California Dreamin: Are Freelancing Musicians Finally Protected Under AB5, or is the Legislation a Quash to Creativity?

By: Lauren Hobler-Tregerman

Imagine Sandra, a recent graduate from a prestigious conservatory in the northeast who heads to Los Angeles after graduation in hopes of being a film composer. She is an independent musician with no record label, no union, and no musical executives backing her up or guiding her in her employment decisions. She juggles multiple jobs and has no health benefits, retirement plan, or sick leave. Nor is there a wage standard by which her commission work is bound to. She works independently for many individuals and organizations who hire her to transcribe, compose, or even perform. And at any moment, they can hire someone else no matter how dedicated and continuous her work is, and Sandra is left to struggle to find another commission without unemployment benefits.

This is precisely a situation which California’s new legislation, AB5, responds to. Under AB5, hundreds and thousands of freelancers and “gig economy” workers gain new rights as “employees” who have been wrongly classified as “independent contractors.”[1] This has a profound impact in nearly every industry including the music industry in which independent and freelance work is prevalent.[2] AB5 is the legislative outcome of the 2018 California Supreme Court class-action lawsuit case, Dynamex Operations W. v. Superior Court, which determined that Dynamex’s delivery drivers were wrongly classified as independent contractors, and thus, Dynamex was not fulfilling its obligations under California’s wage orders.[3] The California Supreme Court’s stated objective in this ruling was to ensure a worker’s bargaining power and most fundamentally to “protect the health and welfare” of workers.[4]  The court applied a three-part test to determine employment status by establishing that a worker can be considered an “independent contractor” only if the hiring entity shows that: A) the worker is “free from the control and direction” of the hiring entity in relation to the worker’s performance[5]; B) the worker is performing work which is “outside the usual course of the hiring entity’s business”[6]; and C) the worker is typically working in an independent business of “the same nature as the work performed for the hiring entity.”[7]

The AB5 legislation adopted all of these criteria in determining employment status.[8] Several music industry executives have outwardly expressed concern for the new legislation, addressing the fact it would “gut the music industry.”[9] These fears were expressed in an Op-Ed article authored by prominent music executives who argue that the legislation could have extremely negative consequences for the independent artist in being wrongly categorized as an “employer” due to the large variety of other, independent artists who they commission at various stages of their work, such as sound engineers, producers, background instrumentalists, and more.[10] However, while these concerns are valid, they seem to purposefully focus on the potential liability of an independent musician, who is likely not incorporated as a business, if categorized as an “employer” rather than seriously construing the liability that could face the record labels and high-profile music companies as “employers” and corporations who are currently facing economic hardships with the technological revolution of the music industry.[11] Although, on their face, these concerns seem protective of the independent artist, in reality they may very well be counter-productive to ensuring freelance musicians basic wage protections and bargaining power. The music industry, in fact, had the opportunity to work out an exemption within the legislation to consider these issues, however the industry could not reach consensus over exemption language and thus no amendment was made.[12]

It is unclear, therefore, whether the industry is afraid of this change due to their own economic hardships, or whether they are genuinely working towards protecting independent artists and seeing the promise that AB5 has for protecting the abundance of freelancing musicians in California’s evolving music scene.[13]

[1] John Myers, Johana Bhuiyan & Margot Roosevelt, Newsom signs bill rewriting California employment law, limiting use of independent contractors, Los Angeles Times (Sept. 18, 2019, 3:55 PM), https://www.latimes.com/california/story/2019-09-18/gavin-newsom-signs-ab5-employees0independent-contractors-california.

[2] See Id.

[3] Dynamex Operations W. v. Superior Court, 4 Cal.5th 903, 942 (2018).

[4] Id. at 952.

[5] Id. at 916-917.

[6] Id. at 917.

[7] Id.

[8] See Myers, Bhuiyan & Roosevelt, supra note 1.

[9] See Mitch Glazier, Richard James Burgess, Susan Genco & Jordan Bromley, AB5 Could Crush Independent Music in California, Variety (Sept. 4, 2019, 5:55 AM), https://variety.com/2019/music/news/ab5-could-crush-independent-music-in-california-guest-column-1203322730/ (explaining the extent to which independent artists “hire” other individuals to help “realize their vision” but not explaining the lack of protections that hired, independent artists face in a variety of freelancing hypotheticals).

[10] Id.

[11] The music industry is currently facing a tech revolution which disrupts the prior business hierarchy with record companies and labels on the top. This is evident by the dramatic decrease in profits from recorded music. Musicians must therefore shift their focus as professionals to new forms of musical commission work proliferated through new technology including in digital advertising, digital fan-based interaction, social media, and film or television. See Henry H. Perritt, Jr., New Business Models for Music, 18 Vill. Sports & Ent. L.J. 63, 65-66 (2011).

[12] Claudia Rosenbaum, California Bill Could ‘Gut the Music Industry,’ But Lawmaker Says Trade Groups Couldn’t Agree on Exemption, Billboard (Sept. 9, 2019), https://www.billboard.com/articles/business/legal-and-management/8529517/california-bill-music-industry-exemption.

[13] See supra note 9 at 70-71, for an overview of the “characteristics of the music industry” which determine the musician’s response to the marketplace and economic resources available for creativity.

California Legislature Cements the Once Flexible Gig Economy: Will Ridesharing Apps Bend or Snap?

By: Aaron Smallets

In 2009, the company originally known as UberCab changed the game.[1]  Not only did it allow stranded passengers to catch rides at rates lower than cabs,[2] it carved out a whole new way to earn money.  With the 2008 recession in full swing, the revolutionary business model could not have arrived at a better time.[3]

Now, those trying to survive in a bleak job market had an opportunity to make extra cash, whenever they wanted.[4]   It wasn’t long before Uber, once sitting alone in the App Store, had company, as other ridesharing apps like Lyft[5] and Juno[6] also emerged.

The flexibility offered by such apps could be a thing of the past as a new bill out of California, the world’s 5th largest economy, redefines the term “independent contractor.”[7] The bill, titled AB5, recently signed into law by Governor Gavin Newsom,[8] codifies the California Supreme Court’s ruling last year in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.[9]  Under the slightly reformed test, for a company to prove that a worker is an independent contractor they have the burden of showing: (1) “the worker is free from their control,” (2) “performs work outside the company’s usual business,” and (3) “independent of their work for the company — is regularly engaged in the trade they’re hired to do.”[10]

This classification comes on the heels of a nationwide movement to improve working conditions, and create livable wages.[11]  Defining workers as employees give them the right to benefits that many gig workers don’t have access to: income tax withholdings, unemployment insurance, workers’ compensation, mandatory sick leave, and more.[12] Meanwhile, Uber has been defiant.[13]  Uber CEO Tony West has stated that the second prong of the employee test isn’t satisfied because “drivers were not a core part of Uber’s business” and that Uber only “serv[es] as a technology platform for several different types of digital marketplaces.”[14]

While many in the labor force see this as a landmark bill with cause for celebration, those who have enjoyed the ability to clock-in at their discretion are worried that this bill will take away that flexibility.[15]

Still, others believe it’s worth it, as the flexibility once offered by Uber has already been taken away by “software and algorithms that share information selectively with drivers.”[16]

Thus, it is unclear how this bill will affect the ridesharing business model, and if drivers will receive any benefit at all.  Either way, the pro-employee movement will continue to move forward, and everyone will most certainly have their eyes on California come 2020.

