On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”), requiring employers with less than 500 employees to provide Public Health Emergency Leave and Paid Sick Time to employees impacted by the Coronavirus pandemic.  The details of the Act are set out in our earlier Blog post here. Health care providers and first responders on the frontline of the pandemic have a critical need to understand how this requirement impacts their operations during this critical moment.  In evaluating this issue, it is important to note that the two leave requirements, one for child care and the other for illness, arise in different portions of the Act.  The right to Public Health Emergency Leave is set forth in Division C of the Act, which amends the existing statutory text of the Family and Medical Leave Act (“FMLA”).  The right to Paid Sick Time is set forth in Division E of the Act, which creates a new statute known as the Emergency Paid Sick Leave Act. Both of these Divisions address the application of leave provisions to health care providers.  Specifically, the FMLA amendment provides that the Secretary of Labor may issue regulations excluding certain health care providers from the definition of “Eligible Employee”.  The Emergency Paid Sick Leave Act provides that the Secretary of Labor may issue regulations “to exclude certain health care providers and emergency responders from the definition of employee under section 5110(1) including by allowing the employer of such health care providers and emergency responders to opt out.” Additionally, both the FMLA amendments and the Emergency Paid Sick Leave Act allow an employer of an employee who is a health care provider or an emergency responder to elect to exclude a health care provider from coverage under these expanded worker benefits.  The Act provides that the term “health care provider” as it is used in the FMLA amendments shall have the same meaning given to the term under Section 101 of the FMLA.  There is no similar provision in the Emergency Paid Sick Leave Act.  However, employers may look to the FMLA for guidance. The term “health care provider” is defined in Section 101(6) of the FMLA to mean (A) a doctor of medicine or osteopathy who is authorized to practice medicine or surgery (as appropriate) by the State in which the doctor practices; or (B) any other person determined by the Secretary to be capable of providing health care services. The Secretary of Labor subsequently issued regulations expanding this definition to include the following: Podiatrists, dentists, clinical psychologists, optometrists, and chiropractors (limited to treatment consisting of manual manipulation of the spine to correct a subluxation as demonstrated by X-ray to exist) authorized to practice in the State and performing within the scope of their practice as defined under State law; Nurse practitioners, nurse-midwives, clinical social workers and physician assistants who are authorized to practice under State law and who are performing within the scope of their practice as defined under State law; Christian Science Practitioners listed with the First Church of Christ, Scientist in Boston, Massachusetts. Where an employee or family member is receiving treatment from a Christian Science practitioner, an employee may not object to any requirement from an employer that the employee or family member submit to examination (though not treatment) to obtain a second or third certification from a health care provider other than a Christian Science practitioner except as otherwise provided under applicable State or local law or collective bargaining agreement; Any health care provider from whom an employer or the employer's group health plan's benefits manager will accept certification of the existence of a serious health condition to substantiate a claim for benefits; and A health care provider listed above who practices in a country other than the United States, who is authorized to practice in accordance with the law of that country, and who is performing within the scope of his or her practice as defined under such law. The phrase “authorized to practice in the State” means that the provider must be authorized to diagnose and treat physical or mental health conditions. Based on these definitions, it is clear that a large number of employees in the health care industry may be excluded from coverage under the Act at the employer’s discretion. Less clear is whether the Secretary of Labor will adopt regulations excluding all health care providers or allowing health care employers to opt out of Emergency Paid Sick Leave. To date, the Secretary of Labor has not issued express guidance on this issue.

On March 20, the Department Homeland Security (DHS) announced procedures to provide flexibility for companies navigating Form I-9 compliance in light of the Covid-19 national emergency. All U.S. employers must continue to complete the Form I-9, Employment Eligibility Verification form, as mandated by the Immigration Reform and Control Act of 1986 (IRCA), for all newly-hired employees. Normally the Form I-9 process requires the employer to physically meet with the new hire to conduct an in-person inspection of original identity and employment authorization documents to confirm they appear reasonably genuine and relate to the new hire. However, the emergency DHS guidance allows employers who are implementing distancing precautions to temporarily forego the requirement to physically inspect the employee’s identity and employment authorization documents until May 19, 2020, 60 days from the date of the DHS announcement, or 3 business days after the termination of the National Emergency, whichever occurs first. Completion of Form I-9 for Employers with Closed Offices To avail themselves of this exception, employers with closed offices, must: Inspect the identification and employment authorization documents for Section 2 remotely, using video conferencing technology, fax, email, or other available method. Provide written documentation of their remote onboarding and telework policy for each employee. Employees who are onboarded using remote verification must provide documentation for in-person verification within 3 business days, once normal business operations resume. Companies should note that this flexibility is only provided to those with no employees physically present at the work location. Form I-9 completion for newly hired employees or existing employees subject to COVID-19 quarantine or lockdown protocols will be considered for compliance on a case-by-case basis by DHS. The Form I-9 should be completed via remote verification of documents. At the time that the physical documents can be inspected, the employer representative should enter the text as follows in the additional information box of Section 2 of the Form I-9. In addition to the above procedures for remote verification, employers continue to have the option to designate an authorized representative to conduct verification. The U.S. Citizenship and Immigration Services (USCIS) explains in its M-274 Handbook for Employers: You may designate or contract with someone such as a personnel officer, foreman, agent, or anyone else acting on your behalf, including a notary public, to complete Section 2. Note that anyone else who completes Form I-9 on your behalf must carry out full Form I-9 responsibilities. It is not acceptable for the designated person to physically examine the employee’s employment authorization and identity documents, and leave Section 2 for you to complete. You are liable for any violations in connection with the form or the verification process, including any violations of the employer sanctions laws committed by the person designated to act on your behalf. Employers in California should continue to abide by State law which authorizes employers to only use licensed attorneys, individuals authorized under federal law to provide immigration services, and individuals who are qualified and bonded as immigration consultants under California law (Business & Professions Code, Sections 22440, 22441). Immigration and Customs Enforcement (ICE) Grants Additional Time to Employers for I-9 Audits and Notices of Inspection DHS, through the March 20 announcement, has also granted a 60 day extension to employers issued a Notice of Inspection (NOI) in March of 2020. If the employer has not already responded, the employer has an additional 60 day to respond. At the end of the 60 day period, DHS will assess whether another extension is warranted. Continuing employment verification compliance is a critical part of protecting a company from future liability in the event of an ICE Inspection. Employers must retain I-9 forms for inspection for all current employees, as well as for terminated employees for at least three years past the start date or one year past the termination date, whichever is later. Polsinelli attorneys are available to answer questions regarding Form I-9 compliance.

E-Verify has announced that it is temporarily extending the timeframe to take action to resolve Tentative Nonconfirmations (TNC) from the Social Security Administration or Department of Homeland Security due to office closures to the public. Under the new temporary policies, employers are still required to create E-Verify cases for new hires within three business days from the date of hire.  If the E-Verify case creation is delayed due to the employer’s office closure or other COVID-19 precautions, the employer should select “Other” in E-Verify and enter COVID-19 as the reason. If an employee receives a TNC, the employer must still notify the employee of the TNC result as soon as possible.  If the employee decides to take action to contest the TNC, the employer should notify E-Verify of the employee’s decision. E-Verify works by comparing the information employees provide for Form I-9, Employment Eligibility Verification, against records available to SSA and DHS.  If the information provided by the employee does not match, the case will receive a TNC result, and the employer must give the employee an opportunity to take action to resolve the mismatch.  Employees who choose to take action on a TNC are referred to SSA or DHS. In ordinary times, an employee taking action to resolve a TNC must visit the SSA or DHS office within eight (8) federal government workdays to begin resolving the discrepancy.  Provided the employee has timely visited an SSA field office or contacted DHS, the E-Verify case will be in interim status until a final result is issued. Because of government office closures due to COVID-19, an employee contesting a TNC may not be able to visit an SSA or DHS office within eight business days.  Under the new temporary guidelines, the E-Verify case will then be in an extended interim status.  Once government offices reopen, the employee must then visit the appropriate office to resolve the TNC, ultimately leading to a result that either the employee is authorized or a final nonconfirmation result that the employee is not authorized to work. DHS reminds employers not to take any adverse action against an employee because the E-Verify case is in an interim status, including while the employee’s E-Verify case is in an extended interim case status due to COVID-19 precautions. Employers should consider these rapidly developing changes and consult Polsinelli counsel for updated guidance for specific issues related to immigration compliance.

The COVID-19 National Emergency has brought a host of challenges to employers in the United States, including travel, compliance with employment verification processes, and hiring and maintaining immigration status for foreign national employees. In the past two weeks we have seen a flood of interim policy changes. We expect the various immigration and enforcement agencies will continue to adapt and provide further guidance. Form I-9 Compliance for Employers with No On-Site Employees The Department of Homeland Security (DHS) announced flexibility for verification of identification and employment authorization documents for completion of Form I-9. DHS has provided remote verification procedures to allow an employer with no employees on-site due to the COVID-19 National Emergency, to review Section 2 documents using virtual review methods such as video conference, fax or email. The remote verification policy is in effect for the next 60 days. ICE Immigration and Customs Enforcement (ICE) has provided a 60 day document production extension for any employer issued a Notice of Inspection (NOI) for Form I-9s during the month of March 2020. ICE will determine if additional extensions are warranted at the end of the 60 day period. United States Citizenship and Immigration Services (USCIS) has suspended in-person services at USCIS Service Centers around the country until at least April 1. This suspension includes final interviews for permanent residency and naturalization. Applicants with interview notices during this time will be automatically rescheduled. Those with InfoPass appointments or other appointments at a field office must reschedule through the USCIS Contact Center. USCIS has suspended premium processing service for I-129 and I-140 petitions filed directly with USCIS until further notice. Form I-129 is utilized for employment-based non-immigrant petitions, including, but not limited to, the H-1B, L-1A/B, E-1, E-2, O-1, and TN statuses. Form I-140 is utilized for employment-based permanent residency applications. USCIS will continue to accept and process all applications in accordance with regular processing guidelines, including filings for those selected in the FY 2021 H-1B lottery, expected to occur before April 1, 2020. USCIS will temporarily accept copies of original signatures. USCIS has provided employers and their legal counsel much needed relief, by accepting reproduced copies of original signatures for filing of benefit forms with USCIS, including Form I-129. For forms that require an original signature, USCIS will accept the reproduced original for the duration of the COVID-19 National Emergency. Originals of the forms must be retained and provided to USCIS at a later date if requested. The Department of Labor (DOL) has issued a FAQ on complying with regulations related to immigration processing services provided by the DOL in light of COVID-19. Notably, companies who sponsor foreign national employees for H-1B, H-1B1 and E-3 visas may need to move their sponsored employees to a different worksite that was stated on the Labor Condition Application (LCA) included in the work visa filing. Companies must still comply with certain posting obligations but will be considered compliant as long as the posting is done within 30 days of the move. In addition, DOL is providing additional time to meet recruitment requirements for the first step of the green card process, the Program Electronic Review Management (PERM) labor certification. Companies will have temporary extensions for recruitment and filing timelines, to allow additional time for the physical posting requirement. The U.S. Department of State (DOS) announced a temporary suspension of routine visa services at all U.S. Embassies and Consulates around the world. All immigrant and non-immigrant visa appointments will be cancelled as of March 20. The DOS will resume visa processing as soon as possible and will continue to provide emergency services as possible. Travel Restrictions continue. Foreign national travelers who have been present in the following countries within the past 14 days are currently restricted from entering the U.S. (U.S. Citizens, Lawful Permanent Residents and their immediate family members are allowed entry to the U.S. with additional screening.) Countries currently impacted by the travel bans include: China, Iran, Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the United Kingdom. Canada and Mexico travel restrictions. Further, the U.S. has announced joint border closures with Mexico and Canada, for at least 30 days, limiting cross-border traffic to “essential travel” in an effort to reduce the spread of COVID-19. Both countries have confirmed that truck and train traffic carrying supplies are considered essential travel and will continue. U.S. Citizens warned to not travel. The U.S. Department of State has issued a Level 4: Do Not Travel Warning and Global Health Advisory warning United States citizens to avoid all international travel due to COVID-19. U.S. employers should consider these rapidly developing changes and consult Polsinelli counsel for updated guidance for specific issues related to immigration compliance.

The National Labor Relations Board (“Board”) announced today that it will suspend all representation elections, including mail ballot elections, effective immediately through April 3, 2020 because of the COVID-19 pandemic. The Board stated that the election suspension is necessary to ensure the health and safety of its employees, as well as members of the public who would be involved in the election process. Another factor in the Board’s decision was its potential inability to effectively conduct elections due to the closure of several Regional Offices caused by staff exposure to the virus, and the significant number of Board employees who were required to work remotely because of COVID-19. The Board did not disclose how many representations will be affected, how the elections will be rescheduled, or the impact on recently filed election petitions.

