The workplace is changing: Millennials, Generation Z-ers,
and Baby Boomers looking to supplement their retirement income. These
individuals are more interested in autonomy and avoiding bad managers, office
politics and lengthy, non-productive staff meetings. Plus, the tax-savvy
individual knows the economic advantage of having access to traditional
business deductions through a Schedule C, rather than being limited to the
standard deduction or itemizing as a W-2 employee would be.
More and more businesses also seem to be interested in the advantages of a gig workforce, also called freelancers, subcontractors, contingent workforce, and more. After all, it allows a business to gain access to skills and talent without having to commit to hiring an individual as a full-time employee. According to Deloitte’s 2018 Global Human Capital Trends study, more than 40% of workers in the U.S. are employed in “alternative work arrangements.” These arrangements include contingent, part-time, or gig work.
So, is it a win-win for all involved? The problem is that current employment laws are simply not evolving at the pace required to keep up with this modern-day independent contractor. With this, a minefield is created for the unwary business.
Under the Obama administration, the DOL had issued broad guidance suggesting that gig workers were likely to be considered “employees.” That guidance was rescinded with the change in administration. Then, on April 29, 2019, the DOL issued an atypical, 10-page opinion letter on the subject. The opinion letter lays out a detailed analysis of all the relevant factors for independent contractor status and then comes to the conclusion that the gig workers at issue are not employees.
For now, if your business is participating in the trend of the gig worker, you want to make sure the relevant factors are met. Those factors and the analysis change depending on which law the issue is being examined under. Some of the more common factors are: control, permanency of the relationship, integrality to business operations, ability to sustain a profit or loss, accountability for operating expenses, etc. In other words, is the individual truly operating as a stand-alone business?
If you choose to engage gig workers, make sure to avoid these common mistakes:
Do not treat the individuals as employees. Do not even use the word “hire.” Instead, you are “engaging” their services, or “contracting” with them. And, commit to the arrangement in writing.
Do not be tempted to offer them benefits. Putting them in your health plan or letting them participate in a 401(k) will jeopardize any argument that they are not otherwise an employee. If it walks like a duck, quacks like a duck….
Do not make them sign a non-compete agreement. A critical factor in most cases is whether the individual is free to take on work from others or whether they are completely dependent on your business for work. If the individual is subject to a non-compete agreement and effectively being prevented from working for others, you will not win on this factor.
Because of the amount of exposure involved with a
misclassification lawsuit, it is worthwhile to have competent employment
counsel review your situation and any independent
contractor agreement or contracts that you are using to help you make
sure it’s being handled in the best possible manner to strengthen the
individual’s status as an independent contractor.
It appears Illinois will become the 11th state to permit recreational cannabis. Once Governor Pritzker signs the legislation, as promised, beginning January 1, 2020, the Cannabis Regulation and Tax Act (“Act”), will allow adults (21+) in Illinois to possess and consume cannabis. While there is a lot “rolled” into the 600 plus page law (pun intended), there are significant employment pitfalls for employers with regard to enforcing drug free workplaces.
The Act expressly permits employers to adopt and enforce “reasonable” and nondiscriminatory zero tolerance and drug free workplace policies, including policies on drug testing, smoking, consumption, storage, and use of cannabis in the workplace or while on-call – which is good for employers.
However, the Act’s language indicates that employers are not allowed to take an adverse action against an applicant or employee for marijuana usage outside the workplace. This is bad for employers, as it makes it much more difficult for employers to identify and address use of marijuana by employees. In particular, the Act amends the Illinois Right to Privacy in the Workplace Act (“Right to Privacy Act”), which prohibits employers from restricting employees from using legal products outside of work. Specifically, the Right to Privacy Act is amended to provide that “lawful products” means products that are legal under state law, indicating that recreational and medical marijuana are legal products that must be treated like alcohol and tobacco. Thus, employers may not discriminate against an employee or applicant who lawfully uses cannabis (recreationally or medically) off-premises during nonworking and non-call hours.
Much like with the Illinois medical marijuana law, the Act changes the emphasis from whether an employee “used” marijuana while employed, to whether the employee was “impaired” or “under the influence” of marijuana while at work or working. As a result, drug testing without any other evidence of the employee being impaired at work or while working will open the door to legal challenges. Specifically, refusing to hire, disciplining, terminating, refusing to return an employee to work or taking an adverse action against an employee or applicant who fails a pre-employment, random, or post-leave return to duty drug test for marijuana will arguably create a claim for the employee against an employer for a violation of Illinois law. For example, an employee who undergoes a urine drug test (which shows use of marijuana within 30-45 days) following a workplace accident may argue that “recreational cannabis was lawfully used outside of work, and the accident/injury was unrelated to the employee’s legal use of cannabis outside of work.” Without more than the drug test result, the employer would be in a vulnerable position to argue against or defend such a claim. However, if the employer completed a post-accident report, which included a reasonable suspicion checklist, in which a trained supervisor observed and recorded symptoms/behaviors of drug use, the employer would be in a much better position to take an adverse action against the employee and dispute any such claim by an employee based on the observations and positive drug test.
