New York Labor and Employment Law Report : New York Employment Lawyer & Attorney : Bond Schoeneck & King Law Firm : NY Labor Relations, Employee Benefits

Under guidelines recently issued by the Federal Trade Commission (“FTC”)—Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 CFR Part 255—an employer may now face liability for employee endorsements of its products and services, if the employment relationship is not disclosed. The guidelines, which took effect on December 1, 2009, require that employees who endorse their employer’s products or services, must “clearly disclose” the employment relationship within the endorsement.

Although the new guidelines are primarily concerned with celebrity endorsements, they also apply to more routine comments ordinary employees may make on social media outlets such as personal blogs, Facebook and Twitter. The FTC has stated, for example, that where an on-line blogger discusses a product manufactured by her employer, she “should clearly disclose her relationship to the manufacturer to members and readers of the message board” because knowledge of that relationship “likely would affect the weight of credibility of her endorsement” in the eyes of the public. If the employment relationship is not disclosed, both the employer and employee may face liability under Section 5 of the Federal Trade Commission Act (15 USC § 45 et seq.), which prohibits unfair or deceptive acts or practices in the marketplace. This is so even if the employee’s endorsement was not authorized or sponsored by the employer, and even where the actual endorsing statement is not misleading.
 

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Employers often assume that because an employee performs “professional” work she must be an exempt professional under the Fair Labor Standards Act (“FLSA”). Late last year, the United States Court of Appeals for the Second Circuit issued a decision which serves as a valuable warning to employers who make that assumption, Young v. Cooper Cameron Corp. For those of you who may not know or recall what the professional exemption is all about, here is a quick primer. The FLSA’s overtime provisions do not apply to exempt professionals. An exempt professional is one who, among other things, is “employed in a bona fide professional capacity.” The FLSA does not define that term any further. But the U.S. Department of Labor (“DOL”) has issued extensive regulations on the subject. In the Young case, the Second Circuit’s interpretation and application of these regulations revealed a common employer mistake: Just because the position seems like a “professional” position does not mean it falls within the professional exemption. In this case, the plaintiff was performing a type of engineering design work on a pretty sophisticated piece of equipment used on oil drilling rigs. While he had 20 years of engineering-type experience, he had only a high school degree. Nevertheless, based on the amount of his engineering experience and the type of work he was performing, the employer classified him as exempt.

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The Equal Employment Opportunity Commission (“EEOC”) recently released statistics on its charge processing and litigation which include data from 1997 through 2009. As others, including the New York Times , have reported, the data shows overall charge filing down about two percent from 2008.  However, the continued high number of charges is the real story, because 2008 was a record year for charges. Thus, although there was a slight decrease in age discrimination charges in 2009, even those stayed close to the record levels of 2008. In fact, age charges for 2009 are up more than 42 percent over the last ten years. Harassment charges of all types also decreased significantly (5.8%), but again from the record 2008 levels. The subgroup of sexual harassment charges decreased at a greater rate, 8.4%. Interestingly, the percentage of sexual harassment charges filed by males stayed about the same, 16%.

Some types of charges did increase. Charges filed based on disability (up 10% from 2008), religion (up 3.5%) and national origin (up 5%) are at record levels. Charges alleging race discrimination and sex discrimination stayed very close to their record levels of 2008, and make up about 36% and 30% respectively of all charges filed. Overall, Commission charges have increased almost 16.8 percent from fiscal year 2000.

Paradoxically, the increase in number of charges over the last decade has not caused a corresponding increase in suits filed by the Commission. The number of lawsuits filed by the Commission in 2009 (314) represents a 32.5% decrease from the record setting year of 1999 (465).
 

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While there has been significant press coverage of the health care reform bills being considered by Congress, there has not been as much attention given to the impact that this legislation could have on employers. As widely publicized, both the House and Senate passed their own versions of a health care reform bill. The House passed the Affordable Health Care for America Act (H.R. 3962) on November 7, and the Senate passed the Patient Protection and Affordable Care Act (H.R. 3590) on December 24. Both houses promise to act quickly to reconcile these two bills, with the goal of presenting President Obama with a bill for signing early in the year.

