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TERMINATING EMPLOYEES FOR MEDICAL MARIJUANA STARTING TO RAISE SERIOUS LEGAL ISSUES

Federal law still considers marijuana illegal, and it is exempt from positive drug-testing protection under the ADA.  For many years, arbitrators and courts allowed employers to terminate employees who tested positive for marijuana, even in medical marijuana situations.  Since 2017, however, the situation has become more confusing.

Courts in at least four states have indicated that employers potentially violate state law by disciplining employees with positive marijuana tests in the case of medical marijuana.  The first state was Rhode Island in 2017, and now the states have expanded to include Delaware, Connecticut, and Massachusetts.  The number of states in this category could expand further, as some 13 states have anti-discrimination provisions in their laws specifically for medical marijuana patients, and many other states have laws protecting lawful off-duty activities against employer retaliation.  Some 32 states and Washington, D.C., now allow medical marijuana, and some states have legalized recreational use.  There is a question whether the "lawful activities" state statutes affect a worker for failing a positive medical marijuana test, since medical marijuana may not qualify as a lawful activity because it is illegal under federal law.   On the other hand, these state law issues do not appear to be as big a problem when there is federally mandated drug testing, such as the U.S. Department of Transportation (DOT) requirements of testing for workers who operate commercial vehicles.  Even in DOT testing situations, a plaintiff might argue that it is possible for an employer to test for marijuana and yet allow some sort of accommodation to a medical marijuana user.

The employer community is confused concerning these developments, which are particularly complicated in the case of multi-state employers.  Because of the legal issues as well as a shortage of workers, some companies have discontinued testing for marijuana or only testing employees in safety-sensitive positions, or have provided job accommodations for medical marijuana patients.

Joint Employment

On April 1, 2019, DOL published a third proposal rule over two weeks, this one dealing with joint employment.  The Fair Labor Standards Act (FLSA) allows joint employer situations where an employer and a joint employer are jointly responsible for the employee's wages.  This is a major issue for companies that could be potentially liable for wage and hour violations of contractually related companies, such as staffing companies and companies in franchise relationships.

In 2017, the DOL withdrew the previous administration's sub-regulatory guidance regarding joint employer status that did not go through the rulemaking process that includes public notice and comment.  That previous Obama-era guidance memo said that joint employment should be applied "as broad as possible" under the FLSA. 

Now the DOL proposes a four-factor test that would consider whether the potential joint employer actually exercises the power to:

  • Hire or fire the employee;
  • Supervise and control the employee's work schedules or conditions of employment;
  • Determine the employee's rate and method of payment; and
  • Maintain the employee's employment records.

The proposal also includes a set of joint employment examples for comment that would further assist in clarifying joint employer status.  There are numerous examples, but only one illustrative example is listed below.  Examples also include factors that the DOL would consider irrelevant, including notably that "economic dependence" on the potential joint employer does not determine the potential joint employer's liability.

Example: An office park company hires a janitorial services company to clean the office park building after-hours.  According to a contractual agreement with the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services.  However, office park personnel do not set the janitorial employees' pay rates or individual schedules and do not in fact supervise the workers' performance of their work in any way.  Is the office park a joint employer of the janitorial employees?

Application: Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment.  The office park's reserved contractual right to control the employee's conditions of employment does not demonstrate that it is a joint employer.

The proposed rule would also clarify factors that are not relevant to the joint employer analysis, most notably explaining that "economic dependence" on the potential joint employer does not determine the potential joint employer's liability.  Other irrelevant factors include, but are not limited to, whether the employee is in a specialty job or a job otherwise requiring special skill, initiative, judgment, or foresight; has the opportunity for profit or loss based on managerial skill; and invests in equipment or materials required for work or the employment of helpers - factors often used to determine whether a worker is an employee or an independent contractor.

The NLRB recently published a separate proposed rule to restrict joint employer liability.  The Board generally would require a company to exercise direct control over workers to be considered their joint employer.  The NLRB during the Obama Administration took an expansive view, indicating that a company's ability to indirectly control workers even if that authority wasn't used, may be enough to establish joint employment.

Comments on the joint employment rule are due June 10, 2019.

Regular Rate

On March 28, 2019, DOL announced a proposed rule to clarify and update the regulations governing the "regular rate" on which overtime is computed.   Under current rules, employers are discouraged from offering more perks to their employees as it may be unclear whether those perks must be included in the calculation of an employees' regular rate of pay.  The proposed rule focuses primarily on clarifying whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate. 