 

[1] Avery Hartmans & Paige Leskin, The History of How Uber Went From the Most Feared Startup in the World to its Massive IPO, Business Insider (May 18, 2019), https://www.businessinsider.com/ubers-history.

[2] Sara Silverstein, These Animated Charts Tell You Everything About Uber Prices In 21 Cities, Business Insider

(Oct. 16, 2014), https://www.businessinsider.com/uber-vs-taxi-pricing-by-city-2014-10.

[3]  Kimberly Amadeo, The Great Recession of 2008 Explained With Dates What Happened and When?, the balance (June 25, 2019),  https://www.thebalance.com/the-great-recession-of-2008-explanation-with-dates-4056832.

[4] M. Keith Chen et al., The Value of Flexible Work: Evidence From Uber Drivers, National Bureau Of Economic Research (June 2017), https://www.nber.org/papers/w23296.

[5] See Andrew Greiner et al, A History of Lyft, From Fuzzy Pink Mustaches to Global Ride Share Giant, CNN (March 28, 2019), https://www.cnn.com/interactive/2019/03/business/lyft-history/index.html (showing timeline of Lyft launching in San Francisco in May of 2019).

[6] Nat, An Introduction to Juno Rideshare: Should You Use It? Should You Drive for Them?, ridester

(Nov. 6, 2018), https://www.ridester.com/juno-rideshare/ (“Launched in NYC in 2016, Juno is a ridesharing app that aims to provide a better experience for drivers and riders.”).

[7] A.B. 5, 2019 Leg., Reg. Sess. (Cal. 2019), http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml ?bill_id=201920200AB5.

[8] Sarah Ruiz-Grossman, California Gov. Gavin Newsom Signs Law That Could Upend Uber, Lyft, Huffington Post (Sept. 19, 2019), https://www.huffpost.com/entry/california-law-ab5-uber-gig workers _n_5d79867ee 4b0fc715341ba85.

[9] California Assembly, supra note 7.

[10] See Braden Campbell, A Year Later, Dynamex Still Has Employers Scratching Heads, Law 360 (July 29, 2019), https://www.law360.com/articles/1182974/a-year-later-dynamex-still-has-employers-scratching-heads. See also Dynamex Operations v. Superior Court, 4 Cal. 5th 903 (2018) (establishing original ABC test).

[11] See Campbell, supra note 10 (“The ABC test is also gaining some traction nationally with the proposal of the Protecting the Right to Organize Act, an ambitious labor law overhaul that includes language that would make the ABC test national under the National Labor Relations Act.”).

[12] Alexia Campbell, California Just Passed a Landmark Law to Regulate Uber and Lyft, Vox (Sept. 18, 2019), https://www.vox.com/2019/9/11/20850878/california-passes-ab5-bill-uber-lyft.

[13] Tony West, Update on AB5, Uber Newsroom (Sept. 11, 2019), https://www.uber.com/en-NL/newsroom/ab5-update/.

[14] Katie Orr, Legislature Passes Landmark Bill to Regulate Gig Economy and Boost Worker Protections, KQED NEWS (Sept. 10), https://www.kqed.org/news/11773542/state-senate-passes-ab-5-bill-that-limits-who-can-be-classified-as-contractors.

[15] Kate Conger & Noam Scheiber, California Bill Makes App-Based Companies Treat Workers as Employees, N.Y. Times (Sept. 11, 2019), https://www.nytimes.com/2019/09/11/technology/california-gig-economy-bill.html.

[16] Id.

GETTING WHAT THEY DESERVE – THE WNBA

By: Sasha Unger

Employment law has seen many issues, but a prevalent one is equal-pay for men and women.  For female athletes this is a constant issue.[2] With the United States Women’s World Cup team winning in France this summer, equal pay for female athletes has become a large topic of discussion.[3] Specifically, equal pay disputes in the Women’s National Basketball Association (“WNBA”) has also been heavily discussed.[4] The upcoming expiration of the WNBA Collective Bargaining Agreement (“CBA”) in 2021 is what has been the central reason for this issue.[5]

The Federal Equal Pay Act currently prohibits gender-based disparities unless they are based on one of the four bases: “(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by the quantity or quality of production; or (iv) a differential based on any other factor other than sex.” [6]

$75,000 is the “base salary” for WNBA players, while the average salary only reaches $116,000.[8] The difference in pay is very clear when compared to $838,464,  the lowest pay a “National Basketball Association (‘NBA”) rookie” received in the most recent season.[9]

The women of the WNBA do not anticipate their contracts can or will reach the numbers of NBA contracts.[10] “Look, we’re not over here saying we should be paid the same as men,” said WNBA player Sue Bird.[11] She continued by saying, “[w]e understand that this is a business and that their revenue is insane compared to ours. But there is a bias that exists.”[12]

Nneka Ogwumike explained the decision of the WNBA to opt out of the current WNBA CBA.

In opting out of this CBA, our primary objective is full transparency. We just want information about where the league is as a business, so that we can come together and make sound decisions for the future of the game… [W]e never get to see the numbers. We don’t know how the league is doing . [14]

Because of the lower level of pay received by the WNBA players, many have to resort to going out of the country to play basketball in order supplement their pay. The women feel that as far as pay improvement goes, there has not been much change.[16] The women of the WNBA are worried about “the future”.[17] For them, the issue is not simply the pay but so much more.[18]

The women who do opt to play overseas know that the WNBA would pay them only a shred of what they make playing in other countries.[19] The risk that comes with playing multiple seasons on multiple teams is high.[20] “In the past few years, high profile players like Chiney Ogwumike and Breanna Stewart have been injured while playing this second season.”[21] To put things into perspective, about 90/144 WNBA players opted to play an extra season in another country in 2018.[22] If a player decided to play an extra season in China, “a player could earn an estimated $600,000.”[23] When compared to the $116,000 average salary for a WNBA player playing in the United States, the incentive and need to play out of the country is clear.[24] The women want the ability to stay in the States and only play a single season in a calendar year, but unfortunately with the current pay that is not realistic for them.[25]

To understand just how difficult it may be to resolve the issue of the CBA, it is important to understand the structure of the WNBA.[26] “There are 12 WNBA team owners, whose teams collectively own 50% of the WNBA. The other 50% of the WNBA is owned, collectively, by the 30 NBA owners, through a company called ’WNBA Holdings.’”[27] Because different groups of people with different perspectives come into play, there would need to be a lot of convincing to do before there would be any new agreement.[28] The two groups would be affected very differently by any upcoming changes that could be made.[29] Still, Adam Silver, the commissioner of the NBA, is adamant that the WNBA has the complete backing of the NBA.[30]

In conclusion, the expiration of the WNBA CBA in 2021 is something the WNBA players are taking very seriously.[31] They want to resolve the issue and with the voiced opinions of some of the league’s biggest stars, but it is clear that until there is a resolution, the players will be unhappy and will continue fighting for what they believe is right.[32]

 

[1] Jocelyn Frye, Robin Bleiweis, Rhetoric vs. Reality: Making Real Progress on Equal Pay, Center For American Progress (Mar. 26, 2019), https://www.americanprogress.org/issues/women/reports/2019/03/26/467778/rhetoric-vs-reality-making-real-progress-equal-pay/.

