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USA: Labor Department Adopts ‘Primary Beneficiary’ Test for Determining Employee Status of Interns, Students

Interns and students working for “for-profit” employers are entitled to minimum wages and overtime pay if they are determined to be employees under the FLSA. To determine whether interns and students are employees, the primary beneficiary test focuses on the economic realities of the relationship to decide whether the intern or the employer is the primary beneficiary of the internship program.

In December 2017, the U.S. Court of Appeals for the Ninth Circuit became the fourth federal appellate court to expressly reject the DOL’s standard for determining whether interns and students are employees under the FLSA. The DOL followed with its announcement that it would employ the primary beneficiary test approved by three of those four appellate courts, abandoning its six-factor test. The DOL six-factor test, adopted in 2010, required that all six factors be present for the intern to avoid qualification as an employee subject to the FLSA’s minimum wage and overtime requirements. The most controversial factor was the requirement that the employer could derive no “immediate advantage” from the intern’s work.

The U.S. Court of Appeals for the Second Circuit, in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2015), rejected the DOL’s six-factor test. Instead, the Second Circuit adopted a non-exhaustive, seven-factor test aimed at assessing whether the employer or the individual was the “primary beneficiary” of the relationship. (For details of the decision, see our article, ‘Primary Beneficiary’ Test Determines Employee Status of Unpaid Interns, Federal Appeals Court Rules.)

Those factors include:

  1. The extent to which the intern and the provider of the internship clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee;
  2. The extent to which the internship provides training similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by education institutions;
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  5. The extent to which the internship’s duration is limited to the period in which the internship provides beneficial learning to the intern;
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  7. The extent to which the intern and the provider of the internship understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Under the Second Circuit’s analysis, no one factor is dispositive or preclusive in determining whether an individual is an intern or an employee. The Glatt analysis subsequently was adopted by the U.S. Court of Appeals for the Eleventh Circuit in Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015). Most recently, it was adopted by the U.S. Court of Appeals for the Ninth Circuit in Benjamin v. B&H Education, 2017 U.S. App. LEXIS 25672 (9th Cir. Dec. 19, 2017). The U.S. Court of Appeals for the Seventh Circuit also rejected the DOL’s former analysis, in Hollins v. Regency Corp., 867 F.3d 830 (7th Cir. 2017), although that appeals court did not expressly adopt Glatt’s primary beneficiary test.

Finally, the DOL said, “[The] Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”

An updated “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act” is available on the Wage and Hour Division website.

The DOL’s adoption of the “primary beneficiary” test gives employers a more uniform standard to apply when implementing internship programs.

For more information on these articles or any other issues involving labour and employment matters in United States, please contact John Sander, Principal at Jackson Lewis P.C. (www.jacksonlewis.com) at John.sander@jacksonLewis.com

France: Collective mutually agreed terminations: the brand new product from the Macron reform

One of the five Macron ordinances published at the end of September defines a new autonomous regime of collective termination of employment contracts: collective mutually agreed terminations. The company may negotiate with the unions a collective agreement providing for redundancies that are not subject to the economic lay off procedure and without having to justify an economic reason. The agreement must provide compensation to employees and must be validated by the administration. The various phases and obligations of a standard collective redundancy procedure (obligation of reclassification, safeguarding plan) do not apply. Staff representatives are informed of the agreement and consulted when monitoring its implementation.

For more information on these articles or any other issues involving labour and employment matters in France, please contact Joël Grangé, Partner at Flichy Grangé Avocats (www.flichygrange.com) at grange@flichy.com

China: The Regulations on Employee Representative Congress in Shanghai was amended

The Standing Committee of Shanghai Municipal People’s Congress amended the Regulations on Employee Representative Congress in Shanghai (the “New Regulations”). The New Regulations included new and revised 13 clauses on the principle to further improve protection for employees’ interests and encourage employees’ participation in the employee representative congress (the “ERC”). Specifically, the New Regulations clarify that employers should solicit opinions and suggestions from employees through the ERC or other manners when the employers decide on restructuring, merger, separation, relocation, shutdown, dissolution, bankruptcy or other significant matters. In addition, Shanghai municipal and each district’s human resources and social security departments, as well as trade unions of the same level, have the power to inspect employers’ implementation of the ERC system. If employers violate the New Regulations and fail to correct within the prescribed time limit, Shanghai Municipal Federation of Trade Unions has the right to disclose the said information on the Shanghai Municipal Public Credit Information Service Platform.  The New Regulations came into effect on January 1, 2018.

