News Type: Blogs

In a dramatic departure from the rather flexible standard for joint employer liability embraced under the Obama administration, the Department of Labor has announced a final rule regarding joint employer status under the Fair Labor Standards Act (FLSA) that will surely please employers. It becomes effective in mid-March. The new rule is, in part, a response to the business community’s outcry against prior decisions finding franchisors to be joint employers of their franchisees’ employees, even when those franchisors lacked control over the terms and conditions of workers’ employment.

Four-Factor Balancing Test

In a nutshell, the DOL has adopted a four-factor balancing test to establish whether two or more affiliated businesses jointly employ workers that perform tasks for one company while simultaneously benefiting the other. As finalized, this test weighs whether a potential joint employer:

  1. Hires or fires an aggrieved employee;
  2. Supervises and controls the employee’s work schedules or conditions of employment to a substantial degree;
  3. Determines the employee’s rate and method of payment; and
  4. Maintains the workers’ employment records.

Of note, not every one of these factors must be satisfied for a business to be considered a joint employer.

Clearly, the DOL’s new rule is a far cry from the Obama standard, which made it easier for workers to sue their employees by considering a business to be a joint employer not only if it exercised direct control of an employee’s activities, but also if it had “indirect” or even “potential” control. The net effect of the rule as reworked will be to reduce joint employer liability, which is good news for businesses.

The Takeaway

All companies, including yours, should be mindful of joint employer liability because when two businesses are deemed joint employers under the FLSA, they share responsibility for their employees’ wages and can both be deemed legally liable for wage violations. That being said, the DOL’s final rule gives employers more leeway than previous incarnations, is limited to the FLSA, and has no effect on the issue of joint employer liability as it relates to other federal or state employment statutes.

Of course, the labor and employment attorneys at Michelman & Robinson, LLP are here to answer any questions you may have about joint employer liability or, for that matter, any other employment-related issue.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Cannabis is on fire. And as more and more jurisdictions move to legalize marijuana for medical and/or recreational use, would-be players in the cannabis space are lining up to sign leases on commercial property from which they hope to operate. Which begs the question: do these cannabis-related leases require any unique terms given the nature of the business? The answer is a definitive yes.

A critical concern for any storefront retailer, including those operating a cannabis business, is the lease agreement. To be sure, given the unique circumstances presented in the pot biz-namely, the interplay of federal and state laws, banking and insurance industry aversion, and the relative unknowns presented by a new and burgeoning industry-leases for dispensaries and associated retail operations require special considerations. Here’s an overview.

Compliance with Law

Most commercial leases require tenants to comply with all federal, state and local laws. That’s a problem for players in the marijuana industry because the use, sale and possession of most cannabis products are illegal under federal law. That being said, real property leases entered into by cannabis businesses should specifically exclude the requirement that the tenant abide by all federal laws, including the Controlled Substances Act(21 U.S.C. § 811), which renders the medical and recreational use of cannabis illegal on the federal level.

Landlord Acknowledgement

By way of a use provision ordinarily present in a commercial lease, the tenant typically ensures that the landlord permits the intended use of the premises. In the case of a marijuana dispensary or similar enterprise, tenants would be wise to demand a lease provision stating that the landlord expressly acknowledges and authorizes the tenant’s cannabis-related use of the subject property.

Landlord Cooperation

A standard commercial lease often contains a cooperation clause that requires the landlord to cooperate with the tenant in furtherance of the tenant’s business. For instance, a tenant might need its landlord’s cooperation when performing construction work or obtaining licenses and permits. With that in mind, all tenants in the cannabis business should demand robust landlord cooperation provisions in their leases obligating the landlords to sign any documents and make necessary acknowledgments in furtherance of the tenants’ core operations. In fact, the cooperation clause should mandate that the landlord use diligent efforts and take cooperative action as soon as practicable upon a tenant’s request.

Lease Termination

Because the state of the law as it pertains to marijuana is ever-evolving, the termination provision in any cannabis-centric commercial lease should allow for the right of the tenant to terminate early in the event of a change in the law or enforcement patterns, nuisance claims, or other occurrences that serve to disrupt or hinder the purpose of the lease. Bottom line: if a tenant is no longer allowed to operate in the cannabis business, it must have a means of relief from future payment obligations.

