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Without employment status, persons generally cannot organize a union, pursue employment litigation, or have employment taxes taken out of their paychecks.  But unions, plaintiffs’ litigators, and of course the U.S. government, like employment status for tax, enforcement, and other reasons.

On July 15 of this year, the U.S. Department of Labor (DOL) issued an Administrator’s Interpretation regarding the application of the wage-hour laws with respect to the misclassification of workers as independent contractors.  Among other things, it is DOL’s opinion that "most workers are employees" under the wage-hour laws.  DOL advocates the "economic realities" test as its approach to determining whether a worker is an employee or a contractor, and downplays the significance of an employer’s control over the tasks performed by the worker.  Administrator’s Interpretation No. 2015-1 can be found at http://www.dol.gov/ whd/workers/misclassification/ pressrelease.htm.

The "multi-factor economic reality" test normally includes: (a) the extent to which the work performed is an integral part of the employer’s business; (b) the worker’s opportunity for profit or loss depending on managerial skills; (c) the extent of the relative investments of the employer and the worker; (d) whether the work performed requires special skills and initiative; (e) the permanency of the relationship; and (f) the degree of control exercised or retained by the employer.  In applying the economic reality factors, the courts have described independent contractors as those workers with economic independence who are operating a business of their own.  On the other hand, workers who are economically dependent on the employer, regardless of skill level, are considered employees.

Editor’s Note -  While the DOL interpretation does not suggest anything dramatically new in the law, it does emphasize rather vague tests in making a determination of whether a worker is an independent contractor.  It should be noted that the DOL interpretation applies only to the wage-hour laws, which applies the liberal "economic realities" test for employee status, while other laws are not as strict as that of the wage-hour laws in this regard.


Many employers provide healthcare benefits not only for active employees, but also for retirees.  While pension benefits are normally thought of as vested, by and large employers have a great degree of leeway to design health and welfare plans according to their own wishes.  However, once the welfare plan is written, courts will enforce the terms of the plan.

As healthcare costs have significantly increased, many employers have required employees to begin contributing to the cost of their healthcare benefits.  Some retirees, in turn, have argued that their healthcare costs cannot be increased but are instead "vested" at the time of their retirement.  It appears that the resolution of this issue largely depends on the terms of the particular plan.

The Supreme Court addressed this issue in a case involving free healthcare benefits for retirees under an expired labor contract.  M&G Polymers USA, LLC v. Tackett, 202 LRRM 3201 (Jan. 26, 2015).  The lower court seemed to indicate that in the absence of intrinsic evidence to the contrary, provisions of the labor contract indicated an intent to vest retirees with lifetime benefits that could not be changed.  The lower court noted the absence of a termination provision specifically addressing retiree benefits, and inferred from this situation an intent to vest those retiree benefits for life.

The Supreme Court reversed, finding that traditional principles of contract law applied to retiree plans, also applied to collective bargaining agreements.  One of those traditional principles are that courts should not construe ambiguous writings to create lifetime promises.  The Court cited the principle favorably that because vesting of welfare benefits is not required by law, an employer's commitment to vest such benefits is not to be inferred lightly; the intent to vest must be found in the plan documents and must be stated in clear and express language.

Editor's Note - The Supreme Court ruling will give employers more leeway to modify or reduce healthcare benefits provided to retired workers.  However, this issue remains one of the interpretation of a contract, and the primary result of the case is that the courts must apply ordinary contract principles, without presumptions, to determine whether retiree healthcare benefits are vested.


In light of the government's effort to provide protected status to transgender persons, and to require employers to honor an individual's choice as to what sex they wish to identify with, one wonders about recent "transracial" issues that arose concerning former NAACP Spokane Chapter President Rachel Dolezal.  Dolezal resigned on June 15 amid controversy resulting from her claim of being black or bi-racial.  She had represented herself as being African-American when she assumed leadership of the NAACP chapter, but it later emerged that as a student, she had sued Howard University, a historically black institution, for discriminating against her because she was white.  So here's the question:  who decides what race a person belongs to?  In many cases, there's no easy answer.

The Dolezal controversy reignited smoldering issues related to racial identity, affirmative action, quotas, and related social issues.  Many government programs, such as the Office of Federal Contractor Compliance Programs (OFCCP) and the Equal Employment Opportunity Commission (EEOC) have rules that require employers to report the race and gender of employees. But this is not always an easy task.  A Federal Register Notice dated November 28, 2005, states that employers should seek "self-identification" of new employees under race and ethnic categories. (See 70 Fed. Reg. 71300.) Some employees may readily identify themselves as "Black or African-American," "white," "Asian-Pacific Islander," "Alaskan/Native American," or "Hispanic/Latino." Others may identify themselves in the "Two or More Races" category. When this occurs, the employer is advised to preserve detailed race information because it is an employment record. See 29 C.F.R. § 1602.14.

An instruction bulletin from the EEOC advises employers completing the EEO-1 form that self-identification is the preferred method of identifying the race and ethnic information necessary for the EEO-1 report. Employers are required to attempt to allow employees to use self-identification to complete the EEO-1 report. The EEOC recommends that records concerning race and ethnicity should be maintained separately from the employee's basic personnel file or other records available to those responsible for personnel decisions, to avoid having this information influence such decisions.

