On August 9, 2019, the National Labor Relations Board (“NLRB” or “Board”) issued the first of an anticipated sequence of regulations addressing certain union election procedures.  The proposed rule, published in the Federal Register, proposes modifying three Board policies governing election processes, including: The process for adjudicating  “blocking charges”; The voluntary recognition bar; and Presumed collective bargaining relationships in the construction industry. Board Chairman John Ring, Member Marvin Kaplan and Member Bill Emanuel voted to approve the proposed rule for publication, while Member Lauren McFerran dissented. The proposed rule first addresses the Board’s policy on blocking charges, which are allegations that a party to a union election unlawfully coerced workers. Because blocking charges ultimately delay elections pending the resolution of Board proceedings, the proposed rule would replace the current policy with a “vote-and-impound system,” in which the election would still proceed, and the Board would seize ballots cast in an election during the pendency of the unfair labor practice charge. The proposed rule further addresses the Board’s voluntary recognition bar standard, which currently prohibits challenges to whether a union has majority support to proceed with an election for a “reasonable period of time” (interpreted to be six months to a year) after an employer voluntarily recognizes a union. The proposed rule would shorten the voluntary recognition bar to 45 days. Finally, the proposed rule would heighten the evidentiary standard for a union that wishes to demonstrate a presumed collective bargaining relationship in the construction industry without a union vote pursuant to Section 8(f). Specifically, the proposed rule would require a union to present “extrinsic evidence” that its recognition “was based on a contemporaneous showing of majority employee support,” such as a petition or signed authorization cards. In dissent, Member McFerran opposed the proposed rulemaking, writing that the majority’s proposal “fails to meet even minimal standards of reasoned decision-making” that must be “fundamentally reassess[ed].” While still subject to notice-and-comment requirements, the proposed changes are good news to employers. Employers with questions regarding the proposed rule, or union election proceedings generally, should consult with competent counsel.Stay tuned to Polsinelli at Work for further updates.

In an unpublished opinion, the Colorado Court of Appeals recently held that a departing employee's right to vacation pay at separation is dependent on the company's policies.  Nieto v. Clark’s Market, Inc., 2019 COA 98. In this case, the employer had a policy stating than an employee was not entitled to payment for unused vacation time if the employer discharged her or if she voluntarily quit without giving two weeks' notice. The employee quit without giving the requisite two weeks' notice and the employer did not pay her for unused vacation pay.  Thereafter, the employee filed suit. In its decision, the Court rejected the employee’s claim that her vacation pay was "earned and determinable," and, thus, owed to her on discharge pursuant to the Colorado Wage Claim Act (“CWCA”). Therefore, the employer did not owe her for that vacation time. The Court observed: Nothing in the CWCA creates a substantive right to payment for accrued but unused vacation time.  Rather, "the employee’s substantive right to compensation and the conditions that must be satisfied to earn such compensation remain matters of negotiation and bargaining and are determined by the parties’ employment agreement rather than by statute." The Court concluded by writing: In sum, reading Sections 8-4-101(14)(a)(III), 109(a), and 121 together, we hold that the [employer’s] unused vacation policy doesn't violate the CWCA.  [The employee’s] right to compensation for approved but unused vacation pay depends on the party's employment agreement.  And that agreement unequivocally says that the vacation pay she seeks wasn't vested given the circumstances under which she left the [employer’s] employ." The Nieto case is certainly good news for employers.  Even if not binding precedent, its rationale can be used to support a “use it or lose it” policy.  However, it may be prudent to still rely on a "cap on accrual" policy as a way of controlling an employer's liability to a separating employee for vacation pay.  Employers with questions regarding vacation payout policies and other employment policies would do well to consult with able counsel.

On July 31, 2019, OFCCP Director Craig Leen gave the opening remarks at the National Industry Liaison Group conference in Milwaukee, Wisconsin.  Director Leen described several new and renewed areas of focus for OFCCP and provided some insight into the agency’s priorities.  Polsinelli attended Director Leen’s speech and several panels at the conference in which OFCCP officials weighed in on compliance and enforcement trends. Disability Issues Director Leen emphatically stated that OFCCP will begin treating discrimination against individuals with disabilities in the same way it treats discrimination against other protected classes like race and gender and will begin to focus the same level of resources as are devoted to other types of discrimination.  He described this focus as a “fundamental  principle” in the agency’s future planning. The most immediate sign of this renewed focus on disability issues is the Section 503 focused review process that OFCCP is undertaking for the first time this year.  In a panel, OFCCP Deputy Director Tina Williams and other officials described a robust focused review process.  To the surprise of many in the audience, Deputy Director Williams explained that every focused review will include an on-site interview component that is expected to last a week or longer.  OFCCP regional directors on the panel stated that compliance officers performing focused reviews will seek broad-based information about the contractor’s handling of disability accommodation and leave requests and interview individual employees about their experiences with the accommodation process. Veterans Issues Director Leen advised that the first list of contractors scheduled for VEVRAA focused reviews will be released around Veterans Day.  He also expressed OFCCP’s desire to evaluate whether contractors are discriminating against veterans on a systemic basis.  Director Leen also stated that OFCCP is interested in whether statistically-significant pay disparities for veteran employees may indicate violations of USERRA’s requirement that employees be held harmless for taking military leave and receive the same raises and promotions they would have received had they not taken the lease. Compensation Director Leen directly addressed the recent Analogic decision in which an OFCCP administrative law judge strongly criticized the agency’s compensation audit approach.  He noted that the agency did not appeal the decision and pledged that senior officials have “internalized” its criticisms.  Director Leen stated that he believed Analogic’s principles are consistent with the agency’s compensation directive (2018-05), which states that compliance officers should consider how the employer actually sets compensation.  Director Leen also noted that OFCCP is preparing additional compensation guidance for public release. Director Leen also explained that OFCCP will focus on identifying actual discriminatory policies or practices that cause pay disparities, rather than asserting that the mere existence of a statistically-significant disparity alone shows discrimination.  That said, Director Leen hedged on whether the agency will continue to find violations in the absence of anecdotal evidence of discrimination, stating that such evidence was necessary in “most” cases.  This qualification implies that OFCCP will find violations based solely on statistical evidence in at least some instances.  Two senior OFCCP economists echoed this focus in a panel, noting that the agency is moving to the use of “descriptive statistics” that seek to identify the root causes of disparities and hone in on whether those causes are the result of discrimination. Transparency, Certainty, and Efficiency Director Leen identified transparency, certainty, and efficiency as being OFCCP’s “bedrock” principles.  Director Leen committed to continuing to provide compliance guidance to contractors through the issuance of additional opinion letters and FAQ documents.  He also noted that the agency plans to establish an online help desk through which contractors can anonymously seek compliance guidance with the agency’s answers posted for public reference.  OFCCP will also release technical assistance guidance on Section 503, VEVRAA, and promotions after it undertakes its first rounds of focused reviews in those areas. Director Leen expressed his desire for OFCCP to take a more collaborative approach with contractors, particularly at the desk audit and conciliation stages.  OFCCP intends to pursue settlements and Early Resolution Programs to seek to resolve alleged discriminatory practices and quickly bring relief to affected employees.  Director Leen generally rejected OFCCP’s former “active case enforcement” methodology and stated that the agency will now focus on reviewing the practices of a greater number of contractors in a quicker and more efficient manner. While Director Leen’s comments provided some reassurance for the contractor community, they also identified several new areas of focus that contractors should seek to address before they face an in-depth focused review.  Polsinelli will continue to monitor and report on developments at the OFCCP.

On August 2, 2019, OFCCP published six new compliance guides on its website.  The new guides include: OFCCP At A Glance, which provides an overview of the functions performed by OFCCP What Federal Contractors Can Expect, which provides general expectations that guide interactions between contractors and OFCCP Posting and Notices Guide & Checklist, which focuses on the posting and notice requirements of federal government contractors and subcontractors VEVRAA Recordkeeping Guide, Section 503 Recordkeeping Guide, and Equal Opportunity (EO 11246) Recordkeeping Guide, which identify which records must be kept by covered contractors and how long the records must be kept The publication of these compliance guides follows OFCCP Director Craig Leen’s commitment during his July 31 remarks at the National ILG conference that OFCCP will maintain a “laser focus” on transparency and regulatory certainty.  Director Leen stated that OFCCP intends to publish additional technical assistance guidelines on Section 503 and disability issues, VEVRAA compliance, and promotions after the OFCCP undertakes its first round of focused reviews on those subjects.  He also noted that OFCCP will soon open an online help desk that will allow contractors to anonymously seek guidance from OFCCP with responses posted for public reference. Contractors would be well served to review these compliance guides and consider whether they are meeting all applicable requirements.  In particular, OFCCP officials at the National ILG conference noted OFCCP will have a renewed focus on recordkeeping requirements, which have not been a focus for several years during compliance evaluations.  If contractors are unable to offer proof that they are complying with their recordkeeping obligations, they face  penalties for technical violations.  With the assistance of counsel, contractors should identify and address potential issues before they are discovered in an OFCCP audit. Polsinelli will continue to monitor this issue and provide updates on available compliance assistance tools.