With the changes to the Right to Privacy Act, it is important for employers to understand the potential exposure and damages. Under the Right to Privacy Act, aggrieved employees can recover actual damages, costs, attorneys’ fees and fines. As such, employers should make sure their practices and procedures are practical in light of these changes, until and unless the legislature or a court provides further clarity. Of course, the Illinois Department of Labor can provide such clarity through administrative rulemaking. However, that will likely not happen any time soon.
Interestingly, the Act neither diminishes nor enhances the protections afforded to registered patients under the medical cannabis and opioid pilot programs (while cannabis use is not protected under federal law, the underlying medical condition is likely an ADA and IHRA-covered disability!). Much like under the Illinois medical marijuana law, the Act appears to require employers to take an additional step before disciplining or terminating an employee based on a “good faith belief” that the employee was impaired or under the influence of cannabis while at work or performing the job. After the employer has made a “good faith belief” determination and drug tested the employee, but before disciplining or terminating an employee, the employer must provide the employee with a reasonable opportunity to contest that determination. Once the employee is provided a reasonable opportunity to explain, an employer may then make a final determination regarding its good faith belief that the employee was impaired or under the influence of cannabis while on the job or while working, and what, if any, adverse employment action it will take against the employee without violating the Act. Requiring an employee to go through drug testing is still currently the best practice as a positive drug test will provide additional support for a supervisor’s reasonable suspicion determination.
What Employers Should Do to Diminish Legal Risks and Protect their Workforce?
First, get educated and evaluate all policies and practices that touch on providing and ensuring a safe workplace, including job descriptions. Review the law. Talk to legal counsel on an intimate basis. Assess workplace cannabis-tolerance (in general) and implement policies that can be enforced consistently amongst similarly situated employees. Policies that should be reviewed (and that could be affected) include those addressing health and safety (including accident reporting, smoking, and distracted driving), equal employment opportunity policies, workplace search/privacy policies and drug testing policies. Companies should also review with legal counsel, their drug testing vendor as well as their Medical Review Officer, the drug testing methodology being used to make sure that such is producing results that are useful, accurate and well vetted.
Second, ensure managers and supervisors are well trained and capable of enforcing policies. Remember – exceptions and favoritism lead to discrimination claims. Conducting training, especially training on reasonable suspicion detection, will be necessary to avoid legal challenges to a supervisor’s reasonable suspicion determination. Creating and/or updating forms for accident reporting (including witness statements), reasonable suspicion checklists, and established protocols for addressing suspected impairment in the workplace, is now more critical than ever.
Third, clearly communicate management’s position and policies to employees, especially where there is a shift in current policy or practice. Educate employees on the effect of lawful and unlawful drug use and the employer’s policies regarding marijuana.
Fourth, engage competent legal counsel to assist you in this process and in addressing difficult situations before they lead to costly and time-consuming litigation.
Finally, stay tuned for further state and national developments in this growing area of law. Be assured that SmithAmundsen’s Labor & Employment Group will be presenting timely webinars and seminars on this subject in the coming weeks and months.
Like a majority of U.S. states, Illinois’ legal stance on marijuana is becoming more tolerant and liberal – with regard to both medical and recreational use (also called “adult use”). As we previously reported on November 6, 2018, the Alternatives to Opioids Act of 2018, PA 100-1114 amended Illinois’ Medical Cannabis Pilot Program to allow individual prescribed opioid medication to enroll in the Illinois Opioid Alternative Pilot Program (OAPP). The OAPP allows these individuals to seek relief through the legal use of medical cannabis, rather than opioid medications. In the first two months of the program, 1,000 patients registered (compared with 61,231 qualifying patients that have been registered under the medical cannabis pilot program since September 2, 2014). This can be attributed to the decrease in time it takes to register, as well as the decrease in requirements and restrictions for qualifying as a registered patient under the OAPP.
Additionally, like many other state legislatures, the Illinois legislature has proposed bills, including HB-0902 which would legalize recreational use of marijuana. (See our prior post on this proposed bill). Even the federal government loosened its regulations regarding marijuana products through the Agricultural Improvement Act of 2018 (AIA), which specifically addressed and legalized the research and production of industrial hemp (marijuana plants having less than .03 percent THC concentration). In particular, the AIA legalized CBD (the non-psychoactive component of marijuana) derived from industrial hemp plants. (See our prior post on this act). It is important to note that while there are legal CBD products, which are derived from industrial hemp plants, CBD derived from marijuana plants with higher THC levels are NOT legal on the federal level.
