Employment Law Issues

For Engineers

 

 Peter M. Good

Smigel, Anderson & Sacks, LLP

4431 N. Front Street

Harrisburg, PA 17110

Telephone (717) 234-2401

Facsimile (717) 234-3611

 

 

 

Determining if there is an employment relationship

 

            In an employment law situation, the first question you must ask, whether from the employer or potential employee perspective, is whether there actually is an employer-employee relationship.  While there are laws that hold employers liable for certain acts of others, they generally hold employers liable for the act of its employees.

 

Employee versus Independent Contractor

 

            An employer-employee relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the services.  This right to direct and control must extend not only to the outcome or result to be accomplished through the work, but also to the details and means by which that outcome or result is achieved.

 

            The employer does not have to actually control or direct the detail and manner by which the work is performed.  It is sufficient that the employer has the right to do so.

 

            An employer also has the right to discharge an employee.

 

            Independent contractors, on the other hand, have the exclusive control over the manner in which they perform the work they engaged in and are responsible only for the result.

 

            Likewise, independent contractors cannot be “fired” so long as they produce a result that meets the contract specifications.

 

Test for determining whether an individual is an employee or an independent contractor:

 

            As stated above, the greatest factor weighed by the courts in determining the employee versus independent contractor status is the alleged employer’s right to control the manner and means by which the individual’s work is performed.  But other factors are considered by the courts as well.  These include:

 

(1)               Details of Work Performance – includes set hours of work performance, requirement of full time performance, order or sequence the work is performed.  If the individual has little or no discretion over determining his or her own work days, work week or the hours required to perform the work, the individual is more likely an employee than an independent contractor.  Similarly, if the individual has no authority or discretion to hire others to assist in performing the work, the individual is most likely an employee.

 

(2)               Compensation for Work Performance – Payment by the hour, week or month generally points to an employer-employee relationship, while payment made by the job or on a straight commission basis generally indicates independent contractor status.

 

Additionally, if the alleged employer withholds payroll and other taxes from the compensation paid to the individual, this is another indicator that the individual is an employee and not and independent contractor.  The same is true if the alleged employer provides the individual health and other benefits.

           

(3)               Expenses, Tools, Licenses, and other Equipment for Work Performance -

Payment of an individual’s business and travel expenses, the provision of tools necessary to complete the work to be performed, and the payment for obtaining necessary licenses and then maintaining those licenses are all indicators that the individual is an employee as opposed to an independent contractor.

           

(4)               Duration of Work Relationship – a continuing relationship indicates an

employer-employee relationship.  The longer the relationship, the more likely the individual will be regarded as an employee.

 

(5)               Structure of the Work Position – this is a question of whether the work being performed is a necessary and integral part of the alleged employer’s business.  The more integral to the business, the individuals who perform that work must necessarily be subject to a certain amount of control in its performance and, therefore, is more likely to be regarded as an employee.

 

(6)               Location of Work Performance – if the work is to be performed at the alleged employer’s facility, the individual is more likely to be regarded as an employee than an independent contractor.

 

* Because of modern technology and the number of businesses allowing employees to work off-site, this factor has decreased in importance.

 

(7)               Assignment of Additional Tasks/Projects – if the alleged employer has the right to assign additional tasks or projects to the individual, especially without the requirement of a new contract or contractual form such as a Change Order, the individual will most likely be determined to be an employee as opposed to an independent contractor.

 

(8)               Working for Oneself/ Able to Provide Services to Others in the Industry – A person who is in business for him or herself is obviously more likely to be considered an independent contractor by the courts.  The work being performed should relate to the business the individual is in.

 

Additionally, if the individual is not restricted from making his or her services available to other businesses in the industry and the public in general, the individual will most likely be regarded as an independent contractor.

 

            The courts will, after weighting all factors, look at the totality of the circumstances to determine whether an individual is an employee or an independent contractor.  Although the parties – the company and the individual – may “name” the relationship as one or the other, the courts will not be restricted by the label utilized.  The courts will take the name, or label, into consideration, but then weigh the above factors to determine what it believes to be the true working relationship.

