The parameters of Title VII of the Civil Rights Act, the Fair Labor Standards Act and the National Labor Relations Act are evolving without legislative action, and employers must revisit their policies and decision-making processes to comply with agency pronouncements such as those described below.

EEOC Declares That Title VII Prohibits Sexual Orientation Discrimination.

Title VII prohibits discrimination on the basis of specific characteristics, including sex. 42 U.S.C. § 2000e-16(a).  Proposed legislation adding sexual orientation as a protected characteristic under Title VII has been submitted to Congress for the past twenty years, but it has never passed.  The EEOC, however, has issued a new decision pronouncing that “sexual orientation is inherently a ‘sex-based consideration,’ and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.”  In Doe v. Foxx, Appeal No. 0120133080 (July 15, 2015), a federal air traffic control specialist asserted a discrimination claim under Title VII, alleging that he was not selected for a permanent position with the Federal Aviation Administration because he is gay.  The employee based his claim on evidence that his supervisor, who was involved in the decision making process for the position he sought, made disparaging comments about gays in the workplace.

The EEOC interpreted Title VII’s prohibition against discrimination by government employers, which is essentially identical to that applicable to private employers.  Despite acknowledging that Title VII does not expressly prohibit discrimination on the basis of sexual orientation and the history of failed attempts to amend the statute, the EEOC concluded that: “Title VII’s prohibition of sex discrimination means that employers may not “[rel]y on sex-based considerations” or take gender into account when making employment decisions.  This applies equally in claims brought by lesbian, gay, and bisexual individuals under Title VII.”  The EEOC explained its reasoning as follows:

  • “Sexual orientation as a concept cannot be defined or understood without reference to sex.”  
  • Sexual orientation discrimination is analogous to associational discrimination (i.e., discrimination based on interracial marriage) that courts have held prohibited under Title VII.  “That is, an employee alleging discrimination on the basis of sexual orientation is alleging that his or her employer took his or her sex into account by treating him or her differently for associating with a person of the same sex.”  
  • “Sexual orientation discrimination also is sex discrimination because it necessarily involves discrimination based on gender stereotypes,”  which is prohibited by decisions such as Price Waterhouse v. Hopkins, 490 US 228, 239, 241-42 (1989).
  • Even though Congress may not have envisioned the application of Title VII to associational discrimination or gender stereotypes when the law was passed, the Supreme Court’s ruling in Oncale v. Sundowner Offshore Services, Inc. that same-sex harassment is actionable under Title VII confirms that “statutory prohibitions often go beyond the principal evil [they were passed to combat] to cover reasonably comparable evils, and it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.” 523 U.S. 75, 79, 78-80 (1998). 

Perhaps the EEOC’s decision is not surprising in light of Obergefell v. Hodges, 576 U.S. ___ (2015), in which the Supreme Court legalized same sex marriage throughout the country.  But it is contrary to a number of court decisions holding that Title VII does not prohibit discrimination based on sexual orientation since that characteristic is not listed in the statute.  Employers should not ignore the EEOC’s strong message that employment decisions cannot be based on employees’ or applicants’ sexual orientation, whether Congress amends Title VII or not.

DOL Pronounces That Most Workers Are Employees, Not Independent Contractors, Under the FLSA.

The DOL administers the Fair Labor Standards Act (“FLSA”) and has made misclassification of workers as independent contractors an enforcement priority for several years.   In July, the agency issued Administrator’s Interpretation 2015-1 pronouncing that the test for determining whether a worker is an independent contractor under the FLSA is the “economic realities” test, which focuses on whether the worker is economically dependent on the employer (an employee) or in business for himself (an independent contractor).  The DOL listed the following test factors and made clear that it will strictly construe each factor in favor of a finding that the worker is an employee:

  • Is the work an integral part of the employer’s business?  If yes, the worker is not likely to be an independent contractor.
  • Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?  The DOL will focus on the profit/loss possibilities available to the worker.  
  • How does the worker’s relative investment compare to the employer’s investment?  The DOL notes that the worker’s investment in tools and equipment is not necessarily a business investment or a capital expenditure that indicates he is an independent contractor.
  • Does the work performed require special skill and initiative?  The DOL will focus on a worker’s business skills, judgment, and initiative, and not on technical skills.
  • Is the relationship between the worker and the employer permanent or indefinite?  According to the DOL, “neither working for other employers nor not relying on the employer as his or her primary source of income transform the worker into the employer’s independent contractor.”  The DOL will scrutinize whether the lack of permanence is due to “operational characteristics intrinsic to the industry” (for example, employers who hire part-time workers or use staffing agencies).
  • What is the nature and degree of the employer’s control?  In the DOL’s view, control over the hours when work is performed or even the lack of direct supervision by the employer do not necessarily indicate independent contractor status.  

