Chapter 31

Business Law: Employment, Worker Protection, and Immigration Law

Learning Objectives (1 of 2)

  • 31.1 Define an at-will employee.

  • 31.2 Compare the concepts employee and independent contractor.

  • 31.3 Explain workers’ compensation.

  • 31.4 Illustrate an employer’s duty to provide safe working conditions.

  • 31.5 Summarize minimum wage and overtime pay rules.

  • 31.6 Apply the Family and Medical Leave Act.

Learning Objectives (2 of 2)

  • 31.7 Outline protections of employment health benefits.

  • 31.8 Describe protections of retirement benefits.

  • 31.9 Summarize unemployment compensation.

  • 31.10 Explain Social Security.

  • 31.11 Describe immigration laws and foreign guest worker visas.

Introduction to Employment, Worker Protection, and Immigration Law

  • The employer–employee relationship is governed by:

    • The common law of contracts

    • Agency law

  • This relationship is highly regulated by federal and state governments.

Employment and Employment at Will

31.1 Define an at-will employee.

  • Term employment:

    • A term employee has an employment contract for a specified time period.

    • If terminated before the term ends without cause, the employer is liable for wrongful discharge.

  • At-will employment:

    • An at-will employee does not have a term contract and can be fired or quit at any time without cause.

Exceptions to At-Will Employment

  1. Labor union exception:

    • Federal and state laws restrict discharging employees who are union members, as protected by collective bargaining agreements.

  2. Public policy exception:

    • Employees cannot be fired for refusing to violate public policy, especially for unlawful actions.

  3. Statutory exception:

    • Employees cannot be fired in violation of federal or state statutes.

Employee and Independent Contractor Status

31.2 Compare the concepts employee and independent contractor.

  • Issues arise regarding whether a hired individual is an employee or an independent contractor.

  • Independent contractor:

    • Employers do not provide employee benefits such as:

    • Workers’ compensation

    • Unemployment benefits

    • Contributions to Social Security and Medicare

    • Health plans and pensions

    • Overtime pay and others.

    • Employers are not liable for independent contractors’ negligent or wilful actions that cause injury or death during their work.

  • Courts apply three tests to determine status:

    1. Right to control test

    2. Economic reality test

    3. A B C test

Right to Control Test

Right to Control Test Factors (1 of 2)

  • This common law test assesses control exerted by the employer over the worker, through:

    • The extent of control over work details.

    • Whether the worker engages in a distinct occupation or business.

    • Supervision by the employer vs. independence of the worker.

    • Skills required to perform the work.

Right to Control Test Factors (2 of 2)

  • Additional factors include:

    • Who provides equipment, tools, and workplace.

    • Duration of employment.

    • Payment method (e.g., hourly vs. per job).

    • Whether the work is part of the employer's regular business.

    • Beliefs of both parties regarding their relationship.

Economic Reality Test

  • This is a six-factor test to determine economic dependency:

    • Degree of control by the hiring party.

    • Relative investments of both parties in materials and facilities.

    • Worker’s opportunity for profit or loss.

    • Permanence of the relationship.

    • Integration of the work into the hiring party's business.

A B C Test

  • A modern test that presumes a worker is an employee unless proven otherwise by the employer.

  • The employer must establish:

    1. The worker is free from control and direction of the hirer in performing their work under the contract and in fact.

    2. The worker performs work outside the hirer’s usual business course.

    3. The worker is engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Gig Workers: Independent Contractors or Employees?

  • Gig economy:

    • Consists of temporary and part-time workers engaged in short-term assignments.

    • Many gig workers are classified as independent contractors, though they may prefer full-time employment status.

    • An increasing trend exists where courts and governments classify gig workers as employees.

Case 31.1: State Court Case Gig Economy (1 of 2)

  • Case: Vega v. Postmates Inc.

    • Citation: 35 N.Y.3d 131, 149 N.E.3d 401, 125 N.Y.S.3d 640 (2020)

    • Jurisdiction: Court of Appeals of New York

  • Facts:

    • Postmates uses an app to assign couriers. Vega worked as a courier and was banned from the app due to negative reviews. He applied for unemployment benefits claiming employee status.

Case 31.1: State Court Case Gig Economy (2 of 2)

  • Facts (cont’d):

    • The New York Unemployment Insurance Appeal Board decided Vega was an employee. Postmates appealed, and the Appellate Division reversed this decision.

  • Issue:

    • Are Vega and other gig drivers employees or independent contractors?

Workers’ Compensation

31.3 Explain workers’ compensation.

  • Workers’ compensation provides compensation for workers injured on the job.

    • Workers file claims with the designated agency:

    • Often called the workers’ compensation board or commission.

    • The agency verifies the claim’s legitimacy and disburses benefits accordingly.

Workers’ Compensation Insurance

  • Employers must either:

    • Purchase insurance from private companies or government programs.

    • Self-insure if capable of paying compensation claims.

