Employment Law

On remand from the Ninth Circuit, the United States District Court for the Southern District of California issued its decision on August 27, 2012, holding Affinity Logistics Corporation (“Affinity”), a motor carrier, carried its burden of establishing it properly classified as independent contractors a certified class of former owner-operator delivery drivers (the “contractors”) under California law.  Ruiz v. Affinity Logistics Corp., No. 05CV2125, slip op. at 21 (S.D. Cal. Aug. 27, 2012). 

The Southern District previously reached this same conclusion under Georgia law, which applies a presumption of independent contractor status, to the facts adduced at a three-day bench trial.  On appeal, the Ninth Circuit concluded California, not Georgia, law should apply to the contractors’ relationship with Affinity and remanded the case.  California law applies a presumption of employment status that a putative employer may overcome if the weight of the evidence supports a finding of independent contractor status when the court applies a multi-factor, common law right of control test.   

When it revisited the issue under California law, the Southern District applied the right of control test with “with deference for the remedial purposes of California’s protective legislation.”  Id. at 6.  This notwithstanding, the court found evidence that the contractors could “hire others to complete the deliveries Affinity hired them to do is strong evidence suggesting that Affinity did not have the requisite level of control over the manner and means of [the contractors’] work.”  Id. at 7.  The court further found the majority of the “secondary factors” considered by California courts, including, e.g., investment in equipment and opportunity for profit or loss, among others, favored independent contractor status.  Id. at 20-21. 

While the court further found Affinity exercised “some control” over the contractors, the court deemed this evidence irrelevant to the ultimate question because “this control was either unrelated to the manner and means by which [the contractors] accomplished their work, or it was a result of other factors—such as federal regulatory requirements or [customer] preferences—rather than direct control by Affinity.”  Id. at 21.

The court therefore found in favor of Affinity.  Judgment has been entered against the plaintiff and class of contractors.  Plaintiff filed a Notice of Appeal on August 29, 2012.              

On March 29th, a federal court in the S.D. Indiana issued an opinion denying class and conditional certification of plaintiffs’ claims in the Scott v. NOW Courier case.  Plaintiffs are five former couriers who brought the action at issue in June of 2010, alleging they were misclassified as independent contractors, along with violations of the Fair Labor Standards Act ("FLSA") and Indiana employment law protections. Plaintiffs sought recovery of minimum wage and overtime under the FLSA and various benefits under Indiana law.

In its analysis, the court stated it found "disingenuous" plainitffs' assertions that NOW controlled the maner and means of deliveries by its drivers.  Furthermore, the evidence revealed that the indvidual drivers had considerable autonomy and independence in choosing the kinds of routes they wish to be assigned and schedules they wanted to work. As to the state claims, the court  stated it was not persuaded that certification was appropriate or necessary based on the same problems addressed in its FLSA analysis.  While the court did provide sub-groups of drivers may be appropriate, it stated no sub-groups were suggested nor were independent facts available upon which the court might determine such subsets exist.

Last week, the Occupational Safety and Health Administration (“OSHA”) placed the Office of the Whistleblower Protection Program under the direct supervision of the agency’s head, Assistant Secretary of Labor Dr. David Michaels.  The move strongly emphasizes the heightened priority OSHA and the U.S. Department of Labor placed on employee whistleblower protections last year.

Among the whistleblower laws enforced by OSHA that are critical to motor carriers is the Surface Transportation Assistance Act, or STAA.  The STAA protects drivers and other employees from adverse employment action taken in response to complaints related to commercial motor vehicle safety.  Motor carrier liability under the STAA is significant and may include back pay, reinstatement, compensatory and punitive damages, and attorney’s fees.  OSHA’s efforts to strengthen whistleblower protections, as indicated by yesterday’s announcement, signals a continuation of the increased government scrutiny motor carriers have faced in recent years.

The National Labor Relations Board ("NLRB") ruled on January 3, 2012, that employers may not force employees to sign arbitration agreements that waive (prohibit) class actions and class arbitrations over issues involving pay and other working conditions.  The decision seeks to distinguish the Supreme Court's ruling in AT&T Mobility v. Concepcion last April, which provided that the Federal Arbitration Act ("FAA") preempts state laws and court decisions that invalidate bans on class arbitration. 