[2] See generally Lerae Ettienne, It’s Time to Pay Up, The Justification for Higher Salaries for WNBA Players: An Analysis of the WNBA’s Success and Employing Mediation between the WNBA and NBA to Leverage Future Success, 19 Pepp. Disp. Resol. L.J. 175 (2019).

[3] Abigail Hess, House Bill Would Block 2026 Men’s World Cup Funding Until Women’s Team Receives ‘Equitable Wages’, CNBC (Jul. 24, 2019), https://www.cnbc.com/2019/07/24/bill-would-block-world-cup-funds-until-womens-team-receives-fair-pay.html (explaining the GOALS act which would aid in getting the Women’s National Soccer Team equal pay by withholding “Federal Funding” for the 2026 Men’s World Cup until the women get “fair and equitable wages”).

[4] Mechelle Voepel, Why Substantially Increasing WNBA Player Salaries is More Complex Than You Think, ESPN (Jul. 31, 2018), https://www.espn.com/wnba/story/_/id/24247429/why-increasing-wnba-player-salaries-more-complex-think.

[5] Michael Baumann, The WNBA is at a Crossroads, The Ringer (May 23, 2019), https://www.theringer.com/2019/5/23/18636580/wnba-crossroads-labor-cba-negotiations (Stating that “[t]he 2019 season marks the league’s last under its current CBA”).

[6] 29 U.S.C. §206(d)(1).

[7] Kimberly Cataudella, WNBA Players Willing to sit out 2020 Season Over CBA issues, Newsday (Aug. 22, 2019), https://www.newsday.com/sports/basketball/liberty/wnba-players-strike-cba-negotiations-1.35353661.

[8] Id. (explaining that the average salary of a player encompasses “insurance and housing”).

[9] Id.

[10] Id.

[11] Mechelle Voepel, supra note 4.

[12] Id.

[13] Nneka Ogwumike, Bet on Women, The Player’s Tribune (Nov. 1, 2018),  https://www.theplayerstribune.com/en-us/articles/nneka-ogwumike-wnba-cba-bet-on-women.

[14] Id.

[15] Howard Megdal, BREAKING: WNBPA opts out of Collective Bargaining Agreement, Fansided, https://highposthoops.com/2018/11/01/breaking-wnbpa-opts-out-of-collective-bargaining-agreement/ (last visited Oct. 31, 2019) (stating that “[w]e’ve got a room full of players that have to go to Spain, Italy, Russia, China …”)

[16] Id.

[17] Kimberly Cataudella. supra note 7.

[18] Id.

[19] Lindsay Gibbs, The WNBA union is at a Crossroads, THINKPROGRESS (Nov. 19, 2018), https://thinkprogress.org/the-wnbas-players-fight-for-their-future-687e232c7863/.

[20] David Driver, Overseas play a necessary part of life for WNBA players, GLOBALSPORT MATTERS (Apr. 16, 2019), https://globalsportmatters.com/business/2019/04/16/overseas-play-a-necessary-part-of-life-for-wnba-players/.

[21] Id.

[22] Id.

[23] Id.

[24] Kimberly Cataudella, supra note 7.

[25] David Driver, supra note 20. (quoting Jordan Hooper, who said “I would love to stay in the states and play one season and one season only and have an offseason where I could get to work out really hard with some trainers and a nutritionist like LeBron”).

[26] Howard Megdal, WNBA CBA Negotiations: Adam Silver, Terri Jackson Discuss The Stakes And The Grad Bargain, Forbes (Nov. 19, 2018), https://www.forbes.com/sites/howardmegdal/2018/11/19/wnba-cba-adam-silver-terri-jackson-discuss-stakes-and-the-grand-bargain/#4b5831f25b7b.

[27] See Id.

[28] See Id.

[29] See Id. (Stating that “… WNBA owners who are directly affected by any changes, but also a majority of the 30 NBA owners, many of whom are involved with the league only in the sense that it appears as a single line item on their budget.”).

[30] Mechelle Voepel, Adam Silver isn’t ‘Disappointed’ that WNBA players Opted out of CBA, ESPN (Nov. 7, 2019), https://www.espn.com/wnba/story/_/id/25205141/commissioner-adam-silver-disappointed-wnba-players-opted-cba-says-nba-support-wnba-remains-firm.

[31] See generally Mechelle Voepel, supra note 4.

[32] See generally Id.

“[U]nions are lame. How about unicorns?”

“[U]nions are lame. How about unicorns?”[1]

By: Rebecca Falk

On May 21, 2018, Elon Musk received a comment “How about unions?” on his unrelated Tweet about NASA.[2]  Minutes later Musk responded,

“Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues & give up stock options for nothing? Our safety record is 2X better than when plant was [United Auto Workers] & everybody already gets healthcare.”

Musk further explained in a later comment that since Tesla was “betrayed” by United Auto Workers (“UAW”) 8 years ago, Tesla’s injury rate decreased in half and the wages increased, showing that his employees would be better off without being part of a union. However, this comment was amidst the ongoing unionization efforts of Tesla employees, and the ongoing resistance of Tesla and Elon Musk.

In 2016, a Tesla employee, Jose Moran, reached out to the UAW seeking to unionize Tesla’s employees.[5] In turn, the Union began a campaign to represent Tesla’s employees.[6] A different Tesla employee, Ortiz, even requested safety records from the California Division of OSHA.[7]  Union literature was distributed in the Tesla facility and social media pages were created to help the unionizing efforts.[8] In response to Musk’s Tweets mentioned above, members of the employee group trying to unionize Tesla, with the help of the UAW, commenced an action against Tesla, Inc. and Elon Musk for violating several of their rights under the National Labor Relations Act (“Act”).[9]

One part of their Complaint concerned the distribution of Union paraphernalia.[10] The facts were disputed but the administrative law judge decided based on the testimony that Supervisor Armando Rodriguez announced the following at a meeting: “[passing out] stickers, leaflets, and pamphlets that’s not approved by Tesla could be. . . terms of termination and be active vandalism.”[11]

The Supreme Court has found that employers may not prohibit employees from distributing union literature if the distribution is done in nonworking areas and nonworking time.[12] The NLRB has found that requiring employees to receive approval for a protected activity is unlawful.[13] Additionally, Section 8(a)(1) of the Act is violated if it communicated to employees that engaging in rights protected in the Act could “jeopardize their job security, wages, or other working conditions.”[14] Section 8 is also violated when an employer does something to disturb an Employee’s rights from Section 7.

