know the full scope of consequences that may arise from giving out holiday bonuses.

In sum, if a “holiday bonus” can be considered either a gift or a discretionary bonus, then the amount of the bonus will not be included in the employee’s regular rate of pay and will not impact that employee’s overtime rate of pay. To help a bonus remain in one of these categories, a holiday bonus or specific payment amount should not be promised in advance.

Call General Counsel, P.C. Today

If you’re unsure whether or not a planned bonus will be considered discretionary or have other unintended effects, our attorneys can help you make that determination. Attorneys at General Counsel, P.C. are specialized in labor and employment law and have experience working with business owners across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William.

Call General Counsel, P.C. at 703-556-0411 today to see how we can help you.

Employment Law Update: Make Sure Your Disclosure Forms Are Up To Date

In May 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act. Under the Act, consumer reporting agencies must provide “national security freezes” free of charge to consumers. These national security freezes restrict prospective lenders from obtaining access to a consumer’s credit report, making it harder for identity thieves to open fraudulent accounts. Additionally, whenever the Fair Credit Reporting Act (“FCRA”) requires a consumer to receive a Summary of Rights, the consumer must now also receive a notice of the new security freeze right.

For employers, this means that when an employer subjects job applicants or employees to background checks or adverse actions as a result of background checks, the FCRA requires the employer to provide the revised “A Summary of Your Rights Under the FCRA.” Since the new form requirement took effect September 21, 2018, any employers that utilize background checks for their employees or job applicants must ensure that their disclosure forms are updated immediately. Failure to update the form may lead to liability for violations of the FCRA.

The Bureau of Consumer Financial Protection recently updated its model disclosures to implement these changes made to the FCRA. Employers can use the Bureau’s model forms or create their own substantially similar forms.

Call General Counsel PC Today

If you would like to ensure your business’s disclosures are FCRA complaint or more generally update your business policies, General Counsel PC can help. Our attorneys are specialized in labor and employment law and have experience working with business owners across Virginia. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Can Employees of Government Contractors use Medical Marijuana?

While many states have enacted legislation permitting marijuana use in some form (you can find more information on marijuana in the workplace in VA, MD, and D.C. here), marijuana use is still prohibited under federal law. Specifically, under the federal Controlled Substances Act, marijuana is prohibited as a Schedule 1 illegal drug. While the Americans with Disabilities Act (“ADA”), prohibits employers from discriminating against qualified individuals on the basis of a disability and requires employers to provide reasonable accommodations to employees with disabilities, the ADA specifically excludes protection for individuals “currently engaging in the illegal use of drugs.” “Illegal use of drugs” refers to drugs that are unlawful under the Controlled Substances Act, including marijuana, leading courts to historically find that employers are not required to provide accommodations for the use of medicinal marijuana under the ADA.

More importantly, federal employees and contractors are subject to the Drug Free Workplace Act, which requires federal contractors to meet certain requirements in order to be eligible for federal contacts. Under this Act, any company that receives a federal contact of at least $100,000 and any organization that receives a federal grant of any amount, must maintain a drug-free workplace policy and a drug-free awareness program. The drug-free policies apply to contract employees who are directly engaged in the performance of contract work. While technically the Act only covers employees working directly on the grant, a drug-free workplace for all employees of the organization is advisable.

Federal contract conditions must be maintained throughout the life of the contract. A contact may be suspended, debarred, or terminated if a contractor is found in violation of the Drug-Free Workplace Act, such as by failing to provide a drug-free workplace. Contractors and individuals that have been debarred will not qualify for federal contacts for a period up to five years. Additionally, companies that fail to timely inform the relevant federal agency of drug violations, may similarly face contract suspension, debarment, or termination.