It is likely that 2019 will see continued and increasing tolerance of medical and recreational marijuana on federal, state, and local levels. Employers should implement the following steps now to protect their businesses.
corporate tolerance for marijuana use (at least off-duty), and how that will
impact drug testing. For example, if off-duty use is a non-issue, then
consider the type of drug test used for testing marijuana or removing marijuana
from the drug panel for certain tests (e.g. applicants) – which can only
indicate the presence of the drug in the system and not actual impairment, or how
you will treat positive tests for marijuana depending on the type of test and
positions. However, be aware that making exceptions for particular candidates
or employees could leave the company susceptible to discrimination claims (such
as, but not limited to, disability claims).
policies to comply with the laws (disability, medical leave, registered user
protections), company tolerance, and external pressures (e.g.,
and update job descriptions – especially for safety sensitive positions.
appropriate management training – including identifying impairment and
mandating substance testing, how and when to involve human resources, medical
nature of information and company’s policies on marijuana.
that disability laws, which never protect at-work impairment, may protect an underlying
medical condition, and as such companies should be prepared to engage in the
ADA interactive process.
understand the implications of and interactions with other laws – like the
FMLA, Workers’ Compensation, and equal employment opportunity laws.
policies consistently to avoid discrimination claims.
the advice of experienced employment counsel to deal with difficult employees
or potentially risky discipline/termination situations.
While these steps are useful for protecting businesses in
light of developing marijuana legalization trends, they are also practical
audit and compliance reminders under other laws, including but not limited to
the Americans with Disabilities Act and mandated leave laws.
When was the last time you conducted an HR audit for your organization?
We’re all busy and get distracted easily. Often times HR considers a thorough review of the Employee Handbook is enough to ensure all is well from a legal compliance perspective as to personnel policies and practices. Not quite. A closer examination of an employer’s forms, contracts, procedures, practices and actual day-to-day management is essential. In other words, a deeper dive into an organization’s HR-universe is necessary these days. In a world of increased workplace regulation and litigation risks, a more thorough review and audit is required.
For a sample of a comprehensive checklist of the subjects, topics, and issues that a common HR audit entails, please take a moment and familiarize yourself with our HR Audit Checklist here.
Effective January 1, 2019, the Illinois Wage Payment and Collection Act requires employers to reimburse “necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.”
Travel expenses design, with airplane and money
Here’s what you need to know now to prepare
While the law requires reimbursement of expenses which are for the primary benefit of the employer, employers are not responsible for expenses due to (i) the employee’s negligence, (ii) normal wear, or (iii) theft (unless the theft was the result of the employer’s negligence). Employees have at least 30 calendar days to submit supporting documentation, or a signed statement as to why such support is nonexistent, missing, or lost.
An employee is not entitled to reimbursement if he/she fails to comply with an established written expense reimbursement policy. The policy may set guidelines and specifications on what is reimbursable, as long as it is not de minimus or nonexistent. But, if the employer authorizes or requires the employee to incur an expense, or fails to comply with its own policy, then the expense may become reimbursable.
While the Illinois Department of Labor has not clarified what types of expenses are reimbursable, the statute closely tracks California’s Labor Code 2802, which has been interpreted to require reimbursement for: personal automobile use at the IRS rate or the actual costs if higher; personal mobile phones and service used for work (even where minimal); training; business travel; tools; equipment; and uniforms (including apparel and accessories of distinctive design and color). This list is not exhaustive, nor is it necessarily controlling on Illinois employers. Both states’ laws provide for attorney fee shifting and penalties for violations.
What to do? Spoiler alert – Enforce written policies
Review existing policies and procedures:
How, when, and where do employees submit receipts?
Are there limits on reasonable meal reimbursements?
What about class of travel for domestic vs. international flights?
Are these policies that the company can and does effectively, fairly, and consistently apply?
As BYOD (Bring Your Own Device) policies become more prevalent, employers must evaluate whether they are required to reimburse for the cost of all or a portion of the device (mobile phone, tablet, computer) and related voice, data, and internet services. Similarly, consider educational and business development expenses which are primarily for the employer’s benefit such as trade and industry subscriptions and memberships. Also address expenses currently incurred without forethought: e.g., curbing practices where employees purchase office supplies as they deem necessary.
Employers should consider having competent employment counsel review expense policies and ancillary documents for compliance and best practices. For example, update template release agreements to acknowledge that an employee received complete expense reimbursements.
