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On December 22, 2017, the Tax Cuts and Jobs Act was signed into law bringing significant changes to US tax law. One provision of the Act may further incentivize individuals to work as independent contractors instead of as traditional employees.

The new provision allows for independent contractors, and for service providers structured as a partnership or other flow-through entities, the potential to deduct up to 20% of their revenue from their taxable income. And while some companies might view the opportunity to re-classify individuals from employees to independent contractors as a “win–win” scenario, it could create substantial legal exposure for employers.

Continue Reading New Tax Law Could Incentivize Employees To Become Independent Contractors – Employers Should Proceed With Caution

Many of the NLRB initiatives established during the previous administration could soon be no more.

On December 1, 2017, the new NLRB General Counsel, Peter Robb, issued a memorandum that rescinded numerous memorandums and initiatives of his predecessor, and set forth the types of future charges that should be submitted to his office for advice. Highlighting the list of the seven expressly-rescinded memorandums are:

  • GC 11-04 (Default Language). This 2011 memo instructed all NLRB Regional Offices to include certain “default language” in all informal and compliance settlement agreements that provided that if the Charged Party/Respondent failed to comply with the terms of the settlement agreement, the underlying complaint would be re-issued and summary judgment would be entered in favor of the GC. The only issue that could be raised to the Board is whether the Charged Party/Respondent, in fact, defaulted on the terms of the settlement agreement.
  • GC 12-01 (Guideline Memorandum Concerning Collyer Deferral). This 2012 memo changed the previous deferral policy, directing NLRB Regional Offices to stop deferring Section 8(a)(1) and (3) cases where arbitration will not be completed within a year. If the grievance arbitration was not likely to be completed within one year and deferral was deemed inappropriate, the Region was instructed to conduct a full investigation on the merits of the charge.

Continue Reading New NLRB GC Peter Robb Spells Relief For Besieged Employers

Last week, we discussed 5 executive agreement provisions to consider now to help avoid future risk. This week, we are back with our second installment.

As with the previous 5 provisions, companies should pay close attention when drafting the following executive agreement terms so as to best position itself in the event of future disputes.

6.  Trade Secret – Last year, the Defend Trade Secrets Act was passed and created a federal cause of action for misappropriation of trade secrets. However, to recover exemplary damages and/or attorneys’ fees under the Act, companies must provide explicit notice to employees that identifies the Act’s immunity provisions for certain types of trade secret disclosure, such as when a trade secret is disclosed through the reporting of a violation of law to federal, state, or local government officials. To maximize their recovery potential, companies should include the relevant notice in their executive agreements.

7.  Tax Code § 409A – The Internal Revenue Code includes significant tax penalties for certain deferred compensation arrangements. Under IRC Section 409A, there could be penalties if an executive agreement allows for payments to be made to the executive more than 2.5 months after the tax year in which the executive acquires a legal right to the compensation. This could apply to contract provisions regarding bonuses, severance payments, equity payments, change in control, terminations, and other compensation and benefits provisions. Given the intricacies surrounding these rules and exceptions, companies should engage in a specific review of all executive agreements for compliance to avoid these risks. For more information and updates on 409A in light of recent US tax reform, visit The Compensation Connection.

Continue Reading Executive Agreement Litigation – Part 2 of The Top 10 Agreement Provisions To Consider Now To Avoid Future Risk

In recent years, disputes surrounding executive employment agreements have increased significantly.

This is no surprise given the amounts at stake, whether it is the compensation and incentives arguably owed to the executive, or threats to the company’s business itself through unlawful competition, trade secret theft, or unauthorized use of confidential information.

While impossible to safeguard against all risk of course, pay close attention to the following provisions when drafting executive employment agreements. By doing so, the company will be better prepared to defend itself in future litigation, if necessary.

Continue Reading Executive Agreement Litigation – Top 10 Agreement Provisions To Consider Now To Avoid Future Risk, Part 1 of 2

On Monday, September 26, the U.S. Senate voted and confirmed William Emanuel as the newest member of the National Labor Relations Board.  Emanuel is a long-time management-side labor and employment attorney, who was nominated by President Trump in June to fill the vacant NLRB seat.  With Emanuel’s confirmation, the NLRB has a Republican majority for the first time in ten years.

As previously reported here, President Trump also recently nominated Peter Robb to serve as the next General Counsel for the NLRB.  Robb has worked as a management-side attorney in private practice since 1985.  If confirmed, Robb would be the first Republican to serve as NLRB General Counsel since 2010.

