By: Bob Goldberg, RSPA General Council
This column often brings employment issues to your attention. After all we all have employees and need to be aware of the latest regulations affecting our relationships. It is clear that the pendulum is swinging away from employers and favoring employees. RSPA members have always treated their employees well and to continue doing so here are some recent changes you should be aware of.
Several large corporations, eBay, Intuit, Adobe, Apple, Google, and Intel, have been subject to antitrust suits regarding agreements not to poach each other’s employees. The restrictions have also been expanded to include the sharing of wage information and in some jurisdictions asking an applicant their previous compensation is prohibited. The antitrust laws prohibit contracts, combinations, and conspiracies in restraint of trade. No matter what line of business you are in we all compete for employees. Thus, an agreement not to poach employees from another business is a restraint of trade of the employee seeking employment. Many channel agreements have provisions prohibiting the solicitation of employees from the parties. Do these violate the law? There are exceptions.
In limited situations businesses may agree, without violating antitrust laws, not to solicit each other’s employees or to share information about wages. These situations must be necessary as part of a legitimate collaboration among the parties. For example, it may be permissible to agree to a restriction on hiring as part of a legitimate joint venture or teaming agreement. Recently I reviewed an agreement where a software developer agreed to support a dealer’s customers where the dealer had yet to develop that capability. The agreement had a one-year non-solicitation of each other’s employees and the dealer’s customers. These teaming agreement restrictions have a legitimate business purpose. Likewise, there is an exception allowing businesses to share employment information in evaluating whether to pursue a merger or acquisition. Restrictions on asking potential employees their previous salary are thought to limit compensation rather than determining compensation based upon qualifications.
Rising health insurance premiums, benefits, and taxes have prompted many dealers to consider adding Independent Contractors to their team. Whether one qualifies as an employee or independent contractor has always been a gray area. The US Department of Labor provides factors to consider in making a determination but does not place an emphasis on specific factors as being more important than others.
The California Supreme Court, the source of many employment law changes, recently issued a ruling establishing a new standard for determining if an individual is an independent contractor or employee. The court held that all workers are presumed to be employees. Thus, the burden is on the company to prove the individual is an independent contractor. In the past the factors considered were the worker’s investment in the tools used, the method of payment, the degree of permanence of the relationship, the degree of direction and independence of the worker, and the parties’ intention regarding the relationship. Employees are entitled to minimum wage, overtime, meal and rest breaks, paid sick time, expense reimbursement, and other forms of compensation whereas independent contractors are not.
The California Supreme Court established the “ABC” standard to reach a determination. A) Is the individual free from the control and direction of the hirer, both under contract and in fact? B) Is the worker performing work that is outside the usual course of the hiring company? C) Is the worker customarily engaged in an independently established trade, occupation, or business? Under the California rule a POS salesperson working for a dealership would not likely qualify as an independent contractor. Expect this analysis to spread beyond California.
It is important to remain current on the quickly changing employment picture. RSPA will endeavor to keep you advised.