In recent years, California courts have complicated the lives of employers that utilize commission and piece rate compensation systems (i.e., “activity-based compensation”).  Federal and state courts have repeatedly found activity-based compensation plans to be unlawful under California law, even when they result in per-pay-period compensation that exceeds the minimum wage.  Courts reasoned that these plans violate California law because they do not separately compensate employees for each hour worked, such as time spent performing non-commission or non-piece-rate earning tasks (e.g., waiting for work, cleaning, attending meetings, etc.).  See, e.g., Vaquero v. Stoneledge Furniture LLC, 9 Cal. App. 5th 98 (2017); Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36 (2013). However, the California Court of Appeal recently gave its stamp of approval to a variable hourly-based compensation system that could permit employers to closely approximate the wages paid using traditional commission/piece rate plans while complying with California law.  In Certified Tire and Serv. Ctrs. Wage and Hour Cases, 2018 WL 4815544 (Cal. Ct. App. Sep. 18, 2018) (“Certified”), the employer compensated automotive technicians as follows: [A] technician is paid an hourly wage for all work performed …, which … exceeds the legal minimum wage. … [T]he hourly rate paid to a technician during any given pay period may be higher than the guaranteed minimum hourly rate based on a formula that rewards the technician for work that is billed to the customer …. [E]ach billed dollar of labor charged to a customer as a result of the technician’s work during the pay period is referred to as the technician’s “production dollars.”  Certified Tire … multipl[ies] the technician’s production dollars by 95 percent, multiplying that amount by a fixed “tech rate” …, and then dividing by the total hours worked by the technician during the pay period.  By applying this formula, Certified Tire determines the technician's “base hourly rate” for the pay period.  If the base hourly rate exceeds the technician’s guaranteed minimum hourly rate, the technician is paid the base hourly rate for all time worked during the pay period.  If the guaranteed minimum hourly rate is higher than the base hourly rate, the technician is paid the guaranteed minimum hourly rate for all time worked during the pay period. Id. at *1.  Put simply, a technician’s hourly rate was the higher of a pre-set minimum, or a rate derived from the technician’s average hourly “production.”  The court provided this illustration of the plan’s operation: [A] technician with a “tech rate” of 30 percent who generated $5,000 of production dollars in an 80-hour pay period, would achieve a base hourly rate for that pay period of $17.81 (based on $5,000 multiplied by .95, multiplied by .30, divided by 80).  Assuming that base hourly rate is higher than the technician’s guaranteed minimum hourly rate, the technician would be paid $17.81 multiplied by 80 hours for the pay period, for a total payment of $1,424.80. Id. at *1 n.4. The plaintiffs alleged this compensation method violated California law because the employer required employees to perform work that could not generate production dollars (e.g., tire rotations, oil changes, cleaning, attending meetings, etc.) and thus “could not increase the base hourly wage[.]”  Id. at *2 (emphasis in original).  As such, time spent performing these non-productive activities was “all uncompensated[.]”  Id. at *3 (“[A]ccording to [plaintiffs], technicians earn ‘no wages’ when performing work that does not generate production dollars, and therefore ‘the [plan] violates the minimum wage requirements by failing to provide the required separate compensation’ for each hour worked.”).  To bolster this point, plaintiffs compared the compensation of two hypothetical technicians: [A]ssume one technician generates $2,000 of production dollars in a 30-hour pay period working solely on tasks that generate production dollars.  A second technician generates $2,000 of production dollars in a 40-hour pay period, devoting 10 hours of the 40 hours to tasks that do not generate production dollars.  Further assume both technicians have a “tech rate” of 30 percent.  The base hourly rate for the first technician is $19 per hour ($2000 x .95 x .30 ÷ 30 = $19).  The base hourly rate for the second technician is $14.25 per hour ($2000 x .95 x .30 ÷ 40 = $14.25).  For 30 hours of work the first technician gets paid $570 during the pay period ($19 x 30 = $570).  For 40 hours of work the second technician also gets paid $570 during the pay period ($14.25 x 40 = $570). Id. at *7.  According to plaintiffs, this example illustrates that “because both technicians are taking home the same amount in their paychecks (i.e., $570) even though the second technician worked 10 hours more than the first technician while involved in tasks that did not generate production dollars, the second technician is not compensated at all for the last 10 hours of the pay period.”  Id. at *8 (emphasis in original).  The court rejected the plaintiffs’ argument. First, the court noted that the technicians’ pay plan was an hourly-based compensation system, not an activity-based compensation system.  “Although the hourly rate differs from pay period to pay period because technicians have the opportunity to increase their guaranteed minimum hourly rate based on the generation of production dollars, the technicians are always paid on an hourly basis for all hours worked at a rate above minimum wage regardless of their productivity, and regardless of the type of activity in which they were engaged during those hours.”  Id. at *7. Second, the court found “no merit to plaintiffs’ contention that the second technician is receiving no wages … for the time spent on tasks that do not generate production dollars[.]”  Id. at *8.  Because the plaintiffs received an hourly wage for all hours worked – albeit a variable one – the court “reject[ed] the plaintiffs’ argument that [the employer] must make a separate additional payment to the technician” for unproductive time to comply with California law.  Id.  Accordingly, the court concluded that the variable hourly rate compensation was lawful. The court’s decision in Certified provides a roadmap for employers struggling to create compensation plans that incentivize production while complying with recent decisions invalidating traditional commission and piece rate plans.  Employers with questions regarding their compensation plans should consult with competent counsel.

In the wake of the #MeToo Movement, New York enacted legislation that is specifically targeted to sexual harassment in the workplace.  On October 1, 2018, New York released final guidance materials regarding the legislation, including a model policy and a list of Frequently Asked Questions, which can be located here. All New York employers must have updated anti-sexual harassment policies in place by October 9, 2018.  All employers must distribute to all New York employees a sexual harassment prevention policy and complaint form that employees can use to report sexual harassment, which New York has made available online here. For employers that opt to create their own policies, the policy must: Prohibit sexual harassment consistent with guidance issued by the Department of Labor in consultation with the Division of Human Rights; Provide examples of prohibited conduct that would constitute unlawful sexual harassment; Include information concerning the federal and state statutory provisions concerning sexual harassment, remedies available to victims of sexual harassment, and a statement that there may be applicable local laws; Include a complaint form; Include a procedure for the timely and confidential investigation of complaints that ensures due process for all parties; Inform employees of their rights and redress and all available forums for adjudicating sexual harassment complaints administratively and judicially Clearly state that sexual harassment is considered a form of employee misconduct and that sanctions will be enforced against individuals engaging in sexual harassment and against supervisor and managerial personnel who knowingly allow such behavior to continue; Clearly state that retaliation against individuals who complain of sexual harassment or who testify or assist in any investigation or proceeding involving sexual harassment is unlawful. Additionally, employers must provide this policy in writing or electronically to employees.  If the policy is made available on a work computer, employees must be able to print a copy for their own records.  New York further requires that the policy be provided to employees “in the language spoken by their employees.”  To assist employers, New York intends to publish the model materials in different languages; yet if the model materials are not available in an employee’s primary language, the employer may provide the employee with an English-language version.  Employers do not have to provide this policy to “independent contractors, vendors or consultants.” Furthermore, the complaint form does not need to be included in full in the employer’s policy, but the policy should be clear about where the form may be found, for example, on the company’s internal website. In addition to the above requirements, all New York employers must provide employees with annual, interactive sexual harassment prevention training.  The deadline for completing the training requirement has been extended to October 9, 2019. New York employers may wish to work with competent counsel to examine their anti-harassment policies to ensure compliance with the legislation.  New York employers should also make sure that they implement compliant annual preventative sexual harassment training by the October 9, 2019 deadline.  In addition, New York employers operating in New York City should familiarize themselves with the requirements imposed by the Stop Sexual Harassment in New York City Act, which will impose additional training requirements beginning April 1, 2019.

Throughout the month of September, 2018, the U.S. Department of Labor (“DOL”) held five listening sessions across the United States to receive feedback from the public on the minimum salary requirements for the white collar exemptions of the Fair Labor Standards Act (“FLSA”).  These sessions were held in Atlanta, Seattle, Kansas City, Denver, and Providence.  Another listening session is scheduled for October 17, 2018, in Washington, DC. As a reminder, in 2016, the DOL proposed an increase to the FLSA’s salary threshold for the white collar exemptions from $455 per week (i.e., $23,660 annually) to $913 per week (i.e., $47,476 annually). On November 22, 2016, a federal judge in Texas issued a nationwide injunction halting implementation of the DOL’s proposed rule. Polsinelli attorneys participated in the DOL’s listening sessions in multiple cities to ascertain the concerns raised by employers. Summary of employers’ comments The vast majority of the comments were from employers. In general, employers did not oppose an increase to the salary threshold, but advocated that the DOL adopt the 2004 methodology of calculating the minimum salary, which would put the salary threshold for purposes of the exemption at approximately $32,000/year. Employers large and small raised several concerns regarding the DOL implementing a threshold salary level that is too high. Indeed, employers argued that small business would have to hire and schedule more employees, engage expensive HR and payroll consultants, and contend with morale issues associated with people losing the salaried stature.  Employers further advocated against automatic increases in the salary threshold and argued the DOL should engage in a notice and comment period prior to implementing any additional increases.  Employers further stated that the jump in salary threshold as proposed in 2016 would have caused wage compression, budget issues, and impacted the regular salary/raise structures employers already had in place. Employer representatives also advocated for the DOL to make the duties test for the administrative exemption clearer to avoid misclassification and avoid future litigation. Summary of comments from other institutions Additionally, several speakers pointed out that the current workforce desired and enjoyed the flexibility that comes with being an exempt employee, and that raising the salary threshold too high could disqualify individuals and restrict this freedom. Moreover, several financial institutions advocated for a larger percentage of the threshold salary to be satisfied through incentive and bonus payments to employees. Publicly funded education institutions advocated for the salary threshold to be tied to local conditions as they rely on public funds and budgets. They also raised concerns that the salary threshold did not include “in kind” compensation. There was also a concern that any increase to the salary threshold needed to be phased in over time so educational institutions could comply with the federal grants which had been granted under prior salary requirements. The DOL did not make any responsive comments or engage with speakers during the listening sessions. Only time will tell if employers’ concerns were heard and will be considered by the DOL when formulating the new salary threshold for the FLSA’s white collar exemptions.  Stay tuned to Polsinelli at Work for further updates.