Unemployment benefits are a joint federal-state program. While the federal government provides some guidelines, every state has its own rules on unemployment benefits, making navigation of the rules challenging for employers who have employees in multiple states. Complicating the unemployment process are quickly evolving changes to state unemployment standards in response to COVID-19. The general questions that determine unemployment eligibility are: A. Is the employee out of work or did the employee experience a reduction in work income through no fault of the employee? B. Is the employee ready and able to work? C. Does the employee meet qualifying work and wage requirements? (Each state has requirements for wages earned or time worked during an established period of time referred to as a “base period.”) D. Is the employee receiving income replacement such as sick, disability, or severance pay that offsets or replaces unemployment? (Some states reduce unemployment benefits for qualifying employees by other income replacement the employee may be receiving.) In operation, the availability of unemployment benefits will depend on the circumstances surrounding the employee’s unemployment and state law: If an employee is on leave by choice, such as to care for himself/herself or others, self-quarantine, or FMLA, then unemployment benefits are generally not available because the employee is unable to work. Note that some states are making exceptions here for absences related to caring for oneself or others who have tested positive for or have been exposed to COVID-19. If there is a layoff or furlough (temporary or otherwise), then unemployment benefits are typically available to affected employees because the affected employee is able to work. If an employer reduces an employee’s hours, then unemployment benefits are typically available depending on the state and the amount of the reduction in hours. In many states, benefits are available under a “work share” program if certain criteria are met. If there is forced leave by an employer, such as a 14-day quarantine, the availability of unemployment benefits will depend on the jurisdiction. The United States Department of Labor (“DOL”) has clarified in published guidance that individual states have the authority to make changes to unemployment based on COVID-19, concerns such as extending the availability of unemployment benefits to eligible employees when: (1) An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work; (2) An individual is quarantined with the expectation of returning to work after the quarantine is over; or (3) An individual leaves employment due to a risk of exposure or infection or to care for a family member. In addition, federal law does not require an employee to quit in order to receive benefits due to the impact of COVID-19. A majority of states have taken action to modify their usual unemployment rules. For example, California has stated it will remove the waiting week period that usually applies to unemployment, meaning that employees will receive benefits starting on day one. Missouri has specifically stated that it would allow benefits for a forced quarantine by the employer. In light of the global pandemic, unemployment benefits rules may rapidly change in coming weeks. Pending federal legislation proposes further relief including additional money for unemployment benefits and relief to employers for charges related to unemployment benefits paid due to COVID-19. In addition, states continue to monitor their processes and institute changes to respond to the current economic landscape. Employers are free to offer employees information on filing for unemployment, but should note that state unemployment agencies are making frequent changes that may provide for unemployment benefits for COVID-19-related issues. Below is a list of resources for states that have taken action in response to COVID-19 issues and, for states where action has not yet been taken, a link to the general unemployment site:

COVID-19 continues to have far-reaching implications for global mobility and the international workforce in the United States. Polsinelli attorneys are closely monitoring travel restrictions and Department of Homeland Security policy implementations for its impact on workforce mobility and immigration status. Travel Restrictions On March 16, the United Kingdom and Ireland were added to the list of countries with entry restrictions to the United States. The travel restrictions, originally enacted on Friday, March 13 for the Schengen area countries is expanded to include the United Kingdom and Ireland. Entry is suspended for most foreign nationals who have been present in one of the countries listed below at any time within the 14 days prior to their scheduled departure to the U.S. As with the initial ban, U.S. citizens, legal permanent residents, and immediate family members will be exempt from the ban on entry. Travelers should review the restrictions carefully to determine their eligibility for re-entry. Countries currently impacted by the travel bans include: China, Iran, Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom. American citizens, legal permanent residents and their immediate family members returning to the U.S. from the countries impacted will be required to travel through 13 airports within the U.S., including: Boston-Logan International Airport (BOS) Massachusetts Chicago O’Hare International Airport (ORD) Illinois Dallas/Fort Worth International Airport (DFW) Texas Detroit Metropolitan Airport (DTW) Michigan Daniel K. Inouye International Airport (HNL) Hawaii Hartsfield-Jackson Atlanta International Airport (ATL), Georgia John F. Kennedy International Airport (JFK), New York Los Angeles International Airport, (LAX), California Miami International Airport (MIA), Florida Newark Liberty International Airport (EWR), New Jersey San Francisco International Airport (SFO), California Seattle-Tacoma International Airport (SEA), Washington Washington-Dulles International Airport (IAD), Virginia The DHS, is advising that all travelers to the U.S. from the impacted countries may be subject to heightened screening and must self-quarantine for 14 days after arrival. ESTA Warning U.S. Customs and Border Protection announced that any traveler with a valid ESTA who is covered under the Presidential Proclamation on travel restrictions and who attempts travel or entry to the United States during this time will have their ESTA authorization suspended. ESTA (Electronic System for Travel Authorization) is an automated system that determines the eligibility of visitors to travel to the United States from the 39 visa waiver countries. USCIS Cancellations and Closures United States Citizenship and Immigration Services (USCIS) announced closure of all field offices to the public for the period March 18 to at least April 1. All in-person services will be unavailable during this time. Anyone who has an appointment scheduled during this time, including naturalization ceremonies, biometrics appointments, and final permanent residency interviews, will be rescheduled by USCIS for a later date once normal operations resume. USCIS will continue its non-public facing case processing. Department of State Consulate Closures and Visa Appointment Cancellations U.S. Embassies and Consulates around the world are actively cancelling visa non-immigrant and immigrant visa appointments. The U.S. Department of State is maintaining a webpage to the embassy and consulate announcements regarding COVID-19 restrictions in each country.

Since negotiations began last week, people across the country have been anxious to know how Congress’s response to the COVID-19 pandemic would impact them. The Senate has just passed the Families First Coronavirus Response Act (“Act”). The Act will impact how employers address the pandemic and how health care providers are paid for some of the services associated with COVID-19. Unemployment Benefits The Act provides $500 million dedicated to providing immediate, additional funding to states for staffing, technology, and other administrative costs, so long as the state meets certain claim processing requirements. For states with a 10% or more increase in their unemployment rate (over the previous year) that comply with all beneficiary access provisions, the federal government will provide 100% of the funding for Extended Benefits, as opposed to the usual 50%. Emergency Paid Sick Leave Act Employers with fewer than 500 employees and government employers must provide employees with an additional two weeks of paid sick leave for certain COVID-19-related instances. Employers must provide paid sick leave to an employee who is unable to work (or telework) due to a need for leave because: 1. The employee is subject to or is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19. 2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 or is caring for an individual who has been so advised. 3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis. 4. The employee is caring for their child due to the closure of their child’s school or place of care, or the unavailability of the child’s care provider, due to COVID-19 precautions. 5. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. Employees would receive the following amounts of paid sick leave: 1. Full-time Employees – 80 hours 2. Part-time Employees – hours equal to the number of hours that such employee works, on average, over 2 weeks For employees on leave due to being placed in isolation or experiencing COVID-19 symptoms, paid sick leave is paid at their full regular rate, capped at $511 per day and $5,110 in the aggregate. For employees on leave due to the other reasons provided in the Act, paid sick leave is at 2/3 the employee’s regular rate, capped at $200 per day and $2,000 in the aggregate. If an employee works varying hours week to week, the number of hours paid is based on the average number of hours scheduled per day over a 6-month period ending on the date when an employee took leave, or if such information is unavailable, the employee’s reasonable expectation at the time of hiring of the average hours per day the employee would be scheduled to work. After the first day an employee receives paid sick leave, an employer may require the employee to follow reasonable procedures to continue receiving paid sick leave. Sick leave under the Act expires if not used in 2020. State and local paid leave entitlements are not preempted by the Act. Employers are prohibited from discharging, disciplining, or discriminating against an employee who takes leave under this Act or complains or institutes a complaint related to this Act. Employers violating this Act will be considered to have violated the Fair Labor Standards Act (“FLSA”) and will be subject to the respective penalties. The Secretary of Labor may exempt employers with less than 50 employees from the paid sick leave requirements if compliance would jeopardize the business’s viability as a going concern and may also exclude certain health care providers and emergency responders from the definition of eligible employee. The sick time requirements go into effect 15 days after the bill is enacted and expire December 31, 2020. Emergency Family and Medical Leave Expansion Act Employers with fewer than 500 employees must provide 12-weeks of job-protected, partially paid FMLA leave to certain employees prevented from working due to COVID-19. Employees are eligible if they have been employed for at least 30 calendar days (not the 12 months typically required under FMLA). Employers must provide 12 weeks of FMLA leave if an employee is unable to work (or telework) due to the need to care for their minor child because of the closure of the child’s school or care facility, or unavailability of the child’s care provider, due to a declared Federal, State, or local COVID-19 emergency. Employers are not required to provide paid leave during the first 10 days of leave under this section of the Act. Accordingly, pay for the first 10 days would be under paid sick leave. After the first 10 days of FMLA leave, employers must pay an employee no less than 2/3 of the employee’s regular rate of pay under the FLSA for the number of hours the employee would have normally been scheduled to work, up to $200 per day and $10,000 in the aggregate. If an employee works varying hours week to week, the number of hours is based on the average number of hours scheduled per day over a 6-month period ending on the date when an employee took leave, or if such information is unavailable, the employee’s reasonable expectation at the time of hiring of the average hours per day the employee would be scheduled to work. Employees must provide the employer with notice of leave as is practicable. At the end of the leave period, employers must generally reinstate employees to the same or a reasonably equivalent position upon availability. Employers with fewer than 25 employees are not required to reinstate employees under certain conditions. The Secretary of Labor may exempt employers with less than 50 employees from the emergency leave requirements if compliance would jeopardize the business’s viability as a going concern and may also exclude certain health care providers and emergency responders from the definition of eligible employee. The emergency leave requirements go into effect no later than 15 days after enacted and expires December 31, 2020. Employer Tax Credits In order to defray costs, the Act provides a payroll tax credit to employers for “qualified sick leave wages” (i.e., wages required to be paid under the Emergency Paid Sick Leave Act) and “qualified family leave wages” (i.e., wages required to be paid by the Emergency FMLA Expansion Act), subject to certain caps. Employers may claim a credit against Social Security tax liability for each calendar quarter. If the credit exceeds an employer’s social security taxes for a calendar quarter, the excess is generally refundable. Health Care Costs The Act includes several notable provisions aimed at providing coverage for COVID-19 related health care services. Private group and individual health plans must cover COVID-19 diagnostic testing, including the cost of a provider, urgent care, or emergency room visit to obtain the testing, without any patient cost-sharing (this includes deductibles, copayments, and coinsurance). Medicare Part B already covers the cost of a COVID-19 diagnostic test, but the Act expands that coverage to include COVID-19 testing-related services, with no cost-sharing. A “testing-related service” is an outpatient, hospital observation, emergency department, nursing facility, or home service furnished during the COVID-19 emergency that relates to and results in an order for a COVID-19 diagnostic test. Medicare Advantage plans must also cover COVID-19 diagnostic testing and testing-related services without any cost-sharing or prior authorization requirements. Medicaid and CHIP plans are similarly required to cover COVID-19 diagnostic testing and the related visit without any patient cost-sharing. Individuals covered under TRICARE, veterans, and federal civilian workers cannot be charged for any cost-sharing for COVID-19 diagnostic testing and the associated visit. The same is also true for individuals receiving care through the Indian Health Service. During the COVID-19 emergency period, states are permitted to expand Medicaid to uninsured individuals for COVID-19 diagnostic testing and the associated provider visit. Medicaid costs for these individuals will be matched 100% by the federal government. For the period of the public health emergency, the federal government will increase Federal Medical Assistance Percentages (FMAP), the federal funding portion of all Medicaid programs, by 6.2%. Allotments to U.S. territories will also increase. Conclusion Employers, payors and health care providers will need to take immediate steps to adapt to the requirements of the Act. Polsinelli’s Cross-Disciplinary COVID-19 Response Team is at the forefront of these efforts and stands ready to assist.

