Employee v. Independent Contractor? The Stakes Continue to Rise

Are your workers employees or contractors? This question has long been a source of confusion and frustration to companies due to vague and often conflicting legal standards that dictate whether a worker is a contractor or employee. A company that misclassifies a worker can be exposed to stiff penalties under a constellation of state and federal laws. With the implementation of the employer mandate provision of the Affordable Care Act taking effect in 2015, the stakes have been significantly raised. Below is a link to a recent New York Times article that is a must read for any company that engages workers as 1099 contractors.




Arizona’s Minimum Wage Increases on Jan. 1, 2015

Effective Jan. 1, 2015, AZ’s minimum wage will increase to $8.05/hour. Arizona employers must post the new mandatory minimum wage poster before the new year begins. The poster is available on the Arizona Industrial Commission’s website at http://www.ica.state.az.us/Labor/Forms/Labor_MinWag_MinimumWagePoster_2015_English.pdf.  Arizona employers that claim tip credits for employees who customarily and regularly receive tips must pay at least $5.05/hour because the permitted $3.00/hour tip credit is tied directly to the minimum wage. If, however, an employee’s tips combined with the employer’s direct wages do not equal the AZ minimum hourly wage, then the employer must make up the difference.

Additional information regarding Arizona’s Minimum Wage law can be found at http://www.ica.state.az.us/Labor/Labor_MinWag_FAQs_English.aspx

AZ Unemployment Notice Requirements

As a reminder, Arizona law requires employers to prominently post in their place of business a Notice to Employees that provides information about the Unemployment Insurance program to their employees.  A copy of the poster can be dowloaded at https://www.azdes.gov/InternetFiles/Pamphlets/pdf/POU-003.pdf.  The poster was recently amended to notify employees that they can obtain information about filing for unemployment benefits in a pamphlet entitled “A Guide to AZ Unemployment Insurance Benefits” by dowloading a copy at www.azui.com.

The EEOC Takes Aim at Employee Separation Agreements

In February 2014, the EEOC’s Chicago District Office filed suit against CVS Pharmacy alleging its standard employee separation agreement violates Title VII of the Civil Rights Act because it contained language that could be construed to interfere with an employee’s right to file charges, cooperate or communicate with the EEOC (or comparable state or local agencies).

Even though CVS’s form agreement includes a disclaimer preserving the employee’s right to file an administration charge of discrimination or participate in a government investigation, the EEOC argues the following provisions deny employees full exercise of their Title VII rights:  (1) a cooperation clause requiring the employee to notify CVS if contacted about an administrative investigation; (2) a non-disparagement provision prohibiting the employee from making disparaging remarks about CVS or its employees; (3) a non-disclosure provision prohibiting the employee from disclosing CVS’s confidential information; (4) a general release of claims; and (5) a covenant not to sue.  Presumably, your organization’s separation agreement includes some or all of these provisions.

The outcome of this lawsuit will not be known for some time.  However, win or lose, this lawsuit represents a new and aggressive effort by the EEOC to attack what most employers would consider boilerplate separation agreement language.  It may be time to review your organization’s agreement to get ahead of a potential legal challenge.


Severance Pay and Unemployment Benefits

On February 1, 2014, I advised you of a court decision, Wynn v. Arizona Department of Economic Security, that held employees who receive severance in exchange for signing a release of claims were not disqualified from receiving unemployment benefits. In a swift rebuke of the Wynn decision, the AZ legislature has passed legislation that disqualifies an ex-employee from collecting unemployment benefits during a severance pay period, whether or not the ex-employee signs a release of claims. The legislature took this action to prevent what it saw as employee double-dipping and to protect the solvency of the state’s unemployment trust fund. When this law goes into effect on July 24, 2014, employers can rest assured that departing employees who receive severance pay will not be eligible for unemployment benefits until after the severance pay period expires.