Notwithstanding two previous California Supreme Court decisions which essentially held that “[u]nder the common law, corporate agents acting within the scope of their agency are not personally liable for the corporate employer’s failure to pay its employees’ wages,”  Reynolds v. Bement (2005) 36 Cal.4th 1075, 1087, and Martinez v. Combs (2010) 49 Cal.4th 35, 66 (limiting liability for wage claims to the actual employer and not its agents), the California Court of Appeal just held that  individual employees can be liable for civil penalties and attorneys’ fees for a company’s failure to pay overtime and/or minimum wages. In Atempa v. Pedrazzani (September 28, 2018, D069001) ___ Cal.App.4th ___ [2018 WL 4657860], the Court of Appeal, Fourth Appellate District, distinguished both Reynolds and Martinez and held that individuals can be liable for civil penalties under California Labor Code section 558, subdivision (a) (relating to overtime) and Labor Code section 1197.1, subdivision (a) (relating to minimum wage) through the Private Attorneys General Act (“PAGA”) (Cal. Lab. Code, § 2699). The Court held that the plain meaning of Labor Code sections 558(a) and 1197.1(a) imposed liability for civil penalties on an “other person” acting on behalf of an employer.  Having established that an individual under the circumstances described in the case could be individually liable for civil penalties, as contrasted to the underlying wages, the Court relied on PAGA to allow a private attorney to collect those penalties (75% to the state and 25% to the aggrieved employees) and to collect attorneys’ fees of $315,014 pursuant to PAGA (Lab. Code, § 2699, subd. (g)(1)). CORPORATE EMPLOYEES NEED TO BE MINDFUL OF INDIVIDUAL LIABILITY FOR CIVIL PENALTIES ARISING FROM VIOLATIONS OF CALIFORNIA’S WAGE AND HOUR LAWS Notwithstanding the California Supreme Court’s determination that individuals, absent alter ego liability, are not liable for wages owed to a company’s employees, the Pedrazzani case establishes that corporate individuals can be held personally liable for civil penalties underlying the statutes requiring that employees be paid overtime and a minimum wage.Additionally, they can be held personally liable for attorneys’ fees resulting from an employee’s successful pursuit of those civil penalties under PAGA. It is unclear whether those payments ultimately will be paid by the company, if it hasn’t gone bankrupt, pursuant to California Labor Code section 2802.

In spite of all the controversy swirling around Judge Brett Kavanaugh’s nomination to take Justice Kennedy's seat, it’s business as usual at the United States Supreme Court as the Justices kicked off a new term on October 1.  Does the ADEA’s 20 employee threshold apply to public employers? The Justices heard argument their first day back in Mount Lemmon Fire District v. Guido, U.S., No. 17-587. The Court will determine whether the Age Discrimination in Employment Act’s (“ADEA”) 20 employee threshold applies to public employers in the same way it does private employers.  In that case, laid-off firefighters brought an ADEA claim against the District, which argued it was not subject to ADEA coverage because it had fewer than 20 employees. The U.S. Ninth Circuit Court of Appeals held otherwise, finding the ADEA protects all public employees regardless of employer size. Court to consider scope of FAA and issues of arbitrability Arbitration agreements make a repeat appearance on the Court’s docket this term. In Lamps Plus Inc. v. Varela, U.S., No. 17-988, the Court will review whether an arbitration agreement stating that "arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings" effectively waived an employee's right to bring a class-action claim. The Ninth Circuit held the arbitration agreement was valid, but further held that language in the agreement should be construed against the drafter based on California law such that the employee could bring class action claims in arbitration. Lamps Plus appealed the Ninth Circuit’s decision, arguing that the agreement’s failure to mention class arbitration should be interpreted under the Federal Arbitration Act (FAA) and the Court’s precedent to require arbitration on an individual basis only. In New Prime Inc. v. Oliveira, U.S., No. 17-340, the Court will assess whether arbitration agreements may be enforced against long-haul truck drivers classified as independent contractors based on an exception to the FAA for "contracts of employment" with workers who engage in interstate commerce, such as long-haul truck drivers. The trucking company asserts that it may enforce the agreements because the drivers are not employees. Further, while some arbitration agreements delegate authority to decide such threshold questions, the Court will consider whether a court may keep and decide issues of arbitrability if they are “clear,” in an effort to preserve party resources. Finally, in Henry Schein Inc. v. Archer and White Sales Inc., U.S. No. 17-1272, the Court will determine whether the FAA permits a court to decline to enforce an agreement delegating questions of arbitrability to an arbitrator if the claim that the case should be arbitrated is "wholly groundless." If there is one thing employers may already take away from the Court’s new term, it is the repeat lesson that arbitration agreements must be drafted carefully and clearly. Indeed, all arbitration agreements should be thoroughly reviewed by legal counsel. In addition, employers may also consider asking a handful of employees to review draft agreements in advance of dissemination to help ensure their employees will understand the language and process set forth in the agreement.Employers with questions regarding the breadth, scope, or enforceability of their arbitration agreements would do well to consult competent counsel.

So far in 2018, the U.S. Department of Labor (“DOL”) has issued more than 20 opinion letters navigating the murky waters of the Fair Labor Standards Act (“FLSA”). In late-August, the DOL issued several new opinion letters to which employers can refer for guidance when confronted with FLSA questions.  Herein, we address two important opinion letters.  Later this week, we will address two more. 1. FLSA Retail and Service Establishment Exemption Can Include The Sale of Tech Goods and Services to Commercial Entities The line dividing qualifying (for example, grocery stores, hardware stores, restaurants, hotels, etc.) and non-qualifying “retail or service establishments” can be difficult to divine. For employers (1) selling mostly retail goods and services (in other words, retail, not wholesale, goods and services) and (2) employing individuals who primarily receive commissions – the DOL has addressed an issue of particular interest. The employer requesting DOL’s guidance sold a technology platform to merchants that allowed those merchants to process their customers’ credit card payments via a mobile device, online or in-person. The DOL noted -- even though the employer’s primary customers were, themselves, commercial entities (and not the general public) – the employer still qualified for the FLSA retail or service establishment exemption.  The opinion letter further provides that the employer’s goods and services were not being resold to any other entities and, thus, fully met the exemption. Wage and hour law is usually slower on the uptake regarding changing technologies. This DOL opinion letter is one means by which tech companies can seek guidance with respect to compliance with the FLSA. 2. Motivation is the Key to Any Volunteer Generally, an individual’s time spent on charitable or public endeavors outside of his or her normal working hours is not compensable under the FLSA (though volunteers and interns with for-profit entities are analyzed differently). Here, a nonprofit organization sought DOL guidance regarding whether individuals who volunteered to grade a professional examination should be paid for their grading time. The DOL noted volunteers must freely offer their services (instead of being coerced or pressured into doing so) for their time engaged in their “volunteer” extracurricular public or charitable activities to be non-compensable under the FLSA.  In this situation, the subject individuals all sought to give back to their profession and held highly compensated positions outside of their roles as graders. The DOL opined the nonprofit entity was not required to pay these graders for their time, but could pay for the individuals’ incidental travel, lodging, meals and other expenses (without negating their FLSA volunteer status). Nonprofit organizations should ask volunteers several questions to determine, properly, whether such an individual truly qualifies as a “volunteer” whose time is non-compensable under the FLSA, including: Why are you volunteering? Are you employed elsewhere? Is your employer asking you to volunteer here? Has someone from our organization asked you to volunteer here? Is anyone asking you to volunteer here? Are you also seeking employment through our organization? Are you leveraging this volunteering opportunity as a means to work for our organization? Do you understand you will not be compensated for your time? Do you understand we will not consider you for employment because of this volunteering opportunity? As a better, or even best practice, any nonprofit entity utilizing non-paid volunteers should memorialize in writing answers to these questions and require the volunteer to sign the written understanding.

Employers subject to collective bargaining relationships often complain about the time they spend responding to objectively meritless grievances. From showing, for example, that it had just cause to terminate an intoxicated employee or justifying why it did not assign overtime to an employee who consistently refuses to work more than 40 hours a week, Employers may be compelled to expend resources responding to grievances that are filed without an appropriate investigation. One of the justifications proffered by Unions for filing and litigating such grievances is that they have a “duty of fair representation” under the National Labor Relations Act (the “Act”) to their members, violation of which could lead to an unfair labor practice charge (“ULP”).  Although true, this “bar” has been set artificially low, and so long as Unions do not act arbitrarily, discriminatorily, or in bad faith when failing to process grievances, they will not run afoul of the Act.  Longstanding National Labor Relations Board (“NLRB”) precedent has held that “mere negligence” when mishandling grievances is not a violation of the Act. Recently, Peter Robb, the General Counsel of the NLRB, issued a Memorandum that imposes a higher standard on Unions regarding the handling of grievances.  Doing away with the “mere negligence” standard, the General Counsel asked Regional Directors to more closely scrutinize decisions made by the Union not to pursue grievances on behalf of their members.  Going forward, the NLRB will issue complaints against Unions that claim that they, for example, “lost track, misplaced, or otherwise forgotten about a grievance.”  Likewise, where a Union fails to respond to a member’s request for a status of a grievance, the absence of a “reasonable excuse or meaningful explanation” will not pass muster. Facially, General Counsel Robb’s Memorandum appears to be another favorable outcome for Employers under the NLRB’s new Republican controlled majority. However, the increased scrutiny regarding the processing of grievances may actually increase the amount of grievances filed.  Instead of vetting whether a grievance has merit prior to its filing, Unions simply may file the grievance to satisfy their heightened “duty of fair representation” obligations.  Employers may also expect an increase in the number of information requests where Unions, as part of their grievance investigation, will ask for documents and other records earlier in the grievance process.  Objectively meritless grievances may be pursued to arbitration, especially in the case of vocal and antagonistic Union members, as Unions may prefer to lose at arbitration than justify its reasons not to pursue arbitration before the NLRB. Consequently, Employers are encouraged to maintain complete and accurate records of their employees’ work performances, since grievances regarding employee discipline likely will rise. Employers also should strictly enforce contractual time limitations throughout the grievance and arbitration process, since a Union’s failure to timely prosecute alleged violations of the collective bargaining agreement now may draw a ULP.

Employers may face risks of departing employees, particularly involuntarily terminated employees, taking the employer’s confidential information or trade secrets with them when they leave.  Putting aside  the employee’s motivation—a desire to compete, spite, or something else entirely—employers should consider protective measures to limit, if not completely cut off, an employee’s access to confidential information and trade secrets attendant to termination of employment. Here are four best practices to limiting an employee’s access to confidential information and trade secrets proximate to termination of employment: 1.  Cut off the employee’s access to Company computer systems during, but not before, the termination meeting.  Use the element of surprise to the Company’s defensive advantage.   An employee who notices that access to Company computer systems has been cut off may sense the impending termination and take efforts to obtain conceal, access, or destroy Company confidential information in paper form or on electronic media. 2.  Remind the employee of all post-employment confidentiality obligations and restrictive covenants during the termination meeting.  The termination meeting may be the last point of direct communication between a departing employee and the employer.  Whether or not the employee heeds the warnings given, the Company is in a better position to enforce its rights having given the departing employee notice of the employee’s obligations, and a paper copy of any applicable agreements. 3.  Gather all Company devices from the departing employee as soon as possible.  The longer the departing employee has access to Company devices, the more likely the devices (and any confidential or proprietary data thereon) will become lost or compromised.  The employee should be given a deadline by which devices at the employee’s home or elsewhere outside the workplace should be returned to the Company. 4.  Consider financial incentives for departing employee compliance.  Employers may condition severance pay, if offered to the departing employee, upon the return of all Company confidential information and devices.   Likewise, in some but not all states, employers may implement policies that condition payout of accrued and unused vacation upon prompt surrender of Company devices and compliance with post-employment confidentiality obligations.