For years, courts applied the de minimis doctrine “to excuse the payment of wages for small amounts of otherwise compensable time upon a showing that the bits of time are administratively difficult to record.” Troester v. Starbucks Corp. 5 Cal. 5th 829, 835 (2018). Recently, California courts have held that the de minimis doctrine does not apply to wage and hour claims brought under the California Labor Code, which may increase exposure for California employers to potential class actions regarding menial tasks that employees may perform “off the clock.” By way of background, in Troester, the California Supreme Court determined the de minimis doctrine did not apply where the manager of a coffee shop was required to clock out before completing the following tasks: 1) performing the “close store procedure” on a computer; 2) activating the alarm; 3) exiting the store; 4) locking the front door; and 5) walking coworkers to their cars. On average, together these tasks took four to ten minutes of “off the clock” time, and totaled 12 hours and 50 minutes during the manager’s 17-month employment with the company. The Court ruled that the employer must compensate hourly employees for off-the-clock work that occurs on a daily basis. Critically for employers, the Troester ruling is already making its way through the courts. For example, in Rodriguez v. Nike Retail Services, Inc., 928 F.3d 810 (2019), plaintiff-employees filed a class action seeking compensation for “off the clock” exit inspections, which occurred at the end of each shift. The district court granted summary judgment to the employer, and held that plaintiffs’ state law claims failed based on the de minimis doctrine. When making its ruling, the district court noted that Troester was pending before the California Supreme Court and it had to apply the law as it currently existed. Predictably, the plaintiffs in Rodriguez appealed and, while the appeal was pending, the California Supreme Court issued its decision in Troester. Subsequently, the U.S. Ninth Circuit Court of Appeals reversed the district court’s grant of summary judgment to the employer based on Troester and remanded the case for further proceedings. Notably, the court rejected the employer’s contention that because there was evidence that only 3.3% of the exit inspections lasted more than 60 seconds, the time was de minimis even under Troester, and reasoned that the exit inspections at issue did not appear to be “so irregular that it is unreasonable to expect the time to be recorded.” The Ninth Circuit’s ruling in Rodriguez indicates that the Troester ruling is here to stay. Accordingly, employers with workforces in California may wish to consider examining whether their employees perform “off the clock” for time that may have previously been considered de minimis to minimize legal risk. **Polsinelli provides material for informational purposes only. The material provided herein is general and is not intended to be legal advice.

On July 11, 2018, New York State enacted a sweeping new law aimed at combating sexual harassment in the employment context.  A year later, on July 22, 2019, the U.S. District Court for the Southern District of New York ruled that the law’s prohibition from requiring employees to submit sexual harassment claims to mandatory arbitration was preempted by the Federal Arbitration Act (FAA). The court’s decision is a straightforward application of the FAA.  Section 2 of the FAA provides that arbitration agreements are enforceable except on grounds that would invalidate any type of contract.  The U.S. Supreme Court has consistently applied the FAA to invalidate state laws that target the enforceability of arbitration agreements and do not apply generally to all types of contracts.  As New York’s prohibition on mandatory arbitration clauses was clearly targeted at arbitration agreements, it fell squarely within the type of prohibition that is preempted by Section 2 of the FAA. This decision comes as welcome news to employers, and shows that the FAA remains a powerful tool to ensure that arbitration agreements are enforced even in the face of state legislation.  Employers with questions regarding arbitration agreements would do well to consult with able counsel.

In a welcome development for federal government contractors, OFCCP issued its second opinion letter on July 22, 2019.  The opinion letter endorsed a process through which contractors can submit proposed pay analysis groups (PAGs) to OFCCP for pre-approval for future audits. PAGs are groups of employees who OFCCP deems comparable for purposes of the contractor’s pay practices.  The PAG is the building block of an OFCCP compensation audit as OFCCP compares the compensation of PAG members to assess whether there is systemic discrimination in employee compensation.  PAG members need not have the same job title, work in the same departments, or be members of the same affirmative action plan job group.  Because OFCCP demands PAGs consist of a certain number of employees for statistical purposes, creating PAGs for non-entry level positions that do not have a large number of employees with the same title or performing the same functions requires careful analysis. By permitting contractors to gain pre-approval of their PAG composition, the opinion letter provides an opportunity for contractors to obtain certainty about how their employees will be grouped and analyzed in compensation audits.  Contractors can then self-audit and identify and address potential compensation disparities before they face the pressure of an OFCCP compliance audit.  Contractors should note, however, that OFCCP reserves the right to dispense with the pre-approved PAGs if there is a material change in the contractor’s compensation system between the pre-approval and the time of the audit. This development is the latest in a trend of OFCCP efforts to work cooperatively with contractors to obtain compliance.  Similarly to the Voluntary Enterprise-Wide Review Program announced earlier this year, PAG pre-approval may provide contractors with an opportunity to work more collaboratively with OFCCP to avoid or reduce the cost and uncertainty of random annual compliance evaluations. Contractors should consider taking advantage of this procedure to obtain certainty that their self-audits are consistent with the analysis that OFCCP will perform in a compliance evaluation.  That being said, contractors should work with counsel before submitting data or information to the OFCCP to ensure that the submission does not contain information that would draw unwanted OFCCP scrutiny. Polsinelli will continue to report on OFCCP developments.

On July 15, 2019, the EEOC opened its online filing system for the submission of EEO-1 Component 2 pay data.  Employers that are required to file EEO-1 reports can now submit pay data broken down by job category, pay band, race, ethnicity, and sex for the calendar years 2017 and 2018.  This submission is due by September 30, 2019. As of now, the filing system only allows the manual entry of the Component 2 data by employers.  The EEOC previously reported that it is working to finalize a data file upload function for the Component 2 reports.  That function should be available to employers by August 15, 2019. To access the EEO-1 Component 2 filing system, employers will need log-in information that EEOC mailed and e-mailed to them on July 12, 2019 and July 15, 2019.  The EEOC has also posted a 44-page user guide to assist employers in preparing the Component 2 report. Polsinelli will continue to monitor developments on the Component 2 data submissions and has staff available to assist employers with their filings.

On August 7, 2019, OFCCP and the Veterans’ Employment and Training Service (VETS) will hold a joint town hall focused on VEVRAA and USERRA compliance issues. This town hall meeting comes as the OFCCP continues to focus its attention on VEVRAA and Section 503 compliance issues.  Earlier this year, OFCCP sought approval for a scheduling letter for VEVRAA focused reviews and also projected that the number of focused reviews would increase from 500 in fiscal year 2019 to 1,500 by fiscal year 2021. The town hall is anticipated to address “the challenges federal contractors and employers face in recruiting, promoting and retaining veteran talent.”  Like earlier OFCCP town halls, it is open to the public.  As OFCCP gears up for its first round of VEVRAA focused reviews next year, this town hall could provide insight into the agency’s expectations for contractors. Stay tuned for a summary of the guidance provided by OFCCP during the town hall meetings.

In a recent decision, Marshall v. Montaplast of North America, Inc., the Supreme Court of Kentucky reaffirmed that a cause of action for wrongful termination based on a violation of public policy may proceed only if the public policy at issue is: (a) found in an existing law; and (b) has an “employment related nexus.” In Marshall, the plaintiff filed a complaint against her former employer for wrongful discharge in violation of public policy, claiming that she was terminated in retaliation for informing her co-workers that their supervisor was a registered sex offender. The plaintiff argued that her termination for disseminating information from the sex offender registry is against public policy because, pursuant to the Kentucky Sex Offender Registration Act (“Act”), the sex offender registry should be open and accessible to everyone.  In contrast, the employer argued that the plaintiff’s claim must fail because no such public policy could be divined from the Act. The Supreme Court sided with the employer.  When ruling, the Court made clear that “the public policy involved must have an employment related nexus.” Specifically, the public policy must be “clearly defined by statute and directed at providing statutory protection to the worker in his employment situation.”  And in this case, the Act did not meet the employment-related nexus requirement because its primary purpose was to protect the public generally, and not “the worker” specifically.  While the Act did provide criminal and civil immunity for anyone who disseminated information from the registry in good faith, it did not create a private right to disseminate information from the registry in a private workplace. This decision comes as good news to Kentucky employers.  Nevertheless, employers in Kentucky that are considering terminating an employee would do well to consult with competent counsel to minimize the risk of a possible public policy claim.