The bills differ in many ways, and it is too early to predict which provisions of the bills will survive the conference process, but at this stage, there are a few core concepts employers should understand:
 

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On December 10, 2009, Governor Patterson signed into law the Tier V Pension Act  which adds Article 22 to the Retirement and Social Security Law. The legislation creates a new Tier V pension classification for public employees who first join the New York State and Local Retirement/Police and Fire Retirement System (PFRS), the New York State and Local Retirement Systems/Employees Retirement System (ERS) and the New York State Teachers’ Retirement System (TRS) on or after January 1, 2010. Governor Paterson announced that this Legislation will provide more than $35 billion in long-term savings to New York taxpayers over the next thirty years.  However, as reported by the Albany Times Union, others such as E.J. McMahon, Director of the Empire Center for New York State Policy, have challenged such claims.

Below are some of the highlights of the new legislation:
 

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The New York State Department of Labor (“NYSDOL”) recently posted guidelines and instructions on its website addressing employer obligations under New York Labor Law § 195(1). This recently amended statute requires employers to notify newly-hired employees in writing of their pay rates, pay dates, and, if applicable, overtime rates. The statute also requires employers to obtain written acknowledgments from new employees confirming receipt of this information.

NYSDOL also posted several new “model” forms for employers to use when complying with Section 195(1). The new forms supplement the problematic, one-size-fits-all form published by the agency last year. These new forms are intended to cover several different employee groups, including non-exempt employees who are paid either: (a) an hourly rate; (b) multiple hourly rates; (c) a weekly rate or salary for a fixed number of hours (40 or fewer in a week); (d) a salary for varying hours, day rate, piece rate, flat rate, or other non-hourly pay; or (e) a prevailing rate on a public work project. There is also a new model form for exempt employees.  

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Starting January 1, 2010, employers and certain other entities that administer group health plans will be required, for the first time, to report on an Internal Revenue Service ("IRS") form certain types of group health plan violations and pay the applicable excise taxes. Violations that must be reported include a failure to satisfy health coverage continuation requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), certain requirements under the Health Insurance Portability and Accountability Act ("HIPAA"), certain mental health benefit parity requirements, childbirth hospital stay requirements, and certain health coverage continuation requirements for seriously ill higher education students. Administrators of group health plans were not required to self-report such violations when they were discovered, and the lack of such self-reporting often resulted in any applicable excise taxes not being paid. The IRS has issued regulations that will require such violations to be self-reported, and will require any applicable excise taxes to be paid in a timely manner.

Steps that should be implemented by employers to comply with these new requirements include:

making sure that employees or other persons who are involved in the administration of each applicable group health plan are informed about these new requirements;

implementing procedures that will help ensure the timely discovery of applicable group health plan violations, the timely submission of the IRS form reporting such violations, and the timely payment of all applicable excise taxes; and

to the extent an employer's group health plan is administered by another entity (e.g., a third party administrator, an insurance company or a health maintenance organization), reviewing any agreement with such entity to see if any changes are needed to help ensure compliance with these new requirements.

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Too often employers take for granted that their anti-harassment policies are sufficient to prevent and remedy inappropriate workplace conduct, as well as mitigate legal liability. But failure to regularly update those policies can create significant (and expensive) problems down the road. To limit the risk presented by stale and outdated anti-harassment policies, employers should periodically review them to ensure that they are legally compliant and accurate. When conducting that review, consider in particular three important questions:

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In recessionary times like these, employers often rely more heavily on independent contractors to avoid the personnel costs associated with hiring regular employees. Doing so, however, creates risks. Now is a good time to make the effort to determine whether your independent contractors are really independent contractors. Just don’t expect the answer to come easily.

The issue of who is properly classified as an independent contractor (as opposed to employee) has been giving employers headaches for decades. As the United States Supreme Court noted over 60 years ago: “Few problems in the law have given greater variety of application and conflict in results than the cases arising in the borderland between what is clearly an employer-employee relationship and what is clearly one of independent entrepreneurial dealing.” N.L.R.B. v. Hearst Publication, 322 U.S. 111, 121 (1944). It is little wonder that even the Supreme Court is troubled by this legal issue given the difficulties involved in the analysis. For starters, courts and government agencies (both state and federal) use different legal tests to make this determination. As a result, a single set of facts can produce different legal conclusions. Moreover, none of the tests utilized relies on definitive factors. As the Internal Revenue Service (“IRS”) states on its website, “[T]here is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.”

Although the issue is old, it has continued vitality. There has been a significant increase in litigation, government enforcement and legislation over the misclassification of independent contractors in recent years. It is equally clear that the focus on independent contractor misclassification, far from slowing down, will only continue to pick up steam. The remainder of this blog summarizes some recent developments demonstrating that employers need to be very careful when using independent contractors.
 

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