Some significant changes are affecting the workplace in 2016 as a result of Oregon legislative and regulatory changes. The Oregon Manufacturing Extension Partnership released this information compiled by Jean Ohman Back of Schwabe, Williamson and Wyatt:
What You Need to Know to Keep Ahead of 2016
The year 2015 was significant for employment legislation in Oregon. From the new statewide sick leave law, to added restrictions on non-competition agreements, to legalization of recreational marijuana, the 2015 Oregon legislature handed down several laws that employers should be aware of as we head into 2016.
On the federal level, in 2015 both the National Labor Relations Board and the Department of Labor issued significant pro-employee rulings, guidance, and proposed regulations concerning topics such as union elections, temporary employees, independent contractors, and the salary requirement for exempt employees. These regulatory developments could have a substantial impact on the financial planning and day-to-day operations of employers in Oregon and across the country.
National Labor Relations Board (NLRB) Updates
Expedited Union Election Rules
On April 14, 2015, new NLRB rules came into effect concerning the procedures for union representation elections. By and large, these pro-labor rules speed up the union election process and limit employers’ ability to dispute a unionization effort. Among the most important changes contained in the rules are the following:
- Representation hearings will take place within 8 days of the filing of a petition for union representation (as opposed to 14 days under the former rules). A petition for union representation is a document filed by employees or unions seeking to have the NLRB conduct an election to determine whether the employees of a particular business wish to unionize. Before the election takes place, the NLRB holds a representation hearing to determine the propriety of the petition and address any legal issues raised by the employer.
- After a petition for union representation is filed, employers must provide the NLRB with a preliminary list of employees who will participate in the election, along with their job titles, shifts, and work locations, before the representation hearing (under the former rules, employers were allowed to provide this information after the hearing).
- If an employer disputes the propriety of the proposed bargaining unit named in a union representation petition, the employer must also provide the NLRB with the names, job titles, work locations and shift information for all other employees it believes should be included in the unit.
- Employers must submit a “Statement of Position” by noon on the day before the representation hearing that identifies any legal issues the employer believes exist with respect to the petition. In addition, employers no longer have the right to present evidence at the representation hearing. Instead, they must make an “offer of proof” at the hearing that describes in detail the witnesses and evidence the employer would have presented had it been allowed to do so.
- Within two business days of the NLRB’s approval of a union election, the employer must submit a final list of voting employees along with their home phone numbers and personal email addresses (under the former rules, employers were only required to provide names and home addresses). These changes facilitate further organization of an employer’s workforce prior to a union election.
- Employers no longer have the right to file post-hearing briefs on issues raised in a representation hearing, and no longer have the right to appeal the decision made at the representation hearing prior to an election. These changes allow union elections to take place immediately following a representation hearing. This means that a business could go from non-unionized to unionized in as little as 14 days, as opposed to the typical 40-45 days under the former rules.
Overall, the expedited union election rules (sometimes referred to as the “ambush election rules”), speed up the unionization process while limiting employers’ ability to dispute a petition for representation before a union election occurs and creating new pre-election obligations that an employer must meet in a shortened time frame. Employers wishing to avoid unionization should be mindful of these new, pro-labor rules and should consider proactive measures to improve workplace morale and diminish the appeal of unionization (such as open-door management policies and regular assessment of wages and benefits to ensure competitiveness).
Temporary Employees and Joint Employment
The NLRB’s recent decision in Browning-Ferris Industries drastically revised the standards for determining when a company is considered a “joint employer” of temporary employees. This decision represents a dramatic change for employers who subcontract part of their operations, or who use staffing agencies to fill temporary vacancies.
Browning and Ferris (BFI) is a waste disposal company. At its sorting operation, it contracted with another company, Leadpoint, to provide sorters and on-site supervision. In the agreement between BFI and Leadpoint, BFI reserved the following rights:
- No employee assigned to BFI sorting would be paid more than a BFI employee performing the same work. Within that cap, Leadpoint was free to establish wages and fringe benefits.
- All Leadpoint employees would have to be drug tested.
- Leadpoint was paid on a cost plus basis.
- Leadpoint was to exercise reasonable effort not to assign an employee who had previously been fired by BFI.
- Leadpoint was solely responsible for recruiting, interviewing, testing, selecting, hiring, and disciplining its employees.
- Leadpoint would employ site supervisors to supervise its employees deployed on the site.
- BFI established the facility’s work schedule, including when the conveyors would stop for facility-wide rest breaks.
- Each day the site managers of both companies would meet to coordinate daily activities.
- Leadpoint performed initial training of its employees, but BFI occasionally provided pointers and tips.
