American Staffing Association (02/23/12) Richard J. Simmons

Both California and federal laws contain overtime pay exemptions for commissioned employees who qualify under the “inside sales” or “commission employees” exemption. On Jan. 24, a California Court of Appeal examined the California state law exemption in Muldrow v. Surrex Solutions Corp. The trial court determined that overtime wages were not owed under California law to a class of recruiters because they were subject to the commissioned employee exemption in California Wage Order 7.

Pursuant to the exemption, employers are not required to pay overtime wages to an employee “whose earnings exceed one and one-half times the minimum wage if more than half of that employee’s compensation represents commissions.” The court of appeal agreed that the recruiters were exempt. An analysis of the ruling was drafted for ASA members by outside counsel Richard J. Simmons, Esq., of Sheppard, Mullin, Richter & Hampton LLP.

Indianapolis Star (02/23/12) Mary Beth Schneider

The International Union of Operating Engineers Local 150 has brought a lawsuit over Indiana’s “right to work” law, arguing it violates both the U.S. and Indiana constitutions. Under right to work, businesses are prohibited from negotiating a contract that requires nonmembers to pay fees for representation. Gov. Mitch Daniels, who signed the right to work legislation Feb. 1, says the law is needed to foster job creation and to prevent workers from being required to support a union financially. Opponents say the law will result in a decline in wages and will not attract high-paying jobs. The lawsuit says the law violates the contracts clause in Article 1 of the U.S. Constitution because it hinders contractual relationships and violates equal protection clauses by treating employees differently.

JDSupra (02/22/2012)

A class action lawsuit filed against the transportation company Affinity Logistics in California by one of its drivers accuses the company of violating state law and the federal Fair Labor Standards Act by failing to pay overtime, among other things. However, the company requires its drivers to sign written agreements classifying them as independent contractors and including a choice of law provision indicating that Georgia law will govern any disputes.

The Ninth Circuit refused to enforce the choice of law provision, determining that applying Georgia law would contravene an important public policy of California as it undermines California’s employee protection laws. The court also said California has a greater interest in the outcome of the case than Georgia, as the agreement was forged in California, the driver worked and lived in California, and the deliveries under the contract were in California. The only connection to Georgia was that it is the state where Affinity is incorporated.

As a result of the case, California employers should ensure that any agreement classifying workers as independent contractors meets the state’s multifactor test that distinguishes between independent contractors and employees.

Mondaq (02/17/12) Bryan Lazarski

A common issue facing many employers is the misclassification of employees as independent contractors. A dangerous but pervasive myth is that a company can simply agree with a worker that he or she shall be treated as an independent contractor. The truth is, whether a worker qualifies as an independent contractor or an employee is determined by the realities of the relationship between the parties, which cannot be overcome by agreement or contract.

Federal and state enforcement agencies apply a multifactor analysis to analyze classifications. Ultimately, though, the main distinction boils down to whether the employer has the right to control only the result of the work or if it also controls the manner and means of how the work will be done. If it is the latter, the worker is probably an employee.

There are several things to consider when reclassifying a worker to employee status, including the possibility of owing back taxes, having liability for unpaid overtime, and being subject to other fines and penalties. If done correctly, though, a voluntary reclassification can significantly reduce or eliminate a firm’s risk of a much costlier lawsuit.

JDSupra (02/22/2012) Michael S. Arnold

The U.S. Supreme Court has decided not to take up the issue of whether the Fair Labor Standards Act’s antiretaliation component is applicable to prospective workers, leaving intact a Fourth Circuit Court of Appeals decision barring FLSA antiretaliation claims by prospective employees. According to the Fourth Circuit, the antiretaliation component applies only to current and former employees. In the case the Fourth Circuit considered, Dellinger v. SAIC, the court concluded that because the FLSA only allows “employees” to sue their “employers” for retaliation, an employer cannot retaliate against an individual it never hired. Had the case been brought under Title VII of the Civil Rights Act of 1964, however, the results very well may have been different, because Title VII prohibits retaliation against job applicants.