On September 14, 2018, a three-member majority of the National Labor Relations Board (“NLRB” or “Board”) comprised of Members William Emanuel, John Ring, and Marvin Kaplan published a proposed rule in the Federal Register that would restore the Board’s joint-employer standard as it existed prior to the 2015 Browning-Ferris decision. Pursuant to the proposed regulation: “An employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision and direction.  More specifically, to be deemed a joint employer under the proposed regulation, an employer must possess and actually exercise substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.” The rule’s proponents contend the proposed rule would return the joint-employer analysis to the Board’s traditional jurisprudence, which, per the majority, was “significantly relaxed” by the Board’s decision in Browning-Ferris.  Specifically, the Browning-Ferris decision held that the power to exercise control over a workforce, rather than whether such power is actually exercised, was the appropriate lens for assessing joint employment.  The new proposed rule, in contrast, seeks to restore the traditional standard, which found joint-employment when the employer actually exercised direct and immediate control over the other employer’s employees. Employers may recall that this is not the first time that President Trump’s Board has sought to restore its’ traditional joint-employment analysis.  In December 2017, the Board overruled Browning-Ferris in a decision styled Hy-Brand Industrial.  However, Hy-Brand Industrial was vacated in February 2018 when the Board’s Designated Agency Ethics Official determined that Member Emanuel should not have participated in the decision. In a sharp dissent, Member Lauren McFerran took the Board’s majority to task, arguing: “[T]here is no good reason to revisit Browning-Ferris, much less to propose replacing its joint-employer standard with a test that fails the threshold of consistency with the common law and that defies the stated goal of the National Labor Relations Act: ‘encouraging the practice and procedure of collective bargaining.’” Interested parties now have 60 days to comment on the proposed rule. For employers that make use of another entity’s employees, or otherwise have close relationships – such as franchisors and franchisees or contractors and subcontractors -- this proposed rule comes as welcome news.  Should the Board adopt the proposed rule at the end of the rulemaking process, employers will be provided greater certainty when entering into relationship with other entities. That said, labor watchers expect the road to the final rule to be bumpy.  Unions and their allies have already signaled they will challenge the rule through the comment process and – most likely – in the courts.  We have been following the Board’s joint-employer jurisprudence throughout the Browning-Ferris saga and will continue to do so.  Stay tuned for further updates.

In certain circumstances, an employee may begin a leave of absence prior to being eligible to take leave pursuant to the Family and Medical Leave Act (“FMLA”). What if, during the employee’s leave, she subsequently reaches her FMLA eligibility date? Does the employer have to offer FMLA to the employee – who was not eligible for FMLA at the start of her medical leave – when she reaches the 12-month, 1,250-hour requirement while out on leave? Before addressing that specific question, it is helpful to review the FMLA’s basic framework. Basic Framework: The FMLA is a federal law requiring covered employers to provide eligible employees with job-protected, unpaid leave for certain qualified medical and family reasons, including, but not limited to, family illness, pregnancy, military family leave, and adoption. Employers are required to maintain health benefits for employees taking FMLA leave during the covered leave period and are prohibited from retaliating against an employee for exercising FMLA rights. Under the FMLA, eligible employees are entitled to up to 12 weeks of leave. To be eligible for leave under the FMLA: An employee must have been employed with the employer for 12 months; The employee must have worked at least 1,250 hours during the 12 months prior to the start of FMLA leave; and The employer has employed 50 or more employees within a 75-mile radius of the worksite. When an employee’s eligibility is triggered: It isn't always easy to determine when an employee’s eligibility commences. For instance, Covered Employer hires Employee on May 1, 2017, and Employee works a full-time schedule. Employee requests leave pursuant to the FMLA for a serious health condition beginning on April 1, 2018, when she has worked more than 1,250 hours, but not yet worked a full 12 months for Covered Employer. Covered Employer has a policy that provides up to six weeks of non-FMLA leave for employees with serious health conditions. Per the Covered Employer’s leave policy, the Employee’s leave is approved to start on April 1, 2018, for the full six weeks, which continues beyond May 1, 2018. Is the employee entitled to an additional 12 weeks of FMLA-protected leave once she becomes eligible for FMLA leave on May 1, 2018? Simply, yes. Under the FMLA, the determination of whether an employee has met the hours of service requirement and has been employed by the employer for a total of at least 12 months is made as of the date the FMLA leave is to start.  Per the FMLA, an employee can be on non-FMLA leave when she satisfies the 12-month eligibility requirement, and, in that event, “any portion of the leave taken for an FMLA-qualifying reason after the employee meets the eligibility requirement would be FMLA leave." Stated another way, an employer’s policies and/or practices determine whether to grant non-FMLA leave for an employee who is not yet eligible for FMLA leave (unless there is an applicable state family or medical leave law). But once an employee becomes eligible for FMLA leave, an employer may not count any non-FMLA leave taken prior to the employee’s eligibility date toward the employee’s guaranteed 12 weeks of FMLA leave. Thus, in the example above, Employee is eligible for up to 12 additional weeks of FMLA leave as of May 1, 2018 (the eligibility date).  Accordingly, Employee could potentially take leave for up to 16 weeks, which consists of four weeks of leave prior to her FMLA eligibility in April 2018, and up to an additional 12 weeks of FMLA leave beginning May 1, 2018. The application of FMLA to real-life situations can be very complicated.  It is prudent to consult with your employment attorneys when making FMLA-related decisions.  Stay tuned to this blog for further clarification of the FMLA and other employment-related laws.

On August 31, 2018, the National Labor Relations Board (“NLRB” or “Board”) extended the deadline for public comment regarding whether the Board should revisit its 2014 ruling in Purple Communications, 361 NLRB 126 (2014). Employers will recall that the Board’s decision in Purple Communicationsopened the doors for employees to make use of their employer’s email system to engage in union organizing and other protected concerted activities. The Board’s request for briefs from amici was initially issued August 1 in a case styled Caesars Entertainment Corp., Case 28-CA-060841. Specifically, the Board requested that interested amici submit briefing regarding the following questions: Should the Board adhere to, modify, or overrule Purple Communications? If you believe the Board should overrule Purple Communications, what standard should the Board adopt in its stead? Should the Board return to the holding of Register Guard or adopt some other standard? If the Board were to return to the holding of Register Guard, should it carve out exceptions for circumstances that limit employees’ ability to communicate with each other through means other than their employer’s email system (e.g., a scattered workforce, facilities located in areas that lack broadband access)?  If so, should the Board specify the circumstances in advance or leave them to be determined on a case-by-case basis? The policy at issue in this case applies to employees’ use of the Respondent’s “[c]omputer resources.” Until now, the Board has limited its holdings to employer email systems. Should the Board apply a different standard to the use of computer resources other than email? If so, what should that standard be? Or should it apply whatever standard the Board adopts for the use of employer email systems to other types of electronic communications (e.g., instant messages, texts, postings on social media) when made by employees using employer-owned equipment? Briefs from amici must be filed by October 5. Labor watchers have been tracking this issue closely since the Board regained a Republican majority with the confirmation of Member John Ring. We will be following this case on the blog, so stay tuned for further developments.

It’s that time again! The annual run for school supplies, shopping for back to school clothes, and . . . time to review state laws covering school-related parental leave? As kids hurry off to new classrooms throughout the country, employers may notice an uptick in time-off requests for school-related events. Employers should be aware that several states (currently nine states and the District of Columbia) have laws authorizing leave time for parents to attend school functions. California’s law is most generous, providing up to 40 hours per year (but no more than 8 hours per month) to participate in children’s educational activities. Many of these state laws provide for leave beyond traditional school events or classroom activities including, for example, leave to find or enroll a child in a school or daycare facility or to attend a PTA event.  Also, many of the laws also cover not only biological parents, but also those with legal custody, acting as a parent, or otherwise related to the student. Generally speaking, these state laws require the employee to provide advance notice of a request for the school-related leave. Most states also allow employers to request documentation from the school to verify that the employee participated in a school activity on a specific date and time. Typically, however, the employer must accept documentation deemed appropriate and reasonable by the school. No state law requires employers to pay for school-related leave, but some states allow the employer to require use of any accrued PTO/vacation to participate in these activities (if that requirement is specified in the employer’s policy). Finally, similar to other leave laws, these state laws generally contain provisions protecting employees from discrimination or retaliation for taking leave to participate in school activities in compliance with the law. Employers with operations in states allowing for school-related leave should include references to the leave in their employee handbooks or policies, and make sure that any written policy addresses the interplay between existing PTO/vacation policies and school-related leaves.  Employers with questions regarding such leave laws should consult with competent counsel.

Employers should be able to definitively identify their “trade secrets” and non-public information.  Indeed, employers may miss out on opportunities for relief from misappropriation of their trade secrets by former employees and competitors if they do not take time to specifically identify and understand their trade secrets.  Before an employer can effectively protect against the theft, disclosure, and misuse of its trade secrets, it must first clearly understand what is—and what is not—a trade secret.  Once the trade secrets are identified, employers should take careful steps to protect trade secrets and confidential information from competitors, as well as departing employees. What are trade secrets? To begin, anything that gives an employer a competitive advantage may be a trade secret.  Trade secrets are a subset of an employer’s confidential information, and can include information about customers or clients, business methods, pricing data, machinery, marketing strategies, techniques, formulas, processes, or virtually anything else that is secret, unique,  and valuable to the employer.  Considered this way, every employer inevitably has some potential trade secrets. Another way to recognize possible trade secrets is by evaluating who has access to the information.  For example, if the information is subject to measures to maintain its secrecy, such as limited physical or electronic access, it may be a trade secret.  Alternatively, if the employer uses contracts with its employees and business partners to protect the confidentiality and limit the disclosure of the information, said information may very well be a trade secret, too. What qualifies as a trade secret? To qualify as a trade secret, the information must generally 1) be subject to measures to maintain its secrecy and 2) derive independent value from being secret.  If the trade secret is not sufficiently protected or becomes public -- even inadvertently -- it could lose its status as a trade secret, decreasing its worth to the employer.  But an employer cannot realistically be expected to adequately protect its trade secrets if it does not first know what it must protect.  That is why it is so important for employers to regularly audit their trade secrets and update their protective measures, as needed. Employer takeaways Departing employees with access to trade secrets pose a significant threat to an employer’s trade secret security, thus necessitating a consistently-enforced protocol to off-board those employees and ensure compliance with any continuing post-employment obligations owed to the employer.  However, upon discovering that a departed employee may be misappropriating trade secrets, courts expect swift action from the employer to protect its assets—including, early, specific identification of exactly what the employer considers as its stolen trade secrets. With proper planning, including routine auditing of its trade secrets and protective measures, an employer can position itself for greater success if it chooses to pursue relief for the theft in court.  Employers with questions regarding trade secret identification or protection should consult with competent counsel.

