Private sector employers with unionized employees and even non-union employees must be especially careful when addressing certain workforce concerns connected with the coronavirus outbreak.  Below, we will address common issues that may arise in union facilities during this crisis. Management & Labor Report - Default Social Share Image

Analyze the Contract Before Making Changes to the Workforce

If there is a current collective bargaining agreement (CBA), it may provide the employer with the authority to make workplace changes, such as reducing schedules or laying off employees, to address the crisis. Even if the agreement does not expressly reference the right to reduce schedules or lay off employees, recent case law from the National Labor Relations Board (NLRB) allows for employer action if the contract generally covers the employer’s ability to take such action. Employers must also be prepared to satisfy any obligations attendant to taking actions such as layoffs, which could include payment of PTO or other benefits. In these situations, it is very important to review the entire collective bargaining agreement to be prepared for the consequences of drastic decisions.

What if the CBA restricts the employer’s ability to reduce schedules or lay off employees? Generally, an employer or union can refuse to even discuss modifications to contract provisions during the term of a CBA. This does not mean that an employer cannot propose changes to the agreement to avoid more drastic consequences such as complete shutdown or closure. Employers should engage with unions to attempt to achieve compromise if the CBA inhibits an employer’s ability to take necessary action.

If There Is no CBA, Changes to the Workforce Are Subject to Bargaining

If there is no CBA in place, or an existing contract does not cover the measures contemplated by the employer, any changes to the workforce would be subject to the duty to bargain. The National Labor Relations Act (NLRA) requires employers and unions to bargain over subjects including wages, hours and other terms and conditions of employment (often referred to as the “mandatory subjects of bargaining”), which would include many actions taken by employers in this crisis. These subjects would include negative measures such as layoffs, and would even include positive measures such as hazard pay for employees. Where the duty to bargain applies, the employer would need to reach agreement or impasse in negotiations with the union before making unilateral changes regarding mandatory subjects of bargaining.

Exigent Circumstances and the Duty to Bargain Over Effects

Government closures or current economic conditions may excuse bargaining due to exigent circumstances, but employers’ duty to participate in effects bargaining duty remains. NLRB case law allows for an exception to the duty to bargain in extreme circumstances where “economic exigencies … compel prompt action.” This exception has been construed extremely narrowly and is limited in duration, but in view of the current events, employers would be well-advised to closely examine whether this exception applies. If the “economic exigency” exception to the duty to bargain applies, an employer would not need to bargain with a union over the decision to close a facility or take some drastic action to comply with government orders or survive economically in these trying times.

Where there is a CBA in place, there may be provisions that address the manner in which employees are treated in terms of pay and benefits when they are put out of work due to a closure. For example, if employees are laid off as a result of the closure, then the CBA’s provisions governing layoffs would dictate the outcome.

But, where there is no CBA in place, or the CBA does not address the relevant issues related to the closure, the duty to bargain continues. The duty to bargain embraces not just decisions made by employers, but the effects of an employer’s actions, even if an employer lawfully made a decision regarding a mandatory subject without bargaining regarding that subject. Therefore, even if “exigent circumstances” would permit an employer to act without bargaining – such as when it is ordered to shut down operations by government authorities – a union could demand to bargain over the effects of that decision, including severance pay, extension of benefits or rights of employees to return to work after the order is lifted.

Be Prepared for Strikes, Refusals to Work, or Other Protected Concerted Activity

The NLRA guarantees all employees, not just employees represented by unions, the right to strike or to collectively refuse to work. However unionized employees are more likely to strike than others.

Most CBAs contain no-strike clauses, which prohibit the employees from striking. Those provisions prevent strikes, unless the conditions at the work location are “abnormally dangerous,” which could arise under the current circumstances, on a case-by-case basis, depending on many factors such as the presence of coronavirus in the workplace and the nature of the workplace (e.g. hospital or office building).

If there is no CBA – or even if employees are not represented by a union – employees could strike, refuse to work or engage in other forms of protected activity to pressure employers to change working conditions during the crisis or to attempt to extract benefits from employers following layoffs or reductions in schedules. In addition, employees may be protected under federal labor law if they refuse to work in a concerted manner due to fear of coronavirus in the workplace.