In September 2019, NLRB judge Amita Baman Tracy found that Rodriguez’s statement and Musk’s Tweet violated Section 8(a)(1) of the Act.[16] Rodriguez’s statement implied that employees could be terminated if they passes out union paraphernalia, even if it was during nonworking time and in nonworking areas.[17] Musk, via his Tweet, similarly threatened to take his employees’ benefits away[18] when he tweeted “[b]ut why. . . give up stock options.” Musk’s tweet implied that employees would lose stock options if they vote to unionize.

This case revolves around limits employers face, and should show other employers to be careful with their words during a union campaign.

 

[1] Dani21 (Dani21), Twitter (May 21, 2018, 2:55 AM), https://twitter.com/dani21/status/998457273553833984?lang=en.

[2] Id.

[3] Elon Musk (@elonmusk), Twitter (May 21, 2018, 2:44 AM), https://twitter.com/elonmusk/status/998454539941367808.

[4] Elon Musk (@elonmusk), Twitter (May 22, 2018, 3:32 PM), https://twitter.com/elonmusk/status/999010167793504256.

[5] Tesla, Inc., Case No. 32-CA-197020, 197058, 197091, 197197, 200530, 208614, 210879, 220777 (NLRB Decision Sept. 27, 2019), https://cdn.arstechnica.net/wp-content/uploads/2019/09/Administrative-Law-Judges-Decision.pdf.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Republic Aviation Corp. v. NLRB, 324 U.S. 793, 803 (1945).

[13] Brunswick Corp., 282 NLRB 794, 795 (1987).

[14] Baddour, Inc., 303 NLRB 275 (1991).

[15] Lafayette Park Hotel, 326 NLRB 824, 825 (1988), enforced, 203 F.3d 52 (D.C. Cir. 1999).

[16] Shannon Liao, Tesla violated labor laws with Elon Musk tweet, judge rules, CNN (Sept. 28, 2019, 3:29 PM), https://www.cnn.com/2019/09/28/tech/tesla-elon-musk-labor-judge/index.html.

[17] Id.

[18] Id.

[19] Id.

California: Paving the Way for Student Athletes to Receive Compensation

By: Jairo Coronado

“One shining moment, it’s all on the line. One shining moment, there frozen in time.”[1]  These lyrics are heard as the confetti falls down on top of the winning team after every March Madness tournament championship game.    Athletes earn the right to be called champions and earn their “one shining moment,”, but they do not receive any earnings.[3]   The National Collegiate Athletic Association (“NCAA”) brought in $1 billion dollars of revenue during the 2016 – 2017 college basketball season,[4] but none of that money goes directly to the athletes’ pockets.[5]  The NCAA will receive “$10.8 billion from CBS/Turner sports between 2011 and 2024”[6] for the right to broadcast the March Madness tournament.[7]  The NCAA also receives an average of $470 million from ESPN to be able to broadcast the College Football Playoff Series.[8]  The money is not just coming from football and basketball, as ESPN is also paying $500 million to be able to broadcast different collegiate championships.[9]

According to the NCAA, the money they receive goes back to the athletes through different programs and funds,[10] but none of that money goes directly to the student athletes.[11]  The reason college athletes do not get paid is because they are considered amateurs.[12]  NCAA’s definition for amateur is very similar to the dictionary’s definition;[13] NCAA defines an amateur as, “one who engag[s] in athletics for the educational, physical, mental, and social benefits he [she] derives therefrom, and to whom athletics is an avocation.”[14]  In NCAA v. Oklahoma Board of Regents, Justice John Paul Stevens, writing for the majority, wrote that athletes should not be paid, and the NCAA has used that to fight against any lawsuits that try to make them pay student athletes.[15]  Some have argued that students do not need to be paid with money because they are already receiving free education.[16]  If an student has an athletic scholarship, the scholarship covers their tuition, room, and board for the next four years.[17]  Not only do the students receive free education, they also receive unlimited meals, a minimum of two years of medical expenses after college if they are injured while playing for the school,[18]  entrance to multimillion-dollar sports only facilities,[19] and other privileges that are not given to regular students.[20]  Mike Emmert, the president of the NCAA, has also argued that if universities are forced to pay student athletes, they will be forced to cut less profitable athletic problems which would only hurt students.[21]  Emmert says that the reason schools would have to cut certain programs is because universities must abide by educational laws, which means they must provide women the same opportunities as men.[22] This means that if universities pay the men’s football team and men’s basketball team, they must also pay the women’s basketball team. Schools would not have enough money to pay every athlete in every sport.[23]

California passed a bill, the Fair Pay to Play Act, which allows students enrolled in California schools to earn money off their own likeness.[24]  This bill also prevents schools from taking away the scholarships of the students making money from their own likeness.[25]  This bill does not force any school to pay their athletes, but this bill allows athletes to earn money that does not come from the university.[26]  South Carolina is now also looking to pass a similar bill to California’s Fair Pay to Play Act.[27]  The NCAA is looking for a way to fight this bill by banning California schools from participating in any NCAA sanctioned game.[28]  The NCAA believes that California’s new bill will hurt student athletes instead of helping them.[29]  If the NCAA decides to ban California schools from NCAA competition, this might open up litigation for California schools to sue NCAA under the Sherman Anti-Trust Law to break up the NCAA monopoly of college athletics. This battle between California’s bill and the NCAA is only the beginning, and depending on the outcome, this can change the landscape on whether student athletes can receive some sort or income.[30]

 

[1] ­David Barrett, One Shining Moment Lyrics, David Barrett, https://davidbarrett.com/one-shining-moment-lyrics/ (last visited Sept. 26, 2019).

[2] Charles Curtis, Every ‘One Shining Moment’ montage from 1987 to 2019, ranked (UPDATED), For The Win (Apr. 9, 2019, 7:32 AM), https://ftw.usatoday.com/2019/04/one-shining-moment-ranked-ncaa-tournament.

[3] Steve Cameron, The NCAA Brings in $1 Billion a year – Here’s Why It Refuses To Pay Its College Athletes, Business Insider (Mar. 26, 2019, 10:14 AM), https://www.businessinsider.com/ncaa-college-athletes-march-madness-basketball-football-sports-not-paid-2019-3.

[4] Id.

[5] Patrick Hruby, The NCAA Says Paying Athletes Hurts Their Education. That’s Laughable., The Washington Post (Sept. 20, 2018), https://www.washingtonpost.com/outlook/the-ncaa-says-paying-athletes-hurts-their-education-thats-laughable/2018/09/20/147f26c0-bb80-11e8-a8aa-860695e7f3fc_story.html.

