Managing employees and non-employees at a dealership has become a more challenging problem in light of recent activities by the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB). Both have the power to bring enforcement actions for fines and penalties against dealers. Let's look at some of the issues that are hot right now
Americans with Disabilities Act (ADA)
The ADA became law in 1990. The ADA is a civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public. It covers both discrimination in employment and prohibits places of public accommodation from discriminating against individuals with disabilities. A dealership is a place of public accommodation. The employment provisions are enforced by the EEOC while the anti-discrimination in places of public accommodation provisions are enforced by the Department of Justice (DOJ).
In August 2016, the EEOC brought an ADA action against a dealership for discrimination in employment by refusing to make "reasonable accommodations" for a job applicant (all aspects of the employment relationship are covered) who failed the dealership's drug test due to the finding of a substance that had been legally prescribed by her doctor. "The list is the list" was the dealer's position in withdrawing an offer of employment despite the employee showing that the banned substance did not affect her ability to perform the duties of the job.
Courts analyze failure-to-accommodate claims via the following approach: (1) The plaintiff bears the burden of establishing that he or she is disabled; (2) The plaintiff bears the burden of establishing that he or she is otherwise qualified for the position despite her disability: (a) without accommodation from the employer; (b) with an alleged essential job requirement eliminated; or (c) with a proposed reasonable accommodation; (3) The employer will bear the burden of proving that a challenged job criterion is essential, and therefore a business necessity, or that a proposed accommodation will impose an undue hardship upon the employer.
The EEOC emphasized that even when employers are legally permitted to conduct drug tests, they must accommodate qualified persons with disabilities. If the failed drug test resulted from the legal use of a prescription drug in accordance with her doctor's orders and the drug will not prevent the employee from performing the essential functions of the job, the employer will likely need to accommodate the employee's drug use. EEOC v. Bell Leasing, Inc., Civil Action No. 2:16-cv-02848 filed August 25, 2016 in the U.S Court for the District of Arizona.
Temporary Hand Controls on Vehicles for Test Drives
As noted above, It is not only discrimination in hiring and terms of employment that the ADA impacts.
One ADA issue currently being litigated in the federal 9th Circuit Court of Appeals is whether or not vehicle dealers have to install temporary hand controls in a vehicle to allow an individual with a disability to test drive that vehicle if such installation is readily achievable. “Readily achievable” is defined by the ADA and implementing regulations as “easily accomplishable and able to be carried out without much difficulty or expense,” and lists several factors for a court to consider in making this determination. 42 U.S.C. 12181(9); 28 C.F.R. 36.104
The ADA defines discrimination to include, among other things, the “failure to make reasonable modifications in policies,, practices, or procedures” to accommodate individuals with disabilities," 42 U.S.C.12182(b)(2)(A)(ii), and the “failure to remove architectural barriers where such removal is readily achievable,” 42 U.S.C. 12182(b)(2)(A)(iv). As noted, dealerships are places of public accommodation subject to these requirements of the ADA.
While the ADA does not require a place of public accommodation to ‘alter its inventory to include accessible or special goods that are designed for, or facilitate use by, individuals with disabilities.’” 28 C.F.R. 36.307(a), the issue may turn on whether a test drive is a “service” covered by the ADA when the accommodation is the placement of a temporary, not permanent, hand control for people who are physically disabled. Another key will be whether a vehicle can come within the broad definition of “architectural barriers.”.
Title III of the ADA prohibits discrimination against any individual on the basis of disability “in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” 42 U.S.C. 12182(a) (emphasis added). “Facilities” includes equipment, rolling stock and other . One of the examples listed is “installing vehicle hand control.” as a step to remove barriers. 28 C.F.R. 36.304(b)(21).
The Department of Labor’s Title III Technical Assistance Manual (TA Manual), which interprets the Department’s ADA regulations, can be read to support the position that the ADA may require an automobile dealership to install temporary hand controls in vehicles available for test drives to allow individuals with disabilities to operate them. See TA Manual § III-4.4200 (1994 Supp.), available at http://www.ada.gov/taman3up.html (car rental facilities).
A 1998 letter issued by the Department of Justice’s Civil Rights Division suggests that there is no distinction between automobile dealerships and car rental companies for purposes of applying the temporary vehicle hand controls requirement. Letter from John L. Wodatch, Chief, Disability Rights Section, Civil Rights Division, Department of Justice, to Trish Farmer, Tennessee Committee for Employment of People with Disabilities (Nov. 10, 1998), available at http://www.justice.gov/crt/foia/readingroom/frequent_requests/ada_coreletter/ltr218.php.
Nevertheless, the federal District Court for the Southern District of California dismissed the plaintiff’s claim that auto dealers should be required to install temporary hand controls in vehicles for test drives. The Court ruled that a vehicle for sale at a car dealership is not an “architectural barrier” within the meaning of the ADA. The Court also ruled that Title III “does not require a place of public accommodation to "alter its inventory to include accessible or special goods that are designed for, or facilitate use by, individuals with disabilities."(quoting 28 C.F.R. 36.307(a)). In this regard, the court noted that “[c]ourts have differentiated between access to a good and the good itself.” Karczewski v. K Motors, 2015 U.S. App. LEXIS 16424 at p. 5 (9th Cir., Sept. 4, 2015) (citation omitted).
