When purchasing a business, the buyer often desires to set new terms of employment to more efficiently and profitably operate the new enterprise.  However, if the seller’s employees are members of a bargaining unit, the buyer must -- if planning on hiring all the seller’s union employees -- clearly advise employees of their new terms and conditions of employment, or the buyer will be unable to make any changes to same without first bargaining with the union. Traditionally, as enunciated in Spruce-Up Corp., 209 NLRB 194 (1974), a new employer need only bargain with the union prior to setting wages, benefits and conditions of employment for the buyer’s new employees where it was “perfectly clear that the new employer plans to retain all of the employees in the (bargaining) unit.”  Spruce-Up further held the perfectly clear bargaining obligation “should be restricted to circumstances in which the new employer has … misled employees into believing they would all be retained without change in their wages, hours or conditions of employment, or … failed to clearly announce its intent to establish a new set of conditions prior to inviting employees to accept employment.”  Thus, Spruce-Up, and most all subsequent cases, restricted application of the buyer’s bargaining obligation to when: (1) all former bargaining unit employees were hired; and (2) the former bargaining unit employees accepted employment believing the terms of their prior collective bargaining agreement applied.  Application of Spruce-Up has, however, been restricted in recent years.  That may be about to change. During President Obama’s administration, the NLRB took a restrictive view of Spruce-Up and found “perfectly clear” status (and a bargaining obligation) when a “successor (employer) expressed an intent to retain the predecessor’s employees without making it clear that employment will be conditioned on the acceptance of new terms.”  Thus, if the new employer indicated an “intent to retain” all current employees (or if the seller indicated the purchaser’s intent to retain all employees) without mentioning the new terms and conditions of employment, the new employer was obligated to bargain with the union over changes to terms and conditions of employment.  Former NLRB Chairman Miscimarra argued such an interpretation of Spruce-Up made successorship law a “legal trap” for new employers. In two very recent decisions, new NLRB Chairman Marvin Kaplan urged the Board to adopt the traditional view of Spruce-Up and overrule the Obama Board’s interpretation of same.  See First Student Inc., a Division of First Group America, 366 NLRB No. 13 (February 6, 2018) and Walden Security, Inc., 366 NLRB No. 44 (March 23, 2018).  In Chairman Kaplan’s view, application of the “intent to retain” standard is inconsistent with Spruce-Upand U.S. Supreme Court precedent.  Moreover, in Walden, new Member William Emanuel expressed that he is “open” to a re-examination of the Board’s recent Spruce-Up cases using the “intent to retain” standard. With the Senate expected to confirm Republican nominee John Ring to the Board the week of April 9, there appears to be a likely new (3-2) majority at the Board who are primed to “re-examine” the Obama Board’s interpretation of Spruce-Up, likely in order to nix the “intent to retain” standard.  However, pending any re-examination and return to the earlier Spruce-Up standards, employers acquiring new businesses with bargaining units that wish to implement new terms of employment should cautiously comment on plans for the new workforce -- and only commit to hiring all workers – after making it very clear that new terms and conditions of employment will apply to new hires.

Congress and the President have waded in to the ongoing debate regarding employers’ use of “tip pools” under the Fair Labor Standards Act (“FLSA”) by passing the Tip Income Protection Act (“TIPA”) as part of the omnibus spending bill. The FLSA permits an employer to take a partial credit against its minimum wage obligations based on employee tips ifthe employee retains all of his or her tips, or they are made part of a tip pool shared only with employees who “customarily and regularly receive tips.” See29 U.S.C. § 203(m). Thus, an employer utilizing a tip credit to comply with minimum wage obligations cannot establish a tip pool that includes non-tipped employees (e.g., back-of-the-house restaurant employees).  The FLSA left the allocation of tips unregulated where an employer did not use tip credits. In 2011, the Department of Labor (“DOL”) issued a regulation applying the limitation on the use of tip pools to cases where the employer did not take a tip credit and paid employees the full federal minimum wage.  See29 C.F.R. § 531.52.  A number of federal courts concluded that the regulation was inconsistent with the text of the FLSA.  See, e.g., Marlow v. New Food Guy, Inc., 861 F.3d 1157, 1163-64 (10th Cir. 2017) (2011 DOL regulation was inconsistent with the FLSA, which did not authorize the agency to “regulate the ownership of tips when the employer is not taking the tip credit”).  However, the Ninth Circuit disagreed, reasoning that because the FLSA is “silent as to the tip pooling practices of employers who do not take a tip credit” it should defer to the DOL.  Oregon Rest. and Lodging Ass’n v. Perez, 816 F.3d 1080, 1090 (9th Cir. 2016). In 2017, the DOL announced proposed rulemaking to rescind the 2011 regulation.  Seehere and here. After much deliberation regarding the proposed agency action, Congress enacted TIPA, which states, in relevant part: “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” TIPA also provides that the 2011 regulation shall have “no force of effect.”  An employer that violates TIPA may be liable for any tip credit taken, the amount of the withheld tips, liquidated damages, and $1,100 civil penalty for each violation. Stated simply, TIPA limits the permissible use of tip pooling for allemployers irrespective of whether an employer takes advantage of a tip credit or whether its employees’ regular hourly rate exceeds the minimum wage.  However, TIPA’s language raises a number of interpretive questions, such as: What does it mean for an employer to “keep tips” received by employees?  The law very likely prohibits an employer from diverting tips directly to its own coffers.  But does an employer “keep tips” by implementing a standard tip pool that does not include “managers or supervisors?” TIPA does not define a manager or supervisor.  Assuming TIPA permits standard tip pools, does an employer violate the law if the pool includes modestly-paid hourly employees with minimal management responsibilities and limited or no ability to discipline employees (e.g., shift leads)? These are a few of the questions employers with tipped employees will confront in the coming months and years as we await additional guidance from the courts and the DOL.  Employers in the restaurant and other industries should closely analyze how they distribute employee tips to ensure compliance with TIPA. We will keep readers apprised of important judicial and agency interpretations of TIPA.

The new General Counsel of the National Labor Relations Board (“Labor Board”), Peter Robb, continues to reshape the agency with his vision.  Consistent with his January 2018 promise to consider “settlements of any kind that are not inconsistent with the Act,”  the Labor Board has settled unfair labor practice charges brought against McDonald’s USA, LLC (“McDonald’s”) regarding allegations that it should be held liable -- as a joint employer --  for the unfair labor practices (“ULPs”) committed by its franchisees.  This litigation involved the consolidation of nineteen ULPs, filed in over a dozen regional offices, alleging that McDonald’s franchisees interfered with their workers’ attempts to improve their terms and conditions of employment, and terminated supporters due to their protected, concerted activity. This settlement brings to a conclusion the three years of ongoing dispute between McDonald's and the Labor Board.  While the settlement has not been publicly disclosed and still must be ratified by the Administrative Law Judge (“ALJ”), it is likely that she will approve the settlement because it provides full restitution to affected employees. Unions and their advocates stated they will be filing objections with the ALJ.  They are disappointed by the inclusion of a “non-admissions clause,” where McDonald’s would not need to admit that it terminated employees or harassed them for engaging in the “Fight for $15” collective action. Some context is required.  In December 2017, the Labor Board issued its decision in Hy-Brand, which overruled the joint employer test articulated in Browning-Ferris, and held that two independent employers will be found to be joint employers only where they exercise “direct and immediate” control over the essential terms and conditions of employment.  Subsequently, General Counsel Robb requested a stay of the McDonald’s proceedings to determine whether the Complaint allegations were consistent with the holding in Hy-Brand. Less than two months later, the Labor Board vacated Hy-Brand based on a report from the Labor Board’s Inspector General concluding that Member William Emanuel should have recused himself from considering Hy-Brand since his previous law firm represented a party in the Browning-Ferris case.  Per the Inspector General, since Hy-Brand re-examined the Labor Board’s Browning-Ferris decision, Member Emanuel “is and should have been, disqualified from participating” in the decision.  The Labor Board has (for now at least) restored the Browning-Ferris joint employer test, which allows the Labor Board to find liability where it is indirect or reserved (even if not exercised) authority to control another employer’s employees’ terms and conditions of employment. Going forward, employers should be encouraged by the General Counsel’s willingness to settle complicated litigation.  Considering that the prosecution of McDonald’s was a priority by his predecessor, its settlement, along with the purported non-admissions clause, bodes well for the resolution of labor disputes without further and expensive litigation.

