Insurance Agents Properly Classified as Independent Contractors, Circuit Court Rules

The Sixth Circuit ruled that agents were properly classified as independent contractors in an Employee Retirement Income Security Act (ERISA) class action brought on behalf of thousands of current and former insurance agents in Jammal v. American Family Insurance Co., No. 17-4125 (6th Cir. Jan. 29, 2019).

The Court reviewed the lower court’s analysis of the factors for determining employee or independent contractor status set forth in Nationwide Mut. Ins. Co. v. Darden as conclusions of law rather than fact.

On an interlocutory appeal, the Sixth Circuit, looking solely at whether or not the plaintiffs were employees or independent contractors, reversed the District Court’s finding that the approximately 7,200 agents were employees and were owed health and retirement benefits. The District Court found that American Family acted consistently with the industry by classifying its agents as independent contractors, rather than employees, and took many steps to structure the relationship as such. Agents signed a written agreement stating they were independent contractors and filed their taxes consistent with this, deducting business expenses as self-employed business owners. American Family paid by commission and did not provide vacation, holiday, sick, or other paid time off. The agents worked out of their own offices, set their own hours, and hired and paid their own staff. However, as noted by the lower court, the plaintiffs were referred to as employees in company training manuals and received extensive company training.

The Sixth Circuit pointed out that in applying Darden, a court takes into account factors such as control exercised, skill, tools required, duration of the relationship, location of the work, discretion over hours, method of payment, establishment as a business, tax treatment, as well as whether or not there is an express agreement between the parties. The Sixth Circuit in its review held that each Darden factor is in itself a “legal standard” that the District Court applies to the facts, disagreeing with its sister circuits that had treated these as factual matters subject to review for clear error only. As a result, the Sixth Circuit found it could review the District Court’s conclusions about the individual factors de novo.

The Court further noted that, depending on the legal context, more or less weight of a Darden factor might be warranted in the analysis. In this case, the Court found that the District Court incorrectly applied the legal standards to determine the skill required of an agent and the hiring and paying of assistants. The Court also noted that control and supervision are less important in an ERISA context and that the lower court should have given greater weight to the parties’ express agreement. When these factors were properly applied to the facts, the Court held that the entire mix of Darden factors favored independent contractor status, thus warranting reversal of the District Court’s finding of employee status.

Sixth Circuit Rules that Moonlighting Police Officers are Employees, not Independent Contractors

The Sixth Circuit Court of Appeals recently concluded that all officers of a private security and traffic control company were “employees,” rather than independent contractors under the Fair Labor Standards Act (“FLSA”). The case is Acosta v. Off Duty Police Services, Inc., Nos. 17-5995 and 17-6071 (6th Cir. Feb. 12, 2019).

Off Duty Police Services (“ODPS”), in Louisville, Kentucky, offers private security and traffic control services. A majority of ODPS’ workers are sworn officers, who also work full time for a law enforcement entity. ODPS also employs unsworn workers, who generally do not have a background in law enforcement. The jobs performed by both groups of workers are essentially the same, although sworn officers receive a higher hourly wage. Since ODPS classified both sworn and unsworn workers as independent contractors, it never paid overtime wages.

The Department of Labor sued ODPS under the FLSA, alleging that all of the workers were entitled to overtime wages. The district court held that ODPS’ unsworn workers were employees under the FLSA, but the sworn officers were independent contractors because they “simply were not economically dependent on ODPS and instead used ODPS to supplement their incomes.”

On appeal, the Sixth Circuit began its ruling by stating “[t]he way we work in America is changing. The relationships between companies and their workers are more fluid and varied than in decades past. Our task in this appeal is to apply traditional legal protections to one such relationship.”

The Court relied on the “economic realities” test in affirming in part and reversing in part the district court’s decision. The “economic realities” test consists of six non-determinative factors aimed at answering the ultimate question of “the worker’s economic dependence or independence from the alleged employer.”  In balancing the factors, the Sixth Circuit determined that five of the six factors supported a finding that all of ODPS’ workers were employees under the FLSA.

Please contact a Jackson Lewis attorney with any questions related to employee classifications or any other wage and hour issues.

 

 

Ninth Circuit Re-affirms Fair Credit Reporting Act’s Strict Disclosure Standards

A disclosure form that included other, state-mandated disclosure information violated the Fair Credit Reporting Act’s (FCRA) standalone document requirement, the Ninth Circuit held. Gilberg v. Cal. Check Cashing Stores, LLC, No. 17-16263 (9th Cir. Jan. 29, 2019). In doing so, the Ninth Circuit relied on Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), where the Court held the plain language of the FCRA requires that the disclosure be “in a document that consists solely of the disclosure,” and that a disclosure form which included a liability waiver in the same document violated the “standalone document requirement.”

The FCRA requires that employers provide job applicants with a “clear and conspicuous disclosure” that the employer may obtain a consumer report on the applicant.