Recently, a 3-member panel of the National Labor Relations Board (“NLRB” or “Board”) ruled that the University of Pittsburgh Medical Center (“UPMC”) unlawfully prohibited off-duty employees from distributing literature in non-patient care areas of its hospitals. Case Background During a 2016 union organizing campaign at multiple UPMC facilities, hospital managers allegedly threatened off-duty employees with discipline for passing out union materials in cafeterias and outdoor areas of the facilities.  In addition, a manager found union flyers in a break room.  The manager warned employees not to leave materials there that were not directly related to hospital business, then threw the flyers in the garbage.  The union subsequently filed unfair labor practice charges against UPMC, contending, among other things, that UPMC’s Solicitation and Distribution Policy was unlawful. UPMC’s Solicitation and Distribution Policy UPMC’s Solicitation and Distribution Policy defined “off duty” as “any period during which a staff member is not scheduled to work” and “non-working time” as time during a “workday when a staff member is on duty but is not expected to be performing work tasks (i.e., meal periods or breaks).”  The policy lawfully banned solicitation during working time anywhere in a facility, and at any time in patient-care areas. Regarding off-duty employees, the policy stated that “off-duty staff members may not enter or re-enter the interior of their work areas or other work areas within their workplace facility aside from the cafeteria, exercise facility, Human Resources building, for any purpose (including solicitation or distribution) except to visit patients, receive medical treatment, or for other purposes such as are available to the general public.” The Board’s Decision The Board agreed with the Administrative Law Judge’s determination that the Solicitation and Distribution Policy was unlawful because it prohibited off-duty employees, who were permissibly on hospital property, from engaging in solicitation and distribution of union literature.  The Board found that the policy “allowed off-duty employees to access the cafeteria but it prohibited them from soliciting (or being solicited by) employees on non-working time, both in the cafeteria and in other nonworking and non-patient care areas of the hospitals.”  In addition, UPMC was unable to show that the ban on off-duty solicitation was necessary to avoid disruption of health care operations or disturbing patients, which could have justified the policy. Moreover, the Board held that UPMC’s unwritten ban on union materials in non-working areas, such as break rooms, was unlawful, as was the collection and removal of the flyers. Employer Takeaways Hospital policies regarding distribution of literature and solicitation by employees require careful drafting, and consistent, non-discriminatory enforcement.  Hospitals may, and should, maintain lawful restrictions on solicitation and distribution activity including: 1) when and where solicitation and distribution can, and cannot, occur; 2) the rights of on-duty and off-duty employees to solicit or distribute literature; and 3) a ban on solicitation and distribution by non-employees.  Furthermore, Access to Premises policies should dovetail with Solicitation and Distribution policies to ensure limitations on off-duty employees and non-employees will pass NLRB muster.  Employers with questions regarding implementing such policies – or that wish to review their current policies – would do well to consult with competent counsel.

When operating its business, an employer should consider whether and when to implement employment agreements with certain employees.  When considering whether an employee should execute an employment agreement, employers should consider the following five factors: 1.       Complex or specialized compensation, bonus, equity rights, fringe benefits, or duties: If the employee receives compensation, bonuses, equity rights, or unique fringe benefits that other employees do not receive, employers should strongly consider memorializing same in an employment agreement. 2.       Restrictive covenants:Some states’ laws require restrictive covenants (non-competition, non-solicitation and/or confidentiality) provisions to be a part of an otherwise enforceable agreement and do not permit stand-alone restrictive covenant agreements.  In such cases, to the extent the employer wants the employee to agree to restrictive covenants, the covenants should be included in an employment agreement. 3.       Employment for a definite term (with severance): When recruiting employees who would be difficult to replace or who hold a significant position with the company, such as a C-suite employee, the employer may wish to negotiate employment for a specified period to time.  The employer should also consider memorializing with the employee whether and when severance payments will be due to the employee upon termination of employment. 4.       Change in control:Typically, for C-suite or key employees where the employer needs to have certain provisions become operative in the case of a change in control (sale of assets, sale of stock, merger, etc.), placing such terms in an employment agreement is advisable. The employer may also consider including an assignment provision – as permitted under applicable state law – to assign the employment agreement to an entity that buys the employer’s business. 5.       Memorialize specific post-termination provisions: The employer should memorialize any post-termination obligations in an employment contract, and should also consider whether to include a compulsory mediation or arbitration provision regarding any disputes surrounding any post-termination disputes that may arise. When properly implemented, employment agreements can be very beneficial to employers.  Employers considering asking employees to sign such agreements would do well to consult with competent counsel.

In the waning days of President Obama’s Administration, the Occupational Safety and Health Administration (“OSHA”) announced sweeping changes to its recordkeeping rule, originally to be effective January 1, 2017, which contained a heightened emphasis on injury reporting and anti-retaliation protections.  We wrote about those changes in our Blog on August 4, 2016, which can be accessed here. Implementation of the new rule was fraught with delay, with OSHA extending various deadlines for compliance.  The new rule was also challenged in litigation.  Industry groups filed a lawsuit in Texas seeking to block enforcement of the anti-retaliation provisions contained within the new rule.  See Texo ABC/ABG, et al. v. Perez, et al., No. 3:16-cv-01998 (N.D. Tex. July 8, 2016).  Another consortium of industry groups filed a legal challenge in Oklahoma attacking the new rule’s electronic submission requirement for injury data.  Nat’l Assn. of Home Builders, et al. v. Perez, et al., No. 5:170cv000009 (W.D. Okla. Jan. 4, 2017).  Both of these cases were stayed by their respective court in response to OSHA, under President Trump’s Administration, indicating that it would consider revisions to the rule. On July 30, 2018, OSHA announced its proposed changes to the Obama-era recordkeeping rule. See 83 Fed. Reg. 36494 (July 30, 2018).  But, if employers were anticipating wholesale changes to the rule, they may be disappointed.  There were no changes made to the anti-retaliation provisions or electronic submission requirements for OSHA’s Annual Summary Report (Form 300A).  The only substantive change proposed in the new rule is the removal of the electronic filing requirement for OSHA Form 300 and 301 that applied to establishments with 250 or more employees.  The new proposed rule also adds the requirement that employers submit their Employer Identification Number together with injury data.  Employers have until September 28, 2018 to submit comments on the new proposed rule. As OSHA did not make any changes to the anti-retaliation provisions contained within the recordkeeping rule, OSHA’s position on safety incentive programs remains intact.  Incentive programs which reward workers for reporting near-misses or hazards or otherwise encourage involvement in the safety and health management program will likely withstand OSHA scrutiny.  But rate-based incentive programs, which reward employees based upon injury and illness numbers, may give rise to a record keeping violation if OSHA determines the program discourages the reporting of workplace injuries without improving worker safety.

On July 13, 2018, the U.S. Department of Labor (“DOL”) issued a Field Assistance Bulletin (“FAB”) to provide guidance to field-office staff regarding whether caregivers, such as nurses and health aides, qualify under the Fair Labor Standards Act (“FLSA”) as employees of registries that connect caregivers with people who need their services, such as senior citizens or individuals with disabilities and/or certain medical conditions, or are independent contractors. The majority of the FAB summarizes previous guidelines issued by the DOL, such as Conducting a background check and/or verifying references and credentials, does not make a caregiver an employee of the registry.  Note, however, that screening for subjective characteristics, such as likeability, would indicate an employment relationship. Facilitating matches between clients and caregivers based on their parameters and preferences does not establish an employment relationship, so long as the registry does not maintain control over hiring and firing of the caregiver. Facilitating communication between clients and caregivers is acceptable and does not create an employment relationship, so long as the registry does not directly assign specific caregivers based on subjective factors (i.e., likeability). Allowing the caregiver unrestrained profit/loss opportunities (e.g., no maximum number of hours, no limitations on the engagement in other ventures, etc.) tends to show that there is not an employment relationship. Informing the client or caregiver about normal pay rates in the area is not sufficient to create an employment relationship, nor is relaying communications on preferred rates of pay. However, the below factors are indicative of an employment relationship between a registry and a caregiver: The registry maintains the ability to hire or fire a caregiver. Taking extra steps to evaluate “subjective factors that the registry values” rather than “performing basic quality control and verification checks” such as consideration as to whether a prospective caregiver is a likeable person or interviewing the caregiver’s references. Charging “fees that fluctuate based on the number of hours that a caregiver works” for the client indicates an “ongoing interest in the employment relationship, including in the number of hours the caregiver works and whether those hours are tracked accurately.” This type of fee arrangement “may indicate that the registry is the caregiver’s employer.” Conversely, if the fees are issued on an initial basis, as well as “per service” fees for administrative activities, rather than on an hourly basis, it is more likely the parties have entered into an independent contractor relationship. Requiring the creation and confirmation of a caregiver’s hours worked may indicate the existence of an employment relationship. Mandating how services must be provided. Critically, “the analysis does not depend on any single factor” and the Wage and Hour Division of the DOL “will consider the totality of the circumstances to evaluate whether an employment relationship exists between a registry and a caregiver.” As we have previously reported, the standards governing employment and independent contractor classification are constantly changing.  Businesses, especially in labor intensive industries and the sharing economy, should closely track these standards and consult competent counsel with any questions.  We will track how the FAB affects future DOL Wage & Hour investigations and whether it is cited persuasively by courts interpreting the FLSA.

In light of the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis [1] that class action waivers in arbitration agreements are enforceable, employers have been rejoicing.  However, is their excitement misplaced? As that eminent legal scholar, Isaac Newton, once said “for every action, there is an equal and opposite reaction.”[2]  To the extent class action waivers are enforceable, employers may experience an increase in individual cases, each of which includes the possibility for plaintiff’s counsel to obtain attorneys’ fees if he or she is successful.  Accordingly, companies should carefully evaluate whether to include a class action waiver in any arbitration agreement with their employees in light of the possibility of multiple individual arbitrations involving similar issues for which the company must pay for the arbitration fee, its attorney’s fees and the plaintiff’s attorneys’ fees if it is unsuccessful in each arbitration. Class Action Waivers Outside Of Arbitration The reasoning behind the Court’s decision in Epic Systems is tied closely to the policies underlying the Federal Arbitration Act (“FAA”), and it is unclear whether a class action waiver is enforceable in the absence of an arbitration agreement.  For example, in the absence of an arbitration agreement and the public policy underlying the FAA, would a non-arbitration class action waiver survive a challenge under Section 7 of the National Labor Relations Act involving concerted activity?  Similarly, in the absence of an arbitration agreement, would state statutes regarding unconscionability of a class action waiver be applicable?  See e.g., Gentry v. Superior Court, 42 Cal. 4th 443, 165 P.3d 556 (2007), abrogated by Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 327 P.3d 129 (2014).  Finally, in the absence of an arbitration agreement, can collective actions under the Fair Labor Standards Act (“FLSA”) be waived?  As a general matter, substantive rights under the FLSA cannot be waived.  The question is whether the right to a “collective action” is a substantive or procedural right, and the courts are split on this issue. Food For Thought A company should carefully consider whether to employ class action waivers in connection with any arbitration program and, in the absence of an arbitration program, should consider that a class action waiver may not be enforceable in certain circumstances. [1] Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018). [2] Sir Isaac Newton, Newton’s Third Law of Motion, in Philosophiæ Naturalis Principia Mathematica(1687).