A recent decision by the U.S. Court of Appeals for the 7th Circuit provides insight into the sometimes confusing world of when an employer can make decisions unilaterally, and when management must bargain with a union before making a change in employees’ working conditions. In Columbia College Chicago v. NLRB, Nos. 16-2080 & 16-2026 (7th Cir. 2017), the U. S. Court of Appeals reversed a ruling by the National Labor Relations Board (NLRB) that Columbia College Chicago unlawfully refused to bargain over its unilateral decision to make credit-hour changes to its performing arts curriculum. Columbia is a private, independent college that specializes in communication, media and the arts. The Part-Time Faculty Association (PTFA) represents more than 1,200 part-time faculty members at the college. At all relevant times, Columbia and PTFA were parties to a Collective Bargaining Agreement (CBA). The CBA contained a management rights clause that permitted Columbia to make decisions regarding educational, fiscal and employment policies without negotiating with PTFA. Under the CBA, Columbia determined part-time faculty compensation based in part upon the number of credit hours for the course. Columbia was required to notify the affected instructor, but not PTFA, if any significant changes, including credit hours, were made to a course. The CBA also contained a “zipper clause,” which stated the parties had full opportunity to make proposals and the CBA contains all understandings and agreements between the parties. Amidst contentious bargaining for a new contract, Columbia unilaterally decided to reduce the credit hours for ten courses. Columbia notified the affected instructors, but not PTFA. PTFA’s Unfair Labor Practice (ULP) charge alleged Columbia unlawfully refused to bargain over the effects of the credit hours reduction. In March 2013, an NLRB Administrative Law Judge (ALJ) found that Columbia failed to engage in effects bargaining, among other violations related to the protracted negotiations. Columbia appealed to the NLRB, and a divided panel upheld the ALJ’s findings. Columbia appealed to the 7th Circuit Court of Appeals in Chicago. The Court applied the “contract coverage” test it had previously adopted, which the U.S. Court of Appeals for the D.C. Circuit has also adopted. Applying that test, the Court gave effect to the management rights clause, and held that Columbia lawfully refused to bargain over the effects of its decision to reduce credit hours because that matter was “covered by the contract.” The Court stated that because the effects of the bargaining decision were the inevitable consequences of the bargaining decision, the consequences were also “covered by the contract,” and Columbia was not obligated to engage in separate effects bargaining. Although Columbia would have been obligated to bargain over the effects of the decision if the parties’ CBA or bargaining history demonstrated intent to treat effects bargaining separately from bargaining over the decision itself,” the Court found no evidence of such intent. The NLRB, and other Courts of Appeal that have addressed this issue apply a standard that presumes an obligation to bargain exists unless the CBA demonstrates a “clear and unmistakable waiver” by the Union of its right to bargain. Whether an Appeals Court would have reached a different decision under that standard is unclear; the breadth and specificity of Columbia’s management rights clause would provide a strong argument that the outcome would be the same. Lessons Learned A well-crafted management rights clause in a CBA can be a critical asset to an employer—it permits management to make decisions without having to bargain with the union over the decision itself as well as the effects of that decision. Unionized employers should review their management rights clauses and assess whether they permit unilateral action under either the “contract coverage” test or the “clear and unmistakable” waiver standard.

The U.S. Department of Labor (DOL) recently announced a new pilot program, referred to as the Payroll Audit Independent Determination (“PAID”) program, which allows employers to conduct self-audits of its pay practices using the DOL’s compliance materials.  If an employer determines its pay practices are not in compliance with the Fair Labor Standards Act (FLSA), or if an employer believes its practices are lawful but wishes to resolve any potential claims without the need for litigation, the employer may self-report the issue to the DOL’s Wage & Hour Division and certify it has changed the practice to comply with the FLSA. The DOL will evaluate the employer’s information and confirm the amount of back wages due to employees if any.  The DOL will then issue releases of claims limited to any self-identified violations, which employees may sign to receive payment of any wages due.  Employees are not obligated to accept a payment or sign a release of claims, so participation in the PAID program may not insulate participating employers from litigation.  It is also unclear what impact participation in the PAID program might have on state-law wage and hour violations, which may have a longer statute of limitations than the FLSA.  In addition, an employer that self-reports violations pursuant to PAID may invite further investigation from the DOL or other state agencies. For employees who choose to settle the employer-identified violation, the employer must pay the back wages by the end of the next full pay period. The PAID program allows employers to avoid liquidated damages or civil monetary penalties for any self-identified violations of the FLSA.  Further, the PAID program may be used to resolve inadvertent violations of the FLSA, such as failure to pay employees for off-the-clock work, the maintenance of unlawful comp time structures, or employee misclassification issues. Employers cannot conduct self-audits via the PAID program for claims that are already being investigated, nor can employers use the PAID program for repeat-violations. The PAID program will be piloted for a six month period, so the DOL may adjust the parameters of the program at a later date.  While participation in the PAID program may be beneficial to employers with inadvertent, minor FLSA violations, it may not be right for all employers.  Employers that are interested in participating in PAID, or conducting an internal audit of payroll processes, would be wise to work with counsel.  Stay tuned for further updates on the pilot program.

Peter Robb, General Counsel of the National Labor Relations Board (“NLRB, “Board,” or “Agency”), has proposed budget cuts that he contends are necessary to streamline some of the NLRB’s internal processes. Per Mr. Robb, despite a steady decline in NLRB case filings in recent years, the Agency has not updated its investigative processes since the 1980s. Mr. Robb has proposed further changes to the NLRB, including combining NLRB field offices and shifting more decision-making authority to the NLRB’s Washington office. In addition, Mr. Robb is considering a series of changes to the way the NLRB processes unfair labor practice and union representation cases, including shortening investigation times, imposing strict deadlines on parties in cases, and emphasizing settlement. These proposed budget cuts have caused consternation among some NLRB employees. In a letter to Senator Patty Murray of the Senate Appropriations Committee dated March 15, 2018, a group of nearly 400 Agency employees asked lawmakers to spare the NLRB from the proposed cuts to its annual budget. According to the employees, a proposed nine percent budget cut to the NLRB’s funding would limit the NLRB’s ability to investigate and adjudicate unfair labor practice charges and union representation cases. In the letter, the employees requested that Congress “fight to preserve the NLRB’s funding at FY2017 levels adjusted for inflation,” and further stated that “[i]f the NLRB’s budget and staff are reduced, the Agency will not be able to effectively serve the public and fulfill its core mission to protect workplace democracy while maintaining industrial peace.” The employees, who represent about 25 percent of the NLRB’s nationwide workforce, further expressed concern that the proposed budget cut could “inevitably leave the public further in the dark about their rights under federal labor law.” The employees signed the letters in their personal capacities. The NLRB is currently funded by a continuing resolution, which is set to expire March 23, 2018. Congress is widely expected to extend funding to the NLRB through the rest of the fiscal year

On March 5, 2018, in a decision styled Shell v. Burlington Northern Santa Fe Railway Company, Case No. 15-cv-11040 (N.D. Ill. Mar. 5, 2018), the U.S. District Court for the Northern District of Illinois suggested liability could attach where an employer regarded an obese individual as disabled, in violation of the Americans with Disabilities Act, as amended (“ADA”). As previously reported in this blog, courts have held that obesity is not a disability under the ADA.  To qualify as a disability, a physical or mental impairment must substantially limit a major life activity. However, the Equal Employment Opportunity Commission has issued interpretive guidance providing physical characteristics, such as weight, do not qualify as disabilities unless they are (a) outside of a “normal” range and (b) result from a physiological disorder. In this case, BNSF Railway (“BNSF”) maintained a policy prohibiting employees with a body mass index (“BMI”) over 40 from holding safety-sensitive positions based on its belief that such individuals are at a substantially higher risk of developing medical conditions that “can manifest as a sudden incapacitation or a serious impairment of alertness or cognitive ability.”  Ronald Shell applied for the position of the intermodal equipment operator, a job category that BNSF classified as safety-sensitive because it involves using heavy equipment.  However, a post-offer physical established that Shell’s BMI was 47.5 and his conditional job offer was withdrawn.  Shell filed suit, alleging discrimination under the ADA, and BNSF moved for summary judgment. In support of its Motion for Summary Judgment, BNSF argued that Shell was not protected by the ADA because obesity -- by itself -- is not a disability.  The Court acknowledged controlling precedent on this point and further found that BNSF did not regard obesity as a disability.  However, the Court pointed to the fact that BNSF’s policy is based on concerns that someone with a BMI over 40 “would develop sleep apnea, diabetes, or heart disease” and become incapacitated.  All of these conditions, the Court noted, are disabilities.  As a result, the Court held that BNSF was “acting based upon an anticipated worst case scenario derived from precisely the sort of myth, fear, or stereotype which the ADA is meant to guard against,” and denied summary judgment under the “regarded as” prong of the ADA. While this issue is likely to receive additional consideration from the appellate courts, in the meantime employers should continue to use caution when dealing with employment issues related to obesity. Shell v. Burlington Northern Santa Fe Railway Company, Case No. 15-cv-11040 (N.D. Ill. Mar. 5, 2018).

On February 26, 2018, the U.S. Second Circuit Court of Appeals held that sexual orientation is covered by Title VII of the Civil Rights Act of 1964, aligning with a previous decision issued by the Seventh Circuit.  The Second Circuit’s decision further amplifies the existing Circuit split, as the Eleventh Circuit previously held that Title VII’s protections do not extend to sexual orientation. The plaintiff in the case presented was a skydiving instructor who claimed he was terminated after his employer learned of his sexual orientation from a customer.  The District Court dismissed Plaintiff’s Title VII claim on summary judgment, ruling in pertinent part that, as a matter of law, sexual orientation is not a characteristic protected by Title VII.  The plaintiff’s New York claim for sexual orientation discrimination went to trial, where the employer prevailed.  After final judgment was entered, the plaintiff appealed the dismissal of his Title VII sex discrimination claim to the Second Circuit. On appeal, the Second Circuit vacated the district court’s decision and held that sexual orientation discrimination is a form of sex discrimination actionable under Title VII.  Judge Robert A Katzman, writing for the majority, explained: “[S]exual orientation discrimination is a subset of sex discrimination because sexual orientation is defined by one’s sex in relation to the sex of those to whom one is attracted, making it impossible for an employer to discriminate on the basis of sexual orientation without taking sex into account.” While the Second Circuit further noted that sexual orientation was not originally intended to be included under Title VII’s protections, it reached the ultimate conclusion that the reach of the law should be expanded to encompass sexual orientation as a “reasonably comparable evil.” Employers should continue to monitor the law in each Circuit wherein it maintains operations and remain diligent in this evolving area of federal law given the current Circuit split on this issue.  Court watchers expect this issue to eventually be resolved by the U.S. Supreme Court.  Stay tuned to the blog, where we will continue to keep you updated regarding this and other major employment law issues. A link to the Second Circuit’s recent opinion can be found here: Zarda et al. v. Altitude Express, dba Skydive Long Island, et al., Case No. 15-3775 (2nd Cir. 2/26/18).