On March 12, 2020, the California Supreme Court broadened the scope of who can bring a representative action claiming penalties under the 2004 Private Attorneys General Act (PAGA).  (Kim v. Reins International California, Inc.) By way of background, in a PAGA action the named plaintiff must be an “aggrieved” employee or former employee who alleges that the defendant committed one or more California Labor Code violations against him or her.  This permits the employee to bring a “representative” PAGA claim against the defendant on behalf of other “aggrieved” employees for other alleged Labor Code violations.   In its ruling, the Supreme Court held that an employee who settles his or her own individual claims against their employer may still bring a PAGA action on behalf of other “aggrieved” employees. Until recently, an employee who settled their individual claim(s) against the employer could no longer maintain a PAGA action on behalf of other “aggrieved” employees.  The courts reasoned, prior to the instant decision, that because the plaintiff was made whole he or she was no longer “aggrieved.”  With the Kim decision, however, the Supreme Court stated that “[t]he statutory language reflects that the Legislature did not intend to link PAGA standing to the maintenance of individual claims… .”  Rather, the Court ruled that independent of any individual settlement an employee has PAGA standing if “…one or more of the alleged violations was committed against him [or her]… .” The Court’s decision that an employee’s individual claims are no longer linked to PAGA standing will affect the strategies employers utilize in litigating PAGA actions.  For example, companies with arbitration agreements may be unable, and may not want to, arbitrate named plaintiffs’ individual claims.   This is because even if the employer is successful in its arbitration against an employee on his or her individual claims, the employee may still bring a separate PAGA action.  Moreover, employers will need to consider PAGA exposure when settling wage and hour claims with employees on an individual basis.  The Labor and Employment Department of Polsinelli is of course ready to provide you further guidance on this ruling and all of your California and Federal labor and employment questions.

Despite many politicians and employers discussing the option for employees to work at home, there are millions of employees who simply cannot do that. Bartenders, restaurant servers, cashiers, and many others have no one to serve and nothing to ring up when they work at home. Employers of such employees accordingly have a difficult decision to make when business is at an all-time low or they have been shut down. Most cannot afford to pay employees during this time period and hope employees will qualify for unemployment benefits. The question for these employers thus becomes–to fire, or not to fire. This is where a work furlough comes into play. A work furlough is essentially a temporary layoff that qualifies for unemployment benefits. Furloughs rose in popularity some years ago when businesses had to cut costs. Most employers knew employees who worked from paycheck to paycheck would suffer a financial hardship if the employees lost their jobs. Employers did not want to terminate employment. These employers wanted to minimize the negative impact, psychologically and monetarily, a termination brings, and the hard feelings an employee may carry following termination. Employers wanted employees who were already-trained to return to work at the end of a furlough, rather than having to start the hiring process from scratch. Work furloughs generally have a set beginning and end date, similar to the 15-day shut-down ordered in many cities. The employer does not pay the employee during the furlough. Employees, however, generally qualify for unemployment compensation benefits. Employers who want to maintain better relations should tell their employees to apply for unemployment benefits on the first day of the furlough. This ensures the employees will receive the maximum compensation possible. Even an employee who uses vacation time or personal time may qualify for unemployment benefits. Usually there is a one week waiting period before an employee is eligible to receive any unemployment benefits. Many states have benevolently waived this one week waiting period for job losses suffered due to the pandemic. In these states, employees will receive benefits beginning “day 1.” The employee will receive compensation during the second week and any later weeks during which the employee is not working. Any employee who files after the first week of the furlough must use the second furlough week as the waiting period. The employee, therefore, loses a week of unemployment compensation. Even if the furlough period is only one week in length, employees should file for benefits. This helps the employee if the employer is forced to extend a furlough or put employees on furlough again later that same year. The one-week waiting period only applies to the first week when the employee did not work during the first furlough. The employee does not have to wait yet another week to receive benefits (compensation) during any furloughs that take place within 12 months of the first furlough. While furloughs are an excellent option for employers to consider, any employer considering termination or a furlough must carefully consider all state and local laws; the state emergency declarations and laws issued, given the pandemic; and federal law, including any relief package or whether the number of employees furloughed triggers obligations under WARN.

As you are aware from various updates this past weekend, certain cities have closed their schools (bars and restaurants, etc.), and are encouraging or requiring employees to work from home. People who return from risky travel or learn they may have been exposed are self-quarantining. These are certainly signs that many more employees will be working from home or telecommuting regardless of where they are located. A few tips you may send to employees. We hope they may help you and your employees prepare for and, ultimately, work from home for a period of time. Take home, each day, everything you need for telecommuting in case (1) we move to a “telecommuting” or a “work at home” recommended or required policy, (2) your child’s school is closed, (3) you wake up feeling ill (in any way), (4) a loved one wakes up feeling ill and needs your help or you prefer to self-quarantine, (5) you are in a high-risk health category, or (6) you decide at some point you prefer to telecommute. Consider whether meetings of any size, internal or external, might or should be postponed or handled by telephone or videoconference (rather than in person). Use the terms “working from home,” “telework,” or “telecommuting,” rather than we closed our office. The office may be physically empty or mostly empty, depending on what is needed, but “we closed our office” sounds like we are not working. We want to avoid giving anyone that impression. Treat your day like a normal work day to the greatest extent possible. Get up at your regular time, shower, get dressed for work, set up a desk or office area for yourself if you do not already have such an area. End work when you normally stop. Contrary to popular belief, individuals who telecommute often over-work in the beginning, which leads to burn out. Try to remove or limit distractions, including children, puppies, laundry, etc. Having a specified desk / work area, especially one where you can shut a door, will help set boundaries around working time and “no distractions.” If two parents or adults are working from home, work together to share all responsibilities. Try to schedule your most mentally intensive work during, for example, the early morning before anyone else is awake, during your child’s nap time, when your kids are engaged doing something, etc. Synchronize breaks with your children’s or pets’ schedule. (We all know some of this is not as easy as it sounds, especially when children are involved.) Make sure your working area is safe, clean, comfortable (in an ergonomically correct manner), well ventilated, and well-lit. You should have enough electrical outlets to safely power all equipment needed with all wires and electrical cords secured and out of the way. Prepare in advance for periods during which there may be a lack of focus or motivation. This is natural when the energy around your work is not as high as it might be when numerous others are working around you. Use one of many productivity methods available, including the Pomodoro Technique, or my favorite – Eating Live Frogs: Do the Worst Thing First, to help maintain periods of focus and streamline productivity. Anticipate technical problems, which are a huge hassle in the office but even more frustrating when out of the office. Make sure you have a good WiFi or MiFi connection (or both available). Call the Help Desk as often as needed. Arrange for your equipment to be swapped out if the problem is severe. Beware of feelings of isolation or loneliness. The statistics support that people who telecommute tend to lose their sense of community, belonging, etc. Reach out to co-workers in a meaningful, professional AND social way via phone, FaceTime, Zoom, etc. Send funny stories, jokes. In other words, stay in touch as human beings. Working from home or telecommuting is not an ideal situation. We accordingly hope this is a SHORT experience for each of you and your employees. Please do not hesitate to reach out to your Polsinelli contacts if you have additional questions or issues.

In response to the Coronavirus (“COVID-19”), the Internal Revenue Service advised that a health plan that otherwise satisfies the requirements to be a High Deductible Health Plan (“HDHP”) under section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. As a result, the individuals covered by such a plan will not fail to be eligible individuals for purposes of whether their contributions to HSAs are deductible. The notice provides HDHPs the flexibility to provide health benefits for testing and treatment of COVID-19 without application of a deductible or cost sharing. The notice directs individuals to consult their particular health plan regarding the plan’s coverage of testing and treatment of COVID-19, including the potential application of any deductible or cost sharing. As a result TPAs and employers should be prepared to provide such information.

On Wednesday, March 11, 2020, President Trump signed an Order that prohibits foreign nationals from traveling to the U.S. if they have the have been physically in the European countries making up the Schengen area within the 14 days prior to departure.  These countries include: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.   It should be noted that the United Kingdom is currently excluded from the list of countries.  The ban will take effect on Friday, March 13, at 11:59 P.M EDT. Exceptions to the travel ban include: U.S. Citizens, U.S. Permanent Residents (LPR), and Spouses of U.S. Citizens and LPRs. However, they may be subject to additional screening upon arrival.  Additional exceptions are included in the Proclamation, and we encourage anyone who is or has been present in the Schengen area in the previous 14 days and needs to return to the U.S. to read the Proclamation carefully to determine the applicability of the exceptions and restrictions.  Travelers should contact their airline regarding return to the U.S. Those planning to return to the U.S. must be traveling on a flight that departs before 11:59 P.M. EDT on Friday. Companies with foreign workers based in the U.S. who may be traveling overseas should take action immediately to assess the legal status of the workers and determine if emergency relocation back to the U.S. is needed.  Those returning from overseas should be advised to expect additional screening upon re-entry, and if necessary, heightened monitoring or quarantine for a period of at least 14 days after re-entry. Polsinelli attorneys are closely monitoring the effects of the Covid-19 virus spread on the global mobility needs of U.S. employers.  Should you have any questions, please reach out to your Polsinelli immigration attorney.

On February 21, 2020, OFCCP announced the launch of its new Contractor Compliance Institute as part of its ongoing efforts to provide guidance and training to aid federal government contractors in meeting their compliance obligations.  The Institute provides free, interactive tools and courses to educate contractors about their compliance obligations and help them evaluate the sufficiency of personnel practices and affirmative action efforts.  At its launch, the Institute offered one course providing a two-hour basic overview of the legal authority governing OFCCP’s enforcement activities, required job listings, postings, and notices for federal contractors, and applicant tracking. Along with other OFCCP compliance assistance efforts, such as its issuance of opinion letters and technical assistance guides, the Institute is a sign of OFCCP leadership’s focus on transparency and cooperation with contractors.  Polsinelli will continue to track and report on developments at OFCCP.

Polsinelli attended the February 18, 2020 Compensation Roundtable jointly hosted by OFCCP and the National Industry Liaison Group (NILG).  The event provided valuable insight into the thought processes of senior OFCCP officials as they fielded questions from federal contractor compliance professionals.  The frank discussion during the roundtable highlighted contractors’ ongoing concerns regarding OFCCP’s approach to the evaluation of the compensation of small groups of specialized employees and smaller AAP groups. OFCCP’s preferred method of evaluating compensation and other personnel practices is the regression analysis, a statistical tool that seeks to control for various non-discriminatory factors and identify statistically-significant disparities that may be based on race, gender, or other protected characteristics.  Regression analyses can be effective for evaluating large groups of employees performing the same job, such as entry-level or line employees at larger organizations, but is an ineffective tool for addressing employees in higher-level, specialized positions, which may have only one or a small handful of employees or smaller AAP establishment groups consisting of relatively few employees.  Two common contractor complaints regarding OFCCP’s statistical analysis were highlighted in the Roundtable: (1) OFCCP’s combination of groups of employees across job titles, salary grades, job functions, or other relevant groupings into pay analysis groups (PAGs), and (2) OFCCP’s failure to properly consider and control for non-discriminatory factors relied on by the contractor in setting compensation. Both of these concerns stem from OFCCP’s reliance on the regression tool, which OFCCP contends requires a large number of data points to provide reliable results.  It is OFCCP’s position that valid PAGs must contain at least 30 employees.  For specialized or higher-level positions, this rule can result in PAGs containing numerous different positions having different job functions in different departments.  The contractor advocates at the Roundtable urged OFCCP to drop its insistence on 30-member PAGs in every case and instead analyze more focused “similarly-situated employee groups” (SSEGs) that do not consolidate employees in dissimilar positions. Although OFCCP indicated that it will control for differentiating factors among PAG members, two other statistical principles relied upon by the agency hinder its ability to effectively do so.  First, OFCCP requires that for each control factor, the PAG contain at least 10 employees (i.e., to control for 5 different factors requires a PAG of at least 50 employees).   This creates a Catch-22 in which the creation of a PAG requires consolidating dissimilar positions, but including additional controls necessary to account for the dissimilarity requires adding still more employees in other positions to the PAG.  The second rule applied by OFCCP is that any variable must have at least 5 observations or data points or OFCCP will combine that variable with the next closest variable.  For example, if an employer’s performance evaluation system rates employees into three categories – Needs Improvement, Meets Expectations, and Exceeds Expectations – and only four employees in the PAG are rated as “Needs Improvement,” those four employees will be combined with the employees in the “Meets Expectations” category, eliminating consideration of a factor that is likely significant to the employer’s decisions.  Although the OFCCP officials at the Roundtable expressed some openness to considering small group analysis techniques, they showed little willingness to move away from the agency’s current approach to these principles. In addition to recommending that OFCCP adopt a more flexible approach and reduce its rigid adherence to these statistical principles, the contractor advocates at the Roundtable also criticized the agency for failing to consider two factors commonly relied upon by employers in setting compensation: job grades and market rate.  The contractor representatives noted that an employer’s salary or job grades represent the employer’s holistic business judgment about the relative value of each position within its organization. OFCCP, on the other hand, contended that if the agency has data regarding the underlying factors that inform the assignment of employees to grades (i.e., job responsibilities, seniority, etc…) then the agency should more reliably analyze those underlying factors.  As the contractor representatives noted, however, OFCCP’s independent assessment of those factors to the exclusion of the grades actually used by the employer may be inconsistent with OFCCP Directive 2018-05’s emphasis on conducing compensation evaluations using the same factors relied upon by the employer. The Compensation Roundtable provided a forum for a frank discussion of OFCCP’s compensation evaluation practices.  Although there is a wide gulf between the views of OFCCP officials and contractor advocates regarding OFCCP’s analytical techniques, the agency’s consideration of contractors’ concerns is a step in the right direction.  OFCCP’s apparent reluctance to move away from some of its current practices identified as contractor concerns highlights the need for contractors to rigorously self-audit their compensation practices to identify potential agency concerns and address them prior to being selected for a compliance evaluation.

