Janus Decision Does Not Require Union to Pay Back Fees
Let’s call it Janus – 1; AFSCME – 1 in the battle over agency fees.
Last week the 7th Circuit Court of Appeals affirmed the district court’s grant of summary judgment
in Mark Janus’ lawsuit seeking repayment of agency fees withheld from his wages and paid to AFSCME prior to the Supreme Court’s landmark ruling last year overturning its prior rulings that agency fees (fair share) collected from public employees by unions was not unconstitutional. As readers recall, Janus challenged that status quo, successfully arguing to the Supreme Court that requiring him and other public employees to pay agency fees despite their choice against union membership violated their 1st Amendment rights because it, in effect, controlled their speech by making them subsidize political and other public efforts by the union on positions that were contrary to their personal convictions.
Having achieved relief from the Court from being forced to pay agency fees, Janus went back for a second bite of the apple, asking for repayment of all agency fees previously paid to AFSCME. He included CMS (the state-wide administrative agency) as the collector of those fees from his pay. His theory was that the Supreme Court’s decision that mandatory public employee agency fees were unconstitutional had retroactive application and as such, to deprive him of a refund of that money was an unlawful deprivation “under color of law.”
The 7th Circuit ultimately skirted the issue of whether Janus applied retroactively but did hold that AFSCME had relied in good faith on existing law, including the Supreme Court decision that was ultimately overturned as well as the state statute. Further, the court disagreed with Janus’ argument that by allowing the union to keep the fees collected from his and other non-members, they experienced a “windfall”, noting that despite the fact that Janus and others may not have wanted union representation, the union did perform the work for which it was paid in part by agency fees.
The 7th Circuit joins a number of other federal circuits who have held similarly. It remains to be seen whether Janus will seek review of this decision by the Supreme Court.
Independent Contractor or Employee?
I provide advice to some small businesses, and one question I often receive is whether they can classify their workers as independent contractors. We have discussed this topic on this blog before, but I think it is worth discussing it again. And with California requiring ride-sharing services to classify their drivers as employees, this topic is now in the news again. So what is the difference between an independent contractor and employee, and what happens if you classify an employee as an independent contractor?
An independent contractor is someone who enters into a contract with an employer to perform some specific task. For example, an independent contractor would be a plumber whom an employer calls periodically to fix problems with sinks or toilets. An employee is someone who works regularly for someone else, under that person or organization’s orders in a continuous relationship.
Here are some of the things courts look at to determine whether a worker is an employee:
- How much control does the employer have? If the employer tells the worker what to do, how to do it, when to do it, and provides the worker with the resources to do it (e.g., tools, workspace, information) then a court will classify the worker as an employee. The more the employer dictates how the task will be performed, the more likely the worker will be an employee.
- Payment. Is the worker paid when a particular task is performed? Or is he or she paid regularly? Regular payment is evidence that the worker is an employee. Also, if the employer is paying for the employee’s costs, like reimbursement for travel expenses or purchasing equipment, that is also evidence that the worker is an employee. If the worker is able to realize a profit or loss from his labor, he or she is more likely to be considered an independent contractor.
The consequences of misclassifying an employee as an independent contractor can be significant. First, the employer will owe its share of employment taxes. Secondly, if that “independent contractor” worked over 40 hours in any week, the employer will may liable under the FLSA for overtime and related damages. Third, with recent amendments to the Employee Classification Act (820 ILCS 185/1, et seq.), misclassifying an employee could result in the employer being fined.
- Longevity of relationship. If an employer and a worker have a continuous relationship, this will be evidence that the worker is an employee. Sporadic, short-term commitments are evidence the employee is an independent contractor.