On July 3, 2019, Governor Gavin Newson signed Senate Bill 188, styled “Create a Respectful and Open Workplace for Natural Hair” (the CROWN Act), updating California’s anti-discrimination law, the Fair Employment and Housing Act (FEHA).  Specifically, the bill modifies the FEHA’s definition of race to include “traits historically associated with race, including, but not limited to, hair texture and protective hairstyles.”  The new law takes effect January 1, 2020. Notably, the new law provides: “Workplace dress code and grooming policies that prohibit natural hair, including afros, braids, twists, and locks, have a disparate impact on black individuals as these policies are more likely to deter black applicants and burden or punish black employees than any other group.” Employers may notice this language is similar to guidance issued by the New York City Human Rights Commission in February 2019 that “grooming or appearance policies that ban, limit, or otherwise restrict natural hair or hairstyles associated with Black people generally violate [New York City’s] anti-discrimination provisions.” While the new law does not eliminate an employer’s ability to make and enforce grooming policies, California employers should consult with competent counsel to ensure that any grooming policies are imposed for non-discriminatory reasons, are uniformly applied and do not have a disparate impact on certain employees.

On July 5, 2019, a Centers for Medicare & Medicaid Services (“CMS”) regulation (proposed by the Trump administration in July 2018) went into effect, prohibiting automatic union dues deductions from paychecks of home health workers directly paid by Medicaid.  The regulation will affect 350,000 workers who pay approximately $71 million annually in union dues nationwide. The regulation overturns an Obama administration policy that allowed for such deductions, along with deductions for other fees such as health benefits. Specifically, it prohibits states from diverting Medicaid dollars meant for home care providers to third parties, including employers and labor unions.  The regulation stems from CMS’ interpretation of a federal law that prohibits Medicaid funds meant to help the poor and disabled to be paid to anyone other than a Medicaid provider unless ordered by a court. The new regulation will affect home care workers who are paid by the state and hired and/or fired by their clients. Home care workers who are employed by a conventional employer that receives Medicaid funds will not be affected, and their employer can still make any deductions (including deductions for union dues) as required by applicable state laws. In addition, while the new regulation prohibits union dues paycheck deductions for such home health workers, it does not prohibit home care workers from unionizing or accessing benefits. Rather, these workers may continue paying union dues and/or contributing to other organizations. It forecloses, however, a worker’s option to assign a portion of his or her Medicaid payment to a union (or other organization). Unions representing self-directed care home health workers will now be responsible for collecting union dues from such workers either by manual payment methods or automatic bank account deductions. Several states and the Service Employees International Union have sued CMS regarding the regulation, and that litigation remains pending as of the date the new rule became effective.  Stay tuned to Polsinelli at Work for further updates.

On June 13, 2019, the U.S. Seventh Circuit Court of Appeals in Miller v. Southwest Airlines, Co., Case 18-3476 (June 13, 2019), ruled that claims asserted under the Illinois Biometric Information Privacy Act (“BIPA”), in the context of a unionized workforce must be resolved pursuant to the strictures of the Railway Labor Act. By way of background, BIPA applies to all biometric identifiers or measurements of physiological characteristics, such as finger prints, iris scans and facial geometry.  Crucially, BIPA requires that a private entity inform the subject of biometric data collection or the subject’s “legally authorized representative” in writing about the entity’s biometric data effort including, but not limited to, the method of collection, use, storage, retention and destruction of that data. In Miller, which was consolidated with Johnson v. United Airlines, Inc.,  employees complained the airlines’ timekeeping systems violated BIPA due to lack of required consent.  In both cases, Plaintiffs asserted that the employer violated BIPA by using fingerprints of workers to clock in and out.  As articulated by the court, the common issue in Miller and Johnson was “whether persons who contend that air carriers have violated state law by using biometric identification in the workplace must present these contentions to an adjustment board under the Railway Labor Act.” The court explained that “[T]here can be no doubt that how workers clock in and out is a proper subject of negotiation between unions and employers – is, indeed, a mandatory subject of bargaining.”  While Plaintiffs contended that a union is not a “legally authorized representative” for purposes of providing consent under BIPA, the court further found that “[n]either the statutory text nor any decision by a state court suggests that Illinois wants to exclude a collective-bargaining representative from the category of authorized agents.”  The Seventh Circuit remanded the matters with instructions to refer the parties to an adjustment board. Employers using processes involving biometric data or that desire to implement new processes would do well to do so only after developing a comprehensive program, including a written policy, for all aspects of use, collection, storage, retrieval and destruction of the data.  Illinois is not the only state with a statute in this area.  Both Washington and Texas have similar statues, but those do not permit a private right of action.  It is likely more states will follow.  Employers with questions should consult with competent counsel.

On June 24, 2019, the Supreme Court issued its opinion in Food Marketing Institute v. Argus Leader Media, broadening the protection from disclosure under the Freedom of Information Act (FOIA) for confidential information provided by private parties to federal government agencies.  This decision is a win for government contractors that are required to provide sensitive workforce and compensation data in connection with compliance audits, such as audits by the OFCCP and DCAA, and that provide confidential information to federal agencies as part of their contracting activities. In the case, a grocery store trade association challenged lower court decisions compelling FOIA disclosure of information concerning food stamp purchases at the individual store level.  The association claimed that the information was exempt from FOIA disclosure under FOIA’s Exemption 4, which prevents the disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”  The association argued that its members closely guard their store sales information, which is important in modeling projected individual store sales and deciding where to open new locations.  The lower court, applying prior authority, held that the association had not met an additional requirement under Exemption 4 to demonstrate that disclosure of the sales data would cause “substantial competitive harm.” As reported in a prior blog, Polsinelli attended oral argument in the case on April 22, 2019.  As predicted in that blog, a seven-member majority of the Supreme Court had little difficulty dispensing with the “substantial competitive harm” requirement, finding it unsupported in either Exemption 4’s text or the plain meaning of the word “confidential.” The Court noted in its decision that there were two potential conditions to confidentiality: (1) that the information is kept private or closely held by the person providing it, and (2) that the person receiving it provides some assurance that the information will be kept secret.  The Court noted it was uncontested that grocers met the first requirement by not sharing store-level sales data and providing access to the data only to small groups of employees.  The Court did not resolve whether the second requirement, an assurance of confidentiality from the government, was necessary because it was also uncontested that the USDA consistently assured grocers that their data would be kept confidential.  The level of government confidentiality assurances required, if any, remains an open question. In situations like compliance audits, contractors sometimes do not have a choice whether to provide confidential information to the government.  However, they can reduce the risk of disclosure of confidential information in response to a FOIA request by implementing best practices to safeguard their data.  When disclosure is not compelled in an audit, contractors should carefully evaluate any confidentiality requirements in their contracts and negotiate, if possible, appropriate confidentiality assurances from the government to avoid running afoul of the unresolved potential second requirement for confidential treatment under Exemption 4.

On June 14, 2019, the National Labor Relations Board (“Board”) ruled in a 3-1 decision that employers may prohibit nonemployee union representatives from conducting organizing activities on employer property that is open to the public. UPMC Presbyterian Shadyside, 368 NLRB No. 2 (June 14, 2019).  This decision overturns precedent dating back to the early 1980s which held that employers could not ban nonemployee union organizers from cafeterias and restaurants open to the public if they use the facility in a manner consistent with its intended use and are not “disruptive.”  See Montgomery Ward & Co., 256 NLRB 800, 801 (1981), enfd. 692 F.2d 1115 (7th Cir. 1982). The case arose when two union organizers for the Service Employees International Union Healthcare Pennsylvania (“SEIU”) met with six of the hospital employer’s employees in the hospital’s cafeteria, which was open to the public.  The group ate lunch and discussed union organizational campaign matters. In addition, at least one off-duty employee passed out union flyers.  Union flyers and pins were also displayed on the tables where the group was meeting. After receiving complaints, a hospital security guard asked each of the individuals in the group for their identification, and told the union representatives that the cafeteria was only open to patients, their families and visitors, and employees.  The guard further stated that the union representatives had to leave the premises.  They refused, and the security guard called police, who subsequently escorted the union representatives from the cafeteria.  Thereafter, the SEIU filed an unfair labor practice charge, alleging that the hospital had unlawfully discriminated against the union representatives in violation of Section 8(a)(1) of the National Labor Relations Act (“Act.”) When dismissing the charge, the Board ruled that the hospital did not violate the Act by ejecting union organizers from the cafeteria because there was no evidence that the hospital permitted any solicitation or promotional activity in the cafeteria.  In addition, the hospital regularly removed nonemployees who engaged in promotional activities in or near the cafeteria. Moreover, when reaching its decision, the Board overruled the “public space” exception rule, which held that discrimination prohibited by the Act could be established solely by showing that nonemployee union representatives were denied access to a public area within private property.  See Montgomery Ward & Co.  Specifically, the Board held thus: [A]n employer does not have a duty to allow the use of its facility by nonemployees for promotional or organization activity.  The fact that a cafeteria located on the employer’s private property is open to the public does not mean that an employer must allow any nonemployee access for any purpose.  Absent discrimination between nonemployee union representatives and other nonemployees –i.e., ‘disparate treatment where by rule or practice a property owner’ bars access by nonemployee union representatives seeking to engage in certain activity ‘while permit[ting] similar activity in similar relevant circumstances’ by other nonemployees–the employer may decide what types of activities, if any, it will allow by nonemployees on its property. The Board’s decision comes as welcome news.  Employers may now prohibit any nonemployee from soliciting on its property, including union organizers, “so long as it applies the practice in a nondiscriminatory manner by prohibiting other nonemployees from engaging in similar activity.”  Accordingly, employers should take this opportunity to review and update their policies regarding solicitation and distribution on company property.  Employers with questions regarding access or solicitation rules would do well to consult with able counsel.