Employers may desire to transfer an employee to a different position, division, or office because of personality conflicts, performance issues, a reorganization, or myriad other reasons.  While transferring an employee may resolve an immediate problem, it could also lead to a retaliation or disparate treatment claim. Here are at least three things to consider before transferring an employee: First, employers would be wise to review the impacted employee’s history at the company to determine if the transfer could be viewed as retaliatory or discriminatory. For example, employers should generally closely analyze a transfer of an employee who has recently engaged in a protected activity (e.g., filing an EEOC complaint, requesting FMLA leave, etc.). Moreover, employers should avoid a transfer if it would reconnect an employee with a supervisor or coworker with whom there have been previous issues. Often, reviewing personnel files and speaking with managers prior to any transfer will reveal these issues. Second, to avoid a discrimination or retaliation claim, employers should ensure that the new position is not “materially adverse,” or does not have a detrimental effect on the terms and conditions of a person’s employment, such as a decrease in compensation or benefits, or likely will severely limit promotion potential. For example, in Hendrix v. Jesse White, State of Illinois Secretary of State,[1] the court held that a transfer to a different facility was not materially adverse when the new position had the same job title, responsibilities, pay, and benefits. Similarly, in Montgomery v. Medstar Montgomery Medical Center,[2] the court found that a transfer was not materially adverse because the new position did not impact the employee’s compensation or potential for a promotion. Third, prior to the transfer, employers should document the legitimate, non-discriminatory reason(s) necessitating the transfer. Following these three steps – and consulting competent counsel -- will help limit discrimination and retaliation claims stemming from employee transfers. [1] http://hr.cch.com/ELD/HendrixWhite071118.pdf 2 http://hr.cch.com/ELD/MontgomeryMedStar071218.pdf

On July 17, 2018, a National Labor Relations Board (“Board”) Administrative Law Judge (“ALJ”) rejected a proposed settlement that would have concluded the  closely-watched consolidated unfair labor practice case against McDonald’s USA, LLC (“McDonald’s”), which has been ongoing for over three years.  The matter has drawn the interest of labor watchers, as the case hinges primarily on whether McDonald’s is a “joint employer” with its franchisees. In a prior blog post, we discussed Board General Counsel Peter Robb’s proposed settlement with McDonald’s and the impact of the proposed settlement moving forward, especially regarding its impact on employers that rely on the traditional franchise model.  We cautioned, however, that the proposed settlement still had to be ratified by an Administrative Law Judge (“ALJ”). It was not.  ALJ Lauren Esposito rejected the settlement, reasoning it was not a “reasonable resolution based on the nature and scope of the violations alleged.”  Additionally, the ALJ found that the proposed settlement lacked “certain fundamental elements” and contained “limited remedial impact” that would not fully resolve the dispute.  ALJ Esposito’s decision further emphasizes that any future settlement proposal must impose some liability against McDonald’s, rather than solely against its franchisees. Now,  McDonald’s and General Counsel Robb must determine  whether to abandon settlement discussions and prepare for what could be protracted litigation; resume settlement discussions in line with ALJ Esposito’s decision; or appeal the decision to the Board. Please stay tuned to our blog for further updates on this closely-watched dispute.

On July 13, 2018, the General Counsel of the National Labor Relations Board (“NLRB” or “Board”) released several memos authored by the Board’s Division of Advice, which offer further guidance to employers about how the Board will evaluate work rules under the new Boeing standard established in December 2017. Intellectual Property and Confidentiality Rules Determined to be Lawful The first advice memo analyzed intellectual property and confidentiality rules promulgated by Lyft Inc., which the Teamsters Union (Joint Council 7) challenged as unlawfully overbroad under the new Boeing standard.  The intellectual property rule barred employees from making use of Lyft’s logo without written permission, and the confidentiality rule barred employees from using or disclosing “User Information” and other confidential and proprietary information relating to Lyft’s business. “User information” was defined as the personal information of both riders and drivers who use the Lyft platform. The Division of Advice, in a memo dated June 14, 2018, determined that the policies in question are lawful under the Boeing standard.  Regarding the intellectual property rule, the Division of Advice found that it is a Category 1 rule under Boeing. Thus, although some protected concerted activity might fall under the rule’s ambit, including fair use of an employer’s intellectual property on picket signs and leaflets, when reasonably interpreted, most employees would understand that the rule would prohibit only commercial and other non-Section 7 protected uses of the logo.  Further, even if the rule could be interpreted by employees to prohibit the use of logos for protected activity, the rule is unlikely to deter using the logos or the protected activity itself.  The advice memo makes clear that, when balanced against an employer’s significant interest in protecting its intellectual property, any peripheral impact on Section 7 rights is permissible. The Division of Advice also found the confidentiality rule to be lawful, reasoning that it was unlikely to interfere with employees’ protected rights under the National Labor Relation Act.  Employees would not reasonably interpret the rule to prohibit the sharing of 1) information about working conditions, or 2) employee names and contact information. Rather, the rule is primarily designed to prohibit the disclosure of “technical, financial, strategic, and other proprietary” information, and does not specifically reference “employee information.” Social Media Policy Found to be Lawful A second advice memo, dated June 11, 2018, analyzed Kumho Tires’ social media policy.  Specifically, Kumho Tires fired an employee who violated its social media policy by posting a photograph of a team leader’s bonus request form in a closed social media group shared with other employees in the context of a union organizing campaign. The Division of Advice concluded that, although the employee was otherwise engaged in protected concerted activity when posting the form, the conduct was not protected because he photographed and disseminated the form after having received it from a co-worker, who the employee knew had improperly taken it from the team leader’s desk to another floor to photocopy. The employer therefore did not violate Section 8(a)(1) by discharging the employee. The Division of Advice also concluded that the employer’s social media policy is facially lawful under Boeing because, when reasonably interpreted, it would not be viewed as restricting employees’ Section 7 rights.  Rather, the social medial policy reasonably required employees to protect the employer’s confidential and trade secret information when engaging in social media communications. These and other advice memos released from the General Counsel’s office provide employers with further guidance on how the Board will interpret work rules under the Boeing standard.  Employers should review their employee handbooks and work rules, and consult with experienced counsel to make any recommended changes.

Many Colorado physician employment agreements and equity agreements require physicians to pay liquidated damages if the physician competes with his/her former employer after leaving the organization.  The payment of damages are a work-around of the Colorado statute on restrictive covenants, which provides that a physician cannot be prevented from practicing through a restrictive covenant, but permits an organization to require a physician to pay for damages caused by termination of the employment or equity agreement, including damages caused by competition. Two recent legal developments suggest that health care organizations should take a look at their agreements that contain damages provisions for Colorado physicians. 1. On March 8, 2018, a division of Colorado’s Court of Appeals announced a decision criticizing a physician liquidated damage provision.  Crocker v. Greater Colorado Anesthesia, P.C., 2018COA33.    Specifically, the decision stated that because Colorado’s statute provides that physicians can be required to pay damages “related to the injury suffered,” a liquidated damages provision must be reasonable compared to the actual damages experienced after the physician’s departure and competition.  In other words, the decision stated that, unlike other liquidated damage provisions, courts should not assess whether the liquidated damage provision was reasonable when signed, but whether the liquidated damage provision is reasonable at the time of enforcement and in comparison to actual damages experienced.  Importantly, the decision did not state that physician liquidated damages provisions are categorically unenforceable.  Moreover, there are grounds for later courts to conclude these statements are non-binding dicta.  Nevertheless, the decision highlights an issue that is likely to be raised in future cases and should prompt health care organizations to act. 2. Effective April 2, 2018, the legislature amended Colorado’s statute on restrictive covenants to ensure access to care for patients with rare disorders.  As a result of this amendment, physicians are permitted to notify and continue to treat or consult for patients with rare disorders when they leave one organization for another.  Additionally, the statute protects physicians and the organizations that employ them from paying damages for notifying and providing treatment or consultations for patients with rare disorders.  Rather than defining criteria for rare disorders, the statute uses a list compiled and maintained by the National Organization for Rare Disorders, Inc. In response to these developments health care organizations should take the following steps: Review the method used when setting the liquidated damages formula or amount. Assess with experienced counsel whether it demonstrates a desire to and is an attempt to reach an amount that is reasonably related to actual damages. Test the liquidated damage formula or amount against actual experience to assess whether the amount is reasonably related to actual damages. Review accounting and other administrative procedures with experienced counsel to ensure that the organization will be able to prove any  actual damages suffered. Assess with experienced counsel whether the liquidated damages formula or amount should be revised in light of the rare conditions amendment. Evaluate whether training should be provided to physicians and administration about revisions to the liquidated damage provisions and the rare conditions amendment.

Today, the United States Supreme Court ruled unions cannot compel public employees they represent but who are not members to pay “agency fees,” which cover the cost of collective bargaining and processing grievances.  In Janus v. American Federation of State, County, and Municipal Employees, Council 31, No. 16-1466, the Court overruled its 1977 decision that permitted unions to extract agency fees from non-consenting, non-member employees they represented. In Janus,Illinois law allowed unions to require represented employees to choose either to become dues-paying union members or be non-members and pay an “agency fee” to cover collective bargaining and other related costs. The plaintiff in Janus refused to join the union because he opposed some of its policy positions.  However, under the collective-bargaining agreement, he was still required to pay an “agency fee” of approximately $535 per year.  He filed a lawsuit challenging the Illinois law, claiming that it violated the First Amendment.  The trial court and the United States Seventh Circuit Court of Appeals rejected his argument based on the Supreme Court’s prior decision in Abood v. Detroit Board of Education, 431 U.S. 209 (1977), which found such public-sector agency-fee arrangements were permissible.  The Supreme Court granted certiorari to consider whether to overrule Abood on First Amendment grounds. In its 5-4 decision, the Janus Court observed that compelled subsidization of private speech “seriously impinges” on an individual’s First Amendment rights.  The Court noted that recent cases had applied “exacting” scrutiny when judging the constitutionality of agency fees.  Under that standard, a compelled subsidy must serve a compelling state interest that cannot be achieved through means significantly less restrictive of associational freedoms.  The Court found the two justifications adopted by the Court in Abood– labor peace and the risk of free riders – failed to meet such scrutiny. The Court presumed that labor peace – the avoidance of conflict and disruption that would occur if employees in a unit were represented by multiple unions – was a compelling state interest, but determined that the fear of pandemonium was imagined.  In the Court’s view, labor peace could be readily achieved through less restrictive means than the assessment of agency fees.  The Court concluded that avoiding free riders was not a compelling interest and could not overcome a First Amendment objection.  Accordingly, the Court found that neither of these grounds articulated in Abood justified an infringement on agency fee payers’ free speech rights. The implications of the Court’s decision are significant.  Unions that represent public employees will see reduced revenue from employees who stop paying agency fees, and possibly from dues-paying employees who resign their memberships when they are able to do so.  To replace the lost revenue, unions may seek to reduce operating costs through layoffs or other means, or reduce their political spending regarding issues in local, state, or national elections.  Unions may also embark on aggressive organizing campaigns to add dues-paying members to replace lost revenue. At least for the near term, unions that represent public-sector employees are likely to face financial and operational headwinds as a result of the Janus decision.

If an employer is being audited by the US Department of Labor (DOL), there are several steps the employer can take to proactively prepare for and ultimately defend its practices: 1. Review immediately and react to the audit request. Carefully review the DOL’s audit request and promptly advise management and legal counsel. In certain circumstances, the employer may work with the auditor regarding scheduling the date(s) of the audit. 2. Provide responsive existing documents; check your employee rights posters.  Work with legal counsel to provide documents responsive to the auditor’s request for information.  Note employers are not required to specially create new documents for an audit.  Prior to the visit by the DOL, ensure applicable employee rights posters are displayed, including Family and Medical Leave Act (“FMLA”) rights (if the FMLA applies to your business). 3.  Expect employees to be interviewed.  Determine whether the auditor will request employee interviews.  Auditors may interview employees regarding a host of issues, including, but not limited to, exempt/non-exempt status, overtime pay, payroll scheduling, child labor, travel time, on-call time, PTO, training time, volunteer time, wage deductions, and FMLA practices (where applicable). During interviews, employees are often asked to describe their regular daily duties. Note an employee’s own description of his/her work duties is generally determinative regarding any Fair Labor Standards Act (“FLSA”) exemptions. 4.  Beware Protected Health Information. Ensure any protected health information (“PHI”), including medical records, remains separate from employees’ general personnel files.  Note employers must retain certain FMLA documentation including, but not limited to, any records of disputes between the employer and employee about FMLA-related issues. 5.  Protection of Commercial and/or Proprietary Information. Trade secret information may need to be protected or redacted (and marked as redacted).  In other situations, it may be possible to mark documents as “Business Confidential” or “Proprietary/Privileged.” 6. Expect DOL Follow-up.  Often, an auditor will conduct follow-up interviews or request additional information from the employer.  The DOL may also conduct a debriefing discussion with the employer regarding any legal issues that may exist and whether any penalties or back wages may be due.