The Court rejected the defendant’s argument that the extraneous information in its form consisted “of other, state-mandated disclosure information, which furthers rather than undermines FCRA’s purpose.” The Ninth Circuit emphasized the FCRA clearly states that the disclosure must be in a document that consists solely of the disclosure and that no exceptions to this requirement should be implied into the statute. The Court also noted that the presence of the state-mandated disclosures did not further the FCRA’s purpose as they were “as likely to confuse as . . . to inform.”

The Ninth Circuit then held that the form also was not “clear and conspicuous.” The Court quoted one section of the form which it held was unclear because a reasonable person would not understand the language:

The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.

The Court further held the disclosure was unclear because it combined both the FCRA and state-mandated disclosures, which could confuse a reasonable person.

Although the Court held that the disclosure was sufficiently “conspicuous” and noted with approval its use of capitalized, bolded, and underlined headers, it stressed that the form must be both clear and conspicuous and, therefore, did not comply with the FCRA’s “clear and conspicuous” requirement.

Given the Ninth Circuit’s strict interpretation of the FCRA’s “standalone document requirement” and emphasis on clarity, employers within that circuit should ensure that their disclosure forms: (1) do not contain any extraneous materials; and (2) are written in plain English and without any “legalese.”

Please contact Jackson Lewis for assistance in complying with the FCRA.

Standing in Data Breach Litigation: Will the U.S. Supreme Court Weigh In?

The U.S. Supreme Court may finally weigh in on the hottest issue in data breach litigation, whether a demonstration of actual harm is required to have standing to sue. Standing to sue in a data breach class action suit, largely turns on whether plaintiffs establish that they have suffered an “injury-in-fact” resulting from the data breach. Plaintiffs in data breach class actions are often not able to demonstrate that they have suffered financial or other actual damages resulting from a breach of their personal information. Instead, plaintiffs will allege that a heightened “risk of future harm” such as identity theft or fraudulent charges is enough to establish an “injury-in-fact”.

Please click here to access our Workplace Privacy, Data Management & Security Report blog discussing this important issue.

Second Circuit Sheers Cosmetology Student’s Claims in Intern-or-Employee Case

Concluding that a student at a for-profit cosmetology academy was the “primary beneficiary” of the hours he spent training at the academy’s salon, the Second Circuit Court of Appeals has upheld the district’s court’s determination that the student was an intern, and not an not employee entitled to minimum wage or overtime under the FLSA or the New York Labor Law. Velarde v. GW GJ, Inc., 2019 U.S. App. LEXIS 3536 (2d Cir. Feb. 5, 2019). The Second Circuit has jurisdiction over New York, Connecticut and Vermont.

Please click here to access our Wage & Hour Law Update blog discussing this recent decision.

Airline Ordered to Pay Flight Attendants $77 Million in Damages

A class of flight attendants in a case involving alleged violations of California’s wage and hour laws was awarded $77 million in damages. In so doing, the judge rejected the airline’s challenges to the plaintiff’s damages model and reduced the damages requested by the workers by only $8 million. Bernstein et al. v. Virgin America Inc., No. 3:15-cv-02277 (N.D. Cal. Jan. 16, 2019).

The lawsuit, which was filed in 2015, alleged that Virgin did not pay its flight attendants for all time spent before, after, and between flights, for completing written reports, for time spent training and for undergoing required drug testing. Additionally, it alleged that Virgin did not allow the class of flight attendants to take meal or rest breaks, and that the airline failed to pay overtime and minimum wages.

The court granted class certification in November 2016 to a class of more than 1,000 flight attendants who worked for Virgin on or after March 2011. Virgin later moved for summary judgment arguing, among other things, that the California Labor Code did not apply to the class members’ claims because they all did not work principally or exclusively in California. The court rejected that argument, reasoning that Virgin made decisions about how it would pay its flight attendants and then proceeded in accordance with those decisions exclusively from its headquarters in California and, therefore, California law applied. The class later moved for, and won, summary judgment on their claims against the airline.

This decision, which likely will be appealed, highlights for employers the importance of compliance with not only federal wage and hour laws, but the various state wage and hour laws in which employers operate. Please contact Jackson Lewis with any questions about this case.

Court Decertifies Class of Female Drivers’ Hostile Work Environment Claims, Trims Retaliation Claims

Finding that the case involved “actions perpetuated by one individual against another individual in an isolated environment, not conduct in a common environment directed against several women at once,” Chief Judge Leonard Strand decertified a class of female truck drivers that alleged they were subject to a hostile work environment. Sellers v. CRST Expedited, Inc., No. C15-117-LTS (N.D. Iowa Jan. 15, 2019).

He also granted partial summary judgment to the company on the drivers’ separate claim that they suffered retaliation when they complained about harassing conduct under the company’s policies.