The Board found that the FAA did not override the National Labor Relations Act, which provides workers the right to unionize and take part in joint action.  Specifically, the NLRB ruled that employers who force their employees to sign, “as a condition of employment, an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours, or other working conditions against the employer in any forum, arbitral or judicial,” are engaging in an “unfair labor practice” in violation of the National Labor Relations Act.

The decision will affect trucking and other transportation carriers in at least two ways.  Unionized carriers may now face the prospect of class (fleetwide) arbitration of grievances that a collective bargaining agreement might previously have limited to individual arbitration proceedings.  Carriers will want to review the wording of the grievance provisions in their collective bargaining agreements.

For non-unionized carriers, the NLRB decision provides an added reason to hesitate before requiring employee-drivers or contractors to sign agreements to arbitrate disputes.  Transportation carriers already miss out on the preemptive effect of AT&T Mobility to the extent their arbitration agreements are deemed to be contracts with transportation workers, which are expressly exempted from the FAA, the statute on which that Supreme Court decision was based.  Now the NLRB decision adds a possible federal-law basis on which employee-drivers – or contractors successful in persuading a court to reclassify them as employee-drivers – may try to argue a right to use a carrier’s arbitration agreement to institute a class arbitration.
    
The Board did not ban agreements that require employees to arbitrate in order to settle workplace issues, but held that such agreements must provide a way for workers to bring class or collective claims in court or arbitration.

In the Board decision, D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764 (Jan. 3, 2012), the respondent-home builder was ordered to stop “maintaining a mandatory arbitration agreement that waives the right to maintain class or collective actions in all forums, whether arbitral or judicial.”

A number of new California employment laws are set to take effect January 1, 2012. Many of these new laws will have a significant impact on businesses operating in California. The following is a summary of a few of the more notable laws taking effect in the New Year: 

Wage Theft Prevention Act

Effective January 1, 2012, California Labor Code 2810.5 will require that employers provide the following information, in writing, to new employees upon hire:

1.    The rate or rates of pay and the basis for pay, i.e., whether the employee will be paid by the hour, shift, day, week, salary, piece, commission, or otherwise. The rate information must also include overtime rates.

2.    Any allowances claimed as part of the minimum wage, including meal or lodging allowances.

3.    The regular payday designated by the employer.

4.    The name of the employer, including any "doing business as" names used by the employer.

5.    The physical address of the employer's main office or principal place of business. The mailing address must also be provided if it differs from the principal physical address.

6.    The telephone number of the employer.

7.    The name, address, and telephone number of the employer's workers' compensation insurance carrier.

8.    Any other information the Labor Commissioner deems material and necessary.

These requirements apply to all non-exempt, non-union employees, and the duty to disclose this information continues after hiring.  When any of the information listed in this statute changes, employers must notify employees in writing within seven calendar days of the change.  The California Labor Commissioner posted a template for the required notice on the California Department of Industrial Relations’ web site:  http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html
 

Retention of Payroll Records

California also changed the time frame that payroll records must be kept under Cal. Labor Code section 1174 from two to three years (we recommend four years because there is a four-year statute of limitations for many Labor Code violations).

Misclassification of Independent Contractors

California Senate Bill 459, signed into law by Governor Jerry Brown on October 9, 2011,

penalizes employers who willfully misclassify workers as independent contractors. The law defines “willful misclassification” as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” The law makes it illegal to charge a willfully misclassified worker a fee or to make pay deductions where such a fee or deduction would have violated the law if the worker had not been misclassified. 

Employers in violation of the law are subject to civil penalties between $5,000 and $15,000 for each violation, in addition to any other penalties or fines permitted by law. Violators may also be ordered to display (either on the employer’s website or, if there is none, at every location where a violation occurred) a notice for an entire year advising, among other things, that (1) the employer has committed a serious violation of the law by engaging in the willful misclassification of employees; (2) the employer has changed its business practices in order to avoid committing further violations; and (3) any employee who believes that he or she is being misclassified as an independent contractor may contact the California Labor and Workforce Development Agency (“LWDA”).