Employers Are Obligated to Pay Federal Paid Sick Leave

Recently enacted federal laws obligating employers to paid up to 80 hours of paid sick leave and expanded paid Family and Medical Leave Act (FMLA) leave are not negated or affected by existing CBAs. Unionized employers will be required to provide these new benefits in addition to benefits like paid leave that are contained in their union contracts.

Carefully Evaluate When to Act, When to Negotiate, and When to do Both – or Neither

Managing union represented workforce can be challenging at the best of times. The coronavirus and the accompanying economic circumstances do not make it any easier. For employers with union relationships, the best way through this crisis may often, but not always, be to work with unions to try to arrive at a negotiated agreement regarding modified terms which respond to the crisis with an outcome that balances the well-being of the business and the interests of employees in these trying times.

Each employer will need to review the issues we have discussed with a mind to the particular industry in which it operates and the tenor of the relationship with the union at its facilities.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

Robert Nagle is a partner in the firm’s Labor and Employment Department, resident in its Blue Bell, PA office.

Robert Castle is a partner in the firm’s Labor and Employment Department, resident in its Minneapolis office.

Employers have been privileged to withdraw recognition of a union when presented with objective evidence that the union has lost majority support of employees, but have faced significant legal risks in doing so under NLRB precedent.  Some of this legal risk has been mitigated by the NLRB’s decision in Johnson Controls, Inc., 368 NLRB No. 20 (July 3, 2019).  This decision not only clarifies some aspects of the law in this area, but also presents a new framework for addressing the issue of “anticipatory withdrawal” of recognition by an employer.Management & Labor Report - A Fox Rothschild Blog

The law surrounding withdrawal of recognition can be highly fact dependent.  One major issue of concern is whether the employees who are expressing discontent against their union are covered by a current collective bargaining agreement (“CBA”).  The law for decades has been that an employer cannot withdraw recognition of a union during the term of a CBA because, while a CBA is in effect, the union enjoys an irrebuttable presumption of majority support.  This means that even if a majority of employees do not actually support the union, their employer cannot cease recognizing the union as their bargaining agent.  While this rule is supported by lofty goal of maintaining stability in economic relations, it can thwart the will of employees who, for various reasons, desire to oust their union.  It also places employers in the precarious position of recognizing a union that may not enjoy the support of a majority of employees.

The tension between stable economic relationships and majority will of employees was eased to some extent by the NLRB’s “anticipatory withdrawal” doctrine.  This rule allows an employer to announce, near the time of contract expiration, that it would withdraw recognition at the end of an existing CBA if it received objective evidence, usually in the form of a petition from employees, that they no longer supported the union.  Before the decision in Johnson Controls, Inc., anticipatory withdrawal allowed the employer to continue to recognize the union and honor the CBA until the term ran out, while making it clear that it will no longer do so after the CBA expired, therefore supporting the twin goals of stability and employee majority will.

The “anticipatory withdrawal” doctrine, however, had its faults.  One major fault was that, after employees presented the employer with evidence of lack of majority support, the union could “re-organize” the employees and regain the support of a majority of employees.  Once the union regained a majority, which was often done without employer knowledge, the employer would be facing legal risk by carrying out its plan to withdraw recognition.  For example, if there was an employee petition expressing lack of majority support, those who had signed the petition given to the employer could, in secret, sign a new union authorization card and renege on their expression of lack of union support.  The NLRB had held that the “last in time” rule governed this process, so that the employer acted at its peril in withdrawing recognition from the union without specific knowledge that some employees may have changed their minds.

Johnson Controls remedies the “last in time” problem by allowing an employer to anticipatorily withdraw recognition based on objective evidence that the union has lost majority support of employees without worrying about whether the union will reacquire majority support.  Once the employer anticipatorily withdraws, the union must file an election petition to formally regain authorization from the employees.  The ruling sets a 45-day deadline for the union to file the election petition, which begins on the date on which the employer announces anticipatory withdrawal of recognition.

Johnson Controls also clarified the rule by defining the “reasonable” time period to announce anticipatory withdrawal.  Prior to this ruling, NLRB precedent allowed for anticipatory withdrawal if the employer received evidence of loss of majority support within a “reasonable time” before the expiration of a CBA.  The decision expressly marks the timeline as 90 days before expiration.  The NLRB noted that this timeline aligns with the usual time period for filing decertification and rival union election petition between 90 and 60 days prior to contract expiration.