Contingency Provision

In some instances, a cannabis business is required to present an executed lease in order to qualify for a license to operate or obtain necessary financing. In such a circumstance, where the lease is signed as a pre-condition, the tenant should negotiate for a contingency provision allowing for early termination in the event it fails to obtain the license or financing contemplated when the lease was executed.

Insurance Requirements

Commercial leases routinely contain provisions that require tenants to provide proof of specified types and levels of insurance. But there’s more. Those insurance requirements usually include thresholds regarding the perceived market quality of the insurer (for example, an “A-rated” insurer). Nevertheless, not all insurance companies issue policies to cannabis businesses. Consequently, such tenants should ensure that their lease agreements allow them to obtain coverage from any insurer willing and able to write the risk, regardless of rating.

What About the Landlord’s Perspective?

It’s no surprise that landlords will have their own set of priorities when negotiating key provisions in cannabis-related leases. First and foremost, tenants shouldn’t be surprised when they’re asked to pay a premium to lease commercial real estate. Many landlords still have reservations about the legal marijuana industry, and they may insist upon a greater income stream in exchange for any increased risk undertaken, perceived or otherwise. Also, it’s not unusual for a landlord to require an indemnification provision that is much stronger than is the norm in order to protect against such perceived risks or, alternatively, to require additional insurance coverage limits.

The Takeaway

If you’re a prospective in the cannabis sector, no need to fear. Simply recognize the forgoing issues-understanding that this list of provisions above isn’t exhaustive-and approach commercial lease negotiations diligently. Of course, as with any legal transaction, it’s recommended that you first consult with experienced legal counsel.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

If you’re in management, there’s some good news to report out of the National Labor Relations Board-at least theoretically.

The NLRB has just ruled that it’s not a violation of federal law-namely, the National Labor Relations Act-when employers misclassify their workers as independent contractors, as opposed to employees.

Classification issues have made headlines of late, especially in the wake of the California Supreme Court’s decision in Dynamex Operations West Inc. v. Superior Court, which significantly relaxed the standard applied in California to determine whether any given individual may be acting as an employee or independent contractor. But let’s put a pin in that for just a moment.

In the matter before the NLRB, Velox Express (a medical logistics company) was found to have misclassified certain workers as independent contractors. Despite this conclusion, the Board held that the misclassification didn’t violate the NLRA, which makes it illegal for employers to punish workers for forming unions or otherwise engaging in “concerted activities.” The NLRB determined that misclassification on the part of Velox didn’t serve to suppress workers’ organizing rights-this because the workers in question weren’t “inherently threatened” with firing or other discipline for acting together (and misclassification, by itself, wasn’t tantamount to such a threat).

The takeaway from the case is straightforward-employers that misclassify workers aren’t subject to NLRB litigation in the absence of some other labor law violation-though perhaps it’s something of a non-issue given the impact of certain state laws.

In California, for example, misclassification violates state law and related claims can still be brought by aggrieved workers (either individually or in a representative capacity) and the Division of Labor Standards Enforcement – the administrative agency charged with enforcement of the Labor Code. That being said, and given the ruling in Dynamex-by which an individual may be denied the status of employee only if the worker is the type of traditional independent contractor (such as an independent plumber or electrician) who would not reasonably have been viewed as working in the hiring business-there may well be an uptick rather than downturn of misclassification cases notwithstanding the NLRB’s take on the topic.

Long story short: (1) misclassification should remain front and center on company radar screens, and (2) the upside of the NLRB’s Velox Express ruling is likely reserved for entities with locations in states that largely track federal law.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for guidance in specific situations.

It’s a given that employers are prohibited from discriminating against employees on the basis of sex, race, color, national origin and religion – this according to Title VII of the Civil Rights Act of 1964, which generally applies to employers with 15 or more employees, including federal, state and local governments. It’s also been a given that a court lacked jurisdiction over a court action for discrimination under Title VII until and unless an employee first filed a charge of discrimination on the underlying claim with the U.S. Equal Employment Opportunity Commission (EEOC). Not anymore. By way of its recent ruling in Fort Bend County v. Davis, the U.S. Supreme Court has determined that this now-familiar administrative filing precondition is a “procedural obligation” and not a jurisdictional prerequisite to a lawsuit.