The case is currently pending before the U.S. Federal District Court for the 9th Circuit on appeal and will bear watching
Requiring Employees to Arbitrate Workplace Disputes and Waive Class Actions
For a good time now, the NLRB has taken the position that it is unlawful for employers to require employees to arbitrate their grievances with the employer and waive the right to bring a class action. Their thinking is that the class action waiver impedes the employees' right to "concerted action" against the employer. Until recently, most federal Circuit Courts of Appeal had not agreed with the NLRB and allowed mandatory arbitration with class action waivers to proceed.
However, this year two federal Circuit Courts, the 7th and the 9th Circuits, have adopted the NLRB's position and indicated that mandatory arbitration with class action waivers does indeed violate employees' rights to concerted action under the National Labor Relations Act. Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, 2016 U.S.App. LEXIS 15638 (9th Cir. August 22, 2016). The 7th Circuit covers Illinois, Indiana, and Wisconsin and the 9th Circuit covers Alaska, Arizona, Idaho, Montana, Nevada, Oregon, Washington, and California, although the California Supreme Court rejected the NLRB's position so the prohibition on class action waivers does not apply in California state courts Iskanian v. CLS Transportation, 59 Cal. 4th 398, 327 P.3d 129 (2014).
Until the Supreme Court rules on this issue, if you are located in the 7th or 9th Circuit states and elsewhere as a best practice, it would be a good idea to revise your employee arbitration agreement (an arbitration requirement should always be in a separate agreement and not just in an employee handbook that says it does not create a contract of employment). One suggestion is to give your employees the right to opt out of the class action waiver within a reasonable period of time, say within 90 days from their start date. Also, include a provision stating that if the class action waiver is deemed unlawful for any reason, any class, collective, or group action will be heard in a court and not by an arbitrator. Class arbitration is unwieldy and undesirable.
Is Your New Hire an Employee or an Independent Contractor?
Wage and hour suits comprise the majority of lawsuits brought against employers. The Fair Labor Standards Act (FLSA) provides substantial relief for employees, including attorneys' fees. Law firms have been springing up exclusively to bring FLSA claims.
State law penalties can also be significant. For example, under the California Private Attorneys General Act, Lab. Code, § 2968 et seq., an aggrieved employee may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for California Labor Code violations. Lab. Code, § 2699, subd. (a)
The federal government wants to presume that someone doing work for you is an employee unless you can meet the the test developed by the Department of Labor to deem someone an independent contractor. [http://webapps.dol.gov/elaws/whd/flsa/docs/contractors.asp; http://www.dol.gov/whd/regs/compliance/whdfs13.htm]. Follow this test carefully or people you are paying 1099s with no benefits may be deemed employees entitled to benefits and retroactive pay.
In August 2016, the NLRB made public an Advice Memorandum from its Office of General Counsel that effectively said that the misclassification of employees as independent contractors can constitute an unfair labor practice in and of itself. The NLRB does have significant remedial authority to provide "whole relief" to the charging party (the employee or union). In other words, upon finding that an employer has committed an unfair labor practice, the NLRB will order the employer to cease and desist from the unfair labor practice and to take affirmative action to remedy the violation such as back pay and benefits. Penalties can be imposed in private lawsuits with the employer being liable to pay an aggrieved employee's attorney's fees as well.
Exempt vs. Non-Exempt Employees
This has also become a hot issue because of issues concerning whether or not an employee is "exempt" on "non-exempt" from premium overtime pay requirements (generally 1.5 x their hourly rate). To be exempt, you need an exemption, and the minimum salary requirements for exempt "professional employees" (a person who performs duties requiring advanced knowledge in a field of science or learning, requires specialized instruction, who consistently exercises discretion and independent judgment and who receives a salary or guaranty) and "administrative employees" (a person whose primary duty is non-manual work related to policies or general business operations who exercises discretion and independent judgment with little or no supervision and who receives a salary guaranty) has gone up from $425 per week ($22,100 per year) to $913.00 per week( $47,476 per year). "Highly compensated employees" must now make $134,004 per year. A number of specific auto dealer exemptions can exempt certain workers but for the exemptions for partsmen, salesmen, and mechanics to apply, the major part (over 50 percent) of their time must be spent selling or servicing the enumerated vehicles. These auto dealer exemptions must be strictly complied with to assert the exemption.
This is a complex topic and this article is meant to call your attention to the fact that federal regulators are getting much more aggressive in policing practices that they believe cause federal tax revenues to be understated by employers. Expect this trend to continue.
We have barely touched on some critical employment law issues. Now would be a good time to schedule a meeting with your employment lawyer to review your policies, employee handbook, and practices to mitigate your risks. This is one of the fastest-changing areas of law affecting dealers.