Finally, the NLRB provided several clear explanations for some implications of its ruling.  First, it reiterated, based on precedent, that the employer’s anticipatory withdrawal must be based on objective and untainted (no employer support) evidence that actually demonstrates loss of majority support.  If the union did not actually lose majority support, the employer cannot rely on a reasonable or good faith belief that the union lost the support of employees.  Johnson Controls does not change this rule.  Second, the NLRB warned employers that making unilateral changes to working conditions following anticipatory withdrawal and contract expiration may have consequences, depending on the circumstances.  Essentially, unilateral changes may constitute objectionable conduct for purpose of an election, if the union files a petition to regain support within 45 days of the anticipatory withdrawal, or could constitute unlawful unilateral changes if the union prevails in such an election.  If the union does prevail in the election, then the changes would only be unlawful from the date of “re-certification” on the election date, but not for any time between the proper withdrawal upon expiration of the agreement and the date of the election.

As should be apparent from these warnings from the Board, anticipatory withdrawal, or withdrawal of recognition of any kind for that matter, presents certain legal risk, regardless of the note of clarity struck by the Johnson Controls decision.  Employer’s must, therefore, think critically, and carefully evaluate the risks when considering anticipatory withdrawal.  Consultation with experienced labor Counsel is recommended to fully appreciate all relevant concerns.

George J. “Jerry” Oliver is a partner in the firm’s Labor and Employment Department, resident in its Raleigh office.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

Due to the coronavirus outbreak, the NLRB has delayed its roll out of amendments to the “quickie” election rules, which we discussed in a previous post.  Instead of becoming effective on April 16, 2020, the rule changes will now be effective on May 30, 2020.  The scope of the crisis caused by the coronavirus outbreak may require further delays.  Stay tuned.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

For many years, the NLRB has required evidence of a “clear and unmistakable” waiver by unions of the duty to bargain with management over workplace changes.  Now, after prodding from some Courts of Appeals, the NLRB has changed its standard: employer changes to workplace conditions will only require evidence that the change is “covered” by a collective bargaining agreement.  This means that the NLRB will not require hyper-specific language or other types of evidence to find a bargaining waiver on a certain subject.

Generally, once a union is certified as the employees’ exclusive bargaining representative, the employer cannot make any unilateral changes to wages or working conditions.  It must bargain with the union over any changes to the workplace that affects mandatory subjects of bargaining, which can include obvious matters such as vacation time and retirement benefits, but can also include changes to the manner of production in some cases.

The duty to bargain over these subjects can be waived by unions.  For instance, a union may decide that management’s workplace change is acceptable or that their attention is best directed elsewhere.  There are also times, however, where a union seeks bargaining over an impending change, but the employer claims that that collective bargaining agreement allows it to take the action at issue.

Under the previous NLRB standard, the employer would need to point to specific language in the contract that allowed it to take the specific action at issue.  However, under the “contract coverage” standard, the employer need only point to general language in the contract that covers the intended action.

For example, in a recent case the employer contended that the right to “adopt and enforce rules and regulations and policies and procedures” allowed it to establish an absenteeism policy.  Under the “clear and unmistakable” standard, the Board would find that the right to adopt rules did not include absenteeism policies because that type of rule is not specifically mentioned.  However, under the “contract coverage” standard, the right to adopt rules would include absenteeism policies.

Going forward, this standard will help employers make unilateral changes that it would have fallen victim to the clear and unmistakable standard of the past.  Only time will tell how the Board will apply this new standard to cases involving language that is more general.  We should expect that employers will try to make the most of this new precedent.  Stay tuned.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

The National Labor Relations Board recently scaled back the 2015 “quickie” election rule, which had sped up the timelines for conducting union elections.  Speeding up the process provided an advantage to unions by setting short deadlines that often ambushed employers, leaving them with limited time to react to the election petition.  The new rule offers welcome relief to employers and adds more time to address pre-election issues.