Under other similar California statutes that prohibit “knowing,” “intentional,” and “voluntary” violations, courts have found that actions taken on the basis of a good faith belief in their legality do not give rise to liability. It is unclear whether this “good faith” defense will apply under the new misclassification law. Regardless, employers must be cautious when classifying employees as independent contractors, and must be able to explain and demonstrate the validity of the classification. 

Restriction on Use of Credit Checks

Starting in 2012, California employers may not, subject to certain exceptions, use consumer credit reports to evaluate candidates for employment. The use of credit reports to screen candidates for the following types of positions is not prohibited:

• Managerial positions covered by California’s executive exemption
• Positions involving regular access to certain personal financial, proprietary, or trade secret information
• Positions involving regular access to at least $10,000 of money belonging to the employer or its clients or customers
• Positions in which the applicant would be a signatory on the employer’s financial accounts or would have authority to transfer money or enter into financial agreements for the employer
• Positions for which credit information is required to be disclosed by law

Workers Compensation Notices

Among other amendments to California’s workers compensation laws, new legislation now requires that workers compensation notices posted by employers include the website address and contact information for employees to obtain further information about the workers compensation claims process.

These and several other new laws add additional layers of compliance for California employers already struggling to persevere in an extraordinarily difficult business climate. We recommend California employers take time to review their employment policies and practices to ensure compliance with California’s employment laws, both new and old. Questions should be directed to Jim Hanson, Chris McNatt, Bob Browning, and Adam Smedstad.

As alluded to in our previous post, the California Supreme Court now officially decided to delay its ruling in the case of Brinker Restaurant Corp. v. Superior Court, No. S166350 until specific supplemental briefing is submitted.  The Court is allowing both sides until January 3, 2011, to respond to an amicus curiae brief filed by the California Employment Law Council (“CELC”).  The CELC’s amicus brief addresses whether a ruling on the so-called “rolling 5” issue (see our prior post for details) will apply retroactively or only prospectively.  Each side will have 10 days in which to reply to the other side’s response.  The statutory 90-day clock will restart on January 13, 2012, giving the Court until April 12, 2012 to issue its decision.  Questions regarding the impact of the decision or California’s meal and rest break rules should be directed to Jim Hanson.

Employers waiting for the California Supreme Court to clarify California’s meal and rest break rules in the case of Brinker Restaurant Corp. v. Superior Court, No. S166350 may have to wait a little longer.  The case is expected to resolve the contentious question of whether California employers must ensure that employees take thirty-minute off-duty meal breaks or just make them available to employees.  Oral argument was held November 8, 2011.  Under the Supreme Court’s rules, a decision was expected by mid-February, 2012, 90 days after the argument.  On December 2, 2011, however, the Supreme Court agreed to accept additional briefing addressing whether a ruling on the so-called “rolling 5” issue will apply retroactively or only to future violations.  As a result of this additional briefing, it is possible, although uncertain at this time, that the Supreme Court could issue a decision as late as April, 2012, 90 days following the completion of this additional briefing. 

The “rolling 5” issue addresses the time meal breaks must be provided during a workday.  California law generally requires that employers provide employees a 30-minute off-duty meal break whenever they work five hours or more, and another 30-minute meal break where work shifts exceed 10 hours.  The “rolling 5” issue in Brinker is whether employees are entitled to one break during work shifts up to 10 hours long and a second break for shifts over 10 hours (the defendant’s position), or whether employees cannot work for more than five hours without a break (the “rolling 5” position advocated by the plaintiffs).  The Brinker plaintiffs contend that an employer must schedule meal breaks near the middle of shifts to avoid work periods in excess of five hours or pay the hour premium if an employee works more than 5 hours without a break. 

The Brinker plaintiffs’ position on the “rolling 5” issue would have a potentially significant impact on transportation providers operating in California.  Under the “rolling 5” theory, if a driver takes a meal break early in the shift, the driver would be entitled to another one five hours later and could conceivably be entitled to three in a 12-hour shift.  Incorporating these breaks into a driver’s day would be problematic and would, in our view, adversely impact the carrier’s operations and potentially conflict with the federal Hours of Service Rules and the Federal Aviation Administration Authorization Act (the “FAAAA”).  Indeed, as many of the Firm’s clients know, a federal district court in California recently ruled that California’s meal and rest break rules are preempted by the FAAAA as applied to motor carriers. See http://transportationblog.scopelitis.com/blog/transportation-blog/federal-district-court-finds-faaaa-preempts-california-meal-and-rest-break-rules.