On April 24, 2019, Dallas followed Austin and San Antonio to become the third city in Texas to adopt a mandatory paid sick leave ordinance (the “ordinance”).  The ordinance, set to go into effect on August 1, 2019, provides: All private employers with 15 or more employees must provide 8 days of earned sick time (“EST”) annually to employees who work at least 80 hours per calendar year within the City of Dallas. Employers with less than 15 employees must provide 6 days of EST per year. Employees will accrue one hour of EST for every 30 hours worked, unless an employer’s policies establish an accrual rate of a fraction of an hour increment. Employees will become eligible to accrue EST at the commencement of employment, or the effective date of the ordinance, whichever is later, and can begin using EST as soon as it accrues.  However, employers can implement a 60-day waiting period for new hires so long as that employee’s term of employment will be at least one year. Employees may use EST for their own, or a family member’s, physical or mental health or preventative care; or for medical attention, services, or legal actions as a result of domestic abuse, sexual assault or stalking. Employees may carry over accrued but unused EST, up to the maximum yearly cap, unless the employer grants the employee at least the minimum required amount of EST at the beginning of each year. Employers must: (i) provide monthly statements to employees regarding an employee’s accrued EST; (ii) post a notice of the ordinance; and (iii) include notice of the ordinance and its requirements in the employers’ handbooks. The ordinance provides for a civil penalty of up to $500 for each violation. Importantly however, penalties will not be assessed until April 1, 2020 unless an employer’s violation is related to the anti-retaliation provision of the ordinance. What’s Next? Dallas business groups have voiced concerns regarding the ordinance, and may file suit to attempt to enjoin it.  However, the ordinance is currently set to become effective August 1, and employers would do well to begin preparing now to comply with the new sick leave requirements.  Employers with questions about the ordinance – or sick leave generally – should consult with competent counsel.

This year, OFCCP will for the first time be conducting focused reviews that hone in on contractors’ compliance with disability-related obligations under Section 503 of the Rehabilitation Act.  Because Section 503 compliance is a priority for OFCCP’s new leadership, contractors should undertake an internal audit to confirm that it complies with these obligations, including the compliance resources offered by OFCCP. To help contractors prepare for focused reviews, on June 11, 2019, OFCCP posted a notice to contractors highlighting the resources and tools available to assist contractors in preparing for focused Section 503 reviews: OFCCP’s Section 503 Focused Review webpage provides an array of links to additional information, including links to the relevant regulations in the Code of Federal Regulations, a copy of the form Scheduling Letter, factsheets, FAQ’s, and best practices.  Additional information regarding the Section 503 Review process can be found here. OFCCP also encourages contractors to use the resources made available by its partner agency, the Office of Disability Employment Policy (ODEP).  The ODEP provides webinars and training regarding the best practices for ensuring that employers create and maintain workplaces that are inclusive for people with disabilities.   The ODEP also provides a workplace accommodation toolkit, which provides guidance for employees and employers alike regarding the process of evaluating and providing an employee with a workplace accommodation. OFCCP expects that contractors to use these resources in developing its compliance programs and undertaking compliance self-audits.  During audits, OFCCP compliance officers are unlikely to be sympathetic to claims that a contractor was not aware of its compliance obligations under Section 503 and the Rehabilitation Act.  To assist contractors and subcontractors’ compliance efforts and audit responses, Polsinelli has developed compliance tools that comply with OFCCP obligations and guidance materials, including those listing in OFCCP’s posting.

On May 8, 2019, the U.S. Seventh Circuit Court of Appeals reaffirmed its test to determine whether a worker qualifies as an “employee” as defined by and subject to Title VII protections. In this case, the plaintiff was a physician who maintained practice privileges at defendant Hospital.  Most of her revenue came from the work she performed at the Hospital, and the Hospital subjected her to peer-review proceedings.  Nevertheless, the Court ruled that she was not an “employee” of the Hospital for purposes of Title VII, but was instead an independent contractor. In its decision, the Court reaffirmed that the following factors are relevant to determining an individual’s employment status under the statute: the extent of the employer’s control and supervision over the worker, including directions on scheduling and performance of work; the kind of occupation and nature of skill required, including whether skills are obtained in the workplace; responsibility for the costs of operation, such as equipment, supplies, fees, licenses, workplace, and maintenance of operations; method and form of payment and benefits; and length of job commitment and/or expectations. The Court emphasized that the most important factor is the employer’s right to control the worker’s conduct and performance. While acknowledging that a physician who enjoys hospital staff privileges could share an indirect employer-employee relationship with a hospital sufficient to invoke Title VII protection, the Court ultimately held that subjecting the plaintiff to peer review did not meet the necessary control threshold to create an employee-employer relationship with the Hospital. The Seventh Circuit’s decision comes as welcome news for employers, as the employee/independent contractor distinction is currently in flux.  Employers with questions regarding the proper classification of its workers would do well to consult with competent counsel.

“Scabby the Rat” and “Corporate Fat Cat”…beware.  A recent National Labor Relations Board (“NLRB” or the “Board”) Advice Memorandum has suggested that the use of oversized inflatable rats may constitute illegal secondary picketing. In the Advice Memorandum released May 14, 2019, the Board’s General Counsel pressed the Board’s Chicago office to issue a Complaint against an IBEW local (the “Union”) that used the inflatable balloon of “Corporate Fat Cat” (symbolizing the Employer) choking a construction worker at a neutral employer’s job site.  The Union also distributed handbills and displayed a banner in an attempt to force the general contractor to pressure a subcontractor to pay the “area standard” wages and benefits.  The Union did not have a primary labor dispute with the general contractor, to which the banner and balloon were directed. The U.S. Supreme Court long has held that handbilling (as opposed to picketing) at a neutral employer’s business is lawful, protected activity.  Three Board decisions issued during President Obama’s terms in office applied the same reasoning towards bannering and inflatable balloons.  In those cases, the NLRB concluded that a stationary banner was only a form of communication and not picketing, which is a combination of communication and conduct.  The Board’s reasoning extended to inflatable rats/cats; absent patrolling and/or blocking ingress or egress to a jobsite, the inflatables constitute lawful Union speech against a neutral. Here, the General Counsel disagreed.  In the Advice Memorandum, he opined that the banner was a “functional equivalent” of a picket sign, and by having it next to a “frightening,” “large, hostile looking cat,” the Union was picketing a neutral employer, which is a violation of Section 8(b)(4) of the National Labor Relations Act (“NLRA”).  The General Counsel further explained, “The [Chicago region] should use this case as a vehicle to urge the Board to reconsider its decisions in [the three Obama Board cases] and conclude that the Union’s conduct here was tantamount to traditional picketing and moreover constituted signal picketing.”  The General Counsel further posited that the banners used “were knowingly false” and not protected by the First Amendment. Since the parties informally settled the unfair labor practice charge, the Board will not have an opportunity to reconsider those earlier decisions.  Likewise, advice memorandums, by their very nature, are non-binding in all other cases and only serve to provide guidance to local NLRB offices.  Labor watchers anticipate that the current Board is looking for an opportunity to “pop” the use of inflatable rats at the work sites of neutrals.