[6] Michael Wilbon, College Athletes Deserve To Be Paid, ESPN (Jul. 18, 2011), https://www.espn.com/college-sports/story/_/id/6778847/college-athletes-deserve-paid.

[7] Id.

[8] Brent Schrotenboer, Why College Football Bowl Game Industry, With ESPN’s Help, Is Poised To Get Even Better, USA Today (Dec. 15, 2018, 1:16 AM), https://www.usatoday.com/story/sports/2018/12/13/college-football-bowl-game-industry-espn/2286401002/.

[9] Mike Reynolds, ESPN Expands NCAA Championships Rights Via $500 Million Deal, Multichannel News (Mar. 29, 2018), https://www.multichannel.com/news/espn-expands-ncaa-championships-rights-500-million-deal-298185.

[10] Where Does The Money Go?, NCAA (last visited Sept. 26, 2019), http://www.ncaa.org/about/where-does-money-go.

[11] Hruby, supra note 6.

[12] Jon Solomon, The History Behind the Debate Over Paying NCAA Athletes, The Aspen Institute (Apr. 23, 2018), https://www.aspeninstitute.org/blog-posts/history-behind-debate-paying-ncaa-athletes/.

[13] Amateur, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/amateur (last visited Sept. 27, 2019).

[14] Solomon, supra note 13.

[15] Id.

[16] Washington, supra note 3.

[17] Solomon, supra note 13.

[18] Id.

[19] Washington, supra note 3.

[20] Hruby, supra note 6.

[21] Kyle Boone, NCAA President Says Paying Football and Basketball Players Would Eliminate Other Sports, CBS Sports (Apr. 1, 2018, 7:44 PM), https://www.cbssports.com/college-basketball/news/ncaa-president-says-paying-football-and-basketball-players-would-eliminate-other-sports/.

[22] Id.

[23] Id.

[24] S.B. 206, 2019 Leg. Reg. Sess. (Cal. 2019), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB206.

[25] Jeremy Bauer-Wolf, One Step Closer to Pay for California College Athletes, Inside Higher Ed (Sept. 11, 2019), https://www.insidehighered.com/news/2019/09/11/california-passes-bill-allowing-athletes-be-paid-name-image-and-likeness.

[26] Patrick Rishe, California Legislation Will Force NCAA’s Hand Over Athlete’s Ability to Monetize Their Personal Brand, Forbes (June 26, 2019, 11:09 PM), https://www.forbes.com/sites/prishe/2019/06/26/californias-fair-pay-for-play-legislation-will-force-ncaas-hand-over-college-athletes-ability-to-monetize-their-personal-brands/#e62d3025ab19.

[27] Jake Russell, South Carolina Lawmakers Plan to File Bill Proposing Financial Compensation of College Athletes, The Washington Post (Sept. 13, 2019), https://www.washingtonpost.com/sports/2019/09/14/south-carolina-lawmakers-plan-file-bill-proposing-financial-compensation-college-athletes/.

[28] Peter O’Dowd, NCAA Threatens to Bar California Colleges From Competitions Over Student Athlete Pay, wbur (Sept. 13, 2019), https://www.wbur.org/hereandnow/2019/09/13/ncaa-california-college-athletics.

[29] NCAA Responds to California Senate Bill 206, NCAA (Sept. 11, 2019, 10:08 AM), http://www.ncaa.org/about/resources/media-center/news/ncaa-responds-california-senate-bill-206.

[30] O’Dowd, supra note 29.

Supreme Court May Review Widespread Insurance Practice

By: Jonathan Goldhirsch

On October 31, the Supreme Court will announce if it will grant cert to UnitedHealth Group, Inc. v. Peterson, a case that could have massive implications for the insurance industry.[1]  The case challenges the validity of cross-plan offsetting, a technique utilized by insurance providers like UnitedHealth Group, Inc. (“UnitedHealth”) in which a healthcare provider overbills a group of participants (“Group A”) and thus, the insurance provider will deduct any overcharge in its payment in a subsequent claim (“Group B”), even if both claims are submitted by different participants.[2]

The practice is controversial as it is likely a violation of §1104 of ERISA as providers are not acting “solely in the interest of the participants and beneficiaries.”[3]  Although providers will undoubtedly benefit from offsetting as it can recoup any missing funds, individuals in “Group B” will only receive partial payment for services.[4]  In addition, the U.S. Department of Labor contends that the offsetting allows an insurance provider to engage in “self-dealing” behavior with little legal recourse given that the offset amount may not be significant and patients may be unaware of the dispute.[5]  The Eighth Circuit found that UnitedHealth violated ERISA “by recouping its own alleged overpayments for its fully-insured plans that are funded through its own accounts with payments from self-insured plans that are funded by plan sponsors and their employees,” which would not be in the participant’s best interest.[6]

Although UnitedHealth contends that participants asserts that there is “broad savings” as plaintiffs benefit from increased administrative efficiency and greater plan recoveries, the Secretary of Labor disagrees.[7]  UnitedHealth asserts that plans will spend less on administrative costs because the company will now send a lump-sum check to providers and recover 25 percent more overcharges than if the Plan had only engaged in same-plan offsetting.[8]  It is unclear from UnitedHealth’s court filings whether the Plans will pass on these additional recoveries to its participants in the form of reduced copays or premiums.[9]

Furthermore, the Secretary of Labor warns that participants are at risk of increased financial insecurity because providers who offset will also engage in bill balancing.[10]  Bill balancing forces an individual to pay for “medical bills [that] were not paid because of an offset . . . [and have] financial liability for healthcare costs that should have been covered by his plan.”[11]  An individual will have to pay greater out-of-pocket costs for treatment, which could cause great financial instability.[12]  The Consumer Financial Protection Bureau found, in a December 2014 study, that half of collection agency claims are due to unpaid medical bills and that twenty percent of such bills negatively affect individuals’ credit scores.[13]  A March 2019 study done by the American Journal of Public Health showed that approximately sixty percent of Americans “very much” or “somewhat” believe that their medical bills led to their declaring bankruptcy.[14]  However, such surveys likely underestimate the prevalence of medical bankruptcies as “many people financially ruined by illness are undoubtedly too ill, too destitute, or too demoralized to pursue formal bankruptcy.”[15]

Regardless of whether the Supreme Court grants cert, cross-plan offsetting will likely become a hotly litigated matter as it is allegedly utilized by Blue-Cross/Blue-Shield, Aetna, and Cigna.[16]  In addition to Peterson, plaintiffs have filed challenges to the technique in the Second, Third, and Fifth Circuits.[17]  It is unclear how much UnitedHealth offset from the forty seven plans implicated in this suit, however the amount is likely in excess of a million dollars as UnitedHealth claims that cross-plan offsetting has allowed for “an average of more than $290,000 recovered per plan, with one plan recovering an additional $960,000.”[18]  No matter what the final outcome of UnitedHealth Grp. v. Peterson is, the case has brought light to an esoteric insurance practice and employers may revise their plans to include alternative methods to recoup overages.[19]

[1] See Peterson v. UnitedHealth Grp., Inc., 913 F.3d 769 (8th Cir. 2019), petition for cert. filed, (May 30, 2019). The Court has filed nine motions to extend the time to file a response to UnitedHealth’s petition, thus the response date may be tentative.