 

Impact of Non Competition Clauses and other Restrictive Covenants

 

            The inclusion of a non-competition clause/agreement, or other restrictive covenants, is atypical of the independent contractor relationship.  Such a clause or agreement commands the individual’s adherence to the “employer’s” policies, guidelines, and procedures.  The possibility that the individual will be prevented from providing services to the “employer’s” competitors or the general public, especially where the individual’s marketable skills are limited to a particular trade or business in which the “employer” is engaged, impacts many of the factors weighed by the courts.  In essence, while not determinative in and of itself, the existence of a non-competition clause/agreement, or other restrictive covenants, strongly favors a finding of an employer-employee relationship over that of an independent contractor.

 

            *More will be discussed on Non competition clauses and trade secrets later in the materials. 

 

If any employer-employee relationship is found:

           

            Common Law Action of Respondeat Superior – idea of vicarious liability

 

Employers may be held vicariously liable for the wrongful acts of their employees to the extent that those acts are committed during the course of and within the scope of employment.

 

            Scope of Employment – a wrongful act will be considered to have been committed during the course of and within the scope of employment to the extent that it is committed:

 

(1)               it is of a kind and nature that the employee is employed to perform;

(2)               it occurs substantially within the authorized time and space limits; and

(3)               it occurs, at least in part, as a means to serve the employer.

 

            Employers may also be held liable for the negligent hiring, supervision, and retention of employees.  Pennsylvania has adopted the Restatement (Second) of Agency § 213, which hold an employer liable for the acts of his employee if the employer is negligent or reckless in:

 

(1)               giving improper or ambiguous orders or in failing to make proper regulations;

(2)               the employment of improper persons or instrumentalities in work involving risk of harm to others;

(3)               the supervision of the activity; or

(4)               permitting, or failing to prevent, negligent or other tortuous conduct by persons, whether or not his servants or agents, upon his premises or with instrumentalities under his control.

 

In order for a cause of action to survive against the employer under § 213, the plaintiff must first state a viable cause of action in negligence against the employee.

 

            Employers may also be liable for the intentional acts of his employees as well.  Pennsylvania has also adopted the Restatement (Second) of Agency § 317, which requires an employer to exercise reasonable care in the control of employees while acting outside the scope of employment as to prevent them from intentionally harming others or conducting themselves so as to create an unreasonable risk of bodily harm to others if:

 

(a)                the employee

(1)               is upon the employer’s property, or upon property which the employee is permitted to enter only as an “employee”; or

(2)               is using tools, instrumentalities, equipment, etc. of the employer; and

(b)               the employer

(1)               knows or has reason to know that he or she has the ability to control the employee; and

(2)               knows or should know of the necessity and opportunity for exercising such control.

 

The Employment Relationship in Pennsylvania

 

            At-Will Employment

 

Unless the employer and employee enter into an agreement to alter the relationship, the general rule is that the employment relationship is at-will.

 

            This means that either party, the employer or the employee may terminate the employment relationship, with or without cause and with or without notice.

 

            As a general rule, an at-will employee has no cause of action against an employer for termination of the employment relationship.  Exceptions to this general rule are limitedly recognized where the termination violates or threatens the clear mandates of public policy or statutory exceptions.

 

Public Policy Exceptions – employee’s alleging wrongful termination must claim a violation of Pennsylvania public policy, not federal law or policy

 

(1)        Workers’ Compensation – firing an employee in retaliation for filing a worker’s comp claim violates public policy, as does firing a supervisory employee for failing to dissuade a subordinate employee from filing a claim.

 

(2)        Unemployment Compensation – firing an employee in retaliation for filing an unemployment comp claim violates public policy. 

 

(3)        Jury Duty – firing an employee for attending jury duty violates public policy. 

-there is also a statutory prohibition against terminating employees for attending jury duty but the courts have determined that the statutory remedies are not exclusive remedies.

 

(4)        Criminal Background History – denying employment based upon a prior criminal conviction that is not related to the position sought violates public policy.

 

(5)        Polygraph Test – firing an employee for refusal to take a polygraph violates public policy.

 

(6)        PHRA – firing an employee in retaliation for filing a PHRA complaint violates public policy.

 

(7)        WPCL – firing an employee for making a WPCL complaint violates public policy.

 

(8)        Illegal Activity – it is a violation of public policy to fire an employee, or take other employment action, for the employee refusing to engage in illegal activity or for testifying against an employer who engaged in such illegal activity.