With Emanuel’s confirmation to the NLRB, as well as Robb’s nomination for General Counsel, several of the previous administration’s union-friendly decisions are expected to be rolled back.

U.S. Secretary of Labor Alexander Acosta announced in a June 7, 2017 press release that the U.S. Department of Labor (DOL) has withdrawn two of its recent administrator’s interpretations. One of the administrator’s interpretations, issued in 2015, focused on the misclassification of employees as independent contractors under the Fair Labor Standards Act (FLSA) and indicated that the DOL would be more closely scrutinizing independent contractor classifications. The other administrator’s interpretation, issued in 2016, examined joint employment relationships under the FLSA. Both interpretations were widely considered to be an attempt by the DOL to expand the coverage and enforcement of the FLSA. The withdrawal of the guidance documents likely indicates a shift in enforcement focus of the DOL under the Trump administration.

To read more, click here.

On January 13, 2017, the US Supreme Court agreed to determine whether arbitration agreements that include class action waivers are legally enforceable under the National Labor Relations Act (NLRA). In doing so, the Court granted the petitions for certiorari, and consolidated, three cases from the US Court of Appeals for the Fifth, Seventh and Ninth Circuits.  While the Fifth Circuit has ruled that class action waivers are enforceable, the Seventh and Ninth Circuits have disagreed and held that class action waivers violate the NLRA.  The National Labor Relations Board (NLRB) has also continued to hold that class action waivers violate the NLRA and interfere with employees’ rights to engage in concerted activity.  A ruling by the Supreme Court on the issue should resolve the Circuit Court split, provide nationwide guidance, and end the patchwork approach that has been adopted by US employers who utilize arbitration and class waivers.  The Supreme Court’s decision is expected before the end of June 2017.

To read more, click here.

Internal pay audits are rarely enjoyable. Depending on the scope, these audits can be complex and require detailed analysis.  However, in the current legal climate, an internal audit can be extremely valuable and greatly reduce, or even eliminate, potential liability for wage and hour claims as well as pay equity claims.  As previously reported on this blog, increased scrutiny into pay equity discrimination, changes in EEO-1 reporting requirements, the Department of Labor’s joint employment efforts, and the updated FLSA exemption rules continue to place companies at greater risk of government audits, fines, and lawsuits.

Many employers may have already reviewed and updated their policies in anticipation of the changes to the “white collar” FLSA exemptions, which go into effect on December 1, 2016. But if your company has not yet done so, or to the extent you have not conducted a more comprehensive internal audit, your company should strongly consider doing so as soon as possible for several reasons. Continue Reading Don’t Wait! Now Is the Time to Conduct an Internal Wage & Hour Audit

Earlier this month, the National Labor Relations Board issued a memorandum announcing the steps it will take to report complaints alleged against federal contractor employers in order to comply with the Fair Pay and Safe Workplaces Executive Order 13673.  In doing so, the NLRB became the first government agency to implement reporting procedures under the Executive Order, though regulations have not been finalized.  Noteworthy, it appears the NLRB will use the Executive Order’s reporting requirements as a pressure point to further encourage the early settlement of complaints filed against companies.  While it remains to be seen exactly how the Executive Order’s “blacklisting” procedures will impact federal contractors, it is important that companies understand the potential impact of the Executive Order and the planned procedures of the various administrative agencies, including the NLRB, to comply with the Executive Order. Continue Reading Federal Contractors Take Note – NLRB Will Report Complaints Unless Companies Agree to Settlement

On July 11, 2016, the National Labor Relations Board issued its opinion in Miller & Anderson, Inc., and held employer consent is no longer necessary for a union to organize a single bargaining unit consisting of both the employer’s regular employees and temporary workers that are supplied from other companies. In the wake of last year’s Browning-Ferris decision and the NLRB’s expansion of its joint employment standard, Miller & Anderson seems to be the latest effort of the NLRB to broaden the reach of the National Labor Relations Act. The decision reversed previous Board precedent, which gave employers discretion to consent to the inclusion of workers who are supplied by other companies into a single bargaining unit. Now, combined units may be approved if the workers share a community of interest. This decision is significant as it greatly expands employer’s bargaining obligations toward temporary workers and other supplied workers, and potentially lengthens the relationship between the parties.

For more details regarding the Miller & Anderson decision, as well as its potential impact on employers, click here.