Recently a new bill has been proposed that would allow federal workers to legally use marijuana without risking their jobs. The “Fairness in Federal Drug Testing Under State Laws Act” would remove limitations on federal employment for anyone legally using marijuana in accordance with state law. Under the bill, if an employee resides in a state that permits private use of marijuana, he can’t be denied employment or suffer any other adverse employment action as a result of a positive marijuana drug test. The bill won’t apply to positions requiring top security clearances or failed drug tests resulting from probable cause, such as suspected impairment on the job. The fate of the bill is unclear and it is important for employers to ensure compliance with current federal law, until this, or a similar bill, actually takes effect. However, the bill does highlight a trend in marijuana legislation and the importance of staying up to date with changing regulations.

Employer Obligations

Despite a state’s employment protections for users of medical marijuana, such protections don’t extend to federal employees or contractors. In the workplace, these federal employees or contractors are subject to federal law. To be in compliance with federal law, specifically the Drug Free Workplace Act, qualifying employers must:

Publish a statement notifying employees that the unlawful manufacture, distribution, dispensation, possession, or use of a controlled substance is prohibited in the workplace and specify what actions will be taken for violations of the prohibition;
Ensure that each employee engaged in the performance of a federal contract receives a copy of the statement;
Notify employees that as condition of employment, the employee must abide by the statement and notify the employer of any criminal drug statute conviction for a violation occurring in the workplace no later than 5 days after the conviction;
Establish a drug-free awareness program to inform employees of the dangers of drug abuse in the workplace, the drug-free workplace policy, available drug counseling, rehabilitation, and employee assistance programs, and the potential penalties for violations;
Notify the contracting agency within 10 days after receiving notice of an employee’s drug conviction; and
Impose a sanction on any employee who is convicted of a criminal drug offense, or require participation in a drug abuse assistance or rehabilitation program.

It is important to note that compliance with the Drug Free Workplace Act does not require employers to terminate employees for drug-related violations. While employers are free to terminate employees who violate the drug-free workplace policy, compliance with the Act only requires a sanction of some kind. The required sanction can be mandatory counseling or some other type of participation in an employee assistance program.

It is also notable that the Drug Free Workplace Act only requires a drug free policy in the workplace. The Act doesn’t regulate employee marijuana use outside of the workplace, with an exception for criminal drug convictions. Additionally, the Drug Free Workplace Act doesn’t require employers to drug test applicants or employees, but also doesn’t prohibit employers from drug testing if they choose to. Employers may decide that drug testing isn’t beneficial, since a positive drug test doesn’t necessarily mean that an employee was using marijuana in the workplace. Employers need to do a cost/benefit analysis for their individual workplaces to decide the policies that work best for them.

Call General Counsel PC Today

Since the law is still evolving, the uncertainty around marijuana in the workplace can make setting workplace policies difficult. General Counsel PC can help you understand the requirements of the Drug Free Workplace Act and create policies to ensure compliance. Our attorneys are specialized in labor and employment law and have experience working with business owners across Maryland, Virginia, and D.C. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Marijuana in the Workplace Under D.C., Maryland, and Virginia Law

With so many states enacting legislation permitting marijuana use in some form, new questions have developed as to employers’ rights regarding marijuana use by employees. 30 states and the District of Columbia currently permit marijuana use for medicinal purposes. Of those states that allow medicinal marijuana, 9 states and the District of Columbia also permit recreational marijuana use, in some form. With more states considering similar legislation, allowance of recreational marijuana use seems to be on the rise. However, despite support for some level of marijuana use among the majority of states, marijuana use is still prohibited under federal law. This inconsistency creates some uncertainty for employers who are unsure how to handle the issue of marijuana in the workplace.

Marijuana Use Under Federal Law

Under the federal Controlled Substances Act, marijuana is prohibited as a Schedule 1 illegal drug. The Americans with Disabilities Act (“ADA”), prohibits employers from discriminating against qualified individuals on the basis of a disability and requires employers to provide reasonable accommodations to employees with disabilities. Since medicinal marijuana is often prescribed to individuals with disabilities recognized under the ADA, a question arises regarding how medicinal marijuana use affects the protections of disabled individuals under the ADA. However, the ADA specifically excludes protection for individuals “currently engaging in the illegal use of drugs.” Such individuals are not considered “qualified individuals with disabilities” under the ADA. The Act defines “illegal use of drugs” as the use of drugs that are unlawful under the Controlled Substances Act. Since marijuana remains prohibited under the Controlled Substances Act, as a Schedule 1 substance, courts have historically found that employers are not required to provide accommodations for the use of medicinal marijuana under the ADA.