On May 22, 2019, the Trump administration released its Spring 2019 Unified Agenda of Regulatory and Deregulatory Actions.  This agenda reports on the actions that administrative agencies plan to issue in both the near and long term.  Most notably for government contractors, OFCCP announced three regulatory priorities: TRICARE and Other Healthcare Providers OFCCP’s first planned regulatory initiative is entitled “Affirmative Action and Nondiscrimination Obligations of Federal Contractors and Subcontractors: TRICARE and Certain Other Healthcare Providers.”  The abstract states that this initiative “would include limiting and otherwise altering the obligations of TRICARE and other healthcare providers” that are subject to OFCCP’s jurisdiction.  Although the agenda states that OFCCP would issue a Notice of Proposed Rulemaking in May 2019, the agency appears to have missed that deadline. OFCCP identifies this initiative as being “deregulatory” and a “major” regulation, i.e., one having an economic impact of $100 million or more.  Last year, in Directive 2018-02, OFCCP extended a moratorium on the enforcement of compliance obligations against TRICARE subcontractors to May 7, 2021.  It is possible that the contemplated regulation will extend make permanent some or all of Directive 2018-02’s moratorium. Religious Exemptions In its second item, OFCCP announced that it “plans to update its regulations to comply with current law regarding protections for religion-exercising organizations.”  This initiative is also listed as “deregulatory” and its priority to the agency is described as “significant.”  The agenda states that OFCCP will issue a Notice of Proposed Rulemaking in June 2019. Again, this regulatory initiative follows on a 2018 directive concerning religious freedom.  In Directive 2018-03, OFCCP noted several prominent Supreme Court decisions that “addressed the broad freedoms and anti-discrimination protections that must be afforded religion-exercising organizations and individuals” and instructed its staff “to take these legal developments into account in all their relevant activities.”  Now, it appears the agency may be planning to codify formal religious exemptions into its regulations. Resolving Potential Employment Discrimination Finally, OFCCP announced that it would publish “Procedures to Resolve Potential Employment Discrimination.”  The goal of this initiative is to “increase clarity and certainty for OFCCP stakeholders, and enhance the agency’s efficiency in remedying employment discrimination.”  Although the description in the agenda is sparse, this initiative appears to follow OFCCP Director Craig Leen’s stated goal of increasing the agency’s transparency and cooperation with the contractor community. OFCCP intends to issue a Notice of Proposed Rulemaking for this initiative in September 2019.  The initiative is described in the agenda as non-major and “nonsignificant.” Polsinelli’s Government Contractor Update will continue to track these developments and alert the contractor community if and when OFCCP provides more detail about its proposals.

On May 23, 2019, the OFCCP -- without fanfare -- issued its first opinion letter since its announcement last year that it would begin issuing opinions to provide guidance to the contractor community. In its opinion letter, OFCCP concluded that Pell Grants, under which the federal government provides funds to higher education institutions as supplemental financial aid, do not qualify as government contracts because they do not acquire property or services for the direct benefit of the federal government.  Accordingly, higher education institutions do not become subject to the obligations imposed on government contractors under Executive Order 11246, Section 503, or VEVRAA solely by receiving Pell Grant funds. Polsinelli will keep you apprised of future opinion letters and other compliance guidance issued by OFCCP.

On June 3, 2019, the U.S. Supreme Court in Fort Bend County, Texas v. Davis unanimously held that Title VII’s charge-filing requirement is mandatory for claimants, but not jurisdictional.  Stated plainly, employees can still file and proceed with Title VII lawsuits without first filing a charge of discrimination, absent a timely-asserted exhaustion defense by employers. In Davis, the claimant filed a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) alleging sexual harassment and retaliation for internally reporting the harassment.  The claimant was later terminated for reasons she believed to be based on her religion.  Although the claimant amended her intake questionnaire with the EEOC to add religion-based claims, she never amended her EEOC Charge of discrimination.  After receiving a right to sue notice, the claimant filed a lawsuit asserting the claims of harassment and retaliation as stated in her charge, and also included discrimination based on religion.  The case proceeded on the merits on all of claimant’s claims and summary judgment was entered in the employer’s favor on all claims.  The U.S. Fifth Circuit Court of Appeals reversed on the claimant’s religious discrimination claim.  On remand, the district court granted the employer’s motion to dismiss, wherein the employer asserted for the first time that the claimant failed to assert religious discrimination claims in her EEOC charge and, therefore, the court lacked jurisdiction over those claims.  The Fifth Circuit reversed, holding that a failure to exhaust administrative remedies under Title VII is not a jurisdictional bar to sue, but rather is an affirmative defense, which is subject to waiver.  The court further held that the employer waived the affirmative defense by not asserting it in its answer or moving on it earlier in the case. The U.S. Supreme Court agreed with the Fifth Circuit and held that Title VII’s charge-filing instruction is not jurisdictional, but rather a mandatory, nonjurisdictional claim-processing rule that must be “timely raised to come into play.” This case should remind all employers to timely assert all applicable or potentially applicable affirmative defenses.  Employers are encouraged to have thoughtful discussions with their counsel to review waivable defenses that should be asserted as early as possible in litigation.

On May 22, 2019, Colorado’s Governor Polis signed the Equal Pay for Equal Work Act (the “Act”), which brings significant changes to the existing Wage Equality Regardless of Sex Act. C.R.S. § 8-5-101 et seq.  Effective January 1, 2021, the Act will prohibit employers from paying an employee of one sex less than an employee of a different sex for substantially the same work. Employers will also be required to announce or post all opportunities for promotion to all current employees on the same calendar day, and include the hourly or salary compensation, prior to making a promotion decision. Additionally, employers will be required to keep records of job descriptions and wage rate history for each employee for the duration of employment plus two years after the end of employment. Note that wage differentials between employees of different sexes who perform substantially similar work are allowed where the employer can demonstrate that the difference in wages is based upon one or more factors, including: A seniority system; A merit system; A system that measures earnings by quantity or quality of production; The geographic location where the work is performed; Education, training, or experience to the extent that they are reasonably related to the work in question; or Travel, if the travel is a regular and necessary condition of the work performed. Also, the Act will prohibit an employer from: Seeking the wage rate history of a prospective employee or relying on a prior wage rate of a prospective employee to determine a wage rate; Discriminating or retaliating against a prospective employee for failing to disclose the employee’s wage rate history; Discharging or retaliating against an employee for asserting the rights established by the Act; Prohibiting employees from disclosing their wage rates; and Requiring an employee to sign a waiver that prohibits an employee from disclosing their wage rate information. Importantly, the Act will remove the authority of the Colorado Department of Labor and Employment to enforce wage discrimination complaints based on sex and permit aggrieved employees to file a civil action in district court, where a prevailing employee may recover liquidated damages and attorneys’ fees. Employers may wish to consider auditing their existing pay structures to make sure employees are receiving equal pay for equal work in compliance with the Act and would do well to post all opportunities for promotion to all current employees at the same time. Employers with questions regarding the Act, or pay audits generally, should consult with competent counsel.

The Equal Employment Opportunity Commission (EEOC) requires employers with at least 100 employees (and federal contractors with at least 50 employees) to file an EEO-1 Report with a count of employees by establishment and job category with race, ethnicity, and gender information for each employee.  This part of the EEO-1 is now referred to as Component 1. In 2016, the EEOC implemented a pay data requirement for the EEO-1 Report, referred to as Component 2.  Component 2 requires the disclosure of the total number of full- and part-time employees by demographic category divided into 12 pay bands for each EEO-1 job category, and hours worked by all employees in each band. Before the original deadline for Component 2 pay data, the Office of Management and Budget (OMB) paused the U.S. Equal Employment Opportunity Commission’s collection of Component 2 pay data. A lawsuit initiated by both the National Women’s Law Center and the Labor Council for Latin American Advancement followed, arguing that the OMB’s decision halting the expanded data collection was without cause. National Women’s Law Center v. Office of Management and Budget, Case No. 1:17-cv-02458-TSC. This case remains pending in the U.S. District Court for the District of Columbia.  The Court’s August 25, 2018 ruling in this case reinstated the requirement to collect Component 2 data. What now? Employers must report Component 1 gender, race and ethnicity information for all covered employees on a single payroll date between October 1, 2018 and December 31, 2018. The portal will remain open for filing Component 1 data until May 31, 2019.  Employers who need an extension to meet the Component 1 deadline may contact the EEOC for a one-time 2-week extension by contacting E1.EXTENSIONS@EEOC.GOV.  An employer requesting a longer extension must provide the EEOC with a rationale therefor. Requests for extensions will not be accepted after May 31, 2019. When is Component 2 pay data due?  Following the Court’s ruling in National Women’s Law Center, the EEOC first indicated it would likely begin collecting Component 2 data for both calendar years 2017 and 2018 starting sometime in mid-July. Further, the current published deadline for submission Component 2 data is September 30, 2019. EEOC Chair Victoria Lipnic acknowledged that these “first-ever pay data collections,” which are now required in a relatively short time frame, will be difficult to accomplish. However, the EEOC is “committed to meeting the Court’s order, working with employers, and making this happen by the end of September.” On May 3, 2019, the Department of Justice filed a Notice of Appeal in the National Women’s Law Center case, which does not stay the current district court orders or alter EEO-1 filers' obligations to submit Component 2 data. What now? Employers should review our previous post for additional insights on EEO-1 reports, and how to avoid common pitfalls when preparing employer Component 1 data. Employers should also consider hiring experienced counsel to assist with filing their Component 1 and 2 data, in light of these new requirements. Polsinelli will continue to provide updates on the filing of Component 2 data when as it becomes available.

