Putting the Brakes on the Gig Economy? Biden DOL Delays Effective Date of Final Rule on Independent Contractor StatusOn January 7, we wrote about the DOL’s Final Rule on Independent Contractor Status that was slated to take effect on March 8, 2021. Many employer and business groups applauded the Final Rule because its focus on the economic reality test was intended to make it easier for employers to classify certain workers as independent contractors. The Final Rule was expected to have a particularly positive impact on the “gig” economy, which has classified many workers as independent contractors. In our January post, we noted that we did not know if the Final Rule would survive under the Biden administration. It now appears that it will not.

On January 20, the Biden administration froze all pending regulations, including the Independent Contractor Final Rule. The DOL received comments from multiple groups, including the U.S. Chamber of Commerce, opposing a delay of the effective date of the Final Rule. Despite this support, on March 2 the DOL announced that it was delaying the Final Rule’s effective date until May 7.

This delay is likely the death knell for the Final Rule. It also may signal a less employer-friendly DOL for the near future.

Don’t Let Your Employee’s “Unpaid” Meal Breaks Turn into a Costly Mistake for YouAn unpaid meal break can become a very expensive lunch for an employer, but there are ways to comply with the Fair Labor Standards Act (FLSA) to try and minimize the risk.

Identifying the Potential Problem

The problem that results from unpaid meal breaks typically arises like this:

  • Nonexempt employee clocks out for lunch, or has an automatic meal break deduction from the timecard
  • Employee gets busy and performs work during the unpaid meal break period.
  • Employee does not report the time worked to the employer and is not paid for the time worked.

In this example, the employee has worked “off the clock,” and wage-and-hour laws, principally the federal FLSA, have likely been violated if the amount of the “off the clock” work, when combined with on-the-clock work, means the employee has worked more than 40 hours in a workweek and was not paid overtime. The employee may also have a claim for unpaid minimum wage if the employee’s regular rate of pay dropped below minimum wage.

When this happens with one employee, the problem may not be that costly. But when dozens or hundreds of non-exempt employees join together in an FLSA collective action concerning unpaid meal breaks, the problem gets real expensive, real fast. You could be looking at payment of unpaid overtime and minimum wage, liquidated damages (doubling of the unpaid backpay), and what can be the real cherry on top – attorneys’ fees for the lawyers who are suing you.

In addition to lawsuits from private parties, the government can come after you too. The United States Department of Labor enforces the FLSA and announces settlements frequently for off-the-clock work caused by unpaid meal breaks. For example, earlier this month, the DOL announced that it had recovered more than $50,000 on behalf of 56 workers in a Southern California supermarket for off-the-clock work performed in part during unpaid meal breaks.

What is an employer to do?

So what are some ways that employers can help minimize the risk of wage-and-hour claims for unpaid meal breaks?

  1. Employers should have a policy that clearly informs non-exempt employees (i.e., those eligible for overtime) that work during an unpaid meal break is prohibited.
  2. Employers should reinforce with employees and supervisors that if an employee performs work during an unpaid meal break, it must be recorded so that the company can pay the employee for it.
  3. Employers should create a process for non-exempt employees to report time worked during overtime hours. For example, for employers with automatic meal break deductions where 30 minutes is automatically taken off their time at the end of the day (a permissible practice standing alone), create a form that is widely distributed or available on the company intranet that employees are required to fill out to report when employees perform work during the unpaid meal break.

Bottom line: You cannot pay for time that you do not know about, although you can be held responsible for not paying for that time. You should create a system that works for you that places the burden on employees to report their time worked.

Otherwise, an employee’s “unpaid” meal break may turn into a very costly meal for the employer.

Put ‘Em All Back in There: Federal Court Injunction Halts an Alleged Runaway ShopAlthough most employers don’t want a union in their workplace, the National Labor Relations Act (NLRA) is clear: You cannot interfere with union organizing efforts. A federal district court in Kentucky recently followed this rule and ordered a company to reopen a shuttered facility and rehire the workers affected by the closure. In NLRB v. Smyrna Ready Mix, the court issued the injunction because there was evidence allege that alleged the facility closure was intended to interfere with union organizing activities. The court held that the injunction was necessary to preserve the status quo until the administrative process within the National Labor Relations Board (NLRB) was completed. So, how does the NLRA’s injunctive process work?

Protected Activity and Board Charges

We have blogged about so-called protected concerted activity under the NLRA before, for example here and here. Again, the law protects workers’ rights to join together to address issues in the workplace. When employers interfere with those rights, such as by disciplining employees, by refusing to bargain collectively, or by closing a facility because of such activity – implementing a “runaway shop” – charges can be filed with the NLRB. Rather than focusing on the particular protected activity involved or the employer’s unfair labor practices, this post addresses the remedies available to the NLRB, particularly injunctions.

Injunctions under the NLRA

After charges are filed with the NLRB, the agency analyzes the facts and circumstances to determine whether the normal administrative process will be sufficient to remedy the charges or whether something greater will be necessary – an injunction preserving or restoring the status quo. For example, in a relatively simple case involving a single employee’s discipline, the board might let the normal administrative litigation process work itself, which could take months or years. An administrative law judge typically can order reinstatement and backpay fairly easily in such an instance. However, in more complex settings, such as involving a plant shutdown or relocation, implementing an order a year or more later might not be totally effective. Also of note, the NLRB’s authority to author remedies is remedial in nature and not punitive.

In these more complicated cases, the NLRB will consider whether to file a lawsuit in federal court to obtain what is called a Section 10(j) injunction. The NLRB has a whole list of types of cases in which 10(j) relief might be appropriate. These include interference with union organizational campaigns, subcontracting out union “work,” refusing to bargain, and, like in the Kentucky matter, shutting down a location allegedly to squelch union activity. The board normally looks at two main factors in each case as to whether to seek a 10(j) injunction: (1) whether there is a sufficient showing that an unfair labor practice has occurred, and (2) whether there is a sufficient showing that the “ultimate remedial order will be a nullity.”

Smyrna Ready Mix

To be clear, in Smyrna Ready Mix, the company disagrees with the allegations against it and is in the process of appealing. In the meantime, however, the board determined that the two 10(j) factors were present, so it filed a lawsuit seeking a Section 10(j) injunction and got one. The Kentucky federal court ordered that the company restore its Winchester, Kentucky facility to the status quo that existed prior to January 7, 2020, including transferring work back and reinstating employees who accepted offers of reinstatement. In making this determination, the judge noted statements the company allegedly made such as “we are not going to try to run a company with our hands tied behind our back” and we would rather “shut this place down first.” The judge also noted that work was transferred to other locations where presumably there was less or no union activity. The Smyrna court concluded that the evidence demonstrated the “chilling effect” on union activity for the remaining workers and that the reopening and reinstatement of workers was necessary to “preserve the Board’s remedial power.”

Takeaways

The key takeaway to the Smyrna Ready Mix case and the remedies the NLRB sought is the scope and impact of the board’s remedial power. Companies can be faced with very expensive and disruptive injunctive orders after implementing a complex business decision – such as closing a facility. In making the business decision, you should consider the risks associated with such an injunction. While employers have the right to make business decisions based on operational or entrepreneurial factors, adverse decisions based on union animus will almost always be subject to NLRB review and potential reversal.