Marijuana Use Under D.C., Maryland, and Virginia Law

D.C., Virginia, and Maryland have all taken steps towards legalizing marijuana use, in some form, but each location’s legislation varies greatly. Understanding your state’s policy on marijuana use and the related rights of employees and employers is vital to staying in compliance with changing policies.

Maryland has passed legislation permitting the use of marijuana for medicinal purposes. However, this legislation does not prevent employers from testing for marijuana use and does not protect employees that test positive for any reason.

Virginia has passed a very narrow medical exception to the Virginia Drug Control Act, which classifies marijuana as an illegal substance. Under the Virginia law, possession of marijuana is not legalized, but an affirmative defense is created for individuals with intractable epilepsy who meet specific medicinal marijuana requirements. Virginia does not provide any protections for prospective or current employees that use medicinal marijuana.

D.C. has passed legislation permitting medicinal marijuana use, as well as recreational marijuana use for individuals over the age of 21. Current D.C. employees do not have any employment protections for medicinal or recreational marijuana use. However, under the Pre-Employment Marijuana Testing Act of 2015, employers are prohibited from testing prospective employees for marijuana prior to a conditional offer of employment. Employers are permitted to require prospective employees to take drug tests after a conditional offer of employment has been made.

If you need to know more about the potential risks of violating marijuana laws in DC, or Virginia, contact an experienced criminal law attorney like Jay P. Myktiuk.

What Does this Mean for Employers?

It is important to note that in states that permit use of marijuana for some purpose, no state permits employees to use or be under the influence of marijuana in the workplace. Additionally, no state provides employment protections for employees or job applicants who use marijuana recreationally. However, some states offer limited employment protections for employees and job applicants who use marijuana for medicinal services. In such states, employees or job applicants who are discriminated against due to their medicinal marijuana use may have legal claims under state disability or marijuana laws. As noted above, none of the statutes in D.C., Virginia, or Maryland specifically provide workplace protections for employees using medicinal marijuana. Private employers in these states are free to set their own drug policies, including zero-tolerance, drug-free workplace policies, and to discipline or terminate an employee who violates those policies.

Even in states that allow some form of marijuana use, federal contractors must still maintain zero-tolerance policies. Additionally, the Department of Transportation specifically stated that a state’s allowance of marijuana use will not be a valid explanation for a transportation employee’s positive drug test. The DOT also explained that any safety-sensitive employee subject to drug testing under the DOT’s regulations are not permitted to use marijuana, regardless of a state’s policies.

Recent court decisions may point to a shift in the way courts view medicinal marijuana use. Historically, employees fired for off-duty medicinal marijuana use have lost lawsuits against their employers, because even though medicinal marijuana may be legal under state law, marijuana is still illegal under federal law. However, recent cases have disagreed. In 2017, a Rhode Island court found that an employer couldn’t refuse to hire an individual because of her status as a medical marijuana cardholder and use of medicinal marijuana outside of work. Again in 2017, a Massachusetts court found that a medical marijuana user who was fired for failing a drug test could proceed with her discrimination claim. The court found that although illegal federally, the state’s disability discrimination law permitted employees a right to seek a reasonable accommodation for medicinal marijuana use. Continuing the trend, in 2018 a Connecticut court found that an employer discriminated against a job applicant and violated Connecticut’s medical marijuana law when it refused to hire a medical marijuana user after she tested positive on a pre-employment drug test. Courts in D.C., Maryland, and Virginia have not yet addressed the issue. However, these court cases show the importance of staying up to date with court decisions depicting how courts view issues regarding termination of employees who use medicinal marijuana.

