Maryland Business Law Blog

Another Court Disagrees with FedEx Classification of Drivers as Independent Contractors

Posted by Jeanine Gagliardi on Mon, 02/23/2015 - 16:27

We previously wrote about a decision by a U.S. Court of Appeals holding that FedEx misclassified its California drivers as independent contractors rather than employees. The decision surprised some because, when they signed on with FedEx, the drivers agreed that they were independent contractors.

The Kansas Supreme Court recently reached the same conclusion in a similar case. Like the federal court, the Kansas court was considering drivers’ claims that, because it improperly treated them as independent contractors rather than employees, FedEx failed to meet wage and leave requirements.

The standard applied by both the federal court and Kansas courts is known as a right to control test. Pursuant to it, where a principal retains the right to control the worker, the relationship is employer-employee rather than principal-independent contractor. To assess the degree of control, the federal court and Kansas courts weigh multiple factors. Although there is some variance among jurisdictions, factors typically include which of the parties provide necessary equipment, how the worker is paid, when and where the work is performed, and whether there are requirements for the worker to report to the principal.

The recent decisions are good reminders that, in every case, it is the applicable legal or regulatory criteria, not the parties’ agreement or characterization, that determines whether a worker is an independent contractor. In Maryland, the determination should begin here. For purposes of federal law, the process would begin with this website.

Any business that treats its workers as independent contractors faces the risk that there is a later claim, even one filed by a previously agreeable worker, that the classification is improper. Getting the classification wrong is costly, and the tests are complicated. For advice specific to your circumstance, feel free to contact us.

Court sets back EEOC in fight over use of background checks

Posted by Jeanine Gagliardi on Wed, 01/07/2015 - 05:00

We posted about a development that occurred in the EEOC’s suit against BMW arising out of BMW’s use of criminal background checks in the hiring process. BMW sought discovery concerning the EEOC’s use of criminal background checks in its own hiring. A magistrate judge overseeing discovery held that the EEOC did not have to disclose whether and what it does to check backgrounds in hiring. That decision did not stand long.

BMW objected to the magistrate judge’s ruling, resulting in a review by the U.S. District Court for the District of South Carolina. The District Court reversed the magistrate judge’s decision and entered an order forcing the EEOC to produce materials concerning its use of criminal background checks.

In its order, the reviewing judge criticized the EEOC for trying to withhold the information on the ground that it is not relevant. The EEOC argued that the positions for which it used criminal background checks were dissimilar from the positions for which BMW used criminal background checks. At the same time, the EEOC failed to disclose information concerning the positions or its background check policies. Rather than be required to take the EEOC’s word for its practices as dissimilar to BMW’s, the District Court held that BMW is entitled to take discovery on the issue to see for itself.

This is a victory for employers, but it is not a dispositive one. Just because the EEOC must produce information concerning its use of background checks in discovery does not mean that the information will be admissible at trial or, if it is, that it will be sufficient for employers to succeed on the merits. Employers remain subject to suits by the EEOC second guessing their use of background checks. The hope is that the EEOC will reconsider its aggressive stance toward employers who use background checks for legitimate reasons.

EEOC wins latest battle against employers using background checks in hiring.

Posted by Edward Sharkey on Fri, 10/24/2014 - 04:00

Chalk one up for the EEOC in its campaign to target employers for using background checks in hiring - all while the EEOC uses background checks to hire its own employees. In the latest case, the EEOC sued BMW for using criminal background checks to make hiring decisions. BMW sought discovery into the EEOC’s use of background checks on the theory that what the EEOC does in hiring should be evidence of what is reasonable. The magistrate judge overseeing discovery rejected BMW’s motion to compel.

The judge said she was “not convinced the information sought is relevant to BMW's defenses.” She explained that, “BMW has failed to explain how the production of the EEOC's conviction policy contributes to its ability to prove that BMW's criminal conviction policy at issue is job-related and/or is consistent with a stated business necessity.”

Not everyone has a hard time seeing the logic. In a similar case filed by the EEOC against a Maryland business, a different federal court granted the defendant access to the EEOC’s hiring practices. The judge reasoned that:

"If [the EEOC] uses hiring practices similar to those used by Defendant, this fact may show the appropriateness of those practices, particularly because Plaintiff is the agency fighting unfair hiring practices."

The Maryland court ultimately summarily dismissed that lawsuit because the EEOC did not proffer reliable evidence that the defendant’s practices had a discriminatory impact.

The relative recency of the EEOC’s lawsuits, and the varied treatment in the courts, makes this a difficult issue to handicap. The EEOC has issued enforcement guidance that should be read by any business using background checks. It advises that the only way to avoid a disparate impact claim is to develop a multi-faceted “targeted screen” that assures that any policy, as applied in each instance, is a business necessity.

Certainly, any business using background checks should review the guidance and document a substantive assessment of its policy with an eye toward making it consistent with business necessity. Then, the business should adopt a practice that assures the policy, as employed in each case, is substantively consistent with that necessity.

With a subjective standard like this, however, every business will always remain subject to second guessing by the EEOC. While a business may reasonably conclude that business necessity precludes it from hiring violent felons, the EEOC may look at the nature of the business and disagree. And the type and sensitivity of work varies across industries and across employers within industries.

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