On February 26, 2018, the National Labor Relations Board (“NLRB”) issued an Order vacating its recent decision on the issue of joint-employer in  Hy-Brand Industrial Contractors & Brandt Construction Co., 365 NLRB No. 156 (2017).  The 3-0 decision by the NLRB (in which Member William Emanuel did not participate) effectively reinstates the NLRB’s controversial “indirect control” joint-employment test from the Browning-Ferris decision.  362 NLRB No. 186 (2015). The NLRB’s Hy-Brand decision, issued 3-2 along party lines on December 14, 2017, had sought to overturn the NLRB’s previous Browning-Ferris joint-employer jurisprudence.  In Browning-Ferris, the NLRB departed from long-established jurisprudence and determined that a joint-employment relationship could be found where an entity maintained “indirect control” over another entity’s employees’ terms and conditions of employment, or where “industrial realities” dictated the finding of a joint-employment relationship. Critically, Member Emanuel was a shareholder working at the same law firm that represented a party to the Browning-Ferris decision, yet still participated in the Hy-Brand decision.  Upon issuance of the Hy-Brand decision, the Charging Parties sought reconsideration from the NLRB and the recusal of Member Emanuel from any further case proceedings on the grounds that his former law firm was involved in the Browning-Ferris decision. Given the request for recusal, the NLRB’s Designated Agency Ethics Official investigated the propriety of Member Emanuel’s participation in the Hy-Brand decision.  The Ethics Official determined that because Member Emanuel would have been prohibited from participating in the Browning-Ferris decision as a result of his former firm’s involvement in the case, he was likewise barred from participating in the Hy-Branddecision because Hy-Brand involved the same legal arguments as Browning-Ferris.  Accordingly, based upon the Ethics Official’s determination, the NLRB vacated Hy-Brandand disqualified Member Emanuel from any further case proceedings.    Companies that rely on contingent staff or temporary workforces should proceed carefully (for now), as the NLRB’s “indirect control” joint-employment test from Browning-Ferris is once again the state of the law.  However, it is widely expected the NLRB will revisit the joint-employment issue in a different case once nominee John Ring, a management-side labor and employment attorney, is confirmed as the NLRB’s fifth member.  Mr. Ring’s confirmation is expected in the coming weeks.  In addition, the seemingly-mooted challenge to Browning-Ferris will now return to the U.S. Court of Appeals for the D.C. Circuit for further proceedings.  Stay tuned, as we will cover further updates to both the Hy-Brand and Browning-Ferris sagas, as well as other key NLRB rulings.

On February 22, 2018, the U.S Sixth Circuit Court of Appeals determined a union acted properly when it continued collecting union dues from members who did not follow protocol when seeking to revoke consent to their signed dues checkoff authorizations. Plaintiffs worked for a unionized grocery store in Michigan.  The collective bargaining agreement between the employer and the union allowed the employer to deduct union dues from an employee’s paycheck if the employee signed a dues checkoff authorization form.  The form provided that the dues checkoff authorization would be irrevocable for one year or until the termination date of the agreement, whichever occurred sooner, and thereafter for one-year periods unless revoked by certified mail during a 15-day window each year. Plaintiffs signed the authorization forms.  Three years later, they resigned their union memberships and sought to revoke their dues checkoff authorizations.  However, Plaintiffs did not follow the revocation protocol; they sent their written revocations by regular mail, not certified mail, and did so outside the 15-day revocation period.  The union refused to accept the revocations and the employer continued to deduct union dues from Plaintiffs’ wages, which the union continued to accept.  Plaintiffs filed a putative class action against the union, alleging the union violated 1) section 302 of the Labor Management Relations Act (“LMRA”) by imposing conditions on their ability to revoke their dues checkoff authorizations and 2) its duty of fair representation under the National Labor Relations Act (“NLRA”) by enforcing said conditions.  The district court dismissed the complaint as a matter of law, and the Sixth Circuit affirmed. The Sixth Circuit quickly disposed of Plaintiffs’ LMRA claim.  Specifically, section 302 of the LMRA does not contain an express private right of action.  The Court further explained that section 302 does not contain an implied private right of action either because Congress when drafting section 302, did not “imply a right of action in ‘clear and unambiguous terms.’”  Section 302 “does not create person-specific rights.”  Rather, “it focuses on the persons regulated rather than the individuals protected.” The Court also affirmed the dismissal of Plaintiffs’ NLRA claim, ruling that Plaintiffs failed to show the union’s conduct was “arbitrary, discriminatory, or in bad faith.”  Specifically, Plaintiffs agreed to the 15-day revocation window and the certified mail requirement when they signed the dues checkoff authorization form.  Having agreed to the requirements, Plaintiffs could not argue the union acted arbitrarily when enforcing those provisions.  When “holding [Plaintiffs] to this contract, the union did not act in bad faith.” This decision provides a timely reminder to unionized employers that deduct union dues from employees pursuant to dues checkoff authorizations to continue to deduct such dues until the employee properly revokes the checkoff authorization.  Employers with questions regarding dues checkoff authorizations and dues deductions would do well to consult with counsel.

In Digital Realty Trust, Inc. v. Somers, No. 16-1276 (U.S. Feb. 21, 2018), the U.S. Supreme Court determined that the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) is limited to individuals who report a violation of the securities laws to the Securities and Exchange Commission (“SEC”) under § 78u-6(h). The plaintiff alleged that defendant terminated him shortly after he reported suspected securities law violations to senior management, in violation of Dodd-Frank’s anti-retaliation provision.  Although plaintiff could have alerted the SEC prior to his termination, he did not do so. In the district court, the defendant moved to dismiss the claims, arguing that plaintiff did not qualify as a “whistleblower” under Dodd-Frank because he did not report any alleged violations to the SEC. The trial court deferred to the SEC’s Rule 21F-2, which provides that Dodd-Frank’s retaliation procedures could apply in situations where information was not provided to the SEC, so long as the individual provided information shielded by one of the anti-retaliation provision’s three clauses. A divided panel of the Ninth Circuit affirmed. The Supreme Court observed that its charge was to determine the meaning of “whistleblower” within the context of Dodd-Frank’s anti-retaliation provision. With that task in mind, the Court explained the statute defines a “whistleblower” as “any individual who provides information relating to a violation of the securities laws to the Commission.” The statute further instructs that the definition applies throughout the anti-retaliation provision. The definition clearly identifies who is eligible for protection under Dodd-Frank (an individual who provides information “to the Commission”), and the three clauses of the anti-retaliation provision clearly delineate what conduct is shielded from employment discrimination. The Supreme Court held that both requirements must be met to invoke Dodd-Frank. The Court buttressed its conclusion in two other respects. First, it observed that a separate whistleblower protection in Dodd-Frank did not require that information be conveyed to a governmental agency. The Court reasoned that the inclusion of the reporting requirement in § 78u-6(h), but not in other parts of Dodd-Frank, was an intended difference in meaning.  Second, it noted that the core objective of the whistleblower program is to motivate individuals with knowledge of securities law violations “to tell the SEC.” Therefore, the Court concluded that both the text and purpose of the statute make clear that an individual does not qualify as a whistleblower under § 78u-6(h) unless he provides information to the SEC. Somers signals a rejection of an expansive view of Dodd-Frank’s anti-retaliation provisions.  While employers may benefit from this narrower definition, the Court’s ruling may ultimately lead to limited opportunities for internal corporate resolution, as whistleblowers may be incentivized to report concerns to the SEC rather than internally. RETALIATION AND WHISTLEBLOWER DEFENSEFEBRUARY 26, 2018

On January 10, 2018, the Northern District of California certified a state-wide class of non-exempt hourly employees who allege that they were not fully compensated for all time spent submitting to their employer’s bag inspection requirements. (Heredia v. Eddie Bauer, LLC, January 10, 2018, Freeman, B.). In this case, the employer maintained a formal written policy that required all hourly employees who carried a bag that could be used to conceal merchandise to submit to a personal property or bag inspection by a member of management before leaving the store at the end of their shift. Problematically, the written policy at issue was silent as to: Whether employees must clock out before or after undergoing the required inspections. Whether managers needed to inform employees that the inspections would be conducted on-the-clock. The employer claimed that all members of management were trained to conduct all bag inspections and to inform all employees that bag inspections were on-the-clock. When certifying the class, the Court found that both the commonality and typicality requirements of Rule 23 were met since there was a common question about whether the inspections were to be conducted off-the-clock or on-the-clock. The Court dismissed arguments that class treatment was inappropriate because not all hourly employees carried bags to work, finding that even if they did not carry a bag they were still required to inform management that they did not have a bag before leaving the store. The Court also dismissed the employer’s argument that the written policy did not specifically state that the inspections had to be conducted off-the-clock and were therefore not a policy or practice that resulted in off-the-clock inspections in every instance. A takeaway for employers enforcing a bag inspection: the policy should state that the inspection must occur while the employee is on-the-clock.  This will inform employees that they must stay clocked in for the inspection and will reinforce to management that they must ensure employees are clocked-in until the inspection is complete.

On February 8, 2018, the U.S. District Court for the Northern District of California ruled that meal delivery drivers working for GrubHub, Inc. are properly classified as independent contractors and not employees. This closely watched case provides “gig economy” companies with a trial decision and (at least temporary) guidance regarding how to classify certain workers. The Court’s decision relies on California’s multi-factor “Borello test” for determining whether workers are independent contractors. In this case the Court found that “Grubhub’s lack of all necessary control over [Plaintiff’s] work, including how he performed deliveries and even whether or for how long [he worked], along with other factors [such as providing his own vehicle and working for other companies]” was enough to tip the balance in favor of concluding that Plaintiff is properly classified as an independent contractor. Accordingly, Plaintiff is not entitled to minimum wage, overtime, expense reimbursement, worker’s compensation benefits, or other benefits of employment.  Consequently, he also could not prevail on his claims against GrubHub for violations of the California Labor Code or the California Private Attorneys General Act (PAGA). The watershed ruling provides at least temporary reassurance to gig economy companies in California that classify certain workers as independent contractors.  This relief could be short-lived, however, as the California Supreme Court recently heard oral argument in Dynamex Operations West Inc. v. Superior Court, which also addresses worker classification. The California Supreme Court is expected to decide whether the Borello test is the proper mechanism to determine whether a given worker has been correctly classified as an independent contractor, or whether the more rigorous “suffer and permit” test drawn from the California Industrial Welfare Commission wage orders (or another test entirely) should apply. We expect the California Supreme Court’s opinion to be issued in the next 90 days. Misclassification of employees remains an issue of great concern to both the California Industrial Welfare Commission and the U.S. Department of Labor. Employers with questions regarding whether a worker is properly classified would do well to work with counsel to avoid legal liability associated with misclassifying its workforce.  We will continue to follow this issue closely, so stay tuned for further updates. The Federal Court case is Lawson v. GrubHub, Inc., Case No. 15-cv-05128 (N.D. Cal.). The California Supreme Court case is Dynamex Operations West Inc., v. Superior Court, Case No. S222732.