Since there is still a lot of uncertainty surrounding issues of medicinal marijuana in the workplace, employers need to balance the safety-sensitivity of specific job positions against any potential legal protections for employees with disabilities using medicinal marijuana. Below are some tips for employers to consider to help walk that line:

Require employees to acknowledge, in writing, that any medicinal marijuana use is legitimate and won’t be used in the workplace or in a way that may affect their work;
Review existing policies to update language with state law to clarify ambiguous language—prohibiting “illegal drugs” may create confusion regarding whether legal medicinal marijuana is permitted;
Review the nature of your workplace and determine your tolerance for marijuana use outside of work and what the consequences of an employee testing positive for marijuana will be. For example, jobs that require employees to operate machinery or handle dangerous tools or substances may be concerned with the safety of employees and others as well as their own liability. Employees that work on federal contracts are still prohibited from using marijuana;
Caution employees that they may not be under the influence or possess marijuana in the workplace;
Consider your current drug testing policy and whether it is still useful in light of changing legislation. Particularly in D.C., ensure that your drug testing policies are in compliance with applicable laws;
Continue to monitor changes regarding the use of marijuana in state and federal legislation, as well as court opinions.

Call General Counsel PC Today

Since the law is still evolving, the uncertainty around marijuana in the workplace can make setting workplace policies difficult. General Counsel PC can help you examine the nature of your workplace to determine the best policies for your specific business. Our attorneys are specialized in labor and employment law and have experience working with business owners across Maryland, Virginia, and D.C. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Virginia Court Upholds 1-Year, 50-Mile Radius Non-Compete Agreement For National Staffing Company

In a recently decided case, Update Inc. v. Samilow, the Eastern District of Virginia held that a non-compete agreement with a one-year duration and 50 miles from any office geographic scope was enforceable. There, the plaintiff, Update, Inc. (“Update”), employed defendant, Lawrence Samilow. Update provides eDiscovery and legal staffing services throughout the United States. Samilow was employed as Chief Customer Officer and was responsible for developing new sales opportunities, managing client relationships, customer service for New York and New Jersey clients, and supervision of national sales. After working for Update, Inc. for over 20 years, Samilow’s employment ended.

Soon after his employment ended, Samilow started a new business, within 50 miles of Update’s New York headquarters, providing eDiscovery services similar to those provided by Update. Around the same time, Update was acquired by Driven, Inc. and Samilow proposed to Driven, Inc. that all eDiscovery clients he had been servicing personally be moved to his new business, but Driven rejected the proposal. Samilow then solicited a client he had worked with during his employment with Update. Update sued Samilow for breaching the non-competition and non-solicitation agreements. At the time of trial, Samilow was providing services for two of Update’s clients, performing services similar to those provided by Update, and had specifically diverted a large project from Update.

Enforceability of Non-Compete Agreements

Virginia utilizes a three-part test for determining the enforceability of non-compete and non-solicitation agreements. Under this test, a non-compete agreement must be (1) narrowly drawn to protect the employer’s legitimate business interest; (2) not unduly burdensome on the employee’s ability to earn a living; and (3) not against sound public policy. This requires consideration of the agreement’s “restriction in terms of function, geographic scope, and duration.”

Duration of Non-Compete

The court held that Update, Inc. had a legitimate interest in protecting itself from losing potential work to competitors through employees who complete against it using the business knowledge and contacts they acquired as employees. The non-compete and non-solicitation clauses served that purpose. The court found that the one-year duration of the clauses is reasonable, in light of the fact that Update “invests significant resources in its legal services clients and built relationships with many of them” through Samilow’s work on behalf of Update. The court determined that one-year allows Update a reasonable time to convince customers to remain with the company without interference from Samilow.