Employers, dust off your arbitration agreements and take a second look at the signature line. Is it signed by both parties? Did the employer representative sign on behalf of the correct corporate entity? If the answer to either of these questions is “no,” then the arbitration agreement may be unenforceable. Did the company sign the arbitration agreement? The United States Fifth Circuit Court of Appeals recently held that an arbitration agreement – which was signed by the employee but not by the employer – was unenforceable.[1] The employer argued that its signature was unnecessary because the employer drafted the agreement and maintained the agreement as a business record. Thus, the employer contended, that it intended to be bound by the arbitration agreement. The court rejected this argument, finding that such reasoning would allow an employer to “have it both ways – argue that it did not intend to be bound because it did not sign the agreement or it did because it kept the agreement and sought to compel arbitration.” Due to the absence of the employer’s signature, the court held that there was not a valid agreement to arbitrate and the employee could pursue her claims in federal court. Assuming your company executed the arbitration agreement, was it signed on behalf of the correct entity? Further, the U.S. Fourth Circuit Court of Appeals recently held that a subsidiary could not enforce an arbitration agreement when the document was signed by the parent corporation.[2] There, the plaintiff and the subsidiary’s representative, Vaughn, executed a “Services Agreement.” The plaintiff also signed an “Arbitration Rider,” which Vaughn executed on behalf of the parent corporation “d/b/a [the subsidiary].” The Fourth Circuit held that “the parties here must abide by what the agreement says. The Arbitration Rider binds [the plaintiff] and [the parent] to arbitration of their disputes…” Since the subsidiary was not named in the arbitration rider, the court held that it had no basis to compel arbitration, and the plaintiff could pursue his class-action wage claims in federal court. These cases demonstrate that simple oversights can invalidate otherwise enforceable arbitration agreements. Employers should remind their representatives to countersign all employment agreements and ensure that the agreements include all the desired corporate entities. Failure to do so could invalidate the agreement. [1] See Huckaba v. Ref-Chem, L.P., No. 17-50341 (5th Cir., June 11, 2018). [2] See Weckesser v. Knight Enterprises S.E., LLC, No. 17-1247 (4th Cir., June 12, 2018).

By letter dated June 5, 2018, National Labor Relations Board Chairman John Ring announced that the Board will issue a proposed regulation to determine when employers may be considered joint employers under the National Labor Relations Act “as soon as possible, but certainly by this summer.” In the letter, Chairman Ring argued that notice-and-comment rulemaking was the most prudent way to review the joint-employer standard, and further contended that establishing legal standards through precedential decisions limits the Board and results in less comprehensive rules. Per Chairman Ring: “Rulemaking offers the best vehicle to fully consider all views on what the [joint-employer] standard ought to be.” Chairman Ring emphasized that, if approved, any final rule would apply prospectively only, and would not affect pending cases. Labor watchers expect the Board to issue a Notice of Proposed Rulemaking in the coming weeks. Employers that could be affected by any changes to the current joint-employer standard would do well to closely follow the blog for further updates.

Summertime, and the livin’ is easy . . . Ella Fitzgerald’s voice brings images of crackling heat, warm breezes and long, languid days. But, when the temperatures rise outside, human resource managers can find their workforce temperatures rising as well. As summer progresses, the season presents unique workforce management issues. Here are four tips for keeping your workforce temperatures cool, calm and productive during the long, hot summer. 1. Revisit and Communicate Time-Off Policies School’s out; kid’s out. Academic summer breaks can lead to workplace absences and increased requests for time off (paid and unpaid) as parents juggle summer break child care, summer program involvement, family vacations, and those ubiquitous summer camps. HR professionals should take the opportunity, early, to revisit with employees the organization’s workplace vacation or paid time off (PTO) policy. Additionally, HR professionals should communicate the employer’s time-off policies and process/system for time-off requests and approvals, paying attention to communicating any first-requested, first-approved, workplace coverage and seniority requirements, before employees (and HR) find themselves confronted with denied requests, interrupted vacation plans, disappointments and morale issues. 2. Address the Dress Code The arrival of warmer weather can find employee dress leaning more to the casual side of life, reflecting the more relaxed pace of life outside the workplace. While workplace dress codes vary across professions, industries and even specific company/office cultures, summer’s longer days provide a great – and sometimes, needed – opportunity to reiterate to employees  attire that is, and is not, appropriate in a particular workplace. Maybe sandals, flip-flops, shorts, summer tanks and tees are encouraged in some workplaces, but in others, they are considered too casual for business casual. In other, more buttoned-up, workplaces, business casual itself remains too casual, even during the summer. Remind employees, again, of the organization’s dress code policy. If the employer has not implemented a formal dress code policy, take the opportunity to work with management to develop, and communicate, a policy that informs employees of appropriate attire in the particular workplace. At a minimum, communicate the employer’s expectations for workplace attire. Finally, always review applicable federal, state and local laws and guidance for applications of dress code requirements among certain protected classes. 3. Check the Severe Weather Policy Hurricanes, severe thunderstorms, tornadoes – summer can also mean casting a wary eye to the sky (and the forecast). HR professionals should also ensure the employer is prepared should inclement weather cause a major disruption to its business, or to the welfare of its employees. Employers should develop, and communicate, a plan/policy regarding specific steps when severe weather strikes. Some questions to ask, and answer for employees: If severe weather strikes during business/operations hours, what is the plan for sheltering in place? When will the employer close or remain open during a storm or other severe weather outbreak? How will the employer communicate an office closure or reduced-hours schedule? Will employees be allowed to telecommute if the office/facility closes or transportation becomes an issue Will the office/facility be available for sheltering purposes during extreme weather events? 4. Ensure Any Unpaid Internship Program is Compliant With Wage Laws Summertime can bring an influx of interns to a workplace. The Fair Labor Standards Act (FLSA) generally requires “for profit” employers to pay employees for all time worked. However, under certain limited circumstances, interns may not be considered “employees” under the FLSA, in which case they may not be required to be compensated for their work. When it comes to unpaid workplace internships, the U.S. Department of Labor and courts have developed the “primary beneficiary test” to determine whether an intern is, or is not, an “employee” under the FLSA. Employers should review the following factors when determining whether an intern may be unpaid for his/her internship: 1.       The extent to which the intern and the employer clearly understand there is no expectation of compensation. Any promise of compensation, express or implied, suggests the intern is an employee – and vice versa. 2.       The extent to which the internship provides training similar to that which would be given in an educational environment, including clinical and other hands-on training provided by educational institutions. 3.       The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit. 4.       The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar. 5.       The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning. 6.       The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern. 7.       The extent to which the intern and the employer understand the internship is conducted without entitlement to a paid job at the conclusion of the internship. This review should be flexible; no single factor determines whether an internship should be paid or unpaid. The unique circumstances of each internship will require reviewing all of the factors. Additionally, any housing or food stipends – for example – should be clearly designated as unrelated to wages. HR professionals should also consult with in-house or outside labor and employment counsel for questions regarding any workplace policy, regardless of season.

The #MeToo movement has sparked an increase in sexual harassment investigations and focused attention on the potential liability of employers for the actions of third parties with whom their employees interact for business purposes. We previously noted the importance of employers maintaining policies and providing training on proper responses to complaints about third-party harassment in the hostile environment context.  Two recent decisions underscore the importance of awareness of potential liability from third party harassment claims outside the area of sexual harassment and in potential quid pro quo situations. In a recent case involving racial harassment, the U.S. District Court for the Northern District of Alabama, found that the company could be liable for the harassment endured by a former employee subjected to the use by a customer of the "n word" toward him for a number of years.[1]  The court noted that despite the fact that the company had a “strict policy” against unlawful harassment, including acts of “clients, customers, and outside vendors,” the former managerial employee was told by his supervisor that if the company “fired" the customer, then the employee would be held responsible for the budgetary impact of the loss of the customer, likely resulting in a loss of bonus for years to come. In a case out of the U.S. Fifth Circuit Court of Appeals, the court recently cautioned employers about potential liability arising from a supervisor’s comments in the sexual harassment context.  In this case, the employee alleged that her supervisor's request that she date a wealthy potential customer in exchange for a "big bonus" constituted "quid pro quo" harassment.  Although the employer argued the request could not form the basis of a quid pro quo claim because the supervisor requested that the employee engage in a relationship with a third party – and not with the supervisor himself -- the court held that the situation could constitute quid pro quo harassment because the supervisor conditioned the payment of a bonus on the employee's agreement to engage in a sexual relationship with the potential customer.  The court noted that quid pro quo liability exists when an employee can show that a tangible employment action arises out of acceptance or rejection of a supervisor's "sexual harassment," a term which is generally defined as including "unwelcome sexual advances," "requests for sexual favors," or "other verbal or physical conduct of a sexual nature." It did not matter whether the supervisor requested the sexual favors on his own behalf or on behalf of a third party. To avoid potential liability, employers should not only review and update anti-harassment policies to ensure they provide the strongest possible protection against claims of third-party harassment but also train employees and managers to report and address any instances of alleged harassment by third parties #third party harassment #policies #sexual harassment #metoo

Employers face a host of compliance challenges under state and federal law when an employee suffers a workplace injury.  As we recently reported, employers must consider the legal implications of the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA) when litigating workers’ compensation claims.  Employers should also be cognizant of their obligations under the Occupational Health and Safety Act (OSHA) and the Genetic Information Nondiscrimination Act (GINA). Workers’ Compensation and the FMLA Generally, state workers’ compensation laws require the provision of benefits to employees who sustain relatively minor, temporary job-related injuries as well as for permanently disabling serious injuries.  Additionally, the FMLA provides eligible employees with up to twelve weeks of unpaid, job-protected leave per year.  Eligible employees may take leave under the FMLA to care for a spouse, child or parent who has a serious health condition or because of their own serious health condition.  Under the FMLA, a “serious health condition” includes an illness, injury, impairment, and physical or mental condition involving inpatient care in a hospital, hospice, or residential medical care facility or continuing treatment by a health care provider.  Thus, a workplace injury or illness that qualifies as a serious health condition may entitle an eligible employee to FMLA leave. Workers’ Compensation and the ADA The ADA prohibits employers from discriminating against qualified individuals because of their disability.  The ADA defines a disability as (1) a physical or mental impairment that substantially limits a major life activity, (2) a record of such an impairment, or (3) being regarded as having such an impairment.  If an employee suffers a workplace injury that qualifies as a serious health condition and meets the ADA’s definition of an individual with a disability, the ADA, FMLA, and state workers’ compensation laws are implicated, and the employee could be entitled to job-protected leave and may also require a workplace accommodation. OSHA and GINA OSHA requires employers to provide a safe and healthful workplace to employees.  Among other obligations, OSHA requires employers to timely report and keep records of work-related injuries and illnesses.  In addition, employers are prohibited from discharging, retaliating or discriminating against any employee because the employee has exercised rights under OSHA. Finally, GINA prohibits employers from discriminating on the basis of genetic information.  Among other obligations, GINA requires employers who seek medical certifications in support of leave or accommodation requests- including FMLA leave- to affirmatively notify employees of GINA’s limitations on requests for genetic information. In light of the interplay between state workers’ compensation laws, the FMLA, ADA, OSHA, and GINA, employers should pro-actively evaluate and manage their workers’ compensation, FMLA, and ADA issues concurrently at the time of an employee’s injury, while an employee is on leave due to a workplace injury or illness, and after an employee has exhausted any leave or workers’ compensation benefits to ensure compliance with OSHA and GINA.