The DOL’s Interpretation states that all factors must be considered in each case; no one factor (including the control factor which has typically been cited in judicial opinions) is determinative; and the factors should not be applied mechanically.  The agency has thus adopted an extremely broad definition of “employee” and effectively applied a presumption against independent contractor status. 

The consequences of misclassification are significant—it could lead to claims for payroll taxes, penalties and interest, unpaid overtime wages, or failure to provide workers compensation insurance and unemployment benefits.  Any employer who classifies workers as independent contractors should treat this Administrator’s Interpretation as a warning to carefully review the facts surrounding its classification decisions and develop the evidence necessary to satisfy the DOL or the courts in the event of an audit or legal challenge.

NLRB Holds That a Single Employee’s Filing of a Class or Collective Action Lawsuit Equals “Concerted Activity” Under the National Labor Relations Act.

Section 7 of the National Labor Relations Act establishes employees’ right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection,” and Section 8 of the Act prohibits employers from interfering with, restraining, or coercing employees who exercise this right. As a result of the shrinking size of the unionized workforce, the NLRB is zealously enforcing Section 7 rights in the non-union workplace.  The agency has ruled that employees are free to criticize their supervisors and employers on social media, and that confidentiality policies prohibiting employees from discussing topics such as wages and working conditions violate Section 7 rights.  In a recent decision, the NLRB again stretched the definition of “concerted” activity by holding that “the filing of an employment-related class or collective action by an individual employee is an attempt to initiate, to induce, or to prepare for group action and is therefore conduct protected by Section 7.” 

In 200 East 81st Restaurant Corp. d/b/a Beyoglu, 362 NLRB No. 152 (July 29, 2015), a waiter filed a collective action FLSA overtime suit on behalf of himself and other restaurant employees.  The employer made a silly decision to discharge the waiter for filing the suit.  This type of retaliatory action is specifically prohibited by the FLSA, under which the waiter could recover substantial damages and attorney fees.  For some reason, however, the waiter pursued relief under the National Labor Relations Act.

The evidence showed that the waiter filed his FLSA lawsuit without the prior consent of any other employee.  He spoke to one employee who was not interested in joining the lawsuit, and there was no evidence that the employer was aware of this conversation before it terminated him.  Nevertheless, the NLRB found the waiter’s conduct to be protected “concerted” activity.  It reasoned that even if only one employee is involved in filing a representative action, “the filing of the action contemplates – and may well lead to – active or effective group participation by employees in the suit, whether by opting in, by not opting out, or by otherwise permitting the individual employee to serve as a representative of his coworkers.”  Board member Miscimarra dissented on the grounds that the ruling was too broad and,, “depending on the facts, some conduct by employees regarding a non-NLRA claim will trigger NLRA protection even if the claim is not a class or collective action, and other conduct regarding a non-NLRA claim, though it is a class or collective action, may lack NLRA protection.” 

Because the waiter was protected by a strong anti-retaliation provision in the FLSA, there was no urgency for the NLRB to issue a complaint in this case.  Its decision to do so despite the lack of evidence of employee collaboration sends the message that it is on a mission to broaden the application of Section 7 rights for all employees, whether they are represented by a union or not.

Conclusion

The bottom line is that the federal agencies are acting like lawmakers and aggressively expanding the scope of the labor and employment laws they are responsible for enforcing.  Employers cannot rely on old interpretations of these laws that have guided their behavior for years.  Failure to re-examine discrimination policies and worker classification practices could lead to substantial adverse judgments. And non-union employers’ failure to consider the National Labor Relations Act could produce unfair labor practice charges and an unfamiliar litigation process before the NLRB.