We are following the Brinker case closely and will keep you apprised of developments.  In the meantime, while a ruling in Brinker could be delayed by this additional briefing, employers operating in California should not wait to adopt written policies advising employees of their meal and rest break rights under California law.  Employers should also post a copy of the applicable California Industrial Welfare Commission Wage Order (for transportation providers, IWC Wage Order No. 9) in the same place they post other standard employment notices.  Copies of Wage Order No. 9 and other wage orders can be obtained from the Firm.  Questions regarding Brinker or California’s meal and rest break rules in general should be directed to Jim Hanson.

The Supreme Court provided good news to transportation companies facing class action litigation today by issuing an opinion in the Wal-Mart v. Dukes case that reverses the Ninth Circuit Court of Appeals' class certification decision.  In a 5 to 4 ruling, the Court held that plaintiffs failed to demonstrate commonality under Rule 23(a)(2), and unanimously held that the back pay claims could not be properly certified under Rule 23(b)(2).  The decision will make it more difficult for plaintiffs to succeed in certifying class actions going forward.

This decision is a victory for any transportation company faced with a class action lawsuit, as the Court's decision ostensibly makes it more difficult for a putative class action to be certified going forward.  This is especially so in employment law class actions in which the plaintiff cannot point to a specific employment practice of the motor carrier or other transportation entity that violates the law, but rather relies on anecdotal evidence to satisfy the rigid requirements of Rule 23.  How this decision will affect other transportation class action cases such as those involving the Truth-in-Leasing Regulations is unknown at this juncture, but without proof of a class wide policy that violates the law the Wal-Mart case makes clear that certification will be difficult to obtain.

In Wal-Mart v. Dukes, the plaintiffs — a group of 1.5 million current and former Wal-Mart employees — claimed that while Wal-Mart had no express corporate policy against the advancement of women, Wal-Mart's decision to give managers discretion to make pay and promotion decisions  itself was a discriminatory policy.  That policy resulted in male employees earning more money than their female counterparts and holding a disproportionate number of leadership positions that could be proven on a class wide basis according to the plaintiffs.  Wal-Mart maintained that the class members’ claims are not similar enough to justify certifying them as a class, as the sheer number of class members and stores, along with variations in positions the plaintiffs held and differences in managers at each location militated against litigating the case on a class wide basis.

The Court agreed.  Focusing on the commonality prong of Rule 23, the Court mentioned that while the purported policy could possibly form the basis of a disparate impact claim under Title VII of the Civil Rights Act of 1964, it does not follow that every potential class member has a common claim as is required to proceed with a class action case.  To prove commonality under Rule 23, the plaintiff must demonstrate that each class member “suffered the same injury” according to the Court, which the plaintiffs could not do because the employment decisions complained of were admittedly left to the discretion of each store manager.  "Respondents wish to sue for millions of employment decisions at once,” Justice Antonin Scalia said. “Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.” Prior to this ruling, the commonality requirement of Rule 23 was often glossed over in any class certification analysis.  This decision establishes a roadmap for approaching this issue going forward and indicates a renewed focus on commonality is warranted in any class certification inquiry. 

The Court also held that a claim for monetary relief could not be certified under Rule 23(b)(2) when, as here, the monetary relief sought is not incidental to the requested injunctive or declaratory relief.  Rule 23(b)(2) applies when the party opposing the class has acted or refused to act on grounds that apply generally to the class so that final injunctive or declaratory relief is appropriate for the entire class.  The Court's ruling clarifies that Rule 23(b)(2) certification is only appropriate when a single, indivisible remedy would provide relief to each class member, and that when individualized monetary damages are appropriate such claims “belong in Rule 23(b)(3)”, which is arguably a more difficult certification standard to meet.