For more information on these articles or any other issues involving labour and employment matters in China, please contact Carol Zhu, Partner at Zhong Lun Law Firm (www.zhonglun.com) at carol.zhu@zhonglun.com

Canada: Growing Pains As Ontario Employers Adjust to New $14 per Hour Minimum Wage

On January 1, 2018, Ontario’s minimum wage rose from $11.60 to $14.00 per hour. If re-elected, Premier Kathleen Wynne has pledged to raise the minimum wage once again to $15.00 per hour effective January 1, 2019.

Many businesses have responded by reducing other labour costs that they could still control, such as employee benefits and “perks,” such as paid breaks. Some businesses based in Ontario have found themselves in the media spotlight after letters or memos to employees about changes to breaks, tipping practices or employee benefits have found their way into the hands of the press. Many employees, particularly those in the restaurant industry, have reported that their hours have been reduced, that paid breaks have been eliminated, and that they have been asked to pay for a greater percentage of their health and dental benefits.

The public response to media reports about certain employers’ actions has been swift and included countless negative social media posts, as well as initiatives by labour advocacy groups and trade unions. The provincial government responded by announcing that it would be stepping up enforcement to ensure that employers complied with the new minimum wage, and Labour Minister Kevin Flynn expressed disappointment that some employers were “abandoning the spirit” of the legislation.

As the aforementioned employers have learned, actions taken to reduce labour costs may have significant unintended reputational costs. In the age of social media, this serves as an important reminder to employers that today’s internal memo can easily become tomorrow’s headline. Accordingly, it is crucial that all communications with employees are compliant with all applicable legislation and in line with the employer’s public image.

For more information on these articles or any other issues involving labour and employment matters in Canada, please contact Robert Bayne, Partner at Filion Wakely Thorup Angeletti (www.filion.on.ca) at rbayne@filion.on.ca

USA: Plaintiff’s Bar Currently Targeting Online Hiring Practices: What Your Company Needs to Know

Companies’ employee-recruitment ads on social media and websites are the latest targets of the plaintiff’s bar. L&E Global’s member firm in the United States, Jackson Lewis P.C., reports on the latest legal trends affecting employers with US operations that are being targeted with this claim.

What is the claim?

The legal argument being asserted is that the advertisements are alleged class violations of federal, state, and local laws that prohibit age discrimination in employment advertising, recruitment, sourcing, and hiring, including the federal Age Discrimination in Employment Act (ADEA). ADEA protects individuals who are 40 years of age or older from employment discrimination based on age.

The theory is as follows: a feature on certain social media sites allows a user to see the reason he or she was identified to receive a particular advertisement. The feature may show, for example, the company wanted the ad to reach a certain demographic, i.e., people ages 28 to 45 who live or were recently in the United States. The plaintiff’s bar is seizing upon this type of advertisement and language to allege that the plaintiff is in receipt of direct evidence that the company “regularly targets younger prospective job applicants on [social media sites]” and, therefore, that the company is likely engaged in other forms of hiring discrimination. Based on these ads and these allegations, the plaintiff’s bar is threatening legal action—including filing class and associational charges of discrimination with federal, state, and/or local agencies.

How can Jackson Lewis help?

