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US Employment Litigation Round-Up for April 2017

A Review of Key Cases and New Laws Affecting Employers
4 May 2017
Mayer Brown Newsletter

Ninth Circuit: Employers Cannot Condition Reinstatement on Verification of Immigration Status

Decision: On April 7, 2017, a unanimous Ninth Circuit Court of Appeals panel in Santillan v. USA Waste of California, Inc., No. 15-55238, revived an age discrimination and retaliation lawsuit filed by garbage truck driver Gilberto Santillan. USA Waste had employed Santillan for 32 years when it decided to terminate him due to alleged disciplinary issues. Santillan filed a formal grievance under the governing collective bargaining agreement challenging his termination. The company settled the grievance and agreed to reinstate Santillan’s employment, provided he passed a drug test, a physical exam and a criminal background check, and that he furnish documentation showing that he was eligible to work in the United States under the Immigration Reform and Control Act of 1986 (IRCA). Santillan passed the drug test, physical exam and criminal background check, but when he reported to work on the day of his return, he was unable to provide the requisite information for the federal government’s I-9 employment eligibility verification form. After USA Waste refused to reinstate Santillan, he filed a civil suit, alleging wrongful termination based on age discrimination and retaliation. The district court granted summary judgment on both claims, holding that USA Waste had a legitimate, non-retaliatory reason for terminating Santillan’s employment—namely, that he did not provide the necessary IRCA documentation.

The Ninth Circuit reversed the district court’s grant of summary judgment, holding that USA Waste could not rely upon Santillan’s inability to provide the requested documentation to rebut the presumption of discrimination and retaliation established by Santillan’s prima facie case. The court reasoned first that the IRCA specifically exempted Santillan from having to provide the employment eligibility documents because he was a continuing employee who was being reinstated, rather than a new employee. The court further explained that conditioning Santillan’s reinstatement upon proof of his immigration status in the settlement agreement contravened California public policy, which provides that “[a]ll protections, rights, and remedies available under state law … are available to all individuals regardless of immigration status…” (emphasis added).

Impact: This decision serves as an important reminder about the circumstances under which employers can require employees to verify their eligibility to work in the United States. It also highlights the importance of ensuring that conditions placed on reinstatement of employment comply with the public policies of the relevant jurisdiction.


Two Federal Appellate Courts Uphold Classification of Taxicab and Black Car Drivers as Independent Contractors

Decisions: On March 27, 2017, the Ninth Circuit Court of Appeals affirmed a district court’s grant of summary judgment in favor of AAA Cab Service, Inc., finding that the taxi company had properly classified the Phoenix airport cab driver plaintiffs as independent contractors under the Fair Labor Standards Act (FLSA) and Arizona law. Iontchev, et al. v. AAA Cab Service, Inc., et al., No. 15-15789. Applying the “economic realities” test under the FLSA, the court concluded that the drivers were not economically dependent on AAA Cab because their leasing of taxicabs to earn a profit supported the conclusion that they were in business for themselves. In addition, the court found that AAA Cab exercised minimal control over how the drivers performed their work because it did not maintain attendance logs, did not set the drivers’ work schedules and did not require them to spend a certain number of hours at the airport. Rather, the drivers simply paid a flat leasing fee for their taxicabs and would then individually decide to work as much or as little as they wanted.

Reaching the same conclusion in a similar case, the Second Circuit Court of Appeals in Saleem v. Corporate Transportation Group, Ltd. (CTG), No. 15-88, on April 16, 2017, affirmed the district court’s grant of summary judgment in favor of CTG and held that New York City-area black car drivers were properly classified as independent contractors under the FLSA and New York law. Also applying the “economic realities” test, the court concluded that the drivers were in business for themselves because they were permitted to work for direct competitors, they had to make significant capital expenditures to purchase a franchise and a vehicle to work in CTG’s system and they could choose when and how many hours they would work. Accordingly, even though the court recognized several indicia of an employment relationship—including that the drivers had to follow a CTG rulebook, CTG set fare rates and the drivers relied on CTG’s dispatch system—the court ultimately concluded that the majority of factors supported its determination that the drivers were independent contractors.

Impact: While both AAA Cab and CTG successfully established that their drivers were independent contractors, the decisions may be limited to the specific factual circumstances of those cases. Indeed, the Second Circuit emphasized that its decision should be read narrowly and warned that “[i]n a different case, and with a different record, an entity that exercised similar control over clients, fees and rules enforcement in ways analogous to CTG might well constitute an employer within the meaning of the FLSA.” Accordingly, while these decisions reflect the willingness of courts to uphold an independent contractor classification, all factors in the “economic realities” test will be considered in determining whether workers can lawfully be classified as independent contractors.


