Investigations, Misclassifications and new Sick Leave Laws

Employers Should Consider Independent Investigation To Avoid Getting Burned

When an employee alleges he or she has been discriminated against—what do you do? The best practice is to conduct an investigation. But, as is true with much in life, short-cutting the investigation can backfire.
Consider, for example, a recent federal case in which an employee claims she was harassed by text by a co-worker. She complains, and the company did the right thing and “investigated.” But the company took a short cut and spoke only to the alleged bad-actor. The alleged bad-actor manipulated the text messages to make it seem like the female employee invited the inappropriate texts from him because of a consensual relationship. The company took the manipulating co-worker at his word, without even asking the female for her side of the story, and fired the female employee for sending inappropriate texts. Not surprisingly, the Court rejected this approach, effectively concluding that because the employer relied on the tainted employee’s statement without conducting a fair investigation, the employer unlawfully fired the female.

The case adopted the “cat’s paw” theory, which holds an employer liable if it relies on a biased manager’s evidence or observations when disciplining an employee. The new case takes this theory one step further, holding that even if the biased evidence comes from a co-worker (rather than a manager), the employer can be held liable.

The “cat’s paw” theory is based on a fable where a monkey convinced a cat to reach into a hot fire and pull out chestnuts. Unbeknownst to the cat, which continues to burn its paws reaching into the fire, the monkey is eating the chestnuts and leaving none for the cat.

What’s the takeaway? Don’t take a short cut with your investigations. The investigation must be fair and thorough. And consider hiring an outside vendor or lawyer to conduct the investigation – this will go a long way towards demonstrating the independence of the investigation. If employers are not careful, like the cat, they will get burned.

Maryland, Virginia, and the National Labor Relations Board all Impose New Stiff Penalties for Misclassification of Employees

Many employers are aware of possible wage and hour lawsuits resulting from misclassification of independent contractors. In addition to federal wage and hour lawsuits, and potential audits by the IRS and the state taxing authorities, here are three more reasons to be careful about independent contractor classifications:

Maryland – Maryland’s Recovery of Benefits and Penalties for Fraud Act becomes effective October 1, 2016. Penalties under this new law include up to $5,000 per knowingly misclassified employee, and up to $10,000 per future violation.

Virginia – Virginia recently signed a partnership agreement with the Department of Labor agreeing to joint investigations, exchange of information with federal agencies, coordination with DOL on enforcement, and referral of potential violations to the appropriate federal agency. (Maryland had already signed a similar agreement.)

NLRB – Finally, last month the National Labor Relations Board (NLRB) joined the fun by issuing an advice memorandum asserting that misclassification as an independent contractor also violates Section 8(a)(1) of the National Labor Relations Act (NLRA) because it strips employees of the right to form a union. Penalties for this violation range from a notice posting to imposition of a union on your workforce.

Now is probably a good time to review your current independent contractor relationships to confirm that your people are properly classified!

Reminder: Maryland Equal Pay and Montgomery County Sick Leave Laws Both Start October 1, 2016

Maryland’s new Equal Pay for Equal Work law prohibits discrimination on the basis of sex and gender identity if the “employees work in the same establishment and perform work of comparable character,” and also requires pay transparency.

Montgomery County’s Sick and Safe Leave requires employers to allow employees to accrue paid sick leave.

Sick Leave for Federal Contractors: [COMING SOON]
Earlier today, the Department of Labor issued implementing regulations on the new sick leave requirement for federal contractors. We will review and provide guidance in an Alert that will be distributed next week.

If you need a revised handbook policy to comply with any of these changes, please contact your attorney.

Contact info: Meredith S. Campbell Chair, Employment and Labor Group, Shulman Rogers mcampbell@shulmanrogers.com | T 301.255.0550 | F 301.230.2891

 

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