Geographic Scope of Non-Compete

Additionally, the court found the geographic scope of 50 miles from any office, branch office, or production facility reasonable. While, such a large geographic scope may not be appropriate in all circumstances, the court noted that “where, as here, the employee has company-wide knowledge about customers and sales practices” the Supreme Court of Virginia has upheld even less definite geographic restrictions. For example, the court previously upheld a non-compete clause that referred to “all territory” covered by the former employer, since the employee had company-wide knowledge that allowed him to compete nationally. Here, Samilow’s role required him to provide personal customer service to New York and New Jersey customers and was informed about customer information across Update’s national operations. Moreover, his new business had a “national practice.” In light of the company-wide knowledge standard, a 50-mile radius from any office was deemed reasonable, because it only covered the territories in which Update conducts business and in which Samilow conducted business.

Functional Scope of Non-Compete

The court also found that the functional scope of the clauses was reasonable, in light of Samilow’s former role at Update. The non-solicitation agreement prohibited solicitation of clients in geographic areas that would compete with Update and of former clients with whom Samilow worked. Additionally, it only bared solicitation for the purposes of diverting or taking away business from Update, Inc., and not mere contact with former or possible clients. The court found the agreement was reasonable because the scope was limited only to solicitation that “takes business away from the employer.” The non-compete agreement was further limited to prohibit only the types of services and activities that were included with Samilow’s job description in his job offer, and didn’t include services that fell outside the scope of his former role at Update.

What Does Update, Inc. Mean for Employers?

Courts determine the enforceability of a non-compete agreement on a case-by-case basis, based on what is reasonable and narrowly tailored in light of specific circumstances. Due to the fact intensive inquiry each case requires, the court’s finding in Update, Inc. can’t be interpreted as applicable to all non-competes across Virginia. However, it may be illustrative of how the court will view non-competes in similar employment scenarios. Where as here, an employee gains company-wide knowledge from a national company and information about clients nationally, the court was willing to enforce a geographic scope of 50 miles from any office nationally.

Ensuring that a non-compete is sufficiently “narrowly tailored” can make or break the agreement’s enforceability. Attorneys at General Counsel PC have experience walking the fine line of protecting a wide range of employer interests and remaining narrowly tailored. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Employment Law Update: New Approach to Determining Whether Employer Policies Violate the NLRA

The National Labor Relations Act (“NLRA”) serves to protect the rights of employees and employers while restricting certain management practices that may harm workers. The National Labor Relations Board (“NLRB”) is the federal agency that enforces the NLRA.

Section 7 of the NLRA protects an employee’s right to engage in concerted activity, organize, and bargain collectively. Section 8 prohibits employers from adopting workplace policies that interfere with, restrain, or coerce employees in their exercise of these Section 7 rights. Until recently, the NLRB analyzed employer policies under a “reasonable construction” standard created in Lutheran Heritage Village-Livonia, which asked whether employees could “reasonably construe” that an employer policy prohibited a Section 7 right (known as the Lutheran Heritage standard). This standard was very unclear and often led to arbitrary results, leaving much confusion about what rules were actually prohibited under the NLRA.

Recently, in The Boeing Company, the NLRB abandoned this approach and adopted a new standard, allowing the NLRB to consider unique characteristics of a particular situation, rather than the previous “one-size-fits-all” analysis. 365 NLRB No. 154 (Dec. 14, 2017). Under the new rule, the NLRB will first determine whether a facially neutral policy, when reasonably interpreted, could prohibit or interfere with the exercise of an NLRA right. If not, the rule is lawful, without consideration of business justifications.

However, if the NLRB finds that a policy may interfere with Section 7 rights, the NLRB will now analyze two factors: (1) the nature and extent of the potential impact on NLRA rights; and (2) legitimate justifications associated with the requirements. In making this evaluation, the NLRB will work to “strike the proper balance” between “asserted business justifications and the invasion of employee rights” under the NLRA.