The NLRB (though very divided along political party lines) ruled that joint employment would be found if the business entities, while separate, share or codetermine the essential terms and conditions of employment—such as hours and wages. Critically, the majority held that it was unnecessary to find that BFI had actually exercised its rights reserved in the agreement; rather, the mere existence of the rights sufficed. Further, it held that the alleged joint employer need not have direct and immediate control over the alleged employee; rather, indirect control would suffice.
Prior to this ruling, businesses had to exercise “direct and immediate control” over temporary workers employed by another company in order to be considered a joint employer. Now it appears that the NLRB wants to apply an “economic realities” test, in which the main factor in determining whether a joint employer relationship exists is whether the company has a potential to exercise control over a worker’s wages and working conditions. This ruling has created uncertainty as to the outcome of future joint employer cases by dismissing the simple “direct and immediate control” test and replacing it with a vague “economic realities” standard. Employers who contract with other companies for staff or who use temporary staffing agencies should be aware of this legal “gray area” and involve counsel in reviewing any temp or contractor agreements for a potential joint employer issue.
Post-Contract Union-Dues Checkoff
On August 27, 2015, the NLRB ruled in Lincoln Lutheran of Racine that an employer’s obligation to “check off” union dues continues after the expiration of its collective bargaining agreement with a union, overruling 50 years of precedent.
The employer and the union in Lincoln Lutheran of Racine had bargained since at least 2007, and each of their successive collective bargaining agreements had included dues-checkoff provisions under which the employer agreed to deduct union fees and dues from participating employees’ paychecks. Relying on the NLRB’s 1962 decision in Bethlehem Steel, which held that an employer’s obligation to check off union dues ends when its collective bargaining agreement with the union expires, the employer discontinued dues checkoffs one month after the collective bargaining agreement expired.
Reexamining the issue, the NLRB overruled Bethlehem Steel in a split decision. It reasoned that dues checkoff is a matter related to wages, hours, and other terms and conditions of employment within the meaning of the National Labor Relations Act and is therefore a mandatory subject of bargaining. Accordingly, the NLRB reasoned that an employer’s unilateral change to dues checkoff impermissibly undermines collective bargaining.
Recognizing that its decision constituted a departure from decades-old precedent, the NLRB clarified that its ruling would not apply retroactively. Going forward, employers who unilaterally cease deducting union dues from employee paychecks following the expiration of a collective bargaining agreement may be found in violation of the National Labor Relations Act.
Department of Labor (DOL) Updates
On Wednesday, July 15, 2015, the Wage and Hour Division (WHD) of the DOL provided an “Administrator’s Interpretation” about employers’ classification of workers as independent contractors. This guidance document, authored by the highest-ranking person in the division, explains why the WHD takes the position that “most workers are employees” under the laws that the WHD enforces. These laws include the federal Fair Labor Standards Act (FLSA), the federal minimum wage and overtime law, the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), the federal law regarding payment for many or most agricultural workers, and the federal Family and Medical Leave Act (FMLA), the federal law that provides job-protected unpaid leave for workers to address their own or their family members’ health conditions.
The FLSA does not define the term “employee,” but the WHD and courts interpreting the FLSA have applied an “economic realities” test to determine whether a particular worker is “employed” and therefore covered under the FLSA, or is instead an independent contractor to whom the FLSA does not apply. The “economics realities” test is intended to determine whether a worker is economically dependent on the employer (and therefore an employee) or whether a worker is in business for himself or herself (and therefore an independent contractor, and not an employee). The test involves several factors to be considered and weighed in each case, in a non-mechanical, non-formulaic way, in an effort to answer the ultimate question of whether a worker is economically dependent on the employer. In its interpretation, the WHD discussed the factors it considers important:
- Is the work an integral part of the employer’s business?
- Does the worker’s managerial skill affect the worker’s opportunity for profit and loss?
- How does the worker’s relative investment compare to the employer’s investment?
- Does the work performed require special skill and initiative?
- Is the relationship between the worker and the employer permanent or indefinite?
- What is the nature and degree of the employer’s control?
Although these factors are consistent with prior articulations of the economic realities test, the WHD’s interpretation of them is significant in a number of ways. First, and most importantly, the WHD views the factors with the perspective that “most workers are employees under the FLSA’s broad definitions.” Second, and relatedly, the WHD’s interpretation suggests that the control factor, which has over time been given less and less weight, might now be given so little weight that a worker could be deemed an employee even if the employer exercises almost no control over the worker. The WHD’s new focus concentrates less on a mechanical application of the economic realities factors and more on whether the individual is “economically dependent” on the hiring entity. The WHD guidance used the phrase “economically dependent” 21 times. And the WHD noted, as it has historically done, that an independent-contractor label that an employer gives a worker or the existence of a contract between an employer and a worker that designates or describes the worker as an independent contractor is irrelevant to this analysis, and not even considered as a factor.