According to the Centers for Disease Control and Prevention (“CDC”), there are currently tens of thousands of reported cases of the disease (recently named “COVID-19”) in China, with a growing number of cases in various international locations. In the United States, the CDC has confirmed 14 cases and has tested a total of 426 individuals. Another 39 people infected with the disease have been repatriated to the United States. Although most of these illnesses are associated with travel from Wuhan, the United States has reported at least two instances of person-to-person spread of COVID-19. The COVID-19 outbreak presents a host of employment law concerns for U.S. employers across all industries, but in particular, those in high-risk environments (such as healthcare) and those with employees engaged in international travel. The following are some guidelines to help employers respond to the outbreak: Educate Employees For employers that might be impacted by the disease, reassure employees that management is monitoring the outbreak, including travel restrictions and guidance, and supply employees with reputable resources regarding COVID-19, its transmission, and how to prevent exposure. Employers should avoid offering medical opinions or unreliable information that might create unnecessary fear and anxiety among employees. Advise employees to check the CDC’s most recent guidance and recommendations before any international travel. Actively encourage and flexibly permit employees to stay at home if they have symptoms of acute respiratory illness, and remind employees of applicable sick leave or paid time off that might be available to them. Remind employees of applicable policies and procedures for reporting concerns and requesting leaves of absence and other accommodations. Train supervisors and managers on how to respond to such requests. To ensure consistent messaging and uniform application of company policies, appoint a dedicated individual in human resources to field and respond to questions, concerns and requests related to COVID-19. Ensure a Safe and Healthy Workplace Encourage respiratory etiquette, hand hygiene and routine cleaning of commonly touched surfaces in the workplace. Employers should also provide appropriate health and sanitation supplies around the workplace. Comply with Occupational Safe and Health Administration (“OSHA”) regulations for maintaining a safe and healthy workplace. Although all industries should follow OSHA’s recommendations and industry-specific guidance, precautionary measures are required for certain industries (such as healthcare) with a high risk of exposure to infectious disease. If an employee is confirmed to have COVID-19, inform fellow employees of their possible exposure to COVID-19 in the workplace, but maintain confidentiality about an employee’s health so as not to run afoul of the Americans with Disabilities Act (“ADA”) or similar state laws. Healthcare providers may also need to take into account any obligations under the Health Insurance Portability and Accountability Act (“HIPAA”) and consider public health reporting requirements, public safety needs, and the protection of its employees and patients. Review and Implement Policies If possible, temporarily suspend work travel to affected areas and stay abreast of current travel guidance from reputable health organizations. Requiring travel to high risk areas could expose employers to liability under OSHA or other employment laws. If an employee refuses to work or travel because of concerns related to COVID-19, carefully consider whether such concern is reasonable and consistent with current CDC guidance before insisting on travel or taking any disciplinary action. Consider implementing a temporary policy requiring employees that have traveled to affected regions (or are in direct contact with people who have traveled to affected regions) to stay at home for 14 days following their return (the suspected incubation period). This policy should be applied uniformly and not targeted at specific employees based on race, country of origin, or any other protected characteristic. Consider any request for accommodation arising from or related to COVID-19 just as the company would any other request for disability accommodation. An employee infected with COVID-19 (or even “regarded as” having the illness) could be protected under the ADA or similar state law as a “qualified individual with a disability.” Provide all necessary leaves required under state and federal law and/or company policy. A COVID-19 diagnosis will almost certainly qualify as a “serious health condition” under FMLA or equivalent state law. Once an employee has exhausted all leave, employers may still need to consider affording additional time off as a reasonable accommodation. Review any telecommuting policy and facilitate remote working where applicable. Employers should use caution in requiring employees to work from home simply because they display certain symptoms, as many of the early symptoms of COVID-19 share similarities with the common cold. If faced with telecommuting requests by employees with concerns of potential exposure, employers should assess whether such concern is reasonable before refusing this accommodation. Avoid making any medical inquiries or requiring medical examinations of employees absent a reasonable belief that an employee’s medical condition poses a “direct threat” to the workplace, as required by the ADA. “Direct threat” is defined as “[a] significant risk of substantial harm to health or safety of self or others that cannot be eliminated or reduced by reasonable accommodation.” 29 C.F.R. § 1630.2(r). In determining potential risk of COVID-19 infection, employers should rely only on guidance from reputable public health agencies and avoid making any determinations of risk based on race or country of origin. Failure to do so could violate state and/ or federal discrimination laws. To read the CDC Interim Guidance for Businesses and Employers to Plan and Respond to COVID-19, click here. Five Takeaways for Employers The impact of COVID-19 is constantly evolving and will continue to present a host of legal issues for employers. Regardless of industry or location, employers should take the following action: 1.     Closely monitor and communicate developments from U.S. public health authorities. 2.     Implement appropriate policies and procedures to respond to and manage the concerns of employees. 3.     Ensure a safe and healthy workplace in compliance with all federal and state regulations and guidelines. 4.     Protect the privacy of employees. 5.     Consult legal counsel to navigate the various OSHA and employment laws implicated by the outbreak. For more information, please contact one of the authors or your Polsinelli attorney.

On February 3, 2020, President Trump announced that OFCCP Director Craig Leen will be nominated to the position of Inspector General of the Office of Personnel Management.  The press release did not provide any details about the timing of Director Leen’s formal nomination or the appointment of a successor director. During his tenure at OFCCP, Director Leen sought to bring transparency to OFCCP’s compliance evaluations, to clarify the standards for the review of compensation data, and to focus the agency’s efforts on disability issues under Section 504 of the Rehabilitation Act and veterans issues under VEVRAA.  So far, the administration has not announced a potential successor and it is unclear whether new leadership will advance a similar agenda.

A new version of the Form I-9 has been released by U.S. Citizenship and Immigration Services (USCIS). Employers may choose to use either the prior version (marked with a 7/17/17 revision date) or the new version (revision date of 10/21/19) until April 30, 2020 but must begin using the new version by May 1, 2020. The new Form I-9 has no substantive changes; however, the instructions now clarify the definition of an authorized representative. The Form I-9 instructions state: “You may designate an authorized representative to act on your behalf to complete Section 2. An authorized representative can be any person you designate to complete and sign Form I-9 on your behalf. You are liable for any violations in connection with the form or the verification process, including any violations in connection with the form or the verification process, including any violations of the employer sanctions laws committed by the person designated to act on your behalf.” The instructions also further clarifies the use of N/A in Section 2. An employer does not need to write N/A in columns that are not being used for documentation. Form I-9 Completion and Retention – Form I-9s are subject to Inspection All U.S. companies must complete and retain the Form I-9 for all current employees, as well as for terminated employees for at least three years past the start date or one year past the termination date, whichever is later. Companies’ I-9 forms are subject to inspection, and, notably, U.S. Immigration and Customs Enforcement (ICE) audits have increased nationwide. In FY2018, ICE Homeland Security Investigations (HSI) an investigative unit of Department of Homeland Security (DHS), opened 6,848 worksite investigations compared to 1,691 in FY17; initiated 5,981 I-9 audits compared to 1,360 the year before; and made 779 criminal and 1,525 administrative worksite-related arrests compared to 139 and 172, respectively. The current administration has increased staffing of ICE HSI to conduct comprehensive I-9 audits with increased issuance of “Notices of Inspection” (NOIs) under a directive by the current administration.  Last year, ICE announced that over 3,000 NOIs were expected as part of a nationwide surge in ICE investigations in worksite enforcement. NOIs are civil administrative audits that can carry fines from $230-$2,292 per form for substantive and technical uncorrected violations. In some cases, these civil audits can lead to worksite investigations that are criminal in nature, resulting in the more severe “raids” on employers as well as increased monetary penalties and potential imprisonment. During the NOI process, the company only has three business days to turn over their I-9 forms, supporting documents, company information, ownership and payroll records, any applicable E-Verify account information and any SSN no-match letters, and contractor or staffing agency information, for review by ICE. These NOIs are a primary tool for ICE to conduct thorough investigations and are impacting a wide range of employers from small to large companies across all industries. What an Employer needs to know for I-9 Compliance - before receiving a Notice of Inspection As background, it is unlawful for an employer to knowingly employ an unauthorized worker, and the completion of the Form I-9 is a legal requirement for all new employees hired since November 6, 1986. All U.S. employers are required to verify that the individuals they hire are authorized to work in the United States, including citizens and noncitizens, under the Immigration Reform and Control Act ("IRCA") of 1986 by completing the Form I-9. The Form I-9 is a required form used to verify employment eligibility for individuals hired within the United States.  Failure to comply with these laws and regulations may result in ICE imposing criminal and civil sanctions upon employers. Proactive steps for staying I-9 compliant Employers should be diligent in having systems in place which address I-9 training, completion, storage, audits, and re-verification. More importantly, compliance training on how to conduct inspection of original, unexpired documents with a new hire is essential to fully train hiring managers, HR staff, supervisors, recruiters and anyone else involved in the hiring and onboarding process. In addition, employers should implement an onboarding process that includes strict timeframes for timely completion of the Form I-9. Late completions will likely result in high fines: Section 1 must be completed by the first day of work, and Section 2 must be completed within three business days of the start date. Quick tip: the Form I-9 can be completed before the start date as long as there has been an official offer and acceptance by the new hire. Going green with paperless electronic I-9 systems Many employers are becoming more sophisticated with using electronic I-9 forms instead of paper forms. However, they should carefully vet systems for compliance with the electronic I-9 regulations, including review of the system’s security, indexing capability, audit trails and electronic signature requirements, and utilize a well-designed electronic I-9 system which will enable employers to ensure forms have been filled out properly and are up-to-date. https://www.federalregister.gov/documents/2010/07/22/2010-17806/electronic-signature-and-storage-of-form-i-9-employment-eligibility-verification An electronic I-9 system can reduce the retention of paper I-9s as well as make the process more efficient for many employers. Even with an electronic I-9 System, it is critical for employers to conduct regular training sessions with individuals responsible for the completion and retention of I-9 forms. ICE may also request access to a company’s electronic system through an I-9 Demo to confirm compliance. Self-audits with outside counsel with I-9 expertise Due to the uptick in I-9 audits and investigations, employers should conduct internal audits of their I-9 records on a regular basis. Internal audits help employers stay in compliance with the laws and regulations set forth by the government.  It is a best practice for employers to conduct self-audits under the guidance of experienced counsel who can assist with answering questions related to employment verification, spot and address recurrent issues, and develop a remediation plan if errors are present. A remediation plan can help employers address critical issues on I-9 forms and limit exposure in the future. Being proactive can help alleviate serious penalties and fines in the event of an ICE audit. What to expect once you have received a NOI? ICE can compel a review of an employer’s I-9 forms and related documents by serving the employer with a NOI.  Generally a NOI will seek production of all I-9 forms for current and terminated employees, any policies and procedures in place related to employment eligibility verification (I-9/E-Verify), list of current and terminated employees (ICE may ask for a specific date range), business licenses, payroll data, and copies of correspondence from the Social Security Administration office regarding any mismatched or no-matched social security numbers. Once the employer has been served a NOI, the employer will usually be provided three days to respond to the government’s request. The employer should contact their counsel immediately.  NOIs should be taken with the utmost priority and their response submission should be well-organized for the government. Failure of compliance may result in hefty fines. What is a SSN No-Match Letter? Employers should also be on the alert for SS No-Match letters which have re-emerged last year as part of an increased focus on compliance. In early 2019, the Social Security Administration (SSA) office resumed the process of sending letters to employers to advise if an employee’s Form W-2 did not match the SSA’s records. Approximately 575,000 employers have received these no-match or correction request notices. A no-match letter, formally known as an Employer Correction Request (EDCOR), informs an employer where at least one name and Social Security Number (SSN) combination on a W-2 submitted by the employer do not match SSA’s records. The letters do not identify by name specific employee(s) who have incorrect information within the system. If an employer receives a no-match letter, it must first register for the SSA’s Business Services Online (BSO). Once registered with BSO, an employer can log on to view and correct the name and SSN errors. The employer should take these necessary steps to correct the information: Check the reported no-match against personnel records; Inform the employee of the notice; Ask employee to confirm his or her name and SSN. If the exact name or SSN was not previously reported, correct it on a Form W-2C; Advise employee to contact SSA and accordingly update their SSA records to resolve the issue. Have the employee notify you once it has been resolved; If an employee can’t resolve the no-match error for his or her name or SSN, consult legal counsel about how to proceed. For any I-9 compliance questions, please reach out to your Polsinelli attorney or a member of our Immigration Practice Group.