After the NLRB analyzes a policy, it will fall into one of three categories:

Category 1 includes rules the NLRB designates as lawful to maintain, either because they aren’t interpreted to interfere with an employee’s NLRA rights or because any potential impact on these employee rights are outweighed by employer justifications for the rule. (i.e. rules that are lawful, because any impact on an NLRA right is outweighed by the employer’s reasoning for the rule).
Category 2 includes rules that warrant individualized scrutiny to determine if the policy would interfere with an employee’s NLRA rights, and if so, whether the potential impact on these rights is outweighed by legitimate employer justifications.
Category 3 includes rules the NLRB determines are unlawful to maintain because they prohibit or limit NLRA protected conduct and the potential negative impact on employees’ NLRA rights is not outweighed by employer justifications for the rule. (i.e. rules that are unlawful, because the impact on an NLRA right outweighs any employer justification for the rule)

The NLRB explained that in making its determination, it may differentiate among different types of NLRA protected rights, as well as substantial, rather than peripheral, employer justifications. The NLRB also noted that it may apply distinctions between different industries and work settings, as well as consider particular events that may be relevant to the purposes served by a specific policy.

The NLRB will weigh a policy’s potential impact on protected NLRA activity against the employer’s legitimate business justifications for the policy. If the policy’s justifications outweigh the potential impact of employee rights, the rule is lawful. If employer justifications don’t outweigh the impact on employee rights, the policy is unlawful.

This new approach is more favorable to employers since it offers greater consideration of employer justifications for rules. Additionally, employers and employees will have more confidence about the validity of policies, since the new standard provides greater clarity and certainty regarding whether, and to what extent, different types of rules are lawful.

Even though the NLRB’s new approach offers more security to employers, it is still important for employers to review their employee handbooks and other workplace policies to ensure they all comply with the NLRA. Attorneys at General Counsel PC are specialized in labor and employment law and have experience working with business owners and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Our attorneys will stay informed of subsequent NLRB decisions offering additional guidance on the new approach, to ensure we can provide clients with the most up to date information. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Employment Law Update: New Test for Determining if California Workers are Employees or Independent Contractors

Summary: California Supreme Court has established a new standard that makes it much more likely that workers will be W-2 Employees – not 1099 Contactors.

The distinction between a 1099 independent contractor and a W-2 employee is an important one, as this classification affects both federal and state tax issues, and it is important that business owners correctly determine the employment status of workers. Misclassifications can result in liability of the company for missing employment taxes, interest, and penalties and entitlement of the employee to past benefits.

Until recently, the test for determining whether a worker is an independent contractor or an employee could be complicated because the test was unclear and there were a number of factors to be considered. However, recently, the Supreme Court of California helped answer the question of whether workers should be classified as employees or as independent contractors for purposes of California wage orders. Dynamex Operations W., Inc. v. Superior Court, 4 Cal. 5th 903, 416 P.3d 1, 5 (2018). The court decided to utilize a new test to make this determination more clear. Now, in California, a worker is an independent contractor only if: (1) the worker is free from the control and direction of the hirer in connection with the performance of the work; (2) the worker performs work that is outside the usual course of the hiring entity’s business; and (3) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

This test adopts a much more expansive classification of “employee.” Under the first “control and direction” element, a business doesn’t need to control all details of the work in order for the worker to be an employee. The second “outside the usual course of business” element is likely to pull in many workers that were previously categorized as independent contractors. This element will include “individuals who can reasonably be viewed as working in the hiring entity’s business.” For example, if a clothing manufacturing company hires seamstresses to make clothing from home or a bakery hires cake decorators to regularly work on custom cakes, those workers are working in the same business as the hiring company, and are thus, employees. To be an independent contractor the scenario would have to more closely resemble that of a retail store hiring an outside plumber to repair a leak on the premises. Since there, the plumber’s business of plumbing is clearly much different than the hiring business’s retail business, the worker may properly be considered an independent contractor. Lastly, the “customarily engaged” element asks if the worker has independently made the decision to go into business for himself, taking the steps of establishing and promoting an independent business, rather than simply being designated an independent contractor by the hiring business.