The new rule modifies the 2015 “quickie” election rule in the following significant ways:

Pre-Election Hearing / Statement of Position

  • The pre-election hearing will normally be scheduled for 14 business days, rather than 8 calendar days and for good cause the Regional Director can postpone the opening of the hearing.
  • Prior to the hearing, employers will be required to serve the statement of position, which sets forth the employer’s legal arguments and contains information about the bargaining unit of employees sought by the union, within 8 business days of the filing of the petition, instead of 7 calendar days. The Regional Director, for good cause, will have the discretion to grant additional time for filing and service of the statement.
  • At the hearing, employers can litigate substantive issues regarding the makeup of the bargaining unit and voter eligibility, including supervisory status, rather than leaving these matters to be decided after the election, which was the default method under the 2015 rule. Under that rule, employees would vote in the election even if they were later determined to be ineligible.
  • The right for Employers and unions to file post-hearing briefs after the pre-election hearing has been restored. The briefs must be filed within 5 business days and the Hearing Officer may grant up to 10 additional business days for good cause.  Under the 2015 rule, the Board’s regional director handling the election would need to grant special permission for briefs.

Notice of Election / Voter List

  • Employers will be required to post the notice of election petition – a notice intended to inform employees that an election petition has been filed by a union – within 5 business days of the filing of the election petition, instead of 2 business days.
  • Employers will have 5 business days, rather than 2 business days, to serve the voter list after the direction of election. This list contains employee names, job information, and contact information – home addresses, home and cell phone numbers, and email addresses – which can be difficult to compile for large bargaining units.

Scheduling of Election

  • Elections will now not be scheduled before the 20th business day from the date of the direction of election, rather than on the earliest practical date under the 2015 rule.

Appeal Procedure / Certification of Election Results

  • Election result will not be certified if a party files a request for review with the Board. Under the 2015 rule, the Regional Director was required to certify an election result despite a request for review pending before the Board.

The new rule offers commonsense changes to the 2015 “quickie” rule that provides Employers additional business day time periods to raise substantive concerns and compile employee information in the pre-election stage.

George J. “Jerry” Oliver is a partner in the firm’s Labor and Employment Department, resident in its Raleigh office.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

While it may come as a surprise, the NLRB has long held that employees are sometimes entitled to use profane language while engaging in labor activities.  In recent years, the Board has found that employee speech was protected where:

  • An employee posted online that his supervisor was a “NASTY MOTHER F**KER don’t know how to talk to people!!!!!! F**k his mother and his entire f**king family!!!!” while also noting an upcoming union election.
  • An employee used racist language while on a picket line during a strike.

When evaluating profane (and even overtly racist) language, the Board weighs various factors to determine whether the profane statements are not so egregious so that the employee will lose protection of the NLRA.  The Board often notes the high emotional context of labor disputes to justify vulgar behavior of employees.  In recent years, Courts of Appeals have been questioning whether such activities should remain protected under federal labor law, including in both cases mentioned above.

With this context, the Board has requested briefs in a case that involves, among other things, an employee’s statement that his supervisor could “shove it up his ass.”  Usually, an invitation for briefs signals that a majority of the Board is ready to overturn or modify precedent.  Given that the Board has selected a case with an egregious statement like this, it may be a safe bet that the NLRB will be unveiling a new standard for profane language in the near future.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

The National Labor Relations Board recently invalidated an arbitration agreement that would require employees to arbitrate all “all claims or controversies” with their employer, holding that such a provision would unlawfully restrict employees’ access to the Board to adjudicate labor disputes.

The Board’s decision in Prime Healthcare could reverberate widely because the language it declared invalid is particularly common in arbitration agreements.

In the ruling, the Board revisited a topic on which it has previously found itself at odds with the U.S. Supreme Court.

In an earlier ruling, the Board struck down an arbitration agreement on the grounds that it was contrary to the collective rights contained in the National Labor Relations Act to engage in concerted actions with other employees, including engaging in class action litigation. But the Supreme Court overruled this position in Epic Systems v. Lewis and found that employers could lawfully prohibit the use of the class action vehicle in arbitration.

The Epic Systems decision, however, did not eliminate all potential restrictions to arbitration agreements based on the NLRA. While the justices expressly allowed employers to prohibit class actions in arbitration, they did not address the issue of employee access to the Board. Accordingly, employers should not regard Epic Systems as a panacea for NLRA-based challenges to arbitration agreements.

Several factors suggest that the Prime Healthcare decision may have staying power.