On April 30, 2019, the U.S. Court of Appeals for the Tenth Circuit in United State ex rel. Reed v. KeyPoint Government Solutions affirmed the dismissal of an employee’s False Claims Act (FCA) whistleblower retaliation claim.  In its ruling, the Tenth Circuit confirmed that employees with compliance responsibilities bear a heightened burden to show that their alleged protected activities were not simply the performance of their assigned job responsibilities. Ms. Reed, the plaintiff, worked as a Senior Quality Control Analyst for KeyPoint Government Solutions, a company that conducted federal background check investigations.  Amid a series of scandals that rocked the broader background investigation industry, Ms. Reed claimed that she observed systemic violations of KeyPoint’s federal government contract as investigators allegedly made false background check reports, omitted information from reports, and failed to follow proper background check procedures.  Ms. Reed alleged that these violations formed the basis of fraudulent requests for payment from the government.  Ms. Reed claimed that she discussed the issues with several people within the company, but ultimately her efforts were unsuccessful and KeyPoint terminated her employment. The Tenth Circuit affirmed the dismissal of Ms. Reed’s FCA whistleblower retaliation claim.  The court noted that to face FCA whistleblower liability, an employer must know that the relator-employee’s actions were connected to a claimed FCA violation.  Where the employee’s job involves compliance and fraud investigations, it must be clear that the employee is engaging in FCA protected activity and “not just doing her job” to report suspected fraud internally.  Critically, the court found that the requirement for this heightened showing from compliance employees was not affected by the 2009 and 2010 amendments to FCA that expanded whistleblower protections.  Because Ms. Reed’s allegations did not show that she went outside of the established chain of command or beyond the scope of KeyPoint’s ordinary reporting procedures, the court held that she could not establish KeyPoint’s knowledge of her claimed FCA protected activity. Compliance employees are in a prime position to report corporate activities that may trigger whistleblower protection under FCA or other statutes.  However, their internal reports of fraudulent activities should not be protected under the FCA whistleblower protections unless they go beyond their job duties and either report the alleged violation outside of her ordinary chain or tie their concerns to violations of the FCA.  Employers should exercise caution when taking adverse action against employees in their compliance, HR, legal, contracting and finance departments to ensure that (1) the action is justified, well-documented, consistent with policy and prior actions against employees; and (2) the employee did not “blow the whistle” through means or mechanisms outside of their normal job duties.

On May 8, 2019, Washington Governor Jay Inslee signed into law a bill that prohibits employers from entering into noncompetition covenants with employees whose W-2 earnings are less than $100,000, and with independent contractors paid less than $250,000 per year. In addition to the above, employers should be aware of the following five provisions in the new law: The law creates a presumption that any covenant longer than 18 months is unreasonable and unenforceable as a matter of law.  A party to the covenant may rebut the presumption by showing through clear and convincing evidence that a duration longer than 18 months is necessary to protect the party’s business or goodwill. A covenant will be unenforceable unless the employer discloses its terms to a prospective employee in writing. If a covenant is entered into after employment begins, the employer must provide consideration in addition to employment to support the covenant. If an employee subject to a noncompetition covenant is terminated in a layoff, the covenant is void unless the employer pays the terminated employee base salary for the remainder of the covenant’s terms, less compensation earned through subsequent employment. If a court determines a noncompetition covenant violates the new law, the party seeking enforcement must pay the aggrieved person the greater of the actual damages or $5,000, plus reasonable attorneys’ fees and costs. The new law will take effect January 1, 2020.  Employers with questions regarding Washington’s new law – or that wish to review or implement noncompetition covenants – would do well to consult with competent counsel.

Colorado appears poised to join a number of states that prohibit employers from inquiring into a job applicant’s criminal history on an initial employment application.  On April 30, 2019, the Colorado legislature sent House Bill 19-1025 (the “Bill”) to Governor Polis’ desk.  Assuming Governor Polis signs the Bill, Colorado will join a number of other states and “ban the box.”  If the Bill is signed into law, Colorado employers will be prohibited from: Stating in an employment advertisement that a person with a criminal history may not apply for the position; Stating on any form or application for employment that a person with a criminal history may not apply for the position; and Inquiring into or requiring an applicant to disclose any criminal history on an initial employment application. Employers may still obtain a publicly available criminal background report on a job applicant at any time. The above-listed prohibitions will not apply if: Federal, state, or local law or regulations prohibit employing a person with a specific criminal history to the position; The position is designated by the employer to participate in a federal, state, or local government program to encourage the employment of people with criminal histories; or The employer is required by federal, state, or local law or regulation to conduct a criminal background check for the position, regardless of whether the position is for an employee or an independent contractor. Critically, the Bill does not create a private cause of action or a new protected class under existing anti-discrimination laws.  However, the Bill does include staged penalties after the first violation. If signed into law as expected, the Bill’s provisions will become effective September 1, 2019 for employers with 11 or more employees, and September 1, 2021 for all other employers.

The Equal Employment Opportunity Commission (EEOC) has announced that employers covered by the EEO-1 reporting obligation must submit pay data broken down by job category, pay band, race, ethnicity and sex for both calendar years 2017 and 2018.  This pay data, which is referred to as Component 2 of the EEO-1, is due on September 30, 2019. As previously reported, on April 25, 2019, the U.S. District Court for the District of Columbia issued a ruling requiring employers to file Component 2 pay data for 2018 and left it up to the EEOC to also require one additional year of pay data from either 2017 or 2019.  The Court has now published its Order. The EEOC stated on its website that it expects to begin collecting Component 2 data for calendar years 2017 and 2018 in mid-July and will give notice when it has a more precise date. Covered employers should begin planning collection of pay data by race, ethnicity and sex for both 2017 and 2018. Polsinelli will continue to monitor this issue and provide updates on reporting requirements.

On April 25, 2019, the U.S. District Court for the District of Columbia gave an oral ruling from the bench reportedly accepting the EEOC’s proposal to make employers submit their 2018 pay data by September 30, 2019.  This is consistent with the proposal the EEOC submitted on April 3, 2019 on which we previously reported. The pay data is referred to as Component 2 of the EEO-1 report and includes detailed data on employee compensation and hours worked from covered employers sorted by job category, pay band, race, ethnicity, and gender. The pay data is required to be from the 2018 calendar year. All employers who are required for 2018 to file an EEO-1 report will be required to submit pay data. This includes: All private employers with 100 or more employees that are subject to Title VII of the Civil Rights Act of 1964, as amended. Some private employers with fewer than 100 employees, if the employer is owned or affiliated with another employer -- or there is centralized ownership, control or management -- so that the employers together legally constitute a single enterprise, and the entire enterprise employs a total of 100 or more employees. Federal contractors that employ 50 or more employees and are prime contractors or first-tier subcontractors and have a single contract, subcontract or purchase order amounting to $50,000 or more. According to the Court’s docket, a written order is forthcoming. It is also expected that the EEOC will be updating its website to provide instructions on the collection and reporting of this pay data. Polsinelli will continue to monitor this issue and provide updates on reporting requirements.

On April 24, 2019, the Federal Court that reinstated the EEO-1 pay data reporting requirement accepted the EEOC’s recommendation that employers must submit the EEO-1 form for 2018, including pay data, by Monday, September 30, 2018.  Employers with at least 100 employees and federal contractors and first-tier subcontractors with at least 50 employees must file the EEO-1 survey annually with the Equal Employment Opportunity Commission (“EEOC”). The EEOC has expanded the survey to require the disclosure of a wide range of employee pay data, in addition to employee demographics.  The pay data reporting requirement mandates disclosure of the total number of full- and part-time employees by demographic category in each of 12 pay bands for each EEO-1 job category, as well as the aggregate hours worked by all of the employees in each pay band. Employers subject to the EEO-1 reporting requirement for 2018 presently have two deadlines to meet: May 31, 2019: Deadline to submit Component 1 (demographics) data through the EEOC online portal; and September 30, 2019: Deadline to submit Component 2 (pay) data through the EEOC online portal. It is unclear at this time whether the EEOC will remove or alter the existing May 31 deadline.  Adding to the burden, and potential future confusion, the Court ordered the EEOC to collect either 2017 or 2019 pay data at a future time.   The EEOC has yet to choose.  Employers subject to EEO-1 reporting requirements should retain all 2017 employee pay data, pending further guidance from the EEOC. Employers that have not taken preparatory steps to comply with the enhanced EEO-1 reporting requirements should do so now.  In addition, employers with questions regarding their EEO-1 obligations would do well to consult with able counsel.