If you are unsure how this update affects the employment status of individuals performing services for your business, call General Counsel PC at 703-556-0411 today and our attorneys can help you make that determination.

What is the Difference Between a 1099 Independent Contractor and a W-2 Employee?

The distinction between a 1099 independent contractor and a W-2 employee is an important one, as this classification affects federal income tax, social security and Medicare taxes, as well as impacts eligibility for Medicare benefits. It is important that business owners correctly determine whether individuals are employees or self-employed. If a company misclassifies a worker as an independent contractor that is actually an employee, the company could be liable for missing employment taxes, interest, and penalties. Additionally, the employee may be entitled to past benefits.

Business owners generally must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes on wages paid to an employee. An employer also must provide a Form W-2 to an employee. No similar withholdings or taxes are required for payments to independent contractors. Instead, an independent contractor is required to pay his own income and self-employment taxes and may be able to deduct business expenses. The company may be required to provide an independent contractor a Form 1099-MISC.

How Do I know if an Individual is an Employee or Independent Contractor?

Before a company can determine how to treat payments for services, it must determine the business relationship between itself and the individual performing the services. Relevant information in making this determination includes any information that shows the degree of control and independence the individual has when performing services. An individual’s label or position title is not determinative, and instead, it’s necessary to look at the totality of the relationship. There is no magic formula for determining a worker’s employment status, but there are factors that help guide an assessment. There are generally three primary factors considered when determining if an individual is an independent contractor or an employee:

Behavioral Control: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- If a company gives extensive instructions on how work should be done, that indicates the worker is more likely an employee. Instructions may include how, when, and where to complete work; what tools or equipment must be used; what assistants need to be hired to help with any work; and where to purchase supplies and other services.
- If a worker receives extensive training or significant tools, materials, and other equipment from the company, the worker is more likely an employee.
- If a worker has set hours of work, established by the company, the worker is more likely an employee.
- Work performed on the premises of the company for whom the services are performed suggests the worker is an employee.
Financial Control: Are the business aspects of the worker’s job controlled by the company?
- If a worker has a significant investment in his work, he is more likely an independent contractor.
- If the worker is not reimbursed for some or all business expenses, he is more likely an independent contractor.
- If a worker is able to realize a profit or incur a loss, he is more likely an independent contractor.
Relationship of the Parties: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
- If a worker receives benefits, he is more likely an employee.
- If a contract exists, that might be an indication that the worker is more likely an independent contractor.
- If a company has a right to discharge the worker or the worker as the right to quit work at any time without incurring liability, he is likely an employee.

If a company is not able to accurately determine whether a worker is an independent contractor or an employee, a Form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding can be filed with the IRS. The Form SS-8 asks multiple questions about each category (behavioral control, financial control, and relationship type) to get a full picture of the degree of control and independence the worker has. The IRS will make a determination on the worker’s status.

Call General Counsel PC Today

The factors listed above are not all-inclusive. There are other factors to be considered when determining the employment status of an individual. If your business is unsure of the employment status of individuals performing services, attorneys at General Counsel PC can help you make an accurate determination and avoid having to ask the IRS, or worse, facing penalties for misclassifications later. Our attorneys are specialized in labor and employment law and have experience working with business owners across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you.

Public Policy Exception to At-Will Employment Doctrine in Virginia

In Virginia, employment relationships are presumed to be “at will,” which means that the employment term extends for an indefinite period and may be terminated by either party for any reason, or no reason at all, upon reasonable notice. Virginia courts “have strenuously adhered” to the presumption of at-will employment. See Nguyen v.CNA Corp., 44 F.3d 234, 237-38 (4th Cir. 1995). Virginia courts have relied on an underlying theory that stresses the freedom of contract: “An employee is ordinarily at liberty to leave his employment for any reason or for no reason, upon giving reasonable notice, without incurring liability to his employer.” Miller v. SEVAMP, Inc., 362 S.E.2d 915, 917 (Va. 1987).