Finally, the Supreme Court also rejected plaintiffs' theory that back pay could be determined with a "Trial by Formula" calculation, i.e. that a sample of class members could be selected, and statistical modeling could yield a result for the entire class wide recovery without further individual proceedings. Such a method of calculating damages would violate the Rules Enabling Act according to the Court, as a class cannot be certified on the premise that an employer "will not be entitled to litigate its statutory defenses to individual claims."
With the renewed focus on the commonality prong of Rule 23 and the favorable findings regarding Rule 23(b)(2), the class action landscape is certainly more favorable to employers than before.  And while employers should be pleased with the decision, it does not provide a silver bullet to defeat class certification.  The bar for plaintiffs’ counsel to meet to certify a case however, has certainly been raised. 

Under the Wage Theft Protection Act, in the event of a wage payment violation, an employer--which is defined broadly to include individual officers and agents of company--may be liable for up to twice the amount that was due as wages as well as other penalties and legal fees. The law also prohibits retaliation against employees who exercise their rights under the statute.

The federal judge presiding over the FedEx Ground Package System Inc. (“FedEx Ground”) multidistrict litigation (“MDL”) ruled this week that classes of FedEx Ground drivers in numerous states are independent contractors, not employees. In re MDL-1700 FedEx Ground Package Sys. Inc., Employment Practices Litig., No. 3:05-MD-527 RM (MDL 1700) (N.D. Ind. Dec. 13, 2010) (“Dec. 13, 2010 Order”).   

The court’s decision comes on the heels of its August 11, 2010 ruling that a class of Kansas drivers are independent contractors, not employees, under the Kansas Wage Payment Act. See In re MDL-1700 FedEx Ground Ground Package Sys. Inc., Employment Practices Litig., No. 3:05-MD-527 RM (MDL 1700), 2010 WL 3239363 (N.D. Ind. Aug. 11, 2010) (“August 11, 2010 Order”).  Following that ruling, the Court instructed the parties to file supplemental briefing explaining whether the Court should reach the same result – on claims under the laws of other relevant States relating to overtime, business expense deductions from wages, late payment of wages, meal-and-rest breaks, and similar wage-related statutory and breach-of-contract claims – in the MDL’s many other collected cases in which similar summary judgment motions regarding drivers’ employee-vs.-independent-contractor status were awaiting decision. 

The MDL consists of numerous class action cases filed by drivers against FedEx Ground in courts around the country that were combined for coordinated pre-trial proceedings in the U.S. District Court for the Northern District of Indiana in 2005.  In general, the cases allege that FedEx Ground drivers were improperly misclassified as independent contractors, and that the drivers were therefore covered by state and federal laws applicable to employees.  Some of the cases also alleged violations of federal law, including the FLSA and the FMLA, and common law causes of action for breach of contract.  Eventually, at least 56 separate putative class actions from 40 states were transferred to the Northern District of Indiana as part of the MDL.  In 2008 and 2009, the MDL court certified some of the cases as class actions and declined to certify others.  The parties then proceeded to file summary judgment motions on the issue of the drivers’ employee-vs.-independent-contractor status.  The Court’s ruling this week represents the latest stage of the litigation.

In its August ruling in the Kansas case, the Court summarized its conclusion that drivers were independent contractors as follows:

The plaintiffs have all signed Operating Agreements labeling themselves as independent contractors, they can hire others to perform their assigned work and go work for another delivery company, and they can sell their routes to other qualified drivers; yet, they contend they are employees.  The court sees it differently. Upon review of the evidence in the light most favorable to the plaintiffs, the only reasonable inference is that FedEx hasn’t retained the right to direct the manner in which drivers perform their work. FedEx supervises the drivers’ work and offers numerous suggestions and best practices for performance of assigned tasks, but the evidence doesn’t suggest that FedEx has the authority under the Operating Agreement to require compliance with its suggestions. Further, other factors strongly weigh in favor of independent contractor status; in particular, the parties intended to create an independent contractor arrangement, the drivers have the ability to hire helpers and replacement drivers, they are responsible for acquiring a vehicle and can use the vehicle for other commercial purposes, they can sell their routes to other qualified drivers, and FedEx doesn’t have the right to terminate contracts at-will. Although some facts weigh in favor of employee status, after considering all the relevant factors, the court finds that the plaintiffs are independent contractors as a matter of law.

See Aug. 11, 2010 Ruling at 3.  In this week’s decision, the court repeated this same passage (beginning with “Upon review of the evidence…”).  See Dec. 13, 2010 Ruling at 11-12 (quoting Aug. 11, 2010 Ruling at 3). 

