248-409-1900 dburke@mi-worklaw.com
$228 M Fed Ex Independent Contractor Settlement Sure To Result In More Claims

$228 M Fed Ex Independent Contractor Settlement Sure To Result In More Claims

By:  Bill Pilchak and Rob Dare – 6/23/15

The recent $228 Million settlement of a long-fought lawsuit by Federal Express drivers alleging that they were misclassified as independent contractors has attracted plenty of press coverage and will almost certainly result in more claims.   Plaintiff-side attorneys are already tuned into this lucrative practice, as multi-million-dollar settlements are fairly commonplace. In addition to FedEx, Lowes has settled a misclassification case for $6.5 million, a California trucking company paid $11 million and a janitorial services company paid $5.5 million, all within the past year. But, the Fed Ex publicity is likely to put dollar signs in the eyes of individuals classified as independent contractors as well.

Employers utilize independent contractors because they avoid employment costs. Independent contractors receive no fringe or ERISA benefits, receive no overtime compensation, employers do not pay Social Security or Medicare contributions, unemployment, workers compensation, etc., and taxes are not withheld or paid to government. However, these savings translate into two dangers: First, those savings plus often a multiplier and attorney fees are the damages plaintiffs will seek and/or assessments a governmental agency may demand. Second, it means that plenty of individuals and entities have a motive to scrutinize and audit the independent contractor designation, including the workers, their attorneys, the unemployment agency, the IRS, workers compensation carriers, and health care providers. Indeed, the $5.5 claim against the janitorial services company commenced when a janitor filed an unemployment claim, leading the finding that he was an employee.

Businesses may think that they have solved the problem by obtaining an agreement that the worker is an independent contractor. However, such an agreement is not determinative.

Another problem for business is that the determination whether an individual may be considered an independent contractor is not a black and white determination. Each case considers a number of factors. Fed Ex argued that its drivers could operate multiple delivery routes, had authority to hire third parties to help them with those routes and provided the vehicles in which they delivered packages, all of which support independent contractor status because they seemingly demonstrate that the driver is in business for him/herself. However, California, like Michigan, uses a right of control test and the Ninth Circuit Court of Appeals held last August that the drivers were employees as a matter of law, because Fed Ex controlled so much of the drivers’ operations: uniforms, workload, working days, delivery times, vehicle size and appearance and required adherence to Fed Ex policies and evaluated drivers.

Fed Ex was in a better position than most businesses to argue independent contractor status, given the driver’s investment in his/her vehicle and ability to hire its own employees. Independent contractors are in business for themselves, supply their own equipment, control their own schedules, and can turn a profit or a loss depending on how they conduct their business. The most dangerous situations are those where the individual comes to work day after day, does work under the direction and control of the company during hours set by the company, uses the company’s computers or equipment and is primarily reliant upon the company, as opposed to an array of customers, for his or her livelihood. Those situations are ripe for claims.

Boiling the analysis down to bare essentials, the primary question is: Is the independent contractor in business for him/herself, so that the “customer” exercises only limited control, such as scheduling services when mutually convenient? Or does the individual respond to supervision, direction, controls in the manner employees do? If the latter, the potential employer would be wise to adopt a strategy for converting independent contractors without alerting them to their potential claims.

Shouldn’t This Question Be Asked Of All Management/Supervisory Applicants?

Shouldn’t This Question Be Asked Of All Management/Supervisory Applicants?

By: Bill Pilchak – 6/9/15

Anyone reading my curriculum vitae knows that I have been professionally attuned to the subject of compulsive sexual behavior since the early 1990’s.   Knowledge of the underlying psychology has led to defenses in litigation where the accuser had actually acted out herself at work and then claimed sexual banter or activity to be unwelcome.

However, the greater problem for most employers is when supervisors sexualize the workplace as part of a broader pattern of behavior. The pattern need not be terribly dramatic to constitute a pattern.   Sexualizing conversations, double-entendres, subtle overtures, gauging of a subordinate’s interest in a relationship might all be part of a pattern, though not as dramatic or as self-destructive as serial affairs, reviewing pornography at work or the marital or legal problems that can occur in the lives of some compulsive individuals. Nevertheless, Freud noted that individuals with certain psychological conditions are likely to repeat patterns of sexual behavior and that has proven true in our practice.

The dangers of strict liability for a supervisor’s harassment is now so great under Federal law that employers should strive to avoid hiring supervisory employees if they have been involved in one or more incidents of claimed sexual harassment in the past. We have seen enough examples of supervisors, managers and executives causing repeated harassment problems for the same or successive employers to recognize that employers can avoid these problems by raising the subject during the interview process.

Here’s the tricky part: . Knowing that someone previously engaged in protected activity could lead to charges of retaliation if that applicant is not hired.   For the same reason, employers would never ask if someone had filed past discrimination lawsuits or charges of discrimination at past employers.

As such, employers who are inclined to inquire should document in some fashion that the interviewer is only interested if the individual has been ACCUSED. This documentation might consist of:

  • A written question on an employment application that is clear about what is and what is not being asked (as above);
  • Handing a written version of the question to the individual during the interview for clarity and to emphasize what is and what is not being asked;
  • Including the question (with specific language as to what is and what is not being asked) in written materials used by the interviewer to be read to the applicant verbatim. This “script” can be produced later, if the question becomes an issue.