The Federal Court of Appeals for the First Circuit recently upheld a National Labor Relations Board decision finding a car dealership’s dress code ban on “pins, insignias, and message clothing” was, in and of itself, an unfair labor practice. The case is another in a long line of NLRB decisions striking down policies as unfair labor practices because, the board claims, employees might interpret them as infringing upon their right to unionize or engage in other concerted activity protected by Section 7 of the National Labor Relations Act.
The board concluded the dealership’s interest in maintaining its public image did not justify the outright ban. Adding insult to injury, the Board found a second violation for the dealership’s failure to properly repudiate overly restrictive policies contained in an earlier version of its handbook.
The NLRB had earlier challenged several provisions in the dealership’s handbook. The dealership worked closely with the NLRB to draft new NLRA-compliant policies and issued a whole new handbook. In fact, the NLRB’s own General Counsel stipulated that, with the exception of the dress code policy, the new handbook was NLRA-compliant. So, even though the employer rescinded the offending policies and replaced them with policies the NLRB explicitly approved, the employer was still found to have engaged in an unfair labor practice because it had previously maintained policies the Board viewed as overly restrictive and the employer did not properly repudiate those policies.
The Board ordered the employer to issue a notice that specifically addressed the policies it found to be unlawful, advised employees of their Section 7 rights, and assured employees there would be no future interference with those rights. The Federal Appeals Court upheld the Board’s ruling, concluding that to be relieved of liability for unlawfully restrictive policies, even policies that have since been discontinued or appropriately revised, an employer must “signal unambiguously to employees that it recognizes it has acted wrongfully, that it respects their Section 7 rights, and that it will not interfere with those rights again.”
Notably, no employees were alleged to have actually suffered discipline or any other adverse action under the ban. The policies alone formed the basis for finding the employer liable for two distinct unfair labor practices.
In light of the NLRB’s aggressive approach, employers are again reminded to review handbooks and employment policies regularly. Anything the Board believes employees could reasonably interpret as improperly constraining Section 7 activity could form the basis for an unfair labor charge. If any of your policies are questionable, consult legal counsel to determine how best to revise those policies to bring them into compliance and, if necessary, to devise a strategy to effectively repudiate any policies that run afoul of the Board’s broad interpretation of Section 7 rights.
Every year at this time, employers ask us the same set of questions: Do we have to pay employees for holiday time off, or overtime if they work on a holiday? What about inclement weather closings?
Non-exempt employees are those that are covered by the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA) and its state counterparts. These are the bulk of the workforce, and typically hourly workers. Non-exempt employees generally (exceptions follow) only need to be paid for hours they actually work – and not for holidays or weather-related office closings. For example:
Non-exempt employees do not need to be paid for New Year’s Day if they are given the day off.
If the business is closed during inclement weather (e.g., snow days, burst pipes), non-exempt employees do not need to be paid when the business is closed and they are not working.
If employees report to work and are sent home early (e.g., due to imminent ice storm), then non-exempt employees only need to be paid for the hours they worked, and not for the time that they were sent home early and are not working.
Where non-exempt employees do work on a holiday (federal, state, etc.), they only need to be paid overtime (time-and-a-half) if they have worked over 40 hours in the workweek (or 8 hours in a day in some states): An employee who works New Year’s Eve and New Year’s Day does not receive a shift premium (sometimes referred to as “overtime”) merely by virtue of working a holiday, unless the employee has actually worked more than 40 hours – in which case, overtime is paid only for those hours worked over 40 in the week.
Exceptions: Various state wage laws, employer policies (e.g., employee handbooks) and other contracts may obligate an employer to pay employees for certain holidays or business closings, and even pay shift premiums for working on holidays.
Exempt employees are those who are not covered by the FLSA’s overtime requirements. When paid on a salary basis, these employees’ salaries may not be reduced in any week in which they work, except for limited circumstances (e.g., the employee’s personal absence not for sickness or disability, first/last week of employment). These exceptions do not permit an employer to reduce a salaried, exempt employee’s wages for holiday or inclement weather closures. Thus, these employees must be paid their regular, full salary, even though the business is closed for a holiday or due to weather (assuming the weather closure was for less than a week).
And of course, other than the exceptions noted above, there is no overtime or shift premium required for an exempt employee working on holidays.
The Bottom Line
Holiday time off and holiday pay are benefits offered by employers and have become all but expected by employees. Employers should review their policies (or draft written policies) to ensure that they have carefully defined:
– what (if any) holidays or types of business closures are paid;
– what classes of employees (non-probationary, full/part-time) receive holiday or business closure pay; and