Employment-Related Injury

  • Workers must demonstrate that the injury occurred during work. Compensation can cover:

    • Physical injuries, stress, and work-related mental illnesses.

Exclusive Remedy

  • Workers’ compensation functions as the exclusive remedy for workplace injuries.

  • Injured workers cannot sue their employers except in cases of intentional injury.

  • Workers can sue responsible third parties for damages.

Occupational Safety

31.4 Illustrate an employer’s duty to provide safe working conditions.

  • Originating in 1970, this federal act promotes workplace safety.

  • Established the Occupational Safety and Health Administration (OSHA), enforcing safety standards.

  • Employers must:

    • Maintain records and report safety incidents.

    • Display notices informing employees of their rights.

Occupational Safety and Health Administration (OSHA)

  • Enforces the Occupational Safety and Health Act.

  • Can adopt rules to interpret and enforce safety regulations.

  • Thousands of safety standards have been put into practice.

Types of OSHA Standards

  1. Specific duty standards:

    • Set safety rules specific to certain jobs, occupations, or conditions.

  2. General duty standards:

    • Require employers to maintain a work environment free of recognized hazards that can cause severe injury or death.

Case 31.2: Federal Court Case OSHA Safety Standard

  • Case: Martin Mechanical Contractors, Inc. v. Secretary, U.S. Department of Labor

    • Case Number: No. 17-12643 (2018)

    • Jurisdiction: United States Court of Appeals for the Eleventh Circuit

  • Facts:

    • Martin failed to provide necessary safety gear and was cited for OSHA violations.

  • Issue:

    • Did Martin commit a willful violation of OSHA standards?

Fair Labor Standards Act (FLSA)

31.5 Summarize minimum wage and overtime pay rules.

  • Enacted in 1938, this federal act aims to protect workers by:

    • Prohibiting child labor.

    • Establishing regulations for minimum wage and overtime.

Child Labor Regulations

  • The FLSA regulates employment types for individuals under 18 years:

    1. Less than 14 years:

    • Only allowed to deliver newspapers.

    1. Ages 14-15:

    • Limited hours in non-hazardous jobs.

    1. Ages 16-17:

    • Unlimited hours in non-hazardous jobs.

    1. Age 18 and above:

    • Any job.

Portal-to-Portal Act

  • This federal statute mandates payment for time spent on activities crucial to primary job duties. Examples include:

    • Time spent attending mandatory meetings.

    • Compensation for short meal breaks less than 30 minutes.

    • Collective bargaining agreements may dictate compensable work activities.

Minimum Wage and Overtime Pay

Minimum Wage

  • Employers must pay nonexempt employees the federal minimum wage for all hours worked.

    • Students and apprentices may receive less.

    • Tipped employees have a special minimum wage rule.

Overtime Pay

  • For nonexempt employees, overtime pay is set at 1.5 times the regular rate for hours worked over 40 in a week.

    • Overtime regulations apply to first responders, regardless of rank.

Exempt Employees

  • Exempt employees do not receive minimum wage or overtime pay; this category includes:

    • Executives, administrative workers, learned professionals, creative professionals, highly compensated employees, computer employees, outside sales representatives, and teachers.

  • Job titles alone do not determine exempt status; actual duties must align with roles stipulated for exemptions. Misclassification can lead to violations of the FLSA.

Case 31.3: U.S. Supreme Court Case Overtime Pay

Case Overview

  • Case: Helix Energy Solutions Group, Inc. v. Hewitt

    • Citation: 143 S.Ct. 677 (2023)

    • Jurisdiction: Supreme Court of the United States

  • Facts:

    • Hewitt was paid on a daily-rate basis that averaged 84 hours weekly. He sued for overtime under the FLSA.

Case Issue

  • Was Hewitt's payment structure considered a salary basis, and thus was he entitled to overtime pay?

Protections for Employees Who Are Nursing Mothers

  • In 2022, the PUMP Act was enacted amending the FLSA:

    • Requires employers to provide reasonable breaks and private space for nursing mothers to express milk up to one year after childbirth.

    • The designated space must not be a bathroom, should be shielded from view, and free from intrusion.

    • Small employers with less than 50 employees may be exempt if it causes undue hardship.

Family and Medical Leave Act (FMLA)

31.6 Apply the Family and Medical Leave Act.

  • This federal law allows up to 12 weeks of unpaid leave in a 12-month period for specific family and medical emergencies. Conditions include:

    • Applicability to employers with 50+ employees, federal, state, and local government workers.

    • Employees must have worked for the employer for at least one year and logged over 1,250 hours in the past year.

Reasons for Leave

  • Permitted reasons for leave include:

    • Birth and care of a newborn.

    • Child adoption or foster care placement.

    • Serious health conditions preventing the employee from performing job functions.

    • Care for a spouse, child, or parent with a serious health condition.

Leave Conditions

  • Birth, adoption, or foster care leave must be continuous unless the employer permits otherwise.