[2] See id. at 777.

[3] 29 U.S.C.S. § 1104 (2019).

[4] See Peterson, 913 F.3d at 777.

[5] See Brief for the Secretary of Labor as Amicus Curiae Supporting Plaintiffs-Appellants, Peterson v. UnitedHealth Grp. Inc., 913 F.3d 769 (8th Cir. 2019) (No. 17-1744).

[6] Id. at 9.

[7] See id.

[8] Same-plan offsetting involves a provider who overpays for an individual’s treatment, so for subsequent treatments the overage will be deducted from future payments.  Id. at 7.

[9] Id. at 7.

[10] Id. at 11-12.

[11] Id. at 11-12.

[12] Id. at 14.

[13] See Consumer Fin. Prot. Bureau, Consumer Credit Reports: A Study of Medical and Non-medical Collections 4 (2014).

[14] See David U. Himmelstein et al., Medical Bankruptcy: Still Common Despite the Affordable Care Act, 109 Am. J. of Pub. Health 431, 432 (2019).

[15] See David U. Himmelstein et al., MarketWatch: Illness and Injury As Contributors To Bankruptcy, 24 Health Aff. 63, 78 (2005).

[16] See Peterson, 913 F.3d 769.

[17] See MC1 Healthcare, Inc. v. United Health Grp., Inc., No. 3:17-CV-01909, 2019 U.S. Dist. LEXIS 76515 (D. Conn. May 7, 2019); Mayer v. Aetna Inc., No. 3:15CV02595 (Dis. N.J.); Omega Hosp., LLC v. United Healthcare Servs., 389 F. Supp. 3d 412 (M.D. La. 2019).

[18] Brief and Addendum of Appellants at 17, Peterson v. UnitedHealth (June 26, 2017) (No. 17-1744).

[19] Daniel Eliav & Ken Yood, Cross-Plan Offsetting in the Balance: UnitedHealth Group, Inc. Petitions the Supreme Court to Allow Cross-Plan Offsetting; Response to be Filed on or before July 31, 2019, JDSUPRA (July 9, 2019), https://www.jdsupra.com/legalnews/cross-plan-offsetting-in-the-balance-15913/.

Update: New Legislation Giving Domestic Violence Victims Paid Work Leave

By: Alexandra Murray

Federally, victims of domestic violence are able to obtain time off from work to deal with their abuse, but it does not provide for paid time off.[1]  The Family and Medical Leave Act (hereinafter “FMLA”) allows employees to take unpaid time off for serious health conditions, which can be applied to domestic violence victimization.[2]  However, the FMLA provides that states should pass more generous protections of their citizens[3] and New York has listened.  Both New York City and Westchester have protections for domestic violence victims in regard to job security.[4]

New York City passed an expansion to their paid sick leave law to include protections of those dealing with domestic violence.[5]  “This bill does not add to the total amount of leave . . . it adds reasons for using the leave to allow a survivor of domestic violence . . . to take time off of work in order to plan their immediate next steps and focus on safety, without fearing a loss of income.”[6]  This expansion provides victims the opportunity to keep their jobs and get the resources they need to escape the abuse.[7]  By adding domestic violence victims to the protected class under the statute, they are now able to use their paid time off to seek legal assistance, file police reports or get services from a shelter or crisis center.[8]  Employers that have five or more employees must provide paid work leave if they are working more than eighty hours a year.[9]  If employers do not meet these criteria, the work leave can be unpaid.[10]  Under the expansion, employees will be entitled to a maximum of forty hours of work leave, paid or unpaid depending on their employer, to deal with domestic violence related issues.[11]

Instead of making changes to previously enacted statutes, Westchester, New York, passed a new statute entirely to provide job security for domestic violence victims.[12]  The statute becomes effective on October 30, 2019 to provide paid work leave opportunities in addition to those already afforded to employees for sick time.[13]  The new ordinance called, the “Safe Time Leave Law”, will give domestic violence victims forty hours of paid leave,  if he or she is employed by a private employer.[14]  “Under the new paid safe time law, covered employees do not accrue leave based on hours worked as they do under the paid sick leave ordinance; rather, they are entitled to take a specific amount of protected, paid leave.”[15]  Since the paid time off is not based on the employee’s accrued time, it will be up to the employer to determine the calculation of the rate of pay.[16]

By enacting an entirely new statute, the goals and requirements can be tailored for effectiveness.  The statute has notice and documentation requirements to ensure it is implemented properly.[17]  Employers will be required to provide their employees a notice of the new law and how it will apply to them as well as have a poster in both English and Spanish languages posted to remind employees of their rights under the new statute.[18]  To enforce the notice requirement, an employer can be fined $500 for not complying with the notice or not posting the ordinance.[19]  Employers must follow the notice requirement and give their employees the protection of keeping their information confidential in regards to their paid leave. [20]  In return, the employees must  timely provide documentation to use the paid work leave to ensure the time off was used for purposes covered by the statute.[21]

As the effective date quickly approaches for Westchester’s new law, it will be interesting to see the implementation effects and positive impacts it will provide for domestic violence victims in the county.  Hopefully, the new statute will provide the protections needed and other legislatures will follow New York’s lead.

[1] Lisa Guerin, Domestic Violence Leave: Taking Time off Work, NOLO, https://www.nolo.com/legal-encyclopedia/domestic-violence-leave-taking-time-30129.html.

[2] Id.

[3] 29 U.S.C. § 2653 (West 2009).

[4] Melissa (Osipoff) Camire & Justin Reiter, Westchester County Implements Safe Time Leave, Fisher Phillips (Aug. 1, 2019), https://www.fisherphillips.com/resources-alerts-westchester-county-implements-safe-time-leave.

[5] Paid Safe Leave: New York City Expands Paid Leave to Domestic Violence, Sexual Assault, Stalking and Trafficking Survivors, NYC (Nov. 6, 2017), https://www1.nyc.gov/office-of-the-mayor/news/716-17/paid-safe-leave-new-york-city-expands-paid-leave-domestic-violence-sexual-assault-stalking.

[6] Id.

[7] Id.

[8] De Blasio Administration Announces Paid Safe Leave Law Now in Effect, NYC (May 7, 2018), https://www1.nyc.gov/office-of-the-mayor/news/239-18/de-blasio-administration-annouces-paid-safe-leave-law-now-effect.

[9] Id.

[10] Id.

[11] Id.