On February 6, 2018, Airlines for America, a trade association and lobbyist organization for the American airline industry, filed a lawsuit in federal court in Washington State against the Washington Department of Labor & Industries challenging the state’s enforcement of its paid sick leave requirements against airline employers.  On behalf of its members, which include carriers, Airlines for America seeks declaratory and injunctive relief to invalidate Washington’s new Paid Sick Leave Act and to prohibit its enforcement with respect to flight crewmembers, such as pilots and flight attendants. Airlines for America is challenging the application of  Washington Paid Sick Leave Act to the airlines on the grounds that it violates the United States Constitution -- specifically, the Fourteenth Amendment’s Due Process Clause and the Commerce Clause -- because the law also applies  to employees outside the state of Washington and has a negative impact on interstate commerce. The lawsuit also challenges the sick leave law on the basis that it is preempted by the Airline Deregulation Act because it negatively impacts carriers’ “prices, routes, and services.” Washington voters passed the paid sick leave law in November 2016 and it took effect on January 1, 2018. In addition to establishing a statewide minimum wage, it requires employers to provide paid sick leave to employees at the rate of one hour of paid sick leave for every thirty hours worked. The law applies broadly to Washington employers and employees.  It does not include exemptions typically seen in other state and local paid sick leave laws for employees covered by collective bargaining agreements that provide for paid sick leave, or flight crewmembers under the Railway Labor Act. Without these exemptions for airline employees, carriers will have to comply with a patchwork of inconsistent state and local paid sick leave laws, which will cause an undue burden on the airlines’ operations. This legal challenge is an important development for airline employers as they determine the best way to comply with the paid sick leave laws sweeping the nation, while still operating a network of flights and mobile employees crossing state lines. Future court rulings may provide much-needed guidance on these important issues. Be sure to check back for future updates as we will continue to monitor this litigation.

The Pension Benefit Guaranty Corporation (“PBGC”) recently updated and expanded its Missing Participant Program. For most defined benefit plans with missing participants, this program has been a required step in the termination process since 2006. The new regulation, effective January 22, 2018, expands the program to include, on a voluntary basis, terminating defined contribution plans and thereby alleviates problems that employers have had since the Internal Revenue Service (“IRS”) and Social Security Administration (“SSA”) ceased helping to find missing participants through their letter forwarding program. Now, plan sponsors of terminating defined contribution plans may transfer accounts of missing participants to the PBGC to liquidate the plan and, hopefully, reunite missing participants with their accounts. The new PBGC program does not yet replace existing guidance from the U.S. Department of Labor (“DOL”) regarding missing participants. For example, DOL Field Assistance Bulletin 2014-01, identifies an Individual Retirement Account (“IRA”) as the preferred disposition of a missing participant’s account and does not envision the possibility that the account may be transferred to the PBGC. However, the preamble to the final regulation indicates DOL’s intent to review and possibly revise its guidance to coordinate with the PBGC’s final rule. In addition, below we review some common plan termination compliance snafus and how to avoid them:  Final Amendment(s): Regardless of the type of plan document, or how long ago it was restated, the document must be updated for all law changes up to the date of termination.  To a certain extent, the termination of a plan accelerates the amendment deadline for any recent law changes.   If the document is not properly updated, the qualified status of the plan will be at risk. Successor Plan Issues: Plan sponsors often assume that terminating a plan will enable participants to take a distribution.  This may not always be the case.  There is a rule applicable to terminating 401(k) plans, which may prohibit participants from taking a distribution until they actually separate employment.  This rule may be triggered if the plan sponsor maintains another plan or adopts a “successor” plan. Partial Termination:Upon plan termination, all affected participant accounts must become 100% vested.  However, similarly accelerated vesting must occur if there is a “partial termination” of the plan. A partial termination may occur when, for example, more than 20% of plan participants are laid off in a particular year. The IRS has published a website devoted to this concern. Filing Form 5310 with the IRS: A plan sponsor may request that the IRS issue a favorable determination letter upon plan termination. While not required, this is often advisable to provide assurance that the plan is not disqualified (through audit or otherwise) after final distributions have been made. Terminating a plan is often necessary. However, great care should be taken to ensure that the plan is properly wrapped up rather than unraveled.

Following last year’s trend, the Office of Federal Contract Compliance Programs’ (“OFCCP” or “Agency”) website indicates that February 1, 2018, the Agency mailed 1,000 Corporate Scheduling Announcement Letters (“CSALs”). The CSALs do not commence an audit – only a scheduling letter can do that – but they provide an advance courtesy notice that an organization has been identified by the Agency and may receive a scheduling letter for an audit. What does this mean? Organizations that receive CSALs should take the extra time provided to ensure their affirmative action programs and supporting documents are up to date and fully compliant. Organizations should also review their adverse impact data and any potential pay disparities. The CSALs have once again been sent directly to the attention of the Human Resources Director; therefore, it is important to alert HR representatives to watch for the letters. Take note, CSALs are not required by law prior to the issuance of a scheduling letter for an audit, which means federal contractors and subcontractors that do not receive a CSAL may still be scheduled for an audit. Whether an organization receives a CSAL or not, contractors can still receive scheduling letters, which the OFCCP’s website notes will be issued on March 19, 2018.  As a reminder, once an organization receives a scheduling letter, there are only 30 days to respond with the initial submission. Shifting from past practices, the OFCCP will limit audits in 2018 to: No more than 10 establishments of a single contractor placed on the scheduling list; No more than four establishments of a single contractor placed on the scheduling list for a single district office; and No establishment with an audit closed in the last five years is placed on the scheduling list. The OFCCP has not indicated which industries will be targeted, as it has done in past years. Polsinelli will continue to monitor developments and will provide updates as they become available. In the event your organization received a CSAL, we recommend you contact counsel immediately.

In 2014, the National Labor Relations Board (“NLRB” or “Board”) published the controversial “ambush election” rule, which was intended to decrease the time between the filing of a petition for representation and a union election. The rule, which became effective in April 2015, changed the scope of pre-election hearings and the timing and content of pre-election disclosures and required that the time between petition and election be less than thirty days. Employers and industry groups unsuccessfully challenged the rule in federal court. See, e.g., Associated Builders and Contractors of Texas v. NLRB, 826 F.3d 215 (5th Cir. 2016). Last month, the Board, over the scathing dissent of two members, issued a request for information regarding whether the NLRB should retain without change, modify, or rescind the “ambush election” rule. In response to dissenting members, the Board emphasized that its request “merely poses three questions” and “does not suggest even a single specific change in current representation-election procedures.” However, the Board’s dissenting members characterized the request as part of a bad faith effort to rescind or substantially revise the rule. Members Mark Pearce and Lauren McFerran each prepared dissents lambasting the majority’s request and extolling what they believe to be the benefits of the rule. Member Pearce characterized the Board’s request as a search for “alternative facts to justify rolling back the [NLRB’s] progress in the representation-case arena.” Member McFerran made a similar objection, stating that the request amounts to “little more than an open-ended ‘raise-your-hand-if-you-don't-like-the-Rule’ straw poll” that is unlikely to generate meaningful feedback. Arguably more consequential is Member McFerran’s suggestion that the Board failed to articulate a reasoned basis for reconsidering the rule and, thus, any changes would run afoul of the Administrative Procedure Act. Perhaps laying the groundwork for future legal challenges, Member McFerran cautioned that “it should come as no surprise” in the future if a reviewing court “looks back skeptically” at what she characterized as a “partisan effort to roll back," the rule. The deadline to respond to the Board’s request for information is March 19, 2018. We will keep a close watch on the Board’s rulemaking process and provide substantive updates.