In addition to bolstering the provisions of its mini-WARN Act (see Part I), New Jersey Governor Phil Murphy also recently signed into law expansive provisions aimed at deterring worker misclassification. Fines for Employee Misclassification A.B. 5839 authorizes New Jersey’s Department of Labor and Workforce Development to fine businesses for intentionally misclassifying workers.  Fines for employers are $250 per misclassified employee for a first violation, and up to $1,000 per misclassified employee for each subsequent violation.  Additionally, employers must pay each misclassified individual up to 5% of the worker’s gross earnings over the past year. Expanded Liability Under A.B. 5840, businesses entering into agreements with labor contractors—e.g., staffing agencies—for workers are now jointly and severally liable and share legal responsibilities for violations of state wage and hour laws and state employer tax laws, including those related to employee misclassification. A.B. 5840 also impacts manager-level employees of businesses found to have violated state wage and hour and employer tax laws.  The law expands individual liability for violations to any person acting on the employer’s behalf to now include managers. Notice Posting Requirements A.B. 5843 requires employers to conspicuously post notices containing the prohibition against misclassification; the standard for whether an individual is an employee or individual contractor; benefits and protections for employees under state wage, benefit, and tax laws; remedies available for misclassification; and how to report alleged misclassification.  Violations may result in the employer being guilty of a disorderly persons offense and a fine of $100 – $1,000. The new law includes an anti-retaliation provision for employees who complain about potential misclassification.  Employers violating the anti-retaliation provision must offer reinstatement to the discharged employee; correct any discriminatory action; and pay the employee considerable damages of reasonable legal costs, lost wages and benefits, and punitive damages equal to two times the lost wages and benefits. Stop-Work Orders and Public Posting of Violators In keeping with the trend of employee protections, A.B. 5838 allows New Jersey regulators to issue an immediate stop-work order for worksites where an employer has been found to have violated New Jersey wage, benefit, or tax laws.  Employers who violate a stop-work order may be fined up to $5,000 per day.  While a stop-work order can be issued while an employer appeals a violation decision, an employer may seek injunctive relief, and must then demonstrate the stop-work order would be or has been issued in error. New Jersey also enacted S.B. 4226, allowing the Department of Labor and Workforce Development to post information of persons who violate state wage, benefit, and tax laws. For guidance on compliance with any of these new laws and regulations in New Jersey, please contact your Polsinelli attorney.

New Jersey continues to become one of the country’s most employee-friendly states.  On January 21, 2020, Governor Phil Murphy signed into law a slate of employee-friendly bills.  In this post, we discuss the significant expansion of rights for employees impacted by mass layoffs.  In our next post, we will cover the wave of laws aimed primarily at combating worker misclassification and expanding potentially liable persons and entities. S.B. 3170 increases notification time and requires severance pay for mass layoffs.  Beginning July 19, 2020, when 50 or more full-time workers are laid off from an establishment in a 30-day period, employers must pay terminated employees severance equaling one week of pay for each full year of employment.  The changes to the law also expand the definition of “establishment” form a single employment site to any single or group of locations in New Jersey, meaning that the 50 affected employees do not need to have been employed at the same physical location. Under the same bill, employers who employ 100 or more employees (whether full-time or part-time) must provide at least 90 days’ notice (instead of 60) of the layoff to affected workers, any union representing affected workers, local officials, and the Commissioner of Labor and Workforce Development.  If an employer fails to provide the required notice to any employee, the employer must pay an additional four weeks of pay to that employee. Employers considering a mass layoff or in the process of mass layoff should consult their Polsinelli attorney to ensure compliance with this new, extensive New Jersey law.

Public company directors, who are under constant threat of claims, received welcome news earlier this month.  On December 9, 2019, the U.S. District Court for the Southern District of New York ruled that corporate directors cannot be sued for whistleblower retaliation under the Sarbanes-Oxley Act (SOX).  The SDNY decision splits with a 2015 opinion from a California federal district court permitting SOX claims against corporate directors to go forward. The SDNY case involved a number of “yieldco” subsidiaries formed by SunEdison to facilitate investment in renewable energy projects.  The plaintiff and alleged whistleblower was the CEO of two of these subsidiaries.  The CEO claimed that he started questioning SunEdison’s public statements about the subsidiaries’ finances and SunEdison’s liquidity and that, in response, the subsidiaries terminated his employment.  He also accused two SunEdison directors – the Board’s Executive Chairman and Governance Committee chair – of orchestrating his termination.  The CEO’s claim was consolidated with related shareholder litigation concerning the representations about SunEdison’s finances. The court relied on the plain language of the SOX whistleblower retaliation statute, 18 U.S.C. § 1514A, to dismiss the former CEO’s claims against the directors.  SOX provides a retaliation claim against a “company” with publicly-traded securities, a “nationally recognized statistical rating organization,” “or any officer, employee, contractor, subcontractor, or agent of such company or nationally recognized statistical rating organization.”  Directors are not listed in the statute.  Given that SOX specifically regulates the conduct of corporate directors in other respects, the court refused to read the broad term “agent” to encompass corporate directors.  The court also noted that individual directors are not ordinarily regarded as agents of the corporation for which they serve. The New York decision splits with a 2015 decision from the Northern District of California in Wadler v. Bio-Rad Laboratories, Inc.  There, the court found that SOX’s use of the term “agent” was ambiguous and construed it to include directors.  Although the Ninth Circuit ruled on appeal on various issues in the Wadler case earlier this year, it did not address the director liability issue.  No federal appellate court has yet ruled on this issue, leaving the question split between the New York and California federal district courts. Since the SOX was enacted in 2002, plaintiffs and their counsel have been testing the scope of whistleblower claim, including the individuals and entities – such as directors – that can be held liable.  .  Director liability is worth closely watching with D&O insurance rates reportedly on the rise due to an uptick in shareholder litigation.  Polsinelli will continue to monitor this and other emerging SOX and Dodd-Frank whistleblower issues.

2019 has been a year of pivotal developments for defense contractors in the realm of cybersecurity compliance. The Department of Defense (DoD) issued six guidance memoranda to assist its acquisition personnel in developing “effective cybersecurity strategies to enhance existing protection requirements,” including a mandate for the Defense Contract Management Agency to include cybersecurity compliance as a part of a contractor’s purchasing system audit and approval. 2019 also saw the first False Claims Act whistleblower litigation related to contractors’ compliance with DoD cybersecurity contracting provisions. Beyond merely focusing on enforcement of existing compliance obligations, the DoD upped the ante in June 2019 with its announcement of its forthcoming Cybersecurity Maturity Model Certification (CMMC). CMMC is the next step in the DoD’s efforts to protect the government’s sensitive, unclassified information against data exfiltration, and once it goes into effect CMMC will be a mandatory, third-party certification for allDoD contractors and subcontractors. While there remain many unanswered questions surrounding the details and implementation of CMMC, the DoD has made clear that CMMC is coming and the defense contracting community must be ready to implement these requirements in order to continue receiving defense contracts, subcontracts and other DoD-funded agreements. What Will CMMC Require? As currently drafted, CMMC will require all defense contractors and subcontractors to undergo a third party assessment of their internal cybersecurity technical practices and process maturity against published standards. This assessment will result in certification at one of five levels – 1 being the lowest and 5 the highest – or no certification. Each subsequent level is cumulative, meaning a company must meet the requirements of all lower levels to qualify for a higher level of certification. In addition, an organization must satisfy boththe defined practices and process maturity criteria within a given level across all areas of the model to achieve certification at that level (e.g., having a Level 3 assessment on technical practices and Level 2 on process maturity results in an overall Level 2 certification). The DoD expects contractor CMMC assessments to begin in early June 2020. CMMC requirements will start appearing in DoD Requests for Information around this same time, and they become mandatory in all DoD solicitations beginning fall 2020. Once implemented, each DoD solicitation will identify the minimum required CMMC level a company must have to be eligible for that contract award. On December 6, 2019, the DoD released Version 0.7 of the draft CMMC framework. This update refines the technical practice requirements for Levels 1-5 and provides further guidance regarding process maturity expectations. Level 1 identifies 17 basic requirements, mostly consistent with existing general government contractor cybersecurity requirements, while Level 3 aligns with full NIST SP 800-171 Rev 1 compliance. Levels 4 and 5 require “proactive” and “progressive” cybersecurity programs, respectively, and impose additional practices derived from Draft NIST SP 800-171B and other heightened cyber standards. These top two levels are expected to be reserved for companies handling information related to critical technologies. The CMMC model will not be static, however: it will be adapted and revised whenever and however needed as the DoD identifies new threat vectors. While a company’s certification is generally expected to last for  three years, including interim spot checks, model revisions could necessitate earlier reassessment. Who Is Affected by the Upcoming CMMC Requirements? The DoD states that all contractors and subcontractors – including commercial item subcontractors – at any level of the defense supply chain will need to be certified at a minimum of Level 1 in order to be eligible to receive DoD-funded contracts and agreements. The DoD has also left open the possibility that the CMMC qualification requirements may apply to other types of contractual agreements, including DoD-funded grants, cooperative agreements, and other transactions. A company may meet a specific CMMC level across its entire enterprise network or particular segment(s) or enclave(s). At the subcontractor level, the DoD anticipates limiting CMMC application to companies providing products and services in direct support of a defense program, thereby excluding ‘back office’ products and personnel supporting general corporate overhead functions from these requirements. If performance of a contract or subcontract necessitates access to any Controlled Unclassified Information (CUI), a Level 3 minimum certification will be required. CUI includes export controlled information, “For Official Use Only” information, and other information created or possessed by a contractor that is subject to government-mandated safeguarding or dissemination controls. The DoD is still drafting a formal CUI baseline definition to clarify the specific types of information that must be protected, as well as guidance regarding how the government will assign CMMC levels to individual procurement. How Does This Differ from Today’s DoD Cybersecurity Requirements? DoD contractors and subcontractors are currently required in every procurement contract to self-certify their compliance with DFARS 252.204-7012. This DFARS clause mandates that contractors provide “adequate security” – generally equivalent to full compliance with NIST SP 800-171 Rev 1 – on all of its unclassified information systems that process, store or transmit Covered Defense Information (“CDI,” the current DoD-equivalent of CUI). The clause also imposes reporting and cooperation requirements in the event of defined “cyber incidents.” Importantly, the DFARS clause, while mandatory in all contracts, does not apply if no processing, storing, or transmitting of CDI occurs within a contractor’s information system. In addition, in practice, the DoD has allowed companies that have not yet but are working to achieve full compliance with the NIST standards to receive contracts and subcontracts, so long as the contractor can demonstrate it has an acceptable System Security Plan and Plan of Action and Milestones (POAM) in place to achieve full compliance. While NIST SP 800-171 Rev 1 continues to form the substantial baseline for CMMC compliance up to Level 3, the above three key hallmarks of DFARS 252.204-7012 – self-certification, applicability caveats, and flexibility for in-process compliance – are effectively eliminated under CMMC. An independent third party assessment and certification process will replace self-certification, allDoD contractors and subcontractors must be certified at least at Level 1 in order to qualify for award, and the CMMC approach as currently drafted does not include a waiver or deviation process for individual control gaps. In addition, as previously noted, CMMC imposes additional requirements over and above those mandated by NIST SP 800-171 for Level 4 and 5 critical technology contracts, and certification may also become mandatory for research, prototype, and other non-procurement instruments. What Are My Recommended Next Steps to Prepare for CMMC? The DoD has not yet published draft regulations implementing CMMC and many details remain unclear.  Despite this, the agency continues to state that the final CMMC framework (version 1.0) will be published in late January 2020, and its requirements will begin to appear in Requests for Information beginning in June. The DoD has also indicated that it expects to issue an interim rule to accelerate implementation. Companies should begin preparing for the new accreditation system by ensuring compliance with the appropriate NIST SP 800-171 Rev 1 requirements, depending on the level of CUI they expect to handle: Determine if your company receives federal funds from the Department of Defense either directly as a prime contractor or indirectly via subcontracts, purchase orders, or other contractual agreements.  If so, you should be prepared to obtain at least a Level 1 or 2 certification. Determine whether your company currently or in the future expects to electronically process, store, or transmit Controlled Unclassified Information in the performance of its defense contracts. If so, you should be prepared to obtain at least a Level 3 certification. If you are a subcontractor, consider reaching out to your major higher-tier contractor customers to understand how they are preparing to implement CMMC across their supply base. Review your company’s current NIST SP 800-171 Rev 1 compliance level against your expected certification level requirements. If you currently have a POAM in place or identify additional concerns, dedicate appropriate resources to ensure that progress is being made to close any gaps as quickly as possible. CLICK HERE to subscribe to receive new blogs, event information and industry updates directly to your email inbox.