The “jurisdictional” vs. “procedural” distinction is important because if the failure to satisfy the charge-filing requirement itself does not divest a federal court of its jurisdiction over a Title VII lawsuit, an employer-defendant to a lawsuit must now affirmatively raise the plaintiff-employee’s failure to file a charge before a court is required to enforce the requirement. And critically, although the Court noted the plaintiff-employee’s charge-filing requirement is mandatory if properly raised, the defendant-employer may forfeit such requirement it “waits too long to raise the point.”

Translation: federal courts do not lack jurisdiction over discrimination claims simply because plaintiffs bypass the EEOC. Therefore, employers and their counsel must carefully review Title VII lawsuits to ensure they do not contain allegations and claims not previously specifically identified in an EEOC charge. Failure to timely object (e.g., in a responsive pleading) to such allegations and claims not raised to the EEOC may result in a waiver of the defense that a plaintiff has failed to exhaust administrative filing requirements.

Have questions about the EEOC, Title VII or anything in between? The labor and employment attorneys at Michelman & Robinson, LLP are here with answers.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for guidance in specific situations.

Brokers and agents take note – an appellate court in California handed down a decision earlier this month that strikes at the legality of “broker fees” charged by agents.

In Mercury Insurance Co. v. Jones, the 4th District Court of Appeals reversed a trial court decision and gave the thumbs up to a fine in excess of $27M that the California Department of Insurance had levied against the insurer back in January 2015 (the largest fine against a property and casualty company in the CDI’s history). The Department did so pursuant to an administrative action it initiated after determining that Auto Insurance Specialists (AIS) and other Mercury “brokers” – which charged consumers between $50 and $150 in fees in addition to premiums on Mercury auto policies – were actually acting as de facto agents, rendering the fees illegal and subject to prior approval by the CDI.

An administrative law judge, who arrived at the amount by multiplying nearly 184,000 unlawful transactions by $150, initially recommended the penalty. A trial court later overturned it, but the three-justice appellate panel in Jones concluded that doing so was in error and contrary to the intent of Proposition 103, which requires carriers to obtain prior regulatory approval for insurance rates.

It has long been a policy of the Department that fees improperly charged by agents are to be treated as premium subject to a prior approval rate filing. The court in Jones gave its stamp of approval to this policy as well as the CDI’s Bulletin 80-6 (and subsequent clarification), stating that while brokers are free to charge fees to insureds, agents can do so only if they provide services to consumers that are apart from and outside the scope of their agency relationships with carriers.

Insurance Commissioner Ricardo Lara reacted to the appellate court ruling by saying, “[the] decision is unequivocal: insurers cannot avoid the Department’s scrutiny by charging ‘fees’ on top of the rates already approved by the Commissioner. Our efforts to maintain fair rates depend on insurers playing fair by disclosing the full cost of their insurance, which Mercury did not do.”

The takeaway for producers acting as agents: now more than ever, fees charged over and above premiums will be under the microscope.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.

Nearly a year after its decision in Epic Systems Corp. v. Lewis, finding that class and collective action waivers contained in employer arbitration agreements are lawful and enforceable under the Federal Arbitration Act, the U.S. Supreme Court has spoken once more on the topic. This week, in Lamps Plus Inc. v. Varela, the high court ruled that arbitration agreements must specifically contemplate class arbitration for that process to be invoked.

The upshot is that an employer with a valid arbitration agreement not containing an explicit class action waiver can compel alleged class action claims to individual arbitration (assuming, of course, that the given contract does not specifically provide for class arbitration). In making its determination, the Court clarified that ambiguity in an arbitration agreement is not enough to evidence consent to class arbitration. No doubt, the justices’ 5-4 vote represents yet another employer-friendly decision.

Notwithstanding the foregoing, and as we previously pointed out after the Epic Systems ruling was published, employers should proceed with caution despite the good news in Lamps Plus. Remember, a variety of grounds can exist to render an arbitration agreement unenforceable – whether or not it contains a class or collective action component. And despite the Court’s determination in Lamps Plus requiring no ambiguity in a contract regarding a party’s capacity to pursue class arbitration, state and local law may specifically permit alternate ways to facilitate collective or enforcement actions (such as California’s Private Attorneys General Act).

As a practical matter, employers in the wake of Lamps Plus (and Epic Systems) should be certain that arbitration provisions are drafted in compliance with current law. That being said, assuming your company does not want to permit class-wide arbitration, DO NOT include language in your agreements that references class claims (other than a class action waiver).