The U.S. Department of Labor’s (“DOL”) Office of the Inspector General (“OIG”) is investigating the rule-making process relating to the DOL’s new tip pool regulation in response to reports that the DOL buried internal estimates regarding the proposal’s impact on workers. On February 5, 2018, the OIG informed the DOL’s Wage and Hour Division that OIG will audit the DOL’s rule-making process regarding the tip-pooling rule. The DOL’s internal oversight office launched the review on February 2, 2018. Also on February 5, Democratic state attorneys general from 17 states — led by California, Illinois, and Pennsylvania—wrote to the DOL threatening litigation on the grounds that the DOL’s failure to release regulatory data on tip pooling violates the federal rulemaking law, and may also violate the Administrative Procedure Act. The letter further expresses concern that the DOL refused to release an internal analysis regarding the rule’s projected impact on worker tips. Employee advocates have also expressed serious reservations regarding the tip pooling rule, as media reports suggest that the DOL’s internal analysis of the rule indicated employees could receive fewer wages as tips. The rule would allow tip pooling among restaurant servers and other workers who earn gratuities and back-of-the-house employees who do not, reversing a 2011 regulation providing that tips are the property of the workers who earn them. In addition, if an employer pays tipped workers at least the federal minimum wage of $7.25 per hour, the employer could also share in the tip pool. The DOL is currently soliciting comments regarding the regulation’s economic impact.  Employers in the restaurant business would do well to pay attention to further developments regarding the rule, which will be posted here. Stay tuned

Recently, NLRB General Counsel Peter Robb announced his intention to restructure the NLRB’s field office operations and revamp the NLRB’s current case processing procedures. On January 11, 2018, Robb hosted a conference call with the NLRB’s Regional Directors to inform them of his plan to reorganize the NLRB’s 26 Regional Offices into a smaller number of districts or Regions supervised by officials who would report to the General Counsel. On January 29, 2018, Beth Tursell, who heads the NLRB’s Operational Management Division and reports directly to Peter Robb, issued a “Case Processing Memo,” which sets forth a number of suggested changes to the NLRB’s procedures, including: 1) Requiring all parties to respond to inquiries from the NLRB within two days or face closure of the investigation 2) Reducing the amount of time allotted for investigations from two weeks to one week, depending on the case type 3) Directing agency officials to seek settlements in “all” cases “in lieu of litigation,” (even without approval from the Regional Director) Some of the proposals outlined in the Case Processing Memo have drawn criticism. Specifically, if the proposals are implemented, investigations will likely be shortened, which limits an employer’s ability to respond to an Unfair Labor Practice Charge.  Robb and Tursell have requested input from agency staff regarding these proposed changes. Thus, it remains to be seen whether the current proposals will be implemented “as is,” or if further changes will result prior to adoption. Employers, particularly those with unionized labor forces, would be wise to stay abreast of these and other possible changes and can do so by watching this space. Stay tuned for further updates.

As a general matter, many courts disfavor restrictive covenants in the employment context because they restrain trade. However, the law also seeks to prevent unfair competition. As a result, if an employer can point to a legitimate business interest in need of protection, it may be able to enforce a restrictive covenant agreement (RCA) that is narrowly tailored to protect that interest. What constitutes a protectable interest? This varies from state to state; however, courts typically recognize an employer’s need to protect the following: Confidential information and trade secrets Longstanding customer goodwill The value of specialized training Workforce stability. As with other considerations related to the enforceability of RCAs, what qualifies as a protectable interest will vary from state to state. To protect these interests, employers typically employ a combination of the following devices: Nondisclosure Noncompete Customer/client nonsolicitation Employee nonsolicitation. Of these, a non-compete is the most difficult to enforce and will receive the closest scrutiny from a court during an enforcement action. Unlike a nonsolicitation provision, which focuses on preventing a former employee from stealing an employer’s customers on behalf of a competitor, a non-compete provision prevents an employee from working for that competitor at all. Because a non-compete can significantly limit an individual’s ability to earn a living, courts will evaluate a number of factors to determine whether the non-compete is reasonably necessary to protect the employer's interest—commonly referred to as the “Rule of Reason.” Click through toread the full article regarding the enforceability of restrictive covenants in different states and best practices employers can take to maximize their chances to enforce restrictive covenants. Note: this article was first published in Employee Relations Today’s Fall 2017 Edition, 2018 Wiley Periodicals, Inc.

By now, most employers are familiar with their obligations under the Americans with Disabilities Act of 1990 (ADA) to not discriminate against, and possibly provide accommodations for, qualified individuals with disabilities. However, these same employers may not be aware of the newest frontier of plaintiffs’ lawsuits — claims that company websites do not comply with the ADA. Title III of the ADA prohibits discrimination on the basis of disability in the activities of places of public accommodations. Places of public accommodations include businesses that are generally open to the public, such as restaurants, movie theaters, schools, day care facilities, recreation facilities, hospitals, and doctors’ offices. Title III of the ADA also requires newly constructed or altered places of public accommodation, as well as commercial facilities (privately owned, nonresidential facilities, including factories, warehouses or office buildings whose operations affect commerce), to comply with ADA standards. At the time of the ADA’s passage, the internet was not a consideration in the ADA’s provisions or implementation. However, given the internet’s now prevalent use for consumer applications, the ADA’s requirements now extend to include company websites. The growing consensus of the courts and the United States Department of Justice (DOJ), the agency responsible for enforcing Title III of the ADA, is that websites are places of public accommodation that must comply with the ADA. State laws may also impose similar compliance obligations on companies. The DOJ is reviewing websites for compliance. In actions brought by the DOJ, monetary damages and civil penalties may be awarded. Civil penalties may not exceed $50,000 for a first violation or $100,000 for any subsequent violation. Private parties may also file suit to obtain court orders to compel companies to bring their websites into compliance with the ADA’s public accommodation provisions. No monetary damages are available in such suits under federal law; however, reasonable attorneys’ fees may be awarded — making these attractive potential class actions for plaintiffs’ attorneys. State laws may also provide for monetary damages. The DOJ has not yet established binding regulations governing website ADA compliance, and is not expected to do so until 2018 However, it appears to be a near certainty that the DOJ will adopt the current “Web Content Accessibility Guidelines (WCAG-2.0) Level AA” (WCAG) as the relevant regulations. The WCAG explain how to make web content more accessible to people with disabilities. Web content generally refers to the information in a web page or web application, including natural information such as text, images, and sounds and code or markup that defines structure, presentation, etc. Until the adoption of binding regulations, the plaintiffs’ bar and the DOJ seem to be treating WCAG as the de facto standards for ADA compliance. Therefore, compliance with WCAG is highly recommended. Evaluating reasonable accommodation issues for applicants and employees is complicated enough. To keep pace with companies’ ever-growing list of compliance obligations, companies are strongly encouraged to seek counsel to determine whether their websites comply with the ADA and any applicable state laws.

The start of the year is prime time for employers to review employee handbooks. Many policies remain the same year after year. Employers may wish to pay attention to certain policies due to recent changes in the law. 1. Defense of Trade Secrets Act (DTSA) notice. If your company has a confidential-information policy or requires employees to sign non-disclosure agreements, then you should consider including notice of the DTSA’s immunity exceptions. Such notice permits the company to seek all available remedies under the DTSA should a given employee breach their obligations to keep certain information confidential. 2. Protected classes. Employers should review the list of protected classes in their policies prohibiting discrimination, harassment, and retaliation in order to ensure compliance with federal, state, and local laws. For example, the Equal Employment Opportunity Commission (EEOC) views sexual orientation and gender identity discrimination as a form of sex discrimination—and some cities and states prohibit such conduct. 3. Nursing mother policy.The Patient Protection and Affordable Care Act (ACA) requires employers subject to the Fair Labor Standards Act (FLSA), (unless they have fewer than 50 employees and can demonstrate that compliance would impose an undue hardship), to provide unpaid, reasonable break time for an employee to express breast milk for one year after her child’s birth. Several states and some municipalities have similar requirements. 4. Drug and alcohol-free workplace policy.With an increasing number of states enacting both medical and recreational marijuana use laws, employers should consider revising policies to clearly tell employees the employer’s stance on drug testing and how the use of marijuana (even when outside of the workplace) may impact the results of such tests and employment opportunities. In addition to the above considerations, the National Labor Relations Board (NLRB) has focused its attention on numerous handbook policies in its quest to protect employees’ rights to engage in protected, concerted activity. Employers should ensure their policies concerning confidential investigations, workplace recordings, positive employee attitudes, social media and communications, solicitation, and dress code comply with current NLRB decisions.

The Family and Medical Leave Act requires employers with 50 or more employees to permit eligible employees to take covered unpaid medical or caregiver leave.  How can an employer respond when an employee approved to take FMLA leave is later suspected of taking FMLA leave for an improper purpose, such as to moonlight at another job,  go on vacation, or  avoid undesirable work assignments? Nothing in the FMLA statute or regulations prevents employers from ensuring that employees who are on leave from work do not abuse their leave.  Fraud and dishonesty in the use of FMLA leave may be grounds for termination of employment.  An employer suspecting FMLA fraud or abuse may investigate and take action to deter future FMLA abuse. Below are several options to consider: Interviewing the Employee. Employers can investigate suspicious circumstances suggesting FMLA abuse by interviewing employees about their actions and whereabouts on the day(s) in question. Before interviewing the employee, the employer may gather publicly available information (e.g., social media) about the employee’s relevant activities. Other employees who may have witnessed relevant events may also be interviewed.    An employee’s inability to explain, or lack of credibility when explaining, his or her relevant actions or whereabouts may support a finding that the employee has lied or engaged in FMLA misuse.  When interviewing an employee in this context, it is suggested to consult with counsel to ensure the questions do not include prohibited medical inquiries or discourage or interfere with the legitimate taking of FMLA leave.  Private Investigation. Surveillance by a private investigator can document an employee’s physical movements and activities inconsistent with the taking of FMLA leave. Engaging counsel can help to ensure a proper scope of surveillance and that the employer is presented with appropriate facts upon which to assess the suspicion of FMLA fraud or abuse. Recertification.Employees who take intermittent FMLA in a pattern (e.g., every Friday) or under objectively suspicious circumstances (e.g., several employees take FMLA leave on the day after the Super Bowl) may be required to recertify the taking of FMLA. Although employers cannot challenge the medical opinions of the employees’ health care providers as part of recertification, the recertification request may deter future FMLA abuse. If recertification is not timely provided, FMLA can be denied. Recertification may be requested in conjunction with an employee interview or surveillance. Experienced counsel can guide employers through the strategic use of these and other techniques to investigate and deter FMLA fraud and abuse.