 

(9)               Pa Worker and Community Right to Know Act – firing an employee who files a complaint or assists the Department of Labor and Industry with an investigation into violations of this Act violates public policy.

 

(10)           Sexual Harassment – even if an employee is prevented from bringing a claim for sexual harassment under the PHRA (does not meet threshold for number of employees), the courts have imposed a public policy exception, making it a violation to fire an employee for refusing to succumb to sexual advance or in retaliation for attempting to file such a claim.

 

 

 

Statutory Exceptions -

 

(1)        Title VII – prohibits discrimination based upon race, color, religion, sex,

national origin or retaliation for making said claims.

 

(2)        Americans with Disabilities Act (ADA) – prohibits discrimination based upon disability or perceived disability.

 

(3)        Pennsylvania Human Relations Act (PHRA) – prohibits discrimination in employment based upon race, color, religion, ancestry, age, sex, national origin, non-job related handicap or disability, or retaliation for making said claims.  (prevents discrimination in other arenas as well, but only employment is relevant here)

 

(4)        Family Medical Leave Act (FMLA) – prohibits discrimination or termination for taking defined leave.

 

(5)        Employment Polygraph Protection Act – prohibits termination for refusing to take a polygraph test

 

(6)        PA Whistle blower Law – for public employees only – prohibits termination of public employees in retaliation for reporting fraud and/or illegal acts of employer.

 

(7)        Age Discrimination Employment Act (ADEA) – prohibits discrimination based upon age, for workforce that is 40 years and older.

 

(8)        Jury System Improvement Act – prohibits employer from firing employees for serving jury duty.

 

(9)        Uniformed Services Employment and Reemployment Rights Act (USERRA) – prohibits employers from firing employees who fulfill military duties.

 

(10)      Criminal History Records Information Act (CHRIA) – prohibits employers from utilizing criminal records beyond the extent that they apply to the employment position in question.

 

 

 

 

Contractual Exceptions to At-Will Status

 

(1)               Express Contracts – written contracts that generally contain terms for a specified period of time and basis for early termination.

 

(2)               Employee Handbooks can form a contract

 

 

-         provide basis for termination?

 

-         disclaimer?

 

-         sound like a contract?

 

(3)        Additional Consideration

- sufficient or substantial additional consideration.

- great loss or hardship to employee known to employer at time “contract”
   was made.

- “Blue Pencil” of Courts - will be employed for a “reasonable time period”

- cannot be terminated without just cause during that time period.

- if, however, the employer and employee have set down their
   understanding of their employment relationship in writing and it is stated
   as “at-will”, the parties agreement will prevail regardless of additional
    consideration

 

Safety in the Workplace

 

An “employer” owes a duty to provide a reasonably safe and healthful workplace and warn others of any dangers that may exist.

 

The Occupational Safety and Health Act of 1970 (OSHA) applies to all workers employed in businesses that affect interstate commerce.

 

OSHA imposes 2 duties upon employers:

 

(1)        To provide a working environment free of recognized hazards that are causing or are likely to cause death or serious physical harm to employees; and

 

(3)               Conform to certain health and safety standards promulgated by the Department of Labor.

 

A breach of either duty could lead to a violation.

 

OSHA standards also require employers to:

           

(1)               maintain conditions or adapt practices reasonably necessary and

appropriate to protect workers on the job;

 

(2)               become familiar and comply with applicable standards; and

 

(3)               ensure that employees have and use protective equipment when required for safety and health.

 

OSHA Reporting and Record Keeping-

 

            Employers must report all deaths of employees from work-related incidents and all in-patient hospitalization of 3 or more employees as a result of a work-related incident within 8 hours of learning of the incident.

 

            Employers must also report all fatal heart attacks that occur at work.

 

            Employers must prepare and maintain records of all occupational injuries and illnesses.

 

Whistleblower protection under OSHA-

 

Prohibits employers from firing, discriminating or otherwise retaliating against an employee who has reported a condition or violation under OSHA.

 

Fair Labor Standards Act- Overtime Issues

 

            Unless an employee fits within an exemption, federal law requires that the employee be paid overtime pay for all time beyond 40 hours worked by the employee in a single work week.  Pennsylvania also has an overtime law that places additional, more stringent, requirements on employers.