Virginia courts have found an exception to the at-will employment relationship if the termination violates a well-defined public policy of the state or violates Virginia statutory authority. Statutes expressing a public policy sufficient to form the basis of a wrongful discharge claim fall into two categories: (1) a statute explicitly stating that it expresses a public policy; and (2) statutes that do not explicitly state a public policy, but rather are “designed to protect property rights, personal freedoms, health, safety or welfare of the people in general.” Lockhart v. Commonwealth Educ. Sys. Corp., 247 Va. 98, 104, 439 S.E.2d 328, 331 (1994).

In Bowman v. State Bank of Keysville, 229 Va. 534, 331 S.E.2d 797 (1985), the Virginia Supreme Court first recognized a narrow public policy exception to the employment at-will doctrine, and held that the plaintiffs’ employer was liable for wrongful discharge after it had terminated plaintiffs in violation of public policy. There, the plaintiffs were stockholders in the bank corporation that employed them and they were terminated for refusing to vote their stock in accordance with the demands of management. The court reasoned that the employees’ termination violated the public policy expressed in Virginia securities law, which allows stockholders the right to vote their shares free from duress and intimidation by corporate management.

Recently, the Supreme Court of Virginia reaffirmed that the public policy exception is a narrow one in Francis v. National Accrediting Commission of Career Arts & Sciences, Inc. 293 Va. 167, 175, 796 S.E.2d 188, 192 (2017). In Francis, the plaintiff was an at-will employee who claimed a co-worker confronted her, yelled obscenities, and threatened bodily harm. The plaintiff filed a petition for and received a preliminary protective order (PPO) against the co-worker. A few days later, the company terminated the plaintiff because she “did not fit the vision of the organization.” The plaintiff filed suit against her employer, claiming wrongful termination under Bowman, arguing that she was discharged in violation of public policy embodied in Virginia’s protective order statutes. The plaintiff argued that her exercise of her statutory rights in obtaining a PPO was a motivating factor in her termination. The court ultimately held that the plaintiff failed to state a claim for wrongful termination under Bowman. The court reiterated that “while virtually every statute expresses a public policy of some sort, we continue … to hold that termination of an employee in violation of the policy underlying any one statute does not automatically give rise to a common law cause of action for wrongful discharge.”

The court explained that the Bowman public policy exception is only recognized in 3 scenarios: (1) when an employer violated a policy enabling the exercise of an employee’s statutorily created right; (2) when the public policy violated by the employer was explicitly expressed in the statute and the employee was clearly a member of that class of persons directly entitled to the protection enunciated by the public policy; and (3) when the discharge was based on the employee’s refusal to engage in a criminal act.

To make a successful claim under the first scenario, the court must first determine “what right was conferred on an employee by statute, and then whether the employer’s termination of employment violated the public policy underlying that right.” In order for the Francis plaintiff to be successful under this theory, she would have to argue that her termination violated the public policy underlying the rights conferred to her in the protected order statutes. However, the public policy of the protective order statutes is to protect the health and safety of the petitioner and his family. For the public policy exception to apply, the plaintiff must show that her termination violated that stated public policy of protection of health and safety, which she did not. Rather, the plaintiff argued that she was terminated because of her exercise of her statutory rights in obtaining a PPO, but the protective order statute does not include a public policy of protecting the exercise of the right to seek a protective order. Since the public policy exception does not recognize “a generalized cause of action for the tort of retaliatory discharge,” the plaintiff did not make a successful claim under Bowman.

The court’s decision in Francis showed an unwillingness to expand the scope of the public policy exception to Virginia’s at will-employment rule. This is likely encouraging for Virginia employers. However, wrongful discharge matters can still be complicated, and employers should continue to be mindful of applicable public policies when making termination decisions for at-will employees.

Call General Counsel PC Today

Whether you are an employer or employee involved in a potential wrongful discharge matter, attorneys at General Counsel PC can provide you with the knowledge and assistance necessary protect your rights. Our attorneys are specialized in labor and employment law and have experience working with employees and employers across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you.