The court explained that, unlike in a race discrimination case that focuses on the employer’s racial animus underlying employment decisions, which can be proven by common evidence, a “pattern or practice” sexual harassment suit for damages requires individualized proof because liability focuses “on the gravity of the conduct to which the claimant was exposed.” The conduct at issue here involved “actions perpetuated by one individual against another individual in an isolated environment, not conduct in a common environment directed against several women at once.” As a result, the court held that the plaintiffs could not produce common evidence to show the class was exposed to conduct severe or pervasive enough such that a reasonable person would be offended. Accordingly, the plaintiff could not satisfy Rule 23’s commonality, predominance, or superiority requirements. The court remarked that “the allegedly offensive actions, not the employer’s alleged polices are what create difficulties in trying hostile work environment claims as a class.” It concluded the drivers could proceed individually, but not as a class.

In a separate discussion, the court granted summary judgment to the company on the plaintiff’s retaliation claim. Although the court explained there were triable issues on whether the company’s policy for handling complaints of harassment resulted in lower pay to women who used it, or whether the company’s policy of removing complainants from a truck in which an alleged harasser was assigned, could be considered adverse employment actions, the plaintiffs could not demonstrate there was a retaliatory motive behind any of the policies. The court held the company’s reasons for having the policy, including protecting a complainant’s safety and well-being and complying with licensing and other truck ownership rules, were not retaliatory or pretextual. The court reasoned the plaintiffs’ proof that the company knew the policy had an impact on pay, and was working to explore alternative policies, was inadequate to show the retaliatory intent required for the plaintiffs’ claims to prevail.

Please contact Jackson Lewis with any questions about defending class or collective actions.

 

 

Older Applicants Cannot Utilize ADEA to Challenge Neutral Hiring Criteria, Seventh Circuit Rules

The Age Discrimination in Employment Act does not permit non-employees to bring claims under a disparate impact theory, the Seventh Circuit has ruled. Kleber v. CareFusion Corp. (7th Cir. Jan. 23, 2019). Accordingly, in Illinois, Indiana, and Wisconsin, job applicants will not be able to challenge hiring decisions that are neutral, but which disproportionately exclude job applicants over 40.

Divergence of ADEA from Title VII

Title VII was enacted in 1964 and the ADEA was enacted in 1967. For approximately 25 years, courts generally treated standards of proof under the ADEA and Title VII as interchangeable. Thus, the Supreme Court’s 1971 Title VII ruling in Griggs v. Duke Power Co. also applied to ADEA claims. The Court found a cause of action in Title VII for non-intentional disparate impact where neutral “practices that are fair in form, but discriminatory in operation.”

That began to change for ADEA plaintiffs in 1993, when the Supreme Court, in Hazen Paper Co. v. Biggins, cast doubt on whether the ADEA permitted any disparate impact claims. Finally, in 2009, the Supreme Court, in Gross v. FBL Financial Services, Inc., ruled that unlike Title VII, ADEA disparate treatment plaintiffs face a “but-for” standard to establish discrimination.

Facts and Procedural History

After Dale Kleber, then 58, was not hired for a senior in-house position at CareFusion’s law department, he filed an ADEA lawsuit. The job description required applicants to have three to seven years’ legal experience. Kleber had more than seven years’ of relevant experience. One of Kleber’s claims was that CareFusion’s maximum experience requirement had a disparate impact on him, an older attorney. The district court dismissed Kleber’s disparate impact claim. On appeal, a three-judge panel reversed the dismissal. The Seventh Circuit then granted en banc review.

Opinion

The eight-judge majority focused on the plain language of Section 4(a)(2) of the ADEA, which makes it unlawful for an employer “to limit, segregate or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” In light of “any individual” being surrounded by “employees,” the Court said the essential meaning of Section 4(a)(2) was that it protected employees only. The Court also drew distinctions between the text of the ADEA and that of Title VII (which does permit applicants to bring disparate impact claims).

There were two separate dissenting opinions among four dissenting judges.

Implications

The Seventh Circuit joins the Eleventh Circuit in ruling that the ADEA does not provide disparate impact protections for job applicants.

ADEA disparate impact plaintiffs already face other challenges in such claims. Unlike race and gender, employers are less likely to collect age information from applicants. Without readily available age information about an employer’s applicant pool, ADEA plaintiffs are forced to use alternative sources of information about the availability of workers over 40.

Actual Harm Not Required to Sue Under Illinois Biometric Information Privacy Law

Earlier today, the Illinois Supreme Court handed down a significant decision concerning the ability of individuals to bring suit under the Illinois Biometric Information Privacy Act (BIPA). In short, individuals need not allege actual injury or adverse effect, beyond a violation of his/her rights under BIPA, in order to qualify as an “aggrieved” person and be entitled to seek liquidated damages ($1000 per negligent violation/$5,000 per intentional or reckless violation) and injunctive relief under the Act.

Please click here to access our Workplace Privacy, Data Management & Security Report blog discussing this recent decision.

Supreme Court: Interstate Transport Companies’ Independent Contractor-Drivers are Exempt from FAA

In New Prime, Inc. v. Oliveira, the U.S. Supreme Court held that the Federal Arbitration Act’s (FAA) Section 1 exemption applies to transportation workers, regardless of whether they are classified as independent contractors or employees. No. 17-340 (Jan. 15, 2018). Please click here to access our article discussing this recent decision.

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