On December 30, 2019, OFCCP issued a Notice of Proposed Rulemaking on Nondiscrimination Obligations of Federal Contractors and Subcontractors: Procedures to Resolve Potential Employment Discrimination.  The proposed rulemaking codifies aspects of several of OFCCP 2018 directives, including Directive Nos. 2018-01 (Use of Predetermination Notices), 2018-05 (Analysis of Contractor Compensation Practices During a Compliance Evaluation), and 2018-08 (Transparency in OFCCP Compliance Activities). Perhaps most importantly for contractors, the proposed regulation elaborates on the statement in OFCCP’s Directive 2018-05 concerning compensation reviews that “OFCCP will be less likely to pursue a matter where the statistical data are not corroborated by non-statistical evidence of discrimination unless the statistical evidence is exceptionally strong.” The proposed rulemaking adds specificity to this statement, clarifying that in the absence of non-statistical evidence, OFCCP will issue a Predetermination Notice (PDN) only where the statistical evidence is significant at a confidence level of 99% or higher, equating to three or more standard deviations. This appears to be a positive development for contractors, as OFCCP currently pursues compensation audits based solely on alleged statistically-significant disparities falling below this threshold. The proposed rulemaking also defines statistical and non-statistical evidence. The definition of statistical evidence echoes the focus in OFCCP’s recent directives of “controlling for the major, measurable parameters and variables used by employers” in making compensation and selection decisions. The definition identifies several exemplary control factors that OFCCP may consider, including performance evaluations, years of experience or service, and location.  This may provide additional weight to contractors’ arguments that OFCCP must consider contractor’s control factors in its compliance evaluation analyses. The proposed rulemaking defines non-statistical evidence to include testimony about workplace bias, non-statistical cohort analyses, testimony about individuals being denied or given misleading information about employment practices, testimony about subjective or discretionary decision-making, and other anecdotal evidence. Overall, this specificity about the types of non-statistical evidence OFCCP will rely upon is beneficial to contractors.  However, the focus on discretionary elements in compensation systems as evidence of discrimination is problematic as the U.S. Supreme Court has held that giving managers discretion in making employment decisions is not inherently discriminatory. Finally, the proposed regulations will codify OFCCP’s current practice, described in Directive 2018-01, of using of PDNs and Notices of Violation when a compliance review shows preliminary findings of discrimination. Noticeably absent from the proposed regulations, however, is Directive 2018-05’s pledge that OFCCP will attach to the PDN the individual-level data necessary for the contractor to replicate OFCCP’s statistical analyses. Contractors should welcome OFCCP’s effort to formalize these aspects of its Directives into regulations.  Contractors will have until January 29, 2020 to comment on the proposed regulations. Polsinelli will continue to monitor and report on the proposed rulemaking as it proceeds through the regulatory process.

The National Labor Relations Board recently announced significant changes to its rules regarding Representation Elections.  The new rules undo many of the controversial 2014 modifications made by the Obama Board, as discussed below.  These changes are not scheduled to become effective until April 16, 2020.  Until then, the Old Rules still apply. 1. The Pre-election Hearing New Rule:  The pre-election hearing will be held within 14 business days from issuance of the Notice of Hearing (NOH). Old Rule:  The pre-election hearing will be held within 8 business days from the issuance of the NOH. 2. Notice of Petition for Election New Rule:  The employer must post and distribute the Notice of Petition for Election (NAPE) within 5 business days after service of the NOH. Old Rule:  The employer must post and distribute the NAPE within 2 business days after service of the NOH. 3.  Service of Statements of Position New Rule: The employer (and any other non-petitioner parties) must serve the Statement of Position SOP) on all other parties within 8 business days after service of the NOH. In addition, petitioners (usually unions) will be required to serve an SOP on all other parties by noon at least 3 business days before the hearing is scheduled to start. Timely amendments to the petitioner’s statement may be made if good cause is demonstrated. Old Rule:  The employer (and any other non-petitioner parties) must serve the SOP at least 1 business day before the Pre-election Hearing, which typically was 7 business days after service of the NOH. The petitioner is required to respond to the SOP(s) at the opening of the hearing. 4.  Other Petition Issues (Unit Scope, Voter Eligibility, Supervisory Status) New Rule:  These issues will normally be litigated at the pre-election hearing and be resolved by the Regional Director prior to an election being directed.  The parties may agree to defer litigating these issues until after the election. Old Rule:  These issues, which can be critically important in the Representation Election process, are not required to be either litigated or resolved before an election is conducted. 5.  Post-hearing Briefs New Rule:  All parties will have the right to file a post-hearing brief after a pre-election hearing and, also post-election briefs may be filed.  Such briefs will be due within 5 business days of the close of the hearing, and the hearing officer may grant an extension of up to 10 additional business days, for good cause. Old Rule:  Post-hearing briefs are permitted only upon special permission from the Regional Director. 6.  Notice of Election New Rule:  The rule emphasize that the Regional Director has discretion to issue a Notice of Election after issuing the direction of an election. Old Rule:  The prior rule provides that regional directors “ordinarily will” specify election details in the direction of election. The Board believes this change will eliminate confusion caused by the prior rules, which led to unnecessary litigation. 7.  Scheduling the Election New Rule:  Regional Directors will continue to schedule the election for the earliest date practicable, but normally elections will not be scheduled before the 20th business day after the date of the direction of election, absent a waiver of the time limit by the parties.  This timeline will enable the Board to rule on certain types of requests for review prior to the holding of an election and reduce the number of cases in which there are unresolved issues when the election is held. Old Rule:  The Regional Director “shall schedule the election for the earliest date practicable,” with no minimum time between when the direction of the election issued and when the election is held. 8.  Requests for Review/Impounding Ballots New Rule:  Where a request for review of a direction of election is filed within 10 business days after the DOE, if the Board has either not ruled on the request or has granted it, and the election is held, ballots that could be affected by the request for review will be segregated and all ballots will be impounded and remain unopened pending a ruling or decision by the Board.  A party may also file a RFR more than 10 days after the direction of election, but the ballots will not be impounded. Old Rule:  Impoundment of ballots is not automatic when a request for review was filed. 9. Format and Procedural Requirements for all Requests for Review Made Consistent. New Rule:  The same formatting rules apply to all requests for review as well as opposition to a request for review.  Also, an opposition to a request for review is explicitly permitted. Old Rule:  Formatting is not consistent and oppositions to requests for review are not universally allowed. 10.  Election Observers New Rule: Whenever possible, observers will be a current member of the voting unit.  When no such individual is available, the party should select a current nonsupervisory employee. Old Rule:  The rule provides only that parties be represented by observers, without guidance regarding who is, and who is not, an acceptable observer. 11.  Certification of Election Results During the Time Period for Request for Review New Rule:  The Regional Director will no longer certify election results if:  1) a request for review is pending, or 2) the time has not passed for a request for review to be filed. Old Rule:  Regional Directors are required to certify election results despite a pending or possible request for review.  In fact, in cases where a certification issued, requests for review could be filed up until 14 days after the issuance of certification. The new rules will improve the representation election process measurably, even if they increase the time period between the filing of a petition for an election and when the election is held.

Tis the season to be jolly, and the National Labor Relations Board (“NLRB” or “Board”) was in an especially giving mood for employers over this past week.  In the span of five days, it reversed several Obama era union-friendly cases and measures, all to the benefit of employers. First, the NLRB vacated an Administrative Law Judge’s decision that had rejected a proposed global settlement to resolve all pending unfair labor practices (“ULP”) against McDonald’s Corporation.  The Board directed the ALJ to approve the settlement.  At issue was whether McDonald’s corporate was a joint employer with its franchisees and could be liable for their violations of federal labor law.    By settling the case, McDonald’s avoided creating bad case law for itself and all franchisees. Next, in a case called Valley Hospital Medical Center, the NLRB restored decades-old precedent permitting an employer to stop deducting dues after the expiration of a collective bargaining agreement.  Under the Obama Board, employers committed a ULP for stopping dues collection post-expiration, as there was a presumption that checkoff provisions remained active. The Board didn’t stop there.  In Apogee Retail, the Board held employers do not automatically violate the National Labor Relations Act (“Act”) when they forbid employees from discussing confidential workplace investigations.  Reversing the controversial Banner Health System decision, the NLRB held, so long as the confidentiality directive is limited to the period in which the investigation is pending, there will be no violation of the Act. Likewise, in Caesars Entertainment, the NLRB held employers again can preclude employees from using their work emails for personal reasons. Including union-related reasons.  Overruling the Obama Board’s Purple Communications decision, the Board held, “"Employees have no statutory right to use employer equipment, including IT resources, for Section 7 purposes." But perhaps the Board’s biggest “gift” this holiday season to employers was relaxing the punitive time limits in the “quickie/ambush” election rule.  While the rule was not overruled in its entirety, the Board made several changes which will provide management with more opportunities to put on a “pro employer” campaign.  These include, among other things: Requiring the Board to resolve worker eligibility issues, including supervisory status, prior to an election; Scheduling pre-election hearings two weeks (instead of eight days) after the filing of an election petition; Providing at least eight days to file a position statement (as opposed to the current rule which requires these briefs to be submitted a day before a hearing); and Directing regional offices to schedule elections no less than 20 days after the parties stipulate to an election and/or there is a decision on eligibility issues. Not coincidentally, all of these decisions were made prior to the expiration of the term of Lauren McFerran, the lone Democrat on the NLRB.  Currently, the remaining three members of the Board are Republicans.  While many experts expect that she will be nominated for the same position, the Board will operate with only Republican members for the first time in 85 years.  Employer should expect many more management friendly decisions in the near term.

The New Year will bring significant changes to the H-1B lottery selection process and  employers can look forward to a more efficient H-1B cap selection process. USCIS has announced the “Registration Requirement for Petitioners Seeking to File H-1B Petitions on Behalf of Cap-Subject Aliens” will be fully implemented for the Fiscal Year 2021 H-1B cap filing season. The initial registration period will open from March 1, 2020 to March 20, 2020.  During this period of time, employers or their authorized representatives will submit an individual registration for each foreign national it wishes to sponsor for an H-1B for a fee of $10 per registration. Once the registration period closes, USCIS will randomly select the number of registrations necessary to fulfill the H-1B visa quota allotment.  Consistent with last year’s changes, USCIS will select 65,000 H-1B petitions from all cases received, inclusive of regular cap cases and advanced degree exception cases. USCIS will then select from the remaining advanced degree exception cases to fill the remaining 20,000 available H-1B slots. USCIS has indicated they will be posting step-by-step instructions informing registrants how to complete the registration and announcing key timelines on the USCIS website, and we will continue to provide updates as these become available. Given the anticipated changes, we encourage employers to start now in identifying employees or anticipated employees who wish to be sponsored for the H-1B. Potential applicants and positions should be vetted for H-1B eligibility prior to the pre-registration deadline. Please contact your Polsinelli attorney for assistance or more information.

On December 5, 2019, the National Law Review awarded Government Contractor Update author Jack Blum its “Go To Thought Leader” award “for the excellent work they do keeping NLR readers informed on OFCCP compliance matters.”  As NLR noted, the Government Contractor Update’s articles “demonstrate a deep understanding of the forces at work within the OFCCP and provide excellent analysis of the changes within the agency.” The award recognizes 75 authors across 35 practice areas for exceptional contributions to NLR, one of the nation’s oldest and most widely-circulated law journals.  Mr. Blum was the only author selected for the Government Contracts practice area. Contractors can continue to count on the Government Contractor Update for more award-winning coverage of developments at the OFCCP and otherwise affecting government contractors’ workforce compliance efforts.