In the vast majority of states involved (AL, AZ, AR, CA, FL, GA, IN, KY, LA, MD, MN, NH, NJ, NY, NC, OH, OR, PA, RI, SC, TN, TX, UT, WV, WI, in addition to KS), the MDL court this week ruled that drivers were independent contractors under each respective state’s legal test. The Court’s detailed reasoning, state by state, is set forth on pages 18-176 of the decision.

The Court noted (at 4-5) that in arriving at both the Kansas decision and this week’s decision, it “has considered evidence common to the drivers’ relationships with FedEx on a nationwide basis:  the Operating Agreement [lease] and generally applicable Policies and Procedures.  As a condition of class certification, the court excluded particularized evidence of actual control between FedEx and the drivers. …These cases might or might not come out differently under a different procedural posture allowing wider scope for review of extrinsic and particularized evidence, but that situation is not before the court today.” 

The Court denied the plaintiffs’ request to give preclusive effect – that is, to treat as already having decided the issue – the California Court of Appeal’s decision in Estrada v. FedEx Ground Package System, Inc., 64 Cal. Rptr. 3d 327 (Cal. Ct. App. 2007) that a FedEx Ground Single Work Area (“SWA”) class of drivers were employees.  The Court stated (at 8): “The facts before the Estrada court and those before this court are dissimilar insofar as the facts available to this court don’t go beyond the Operating Agreement and generally applicable Policies and Procedures…. Also, the SWA class in Estrada was markedly different from the classes before this court because the MDL classes lump together SWA and MWA drivers.  Thus, though the parties litigated a right to control issue in Estrada, the issue decided in Estrada, isn’t identical to issue before this court.”

The Court also rejected the plaintiffs’ assertion that it viewed as dispositive the Operating Agreement’s indication that the parties intended to create an independent-contractor relationship.  The Court said (at 10) that “the intent factor weighed ‘strongly’ because the intent expressed in the contracts was so clear, not because the intent factor had special status or carried dispositive weight.”

The Court went on to declare (at 10-11, citations omitted) that “Most important in Kansas – and the most important under the common law and Restatement tests generally – is the right to control, which typically is the weightiest factor….  This court held that there was no reasonable inference that FedEx retained the right to control the methods and means of the drivers’ work on a class-wide basis. This finding came in light of the distinction between control of means and control of results.  In most states, control of results doesn’t indicate employee status; control of means used to achieve contracted-for results does indicate employee status.  Drawing the line between means and results is a challenging, highly contextual and fact-specific task.  Bright-line rules prove elusive here.  This court held that the controls reserved to FedEx were results-oriented:   FedEx provides work to and pays contractor-drivers to provide the specific result of timely and safely-delivered packages to FedEx customers.  The totality of the circumstances and review of all the relevant facts and factors led to this results-oriented conclusion.”

The Court further explained (at 11) that it “found the drivers’ entrepreneurial opportunities to be highly probative of independent contractor status.”

The drivers are expected to appeal the court’s ruling.  
 

A new study released this week by the National Employment Law Project (“NELP”), a union advocacy coalition, Change to Win, and Rutgers University charges motor carriers with misclassifying more than 110,000 port truck drivers as independent contractors, as opposed to employees. The release of this study comes on the tails of a call to action by the American Trucking Association regarding Senate Bill 3786, the Fair Playing Field Act of 2010, as an offset for the 9/11 Health and Compensation Act. The Bill targets the use of independent contractors and requires the treasury to release guidelines to help clarify the status of individuals as independent contractors or employees for the purpose of federal employment taxes.

The NELP study, based on surveys from drivers at seven major ports, including Seattle, Oakland, Los Angeles, Long Beach, New York and New Jersey, estimated that approximately 82% of port truck drivers are treated as independent contractors. The study criticizes the use of the independent contractor model, claiming, in part, drivers classified as independent contractors earned, on average, 18% less than employee drivers, are asked to use illegal and unsafe equipment, and face health problems imposed by high concentrations of diesel emissions.

The EEOC's final rule implementing Title II of GINA, which bars the use of genetic information in the employment context and restricts employers from seeking or disclosing genetic data, appeared in the Federal Register on Nov. 9 and becomes effective on Jan. 10, 2011.