On April 12, 2019, the OFCCP submitted new forms of its scheduling, compliance check, and Section 503 focused review letters to the Office of Management and Budget (OMB) for approval.  OFCCP also sought OMB’s approval of a new scheduling letter for VEVRAA focused reviews.  OMB’s authorization of the current versions of the scheduling and compliance check letters is scheduled to expire on June 30, 2019.  Government contractors and other interested parties have until June 11, 2019 to submit comments to OMB regarding the new form letters. If approved, the changes to the OFCCP’s letters will impose significant new data reporting requirements on contractors.  Some of the major changes are described below: Scheduling Letters Contractors must identify their three largest subcontractors to OFCCP. In addition to the percentage of minority and female incumbents within each job group, contracts must also submit the specific race of each employee within the job group. In addition to placement goals for minorities and women generally, contractors must submit data from which OFCCP can determine disparities in the utilization of particular minority groups, or men or women of particular minority groups, to create separate goals for these groups. Significantly, OFCCP will require contractors to submit the results of their most recent compensation system analysis. Contractors must identify the pool of candidates from which promotions were selected by gender and race/ethnicity. In submitting data regarding terminations, contractors must state whether terminations were voluntary or involuntary. Section 503 Focused Review Letter Contractors must submit information provided by each applicant or employee who self-identifies as an individual with a disability. Contractors must submit applicant and employee-level employment activity data concerning applicant flow, hires, promotions, and terminations of disabled and non-disabled employees and applicants. Contractors must submit employee-level compensation data of disabled and non-disabled employees. In addition, all of the data required to be submitted to OFCCP must now be submitted electronically to facilitate OFCCP’s analysis. OFCCP’s supporting statement for the proposed letters reveals that OFCCP intends to increase the number of audits it conducts.  For fiscal year 2018, OFCCP audited 3,500 contractor establishments, divided between full compliance audits, compliance checks, and Section 503 focused reviews.  In its submission to OMB, OFCCP stated that it anticipates conducting 2,500 full compliance audits and 1,000 compliance checks, and that the number of Section 503 and VEVRAA focused reviews will increase from 500 in fiscal year 2019 to 1,500 by fiscal year 2021. OFCCP’s submission shows that the agency intends to seek increasing amounts of data, at an increasingly granular level, from an increasing number of contractor establishments and functional units.  Contractors would be well served to reevaluate their data collection and analysis and other compliance procedures with the assistance of experienced counsel to ensure that they are meeting all applicable requirements and identify and address potential issues before they are discovered in an OFCCP audit.

Recently, the U.S. District Court for the Southern District of Alabama issued a decision reminding employers to take care when reviewing and responding to charges of discrimination. In Payne v. Navigator Credit Union, the defendant employer moved to dismiss the plaintiff employee’s claim for disability retaliation on the grounds that the plaintiff failed to exhaust her administrative remedies. Specifically, the employer argued that the plaintiff failed to allege in her EEOC Charge that she was retaliated against, and was precluded from pursuing a retaliation claim in court. When making its argument, the employer pointed out that the plaintiff had not “checked the box” for “retaliation” on her EEOC Charge nor did she use the word “retaliation” when describing how she had allegedly been harmed.  Nevertheless, the court ruled that the plaintiff’s allegation in the charging document that she was terminated shortly after informing her employer of her need to take medical leave for cancer treatment was sufficient to place the employer on notice of the a claim for  retaliation. This decision suggests that some courts will grant plaintiffs wide latitude to define their claims in litigation.  Employers facing an agency charge, or that have questions regarding responding to inquiries from administrative employment agencies, should consult with competent counsel.

On April 22, 2019, the U.S. Supreme Court heard argument in Food Marketing Institute v. Argus Leader Media.  Polsinelli attended the oral arguments to provide insight concerning the potential implications for federal government contractors that submit data to OFCCP. In that case, a grocery store trade association challenged lower court decisions requiring the disclosure through Freedom of Information Act (FOIA) of data concerning food stamp purchases at the individual store level.  Although the case does not involve disclosures by OFCCP, a victory for the challenger would enhance the ability of contractors to protect confidential workforce data submitted to OFCCP from FOIA disclosure. Contractors facing OFCCP audits are required to provide sensitive employment-related data, including compensation data.  To prevent this data from being disclosed to competitors or others pursuant to a FOIA request, contractors and their counsel typically rely on FOIA’s Exemption 4, which prevents the disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” In the Food Marketing Institute case, the trade association is challenging lower courts’ rulings concerning Exemption 4, which require that a party resisting the disclosure of confidential information under it show that the disclosure would cause “substantial competitive harm.”  If the Supreme Court rules that such a showing is not required, a contractor submitting data to OFCCP would only be required to show that it takes steps to protect its compensation and other workforce data from disclosure to fall within the exemption. Although it is difficult to forecast the Supreme Court’s ultimate decision based on the justices’ questions and comments, several justices appeared skeptical of the “substantial competitive harm” requirement, noting that it lacks support in Exemption 4’s text.  The questioning also suggested that several of the justices believe that Exemption 4 requires the information holder to take affirmative steps to maintain confidentiality, rather than simply deeming or labeling it as confidential without more. Polsinelli will continue to monitor the case in anticipation of the Supreme Court’s decision.  In the meantime, contractors should consult with experienced counsel to ensure that they are implementing best practices to safeguard sensitive data and support a claim of confidentiality under Exemption 4.

Does the adage “no good deed goes unpunished” apply to employers that fail to pay wages to hourly employees during volunteer events? Not necessarily, according to a recent U.S. Department of Labor (DOL) Opinion Letter. Per the Opinion Letter, to avoid a finding that an employee’s volunteer time is compensable, the employer must refrain from directly or impliedly coercing its employees to participate. In other words, participation must be voluntary and devoid of any undue influence. The DOL’s Opinion Letter clarifies that notifying employees of the volunteer event or asking for participation is not coercive. Conversely, if consequences exist for failing to participate, such as changes to working conditions, the employee’s time spent volunteering would likely be considered compensable, as participation would not be considered “voluntary.” The Opinion Letter also addresses whether offering certain benefits for participation would be considered “coercive.” Critically, an employer may consider an employee’s volunteer activities when determining a bonus, without converting volunteer time to compensable hours, as long as: volunteering remains optional; non-participation is not punished; and the bonus is not guaranteed. Employers that wish to ensure volunteer time is non-compensable would do well to remember two things: (1) employers should not punish an employee’s lack of participation in volunteer activities; and (2) bonuses for participation cannot be guaranteed.  Employers with questions about whether volunteer time should be compensated should consult with competent counsel.

On March 28, 2019, the U.S. Department of Labor (“DOL”) announced a proposed rule to update the regular rate requirements under 29 CFR part 778 and section 7(e) of the Fair Labor Standards Act (“FLSA”). The FLSA requires employers to pay non-exempt employees overtime compensation for any time worked over 40 hours in a workweek. The overtime rate equals one and one-half times the “regular rate,” which is defined as “all remuneration for employment paid to, or on behalf of, the employee,” with some exceptions. More specifically, the regular rate must include wages, bonuses, commissions, and any other forms of compensation. Court decisions interpreting what must be included in the calculation of the “regular rate” have caused confusion for employers, who may be unsure whether offering non-exempt employees extra perks could increase the regular rate and, by extension, overtime pay. In addition, the uncertainty stemming from what must be included in the “regular rate” could lead to costly wage and hour actions by employees. When announcing the new proposed rule, the DOL opined that the current regulations “do not sufficiently reflect … developments in the 21st-century workplace,” and stated that the following forms of compensation would be excluded from an employee’s regular rate: the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services; payments for unused paid leave, including paid sick leave; reimbursed expenses, even if not incurred “solely” for the employer’s benefit; certain reimbursed travel expenses; discretionary bonuses; benefit plans, including accident, unemployment, and legal services; and tuition programs, such as reimbursement programs or repayment of educational debt. The proposed rule also seeks to clarify whether other forms of compensation, such as payments for meal periods, call-back pay, and others, must be included in the regular rate. The proposed rule will remain open to comments until May 28, 2019. Employers with questions regarding the calculation of the “regular rate” (or other compensation-related issues) would do well to consult with able counsel.