New Legislation in New York City and Washington DC Prohibits Certain Pre-Employment Inquiries

New York: On April 5, 2017, the New York City Council passed an amendment to the New York City Human Rights Law that generally bans, with limited exceptions, New York City public and private employers from inquiring about a job applicant’s salary history during the hiring process or relying on a job applicant’s salary history in determining the applicant’s salary, benefits or other compensation unless the applicant discloses that information voluntarily and without prompting. The law is aimed at remedying historical pay discrepancies for women and minorities and provides penalties for “intentional malicious violations” ranging up to $250,000. New York City Mayor Bill de Blasio is expected to sign the bill, and the new law will go into effect 180 days thereafter.

Similar laws have been passed in Massachusetts (effective July 1, 2018) and Philadelphia (set to take effect in May 2017, though the law currently is the subject of a US Chamber of Commerce lawsuit aimed at blocking its implementation) and are under consideration in the US House of Representatives, San Francisco, Washington DC and various states.

Washington DC: On a related note, on March 17, 2017, the Fair Credit in Employment Amendment Act went into effect in Washington DC. This law amends the city’s Human Rights Act to prohibit employers from asking applicants, interns or employees to submit their credit information, either during the hiring process or during the course of employment. (There are exceptions for inquiries in connection with certain public employment positions, positions subject to security clearance requirements, positions at financial institutions that involve access to personal financial information, and for inquiries otherwise required by law or court order). The law also prohibits employers from taking any action based on credit information if it is disclosed by the applicant or employee. This law will allow fines of up to $5,000 per violation. Several other states and municipalities limit the use of credit information in employment, including New York City, Chicago and Cook County, Illinois.

Impact: These laws are two recent examples of employment-related legislation enacted at the local level. With this increased legislative activity, it is important for employers to keep abreast of developments in all local jurisdictions in which they have employees.

New York City and Washington DC laws, for example, will likely require changes to the way that employers conduct their hiring processes. Questions about salary history and credit information should be removed from application materials, and human resources employees and others who participate in the hiring process should be retrained to ensure compliance with these laws. The restrictions in these laws should also be communicated to recruiters, search firms and other third parties acting on behalf of employers.


California’s Fair Employment and Housing Council Finalizes New Regulations Regarding the Use of Criminal History in Employment Decisions

Regulation: California’s Fair Employment and Housing Council (FEHC) recently finalized and adopted new regulations restricting employers’ use of job applicants’ or employees’ criminal histories under the state’s Fair Employment and Housing Act (FEHA). Under the new regulations, employers may not use or consider a job applicant’s or employee’s criminal history when making an employment decision (such as hiring, promotion, training, discipline, layoff or termination) if doing so would have an adverse impact on a protected class (such as gender, race or national origin). Applicants and employees bear the initial burden to demonstrate that an employer’s decision has an adverse impact, after which the employer may show that the decision is (a) job-related; and (b) consistent with a business necessity. To meet this high standard, the employer must show that the decision is appropriately tailored by reference to several factors, including (1) the nature and gravity of the offense or conduct, (2) the passage of time and (3) the nature of the position held or sought. The employer’s defense only establishes a presumption, which the employee or applicant can rebut by showing that a less discriminatory alternative exists to meet the employer’s business necessity. The new regulations also require notice to the applicant or employee prior to an adverse decision based on criminal history, plus an opportunity to address any factual inaccuracies, and list certain types of criminal history that employers may never consider. The regulations are set to take effect on July 1, 2017.

Impact: Like the “ban the box” initiatives in California cities including Los Angeles and San Francisco, which restrict certain employers’ use of criminal histories in the job application process, the new regulations signal an effort to eliminate discrimination based on an applicant’s or employee’s criminal history. Moreover, the California legislature is considering AB 1008, a bill that would codify substantially similar rules. In light of these efforts to restrict the use of criminal histories of job applicants and employees, employers should consider their current policies and practices and ensure that, if the policies and practices are necessary, they are appropriately tailored.

Authors

  • Lori A. Zahalka
    T +1 312 701 7921
  • Grant T. Miller
    T +1 213 229 5130
  • Richard E. Nowak
    T +1 312 701 8809
  • Ruth Zadikany
    Associate
    T +1 213 621 3916

Related People

  • Marcia E. Goodman
    T +1 312 701 7953
  • John Zaimes
    T +1 213 229 9545
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