Oregon News & Analysis

  • Employee who didn't complain about unpaid OT wins unemployment claim

    The Oregon Court of Appeals recently ruled that an employee who filed a claim for unemployment benefits had good cause to quit her job over unpaid overtime. The court said it would have been useless or even dangerous for the employee to complain to her employer about the unpaid overtime. Further, she did not have to complain to the Oregon Bureau of Labor and Industries (BOLI) while she was employed because she risked continued nonpayment of overtime wages.


    Linda Nielsen worked as an office manager for a landscaping supply company for approximately one year. The employer required her to work overtime without paying her overtime wages. Specifically, she worked more than 38 hours most weeks, but she was paid for only 38 hours. Nielsen witnessed other employees put in for overtime, but the employer refused to pay. The employer provided excuses such as "Well, I know you were sitting on the side of the road having lunch" and "I don't believe you were really . . . working that entire time."

    Nielsen was afraid of the employer. She testified that she "almost [had] to call 9-1-1 because there was almost a . . . brawl" when former employees asked the employer for their full wages. Nielsen put "the hint out there" about the unpaid overtime wages to the employer. However, she never actually complained to the employer or BOLI.

    Unemployment benefits denied

    Nielsen quit her job and applied for unemployment benefits. An administrative law judge (ALJ) denied her claim, but the Employment Appeals Board (EAB) reversed the ALJ's decision and sent her claim back for further proceedings. The ALJ again denied Nielsen's claim based on her failure to complain about the unpaid overtime wages, stating:

    To the extent [Nielsen] quit because she was not getting paid for all hours worked, [she] established that she faced a grave situation. However, [she] failed to complain to the employer about the situation or file a complaint with [BOLI]. [She] failed to pursue reasonable alternatives, and failed to establish good cause for quitting.
    The ALJ determined that had Nielsen had good cause to quit her job, she would have been awarded unemployment benefits. The EAB adopted the ALJ's final order, and Nielsen appealed to the Oregon Court of Appeals.

    Court of appeals' decision

    The court reversed the EAB's order, concluding that Nielsen had good cause to leave her job voluntarily. Under Oregon law, good cause for voluntarily leaving work "is such that a reasonable and prudent person of normal sensitivity, exercising ordinary common sense, would leave work." An employee's reason for quitting "must be of such gravity that the individual has no reasonable alternative but to leave work."

    The court ruled that Nielsen had no reasonable alternative but to leave work. The court stated that it would have been "useless or even dangerous" for her to complain about the unpaid overtime because uncontested evidence showed that the employer was unwilling to pay overtime to workers who complained about their pay. The court also pointed out that she was afraid of the employer. Filing a complaint with BOLI while continuing to work for the employer was not a reasonable alternative because Nielsen would have risked continuing to be underpaid since she testified that nonpayment of overtime wages was an ongoing problem. The court noted that with each passing week, Nielsen risked never getting paid for the overtime hours she worked.

    Accordingly, the court ruled that a reasonable and prudent person exercising common sense would not have complained to the employer or BOLI about the unpaid overtime. Rather, a reasonable person would have considered the circumstances sufficiently grave to give her no alternative but to resign. Nielsen v. Employment Dept., 263 Or. App. 274, ___ P.3d ___, 2014 WL 2422763 (May 29, 2014).

    Bottom line

    At first blush, the court's decision may seem to relax the standard for employees who file unemployment benefits claims to show good cause for voluntarily leaving work. The court stated that an employee need not show that she explored alternatives to leaving work. If the employee does not complain, the employer may have no knowledge that there is a problem and no opportunity to remedy it.

    However, the court carefully limited its holding to this case. Indeed, an employee testifying that she nearly called 911 because a brawl almost broke out when a former staff member asked the employer for his wages is uncommon and is likely a good basis to distinguish this case from others.

    The author can be reached at jmarkley@perkinscoie.com.

