Significant Recent Developments in State Common Law and Statutory Decisions

By Stephen A. Mazurak

It is impossible in the limited space permitted by this venue to do a complete review of all 50 state jurisdictions in the area of labor and employment law. The best that can be done is to offer a snapshot of the panorama of these cases.

I start first with the formation of the employment relationship as opposed to that of an independent contractor. I next review recent decisions on the at-will relationship and exceptions to that doctrine. I review cases in the area of application of employment class actions and arbitration. I address miscellaneous cases involving such varied topics as profit sharing plans, the rights of undocumented workers to state wage and hour laws, and strategic lawsuits against public participation (SLAPP) statutes. I conclude with comments about efforts to develop anti-bullying statutes.

The independent contractor vs. employee conundrum. There is probably no area of labor and employment law wherein the lawyer will face greater potential malpractice exposure than when advising an employer that a group of individuals are independent contractors and not employees entitled to the various protections afforded by particular statutes.

There is no “bright line” test that can be applied, but where there is a social policy involved, the court will interpret any ambiguity in favor of finding an employer-employee relationship. Whether you applied a three-part, eight-part, or 12-part test, the more control and supervision by the company over the manner and means of production by the individual, the more likely there will be found an employer-employee relationship. There is a gradual continuum from the independent contractor status and the employer/employee status, with no definite division between the two except on the extreme ends of the continuum. Also, any test must be adjusted to accommodate the modern realities of the business world in the hiring of individuals such as professionals.

In many cases, attorneys for employers may have prepared standard contracts with the aim of creating an independent contractor status for the persons retained by the employer client. But after the contract is signed, the client ignores—in part or in total—the restrictions it imposed on the control of the individual and starts treating the person as it would treat an employee. Even the most carefully drafted contract establishing an independent contractor relationship can be nullified if the employer ignores the independence of the contractor and treats that person as an employee.

At-will employment still rules, except. . . . The at-will concept remains firmly implanted in the vast majority of the states, but the exceptions to the rule remain a fruitful source of litigation.

The Supreme Court of Oklahoma faced the issue of whether the termination of an employee, who had sought public records under the Oklahoma Open Records Act in a lawsuit brought by a public entity against him, violated the public policy of that state when his private sector employer demanded that he withdraw his request for those records. The court noted that, because the employee did not allege that he was employed for a definite term, the reasonable inference was that the employment was at-will. As a result, the court observed that the long-standing rule of Oklahoma was that where the contract of employment was for an indefinite period, it “may be terminated without cause at any time” without constituting a breach of contract.

The Supreme Court of North Dakota was presented with the issue of whether a cook of a public school whose contract was not renewed for an additional year had a claim for breach of contract or denial of due process rights. The cook had been employed by the school district for two consecutive years, each time with a one-year contract.When she applied for a third year, she was not awarded the position. The court found that although a handbook and personnel policies may create a contract of employment, these documents did not do so in this case. It also found no evidence of an implied contract between the parties based upon her two prior one-year contracts.

The Nebraska Supreme Court was presented with the issue of whether to extend an exception to the at-will employment rule in the case of an employee who asserts that she was demoted as a result of filing a workers’ compensation claim where the statute does not contain such a prohibition. The court had previously decided that, where the employee alleged that she was terminated for filing a workers’ compensation claim, a public policy exception was established to the normal rules of at-will employment. It concluded that an exception would be found here because an “employee’s right to be free from retaliatory demotion for filing a worker’s compensation claim is married to the right to be free from discharge.”

Class actions and arbitration. One of the more interesting frontiers of employment law is the intersection of class actions and arbitration. The typical scenario is that the employer establishes an arbitration clause in its standardized employment agreement to resolve any contractual or statutory claims that the employee may have arising out of the employment relationship. Some event occurs, usually termination of the employee, and the individual commences a lawsuit. The employer moves the court to submit the matter to arbitration to resolve the dispute.

The California Supreme Court reversed the upholding of a class arbitration waiver, concluding that waivers should not be enforced if a court determines that class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.

Profit sharing and undocumented workers’ rights. The California Supreme Court recently decided a case concerning an employer’s profit sharing plan for its employees. At issue was a grocery chain’s profit-based incentive compensation plan (ICP) that provided additional compensation to individual store employees based upon the profit of the store. The court ultimately decided that “an employee bonus plan based on a profit figure that is reduced by a store’s expenses, including the cost of workers’ compensation insurance and cash and inventory losses” did not violate state statutes and regulations. It found that nothing was ever taken away from the employees; rather, these disputed deductions were never in the amount provided for the bonus pool.

The Kansas Supreme Court decided that an undocumented worker was entitled to the hourly wage agreed to in his employment contract even though he was not lawfully in the country and that the Kansas wage payment statute was not preempted by the federal Immigration Reform and Control Act.

Issues on the horizon. There is a new area of law that bears examination here: SLAPP actions. The acronym stands for strategic lawsuits against public participation. Recently, the California Supreme Court faced a case involving SLAPP, anti-SLAPP, and SLAPP-back concepts. In the unanimous decision, the court decided that the SLAPP-back statute would apply to pending cases and that the provision prohibiting a motion to strike under the anti-SLAPP statute if the prior action was illegal as a matter of law was a narrow exception.

I also direct your attention to proposed legislation in at least 13 states that would make it illegal for a boss to bully an employee. The statutes are meant to expand existing harassment laws in such areas as race, sex, and age discrimination.

For More Information About the Section Of Labor and Employment

- This article is an abridged and edited version of one that originally appeared on page 253 of The Labor Lawyer, Winter/Spring 2008 (23:3).

- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.

- Website:

- Periodicals: The Labor Lawyer, journal, published three times per year; Labor and Employment Law, newsletter, published quarterly; substantive committee newsletters, published biannually.

- Books and Other Recent Publications: The Developing Labor Law: The Board, the Courts, and the National Labor Relations Act, 5th ed., with 2007 Cum. Supp.; Employment Discrimination Law, 4th ed.; The Fair Labor Standards Act, with 2007 Cum. Supp.; The Family and Medical Leave Act, with 2008 Cum. Supp.; Wage and Hour Laws: A State-by-State Survey, with 2007 Cum. Supp.; Age Discrimination in Employment Law, 2007 Supp.; Covenants Not to Compete: A State-by-State Survey, 5th ed., with 2007 Supp.; Employee Benefits Law, 2d ed., with 2007 Cum. Supp.; Equal Employment Law Update, Summer 2007 ed.

Stephen A. Mazurak is a professor of law at the University of Detroit Mercy School of Law. He may be reached at .

Copyright 2008

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