  • Serious health conditions may include physical or mental health needs and require verified documentation.

Military Family Leave

  • Employees can take:

    • 12 weeks for an exigency involving active-duty military family members.

    • 26 weeks to care for a service member with serious injuries.

  • Upon return, employees must resume the same or an equivalent position with similar pay and benefits.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

31.7 Outline protections of employment health benefits.

  • COBRA is a federal law allowing employees and their beneficiaries to maintain group health insurance after involuntary or voluntary termination.

    • Duty to offer continuation of coverage post-employment.

    • Former employees are responsible for paying the total cost of this extended coverage.

  • Coverage is typically available for 18 months after employment ends.

  • Employers must have 20+ employees to be subject to COBRA.

Employee Retirement Income Security Act (ERISA)

31.8 Describe protections of retirement benefits.

  • ERISA aims to prevent fraud and abuse in private pensions. It imposes:

    • Record-keeping and disclosure requirements for employers.

    • Vesting provisions:

    • Vesting: Employees acquire a nonforfeitable right to receive pension benefits.

    • Employees' contributions are vested immediately.

    • Employers' contributions are vested either through:

      • Cliff vesting after five years, or

      • Gradual vesting over seven years.

Unemployment Compensation

31.9 Summary of Unemployment Compensation

  • Unemployment compensation assists temporarily unemployed workers who meet specific conditions.

  • This program was introduced under the Federal Unemployment Tax Act (FUTA) and is managed by states.

    • Employers contribute through unemployment taxes.

Eligibility Requirements

  • Each state sets its own eligibility requirements and benefit amounts/durations. Common requirements include:

    • Being able and available for work.

    • Actively seeking employment.

    • Not being terminated for misconduct.

    • Not having voluntarily left work without justified cause.

Social Security

31.10 Explain Social Security.

  • Social Security provides benefits to employees and their dependents, including:

    • Retirement benefits

    • Survivors’ benefits

    • Disability benefits

    • Medicare

  • Under the Federal Insurance Contributions Act (FICA), employers and employees each contribute to the system. Self-employed individuals pay the full amount as mandated by the Self-Employment Contributions Act.

  • Noncompliance with tax submissions can lead to penalties and criminal liability.

Immigration Law and Employment

31.11 Describe Immigration Laws and Foreign Guest Worker Visas.

  • Immigration is regulated federally through the U.S. Citizenship and Immigration Services (USCIS).

  • Employment Eligibility Verification:

    • Employers must obtain a completed Form I-9 from each employee within their first workday.

    • They must verify identity and employment eligibility.

    • Criminal and financial penalties exist for knowingly hiring undocumented workers.

E-Verity System

  • A web-based system that cross-references Form I-9 data with records from the Department of Homeland Security and the Social Security Administration to confirm eligibility.

  • Employers must maintain Forms I-9 and supporting documents during employment.

Types of Visas for Non-U.S. Citizens

  1. B-1 Visa:

    • For temporary business entry.

  2. B-2 Visa:

    • For tourism or non-business purposes; the Visa Waiver Program (VWP) allows designated country travelers to stay up to 90 days.

  3. F-1 Visa:

    • For students attending U.S. educational institutions.

  4. H-1B Visa:

    • Allows employers to recruit foreign professionals with specialized skills.

  5. EB-1 Visa:

    • For extraordinary ability workers; includes athletes and researchers.

  6. EB-5 Visa:

    • For investors meeting specific requirements for commercial enterprises in the U.S.

  7. L-1 Visa:

    • For transferring international executives and specialized employees.

  8. H-2A Visa:

    • For seasonal agricultural employees.

  9. H-2B Visa:

    • For seasonal or intermittent non-agricultural roles.

Discussion Cases

Case 31.1 Occupational Safety

  • Case: SeaWorld of Florida, LLC v. Perez, Secretary, U.S. Department of Labor

  • Issue:

    • Did SeaWorld breach the general duty clause?

Case 31.2 Overtime Pay

  • Case: Encino Motorcars LLC v. Navarro

  • Issue:

    • Are service advisors exempt employees regarding overtime pay?

Case 31.3 At-Will Employment

  • Case: Dore v. Arnold Worldwide, Inc.

  • Issue:

    • Was Dore an at-will employee subjected to termination without cause?

Case 31.4 Workers’ Compensation

  • Case: Walmart Stores v. Henle

  • Issue:

    • Is Henle entitled to permanent total disability under workers' compensation?

Case 31.5 Ethics

  • Case: Kelley v. Coca-Cola Enterprises, Inc.

  • Issue:

    • Is Kelley entitled to workers’ compensation benefits? Was Coca-Cola ethical in denying payment?

Case 31.6 Ethics

  • Case: R. Williams Construction Company v. Occupational Safety and Health Review Commission

  • Issue:

    • Did Williams violate OSHA trench safety standards? Was the denial of liability ethical?