DOL Proposes Change to FLSA Fluctuating Work Week Rule
Earlier this week, the DOL proposed a change to the lesser-used FLSA overtime rule
that allows employers to pay nonexempt employees who work variable hours each week a set weekly salary from which the regular rate of pay is calculated. Here’s an example: A water operator works 40 hours every other week, but on the opposite weeks is required to go to the water plant on weekends and make various checks on water levels and purity tests. This might mean that the employee works somewhere between four and six hours extra in those opposite weeks. The employee and employer to that the employee will receive a set salary for every week, let’s say $1,000. So, when the employee works 40 hours in a week, the employee’s hourly or regular rate of pay is $25 per hour. When the employee works 44 hours, the hourly or regular rate of pay drops to $22.73 per hour. Since the fluctuating workweek rule allows the employee and employer to agree that the $1,000 is the straight time rate, the employee only owes an additional half time payment based on the $22.73 hourly rate for the additional four hours worked. This method, while a bit cumbersome, can maximize an employer’s savings on overtime when operational needs result in variable schedules for employees.
Currently, the DOL’s regulations find the payment of bonuses or other extra compensation to be “incompatible” with fluctuating workweek arrangements, which has created some confusion among the courts. The proposed rule will eliminate this part of the regulations, thus allowing payment of discretionary and non-discretionary bonuses to employees paid this way.
The fluctuating workweek is appropriate for employees whose hours legitimately vary week by week and should be considered as an option to control overtime liability. Five elements must exist to establish a valid fluctuating workweek arrangement as follows:
- the employee must work hours that fluctuate from week to week, although the hours of work can be static, such as 45 hours every other week and 40 hours in the opposite week;
- the employee must be paid a fixed salary that serves as compensation for all hours worked;
- the fixed salary must meet minimum wage laws for all hours worked in any week, not just the weeks where an employee works 40 hours or less;
- the employee must be paid an additional one-half of the regular rate for all overtime hours worked; and
- both employer and employee clearly understand that the fixed salary is compensation for however many hours the employee may work in a particular week, rather than for a fixed number of hours per week. This can be as simple as an arrangement where the parties agree that an employee will be paid a certain salary per week.
FAQs on Workplace Issues and Adult-Use of Cannabis
The unknown impact of adult-use cannabis and the workplace remains a rich source of discussion among employers and employees alike. Many of our clients ask similar questions in anticipation of the new legislation. Below is a compilation of the most frequently asked questions regarding adult-use cannabis in Illinois after January 1st:
Can we still have a zero-tolerance employee drug policy?
Yes, insofar as your policy prohibits being under the influence of alcohol or drugs while at work, the legalization of cannabis for adults changes nothing. Since cannabis has behavior-altering effects, you can and should treat it like alcohol and prohibit employees from being under the influence while at work.
Should we still test for cannabis during post-employment drug and alcohol screens?
Testing decisions are the tricky part for employers. Because cannabis metabolizes slowly and at different rates for different individuals, it may take a month or more for a person to rid their system of evidence of cannabis use. This is long after the effects of cannabis have dissipated. Unlike alcohol, which people generally metabolize quickly, positive tests for cannabis use are highly unreliable in determining whether an employee is under the influence of cannabis while at work. While nothing prohibits an employer from testing for cannabis use as part of a post-employment drug screen, disciplining an employee solely on the basis of a positive test result for cannabis likely violates the Right to Privacy in the Workplace Act
which prohibits any adverse employment action against an employee for their off-duty legal activities. Just as an employer cannot discipline an employee for having an alcoholic beverage off duty or smoking cigarettes or any other behavior that the employer may prohibit on duty, an employee who uses cannabis recreationally and consistent with the statute while off duty cannot be disciplined for such use.
