News & Events

Oregon Refines the Employment Relationship

Submitted By Firm: Miller Nash LLP

Contact(s): Michael Porter, Susan Stahlfeld

Author(s):

frey Chicoine, and Kellen Norwood

Date Published: 2/6/2014

Article Type: Legal Update

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Oregon courts recently issued two cases addressing fundamental questions about the employment relationship. One asked who is the employer; the other, who is an employee? Not surprisingly, both cases tilted the playing field in favor of workers.

Who is the employer?

In addressing this question, the Oregon Supreme Court held that a purchaser of a business can be a “successor” and be liable for wage claims of a predecessor owner without ever employing the claimants. See Blachana, LLC v. Bureau of Labor & Industries, No. S060789 (Or. S. Ct. January 16, 2014).

In Blanchana, the Oregon Supreme Court validated the aggressive application of a Bureau of Labor and Industries ("BOLI") test to determine when a new business operator can be liable for wage violations of a predecessor. In its simplest form, BOLI asks whether the new owner conducts "essentially the same business." BOLI will look to six primary factors: (1) the name and identity of the business, (2) its location, (3) the lapse of time between the previous operation and the new operation, (4) whether the same or substantially the same workforce was employed, (5) whether the same product was manufactured or the same services were offered, and (6) whether the same machinery, equipment, or methods of production were used. Under this test, not every factor must be present, and BOLI has the ability to consider additional factors.

The first factor, the "name and identity of the business," looms largest in the analysis. In Blachana, the business was a restaurant and bar. The building owner sold a business, including all equipment and goodwill, and leased the premises to the purchaser. When the purchaser stopped making payments, the seller repossessed the business and began operating under substantially the same name as it had before, though it hired an entirely new workforce. The location never changed, the client base was similar (though not identical), and the beer vendors were the same. These factors, all related to the name and identity of the business, influenced BOLI's conclusion that "essentially the same business" was operating during this time. It was not as important that the claimants had never worked for the successor. It was significant that less than two years earlier, the successor had also been the owner. Regardless, BOLI’s test can be applied to cover many situations in which the name and goodwill of a business is sold, especially if the business operates at the same premises.

Who is an employee?

"Who is an employee?" is an important question affecting a business's liability for a variety of claims, from unemployment compensation to discrimination to wage claims. But it can be difficult to answer because of inconsistencies among courts and agencies and under different laws. The Oregon Court of Appeals recently determined in Cejas Commercial Interiors, Inc. v. Torres-Lizama, No. A148291 (Or. App. Dec. 13, 2013), that under Oregon's minimum-wage law, the economic-realities test and not the right-to-control test should apply.

While the court ruled for the employer in this case, adopting the economic-realities test is generally seen as favoring workers. The new test makes a broader swath of workers to be employees. And until this case, Oregon courts generally applied the right-to-control test to Oregon employment statutes.

Cejas Commercial Interiors had just landed its biggest contract to date: completing the drywall part of a mixed commercial and residential construction project. In order to meet construction deadlines, Cejas subcontracted with Viewpoint Construction to handle the less-exacting early stages and, before doing so, verified that Viewpoint was licensed, bonded, and insured. Viewpoint hired the claimants, but disappeared before paying their wages. The claimants argued that Cejas, and not Viewpoint, had employed them and that Cejas was therefore liable.

The intent of the economic-realities test is to expose outsourcing relationships that lack a "substantial economic purpose," because an outsourcing relationship without an economic purpose is likely a "subterfuge" meant to evade labor standards. The court first asks whether the putative employer "formally controls" the worker. This part is similar to the right-to-control test. After determining the formal relationship, the court next asks whether the putative employer nonetheless "functionally controls" the worker.

Eight factors determine functional control: “(1) whether the work was a specialty job on the production line; (2) whether responsibility under the contracts passed from one subcontractor to another without material changes; (3) who controls the premises and equipment used for the work; (4) whether the group of workers had a business organization that could or did shift as a unit from one employer to another; (5) the level of supervision over the work; (6) whether the success of the workers’ enterprise depends on the initiative, judgment or foresight of the typical independent contractor; (7) whether there is permanence and exclusivity in the working relationship; and (8) whether the service rendered is an integral part of the putative employer’s business.”

The court found, first, that Cejas did not formally control the claimants. The court then found that Cejas did not have functional control, either. Importantly, the court noted that the job that Viewpoint, and the claimants, did was a small part of the overall contract for which Cejas was responsible. Also, the claimants had no association with Cejas outside this one project. And Viewpoint, not Cejas, supervised their work. Finally, Viewpoint assumed risk for the profitability of the claimants' work.

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Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel  

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