Five Employment Law Issues for Risk Managers Throughout 2016

By: Don Benson, Esq.

Risk Managers can expect to be confronted in the remainder of 2016 with five growing trends in employment law that require organizational attention and planning:

1. Protecting Trade Secrets
   Protecting your competitive edge is more important than ever. Non-compete, trade secret and related litigation increases as employers attempt to prevent present and former employees from unfairly competing and using or disclosing confidential information and trade secrets. The threat of misappropriation and unfair competition increases as technology advances and becomes more accessible to employees. Employers should consider self-audits focused on whether they have the proper contractual and institutional safeguards in place to protect their trade secrets.

2. DOL White Collar Exemptions and Overtime Rules
   On June 30, 2015, The U.S. Department of Labor (DOL) Wage and Hour Division issued proposed regulations which, if adopted, could significantly increase the number of individuals who are eligible for overtime pay.  The proposed rules would increase the salary threshold from $455 a week (or $23,660 per year) to $970 a week (or $50,440 per year) in 2016. DOL has just possibly accelerated the role out of these new Regulations by forwarding the proposal to OMB for review. If OMB’s review is completed on an expedited basis, DOL could disseminate the proposed final rule to the public by mid-April, with an effective date potentially as early as the beginning of June, subject to delay from that date based on Congressional review under the Congressional Review Act.

3. Independent Contractor Classifications
   In 2015, the DOL published additional guidance regarding the application of the standards for determining who is an employee under the Fair Labor Standards Act. The DOL’s “economic reality” test examines: (1) The extent to which the work performed is an integral part of the employer’s business; (2) Whether the worker’s managerial skills affect his or her opportunity for profit and loss; (3) The relative investments in facilities and equipment by the worker and the employer; (4) The worker’s skill and initiative; (5) The permanency of the worker’s relationship with the employer; and (6) The nature and degree of control by the employer.In other words, the existence of a written independent contractor is not determinative.  Rather, the six factors are to be viewed in their totality as indicators of the broader concept of economic dependence.

4. Background Checks and Screening New Applicants
   The Equal Employment Opportunity Commission (EEOC) has aggressively challenged employer practices that exclude applicants based on credit and criminal history on the theory that such practices have a disparate impact on minorities. In addition, the Fair Credit Reporting Act (FCRA) requires employers to obtain permission before seeking a criminal history report from a third party and providing an applicant with a copy of the report and a summary of rights under the FCRA before taking a negative employment action based on information in the report. The number of class action lawsuits alleging violations of the FCRA is surging.  Several states and cities have enacted “ban-the-box” laws that prohibit private employers from asking an applicant about criminal history at the job application stage.

5. Joint Employer Issues
   In its Browning-Ferris decision, the National Labor Relations Board (NLRB) announced a new standard to determine “joint employer” status. Under the new standard, a company is a joint-employer if it exercises “indirect control” over working conditions or if it has “reserved authority” to do so. The new test runs counter to prior NLRB precedent and may lead to more findings of joint employment relationships under the National Labor Relations Act, particularly . for franchisors and franchisees.