Companies that bid on government contracts should take note of a new federal enforcement initiative. Earlier this month, the Department of Justice’s Antitrust Division announced the formation of an interagency “Strike Force” dedicated to detecting and prosecuting “bid rigging” and other antitrust crimes involving public procurement—an area of the economy that DOJ has described as “particularly vulnerable to collusion.” The Strike Force will combine the resources of the Antitrust Division and 13 U.S. Attorneys’ Offices, as well as investigators from the FBI, Department of Defense Office of Inspector General, the U.S. Postal Service Office of Inspector General and the General Services Administration Office of Inspector General. The Strike Force will focus on prosecuting procurement crimes at all levels of government, including federal, state and local. In a speech last month, Deputy Assistant Attorney General Richard A. Powers explained that the public procurement space is “uniquely” and “particularly” vulnerable to collusion because of the “sheer monetary value of government projects.” Enforcers have also faced monitoring challenges as a result of the rapid growth of government spending in recent years, which has made it difficult for enforcers to catch up, he explained. The new Strike Force will build upon DOJ’s already active antitrust enforcement in the public procurement space. The Antitrust Division has led numerous bid-rigging prosecutions involving public procurement in recent years, including prosecutions in the construction and defense industries, among others. At present, “more than one third of the Antitrust Division’s 100-plus open investigations relate to public procurement or otherwise involve the government being victimized by criminal conduct,” said Assistant Attorney General Makan Delrahim, who heads the Antitrust Division. Outreach and training to “key constituencies” will be a core part of the Strike Force’s work. To facilitate the detection of antitrust violations, the Strike Force “will conduct outreach to federal, state and local government procurement officials to educate them on how to identify potential indicators, or ‘red flags,’ of collusion.” There will also be outreach to government contractors, their trade associations and public contract lawyers to deter violations going forward. To improve detection, the Strike Force will work on using “data analytics” technology to identify possible collusion based on pricing data and other market information. “Many investigative agencies individually have made great strides on this front, and the [Strike Force] will serve to facilitate collaboration and the sharing of best practices between these agencies,” said Delrahim. Takeaways for Companies in the Public Procurement Space The new enforcement initiative presents new risks to companies in the public procurement space. To minimize these risks, companies in the public procurement space should take a fresh look at their antitrust compliance efforts. Having a robust antitrust compliance program in place can prevent violations from happening in the first place and may give companies the opportunity to minimize or even avoid criminal sanctions, if a violation occurs. According to DOJ’s recent guidance on antitrust compliance programs, an “effective” compliance program should be tailored to each company’s risk profile. Antitrust counsel can help conduct a risk assessment to allocate compliance resources to each company’s highest-risk activities. DOJ has urged companies to include regular antitrust compliance training for employees in high-risk positions, such as those responsible for setting the terms of competitive bids. Companies should also consider setting up a mechanism that allows employees to report antitrust concerns to the company. The new initiative is also notable for its planned use of technology to monitor public procurement markets for evidence of antitrust violations. Some companies may benefit from proactively monitoring procurement markets in which they are involved for bidding and pricing trends that are suggestive of antitrust problems.

United States Citizenship and Immigration Services (USCIS) is reminding E-Verify users that they will purge historical E-Verify records on January 2, 2020.  As of this date, companies will no longer have access in E-Verify to records more than 10 years old.   USCIS conducts this annual purge to reduce security and privacy risks associated with government retention of personally identifiable information. E-Verify, as a term of participation, requires participants to record or print and file the E-Verify case verification number associated with each corresponding form I-9, Employment Eligibility Verification.To ensure compliance, prior to January 2, 2020, employers should download a Historical Records Report which encompasses cases more than 10 years old. The Historical Records Report will contain the following information: Company Name and Location Initiated dated and corresponding verification case number Employee Name and Date of Initial Resolution Date of Additional Resolution and Final Status Case Closure Date and Case Closure Description In addition to downloading and saving the Historical Records Reports, employers should use this opportunity to review I-9 and E-Verify records to ensure every I-9 record has a corresponding E-Verify verification case number recorded or printed and filed with the I-9.  Any deficiencies in documentation should be rectified prior to January 2, 2019.  As a reminder, the ten year purge will only affect companies who have been registered E-Verify users for more than 10 years and only employees who would have been subject to E-Verify at the time of hire. If you have any questions about E-Verify and I-9 Compliance or becoming an E-Verify employer, we encourage you to contact your Polsinelli counsel.

CP opined that participants in the Department of Defense’s SkillBridge Program are not government contractors subject to the obligations of Executive Order 11246, as amended, Section 503 of the Rehabilitation Act, or VEVRAA. The SkillBridge Program aims to provide service members with opportunities to gain civilian work experience and training by matching service members with civilian employers and allowing service members to receive civilian on-the-job training during their last 180 days of military service.  OFCCP reasoned that the SkillBridge Program does not qualify as a procurement contract because the government does not obtain property or services for its direct benefit.  Accordingly, the program is more akin to a cooperative or grant agreement, which is not a government contract. As in its earlier opinion letter regarding Pell Grants, OFCCP in the SkillBridge Program opinion letter takes a more conservative approach to its jurisdiction in the context of government programs that are not traditional procurement contracts.  Polsinelli will continue to update the contractor community on OFCCP developments.

The Office of Federal Contractor Compliance has been busy this year.  In 2019, it has obtained over $40M in settlements from federal contractors to resolve claims of hiring and compensation discrimination.  This figure tops the next highest year’s record by more than $16 million. Increased enforcement efforts and proactive compliance assistance account for the rise, OFCCP Director Craig Leen said in a statement released on Friday, October 25.  Over the past two years, OFCCP has issued a series of new directives aimed at encouraging contractors to self-audit, providing transparency in the auditing process and expediting the audit and resolution process. In particular, OFCCP’s Early Resolution Procedures, discussed here, permit a contractor to enter into an early reconciliation process to resolve issues company-wide and forgo an additional audit at the establishment or functional unit in question for five years.  According to the Department of Labor, several large contractors have elected to participate in this program, including Bank of America NA, Goldman Sachs & Co., and Dell Technologies.  These contractors alone account for over $21M of the settlements obtained in 2019, discussed here. It is highly advisable that any contractor with questions regarding its hiring and compensation practices contact outside counsel to review and update its programs before OFCCP comes knocking.  Given the additional resources and guidance that OFCCP has recently released, OFCCP is less likely to overlook any deficiencies by contractors who have turned a blind eye to their affirmative action and pay equity obligations.

It has become almost routine for employees pursuing whistleblower and other employment-related claims against their employer to engage in "self-help discovery," using their access to files and databases to collect and gather, in violation of company policy, documents and data relating to their claims. The company often becomes aware of this type of misconduct during internal investigations, when a forensic review of the complainant's computer or statements by witnesses reveal that the complainant has collected or is collecting evidence. Or, the misconduct may not become evident until after the employee has filed a charge or a lawsuit, when confidential company documents are referenced in the charge or complaint or the employer undertakes discovery. This misconduct appears to be fueled by the belief — on the part of both claimants and at times even their counsel —that current employees have an unfettered, protected "right" to engage in self-help discovery to develop evidence supporting their claims. Indeed, it appears that plaintiffs' counsel still encourage this behavior, requesting that their clients gather "the goods" while they are still employed so that counsel can use the fruits of their efforts in demand letters, draft complaints and litigation. In one recent case, a prominent D.C. plaintiff's attorney proudly touted that her client had gathered and retained over 10,000 proprietary emails and other documents that allegedly supported her client's claims. When a company learns or suspects that an employee is engaging in such behavior, it may feel paralyzed from taking action, fearing that the employee will claim that her termination for stealing records was retaliatory. But, as with any other form of employee misconduct, the employer should undertake an investigation to determine whether the employee has violated company policy and carefully consider a termination is justified and defensible. There is an emerging (although not entirely consistent) body of case law recognizing that, except in certain circumstances, employees do not have the right to engage in self-help discovery and that employees who do can be terminated, even if the evidence was gathered to support their anticipated or pending claims. Courts had struggled with the issue of whether this "self-help" discovery rises to the level of "protected activity" that insulates the employee from termination. Some courts have been willing to offer at least some protection to the employee, as long as the documents or data related to his claim and were not obtained through "improper" means. However, other courts have recognized that an employee's right to pursue a valid complaint or claim does not license him to plunder his employer's files and databases looking for evidence relevant to it.   The analysis of an employee’s self-help efforts necessarily depends on the types of claims the employee is asserting, the types of information the employee takes, and how the employee uses the purloined information. The factors considered by courts in determining whether self-help discovery is protected activity vary depending on the claims asserted by the whistleblower.  False Claims Act cases, for instance, provide a sharp contrast in approaches to the issue.  For instance, in Cafasso v. General  Dynamics C4 Systems, Inc., 2009 WL 3723087 (D. Ariz. Nov. 4, 2009), a terminated employee removed eleven gigabytes of documents from her employer's databases without permission before her computer access was suspended.  When her former employer, GDC4S, brought a breach of contract claim against her, she filed qui tam and retaliation claims under the False Claims Act.  The court explained that the "False Claims Act required [the whistleblower] to give the Government substantially all material evidence and information she possessed." However, the court noted, the whistleblower was not required to show the Government evidence that she did not properly possess and did not have the right to possess evidence unlawfully. The court concluded that confidentiality agreements between defense contractors and their employees serve vital economic and national security interests, including "protect[ing] the secrecy of new technologies that play a part in the nation's military and domestic security operations." The court explained that the whistleblower “willfully compromised these interests for no legitimate litigation purpose, only the speculative pursuit of self-help discovery.... In short, every principle of substantive and procedural law cut against [the whistleblower's] self-help discovery tactic....” On appeal, the Ninth Circuit affirmed judgment in favor of the employer, noting that even if a public policy exception existed, “it would not cover Cafasso’s conduct given her vast and indiscriminate appropriation of GDC4S files.”  Cafasso v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1062 (9th Cir. 2011).  The court explained that were it to adopt a public policy exception for FCA cases “those asserting its protection would need to justify why removal of the documents was reasonably necessary to pursue an FCA claim” through a “particularized showing.”  Id. However, as the Ninth Circuit’s Cafasso decision recognized, the False Claims Act endorses some forms of self-help discovery by employees, as long as it is reasonably tailored to their claims and does not constitute unrestrained pilfering.  In Head v. Kane Co., 668 F. Supp. 2d 146 (D.D.C. 2009), a False Claims Act qui tam action, the whistleblower signed a separation agreement agreeing that all records were the sole property of the company and acknowledging that he had returned all records to the company.  In subsequent qui tam action, the employer brought asserted counterclaims for failing to return a confidential email.  The court held that the counterclaim was void as against public policy, explaining that "[e]nforcing a private agreement that requires a qui tam plaintiff to turn over his or her copy of a document, which is likely to be needed as evidence at trial, to the defendant who is under investigation would unduly frustrate the purpose" of the False Claims Act, which requires relators to disclose to the Government all material evidence and information in their possession.  See also United States v. Duke University, 2018 WL 4211372 (M.D.N.C. Sept. 4, 2018) (self-help discovery is “a goal contemplated by the False Claims Act” as “the FCA contemplates and condones gathering and producing documents prior to service of the complaint and the beginning of formal discovery”); United States v. Boston Scientific Neuromodulation Corp., 2017 WL 6403853 (D.N.J. Dec. 15, 2017) (granting summary judgment in favor of FCA claimant on employer’s counterclaim for breach of confidentiality agreement). As these decisions reflect, there are circumstances where employers may, consistent with their contracts, policies and prior practices, have the right to address theft and other misconduct by a current employee, even if she is pursuing a whistleblower complaint against it. An employer, however, should first undertake a full investigation and consider the circumstances surrounding the removal and use of the documents or data. The employer should also make certain that any action it takes against the employee is consistent with its policies and practices and its treatment of employees who have engaged in comparable misconduct. Also, it is important for an employer to take action promptly when it discovers the misconduct so that its decision is not viewed as retaliatory or pretextual. With respect to claims by former employees, self-help discovery should be explored by an employer as soon as it anticipates claims. Through the forensic review of the former employee's computers, devices, databases and accounts, an employer should be able to determine whether the former employee engaged in self-help discovery conduct while employed by the company. If the employer determines that the former employee stole documents or data in violation of company policy, it may be able to establish a defense to liability or a limitation on damages under an after-acquired evidence or "unclean hands" theory. In addition, the employer may be entitled to assert counterclaims or obtain discovery sanctions against the former employee based on his or her misconduct.

Maintaining its recent focus on compliance issues particular to educational institutions, OFCCP published a technical assistance guide for educational institutions on October 11, 2019.  The guide follows a flurry of OFCCP guidance for institutions of higher learning, including an opinion letter regarding the agency’s jurisdiction over such employers, a directive that student employees need not be considered in fulfilling AAP obligations, and an FAQ providing guidance on the definition of AAP “establishments” in campus settings.  OFCCP is also holding a town hall on issues particular to academic institutions on October 23, 2019 in Washington, D.C.  Contractors can review Polsinelli’s coverage of OFCCP’s prior guidance by following the links in the previous sentence. The guide recognizes that educational institutions present “unique challenges” for OFCCP compliance and enforcement purposes because they have “numerous methods of governance, various organizational structures, and multiple workforces,” as well as “elements that can be difficult to quantify” in their hiring, promotion, and compensation structures.  These subjective criteria can include “the prestige of publications, research, discipline, and contributions to the institution.”  OFCCP also recognizes in the guide that it must apply different analyses to three major areas of an educational institution’s workforce: tenured instructional staff, non-tenured instructional staff, and non-instructional staff. Although it is a good omen for educational institution contractors that OFCCP recognizes that their employment decisions involve idiosyncratic factors and differ from those of a commercial employer, that does not mean OFCCP is abdicating its oversight over educational institutions.  The guide clearly telegraphs OFCCP’s intention to scrutinize the tenure selection process due to the historical and continuing disparities in tenure selection rates for female and minority instructors.  Though OFCCP recognizes that many of the factors going into the tenure analysis are subjective and difficult to quantify, the guide states OFCCP’s intention to evaluate whether a contractor applies these factors consistently and in a neutral, non-discriminatory manner.  It is therefore essential for educational institutions to clearly outline the factors relevant to tenure selection and document how those factors are applied in each selection or non-selection decision.  OFCCP will also look at structural issues in the tenure selection process such as “the process by which the contractor composes the departmental committees responsible for granting tenure” as well as historical tenure data. A second issue of interest to educational institution contractors is the guide’s discussion of disparities in compensation by academic discipline.  OFCCP will only control for differences in discipline areas that have a “substantial impact on determining instructional staff salaries.”  Much like a private sector contractor’s use of “market rate” data in setting compensation, it is essential for educational institutions to be able to explain how differences in compensation by discipline factor into compensation and to have defensible data supporting discipline-based compensation disparities.  The need for careful analysis is heightened because discipline-based disparities can potentially correlate to gender or race based disparities to the extent that members of different genders or races are disproportionately represented in disciplines that command different levels of compensation. Educational institutions should review the new technical assistance guide as it provides useful guidance and a window into OFCCP’s priorities in this field.  Polsinelli will continue to monitor developments in OFCCP’s approach towards educational institutions and other types of contractors and provide updates on new developments.