  • 9th Circuit rules delivery drivers are employees, not independent contractors

    The U.S. 9th Circuit Court of Appeals (whose rulings apply to all Oregon employers) again recently considered the wage claims of a group of California-based truck drivers who were classified and paid as independent contractors by the Georgia company for which they performed delivery services. The first time around, the court concluded that California law — rather than Georgia law — controlled how the drivers should be classified. On this second appeal, the court found the drivers were in fact employees, not independent contractors.

    Delivery drivers classified as independent contractors

    Fernando Ruiz worked as a delivery driver in California for Affinity Logistics Corporation, a Georgia-based company that provides delivery and support services for home furnishings retailers, including Sears. He and others had previously performed essentially the same functions as employees of Sears' former delivery company. But when Affinity took over, it didn't want an employment relationship with the drivers, so it required Ruiz and the other drivers to sign an "independent truckman's agreement" and an "equipment lease agreement" that classified them as independent contractors.

    Eventually, Ruiz filed a class action against Affinity claiming that he and the other drivers hadn't been properly classified. He contended that the drivers were in fact employees and thus entitled to the minimum wage and overtime protections of the federal Fair Labor Standards Act (FLSA) and California law. But the trial court applied Georgia law, as provided by the driver agreements, and determined that they were independent contractors. Ruiz appealed.

    On its initial review of the case in 2012, the 9th Circuit ruled that California had an interest in the terms and conditions for workers within its boundaries. That was where the Affinity drivers were providing their services, and that's the state whose law must determine whether they should properly be classified as employees rather than independent contractors. The matter was returned to the trial court for the judge to decide whether application of California law would change the analysis. In the end, the trial judge once again found — even under California law — that the Affinity drivers were independent contractors. Ruiz appealed again.

    Control over drivers' work shows they're employees

    Under California law, workers who present evidence that they have provided services to a company are presumed to be employees of the company. If workers are classified as independent contractors, the company bears the burden to prove the absence of an employment relationship. The key factor in deciding the question is the degree of control the company has over the workers in question and the manner in which their tasks are carried out.

    The evidence in this case indicated that Affinity controlled the drivers' activities and work procedures throughout their day. Despite their contractor status, drivers were strongly encouraged to rent their delivery trucks from Affinity, for which a rental fee was deducted from their pay. Although the drivers were ostensibly operating independently, their trucks were to be painted and outfitted as prescribed by Affinity and couldn't have any markings identifying the drivers' independent businesses.

    Affinity set pay rates, which the drivers couldn't negotiate, and established driver schedules. The drivers' workday began at an Affinity facility, where company supervisors provided them with their daily delivery routes and ensured that appliances and other goods were loaded on the trucks according to its guidelines. In addition, every "exquisite detail" of the drivers' appearance was set by Affinity, from the color of their socks to the style of their hair.

    During the workday, drivers had to use Affinity equipment and mobile phones, precisely follow the assigned route in the order set by the company, and check in with it after each delivery. Affinity controlled daily start times and required attendance at mandatory driver meetings. It also reserved the right to terminate the services of a driver and to transfer a driver from one location to another.

    Despite that level of control by Affinity, the trial court had been persuaded that the drivers were contractors primarily because they were permitted to hire helpers and secondary drivers. The 9th Circuit saw the situation differently. Most drivers hired assistants because Affinity required them to do so and demanded that all such individuals meet company standards. According to the 9th Circuit, the trial court had reached the wrong conclusion.

    The drivers weren't independent businesspersons carrying out delivery services as they saw fit. Rather, virtually every element of their working day was dictated by Affinity. Under the circumstances, California law required the conclusion that the drivers were Affinity's employees and subject to applicable state and federal wage and hour requirements.

    The case was sent back to the trial court to decide the drivers' wage claims. Ruiz v. Affinity Logistics Corp., Case No. 12-56589 (9th Cir., June 16, 2014).