Beginning on June 7, 2018, four new Washington laws will go into effect and place new restrictions on employers in the state.  These laws, discussed in detail below, expand the rights and protections afforded to Washington employees, and may require employers to review and revise their employment advertisements and applications, pre-hiring materials, and arbitration agreements. Washington Fair Chance Act The Washington Fair Chance Act prohibits employers from posting advertisements for employment openings that exclude employees from applying.  Employers also may not implement any policies or practices that automatically exclude individuals with a criminal record from consideration before determining whether the applicant is otherwise qualified.  Additionally, employers may not ask about -- or obtain information about -- an applicant’s criminal record until after the employer determines that the applicant is otherwise qualified for the position.  Finally, employers may not reject applicants for failing to disclose a criminal record prior to the determination that the applicant is otherwise qualified. The bill excludes a number of employers from its scope, including, for example, employers hiring individuals who will have unsupervised access to children under the age of 18, or vulnerable adults or persons; employers required by law to inquire into, consider, or rely on information about an employment’s criminal record for employment purposes; and law enforcement agencies. Senate Bill 5996 Senate Bill 5996 provides that, as a general rule, an employer may not require an employee “as a condition of employment” to sign a nondisclosure agreement, waiver, or other document that prevents the employee from disclosing sexual harassment or sexual assault “in the workplace, at work-related events coordinated by or through the employer, or between employees, or between an employer and an employee, off the employment premises.”  Moreover, the law prohibits retaliation against an employee for disclosing or discussing (rather than simply complaining about) such harassment or assault. Notably, the law only applies to agreements into which an employee has entered “as a condition of employment,” and expressly excludes from its coverage settlement agreements between an employer and an employee or former employee who has alleged sexual harassment.  The law also excludes human resources managers, supervisors, or managers who are expected as part of their job duties to maintain confidentiality, as well as individuals requested to maintain confidentiality during an open and ongoing sexual harassment investigation. Senate Bill 6313 Senate Bill 6313 seeks to limit the enforceability of arbitration agreements between employers and employees.  The law provides that an arbitration provision contained in, for example, a contract of employment, is void and unenforceable if it requires an employee “to resolve claims of discrimination in a dispute resolution process that is confidential” or to waive the right to “publicly pursue” a cause of action, or publicly file a complaint with an agency, under state or federal antidiscrimination laws.   Given the amount of federal law that provides for preemption of state legislation of arbitration agreements under the FAA, this law, like many other state laws, is subject to challenge.  In the meantime, Washington employers need to be aware of its passage. Senate Bill 6471 Senate Bill 6471 requires the Washington Human Rights Commission to convene a working group to develop model policies and best practices to keep workplaces free of sexual harassment.  The work group will consider the creation and protection of anonymous channels for reporting workplace misconduct, ways to hold human resource departments accountable for enforcing harassment policies, protection against retaliation, required classroom training for all employees, and other issues. The work group must adopt model policies and best practices by January 1, 2019, which will be posted on the Commission’s website within thirty days.  Employers should keep an eye on these policies and practices as they are posted, as they suggest minimum requirements to which employers should hold themselves accountable.  They also provide strong indications of limitations and requirements that may be employed by the Washington legislature in future bills, thereby allowing employers to plan for future adjustments that may need to be made to their employment practices and procedures. Employer Takeaways Given the host of new laws set to become effective June 7, employers should revisit their policies, procedures, and reporting mechanisms to ensure they remain in compliance.  In addition, employers with questions regarding these new laws would do well to consult with able counsel.

Restrictive covenants, such as non-competition and non-solicitation agreements, typically assist employers to protect their legitimate business interests.  When properly drafted and implemented, an employer can use these types of agreements to limit an employee’s ability to unfairly compete after he or she concludes employment. However, restrictive covenants cannot be used to prohibit regular, ordinary competition.  While some employers may be deterred from considering an otherwise qualified applicant who is subject to post-employment restrictive covenants, there are steps employers can take to limit their exposure to claims of unfair competition when interviewing and hiring employees subject to these kinds of restrictions. Ask about restrictions at the earliest reasonable and possible opportunity.  Be specific when asking about any agreements in which these provisions might be contained.  However, take care to avoid discussing the applicant’s former employer’s confidential information. Obtain a copy of the agreement or agreements if a decision to hire is likely and  review and analyze the enforceability of the restrictive covenants at issue, as well as whether the applicant can perform the position without violating the restrictions. Clearly instruct the applicant not to disclose any confidential information, even if volunteered.  Depending on the restrictions at issue, the new employer may also need to instruct the applicant not to solicit any of the former employer's customers, clients, or employees. Consider also including an attestation to that effect in the offer letter or employment agreement. Evaluate the likelihood of litigation.  Assess the circumstances of the employee’s departure, the similarities between the former position and the new role, the nature of the industry and proprietary information or trade secrets at issue, the business relationship (if any) between the hiring employer and the former employer, and the former employer’s propensity for litigation, among other things. Employers that determine that hiring an applicant subject to restrictive covenants justifies the risks of doing so would do well to discuss proactive options with an attorney.  In some situations, opening the line of communication with the former employer prior to – for example – receipt of a cease-and-desist letter demanding the termination of new hire’s employment can be very productive. The existence of restrictive covenants, standing alone, should not in all cases discourage employers from hiring an otherwise qualified candidate.  With careful planning, a savvy employer can substantially limit its exposure to interference and misappropriation claims and position itself with a strong defense should the former employer decide to pursue action against it.

In three separate cases involving airline employers, the U.S. Ninth Circuit Court of Appeals recently certified five questions to the California Supreme Court for guidance on whether California’s labor code provisions apply to non-residents who may be temporarily working in the state for an out-of-state employer because of the mobile nature of a company’s operations.  See Vidrio et al. v. United Airlines Inc. et al., (Case No. 17-55471); Ward v. United Airlines Inc., (Case No. 16-16415); and Oman v. Delta Air Lines Inc., (Case No. 17-15124).  The rulings by the California Supreme Court will be critical to airlines because their workforces inherently cross state lines, potentially requiring compliance with a patchwork of state laws and regulations.   The importance of these decisions reaches beyond the airline industry to any out-of-state employer that has employees who work, at least in part, in California and could arguably be subject to California’s employment laws. The Vidario and Ward cases In the consolidated Vidrio and Ward cases, unionized pilots and flight attendants working for United Airlines (“United”) sued their employer, alleging various wage and hour violations under California law even though they did not principally work in California.  Indeed, the undisputed statistics showed that the plaintiff classes worked only 12-17% of their working time in California or California airspace. The Plaintiffs further alleged that United violated California Labor Code § 226 by issuing noncompliant wage statements.  Plaintiffs also brought a claim under the Private Attorneys General Act and sought penalties and other remedies under the California Labor Code.  The District Court certified the cases as class actions, then granted summary judgment in United’s favor after finding that the California Labor Code could not apply to employees who do not principally work in California and whose employer is not headquartered nor operating primarily in California.  Plaintiffs appealed to the Ninth Circuit, which heard oral argument in March 2018. After considering the issues raised and the lack of controlling California precedent on the extraterritorial application of California law under these circumstances, the Ninth Circuit certified two questions to the California Supreme Court: (1) Wage Order 9 exempts from its wage statement requirements an employee who has entered into a collective bargaining agreement (CBA) in accordance with the Railway Labor Act (RLA). See 8 C.C.R. §11090(1)(E). Does the RLA exemption in Wage Order 9 bar a wage statement claim brought under California Labor Code §226 by an employee who is covered by a CBA? (2) Does California Labor Code §226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, and pays California income tax on her wages, but who does not work principally in California or any other state? The Oman case In the Oman case, the Plaintiffs sued Delta Airlines (“Delta”) in federal court, alleging that Delta’s flight pay calculation for its non-union flight attendants violated California minimum wage law by failing to pay the minimum wage “per hour for all hours worked.” They argued that the flight pay formula impermissibly averaged a flight attendant’s wages for paid, productive time and unpaid, unproductive time. They also contended that Delta failed to pay their wages on time, in violation of California Labor Code § 204, and failed to issue them wage statements that complied with California Labor Code § 226. The Plaintiffs sought to apply California law to their claims based solely on the location of their work – work that lasted only for hours and minutes, not days, in California. They argued that California Labor Code §§ 204 and 226 apply to any pay period in which they performed work in California and the California minimum wage law applied to any work performed in California, however short the duration.  The District Court granted summary judgment to Delta and Plaintiffs appealed.  Following oral argument, the Ninth Circuit determined that there was no controlling California precedent that answered the legal questions in the case.  Accordingly, the Ninth Circuit asked the California Supreme Court for guidance on three questions: (1) Do California Labor Code §§ 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time? (2) Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time? See Cal. Labor Code §§ 1182.12, 1194; C.C.R, § 11090(4). (3) Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty? See Gonzalez v. Downtown LA Motors, LP, 155 Cal Rptr. 3d 18, 20 (Ct. App. 2013); Armenta v. Osmose, Inc., 37 Cal. Rptr. 3d 460, 468 (Ct. App. 2005). Employer Takeaways While the California Supreme Court is considering these questions, out-of-state employers with employees who work at least some of the time in California should carefully consider whether to comply with California’s labor and employment requirements.  Stay tuned to the blog for further updates.

In a 5-4 decision in Epic Systems Corp. v. Lewis, No. 16-285, the United States Supreme Court upheld the use of class and collective actions waivers in arbitration agreements.  Employers nationwide may require employees to sign agreements to arbitrate any employment disputes on an individual basis The majority opinion, written by Justice Gorsuch, found no conflict between the broad mandate to enforce arbitration agreements under the Federal Arbitration Act (“FAA”) and employees’ rights to bargain collectively under the National Labor Relations Act (“NLRA”).  Observing that these nearly 100-year-old laws “have long enjoyed separate spheres of influence,” the majority opinion saw no reason to pick one statute over the other. The majority noted that the NLRA focuses on the right to organize unions and bargain collectively. While the NLRA permits unions to bargain to prohibit arbitration, it does not approve or disapprove of arbitration, mention class or collective action procedures (which did not exist when the NLRA was enacted), or “hint at a wish to displace the Arbitration Act.”  The majority’s enforcement of individualized arbitration agreements obeys the Supreme Court’s long-standing practice to harmonize statutes whenever possible. The majority also rejected the suggestion that class and collective action waivers are invalidated by the savings clause of the FAA.  The savings clause voids arbitration agreements based upon contract defenses generally applicable to “any” contract, such as fraud or duress, not because an employer and employee freely contracted for individualized, as opposed to class, arbitration. The judicial approval of class and collective action waivers in arbitration agreements presents an opportunity to consider whether, and how best, to implement an arbitration program for employment disputes. Polsinelli attorneys stand ready to help employers create and manage effective arbitration programs.

