Employment Law

Prof. R. CarlsonFall 2007

Introduction

Expectations, Reliance and Risk In a Relationship Subject to Change

What Is the Appropriate Model For Employment Relations?

• Status (Master-Servant): Rights and duties of relationship fixed by custom, common law, statute.

• Contract: Exchange of labor for pay under variable terms negotiated by parties.

• Collective Contract: Employees negotiate collectively for variable terms.

• Public Welfare/Regulatory Model: Legislation providing fixed terms of employment.

A Problem For Contract Law:Employment at Will

• Presumed rule for of employment.

• Termination at will in indefinite employment.

• Non-renewal at will in fixed term employment.

• Effect on long-term promises?

• Effect on ability to assert rights?The Sword of Damocles of Employment Law?

Challenges for Contract Model Goals and Risks for the Parties

• Continuity v. flexibilityof business & workforce.

• Investment in training and customer relations.

• Trade secrets and other confidential information.

• Labor costs v. competitiveprofitable business.

• Sustenance and security v. freedom of opportunity.

• Expectation of growth and advancement within firm.

• Investment in training and experience. Transferable?

• Risk of growing dependence on particular job, employer.

In re Halliburton

Detour from the Courthouse?

In re HalliburtonA Promise to Arbitrate?

• How did Myer’s accept?

• Did he know he was making a promise?

• Was his assent voluntary?

• Consideration? Illusory?

• Practical reasons to favor binding contract?

Off to the arbitrator.

ProblemSuppose Halliburton had required each

employee to sign an “acknowledgement” of the arbitration policy, to show receipt and “acceptance” of the terms. Myers did not sign the policy, and his supervisor did not press the matter, either because he wished to avoid conflict or was simply neglectful. Halliburton did not fire Myers, and Myers continued to work. Is Myers bound?

See In re Dillard Dept. Stores, Inc. (“Dillard II”), 198 S.W.3d 778 (Tex. 2006) (per curiam).

Problem Company presented its latest arbitration policy and non-competition agreement to Wilma Worker and insisted Worker must sign the agreement “right away. ” Company also stated it would not issue Worker’s next paycheck until she signed the agreement. Worker reluctantly signed the agreement.

Does the agreement comply with the Texas court’s contract model of change in an employment relationship? Does contract law provide a solution for Worker?

ProblemAssume that the agreement between Worker

and Company is valid. A year later, Company rejected Worker’s application for a promotion. Worker believed the Company had discriminated against her. She was about to submit a claim for arbitration when the Company issued a notice that it was amending the arbitration policy to change some rules of procedure. If Worker demands arbitration, which rules apply to her claim: the old set of rules, or the new set?

Who Is an Employee?

The Employee / Independent Contractor Problem

• Taxes• Discrimination laws• Wage and hour laws• Benefits laws• OSHA

• Workers compensation

• Respondeat superior

• Collective bargaining

• Trade secrets, competition

Before NLRB v. Hearst:Is Control of Details the Key?

• Control test: Control over what?

• Proof by express or implied contract.

• Original context and usage for the test?

• Rationale for making right to control decisive?Just a cog in the

employer’s machine?

Reason to Doubt Control Test In the Modern Era?

• Is diminished supervision really important?

• Non-contractual sources of control over worker?

• Should employer be free to gain advantages of employment without modern duties and risks?

If the contract says he’s self-employed, is it true?

NLRB v. Hearst Publications

Employee? Or self-employed contractor?

Hearst: A New Perspective On Employee Status

• Control by economic power.

• An economic realities test.

• Is there a unitary enterprise in which worker’s labor isintegrated?

• Does employer controlenterprise as its own?

• A statutory purpose angle.

“And I thought I was an entrepreneur!”

Post- Hearst: Three Angles For Viewing Worker Status

• Control: Evidenced by contract or actual exercise of control.

• Economic realities: Integration of worker in enterprise controlled by employer.

• Statutory purpose: Who was law made to protect or regulate?

Federal Courts and a “Hybrid” Test of Employee Status

• Congress’s reply to Hearst?

• Darden: Rejects statutory purpose, validates control plus economic reality factors.

• A resulting “hybrid” test.

• Caveat: Always begin with statutory definitions.

• Variations in state law.Do politicians have an idealistic

view of “newsboys”? 29 U.S.C. 213(d)

Hypothetical• Home-based data entry workers. Contract specifies IC relation.

• Employer solicits workers in newspaper, requiring personal information summary and proficiency test.

• Workers decide whether and how much to work each week; set own hours. Can hold other jobs.

• Worker supplies own computer.

• Can delegate, can hold other job.

• Compensated by piece rate.

• No benefits or performance review.An entrepreneur at the keyboard?

Worker Status ChecklistContract, Statute, “Control”

• First: Check the contract: does it designate status of worker?

• Second: Check statute: Does it include its own definition of “employee?” Any exemptions?

• Third: Are your applying federal (“hybrid” test) or state law (possibly different).

• Fourth: The usual common law control factors relating to supervision of details of work.

Worker Status ChecklistEconomic Reality Factors

• Does worker have an independent business that would exist apart from the employer?

• Does he own/control principal assets for work?• Opportunity for profit, growth (delegation,

opportunity to serve other clients? • Work integrated in an employer’s enterprise?• Also: Does employer manage workers on a

standardized basis, as if they are employees?

Other Types of Worker Status Problems

• “Volunteers.”

• Interns, students and trainees.

• Partners and other “owners.”

• Officers and directors.

• “Salts” and “testers.”Do you also need to pay him?

Discussion Questions On Problems of Worker Status

• What conflicting employer goals cause many workers to end up in the gray area?

• Could one worker’s status affect rights of other employees?

• Reasons for employer to want workers to be employees?