    Use care with 'independent contractor' label

    This case illustrates the importance of looking carefully at the operative details of a work relationship before attaching the label of independent contractor. If a company controls most of the terms and conditions and dictates how the work is to be performed, there very likely may be an employment relationship — regardless of what the parties have agreed to call it. The unpleasant consequence for the employer may come later when — as in this case — mislabeled "contractors" claim the wages and other rights conferred on employees. Be careful, and get it right!

  • Two 9th Circuit rulings uphold retailer arbitration agreements

    Nordstrom and Bloomingdale's both have dispute resolution programs requiring arbitration of employee disputes. In two separate decisions, one involving each retailer, the 9th Circuit recently approved enforcement of arbitration and barred employees from pursuing class claims in court.

  • Sorry, you can't do that! Obama loses on NLRB appointments

    On June 26, the U.S. Supreme Court unanimously upheld the decision of the U.S. Court of Appeals for the District of Columbia Circuit in Noel Canning v. NLRB, concluding that President Barack Obama's three recess appointments to the National Labor Relations Board (NLRB) — Sharon Block, Richard Griffin, and Terence Flynn — weren't valid. Therefore, the NLRB lacked a quorum when they served on the Board, meaning many NLRB decisions are now affected and likely invalid.

  • DOL, White House propose changes to federal family leave laws

    One year ago, the U.S. Supreme Court struck down the provision of the Defense of Marriage Act (DOMA) that defined marriage as being solely between one man and one woman for purposes of federal law. The decision changed the application of every federal law that relied on the DOMA definition of "spouse." As a result of the Court's ruling, same-sex couples married in the states and the District of Columbia where such unions are legally recognized became eligible for equal benefits under more than 1,000 federal laws and regulations.

  • Agency Action

    Perez applauds mayors' call for higher minimum wage. U.S. Secretary of Labor Thomas E. Perez has spoken out in favor of a resolution presented in June at the United States Conference of Mayors in Dallas calling for an increase in the federal minimum wage. A majority of the mayors voted to adopt the resolution on June 23. Before the vote, Perez voiced his support for the resolution, calling on Congress to raise the minimum wage and urging states and local governments to do the same. President Barack Obama is pushing legislation to raise the federal minimum wage from $7.25 to $10.10 per hour. "This resolution, coupled with grassroots-powered action nationwide, is part of a groundswell that proves change doesn't always come from Washington; sometimes it comes to Washington," Perez said in a statement released on June 19.

  • Workplace Trends

    Employers spending more on HR technology. A survey from professional services company Towers Watson finds that companies around the world are planning to increase and redirect their investments in HR technology as they embrace talent management solutions, HR portals, software-as-a-service (SaaS) systems, and mobile applications. The survey also showed that about one in three companies plans to change the HR structure in an effort to improve both efficiency and quality. The survey found a continued increase in the use of SaaS systems for core HR and talent management technologies, further adoption of mobile technologies, and utilization of HR portals.

  • Union Activity

    Union group calls United States among worst labor violators. A report from the International Trade Union Confederation (ITUC) claims that the United States is among the world's worst in ensuring workers' rights to bargain and organize. The organization's Global Rights Index used 97 indicators of human and workers' rights, as defined by the International Labor Organization conventions. The indicators include freedom of association, the right to bargain collectively, and the right to strike. The United States has ratified two of the eight conventions, covering slave labor and the worst child labor abuses, according to the ITUC, while other industrial democracies have recognized all the principles.

  • Store managers exempt? Maybe, maybe not

    In the retail setting, a store manager is typically the person with overall responsibility for all personnel and customer service activities at the location. So if she's paid a salary, she likely would be exempt from overtime requirements of the Fair Labor Standards Act (FLSA), right? Well, it all depends, according to a recent unpublished decision of the U.S. 9th Circuit Court of Appeals (whose rulings apply to all Oregon employers).

  • Employee or independent contractor? Court disagrees with OED

    The Oregon Court of Appeals recently reversed the Oregon Employment Department's (OED) decision that workers who applied for unemployment benefits were employees. The court held that most of the workers were independent contractors.