First, it was not decided with a partisan split between Board members, as is the standard operating procedure at the NLRB when controversial issues arise. Unlike past decisions on class action in arbitration, Prime was unanimously decided without a dissent from Republican-nominated members.

Second, the Board reviewed the question of Board access using the test expressed in Boeing(generally considered an employer-friendly test) which balances an employer’s legitimate interests against the interests of employees to pursue claims against their employers. The Board in Prime Healthcare rejected any justification for the arbitration agreement that restricted employees, even implicitly, from taking complaints to the NLRB.

Third, and perhaps most importantly, the Prime Healthcare decision is likely to affect boilerplate arbitration agreements in place around the country. The specific language at issue – “all claims or controversies” – is extremely common in arbitration agreements. By finding that this routine, boilerplate language renders an arbitration agreement void, the Board has effectively invalidated scores of arbitration agreements.

Therefore, employers should be aware that this unanimous NLRB decision creates a bright-line rule that prohibits broad employment arbitration agreements that confine “all claims or controversies” to the arbitration process. It would be wise to review the language of all arbitration agreements for compliance with the Prime decision and make sure that these agreements allow employees to access to the NLRB.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

Federal labor law protects neutral (secondary) employers from becoming entangled in labor disputes between another (primary) employer and unions.  For most of the past decade, however, the NLRB has allowed unions to set up various displays – including an inflatable rat (otherwise known as “Scabby”) and an inflatable “fat cat” – near neutral employers’ premises or work sites with relative impunity.Management & Labor Report - Default Social Share Image

A recent memo from the NLRB’s Division of Advice signals a change in position of the Board’s prosecutorial arm.  The memo concerned  a construction site in Chicago where a union placed agents with a large banner and a large inflatable cat clutching a construction worker by the neck.  The banner and inflatable cat indicated that the union had a labor dispute with the general contractor (primary) on the project, even though the electrical subcontractor (secondary) was the entity truly targeted by the union.

The purpose the banner and rat was to try to force the general contractor to use an employer, i.e., subcontractor, that was a signatory to the union’s collective bargaining agreement.  Due to this purpose, labor law limited the methods at the union’s disposal to protest the general contractor.  As such, the union was prohibited from engaging in picketing, which has a technical meaning in this context and was limited to patrolling an area or creating a physical barrier at the work site.  The union was also prohibited from engaging in coercive conduct that is tantamount to picketing, which has, in past Board decisions, included the use of extremely loud megaphones or even by way of a signal to others of an invisible picket line.

Under a line of Board cases from 2010 and 2011, the activity involving the banner and the rat have been lawful as non-picketing activity which is not otherwise coercive.  The banner and the rat have been considered to be stationary objects, even when accompanied by union agents, that do not create a physical or psychological barrier that would affect the business of the neutral employer.

The new Advice memo indicates that the Board’s General Counsel will urge reconsideration of Board precedent in this area.  In the memo, the Division of Advice found that the banner and the inflatable cat strangling a construction worker was tantamount to picketing or constituted signal picketing.  Whether it is actually picketing, or just a signal standing in for picketing, the conduct coerces employees, suppliers, or vendors from entering the site to work for or do business with the neutral electrical subcontractor general contractor.  Based on this reasoning, the Division of Advice ordered that a complaint be issued. and instructed NLRB attorneys handling the case to argue for the reversal of precedent on this topic.

Does this mean that Scabby the rat is dead?  Can unions no longer use banners and inflatable animals to protest?  The answer is no.  Scabby is likely alive and well, at least for now.  The NLRB itself would need to overturn the applicable precedent; the position of the Division of Advice is not precedential nor sufficient to change the NLRB’s position.  In fact, a NLRB Administrative Law Judge recently found that a union acted lawfully by using an inflatable rat, passing out handbills, and using a bullhorn at high volume when targeting a neutral employer on a construction site.