The U.S. Department of Transportation’s (“DOT”) new Final Rule modifying DOT regulation 49 CFR Part 40 (“Final Rule”) became effective January 1, 2018.  Specifically, the Final Rule affects employers of employees in safety sensitive positions, and includes changes to the types of drugs for which employers can test, as well as the manner in which employers submit specimens for testing. Changes to Drug Testing Panel The Final Rule modifies the drug testing panel to include testing for semi-synthetic opioids (i.e., hydrocodone, oxycodone, hydromorphone, and oxymorphone). In addition, the Final Rule 1) changed the name of the category of drugs to be tested from “opiates” to “opioids;” 2) removed testing for methylenedioxyethylamphetaime (MDEA); and 3) added testing for methylenedioxyamphetamine (MDA).  Now, the drugs for which employers must test employees subject to the Final Rule include marijuana, cocaine, amphetamines, phencyclidine, and opioids. Changes to Specimen Collection Employers and Consortium/Third Party Administrators are no longer required to submit blind specimens to laboratories. Under the prior regulation, an employer sent a blind specimen to a laboratory, accompanied by a Federal Drug Testing Custody and Control Form, with a fictitious donor name for quality control purposes to see whether the laboratory’s results matched the known contents of that particular blind specimen. Because no false positive results have been found in the last 25 years of drug testing through testing blind specimens, the DOT removed the blind specimen testing requirement. Other Notable Changes The Final Rule additionally changed Medical Review Officer (MRO) practices. In particular, a “prescription” is now defined as a legally valid prescription consistent with the Controlled Substances Act (CSA). This is a significant change: the CSA classifies marijuana as a Schedule I drug, so a prescription for medical marijuana under state law does not qualify as a legally valid prescription for DOT drug testing purposes. Furthermore, the Final Rule modifies the timing regarding when a MRO must communicate to a third party that the MRO considers an employee may be medically unqualified for their position or may pose a significant safety risk when performing a safety sensitive function.  Specifically, if an MRO determines that a legally prescribed medication may make the employee medically unqualified or cause him/her to pose a significant safety risk, the MRO must provide the employee with up to five business days to have his/her physician contact the MRO to discuss whether the medications can be changed to either a prescription that does not make the employee medically unqualified or a prescription that does not pose a significant risk before the MRO may report a safety concern to a third party, including the employer. Employers would do well to examine their DOT drug testing procedures to ensure compliance, and may do so with the assistance of able counsel.

In 2017, the Centers for Disease Control reported that more than one-third of U.S. adults are obese.  But does that mean that one-third of U.S. adults are disabled?  Not necessarily.  The California Supreme Court decided twenty-five years ago in Cassista v. Community Foods, Inc. that obesity can qualify as a disability under the state anti-discrimination statute if it results from a physiological condition affecting a basic bodily system, and limits a major life activity.  However, the California Court of Appeal’s recent decision in Cornell v. Berkeley Tennis Clubseems to have eased a plaintiff’s burden of proving obesity qualifies as a disability. The plaintiff in the case, Ketryn Cornell, who was objectively obese, was employed by the Berkeley Tennis Club (the “Club”) for more than 15 years, holding positions as a life guard, tennis court washer and pool manager during her tenure.  She received positive performance reviews, raises, and bonuses until she was terminated for allegedly concealing a recording device when attempting to record a board meeting.  Recording a private conversation without every participant’s consent is a crime under California law.  Ms. Cornell denied planting the recording device and sued the Club under the Fair Employment and Housing Act (FEHA) alleging, among other things, that the Club discriminated against her and harassed her because of her disability -- obesity.  In support of her claims, Cornell produced evidence that her supervisor made several insensitive remarks and took several actions regarding her weight, including 1) suggesting that she undergo weight-loss surgery; 2) directing the kitchen staff not to give her extra food because “she doesn’t need it;” and 3) refusing her request that the Club special order a uniform that would fit as an accommodation.  The trial court granted the Club’s motion for summary judgment, holding that Cornell failed to produce evidence that her obesity qualified as a disability. The Court of Appeal reversed as to the discrimination and harassment claims.  On the discrimination claim, the Court held that the Club failed to show that Cornell could not establish that her obesity had a physiological cause. Importantly, the Court found that a physiological cause could include a genetic cause and, to defeat summary judgment, it was sufficient for Cornell’s doctor to find a genetic cause based on nothing more than her body mass index.  The Court also determined that the Club’s failure to adequately investigate the recording allegations and the discriminatory comments of her supervisor were sufficient evidence to defeat summary judgment.  As to the harassment claim, the Court found a triable issue as to whether the alleged harassment was sufficiently severe and pervasive.  Although the supervisor’s inappropriate comments about Cornell’s weight, standing alone, were too isolated to preclude summary judgment, the Court also considered evidence that the supervisor reduced Cornell’s hours, passed her over for internal jobs, and paid her less.  Taken together with the weight-based comments, the Court concluded this evidence was sufficient to preclude summary judgment on the harassment claim. In light of Cornell, California employers should take complaints of obesity discrimination and requests for accommodation based on obesity seriously.  As with other bases of discrimination and harassment, California employers should consult with experienced employment counsel to ensure that effective policies are in place to prevent disability discrimination and harassment and to investigate obesity-based complaints when they arise.

On January 5, 2018, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) reissued 17 Opinion Letters that were previously issued in January of 2009 in the waning days of the Bush administration. The Obama administration promptly withdrew the Opinion Letters in March, 2009, “for further consideration.” Subsequently, the Obama DOL discontinued the practice of issuing Opinion Letters in favor of publishing more Administrator Interpretations. The requirements of the Fair Labor Standards Act (FLSA) and the Family Medical Leave Act (FMLA) are established by statutes and regulations promulgated by the DOL.  Employers or other interested parties may seek guidance from the WHD regarding interpretation of the FMLA and FLSA.  In response, the WHD may provide official written explanations of the FLSA or the FMLA requirements through Opinion Letters. Notably, Opinion Letters are intended to be “fact-specific,” based on the facts presented in the individual inquiry. The 17 re-issued Opinion Letters are fact-specific. Many of the re-issued Opinion Letters are based on specific job positions in specific industries, i.e., the exempt status of civilian helicopter pilots, the exempt status of project superintendents of a commercial construction company, and the exempt status of clinical coordinators and business development managers for a temporary medical professional provider.  Other reissued Opinion Letters opine regarding calculating the regular rate of pay for firefighters and alarm operators under a collective bargaining agreement, the exempt status of client service managers at an insurance company, and the application of the retail or service exemption to plumbing sales/service technicians, compensation of “on-call” hours of ambulance personnel. The Opinion Letters do not create “new law,” but rather may provide employers with guidance as they navigate the strictures of the FMLA and the FLSA.  Employers concerned with whether a given Opinion Letter may apply to their specific problem would do well to discuss the matter with able counsel. For a complete list of the re-issued Opinion Letters (including a link to the Opinion Letters), visit https://www.dol.gov/whd/opinion/flsa.htm. 

It’s a new year, and a new session for the active California Legislature. On January 3, 2018, in a likely effort to respond to the #MeToo movement, the Stand Together Against Non-Disclosure Act (“STAND” or the “Bill”) was introduced in the California Senate.  The Bill seeks to prohibit parties, including all public and private employers in California, from including nondisclosure provisions in settlement agreements in cases involving sexual assault, sexual harassment and/or sex discrimination. Intends to Expand Existing Law: California law currently prevents parties from including confidentiality provisions in settlement agreements related to claims for certain sexual offenses, including felony sex offenses, childhood sex abuse, sexual exploitation of a minor, or sexual assault of an elder or dependent adult.  The STAND Act seeks to expand these prohibitions to claims for sexual assault, sexual harassment and sex discrimination, unless a claimant requests the inclusion of a nondisclosure provision in the settlement agreement.[1] Unintended Consequences: As currently drafted, the Bill appears to have at least three unintended consequences: Permits the inclusion of confidentiality provisions in settlement agreements for claims that have yet to be filed with the courts.  Thus, parties may seek to resolve a claim prior to filing.  Many sexual misconduct lawsuits are highly fact intensive and at times require significant investigation.  Employers will likely have more incentive, especially in the current charged environment, to resolve a claim regardless of whether they believe there was misconduct to avoid public disclosure and potential damage to the employer’s reputation.  Consumer Attorneys of California believe that confidentiality provisions at the request of the claimant will provide a guarantee of privacy to those who would not otherwise speak out.  The unilateral election for confidentiality in the hands of the claimant could result in higher settlement demands for the inclusion of a confidentiality provision in the settlement agreement. Once a complaint is filed, parties may be less likely to settle the claim since confidentiality cannot be required in a settlement agreement post-filing of the complaint.  This may result in the use of additional judicial resources, including more jury trials and law and motion filings. Stay tuned as this important Bill works its way through the legislative process.    ------------------------------ [1] Please see our recent blog regarding provisions of the recently passed Tax Cuts and Jobs Act of 2017 that provide negative tax consequences to employers that include confidentiality provisions in settlement agreements resolving allegations of sexual misconduct.