Moving forward, employers should be mindful of the DOL’s default assumption that most workers are employees, and expect continued DOL scrutiny of independent contractor relationships. Employers should also work with counsel to review their independent contractor agreements against the “economic realities” factors as clarified by the new DOL guidance.
Proposed New Salary Requirement for Exempt Employees
On June 30, 2015, the DOL issued a long-awaited notice of proposed rulemaking aimed at updating the Fair Labor Standard Act’s (FLSA) overtime exemptions. The proposed rule would extend overtime protections to an additional 5 million workers in 2016, and would likely affect almost every employer in every industry.
Currently, in order to be exempt from overtime requirements, an employee must meet three criteria:
- The employee must be paid on a salary basis,
- The employee’s salary must be at least $455 per week (or $23,660 annually), and
- The employee must meet a duties test.
The proposed changes are aimed at the minimum threshold salary. Under the DOL’s proposed rule, that threshold would increase to $970 per week, or $50,440 annually, more than doubling the threshold salary required for a worker to be exempt from overtime. According to the notice of proposed rulemaking, that increased threshold represents the 40th percentile of earnings for full-time salaried workers.
Although many expected the DOL to also propose specific changes to the duties tests, the proposed rule offered no specific change. Instead, it solicits comments from employers and other stakeholders on possible changes that could be implemented in the final regulations. Specific areas on which the DOL is seeking comment are:
- What, if any, changes should be made to the duties tests?
- Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be?
- Should the Department look to the State of California’s law (requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model? Is some other threshold that is less than 50 percent of an employee’s time worked a better indicator of the realities of the workplace today?
- Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should the Department reconsider its decision to eliminate the long/short duties tests structure?
- Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower-level executive employees performing nonexempt work?
Although these proposed rules have received a significant amount of media coverage, it is important to keep in mind that they are, at this point, only proposals; there is nothing that employers must do right now as a result of them. Given the DOL’s requests for comments relating to the duties tests, there is a possibility that the final regulations could look very different from the proposed rules. With that said, however, it is almost certain that the final rules will result in a significant increase in the minimum threshold salary.
What comes next? The comment period on the proposed rules closed on September 4, 2015. DOL must consider the comments it has received before it issues its final regulations, which will be followed by a phase-in period. Expect final regulations to take effect sometime in 2016.
“Ban the Box”
Oregon’s “Ban the Box” law will take effect on January 1, 2016. The law restricts employers from inquiring about applicants’ criminal background prior to the interview stage of the application process. All covered employers should double-check that their application forms do not require disclosure of past criminal convictions. The law covers most Oregon employers, with the following exceptions:
- Employers who are required to consider applicants’ criminal history by federal, state, or local law (for example, federal contractors and health care providers)
- Law enforcement agencies
- Criminal justice agencies
- Employers seeking non-employee volunteers
The Ban the Box law does not prohibit employers from running background checks on prospective employees—it simply requires that employers wait until after an interview has been conducted or a job offer has been made to do so. The law also does not prohibit employers from notifying applicants on an application form that the applicant will later be required to disclose certain criminal convictions or that any job offers will be contingent upon the applicant passing a background check. While the law does not give employees the right to sue employers who fail to comply with its requirements, employees may file administrative complaints with BOLI over a violation of the law.
Employers who choose to run background checks for criminal convictions should be cognizant of the Equal Employment Opportunity Commission’s guidance on this subject. In general, the EEOC encourages employers to only consider convictions as opposed to arrests, and to implement a “targeted screen” that looks for convictions that are relevant to the position being filled, rather than a blanket no-hire policy for any criminal convictions. Employers who regularly perform background checks should review their policies for compliance with the EEOC guidance.
Updates on Recreational Marijuana and the Workplace
As of July 1, 2015, Oregon adults age 21 and older can legally possess and use recreational marijuana. In preparation for this change, many employers revised their drug and alcohol policies to clarify that that even though marijuana use is now legal in Oregon, it is illegal under federal law and may still be treated as an illegal drug under workplace policies. Many employers have also found it necessary to re-think drug testing policies. Some employers choose or are required to adopt “zero tolerance” policies, under which an employee who tests positive for marijuana on a drug test would be subject to discipline. Other employers choose to adopt an “under the influence” policy, which treats marijuana in the same manner as alcohol and would result in discipline if an employee reports to work under the influence of marijuana or another prohibited substance. The difficulty with the latter type of policy is the current lack of affordable, reliable methods of testing whether an individual is under the influence of marijuana. We are monitoring developments in drug testing methods that may improve the effectiveness of “under the influence” policies with respect to marijuana.