On May 9, 2018, National Labor Relations Board (“NLRB” or “Board”) Chairman John F. Ring announced the Board is considering whether to change the current joint-employer standard via the Board’s rulemaking process. As we discussed previously here, the Board’s joint-employer standard has garnered a great deal of attention in the past year, with the Board overturning, then returning to, the standard enunciated in the controversial Browning-Ferris decision. When announcing the Board’s consideration of the rulemaking process, Chairman Ring stated: Whether one business is the joint employer of another business’s employees is one of the most critical issues in labor law today.  The current uncertainty over the standard to be applied in determining joint-employer status under the Act undermines employers’ willingness to create jobs and expand business opportunities. In my view, notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the standard ought to be. I am committed to working with my colleagues to issue a proposed rule as soon as possible, and I look forward to hearing from all interested parties on this important issue that affects millions of Americans in virtually every sector of the economy. Any proposed rule would require the approval by a majority of the Board’s five members, with the next step being the issuance of a Notice of Proposed Rulemaking. Employers that may be subject to the Board’s joint-employer standard should follow the Board’s potential rulemaking closely.  If the Board issues a Notice of Proposed Rulemaking, then employers will be able to submit comments to the Board expressing their opinion regarding the proposed rule(s).  In addition, the Board’s general counsel has suggested he will be searching for an appropriate case to seek to overturn the Browning-Ferris standard.  We will be watching this issue closely, so stay tuned.

Employers may regulate the length, style, and neatness of employees’ hair in the workplace through so-called grooming policies, unless the hair style is a matter of sincere religious observance posing no more than a minimal burden on the employer.   A more complicated issue arises when grooming policies prohibit certain hairstyles that are culturally associated with race, such as dreadlocks.  Untangling this issue, on which few courts have spoken, the U.S. Eleventh Circuit Court of Appeals (binding in Alabama, Georgia, and Florida) held that employers may enforce a grooming policy that prohibits dreadlocks, despite a close cultural association to race. In Equal Employment Opportunity Commission v. Catastrophe Management Solutions, 852 F.3d 1018 (11th Cir. 2016), the Eleventh Circuit affirmed that Title VII protects against discrimination based on certain immutable characteristics, including race and sex.  On the other hand, Title VII’s mandate of equal employment opportunity does not prohibit discrimination based on practices that are culturally associated, even closely, with race or sex.  This reasoning aligns with the long-standing authority that employers may impose different hair-length and other grooming requirements for men and women. The employer in Catastrophe Management Solutions did not violate the law by denying a job offer to an African-American applicant who refused to cut her dreadlocks in order to secure a job.  Thus, in Alabama, Georgia, and Florida, grooming policies that explicitly prohibit dreadlocks or other hairstyles with a cultural significance closely tied to race may be enforced. This issue is complicated by the fact that Title VII does not define “race.”  Courts outside the Eleventh Circuit may interpret Title VII differently, by taking a different view of the breadth of Title VII, or a different functional definition of race.   The hairy issue of hair in the workplace in many states presents yet another reason to have an employee handbook regularly reviewed by experienced legal counsel.

Last month, the United States Senate confirmed attorney John Ring by a 50-48 vote to fill the National Labor Relations Board’s (“Board”) last vacancy.  Ring fills the seat vacated by Chairman Philip A. Miscimarra (R) when his term expired in December 2017. What this means for employers: With Ring’s confirmation, the Board returns to a GOP majority of three Republicans and two Democrats. The Board is anticipated to resume questioning the list of Obama-era policies that NLRB’s General Counsel, Peter Robb, identified late last year in GC Memorandum 18-02 (which we discussed in detail here).  Those policies include the controversial Purple Communications ruling, where the Board determined workers could use company email to conduct union business, and the Browning-Ferrisdecision, which made it easier for employees to hold companies associated with an employer liable as a joint employer. Notably, the Board attempted to overturn the Browning-Ferris decision late last year in Hy-Brand Industrial Contractors & Brandt Construction Co., 365 NLRB No. 156 (2017).  However, the Hy-Brand decision was rescinded in late February 2018 after the NLRB’s inspector general determined Member Bill Emanuel should have recused himself from the decision (which we previously reported on in detail here). We will continue to monitor Board rulings as they are issued, so stay tuned to the blog for further updates.

On May 4 and May 13, 2017, the New York Times published an op-ed and article in which the authors asserted—in support of arguments disfavoring non-competition agreements—that California voids all non-competition agreements.* This is an overstatement of California law, which generally prohibits non-competition agreements in the employment context, but narrow exceptions do exist: Sale of a business. When a business owner sells the “goodwill of the business” or otherwise sells his or her ownership stake, the parties may agree to restrict the seller’s ability to compete with the buyer in the same geographic area where the business operates. (Cal. Bus. & Prof. Code § 16601). This is true in the context of a sale even (and especially) when the seller becomes an employee of the buyer. Dissolution/termination of a partnership. When a partner sells or otherwise disposes of his or her partnership interest in a partnership, the parties may agree to restrict the seller’s ability to compete within the same geographic area where the partnership is located, so long as part of the consideration provided to the selling partner is for his or her share of the “goodwill” of the partnership. (Cal. Bus. & Prof. Code § 16602) Dissolution/termination of a Limited Liability Company (LLC). When a member of an LLC sells or otherwise disposes of his or her interest in the LLC, the parties may agree to restrict the seller’s ability to compete within the same geographic area where the LLC is located, so long as part of the consideration provided to the selling partner is for his or her share of the “goodwill” of the LLC. (Cal. Bus. & Prof. Code § 16602.5) Protection of trade secrets. Companies may restrict an employee’s (or former employee’s) ability to use its trade secrets. Whether a company can use a non-competition agreement to do so, however, is a much murkier proposition under California law. A company would be required to demonstrate that a non-competition clause is “necessary” to protect the trade secrets at issue, which most California courts decline to find. In addition, other statutes protect trade secrets (e.g., the Uniform Trade Secrets Act, the Defense of Trade Secrets Act, certain non-solicitation provisions) and are likely a more successful tool to accomplish this important goal. Non-competition agreements are narrowly enforced and strictly interpreted against employers in California. Employers who wish to make use of such agreements should consult with their Polsinelli labor and employment attorney when considering whether to draft non-competition agreements. Employers should also consider other restrictive covenants when seeking to protect company intellectual property, including non-solicitation of customers, which may be more enforceable in California employment agreements or severance documents. *Non-competition agreement is a restrictive covenant to prevent employees from leaving their current employer to go to work for the employer’s competitor.

The Missouri legislature enacted sweeping changes to the Missouri Human Rights Act (“MHRA”) in 2017, which we previously reported on here. Since the amendments went into effect in August 2017, trial courts have grappled with whether and which amendments apply retroactively. To date, no controlling authority has issued from Missouri appellate courts on this issue.  However, trial courts have reached differing conclusions on retroactivity.  For instance, in Billingsley v. Rich Logistics, LLC, No. 4:17 CV 2834 SNLJ, 2018 WL 1924339 (E.D. Mo. Apr. 24, 2018), the U.S. District Court for the Eastern District of Missouri concluded the amendment regarding individual liability was substantive, rather than procedural, and, thus does not apply retroactively.  Similarly, in Hurley v. Vendtech-SGI, LLC, No. 16-01222-CV-W-ODS, 2018 WL 736057 (W.D. Mo. Feb. 6, 2018), the U.S. District Court for the Western District of Missouri determined the Missouri Legislature’s directive to apply the McDonnell Douglasburden-shifting framework was also a substantive change and does not apply retroactively. Conversely, in Gaylor v. Kemco Tool & Mach. Co., No. 14SL-CC00054 (St. Louis Cty. Cir. Ct. Oct. 13, 2017), the St. Louis County Circuit Court determined the amendments applying “the motiving factor” standard and the business judgment instruction applied retroactively because these amendments were of a procedural nature. The majority of courts to address the issue have determined the MHRA amendments do not apply retroactively.  We will continue to monitor these decisions and will provide updates when the issue is addressed by an appellate court.  Stay tuned.

On April 30, 2018, the California Supreme Court adopted a new test to establish independent contractor status pursuant to the California Industrial Wage Orders.  In Dynamex Operations W. v. Superior Court, 2018 WL 1999120 (Cal. Apr. 30, 2018), the court held that “the suffer or permit to work standard [in the California Wage Orders] properly applies to the question of whether a worker should be considered an employee or … an independent contractor[.]”  The court determined that the burden of proof in such a case is on the company to establish that the worker is an independent contractor.  In addition, to meet its burden, the company must establish each of the three factors in the “ABC test.” The New “ABC” Test Unlike the traditional multi-factor balancing test that courts have used for decades when analyzing independent contractor classifications, an individual will be considered an employee under the ABC test unless  the hiring entity can satisfy all  three prongs: (A)  Right to Control The first prong of the ABC test is the traditional “right to control” standard.  A worker will be classified as an employee if “either as a matter of contractual right or in actual practice” s/he is subject to “the type and degree of control a business typically exercises over employees.” (B)  Work Performed Outside Scope of Employer’s Business To satisfy the second prong, the hiring entity must show that the individual’s work is outside the scope of the hiring entity’s usual business.  To clarify this standard, the court provided the following examples: [O]n the one hand, when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store’s usual course of business and the store would not reasonably be seen as having suffered or permitted the plumber or electrician to provide services to it as an employee. On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will thereafter be sold by the company … the workers are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees. Entities in related industries should closely watch developments in this area for guidance on the application of the Dynamex decision and its impact on the classification of workers. (C)  Worker is Engaged In Independent Business To satisfy the third prong, the hiring entity must show that the worker is engaged in an independently established business.  Evidence that a worker is engaged in an independent business includes “incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential customers, and the like.” Impact on Employers Dynamex has changed the playing field regarding the classification of independent contractors in California.  A company that classifies workers as independent contractors and are   central to day-to-day operations of the business should be particularly concerned about this decision, as it may affect the viability of the classification within the business model. All California companies that utilize independent contractors should revisit their contractual arrangements and day-to-day business operations to evaluate the impact of Dynamex.

On February 15, 2018, Austin became the first city in Texas to adopt a mandatory paid sick leave ordinance (the “ordinance”).  To prepare for compliance, Texas employers with employees in Austin will want to review the ordinance’s requirements: Effective October 1, 2018, all private employers with 16 or more employees must provide 8 days of earned sick time (“EST”) to employees who work at least 80 hours per calendar year. Employers with 6-15 employees must provide 6 days of EST per year. Employees will accrue EST at a rate of one hour for every 30 hours worked, in one-hour increments, and will accrue EST at the commencement of employment, or the effective date of the ordinance, whichever is later. Employees may use EST for their own, or a family member’s, physical or mental health or preventative care; or for medical attention, services, or legal actions as a result of domestic abuse, sexual assault or stalking. Employees may carry over accrued but unused EST, up to the maximum yearly cap, unless the employer grants the employee at least the minimum required amount of EST at the beginning of each year. Employers must: (i) provide monthly statements regarding an employee’s accrued EST; (ii) post a notice of the ordinance; and (iii) include notice of the ordinance and its requirements in the employers’ handbooks. The ordinance provides for a civil penalty of up to $500 for each violation. Effective October 1, 2020 employers with 5 or fewer employees must provide 6 days of EST each year. What’s Next? Local businesses currently oppose the ordinance.  On April 24, 2018 the Texas Public Policy Foundation filed suit in Travis County [Austin] on behalf of seven plaintiffs -- including the Texas Association of Business, National Federation of Independent Business, and the American Staffing Association -- challenging the ordinance as preempted by state minimum wage law and as violative of the Texas Constitution. In addition, the Workflex in the 21st Century Act (the “Act”), currently pending before the U.S. Congress, could neutralize the Austin ordinance and the growing number of county and city ordinances across the country regarding mandatory paid sick leave. Under the Act, employers that allow for paid time off and offer their employees options for flexible work arrangements would qualify for ERISA coverage and, thus, would likely pre-empt state and local paid leave and workflex laws.