And even if the NLRB agreed with the General Counsel’s new position, the holding could be limited to conduct including both a banner and an inflatable object at the same time, where the inflatable animal used here was shown straggling a construction worker – an act of physical violence.  If unions contain their activity to one “prop” at a time, or at least just use Scabby the rat without any depictions of violence, they will be in a better position to maintain the status quo on secondary activity.  The case will now progress to the complaint stage, which, if not settled, may eventually bring the case before the Board.  For now, Scabby the rat and the Fat Cat live on.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

Since the emergence of the “gig economy” in the last decade, courts and government agencies have grappled with the question of whether gig workers should be classified as employees or contractors.  The answer to that question has enormous consequences for employee coverage under various federal and state employment laws, ranging from anti-discrimination statutes like Title VII to wage-and-hour laws like the Fair Labor Standards Act.  Generally, these laws usually only cover employees, and exclude contractors.

The National Labor Relations Board, which administers the National Labor Relations Act, recently weighed in on the issue.  The Division of Advice, which is within the office of the NLRB’s General Counsel, recently published a memorandum describing the reasons why Uber drivers are considered to be contractors, not employees for purposes of the NLRA.  This means that Uber Drivers do not enjoy the protections of the NLRA, including, among other privileges, the right to strike and organize with fellow employees to try to improve wages and working conditions.

Like other employment laws, the NLRA applies only to employees, and expressly excludes independent contractors from its coverage.  When a worker’s classification as an employee or contractor is in question, the NLRB applies a factor test that is rooted in the common law of agency.  Of the many factors that may be considered (the list of factors is non-exhaustive), the NLRB especially looks to the extent of control by the purported employer over the worker and the extent of “entrepreneurial opportunity” of the worker.  The greater the worker’s entrepreneurial control, the more likely the worker will be considered a contractor, rather than an employee.

The memo found that Uber drivers are contractors for two core reasons.  First, Uber does not exert a sufficient amount of control over drivers to be consider their employer.  The drivers have “near complete control” of their schedules, and can log on or off the platform at any time for any reason.  Uber does not assign rides to particular drivers, provide cars or other equipment (drivers supply their own cars), or supervise drivers while they are logged into the app and working, which is essentially outsourced to the passenger rating system.  Indeed, Uber has a “hands off” approach to its drivers.

Second, the system created by Uber for drivers generally allows for drivers to control their own entrepreneurial destiny.  Uber’s lack of control provides room for the drivers to serve their own economic objectives and interests (i.e., the more you work, the more you can potentially earn and vice-versa).  Of note, Uber’s rules allow for drivers to utilize other ridesharing apps or pursue other transportation-related businesses in addition to driving for Uber.

Due to Uber’s lack of control over drivers and the entrepreneurial opportunity of drivers, the General Counsel found that the drivers were contractors who do not enjoy the protections of the NLRA.  For this reason, the Division of Advice ordered that the driver’s complaints be dismissed.

The drivers can appeal the dismissal to the NLRB’s General Counsel or withdraw their complaints prior to formal dismissal.  It is expected that the General Counsel would agree with the conclusions of the Advice memo.  While the memo is not technically binding on the NLRB, the General Counsel’s office controls the cases that are brought before the NLRB, so, without a case on which to rule, the NLRB cannot “overrule” it.

Significantly, however, the memo’s proposition that Uber drivers are contractors is also supported by recent Board precedent.  In SuperShuttle DFW, 367 NLRB No. 75 (2019), which was decided before the Uber memo, the Board found that drivers of a shared airport ride service were independent contractors, not employees, and thus were not covered by the Act.  Although this Board decision did not concern workers of rideshare companies, it is still expected to have a wide-ranging impact on gig economy companies reliant on a freelancing and/or sporadic workforce.  In fact, in finding that SuperShuttle drivers were independent contractors, the Board relied on several facts about their work that are also true for Uber drivers (e.g., Uber drivers decide when to work and what hours to work, which trips to accept, and when to turn on the device that alerts them to an available trip).

In sum, this Advice memo and the SuperShuttle decision clarifies Board precedent in this area. This precedent will likely affect not just these particular Uber drivers subject to the complaints before the NLRB, but also the gig economy as a whole (e.g., Lyft or Via drivers).  In addition, although this opinion may be limited to the NLRA, courts and other agencies apply similar factor tests under other laws (Title VII, FLSA, FMLA, etc.).  Therefore, this memo may be cited, or its arguments may be relied upon, by parties in future disputes over employee/contractor status.  The memo represents an important step to provide clarity for businesses operating in the modern gig economy.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.