Employers should also be aware that sales of recreational marijuana through medical marijuana dispensaries will begin on October 1, 2015. The Oregon Liquor Control Commission will also begin the process of issuing commercial recreational marijuana licenses to growers, wholesalers, processors and retail outlets in 2016. In sum, due to increased availability, recreational marijuana use is likely to become more prevalent among Oregon workforces in the coming year. As such, employers who have not already done so should evaluate their drug and alcohol policies and communicate with their workforces regarding the continued prohibition on marijuana use or possession in the workplace and the possibility of discipline due to testing positive for marijuana on a drug test.
New Restriction on Non-Compete Agreements
Oregon law imposes strict limits on the use of non-competition agreements. Non-competes may only be required of exempt employees who earn more than the national median income for a family of four (currently, approximately $75,000 per year). In addition, for a non-compete to be enforceable, Oregon law requires that new hires be informed of the requirement that they sign a non-compete at least two weeks prior to the first day of employment, and that current employees only be asked to sign a non-compete upon a “bona fide advancement.”
On January 1, 2016, a new law will take effect that reduces the maximum enforceable term of a non-compete agreement to 18 months, as opposed to the two-year term allowed under the former law. The law only applies to non-competes entered into on or after the effective date. Accordingly, employers who plan to use non-competes after January 1, 2016, should make sure to limit the term of such agreements to 18 months.
The new law notably does not apply to non-solicitation agreements. Non-solicitation agreements are not subject to the same legal restrictions as non-competes (and hence are more likely to be enforced by the courts), but can achieve many of the same goals. Non-solicitation agreements typically prohibit employees from soliciting customers or employees of a former employer for a specified period of time following separation of employment. As more and more restrictions are imposed on non-compete agreements, Oregon employers should consider whether a non-solicitation is an effective alternative or supplement to a non-compete.
Protected Wage Discussions
Under Oregon House Bill 2007, it is now unlawful for an employer to discriminate against, retaliate against, or otherwise punish an employee for inquiring about, discussing, or disclosing his or her wages, “in any manner.” The law applies not only to discussions between employees, but also to discussions between employers or supervisors and employees. In addition, the bill notably creates a private right of action against employers who violate its prohibitions. The likely effect of the law will be to create a “chilling effect” on conversations between employers and employees about wages, because negative employment action following such a conversation could be construed as unlawful retaliation.
The bill was aimed at closing the wage gap for women and people of color by protecting their efforts to discover and remediate unfair pay. Importantly, the bill does not protect the disclosure of other employees’ wage information by an employee with access to that information as a part of his or her job functions, and who discloses the wages of those other employees to individuals not authorized to access that information. Oregon employers should review their policies and educate their supervisors to ensure compliance with HB 2007.
Developments in Social Media and Employee Privacy
Oregon law currently prohibits an employer from requiring an employee or applicant to disclose social-media log-in credentials, from compelling an employee or applicant to add the employer to a list of social-media contacts, and, except in limited situations, to compel an employee or applicant to access a personal social-media account in the presence of the employer.
Effective January 1, 2016, it will also be unlawful for an employer to require an applicant or employee (1) to establish or maintain a social-media account, or (2) to allow the employer to advertise on the personal social-media account of the employee or applicant. In light of those changes, employers should review their policies to ensure that they do not mandate employees to maintain Facebook, Twitter, LinkedIn, or other social-media accounts as a condition of employment.
While not a new development, employers should also review their policies and agreements to ensure that employees understand that passwords, handles, or administrative licenses to company social-media pages or other Web accounts are confidential and belong to the employer. It is also advisable to require that employees discontinue all use of company social-media information upon termination of employment.
Updates to Oregon’s Consumer Identity Theft Protection Act
Under Oregon’s existing Consumer Identity Theft Protection Act (CITPA), any person who maintains or otherwise possesses data that includes an Oregon resident’s “personal information” must develop, implement, and maintain reasonable safeguards to protect the security and confidentiality of that information. In addition, in the event of a data breach, the affected consumers must be notified that their personal information has been compromised, unless there is “no reasonable likelihood” that the resident will suffer harm.
On January 1, 2016, amendments to the CITPA will expand the definition of “personal information” to include biometric, health-insurance, or medical information; require notification of the Oregon Attorney General for any breach affecting in excess of 250 Oregon residents; and designate a violation of the CITPA as an unlawful trade practice.
With the addition of biometric information to the “personal information” protected by the CITPA, any employers that use biometric data—such as a hand or retina scan—as a means of time keeping or otherwise identifying when employees are at work should review their information security practices and incident response plans to assure that they comply with the CITPA’s requirements.