Our Class Actions and Complex Litigation team has been tracking this development closely. Our goal in bringing these threatened lawsuits to your attention is to provide information and advance notice around a potentially serious issue. Jackson Lewis has assembled an internal team to provide an immediate response to such threats and to efficiently defend employers. If you have any questions, or if you would like to discuss your company’s recruiting and hiring practices in detail, please reach out to Stephanie Adler-Paindiris, Paul Patten, Eric Magnus and Tory Chavey.

For more information on these articles or any other issues involving labour and employment matters in United States, please contact John Sander, Principal at Jackson Lewis P.C. (www.jacksonlewis.com) at John.sander@jacksonLewis.com

China: The Anti-Unfair Competition Law of the People’s Republic of China was amended

The Standing Committee of the National People’s Congress has amended the Anti-Unfair Competition Law of the People’s Republic of China (the “Anti-Unfair Competition Law”). The newly-amended Anti-Unfair Competition Law specifies the definition of the party that accepts bribery in commercial bribery, deletes the provision that “giving or accepting kickbacks secretly without truthful records in accounting books should be deemed as giving or accepting bribes” and provides that operators are not even allowed to unduly influence a third party that may play a material role in the decision of the contemplated transaction. The Anti-Unfair Competition Law also regards employees’ act of commercial bribery as their employers’ act and imposes tougher administrative punishment for commercial bribery. In addition, in order to improve protection for trade secret, the new Anti-Unfair Competition Law elaborates on employers’ engagement in unfair competition by employing their competitors’ former employees and by obtaining trade secret from competitors’ lawyers, accountants or any other independent service providers. The newly-amended Anti-Unfair Competition Law will come into effect on January 1, 2018.

For more information on these articles or any other issues involving labour and employment matters in China, please contact Carol Zhu, Partner at Zhong Lun Law Firm (www.zhonglun.com) at carol.zhu@zhonglun.com

Canada: Recent Report of the Ontario Human Rights Commission Says Discrimination Mostly Occurs at Work

On December 8, 2017, the Ontario Human Rights Commission (the “Commission”) released a report entitled, “Taking the pulse: People’s opinions on human rights in Ontario”. The report examined the results of a public opinion survey of 1,501 people aged 18 and older. The survey sample was generally proportionate to Ontario’s population in terms of gender, age group, ethnic and racial identities, disability status, foreign-born populations, education and income levels, and regional distribution.

The purpose of the survey was to gauge and give a voice to attitudes relating to human rights in Ontario, both positive and negative. The survey asked respondents about their human rights awareness, attitudes towards certain groups, and personal experiences of discrimination. The survey questions covered a broad range of the prohibited grounds of discrimination in employment, housing and services under the Ontario Human Rights Code (the “Code”).

The survey reportedly revealed that discrimination mainly occurs at work. In fact, 45 per cent of respondents who experienced discrimination or harassment in the past five years reported that the prohibited conduct occurred in the workplace.

The survey also revealed that discrimination remains grossly underreported. According to the survey results, 48 per cent of respondents who reported experiencing discrimination did not report it.

The Commission’s report highlights the significance of the issue of workplace discrimination and harassment and the prevalence of such claims. The number of new applications filed at the Human Rights Tribunal of Ontario each year continues to increase. It is anticipated that we will see an even greater increase should proposed legislative changes become law. The Human Rights Code Amendment Act, 2017 proposes to amend the Code to include four new prohibited grounds of discrimination: immigration status, genetic characteristics, police records, and social conditions. Should the proposed amendments become law, applicants will be able to file human rights applications with the Tribunal on the basis of these four prohibited grounds in addition to the grounds currently prescribed.

The Commission’s report serves as a timely reminder of the obligations of employers in the human rights context. Every person who is an employee has a right to freedom from discrimination and harassment on the basis of the prohibited grounds in the workplace. Employers have a corresponding duty to provide a workplace that is free from such discrimination and harassment, which includes a duty to investigate complaints of discrimination and harassment.

In the ever-evolving area of human rights law, employers are advised to review and ensure that policies and practices are fair and equitable. Complaints of discrimination and harassment must be taken seriously and investigated in a manner that is appropriate in the circumstances. Employers should be mindful of possible human rights issues in the workplace, and contact legal counsel for clarification when in doubt.