When President Elect Trump is inaugurated, he will immediately have the opportunity to appoint two new members of the National Labor Relations Board (NLRB). Both of those appointees will be Republican appointees, and will immediately provide the NLRB with a Republican majority. A new “Trump Board” will have the opportunity to review existing decisions as new cases arise, but due to the time progression of most NLRB cases, the result of this review will not likely be felt prior to the middle of 2018. This blog post will review precedential decisions established by the present “Obama Board” that are likely to be considered,revised, or reversed by the new Trump Board. Joint Employment.Since 2011, the NLRB has expanded the definition of joint employment. When two or more employers are found to be joint employers, they both have the same responsibilities to recognize and bargain with a union selected by their employees. Recently, the NLRB ruled that fast food franchisers and franchisees may be joint employers. Similarly, the NLRB determined that a business may be a joint employer of temporary employees supplied by a staffing agency, and that those temporary employees may be counted along with employees directly hired by the business to form a bargaining unit. The NLRB’s decisions have not depended upon whether both employers actually control the terms and conditions of employment of the temporary employees, but rather whether the putative joint employers have the authority to control such terms, regardless of whether such authority was ever exercised. Also, the Obama Board found that if a business can indirectly control employees by influencing the contractor who hired the employees, that indirect authority is sufficient to establish joint employment. A new Trump Board may reverse the joint employer decisions and revert to traditional NLRB principles, which only lead to a joint employer finding when both employers actually and directly control the terms and conditions of employment of employees in a bargaining unit. If the new Trump Board reaches such a determination, then franchisers and businesses who utilize contracting services that bring in temporary employees are much less likely to be considered joint employers. Micro-Units.Prior to the Obama Board, the NLRB most often determined that bargaining units comprised of all employees at a facility (with certain limited exceptions) were presumptively appropriate. The Obama Board reversed that doctrine and placed the burden on the employer, rather than the organizing union, to demonstrate that a small group of employees was an appropriate or inappropriate bargaining unit. Specifically, if there exists a sufficient community of interest among a small group of employees (i.e., common terms and conditions of employment), then the Obama Board considers that group of employees to be a presumptively appropriate bargaining unit, and an employer must show by “overwhelming evidence” that a broader group of employees should be included in the proposed bargaining unit. This decision, known colloquially as Specialty Healthcare and its progeny, paved the way for ”micro-units” that consist of only a few employees (e.g., only the cosmetics and fragrance employees at a Macy’s in Massachusetts). A new Trump Board could reverse the present policy and eliminate the presumptive appropriateness of “micro-units.” Handbook Interpretations. Numerous NLRB decisions over the last several years have concluded that provisions frequently included in employee handbooks are unlawful and overly broad because they might have a chilling effect on employees who wish to exercise their rights under the National Labor Relations Act (NLRA). In one case, the Obama Board determined that a handbook rule prohibiting “harassment” was too broad because it might cause employees to believe they could not vigorously argue with co-workers in the context of a union organizing campaign. Similarly, handbook provisions that required employees to keep investigations regarding employee misconduct confidential were held to be unlawful because employees could possibly construe such a prohibition as preventing them from discussing terms and conditions of employment. It is likely that a Trump Board will reverse these decisions and allow employers broader discretion in promulgating handbook provisions and other workplace rules. Mandatory Arbitration and Class Action Waivers. The NLRB has held that individual contract provisions between an employee and an employer requiring an employee to resolve disputes through arbitration and prohibiting employees from joining class actions filed in courts are unlawful. The NLRB found that these provisions, and particularly the prohibition against participating in class actions (e.g., “class action waivers”), prevented employees from joining together to address wages, hours, working conditions as specified in Section 7 of the NLRA. At the present time, two federal courts of appeals have sustained the NLRB’s decisions prohibiting mandatory arbitration and class action waivers and two courts of appeals have refused to follow those decisions. While a Trump Board is likely to reverse the Obama Board position, the issue may still be addressed by the Supreme Court because there is now a split among the federal circuit courts. Social Media Policies.Since 2011, the NLRB has limited an employer’s discretion to prohibit employee communications on social media about the employer. Among other things, employer efforts to restrict employees from social media communications about the employer’s workplace, supervisors, and/or products have been found to unlawfully limit an employee’s Section 7 rights. Again, it is likely that the new Trump Board will allow employers greater latitude to prohibit employee statements on social media, particularly with respect to statements about the employer’s products. The Obama Board attempted to facilitate union organization and limit the authority of employers to restrict communications by employees that might relate to efforts to improve wages, hours and working conditions. While the effect may not be felt for some time, it is likely that many of the changes initiated by the Obama Board will be sharply cut back or reversed by a new Trump Board.

As 2017 drew to a close, two key members of the National Labor Relations Board (“NLRB” or “Board”) signaled their readiness to revisit the Board’s current stance regarding the confidentiality of severance agreements. All employers should take notice. In a footnote to the Board’s December 27, 2017 order denying summary judgment in Baylor University Medical Center, 10-CA-195335, Members Marvin E. Kaplan and William J. Emanuel, both appointed by President Trump, not only expressed their concurrence with the order but further noted their belief “to the extent not already permitted under Board precedent, the legality of confidential severance agreements for former employees should be reconsidered.”  Days before the issuance of the Baylor University Medical Center order, President Trump named Member Kaplan the Board’s Acting Chair. Confidentiality provisions of agreements resolving alleged workplace sexual harassment allegations came under increasing fire in 2017 as reports circulated regarding Hollywood icons as well as high profile news anchors, commentators and executives, and the #MeToo national awareness campaign gained steam across professions and industries. Recent Decisions by the Obama-Era Board have indicated strong disfavor of “confidentiality” obligations imbedded in such instruments as “non-disclosure” and “non-disparagement” agreements, otherwise known as NDAs. Previously, the Board has barred such contractual obligations upon finding they overreach and infringe on certain rights of employees (unionized and non-unionized alike) to engage in “concerted activities” protected under the National Labor Relations Act (in other words, acting collectively to protect not only themselves but coworkers). Specifically, the Board has invalidated such provisions by finding they tend to chill employees’ Section 7 rights under the Act to discuss terms and conditions of their employment. Indeed, only rarely would the Board in the Obama Era uphold such provisions absent determining them to be very narrowly tailored. The December 27 footnote to what would have been an otherwise obscure Board Order by Members Kaplan and Emanuel caught the attention of employers throughout the country. These comments by the Board’s newest Members (including now the Acting Chair) portend another shift of the Trump Board away from the prior Obama Board, clearly signaling the Board may become more tolerant of employer-imposed confidentiality restrictions in not only severance agreements (as noted by Members Kaplan and Emanuel) but also NDAs. Such a shift would be similar to that recently announced on December 14, 2017 whereby the Board took a more lax position evaluating employer personnel policies, one that will generally be more favorable to employers seeking to enforce workplace rules.

The U.S. Department of Labor ( “DOL”) recently announced that it is abandoning its six-factor test and will use the “primary beneficiary” test first enunciated by the 2nd Circuit in Glatt et al. v. Fox Searchlight Pictures, Inc. et al., 811 F.3d 528 (2d Cir. 2015)   The DOL stated the primary beneficiary test “eliminate[s]unnecessary confusion among the regulated community” and will provide DOL’s investigators increased flexibility to “holistically analyze internships on a case-by-case basis. The DOL’s website provides a Fact Sheet that identifies seven factors employers should consider when determining whether an intern is an employee: The extent to which the intern and the employer clearly understand that there is no expectation of compensation, and any promise of compensation, express or implied, suggests that the intern is an employee. The extent to which the internship provides training that would be similar to that which would  be given in an educational environment, including  the clinical and other hands-on training provided by educational institutions. The extent to which the internship is tied to the intern’s formal education program by integrated course work or the receipt of academic credit. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic year. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern. The extent to which the intern and the employer understand that the internship is conducted without an entitlement to a paid job at the conclusion of the internship. When applying the new test, employers should keep in mind that no single factor is decisive.  Each analysis should apply all seven factors to the facts and circumstances of each internship. The DOL’s decision to adopt the primary beneficiary test comes as welcome news for employers.  Specifically, the primary beneficiary test seems to allow employers to utilize interns to the extent the intern understands the internship will not be paid, is conducted without a guarantee of a paid job at its conclusion, and provides hands-on training, among other things.  When considering bringing on an intern, an employer would do well to define the parameters of the internship in writing, and should further consider putting to writing an agreement with the intern reflecting the unpaid nature of the internship.

Employers, take note:effective January 1, 2018, 18 states, as well as several cities across the country, increased the minimum wage. Companies with employees in Alaska, Arizona, California, Colorado, Florida, Hawaii, Maine, Michigan, Minnesota, Missouri, Montana, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, and Washington should review their pay practices to ensure compliance with the new state minimum wage rates. Additionally, according to the Economic Policy Institute, 39 localities across the United States have adopted a minimum wage above even their own state’s minimum wage.  Legislators in Oregon, Maryland, and Nevada have introduced bills to increase the minimum wage in their respective states in 2018. And in cities and counties in California, Illinois, Maryland, Maine, Minnesota, New Mexico, and Washington, D.C., ordinances to raise the local minimum wage rate are being considered as well. With these changes, 29 states and Washington D.C. have a higher minimum wage than the federal minimum wage rate. Thus, employers with employees in more than one state must ensure compliance with federal law, and may also have to ensure compliance with state and local law regarding minimum wage. With the constant changes in minimum wage rates coming at both the state and local level, employers would do well to audit their pay practices in the New Year.

Employers take note: a provision contained in the recently-passed Tax Cuts and Jobs Act of 2017 (the “Act”) now limits tax deductions for certain types of settlement agreements. Specifically, Section 13307 of the Act, styled “Denial Of Deduction For Settlements Subject To Nondisclosure Agreements Paid In Connection With Sexual Harassment Or Sexual Abuse,” (“Section 13307”) prohibits employers from taking income tax deductions for: Any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement; or Attorney’s fees related to such settlements. Previously, when the parties in a dispute involving allegations of sexual harassment or misconduct settled those claims, they agreed to a nondisclosure provision in the settlement agreement. In other words, both parties would be prohibited from disclosing the terms and amount of the settlement (with corresponding penalties resulting from any violation of the provision). The nondisclosure provision did not affect whether any monies paid pursuant to the terms of the settlement agreement were tax-deductible. Now, however, if a settlement agreement subject to Section 13307 of the Act contains a nondisclosure provision, then the parties to the settlement agreement may not take a tax deduction for the amount of the settlement or any corresponding attorneys’ fees. Another potential problem that employers may face relates to settlements that resolve multiple claims. Indeed, instances arise where employees and employers settle matters that resolve sexual harassment claims and non-sexual harassment claims in one fell swoop. Section 13307 does not define the terms “related to sexual harassment or sexual abuse” so careful drafting of the settlement agreement and/or ancillary agreements is recommended to maximize opportunities to deduct payments that are not subject to Section 13307. Furthermore, a portion of attorney’s fees attributable to non-Section 13307 claims may also be deductible. Stated simply, the scope and breadth of Section 13307 remains murky, and it will take time before clear answers to the above-listed questions emerge. Thus, employers defending against allegations of misconduct covered by Section 13307 would do well to discuss the implications of settling such claims with competent counsel.