So, what does an employer do when the applicant reveals a prior incident? The applicant should be asked detailed questions about the episode with an ear toward whether the applicant’s story makes sense. Here are some questions that might be asked:

  1. Who made the complaint (i.e., which position) what precisely did she/he complain of?
  2. What parts of her/his complaint were true and which were untrue?
  3. Can you think of any reason why she/he would make false allegations?
  4. Was there a written report? Do you have a copy? If not, what did the Company do as a result of the complaints? (i.e., did his/her employment continue; was there any discipline, delay of raises or promotions; did the company require training?)

In some cases, the employer may proceed to hire the individual despite revelations, concluding that the allegations were untrue or benign. Still, it would be wise if Human Resources kept an eye on this “newbie’s” relationships with subordinates until it is sure that he/she presents no problems.

Predictable Supreme Court Loss for Abercrombie & Fitch Re-enforces Obligation To Accommodate Religious Garb

Predictable Supreme Court Loss for Abercrombie & Fitch Re-enforces Obligation To Accommodate Religious Garb

By:  Rob Dare and Bill Pilchak – 6/4/15

On Monday, June 1, 2015 the U.S. Supreme Court ruled that Abercrombie & Fitch unlawfully discriminated against a teenage Muslim applicant when it refused to hire her because her religious headscarf (“hijab”) violated the store’s dress policy. To those of us who defend discrimination cases, the big questions were: How did Abercrombie think it could win? And, why wasn’t this case settled?

An assistant manager interviewed Samantha Elauf and rated her qualified to be hired, but was concerned that Elauf’s headscarf would conflict with the store “Look Policy.” She contacted the district manager, told him that she believed Elauf wore the headscarf for religious purposes and was instructed not to hire Elauf because her headscarf (or any headwear, religious or not) would violate the policy. At no point did the store inquire whether Elauf wore the headscarf based on her faith. The subject never came up in the interview either. The EEOC brought suit against Abercrombie for religious discrimination under Title VII. This necessarily means that Abercrombie declined to resolve the case in the conciliation process after the EEOC found cause to believe discrimination had occurred.

The district court granted summary judgment to the EEOC (meaning that Abercrombie lost the case without a trial) and awarded Elauf $20,000 in damages. However, Abercrombie appealed this modest award and the Tenth Circuit Court of Appeals (Denver) reversed, holding that an applicant must advise the employer that her inability to comply with the employer’s requirement results from a religious practice. Title VII prohibits a prospective employer from refusing to hire an applicant in order to avoid accommodating a religious practice that it could accommodate without undue hardship. The narrow question before the Supreme Court was “whether this prohibition applies only where an applicant has informed the employer of his need for an accommodation.” Abercrombie argued that it could not have discriminated against Elauf without “actual knowledge” of the applicant’s need for an accommodation.

Rejecting this argument, the Supreme Court held that the rule for claims based on a failure to accommodate a religious practice is straightforward: “an employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions.

One wonders why Abercrombie did not resolve this case early on, given the facts. Management-side attorneys generally consider the prospect of solidifying law adverse to employers when litigating. Personally, we believe Abercrombie was doomed to failure, based upon:

  • Of course the applicant’s religious practices were considered: Not only did the managers specifically discuss that prospect, but there would be no basis to assume that the applicant would wear a scarf to work every day, unless there were some obligation to do so.
  • Did Abercrombie really believe an applicant should specifically raise her religion – a subject that should otherwise never be mentioned during an interview- in the absence of any stated concern by the employer?

What does this mean for employers?

Title VII requires employers to accommodate religious practices, including articles of clothing, facial hair and grooming practices unless doing so would constitute an undue hardship. The bar for “undue hardship” is actually quite low. For example, an operation need not change the nature of its operation to accommodate religious practices: A strip club would not be required to hire a woman required to wear a burka for an exotic dancer position. However, from the photo shown at the top of this item, a woman can be stylish while wearing the hijab and Abercrombie’s policy will not prevail over the duty to accommodate. Because of the risk of litigation, employers are encouraged to consult with counsel when resisting accommodation for undue hardship reasons.

           Ideally, those who conduct employee interviews should be cognizant of clothing and grooming mandated by religious practices. Here is a short (and not necessarily complete) list: Yarmulkes and ear-locks (Jewish); Hijabs, burkas, beards (Islamic); Turbans, long hair, beards (Sikhs); Dreadlocks (Rastifanis); Crosses (Christian). When interviewers encounter an applicant whose present appearance clashes with company policy, the employer should engage in an interactive process with the applicant to determine if the present garb or grooming can be changed or is required. For example, the Abercrombie assistant manager could have said to Elauf: “we have a company policy against wearing any headwear. Would you be able to comply with that policy or need an accommodation?” Often, accommodation can be accomplished through creative means. (For example, one employer met religious objections to wearing Santa hats by allowing those employees to wear red baseball caps.)

          There are limits to the accommodation requirement beyond the “hardship” defense noted above. The applicant/employee must actually hold the religious beliefs that require the garb/grooming. So, other Abercrombie employees could not start wearing hats based on Elauf’s precedent. Moreover, religiously garbed applicants may be rejected for legitimate, non-discriminatory reasons. (Our firm defended a similar claim against a high-profile fast food company by an applicant who brought her mother to the job interview.) Also, as illustrated by that same case, the employer need not create religious garb as part of its uniform.