The DOL proposed clarifications to confirm that employers may exclude the following from an employee's regular rate of pay:

  • the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;
  • payments for unused paid leave, including paid sick leave;
  • reimbursed expenses, even if not incurred "solely" for the employer's benefit;
  • reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements;
  • discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
  • benefit plans, including accident, unemployment, and legal services, and;
  • tuition programs, such as reimbursement programs or repayment of educational debt.

The DOL has not proposed any changes to the definition of an excludable discretionary bonus but the agency has proposed some new examples of discretionary bonuses that are excludable.  These include bonuses paid to employees who make unique or extraordinary efforts that are not awarded according to pre-established criteria, severance bonuses, bonuses for overcoming challenging or stressful situations, and employee-of-the-month bonuses.  The proposed rule also includes additional clarification about other forms of compensation, including payment for meal periods, "call back" pay, and others. 

Comments on the "regular rate" regulations are due May 28, 2019. 

TWO OTHER DOL REGULATIONS PROPOSED ON JOINT EMPLOYMENT AND REGULAR OVERTIME RATE

The Department of Labor (DOL), on March 7, 2019, published its proposed "white collar" overtime exemption regulations, raising the previously required $23,660.00 annualized salary to $35,308.00.  Employers may still satisfy up to 10% of the minimum required salary by the payment of nondiscretionary bonuses, incentives and commissions, as long as the bonuses are paid annually or more frequently.  Comments on the proposed rule are due May 31, 2019. 

PAY EQUITY DATA MAY BE REQUIRED FOR EEO-1 REPORTS

In 2016, the EEOC mandated that a significant amount of pay data be submitted by employers with their EEO-1 annual reports.  The new report form required employers to enumerate employee demographics by pay-band - the various pay bands and persons in those bands would be summarized by race, sex and national origin. 

In 2017, the Trump Administration suspended the data collection.  The National Women's Law Center sued, arguing it would be harmed by being deprived of the data to identify pay disparities.  On March 4, 2019, a federal district court in the District of Columbia reinstated the pay data collection, ruling that the Administration's Office of Management Budget (OMB) rescission of its prior approval and subsequent stay were unlawful under the Administrative Procedure Act.  The judge ordered the EEOC to begin collecting this large amount of pay data in a compressed time frame.  The EEOC told the judge in early April that it could collect employee pay data by a deadline of September 30, 2019, under certain circumstances.  Employer groups indicated to the judge that it would take at least 18 months to comply, "the amount of time EEOC originally provided when the Component 2 Form was issued in September 2016" to comply with the reinstated ruling. 

As of the date this article went to press, there is no firm deadline set for compliance.  The judge hearing the case does not appear sympathetic with the EEOC or any employer group seeking a postponement, at least beyond September 30, 2019.  There is great significance to this September 30, 2019 date, as normally following a regulation there are three years for an OMB ruling on the regulation, beyond which time the authorization of the regulation expires.  Thus, there is an argument that there is no authority for collecting the pay data after September 30. 

The collection process itself could cost some $400 million.  There is further concern because the EEOC may share the data with OFCCP, and the OFCCP may be subject to open records requests from third parties seeking the pay data it possesses on employers.  The prior administration had planned to publicize summary data concerning the information in the aggregate, and technically the EEOC could go further, particularly in future administrations.  The government's own studies have indicated that this type of aggregate pay data without information such as workers' experience, education and prior salary, is of no use to show any type of discrimination.  Nevertheless, the information could be sought by plaintiffs' groups and used in publicity campaigns and plaintiff lawsuits.

If the requirement goes into effect, questions arise as to what the remedy would be should employers fail to file the pay data.  The normal EEOC remedy is simply a requirement to file the data, but OFCCP has the authority to go further, including theoretically, debarment from government contracts.  There is an undue hardship exemption to filing the report, but there is little guidance on whether the exemption could apply in this situation. 

The EEOC as of this writing does not have a quorum, leaving unclear whether it can delay the deadline itself.  The EEOC has told the judge in pending litigation EEOC cannot possibly receive the pay data before September 30, 2019, so the judge may very well set this date as the compliance date for the pay data.  The EEOC's position with the court does not impact the filing of EEO-1 demographic data, known as Component 1, and that filing date for 2018 is still May 31, 2019.  The pay data portion of the form, Component 2, will likely not be due until later, possibly September 30.

Employers should "stay tuned" to further developments in this area. 


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