As to the method of collecting data, the basic principles for ethnic and racial self-identification for purposes of the EEO-1 report are:

(1) Offer employees the opportunity to self- identify; and

(2)  Provide a statement about the voluntary nature of this inquiry for employees. For example, language such as the following may be used (employers may adapt this language):

"The employer is subject to certain governmental recordkeeping and reporting requirements for the administration of civil rights laws and regulations. In order to comply with these laws, the employer invites employees to voluntarily self-identify their race or ethnicity. Submission of this information is voluntary and refusal to provide it will not subject you to any adverse treatment. The information obtained will be kept confidential and may only be used in accordance with the provisions of applicable laws, executive orders, and regulations, including those that require the information to be summarized and reported to the federal government for civil rights enforcement. When reported, data will not identify any specific individual."

The instructions go on to say that if an employee declines to self-identify, the employer may use employment records or "observer identification."  "Employment records" presumably allows (but does not compel) the employer to repeat a previously recorded identification.  But what's involved in "observer identification"?  The instructions offer no guidance whatsoever on this point.

Some, like Ms. Dolezal, may self-identify as a member of a racial group that others (including members who self-identify with that group) may feel they are not qualified to join. Still others may refuse to self-identify altogether, leaving the employer unsure which box to check. Self-identification certainly is not allowed in some situations:  recall what happened a few years ago when Senator Elizabeth Warren (D.-Mass.) claimed Cherokee ancestry.  It appeared that Harvard Law School credited that claim when it hired her, announcing in 1998 that they were pleased to have a "minority" Native American woman on the tenured faculty.  Not so fast:  the Cherokee Nation, like other officially recognized tribes, has strict rules governing who may claim membership, and it turned out that Senator Warren did not qualify.

The federal Office of Management and Budget (OMB) and the United States Census Bureau, like the EEOC, rely on self-identification data items in which residents choose the race or races with which they most closely identify, and indicate whether or not they are of Hispanic or Latino origin (the only categories for ethnicity).  There are no criteria for assigning race strictly prescribed by the government:  it's a matter of choice - or so it would appear.  The U.S. Standard Certificate of Live Birth has blanks for the mother and father's race, allowing 13 regular options (plus "other") and 5 specifically Hispanic/Latino options.  Presumably, whatever boxes are checked on these forms reflect self-identification, though they would acquire historical luster over time.  The 2003 revised form does not have a separate option for listing the baby's race.

On the other hand, let's follow the money.  The Small Business Administration (SBA), and many State agencies, have special programs for small, disadvantaged businesses who wish to contract with Federal or State government.  At the SBA, these include small businesses with 51% or more ownership by a minority, which is defined as a person with 25% or more Asian-Pacific, Black, Hispanic, or Native American heritage. "Supporting documentation" is required, but it is not clear what this includes. A group called the National Minority Supplier Development Council (NMSDC) will review and certify minority-owned businesses, for a fee.  Their web site says that "[m]inority eligibility is established via a combination of screenings, interviews and site visits."  This sounds a lot like observer identification, and one of the organization's stated goals is to prevent people from making false claims of minority status to gain advantages in business.  The SBA obviously isn't willing to let people self-identify without limits.  Once a business is properly certified, its owners presumably are credentialed as "minorities," if only for purposes of bidding on government contracts.

So, when it comes to race, does the individual really have the last word?  Is "race" just a meaningless social construct?  Can individuals identify themselves, for government reporting or employment purposes, as whatever race they choose to select? Well, perhaps theoretically, but society does make distinctions, and may not choose to respect an individual's choice.  During his first Presidential campaign, President Obama, who had a white American mother and a black African father, famously observed that although some quibbled about his race, when he was trying to hail a cab in Chicago, he was definitely a black man.  Self-identification obviously isn't everything.

Of course, new horizons in science might answer these questions.  DNA testing through organizations like Ancestry.com and "23&me" will examine your genetic material and provide a printout tracing your ancestry back to prehistory.  (A young friend of mine was intrigued to learn that he was 2% Neanderthal.)  Title II of the Genetic Information Nondiscrimination Act of 2008 (GINA), which took effect on November 21, 2009, broadly prohibits the use of genetic information by employers, so an employer probably couldn't require or use DNA test results to fill out the EEO-1 forms.  But it's a thought.

Beyond employment, what are the implications for scholarships? Set-asides? Redistricting?  In its 2015-16 term, the U.S. Supreme Court will hear a major case on affirmative action in higher education, brought by a white student who claims the University discriminated against her because black students with comparable qualifications were admitted while she was turned down.  (Fisher v. University of Texas.)  Whether a public university may give preferences in admission on the basis of race has long been a controversial issue for the Court, but the fundamental premise on which it rests - the question of race itself, what it is, and how we decide - has rarely been closely examined.  Perhaps Ms. Dolezal is right:  your race is what you say it is.  Certainly there is nothing in Federal EEO law that points to a more scientific test.

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