A positive test for cannabis can be used as additional evidence of being under the influence while at work only as secondary or confirmatory evidence when the employer has established reasonable suspicion of such use. If an employer has reason to suspect that an employee is impaired by cannabis while working, management should clearly document all of the observed objective factors that support this suspicion. The law provides some guidance with regard to reasonable suspicion of cannabis impairment. Symptoms of impairment may include speech issues, problems with physical dexterity, agility, coordination, demeanor, irrational or unusual behavior, negligence or carelessness in the operation of machinery or equipment, an apparent disregard for the employee’s own safety or that of other employees, involvement in an accident or damage to the employer’s property, disruption of the workplace or negligent conduct that results in an injury to another employee. Unfortunately, many of these statutory factors may indicate other issues, such as a stroke or other physical impairment. Well documented symptoms of impairment by trained supervisors and managers are currently the strongest “test” for being under the influence of cannabis, which can be strengthened by a positive test result for the same.
So, employers can never use a positive test result for cannabis as the basis for discipline against employees?
No. Employees who must possess a CDL, certain law enforcement and employees who operate under federal grants can still be disciplined for cannabis use because cannabis is still illegal under federal law
. Additionally, in Illinois, even after January 1, 2020, recreational cannabis use is still illegal for individuals under the age of 21. Employees under that age may still be disciplined solely on the basis of a positive cannabis test result.
Can we still include cannabis among the drugs tested in random drug tests?
Employers should no longer test for cannabis use as part of random drug testing except for CDL required positions, certain law enforcement personnel and those under 21 years of age, with the caveat for lawful medical cannabis use. Additionally, pre-employment drug screens should no longer include tests for cannabis
as it will be a “lawful product” after January 1st.
How does the legalization of recreational cannabis affect our ability or need to regulate the use of medical cannabis?
The use of cannabis for lawful medical purposes has been the exception from discipline for qualifying individuals while cannabis is still an illegal drug for recreational use. After January 1st, employers will no longer need a medical cannabis caveat in their policies except for employees who are still prohibited from its use under federal law.
Do employers need to update their drug and alcohol policies?
Possibly. Since policies vary, it is important to review and when necessary, revise workplace drug and alcohol policies. Equally as important, is the need to revise employment practices in the workplace. Training or retraining supervisors and managers on reasonable suspicion indicators and updating forms that document such is essential. The strength of an employer’s disciplinary decision rests on how knowledgeable and thorough the process of determining reasonable suspicion is. Eliminating cannabis testing in pre-employment and random testing, except for DOT, some law enforcement and federally controlled positions will prevent allegations of violation of the Right to Privacy in the Workplace Act for adverse actions resulting from use of a lawful product while off duty.
What Would Happen to Employers Under Elizabeth Warren’s Healthcare Plan?
Last Friday, Elizabeth Warren rolled out the details
of her healthcare plan. She estimates the plan would create $20.5 trillion dollars in new federal spending over a 10-year period (although rivals like Joe Biden
claim it would be much more than that). How does she plan to pay for that? Mainly by increasing taxes on employers.
Her plan would impose a new tax on employers equal to 98% of their current health care costs. Employers would calculate their contribution by averaging healthcare costs per employee over the last three years, multiplying that average by their total number of employees, and paying 98 percent of the total to the government. In effect, Warren’s plan would shift employer healthcare payments from insurance companies to the government. Warren estimates that this tax would raise $8.8 trillion in new revenue over the next ten years.
Small businesses that do not offer their employees health insurance (those with fewer than 50 full-time employees are not required to do so by the Affordable Care Act) would be exempt from the tax. But those who currently offer their employees health insurance would have to pay it.
The plan would also eliminate health savings accounts, medical savings accounts, and employer deductions for medical expenses. These would all be unnecessary since healthcare premiums would be eliminated.
Warren’s plan would also eliminate accelerated deductions that employers can take for capital investments. For example, section 168(k) of the Income Tax Code allows smaller businesses to deduct half the cost of purchasing certain property in the year that it is purchased. Warren’s plan would eliminate that deduction and others like it.
The plan’s goal would be to not increase employer healthcare spending, but instead transfer payments currently made to insurance companies to the government. Whether this is realistic is a matter of debate. One thing that is clear though is that an Elizabeth Warren presidency would almost certainly see higher taxes on employers.