If interested in a deeper dive on arbitration agreements and class or collective actions, the labor and employment lawyers at Michelman & Robinson, LLP are just a phone call or email away. In the meantime, we are here to help craft effective and enforceable arbitration agreements that will stand up to the scrutiny anticipated in the aftermath of Lamps Plus and Epic Systems.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for guidance in specific situations.

The Family Medical Leave Act (FMLA) is admittedly complex. Still, covered employers are required to strictly comply with its terms. To assist employers as they navigate the intricacies of the FMLA, the U.S. Department of Labor (the “DOL”) recently issued several opinions concerning some difficult and unresolved issues.

FMLA Benefits to Be Tapped First

According to the DOL, once an eligible employee learns that his or her absence from work falls under the umbrella of FMLA protection, the 12-week leave benefit is triggered. In such cases, covered employers are advised not to permit workers to take paid sick time that may be available to them before first using their FMLA leave. As otherwise stated, employers must start the clock running on workers’ 12 weeks of FMLA time as soon as a worker’s absence is determined to qualify for leave under the federal statute. In its opinion letter, the DOL also noted, however, that “nothing in FMLA supersedes any provision of state or local law that provides greater family or medical leave rights than those provided by FMLA.” To that end, an employer may provide additional leave when FMLA leave is exhausted (but such additional time cannot be designated as FMLA leave.)

Of note, the DOL’s opinion directly contradicts a Ninth Circuit ruling that specifically allows workers to defer FMLA leave and take paid time off instead. In Escriba v. Foster Poultry Farms (decided back in 2014), the court held that employees could decline to use FMLA leave. Given this decision, employers in the Golden State (which is decidedly employee-friendly) shouldn’t be too quick to change their current policies as they pertain to family or medical leave. Rather, the DOL’s opinion, which is not binding, simply suggests that employers may prevent employees from extending their FMLA leaves by using paid time off first.

Organ Donors Covered Under the FMLA

Another question often raised is whether a voluntary organ donation falls within the scope of the FMLA. As otherwise stated, are these procedures an impairment or physical condition that qualifies as a serious health condition under federal law? In a separate opinion letter, the DOL has decided that they are. According to the DOL, organ donations surely trigger employers’ FMLA leave obligations.

Incremental Leave

The FMLA allows workers to take leave in periodic (read: noncontinuous) increments. But what about that employee who elects to be out of the office – say – every Friday? Is there anything an employer can (or should) do about that? The answer is tread lightly.

While such a pattern of absence from the workplace may be difficult for an employer (both in terms of inconvenience and tracking the time away), it’s absolutely within a worker’s rights to take necessary time off pursuant to the FMLA to attend to personal or familial care. Still, an employer can request documentation that confirms that an employee must be out on Fridays (or whatever the relevant day or days may be), and workers must do their best to schedule leave so that interference with company operations are kept at a minimum. But all things being equal, if an employee’s reason for being absent from work on “Fridays” is legitimate, he or she can take leave on those days under the FMLA.

The Bottom Line

No doubt, the intricacies of the FMLA can be a bit tricky. To reduce your company’s administrative burden and exposure under the law, ensure complete and consistent documentation of all requests and accurate tracking of FMLA leave time. And, in the event you have questions about your obligations under the FMLA, the California Family Rights Act (CFRA) or any other employment-related issues you may be facing, feel free to contact Lara Shortz at (310) 229-5500 or [email protected] Kathryn Lundy (212) 730-7700 or [email protected].

This blog post is not offered, and should not be relied upon, as legal advice. You should consult an attorney for guidance in specific situations.

Are you in the business of creating, acquiring, owning, publishing, licensing or financing original works entitled to copyright protection, such as books, movies, sound recordings, musical compositions, audio/visual works, software, photos, artwork, or articles? If so, the U.S. Supreme Court’s recent decision in Fourth Estate Public Benefit Corp. v. Wall-Street.com should be of interest.

The use of a copyrighted work without the owner’s permission is unlawful under the Copyright Act and can result in a copyright infringement lawsuit. Such a case may subject the infringing party to significant damages and the payment of the copyright owner’s attorneys’ fees. But this begs a procedural question that has existed for some time without consensus: when can a copyright infringement lawsuit properly be filed? The Supreme Court in Fourth Estate provided a clear-cut answer – a copyright owner cannot file a copyright infringement lawsuit until the U.S. Copyright Office has registered the work subject to dispute.