A major concern by companies prior to the EEOC's interpretation of the law was whether GINA would impose an barrier for businesses looking to offer programs to employees to help improve their health or prevent disease.  The EEOC stipulated that employers will be able to request genetic information as part of a voluntary wellness plan without violating the law.

However, the question of whether employers face legal liability under GINA if they inadvertently elicit genetic information remains open.

The EEOC's proposed rule, which came out in March 2009, said that inadvertently requesting or requiring family medical history did not violate GINA, an exception Congress had included in the language of the law to address the so-called water cooler situation, in which an employer unwittingly receives genetic information, either through a casual conversation or overhearing co-workers talking.

Subsequent public comments on the inadvertent acquisition issue highlighted the need for more clarity concerning the exception, and the EEOC's final rule seeks to provide that clarity by including two examples aimed at showing how the exception applies.

An employer that inadvertently acquires genetic information about someone's family member in response to a general question can't follow up with probing questions, such as whether other family members share a particular condition, the final rule stipulates.

In addition, the final rule clarifies that the inadvertent acquisition exception applies not only in the physical confines of the workplace, but also in the virtual realm. If a supervisor or manager inadvertently learns genetic information through a social media platform, such as Facebook, that he or she has permission to access, then the exception applies.

The EEOC's final rule clarifies the agency's stance on employers obtaining genetic information during the course of implementing programs designed to promote employees' health.

Such programs — which can reduce a company's health care costs — include employee smoking-cessation programs, free health screenings or programs that aim to have a worker meet a specific health goal, like a certain cholesterol level.

The EEOC's proposed rule stated that employers could request genetic information without violating GINA as part of a "voluntary wellness program," but the question of whether an employer could offer inducements for participation and still call the program voluntary remained open.

The final rule provides that employers can offer inducements, but not specifically for genetic information. Companies will remain compliant with Title II if they reward individuals for completing a health risk assessment that includes questions about family medical history or other genetic information, as long as those questions are specifically identified and it is made clear that the individual doesn't have to answer the questions on genetic information in order to receive whatever inducement is being offered.

A federal appeals court denied appeal after the lower court granted certification of a class of deliverymen, who brougt action against their employer, San Diego's North County Times.  The class was certified in the face of one judge's objections that the potential $18 million in damages could sound the paper's death knell.

The class includes nearly 800 newspaper carriers who claim they were wrongly classsified as independent contractors.

The newspaper carriers sued in 2008, claiming that the paper called them “independent contractors” to dodge labor laws on minimum wage, overtime and rest breaks.

The paper maintains that their work duties — picking up newspapers from the presses, assembling them offsite and delivering them with their own cars — are far enough removed from the paper's control that the carriers should not be considered employees.

The majority only briefly explained its decision not to hear the case — a one paragraph note says the court relied on the Ninth Circuit's decision in Chamberlain v. Ford Motor Co.

Even that decision, though, calls for class certification appeals where one of the parties faces a “death-knell” situation, the 9th Circuit's Judge O'Scannlain noted in the court's dissent.

“[Lee] faces a 'death-knell situation' because certification will expose it, a member of the struggling newspaper industry, to $18 million in liability,” he said. “I would grant permission to appeal.”

Under the health care reform legislation signed into law in March 2010, a number of changes in the way employers and the group health plans they sponsor administer benefits take effect on January 1, 2011.  Employers are well-advised to evaluate their plans now to ensure they are in compliance with the new law. 

Among the changes taking effect on January 1, 2011, employers with group health plans operating on a calendar-year basis must (1) eliminate pre-existing condition exclusions for dependent children who are under age 19; (2) allow coverage for adult dependent children up to age 26; (3) restrict annual limits on coverage in accordance with the regulations and eliminate lifetime maximum limits on coverage of essential benefits; and (4) eliminate coverage rescissions in cases not involving fraud.  Regulations published by the Departments of Treasury, Labor, and Health and Human Services also require plans to give notice by January 1, 2011 of a re-enrollment opportunity to those dependents under age 26 whose group health coverage was terminated because of an age restriction.

Although many of the more highly-publicized changes to group health plan administration take effect beginning in 2014, employers should become familiar with the new requirements now to ensure their plans comply with the more immediate deadlines.