Employment Law (Mgmt 445)

1. Employment Law(Mgmt 445) The Regulation of Employment (Chapter 1) Professor Charles H. Smith Spring 2011

2. Introduction • We will cover a number of basic issues in this opening presentation, including • Definition of “employer.” • Definition of “employee” as opposed to “independent contractor.” • At-will employment rule and exceptions to it. • Wrongful employment termination.

3. Employment Law Overview • The area of employment law is very interesting for a number of reasons including • There are many laws – cases and statutes – that govern employment relationships. • Employment law can include legal topics such as contract law as well as public policy (e.g., political, social or economic issues). • In many situations, neither the business nor the worker is 100% right or wrong. • Many people measure their self-worth by their jobs so, if a person loses his/her job or has some problem with a job, that person may be very emotional about it and could try to use the legal system to exercise those emotions.

4. Employment Law Overview cont. • For starters, let’s quickly look at • Exhibit 1 (text, page 4) – “MYTHS about the Regulation of Employment.” • Exhibit 2 (text, page 5) – “MYTHS about Who Is an Employee and Who Is Not.”

5. Definition of Employer • California Code of Civil Procedure § 706.011(d) – “a person for whom an individual performs services as an employee.” • Text (page 11) – “one who employs or uses others to do his or her work, or to work on his or her behalf.”

6. Definition of Employee • California Code of Civil Procedure § 706.011(c) – “a public officer and any individual who performs services subject to the right of the employer to control both what shall be done and how it shall be done.”

7. Definition of Independent Contractor • California case law – “one who, in rendering services, exercises an independent employment or occupation and, represents his employer only as to the results of his work, and not as to the means whereby it is to be accomplished. . . . The chief consideration which determines one to be an independent contractor is the fact that the employer has no right of control as to the mode of doing the work contracted for.” (Green v. Soule, 145 Cal. 96 (1904).) • Third Restatement of Agency (2006) – “independent contractor” is “equivocal in meaning and confusing in usage” and does not use the term.

8. Employee vs. Independent Contractor • Why is this distinction important? Employees and independent contractors both work for the employer, don’t they? • Not so fast – there are significant differences in the rights and responsibilities of the employer and the worker depending on whether the worker is an employee or independent contractor.

9. Employee vs. Independent Contractor cont. • Examples of when this distinction matters • Worker’s compensation benefits • Employee’s exclusive remedy vs. employer for injury caused by accident occurring the within course and scope of employment is W/C; no court. • Independent contractor gets no W/C for on-the-job injury but can sue employer in court for negligence. • Withholding taxes • Employer must withhold federal and state taxes from employee’s paycheck; no such requirement for independent contractors.

10. How to Tell the Difference Between an Employee and Independent Contractor • Incorrectly classifying worker can cost employer a lot of money. • Fortunately, there are many cases and other guidelines which can be used to correctly classify a worker.

11. How to Tell the Difference cont. • Guidelines used by government agencies such as • IRS Publication 15A, which can be found at http://www.irs.gov/pub/irs-pdf/p15a.pdf (pages 6-9 only), has three main categories – behavioral control, financial control, and type of relationship – with several sub-categories under each category.

12. How to Tell the Difference cont. • Many courts have interpreted this issue using the same or similar standards such as • Estrada v. FedEx Ground Package System, Inc. (text, pages 58-60). • NLRB v. Friendly Cab Co. (text, pages 60-63). • FedEx Home Delivery v. NLRB, 563 F.3d 492 (D.C. Cir. 2009).

13. How to Tell the Difference cont. • Many experts and organizations have devised their own helpful guidelines such as • “Employee or Independent Contractor? Twenty Questions” by Christina Morfeld (text, pages 19-20). • “Employee or Independent Contractor: Differences You Need to Know” by Ellen Feig (http://www.legalzoom.com/everyday-law/workplace/employee-vs-independent-contractor-differences).

14. At-Will Employment Rule • “An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.” (California Labor Code § 2922.) • However, a valid employment contract may be made with no fixed term so presumably employment that lasts less than one month is still governed by the at-will employment rule.

15. At-Will Employment Rule cont. • Basically, the at-will employment rule works to the benefit of the employer who can terminate the employee at any time for any legal reason. • “Any legal reason” certainly includes “good” reasons such as theft, violation of company rules, or layoffs due to economic woes. • But, it also may include reasons that show bad business acumen such as the result of coin flip or drawing straws. • Employee’s two-week notice – legal requirement or just a good idea (or both)? • Student examples.

16. Exception to the At-Will Employment Rule – Contract • Ultimately, the employment relationship is based on contract principles which can be used to support a wrongful termination lawsuit. • An employment contract can be written, oral, implied from industry standards or other sources, or combination of any or all of these. • Take care to know about all related documents that could possibly impact the employment relationship, such as the contract with the particular employee, employee handbook, and union agreement. • Student examples.

17. Exception to the At-Will Employment Rule – Contract cont. • “Good cause” is often stated as the reason for terminating an employee in an employment contract or related documents. • If good cause required, then firing an employee without good cause is a breach of the employment contract. • Good cause can be shown by the employee’s actual misconduct or the employer’s honest but mistaken belief that misconduct has occurred.

18. Exception to the At-Will Employment Rule – Contract cont. • Definition of good cause (BAJI 10.13) – "Where there is an employment agreement not to terminate an employee except for good cause, an employer may not terminate the employment of an employee unless such termination is based on a fair and honest cause or reason. In determining whether there was good cause, you must balance the employer's interest in operating the business efficiently and profitably with the interest of the employee in maintaining employment.”

19. Exception to the At-Will Employment Rule – Contract cont. • Employment contract and/or related documents may also set forth process to be followed before an employee can be terminated even if good cause not required. • Not following the stated process can be a breach of the employment contract. • Examples of these processes include • Opportunity to be heard. • Right for counsel or union representative to be present. • Written notice of reason(s) for proposed termination. • Disciplinary steps.

20. Exception to the At-Will Employment Rule – Contract cont. • Employer’s promise of “lifetime job”, “permanent position” or “you can work here as long as you like” – does this provide any job security to the employee? • Case studies – Melott v. ACC Operations, Inc. (pages 70-71); Stillwell v. Salvation Army, 167 Cal.App.4th 360 (2008). • Implied covenant of good faith and fair dealing – does this require the employer to proceed fairly when terminating an employee? • Case study – Guz v. Bechtel National, Inc. (pages 69-70).

21. Exception to the At-Will Employment Rule – Public Policy • Employee cannot be terminated if it would violate public policy which can be shown by termination in retaliation for • Employee’s refusal to perform illegal act. • Employee is a whistleblower. • Student examples.

22. Exception to the At-Will Employment Rule – Public Policy • Elements of a lawsuit based on public policy are • Based on law found in constitution, statute, case, etc. • Inure to the public benefit instead of just serving the employee’s individual interest. • Fundamental and substantial. • Well-established at the time of termination. • Nexus between public policy violation and adverse action vs. employee (causation).

23. How an Employee Can be Terminated • Actual termination • Constructive termination • [finish for class on Feb. 8]

24. Wrongful Employment Termination • [Feb. 8 class]