In the legal world, summer signals the end of several important seasons. The U.S. Supreme Court ends its spring term in June by issuing opinions before it breaks for summer vacation. The Arkansas Legislature wrapped up its 92nd General Assembly on April 24, 2019, and most statutes passed during session go into effect on today (Wednesday, July 24, 2019.) Keep reading for our Supreme Court and legislative updates which highlight the major opinions and legislative updates affecting employment law.
U.S. Supreme Court
Arbitration
The Court decided several important cases addressing proper application and interpretation of the Federal Arbitration Act (FAA) this term. The Court decided Henry Schein, Inc. v. Archer & White Sales Inc. on January 9, 2019. There, the Court concluded that parties — by the terms of their arbitration agreements —can delegate the initial determination of whether a matter is subject to arbitration to an arbitrator, rather than the courts. The Court emphasized that arbitration is a matter of contract, and that courts must enforce contracts according to their terms.
We previously reported on the Court’s January 15, 2019 opinion in New Prime, Inc. v. Oliveira. In New Prime, the Court held that a court — not an arbitrator — must decide the threshold question of whether a carve-out for transportation workers in section 1 of the FAA applies before ordering arbitration. The distinction from the Henry Schein case discussed above is that the employee in New Prime argued he was exempt from the FAA altogether. The bottom line of these two cases is that in most cases the parties can assign the initial determination of whether a matter is arbitrable to an arbitrator rather than the court; an exception to that rule is when someone claims they are exempt from the terms of the FAA, which a court must first determine.
We also previously reported on Lamps Plus, Inc. v. Varela. In that case, the Court held that an arbitration agreement must expressly allow for class arbitration before plaintiffs will be permitted to pursue arbitration as a class. The agreement can neither be silent nor ambiguous.
Discrimination
In Mount Lemmon Fire District v. Guido, the Court held that all state offices and employers are covered by the Age Discrimination in Employment Act (ADEA) regardless of the number of employees. The ADEA only covers private employers with 20 employees or more, but the Court clarified that limit does not extend to public employers, which are all covered under the Act.
The Court issued its opinion in Fort Bend County, Texas v. Davis, on April 22, 2019. There, the Court held that failing to file a charge of discrimination with the EEOC or equivalent state or local administrative agency is not a jurisdictional bar to a Title VII lawsuit. Instead, it is a mandatory claim-processing rule that is a precondition to relief. The result is that failure to file an EEOC charge does not bar an employee from filing suit. Rather, employers must timely raise any defense of failure to exhaust administrative remedies or risk waiving the defense.
Arkansas Legislative
Act 455 (SB303) Clarifying the penalties for failing to report for unemployment insurance — Ark. Code § 11-10-717(b)(3) assesses a penalty for employers who fail to supply required information on quarterly reports to the Department of Workforce Services for the payment of unemployment insurance. Specifically, the statute provides for a penalty of $30 or 15 percent of the contributions due on the employer’s report, whichever is greater. Act 455 adds subsection (b)(3)(D) clarifying that the Department of Workforce Services will assess such a penalty when an employer initially files a quarterly wage report stating that no wages were paid and later amends the quarterly report to reflect employee information and wages paid when such an amendment is filed more than 20 days after the quarterly report was due. Accordingly, merely filing a zero wages report and later amending will not avoid the penalty provision of § 11-10-717.
Act 853 (HB1751) Amending the Arkansas Minimum Wage Act — Act 853 makes several important changes to the Arkansas Minimum Wage Act (AMWA) to bring it more in line with its federal counterpart, the Fair Labor Standards Act (FLSA). Collectively, these changes should make litigating wage-and-hour claims more seamless since Arkansas law now more closely mirrors federal law. These changes include:
- Act 853 does away with the prior standard under the AMWA, which stated that the statute should be “liberally construed,” and required courts to interpret the law most favorable to employees. Moving forward, the statute will be interpreted objectively and in accordance with its plain language, rather than in favor of a particular party. This echoes interpretation of the FLSA.
- Act 853 also significantly amended provisions regarding the extent to which room, board, apparel, and other items can be counted as wages. The AMWA previously limited allowances for such items to no more than 30 cents per hour. Now, employers may take allowances for “the fair and reasonable cost of the board, lodging, apparel, or other items and services,” so long as such items are “customarily and regularly” provided for the benefit of the employee (not for the benefit of the employer). Fair and reasonable cost is determined in accordance with the FLSA.
- The Act also amends the AMWA to change the procedure for bringing claims for alleged unpaid wages and overtime on behalf of a class. Currently under the AMWA, if the Court certifies a class, all individuals who meet the definition of the class are automatically included in the class unless they opt out. Act 853 changes this procedure to require individuals to opt in to an AMWA collective action. In most cases this will reduce an employer’s potential liability in a wage and hour lawsuit. This also mirrors the structure of collective actions under the FLSA.
- Additionally, Act 853 reduces the statute of limitations under the AMWA from three years to two years.
- Finally, Act 853 amended the final paycheck provisions under the AMWA. The final paycheck provisions now simply state that when an employer terminates an employee, the employer must pay all wages due by the next regular payday. An employer who fails to pay all wages due by the next regular payday, or within seven days, owes double the wages due.
Act 1055 (HB1850) Establishing a new test to determine who is an independent contractor versus an employee — Act 1055 adopts a 20-factor test from the IRS for determining when individuals constitute employees and when they are independent contractors. The test is to be used by all employers and all state agencies when making such a determination. Some of these factors include: whether an individual has the right to direct when, where, and how the work is performed; whether the worker is required to complete particular training; whether the worker is subject to the direction and control of the person for whom a service is performed; whether a worker provides his or her own tools; and whether a worker makes his or her services available to the general public. Act 1055 codifies and incorporates many of the factors Arkansas courts already consider in determining whether an individual is an employee or an independent contractor. Thus, it should not significantly affect who is classified as an independent contractor under state law.
Act 516 (HB1177) Prohibiting the involuntary implantation of microchips in employees — Act 516, simply put, is the probably the strangest bill passed this session. Act 516 prohibits employers from forcibly implanting microchips in their employees.
The information was written by the attorneys in the Labor and Employment Practice Group at Friday, Eldredge & Clark, LLP. This is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Labor and Employment Attorneys.