[12] Lowell et al., Westchester County, NY Enacts Standalone Paid “Safe” Time Ordinance, Littler (May 10, 2019),  https://www.littler.com/publication-press/publication/westchester-county-ny-enacts-standalone-paid-safe-time-ordinance.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Allan Bloom & Laura Fant, Westchester County, New York to Require Paid Leave for Victims of Domestic Violence, L. & The Workplace (May 17, 2019), https://www.lawandtheworkplace.com/2019/05/westchester-county-new-york-to-require-paid-leave-for-victims-of-domestic-violence/.

[21] Id.

Reading Plainly: How Class-Action Waivers Adhere to the Principles of the Republican Form and the Doctrine of Separation-of-Powers

By: Farris Lee Francis

In a recent decision regarding the rights of workers, the Supreme Court issued a ruling declaring the validity of class action waivers.[1]  The Court’s holding is chiefly significant to the enforcement of Article III of the Constitution[2].  More specifically, the import of the ruling is identified insofar as it reinforces the principle of separation-of-powers and the republican form of government as envisioned by our Founders.[3]  In our system, the judicial department is not empowered to say what the law should be[4], rather the judicial department is tasked with saying “what the law is.”[5] As such, the Court’s plain reading of the Federal Arbitration Act is aptly and properly applied.

In Epic Systems, the Court explained that “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.”[6]  The dissent seemingly rejects this perspective and argues that the aim and intent of congress ought to govern.[7]  For Article III courts, this monumental point must not be lost: “it is the law that governs, not the intent of the lawgiver.”[8]  Thus, for the originalist, congressional intent and legislative history are of no consequence.  To test the point further, as Justice Scalia contends, “[ours] is a government of laws not of men. Men may intend what they will; but it is only the laws they enact that bind us.”[9]

At bottom, judges may be tempted to invade the province of the lawmaker thus declaring what the law should be.  Such jive ought to be swiftly quelled as they have no place in our constitutional scheme.  Strictly construed, the principles of the republican form and the doctrine of separation-of-powers requires that the chief branches of government ought not commingle or mix powers.  Such a separation is required to prevent the abuse of power in a single branch and provides essential accountability of each branch, respectively.[10]  Therefore, to proclaim the will and intent of the lawmaker should govern over and above that of the law is anathema to our constitutional scheme.

In what has been hailed as a “blow to workers,”[11] it is not for the judge to amend or suggest new pronouncements of law. In finding that the FAA overrules the NLRA, the majority asserts that “[t]he policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.”[12]  To argue the contrary is to further tempt tyranny by impermissibly invading that which is secured by congress—lawmaking.

[1] Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

[2] U.S. Const. art. III.

[3] THE FEDERALIST NO. 39, at 240 (James Madison) (Clinton Rossiter ed., 1961). Madison declares:

It is evident that no other form would be reconcilable with the genius of the people of America; with the fundamental principles of the Revolution; or with that honorable determination which animates every votary of freedom, to rest all our political experiments on the capacity of mankind for self-government.

[4] Obergefell v. Hodges, 135 S. Ct. 2584, 2611 (2015) (Roberts, CJ., dissenting) (“[T]his Court is not a legislature.  Whether same-sex marriage is a good idea should be of no concern to us.  Under the Constitution, judges have power to say what the law is, not what it should be.”).

[5] Marbury v. Madison, 5 U.S. 137 (1803).

[6] Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

[7] Id. at 1642-43 (Ginsburg, J., dissenting) (“The legislative hearings and debate leading up to the FAA’s passage evidence Congress’ aim to enable merchants of roughly equal bargaining power to enter into binding agreements to arbitrate commercial disputes. [H]istory also shows that Congress did not intend the statute to apply to arbitration provisions in employment contracts.”).

[8] Antonin Scalia, A Matter of Interpretation: Federal Courts and the Law 17 (Amy Gutmann ed., 1997).

[9] Id.

[10] THE FEDERALIST NO. 47, at 298 (James Madison) (Clinton Rossiter ed., 2003) (“The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.”).

[11] Nina Totenberg, Supreme Court Decision Delivers Blow To Workers’ Rights, Npr (May 21, 2018) https://www.npr.org/2018/05/21/605012795/supreme-court-decision-delivers-blow-to-workers-rights.

[12] Id.

Does California Really Think They Can Put an End to Mandatory Arbitration Clauses?

By: Brian Gordon

The Federal Arbitration Act (hereinafter “FAA”) states that a contract evidencing a transaction involving commerce to settle disputes by arbitration arising from that contract are valid, irrevocable, and enforceable, except for when other laws allow for the revocation of the contract.[1]  If an employer is brought to trial by one of their employees and they have an arbitration agreement in place, the employer can stay the proceeding[2] and compel arbitration with that employee under the written terms of the employment agreement.[3]  The FAA in essence is a statute that upholds arbitration as a matter of contract between the employee and the employer and establishes the employers right to forego the expensive and time consuming trial process by a judge or jury, thus allowing them to waive the employers’ prototypical “day in court”.[4]

On Oct. 10, California’s Governor, Gavin Newsom, signed an amendment to California’s Fair Employment and Housing Act (“FEHA”), which states that “[a]n employer cannot require that an employee agree to arbitrate a potential claim under the FEHA as a condition of employment” and “[a]n employer cannot threaten, retaliate or discriminate against . . . an employee for refusing to consent” to arbitrate a FEHA claim.[5]  One caveat of the law is that it only applies to new employees required to sign an arbitration agreement to get hired, but unless Congress makes a change to the FAA, all mandatory arbitration agreements already in place in employment contracts are still enforceable for harassment, discrimination and other employment-based claims.[6]

The Supreme Court has routinely upheld forced arbitration agreements between the employer and the employee and has firmly stated that the “principal purpose of the FAA is to ensure that private arbitration agreements are enforced according to their terms.”[7]  Justice Scalia went as far in Concepcion to say that there is a national policy in favor of arbitration in the employment setting and the goal of achieving “streamlined proceedings and expeditious results” would be frustrated by having claims that fall within the arbitration agreement an employee signs when employed to be litigated in a court setting.[8]

Recently, vast media attention has been raised to the conflict of forced arbitration agreements between employers and employees as a result of Senator Kamala Harris being asked to openly attack the practice because of her husband’s company, DLA Piper (hereinafter “DLA”).[9]  DLA has been under scrutiny for forcing arbitration of a claim brought by a partner alleging that another DLA partner groped her on business trips and threatened her job all while denying the interaction.[10]  The employee, Vanina Guerrero, and Senator Harris are claiming that forced arbitration deprives employees their basic right to a trial and their day in court.[11]

The new state law in California makes it illegal to make signing a mandatory arbitration clause a requirement to be hired by the employer, making an attempt to differ from the previous practices California Courts have used that the Supreme Court has struck down.[12]  However, based on how the court has traditionally ruled in favor of the arbitration process, the amendments to the FEHA may still fall in conflict with the FAA because of the all-encompassing provision of §2 of the FAA.[13]  The portion that states all arbitration agreements are irrevocable and enforceable saved only upon grounds that exist in law or in equity for the revocation of a contract suggests that states may not pass laws to limit the ability of the arbitration process that do not already exist to nullify a contract under existing contract law.[14]

Overall, the newly passed California Law will be limited in application again by the FAA and people like Ms. Guerrero who want to forego the arbitration process to have her sexual harassment in the workplace case heard by a Judge in a court proceeding will be hard-pressed to get the outcome she desires.