For copyright owners, this decision, written by Justice Ruth Bader Ginsburg, is not welcome news given that it takes the Copyright Office seven months, on average, to process applications. Justice Ginsburg acknowledged this delay, but dismissed its impact by assuring plaintiffs that despite the bureaucratic lag, they will have plenty of time to sue (read: the ruling does not present statute of limitation issues) and recoveries may contemplate infringement that began even before the copyright owner’s submission of an application. This should come as some comfort to victims of copyright infringement, as may the option to expedite the registration process (though such “special handling,” which typically results in action by the Copyright Office within days, is costly and may now take longer as a result of the flood of expedited submissions expected in the wake of Fourth Estate).

The Takeaway

To avoid having to wait months to initiate litigation under the Copyright Act (or pay a substantial fee for expedited registration), copyright owners are encouraged to register their works sooner rather than later. The attorneys at Michelman & Robinson, LLP are here to help in that regard. If you have IP that has yet to be legally protected, please contact Jeremy Richardson at (212) 730-7700 or [email protected], and should you have questions about how the Court’s decision affects your rights as an owner, acquiror, lender or financing source for creative works, please contact Michael Poster at (212) 730-7700 or [email protected].

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.

Attention employers with 26 or more employees operating in the cities of Los Angeles, Santa Monica and Malibu and unincorporated Los Angeles County, on July 1, 2018, the minimum wage you are legally required to pay jumped to $13.25 an hour. This latest increase is a steppingstone to the $15 hourly rate that will be mandated in 2020.

For companies in those same cities (and county) with 25 or fewer workers, July 1 was marked by a minimum wage boost to $12 an hour – this from the $10.50 minimum hourly rate previously imposed by law.

There is more. Also as of July 1, the minimum hourly rate that must be paid to hotel workers in Los Angeles and Santa Monica increased to $16.10 pursuant to the Citywide Hotel Worker Minimum Wage Ordinance (applicable to hotels in L.A. with 150 or more rooms) and the Santa Monica Hotel Worker Minimum Wage Ordinance (which applies to all hotels in that coastal city).

In contemplation of the minimum wage hike, employers are considering their various options, some having to resort to a reduction of working hours assigned to employees, outsourcing and layoffs. Yet even for companies unduly burdened by the new minimum wage requirement, compliance is a must.

No matter your particular circumstances, the labor and employment attorneys at Michelman & Robinson, LLP can certainly assist – navigating wage and hour issues, in the hospitality space and otherwise, is most definitely a firm specialty. Do not hesitate to contact our California employment team at (310) 299-5500.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.

Given the choice, most California employers facing a lawsuit filed by an employee or, in the case of sexual harassment, a complaint with the Department of Fair Employment and Housing (DFEH), would pick arbitration as the favored forum for dispute resolution. Why? Because arbitration is typically a faster, more cost-effective and confidential process for litigants. Likewise, it allows for more streamlined discovery, and imposes simplified rules of civil procedure and evidence. But perhaps the most significant reason employers lean toward arbitration is that an unreasonable damage award is less likely to be levied by an arbitrator, as opposed to a jury. No wonder, then, that mandatory arbitration clauses are a fixture in employment agreements.

That being said, labor advocates suggest that forced arbitration is unfair, that contracts containing such provisions are lopsided, and that “the deck is stacked against any employee who is forced to sign one of these agreements,” especially in the wake of sexual harassment, this according to Assemblywoman Gonzalez Fletcher. Consequently, Assemblywoman Fletcher has introduced AB 3080 to the California State Legislature, a bill that, among other things, seeks to prohibit employers in California from requiring an applicant or employee to agree to arbitrate discrimination, harassment or retaliation claims as a condition of employment, continued employment, or receipt of any employment-related benefit. The proposed legislation also forbids an employee from prohibiting an employee or independent contractor from disclosing sexual harassment he or she suffers, witnesses or discovers. If the bill passes, these banned acts will be characterized as unlawful employment practices under the Fair Employment and Housing Act (FEHA), which would entitle employees to remedies for every violation.

Without question, California’s employee-friendly landscape might be getting even friendlier given the pendency of AB 3080 and other proposed bills inspired by the #MeToo movement. As they weave their way through the legislative process, we’ll be sure to keep employers posted.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.