“Glaring,” “concerning,” “troubling,” “problematic,” and “systemic” were some of the words used by OFCCP Director Craig Leen to describe the underrepresentation of women, minorities, and individuals with disabilities at large law firms at an April 10, 2019 town hall meeting in New York City.  Director Leen announced that representation and pay equity issues at law firms and other professional services providers will be an area of focus for OFCCP as early as next fiscal year. Director Leen indicated that OFCCP will focus on investigating and redressing disparities in the promotion of law firm associates to partner.  OFCCP is also expected to examine whether law firm billable hours policies act as an impediment to the advancement of female lawyers and the ability of employees of all genders to take family leave.  OFCCP also plans to issue guidance regarding its ability to police practices involving attorneys who are equity partners. OFCCP’s 2019 listing of contractors selected for audit included five AmLaw 100 law firms for compliance audits.  Law firms that are not government contractors may also unexpectedly fall within OFCCP’s jurisdiction if they provide services to government contractor clients that are deemed “necessary” to the performance of a federal government contract. Director Leen’s announcement comes against the backdrop of several high-profile lawsuits filed by female attorneys, both partners and associates, against some of the nation’s largest firms.  These developments show that pay equity and gender discrimination at law firms are in the crosshairs of both private litigants and government agencies.  Rather than wait to be the target of a government investigation or lawsuit, law firms should retain outside counsel and undertake comprehensive compliance audits, including reviewing pay equity and promotion rates reviews.

Mergers and acquisitions can be complicated transactions, particularly when the entity to be acquired has employees covered by a collective bargaining agreement with a union.  In a recent case, a federal court in Chicago ruled that a successor owner of a business unlawfully terminated health benefits for retired employees under a collective bargaining agreement entered into by the business it acquired. The plaintiffs were two retired employees who worked for a packaging company for more than 35 years and were members of the union.  After retirement, they continued to receive health care benefits under a collective bargaining agreement (CBA) their union negotiated in 1994.  The packaging company went into bankruptcy and it negotiated new CBAs with the union in 2001 and 2002, which were approved by the bankruptcy court.  After emerging from bankruptcy in 2003, the packaging company was acquired by the first successor, which closed the plant where the retirees had worked.  After the plant closed and the CBA expired, the first successor continued to provide benefits under the expired CBA’s terms.  In 2014, the first successor sold part of its business and transferred its obligations under the relevant CBA to the second successor.  Shortly thereafter, the second successor terminated the CBA. The retirees and the union filed suit against both the first and second successor to enforce the health care benefits provided under the CBA.  The case focused on two provisions in the CBA.  Specifically, Section 6 of the CBA provided:  “any Pensioner or individual receiving a Surviving Spouse’s benefit who shall become covered by the Program established by the Agreement shall not have such coverage terminated or reduced (except by the Program) so long as the individual remains retired from the Company or receives a Surviving Spouse’s benefit, notwithstanding the expiration of this Agreement, except as the Company and the Union may agree otherwise.”  In addition, Section 7 stated the CBA “shall remain in effect until February 29, 2014, thereafter subject to the right of either party on [120] days written notice served on or after November 1, 2003 to terminate the [agreement].” The court noted that “unlike pension benefits under ERISA, insurance benefits, such as the benefits at issue in this case, do not automatically vest” and an employer “may create vested welfare benefits by contract.”  The defendants argued that Section 6 of the CBA limited lifetime health benefits because the phrase “except as the Company and the Union may agree otherwise” incorporated Section 7’s language permitting unilateral termination.  The court disagreed, noting that Section 7 referred only to termination of the CBA, and did not apply to health benefits under Section 6. The defendants also argued that the U.S. Seventh Circuit Court of Appeals had previously ruled that “lifetime” benefits were limited to the term of the CBA.  The court readily distinguished the defendants’ authority because the agreements at issue therein expressly limited the duration of the benefits to the duration of the contract.  But in the current case, the court ruled that the “provision of lifetime benefits without provision for their termination constitutes vested benefits.”  As a result, the court granted summary judgment for the plaintiffs. When a merger or acquisition involves a collective bargaining agreement, employers would do well to perform a thorough legal analysis of the terms and history of existing and predecessor collective bargaining agreements and contract negotiations (as well as pending and past grievances and unfair labor practices).  Doing so is critical to understanding (and minimizing or avoiding) any potential risk.  Employers with questions should consult with able counsel. Stone v. Signode Industrial Group, LLC, No. 17 C 5360, (N.D. Illinois) March 13, 2019.

On April 3, 2019, the EEOC announced in a court filing that it will require employers to submit 2018 EEO-1 pay and hours data by September 30, 2019.  With EEO-1 reports currently due by May 31, 2019, this announcement gives employers four additional months to collect and submit this information.  The extension of the EEO-1 deadline appears only to apply to Component 2 pay and hours data because EEOC’s website still lists the deadline for submission of the Component 1 demographic data as May 31, 2019.  The EEOC’s filing states that employers will not be required to report 2017 pay and hours data at this time. The EEOC’s filing came in response to a March 19, 2019 order from Judge Chutkan of the U.S. District Court for the District of Columbia requiring the agency to state its position on the filing of the Component 2 submission in light of her prior summary judgment ruling reinstating the Component 2 obligation.  A link to our blog summarizing the March 4, 2019 summary judgment order is included here.  The plaintiffs in the case will now have until April 8, 2019 to respond to the EEOC’s announcement. In another development in the case, a coalition of employer advocacy groups (including, among others, the U.S. Chamber of Commerce, Society for Human Resources Management, and Associated Builders and Contractors) on April 4, 2019 filed an amicus curiae brief requesting that employers be provided at least 18 months to comply with the reinstated pay and hours data submission requirement.  The coalition also raised concerns about the EEOC’s ability to maintain the confidentiality of Component 2 pay data it receives. Polsinelli will continue to monitor these developments closely.

On April 1, 2019, the U.S. Department of Labor (“DOL”) announced proposed changes to its joint-employer test. Specifically, the DOL set out a four-factor balancing test, which inquires whether an entity that does not directly employ an individual employee: 1. hires or fires the employee; 2. supervises and controls the employee’s work schedule and/or conditions of employment; 3. determines the employee’s rate and method of payment; and 4. maintains the employee’s employment records The proposed changes clarify that merely having the ability, power or contractual right to affect the other employer’s employees’ terms and conditions of employment is not relevant to the analysis.  Rather, the putative joint employer must actually exercise or exert control over the other employer’s employees to be considered a joint employer.  In addition, certain business models, such as a franchisor relationship, do not make a finding of joint-employment more likely.  And if adopted, the proposed changes would also provide examples to assist with determining joint employment status. Once the proposed changes are published in the Federal Register, the public will have 60 days to submit comments. These proposed changes mark the first time since 1958 that the DOL has meaningfully revised the joint-employer regulations.  According to the DOL, the proposed changes are meant to provide courts with clear guidance when considering joint employer status and reduce litigation.  Notably, the DOL’s proposed changes to the joint-employer test come on the heels of  the National Labor Relations Board’s proposed joint employer rule, which provides that  joint employment turns, in part, on whether a putative joint employer actually exercises control over the other employer’s employees’ terms and conditions of  employment. The DOL’s proposed changes would bring welcome clarity and certainty to employers that make use of another entity’s employees or that operate under certain business models.  We will keep you posted as the proposed changes move through the notice and comment period.

While the U.S. Supreme Court’s recent decisions have generally supported the enforceability of employment-related arbitration agreements, mandatory employment arbitration remains under fire in other contexts.  The latest example  came on March 21, 2019, when a National Labor Relations Board (NLRB) administrative law judge (ALJ) ruled in Pfizer, Inc., Case 10-CA-175850 that an employer’s arbitration agreement requiring employees to engage in  confidential  arbitration proceedings and prohibiting disclosure of arbitration-related submissions and materials constituted an unfair labor practice prohibited by the National Labor Relations Act (NLRA). The ALJ’s decision comes in the wake of the Supreme Court’s Epic Systems decision, which rejected a similar argument that the NLRA prohibits employers from requiring employees to arbitrate their claims on an individual basis and waive the ability to bring claims on a class or collective basis.  In an attempt to distinguish Epic Systems, the ALJ reasoned that while the Epic Systems Court endorsed an arbitration agreement’s limitation of the procedural right to litigate as a class or collective, it did not permit limitations on substantive rights, such as an employee’s right under the NLRA to engage in “concerted activity” by discussing his or her terms and conditions of employment with co-workers and others. The ALJ also ruled that a limiting clause in the arbitration agreement stating that the confidentiality requirement did not “prohibit employees from engaging in protected discussion or activity relating to the workplace, such as discussions of wages, hours, or other terms and conditions of employment,” was insufficient to save the agreement because it did not explicitly permit disclosure of arbitration-related materials in furtherance of NLRA-protected activity. The ability to maintain the confidentiality of arbitration proceedings is one benefit that employers may seek through mandatory arbitration.  However, the ability to compel confidential arbitration is being challenged by legislative action, public awareness campaigns, in agency proceedings, and in the courts.  As the ALJ’s decision may be subject to further review before the NLRB and a federal court of appeals, employers that rely on confidential arbitration agreements should consult with counsel to stay abreast of any developments and ensure that their agreements do not run afoul of the NLRA or other federal and state statutes.