 

[1] 9 U.S.C. §2 (1947).

[2] 9 U.S.C. §3. (1947).

[3] 9 U.S.C. §4. (1947).

[4] Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010).

[5] John Lewis & Joseph Persoff, California Enacts Anti-Arbitration Legislation, but Will the FAA Limit its Potential Impact? Not Entirely, JDSUPRA (Oct. 14, 2019), https://www.jdsupra.com/legalnews/california-enacts-anti-arbitration-52443/.

[6] Mallory Moench, New State Law Bans Mandatory Arbitration for New Employees – but Doesn’t Cover Everyone, S. F. Chron. (Oct. 13, 2019), https://www.sfchronicle.com/business/article/California-has-a-new-law-against-mandatory-14511832.php.

[7] AT&T Mobility LLC. v. Concepcion, 563 U.S. 333, 344 (2011) (quoting Volt Info. Scis. v. Bd. of Trs., 489 U.S. 468, 478 (1989)).

[8] Id.

[9] Mike LaSusa, Sen. Harris Criticizes DLA Piper’s Forced Arbitration Policy, Law360 (Oct. 8, 2019),  https://www.law360.com/employment/articles/1207640/sen-harris-criticizes-dla-piper-s-forced-arbitration-policy.

[10] Id.

[11] Id.

[12] See Concepcion, 563 U.S. at 343.

[13] 9 U.S.C. §2. (1947).

[14] Lewis & Persoff, supra note 5.

THE NEW DOL OVERTIME RULE AND ITS EFFECTS

By: Victoria Scaglione

On Tuesday, September 24, 2019, the Department of Labor (DOL) revealed its new white-collar overtime rule, which updates “the Fair Labor Standards Act’s overtime and minimum wage exemptions for executive, administrative and professional . . . workers.”[1]  “Unless exempt, employees covered by the Fair Labor Standards Act” are required to receive overtime for any hours worked in excess of the forty hour workweek.[2]  The new rule sets the threshold salary for executive, administrative, and professional (EAP) employees to $35,568 a year to be considered exempt.[3]  Simply put, this means that anyone earning above this threshold will no longer receive overtime pay.  The new regulation leaves employers with only a couple of months to comply, as it will take effect on New Year’s Day 2020.[4]

Prior to enacting this rule, only blue-collar employees and workers earning less than $23,000 a year earned overtime pay.[5]  In 2014, the Obama administration attempted to raise the threshold to $47,000 in order to keep up with inflation, which would allow an additional 4.2 million employees to become eligible for overtime pay.[6]  However, this attempt received a highly negative response, as twenty-one states sued the administration.[7]  The rule was later invalidated, as a federal judge held that the DOL lacked the authority to make such a radical change.[8]  This ruling is still on appeal before the Fifth Circuit Court of Appeals.[9]

To be considered exempt under the new rule, employees must pass the “job duties test,” where employers conduct an analysis of the employee’s job duties when they earn over the salary threshold.[10]  If the job duties involve primarily EAP duties according to current regulations, then the employee is deemed exempt.[11]  This test has not changed under the new rule and has been a long-standing method used for determining exemption.[12]

Although the DOL believes that the new rule will benefit near 1.3 million workers by allowing them to be eligible for overtime pay, it will likely harm over 2.8 million workers who would’ve received overtime under the rule proposed by the Obama administration.[13]  Additionally, others believe that the regulation will lead to legal action, similar to the litigation that occurred after the Obama administration’s 2016 overtime rule.[14]  The new rule will most likely impact “education, wholesale, and retail businesses, [as well as] businesses providing professional services.”[15]  For example, those who work in higher education institutions and earn salaries in the mid-$20,000 range, like “adjunct professors, graduate student assistants or assistant sports coaches” will likely have their job duties redefined, so that their employers avoid paying overtime wages.[16]  The increment in salary to meet the newly set threshold would not be practical.[17]

As a result of the new regulation, employers may have to make drastic changes in order to be compliant.  Some employers may have to increase employee salaries in order to avoid overtime payment, while others may be forced to “[r]eclassify employees as nonexempt or ‘hourly.’”[18]  Additionally, it may be necessary for employers to “[e]xamine existing and potential bonus and commissions plans as an alternative to reclassification,” and to “[d]evelop internal messaging to aid employees in understanding the changes to their compensation and classification.”[19]

[1] Vin Gurrieri, Employers Face Time Crunch As New OT Rule Looms, Law360 (Sept. 25, 2019), https://www.law360.com/employment/articles/1202771/employers-face-time-crunch-as-new-ot-rule-looms.

[2] David M. Prager, Overtime: DOL Proposes to Raise Salary Level for Overtime Exemption to $35,308, Wage & Hour Def. Blog (Mar. 8, 2019), https://www.wagehourblog.com/2019/03/articles/flsa-coverage/overtime-dol-proposes-to-raise-salary-level-for-overtime-exemption-to-35308/.

[3] Vin Gurrieri, 4 Takeaways As DOL Finalizes Overtime Rule, Law360 (Sept. 24, 2019), https://www.law360.com/employment/articles/1202554/4-takeaways-as-dol-finalizes-overtime-rule-.

[4] Id.

[5] Alexia Fernández Campbell, 1.3 Million Winners and 2.8 Million Losers From Trump’s New Overtime Rule, Vox (Sept. 24, 2019), https://www.vox.com/identities/2019/9/24/20835653/trump-overtime-pay-rule-explained.

[6] Id.

[7] Id.

[8] Id.

[9] Michael Correll & Abby Kotun, The New DOL Final Overtime Rule: What It Means For Employers, Lexology (Oct. 1, 2019), https://www.lexology.com/library/detail.aspx?g=e28844eb-88a7-4c19-a1f0-7597dfd66519.

[10] Gurrieri, supra note 3.

[11] Id.

[12] Correll & Kotun, supra note 9.

[13] Campbell, supra note 5.

[14] Gurrieri, supra note 3.

[15] Id.

[16] Gurrieri, supra note 1.

[17] Id.

[18] Update on DOL Overtime Regulations: New FLSA Overtime Rule Just Finalized and Effective January 2020, ComplyRight (Sept. 25, 2019), https://www.complyright.com/employee-time-pay/dol-announces-potential-new-flsa-overtime-regulations.

[19] Correll & Kotun, supra note 9.