On Monday, February 4, Governor Phil Murphy made good on a campaign promise and signed into law a new bill (A-15) that will raise the State’s minimum wage to $15 per hour by 2024. This hike in minimum wage, however, will not happen immediately and increases will be phased in over time.

Currently, the minimum wage rate in New Jersey is $8.85 per hour. Under the new law, this rate will jump to $10 per hour on July 1, 2019 and will again increase to $11 per hour by January 1, 2020. At that point, these two increases will amount to an almost 25% increase in minimum wage in about 11 months. After January 1, 2020, the statewide minimum wage will increase by $1 per hour every year on January 1 until the rate reaches $15 per hour on January 1, 2024. Afterward, any further increase in minimum wage would be in accordance with the consumer price index (CPI) for urban wage earners and clerical workers as calculated by the U.S. Department of Labor, Bureau of Labor Statistics. In other words, the federal government uses the CPI to measure the cost of living and, thereafter, the New Jersey Department of Labor and Workforce Development (“NJLWD”) evaluates any changes to the CPI and adjusts the minimum wage as necessary.

Notably, this new minimum wage law places New Jersey in an exclusive group of other states and districts – California, Massachusetts, New York and the District of Columbia – who have similarly authorized such increases in minimum wage.

However, the new minimum wage law will not affect every employee equally – at least at first – and comes with exceptions for certain workers. For instance, seasonal workers and small business employees (businesses that employ five or less individuals) will experience wage increases at a slower rate and have to wait until 2026 for the minimum wage to reach $15 per hour. Specifically, these employees’ minimum wage – currently at $8.85 per hour – will increase to $10.30 per hour by January 1, 2020 and every year thereafter by $.80 per hour until January 1, 2025. Then, a final $.70 increase on January 1, 2026 will be implemented to bring their minimum wage to $15 per hour.

Agricultural workers in New Jersey will also see a similar – and slower – progression in minimum wage increases as their rate will only jump to $12.50 per hour by January 1, 2024. Then, by no later than March 31, 2024, the NJLWD Commissioner and the Secretary of Agriculture (“Secretary”) will decide whether to continue minimum wage increases up to $15 per hour by 2027. (If the Commissioner and Secretary cannot agree on how to move forward, the Governor shall appoint a member of the public – subject to the advice and consent of the Senate – to serve as a tie-breaking vote, if necessary.)

Additionally, tipped workers – who currently earn $2.13 per hour – will see their minimum hourly wage increase to $5.13 per hour by 2024. Further, starting January 1, 2020, employers will be able to pay newly hired employees enrolled in an established on-the-job or other training program a “training wage” of not less than 90% of the established minimum wage at the time. Employers can pay these new employees this training wage for their first 120 hours of work (or first three weeks on-the-job based on a 40-hour workweek), provided the new employee has no previous similar or related experience. The NJLWD Commissioner will implement and adopt standards by which a training program must abide.

At this time, it is critical that employers start preparing themselves for the effect of these increases. For example, employers must think about overtime and the increased amount they will have to pay nonexempt employees for each hour over 40 worked per workweek. Moreover, employers should consult experienced labor and employment attorneys before making any changes to their payment practices and/or business model in an attempt to offset these forthcoming increases in minimum wage, e.g., laying off employees or reducing work hours. Noncompliance with the new minimum wage law could result in substantial penalties and lengthy/costly litigation, as well as possibly lead to unwanted attention from, and increased oversight by, the NJLWD.

Further, unionized employers should be aware that future increases in the State’s minimum wage rates, e.g., $12-$15 per hour, might be higher than the negotiated wage rates in their then-current collective bargaining agreements. In such instances, it is possible – if not likely – that the parties will need to re-open negotiations as to wages to meet the current statutory minimum wage (and this is a certainty where parties provide for such specific re-openings in their contracts themselves).

In sum, New Jersey employers must remain vigilant, proactive, and cautious in complying with these impending changes to the minimum wage rates as their failure to do so could result in serious legal consequences.

For more information about this alert, please contact Carlos Torrejon at ctorrejon@foxrothschild.com or 973.548.3312, or any member of the firm’s Labor and Employment Department.

Carlos A. Torrejon is a former NLRB Attorney and an associate in the firm’s Labor and Employment Department, resident in its Morristown office.