           

            Contrary to popular belief, the fact that an employee is “salaried” does not mean that the employee is exempt from the federal overtime requirement.  In fact, being salaried is only one of two requirements.  The other requirement is that the employee’s duties must fall within a specific exemption.

 

            Many engineers are paid on a salary basis and perform duties that qualify them as exempt professional employees.  However, an employer cannot simply define an employee as an exempt professional.  U.S. Department of Labor regulations spell out when an engineer is considered exempt.

 

            In general, engineers that perform work for which a bachelor’s degree or master’s degree in engineering is a job requirement are probably exempt.  The mere fact that an engineer has a bachelor’s or master’s degree in engineering, however, does not make the engineer an exempt professional if the degree is not an essential requirement of the work the person is actually performing, as opposed to a mere job qualification.  If engineers with bachelor’s degrees are doing the same job as employees with lesser degrees or no degrees, a judge or DOL investigator may conclude that the job does not require an advanced degree, in which case none of the employees performing that particular job are exempt from federal overtime laws.  Additionally, the new regulations specifically permit the exemption to be applied to employees in a field of science or learning who have substantially the same knowledge level and perform substantially the same work as the degreed employee, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.  Employees who obtain their skills strictly through experience with no advanced instruction remain excluded from this exception.

 

            Even engineers who perform exempt work are not exempt unless they are paid on a salary basis.  Employees who are paid on a salary basis may not have their pay reduced based on the number of hours they work in a week, except in limited circumstances.

 

            The potential penalties for violating federal overtime laws include liability for double the amount of the overtime pay the employees should have received as well as monetary fines.  Under certain circumstances, the individual officers of an employer can be held personally liable for the employer’s violations.  In theory, criminal prosecution of the employer and its officers is also possible.  Accordingly, employers who are not sure whether their employees should be receiving overtime would be wise to consult employment counsel or to err on the side of caution.

 

Restrictive Covenants and Trade Secrets

 

            Without a restrictive covenant, an at-will employee is free to leave employment at any time, and to compete with a former employer so long as the employee does not misuse trade secrets or confidential information, engage in fraud, solicit customers while still employed, or otherwise engage in conduct directly damaging the employer during the period of employment.  The employee may even take steps to prepare to compete with his or her employer before terminating employment. 

 

            While restrictive covenants may be beneficial to the employer, it should be noted that they are not favored by the Pennsylvania courts.  The courts view such covenants as a restraint on trade that prevent an employee from earning a living in the profession which he or she has experience and knowledge.  For these reasons, restrictive covenants are strictly construed against the employer, who is generally the sole drafter of the covenant.

 

Types of Restrictive Covenants -

 

(1)               Non-compete

 

(2)               Non-solicitation of customers

 

(3)               Non-solicitation of employees

 

(4)               Confidentiality, non-disclosure

 

(5)               Assignments of property rights – own, trademark, patent, or copyright of any work developed by the employee during the course of employment

 

 

Requirements for an Enforceable Restrictive Covenant –

 

(1)               the restrictive covenant must be made ancillary to the employment relationship;

 

(2)               it must be supported by adequate consideration;

 

(3)               the terms of the restrictive covenant must be only as restrictive as is reasonably necessary to safeguard a legitimate interest of the employer; and

 

(4)               the terms of the restrictive covenant must be reasonably limited in duration and geographic scope.

 

Restrictive covenants are not assignable unless they contain an express assignability provision, which is then specifically adhered to by the employer.

 

The Pennsylvania Uniform Trade Secret Act (PUTSA) 12 Pa. C.S. § 5301 et seq. –

 

            Uniform Act that was adopted by Pennsylvania and became effective April 2004.

 

            Expands the common law definition of “trade secrets” to include customer lists, if they are not generally known and not readily ascertainable by proper means.

 

            What is a trade secret – “information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique, or process that:

(1)               derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainably by proper means by other persons who can obtain economic value from disclosing or using the information; and

(2)               is the subject of reasonable efforts under the circumstances to protect its secrecy.

 

PUTSA provides for both injunctive relief and damages

 

-          damages can include both punitive damages, for willful and malicious misappropriation, as well as the recovery of attorneys’ fees and costs for willful and malicious misappropriation or for bad faith through the course of litigation.

 

3 year statute of limitations

 

Preempts certain tort claims that mirror, or have the same elemental requirements, as a misappropriation of trade secret claim, such as conversion.