For more information on these articles or any other issues involving labour and employment matters in Canada, please contact Robert Bayne, Partner at Filion Wakely Thorup Angeletti (www.filion.on.ca) at rbayne@filion.on.ca

UK: Corporate governance: Parker Review – final report on ethnic diversity on boards

The recommendations made in the final report remain unchanged from those made in the consultation version of the report. The final report makes the following recommendations amongst others:
• Increase the ethnic diversity of UK boards. There should be at least one director of colour on each FTSE 100 board by 2021 and each FTSE 250 board by 2024.

• Develop candidates for the pipeline and plan for succession. FTSE 100 and FTSE 250 companies should develop mechanisms to identify, develop and promote people of colour within their organisations to ensure that there is a pipeline of board-capable candidates, and their managerial and executive ranks appropriately reflect the importance of diversity to their organisation.

• Enhance transparency and disclosure. The company’s annual report should include a description of the board’s policy on diversity. This should include a description of the company’s efforts to increase, among other things, ethnic diversity within its organisation, including at board level. Companies that do not meet board composition recommendations by the relevant date should disclose in their annual report why they have not been able to achieve compliance.

The Committee encourages members of the FTSE 100 and FTSE 250 to adopt the recommendations on a voluntary basis, however if there is insufficient progress towards the goals on that basis, the Committee reiterated that it may revise its approach and endorse that the recommendations (or relevant parts of them) become mandatory.

For more information on these articles or any other issues involving labour and employment matters in United Kingdom, please contact Robert Hill, Partner at Clyde & Co (www.clydeco.com) at robert.hill@clydeco.com

UK: Employment tribunal fees: refund scheme annouced

In October 2017, the government launched the initial phase of its tribunal fees refund scheme following the Supreme Court’s July 2017 ruling that the fees being charged in employment tribunal claims were unlawful. The government has now rolled out the scheme in full. As expected, the scheme is open to claimants and respondents who paid a fee. It includes those who reimbursed their opponent for a fee because they were ordered to do so by the tribunal, and those who paid Employment Appeal Tribunal fees. The scheme is also open to those who paid a fee on behalf of a party to a claim (and who have not been reimbursed), such as lawyers and trade unions. However, the refund scheme does not cover payments made under a settlement agreement designed to compensate a claimant for a fee that they paid, even though it appears that the claimant may still be eligible to apply for a refund under the scheme. Eligible parties can apply online or by post.

For more information on these articles or any other issues involving labour and employment matters in United Kingdom, please contact Robert Hill, Partner at Clyde & Co (www.clydeco.com) at robert.hill@clydeco.com

UK: Modern slavery: updated guidance

Certain organisations are required by UK law to provide an annual statement on slavery and human trafficking with information about the steps the organisation has taken to ensure modern slavery is not taking place in their business or supply chains.

Although no fundamental changes have been made to the guidance that was originally published in October 2015, the key changes are that the updated guidance:

• highlights that smaller organisations who are not required by the legislation to make a statement may choose to do so voluntarily, and encourages all businesses to be open and transparent about their recruitment practices, policies and procedures in relation to modern slavery and to take steps that are consistent and proportionate with their sector, size and operational reach

• emphasises the importance of continuity of statements, encouraging organisations to continue publishing a statement each year even if they are not required to do so (e.g. because their turnover falls below the £36 million threshold). It also emphasises the importance of statements from previous years being available online even when new statements are published so that the public can compare statements and monitor the organisation’s progress over time

• states that it is best practice for the director who signs the statement to sit on the board that approved it and include in the statement itself the date on which it was approved

• includes a definition of child labour and recognises that children are particularly vulnerable to exploitation.

For more information on these articles or any other issues involving labour and employment matters in United Kingdom, please contact Robert Hill, Partner at Clyde & Co (www.clydeco.com) at robert.hill@clydeco.com