The Courts were kind to California employers in September, 2019, issuing two decisions which substantially reduce the damages which plaintiffs can recover in wage and hour cases. In the first case, ZB N.A. and Zions Bancorp.v. the Superior Court of San Diego County, the Supreme Court held that individuals cannot recover unpaid wages as part of a Private Attorneys General Act (“Paga”) action.  In doing so, it held that the "unpaid wages" that are available pursuant to § 558 can only be recovered by the Labor Commissioner and that they are not a civil penalty that a private citizen has authority to collect through PAGA. In the second decision, Naranjo v. Spectrum Security Services, Inc., the Court of Appeals of the State of California Second Appellate District held, among other things, that unpaid premium wages from meal and/or rest break violations do not entitle employees to additional remedies pursuant to §§ 203 and 226 of the Labor Code.  In doing so, the Court rejected those "derivative" claims and, relying on the Court in Kirby v. Immoos Fire Protection, Inc., (2012) 55 Cal.4th 1244, concluded that a § 226.7 action is brought for the non-provision of meal and rest periods, not for the "non-payment of wages." The significance of these cases is that the damages available to employees who claim that they have been denied meal and/or rest breaks is limited to the premium payments allowed for under Cal.Lab.Code § 226.7 but they are not entitled to recover unpaid wages under Cal.Lab.Code § 558 nor are the entitled to recover waiting time penalties under § 203 or penalties for violation of § 226 relating to itemized wage statements.  Additionally, under Kirby, attorney’s fees are not payable for alleged meal and rest break violations because those violations are not wages. The net result of these cases is that employees pursuing claims, whether on an individual basis, class basis or based on Paga, will only be able to recover the premium payments under § 226.7 but will be unable to recover any derivative damages and/or attorney's fees for an employer's failure to provide meal and/or rest breaks.

The OFCCP opened the month of October by announcing three multimillion dollar settlements with major government contractors.  The agency entered into early resolution conciliation agreements with Goldman Sachs & Co. LLC and Dell Technologies, Inc. to resolve claims that they engaged in race and gender discrimination in compensating employees.  Also, Bank of America NA will pay $4.2 million to resolve claims that a predecessor company engaged in hiring discrimination. Goldman Sachs will pay nearly $10 million to approximately 600 workers at its New York City headquarters and Dell will pay $7 million (with a credit for $1.5 million previously paid in another settlement) to resolve 20 ongoing OFCCP compliance evaluations.  Goldman Sachs will also move from establishment-based to functional affirmative action programs (FAAPs) as part of the settlement.  Because Goldman Sachs and Dell settled through OFCCP’s early resolution program, the establishments in question will not be subject to further compliance evaluations for five years. In each case, the employer released a statement noting that OFCCP’s claims resulted from statistical analyses by the agency that the contractor disputed.  These major settlements emphasize the need for thorough self-auditing to identify and fix potential compensation and hiring vulnerabilities before contractors are required to submit data for OFCCP review and analysis as part of compliance evaluations.

On September 24, 2019, the US Department of Labor announced a finalized rule increasing the earnings threshold necessary for employees to qualify as exempt from the Fair Labor Standards Act’s (“FLSA”) minimum wage and overtime pay requirements. It is estimated the new Rule will bring an additional 1.3 million employees below the FLSA’s overtime requirements, making them non-exempt employees. Why the change? Employee earnings, including federal and state minimum wage requirements, have continued to grow since the last time the exemption thresholds were updated—all the way back in 2004. Though some have suggested the DOL should automatically update the salary threshold levels in the future, the DOL has rejected this proposal. But, the DOL has noted it plans to provide more frequent updates to the standards through notice-and-comment rulemaking. What does the Rule do? Raises the “standard salary level” for white-collar employees paid on a salary basis (either weekly or annually) from $455/week to $684/week (or an increase from $23,660/year to $35,568/year for a full-time employee). For “highly-compensated employees,” the annual compensation threshold for exemption is increased from $100,000/year to $107,432/year. Allows greater flexibility in the payment method of the minimum salary requirements, allowing non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level. The Rule does not change the regulatory test for primary duty or the tests for the duties necessary for exempt executive/administrative/professional employees; it does not amend the definition of “salary basis;” does not apply a new compensation standard to doctors, lawyers, teachers or outside sales employees; and makes no change to the computer employee exemption. What should employers do? The effective date for the changes is January 1, 2020.  There are several things employers should consider in determining how best to comply with the new Rule. Employers should determine which and how many employees will be affected by the change—those making between $455 and $684 per week.  An employer should then determine if it makes business sense to increase the salaries of those individuals or to reclassify them as non-exempt making them eligible for overtime pay. For employees who will become non-exempt, employers should consider adjusting employee schedules, especially those which allow for flexible hours and remote working options. Employers should ensure that the timekeeping and payroll systems are updated to reflect any changes in employees’ exempt/non-exempt statuses. Employees transitioned to a non-exempt status should be trained on timekeeping systems and proper timekeeping practices to capture all time worked (including, but not limited to work performed on smart phones, on remote access systems, etc. – or eliminating these employees’ ability to conduct such work away from the office). Employers should consider conducting audits to ensure that current classifications are proper as well as to determine if any other exemptions may apply to employees that otherwise will be brought into the non-exempt category by the new Rule. Of course, employers should always be aware that being in compliance with this Rule and the FLSA in general is just a small part of their overall compliance requirements of applicable wage and hour laws. There are also state and local laws and regulations that employers must comply with that may significantly differ from the FLSA. Employers with questions or concerns should consult competent counsel.

On September 11, 2019, the Department of Labor announced that whistleblower retaliation complaints under the Taxpayer First Act (TFA) will be handled by the Occupational Safety and Health Administration (OSHA). TFA was created as part of a broader IRS reform bill that passed on July 1, 2018.   It provides a retaliation claim for employees who are terminated or otherwise disciplined because they provided information or assisted in an investigation regarding underpayments of tax or violations of the internal revenue or other federal tax fraud laws.  Generally speaking, the procedures for a TFA whistleblower retaliation claim follow those in place for whistleblower claims under the Sarbanes-Oxley Act, which are also administered by OSHA. Employees who prevail under this cause of action are entitled to “all relief necessary to make the employee whole” and compensatory damages, including reinstatement, 200% of the amount of back pay and 100% of all lost benefits, with interest, and special damages including litigation costs, expert witness fees, and reasonable attorney fees.  Employers cannot require employees to arbitrate TFA retaliation claims through pre-dispute arbitration agreements. The TFA adds to the increasing list of statutes, such as the False Claims Act and the Sarbanes-Oxley Act, which provide whistleblower protections to employees who reasonably believe that their employer has violated federal law and report such beliefs.  When an employee blows the whistle regarding alleged wrongdoing, now including tax underpayment or fraud, employers should consult outside counsel to help navigate through the investigation and subsequent interactions with the employee and avoid or better prepare for potential whistleblower litigation.

Following closely on its release of guidance for higher education institutions, and its promise of a forthcoming technical assistance guide for contractors in this field, OFCCP announced it will hold a town hall forum for academic institutions in Washington, D.C. on October 23, 2019.  Contractors can register for the town hall here. This event follows town hall events focused on veterans issues, the financial and legal industries, and the tech industry, among others.  In past events, OFCCP officials have announced new areas of emphasis, so these events can be a source of insight for contractors into the agency’s views and priorities.

UPDATE:  California Governor Gavin Newsom signed AB5 into law on September 18, 2019.  In his signing statement, Governor Newsom stated that the “next step is creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work.”  Businesses that retain workers as independent contractors in California should now immediately begin planning to defend these arrangements under the new law or adapt them to avoid or reduce potential misclassification liability (September 19, 2019). On September 10, 2019, the California Senate passed AB5, a sweeping bill to control the use of independent contractors in the nation’s largest state.  With the California Assembly concurring in the Senate’s amendments to the bill on September 11, 2019, the legislation now proceeds to Governor Gavin Newsom who is expected to sign it into law. AB5 codifies the California Supreme Court’s holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, and adopts an “ABC” test to determine whether a worker is classified as an “employee” for purposes of California’s Labor Code, unemployment insurance law, and wage orders.  Under the “ABC” test, for a worker properly to be classified as an independent contractor, the putative employer must satisfy three conditions: The worker is free from the employer’s control and direction in connection with the work performed, both under the contract and in fact; The work being performed is outside the usual course of the employer’s business; and The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. The bill contains numerous exceptions for occupations and contracting arrangements that will not be subject to the ABC test under either AB5 or Dynamex.  Certain professionals, including lawyers, doctors, engineers, accountants, investment advisors, insurance brokers, and others, will continue be governed by the pre-Dynamex common law standard.  Independent contractors providing certain types of services (including, marketing, human resources, design, photography, writing, and editing) will not be subject to the ABC test if they meet a separate, six-factor test focusing largely on whether they operate an independent business.  Construction subcontractors and bona fide business-to-business contracting relationships are also exempted from the ABC test. Although AB5 states that it applies only prospectively to work performed after January 1, 2020, it is an open question whether the Dynamex ruling will be applied retroactively.  The U.S. Court of Appeals for the Ninth Circuit previously ruled that it did, but then vacated that ruling and certified the issue to the California Supreme Court, which has not decided the issue.  AB5 is not helpful to employers on this point, providing that its test “does not constitute a change in, but is declaratory of, existing law.” It is anticipated that Governor Newsom will sign the bill, though he has stated he will continue to negotiate with major California gig economy employers about its scope.  If passed, the bill will upend numerous independent contractor relationships in the state and subject businesses that retain independent contractors to a patchwork of local minimum wage laws (21 in the Bay Area alone), meal and rest break requirements that are difficult for employers to police, and the requirement to provide wage statements containing nearly a dozen categories of information.  Businesses in California that use independent contractors should immediately begin working with counsel to plan for AB5’s January 1, 2020 effective date by either ensuring that existing contractor relationships pass the ABC test or meet the requirements of one of AB5’s exceptions and/or preparing to transition certain contractors to W-2 employment status.

After devoting its first opinion letter to addressing aspects of its jurisdiction over higher education institutions, OFCCP recently provided additional guidance about the AAP obligations of educational institutions.  In addition, the agency pledged to publish a technical assistance guide to provide further assistance to government contractors in the higher education field. First, OFCCP released a new Directive 2019-05 addressing the employment status of student employees, such as graduate research or teaching assistants.  The employment status of these types of workers has been a hotly litigated issue under Title VII, the FLSA, and other employment statutes.  In its directive, OFCCP announced that it would exercise its enforcement discretion to permit educational institutions to exclude student employees from their AAP job groups and personnel activity data submissions.  OFCCP noted that the available data for these employees is typically not robust enough to support reliable statistical analyses and distracts OFCCP and contractors from focusing on their resources and attention “on individuals whose primary relationship with the educational institution is work-related.”  This exclusion is a win for contractors as they are relieved from tracking personnel activity for employees whose employment is typically short-tenured with high year to year (or semester to semester) turnover. OFCCP also released a new FAQ regarding the definition of “establishment” in the context of campus-like settings in which employees work in multiple, closely-situated buildings.  The FAQ addresses whether the entire campus should be combined into one AAP or whether separate AAPs should be maintained for different locations on the campus.  Unfortunately, the FAQ provides little definitive guidance and instead emphasizes that the AAP organization of a campus-type facility is a fact-specific inquiry.  Generally, contractors maintaining campus facilities must look to the level of interaction and interdependence of the employees and units in the various buildings on the campus. With this flurry of guidance, OFCCP appears to be following through on Director Leen’s pledge to focus on compliance assistance. Polsinelli will continue to track OFCCP guidance releases.