Recently, we reported that the “new” National Labor Relations Board (“NLRB” or the “Board”) has commenced the anticipated roll back of decisions and procedures rendered by the Obama Administration’s NLRB. On Friday, December 15, 2017, the NLRB issued another important decision with far-reaching implications for all employers. In Boeing Company, 365 NLRB No. 154 (2017), the NLRB established a new standard for evaluating whether workplace rules, policies, or employee handbook provisions unlawfully interfere with employees’ exercise of rights under Section 7 of the National Labor Relations Act (“NLRA”). Under the new standard established in Boeing, the NLRB will balance the impact an employer’s proffered rule may have upon an employee’s Section 7 rights to engage in protected concerted activity against the employer’s business justification for the rule. The NLRB indicated it would categorize the results of future decisions in three ways: Category 1 will include rules the NLRB designates as lawful because (i) the rule, when “reasonably interpreted,” does not prohibit or interfere with the exercise of Section 7 rights; or (ii) the potential adverse impact on protected rights is outweighed by the employer’s business justification(s) for the rule. Category 2 will include rules warranting individual scrutiny on a case-by-case basis as to whether the rule would prohibit or interfere with Section 7 rights, and if so, whether any adverse impact on employees’ protected conduct is outweighed by legitimate justifications. Category 3 will include rules that the NLRB will designate as unlawful because they would prohibit or limit NLRA-protected conduct, and the adverse impact on employees’ Section 7 rights is not outweighed by legitimate business justifications. The Board specifically identified employer policies that would prohibit employees from discussing wages or benefits with each other as an example for this third category. The three categories identified by the NLRB represent a classification of results from the NLRB’s application of the new test and are not part of the test itself. The NLRB will determine in future cases the types of additional rules that fall into each category. The new balancing test established in Boeing Company overrules the “reasonably construe” standard in place since 2004. Under the “reasonably construe” standard, the NLRB could conclude that a proffered work rule violated the NLRA so long as an employee could “reasonably construe” the rule to interfere with their Section 7 rights. The Board’s new balancing test seeks to provide employees, employers and unions with greater clarity and certainty. While it will take time to determine the full impact of the Boeing decision, the fact that the new balancing standard requires the NLRB to consider the business purpose of a rule is a remarkable shift in the Board’s evaluation of workplace rules, policies and employee handbook provisions. In light of the new balancing test, employers should consider clearly articulating the business justification(s) for workplace rules, policies, and procedures, particularly those that could conceivably implicate rights arising under Section 7 of the NLRA.

Pursuant to Wage Orders promulgated by California’s Industrial Welfare Commission, most non-exempt employees in California are entitled to a paid 10 minute rest break for every 4 hours worked or major fraction thereof. In December 2016 the California Supreme Court clarified in Augustus v. ABM Security Services, Inc. (2016) 2 Cal. 5th 257, 260, that during said rest breaks, “employers must relieve their employees of all duties and relinquish any control over how employees spend their break time.” As we anticipated when this decision first came out, there has been a steady uptick in litigation about this matter as the courts work to define the nature of relinquishing control in the context of a 10 minute rest break. Prior to Augustus, the California Labor Commissioner, Division of Labor Standards Enforcement (“DLSE”) directed that employers could require employees to stay on the premises during rest breaks. However, in the wake of Augustus, in November 2017, the DLSE published updated guidance on the provision of rest breaks to California non-exempt employees and made clear that employers “cannot impose any restraints not inherent in the rest period requirement itself,” including whether employees may leave the premises. As the New Year approaches, California employers should ensure they are meeting the requirements of California rest break law. California businesses should: Review and update policies to reflect that employees entitled to rest breaks may take them at the location of their choosing; Train managers and supervisors on requirements for rest breaks for California employees to ensure expectations are properly communicated; and Communicate to eligible employees their rights regarding rest breaks. If you have concerns that your business may have unintended liability for the provision of rest breaks or you have concerns about remaining compliant, please contact your Polsinelli attorney.

At the end of an unprecedented week of reversals of “Obama Board” precedent, the National Labor Relations Board (“NLRB” or “Board”) reversed its 2011 decision in Specialty Healthcare & Rehabilitation Center of Mobile,357 NLRB 937 (2011), casting aside the concept of micro-units and reverting back to the traditional community of interests test for determining bargaining unit appropriateness in representation cases. In PCC Structurals, Inc.,365 NLRB No. 160 (2017), the International Association of Machinists & Aerospace Workers filed a petition for election with the NLRB, seeking to represent a unit of approximately 100 production employees. The Employer, a metal casting company, objected to the unit and argued that its maintenance employees shared the same community of interests as the production employees. It asserted that a wall-to-wall bargaining unit, consisting of 2,565 production and maintenance employees, was the only appropriate unit. The Regional Director disagreed and concluded that the maintenance employees did not share an “overwhelming” community of interests with the production employees. The Employer lost the representation election in this micro-unit by sixteen votes. On appeal, the newly constituted Republican majority reversed and remanded. In a 3-2 decision, the Board discarded the “overwhelming” community of interest standard, and reinstated its pre-2011 standard “that the Board has applied throughout most of its history” allowing it to “evaluate the interests of all employees – both those within and those outside the petitioned-for unit.” The majority criticized the NLRB’s Specialty Healthcare decision for changing the standard for appropriateness in representation petitions, disputing that there ever was a need to “clarify” the traditional community of interests test. Focusing on the interests of excluded employees, which it believed was ignored by the “overwhelming” community of interests standard, the NLRB held, “We believe Specialty Healthcare effectively makes the extent of union organizing ‘controlling,’ or at the very least gives far greater weight to that factor than statutory policy warrants, because under the Specialty Healthcare standard, the petitioned-for unit is deemed appropriate in all but rare cases.” The traditional test will focus on whether the excluded employees share the same community of interest as those in the petitioned-for unit and consider factors such as functional integration, organizational/departmental structure, skills and training, interchangeability, common supervision, along with similarities/differences in working conditions, wages and benefits. In a strongly worded dissent, the Democratic members of the NLRB chided their Republican colleagues as being hypocritical and opportunistic, in light of their newly found majority status and the impending departure of Chairman Miscimarra (who left the NLRB the following day). It argued, “Instead of performing its statutory duty…the Board’s newly-constituted majority seizes on this otherwise straightforward case as a jumping off point to overturn a standard that has been upheld by every one of the eight federal appellate courts to consider it.” As with the recent decision on joint employers, this decision is an overdue but welcome victory for Employers. Challenges to “arbitrary” or “irrational” designations of micro-units will likely be much more successful under the traditional standard. A Union’s ease in organizing smaller and smaller units will become more difficult.

On December 14, 2017, the National Labor Relations Board (“NLRB” or the “Board”), issued a case styled Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156, that expressly overruled the controversial Browning-Ferris Industries of California, Inc.,362 NLRB No. 186(Browning-Ferris)decision issued in 2015. When doing so, the Board reverted to its prior (and longstanding) joint-employer standard. In a 3–2 vote, the Board overturned the joint-employer standard enunciated in Browning-Ferris, which provided that two or more entities, such as a company and a contractor, would be considered joint employers where (for example) the company possessed “indirect control” over aspects of the contractor’s workforce, such as wages, hours, or other material terms and conditions of employment. The Board majority commented: “We think that the Browning-Ferris standard is a distortion of common law as interpreted by the board and the courts, it is contrary to the [National Labor Relations Act], it is ill-advised as a matter of policy, and its application would prevent the board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.” The Board then announced it was returning to its longstanding joint-employer standard that existed prior to Browning-Ferris, which provides that two or more separate entities ( such as the company and contractor discussed above) will be considered joint-employers where the company exerts “direct and immediate” control over the contractor’s employees’ terms and conditions of employment. According to the Board majority: “A finding of joint-employer status shall once again require proof that putative joint employer entities have exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’” Applying the reinstated joint-employer standard, the Board affirmed the Administrative Law Judge’s determination that Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. -- companies owned by the same individuals --are joint employers and therefore jointly and severally liable for the unlawful discharge of seven striking employees. The Hy-Branddecision represents a welcome change for employers that make use of another entity’s employees, such as franchisors and franchisees or contractors and subcontractors, among many other business relationships. Indeed, the Board’s decision to overrule Browning-Ferrisprovides businesses with greater certainty when entering into relationships with other entities, and further decreases the risk an employer will be found liable for a separate entity’s unfair labor practices.

In two recent developments, the “new” National Labor Relations Board (“NLRB” or the “Board”), which includes two Members nominated by President Trump, has commenced the anticipated roll back of decisions and procedures rendered by the previous Administration’s NLRB. 1. The NLRB General Counsel can no longer demand settlements with a full remedy for all violations. In UPMC, 365 NLRB No. 153 (December 11, 2017), the Board reversed a 2016 decision that prohibited settlements of NLRB complaints over the objection of the NLRB General Counsel (Prosecutor) and the party filing the charge, unless the settlement provided complete remedies for all violations alleged in the Complaint. The 2016 decision, United States Postal Service,364 NLRB No. 116 (2016), had overturned decades-long NLRB precedent established inIndependent Stove, 287 NLRB 740 (1987). In the UPMCmajority’s (Chairman Philip Miscimarra, Member William Emanuel, Member Marvin Kaplan) view, requiring a settlement of all violations with a full remedy for the employees (and union) “imposed an unacceptable constraint on the Board itself which retained the right under prior law to review the reasonableness of any … settlement terms” offered by Respondents (employers and unions). According to theUPMC majority, the 2016 USPSdecision unduly restricted the settlement of NLRB cases and ignored the risks inherent in NLRB litigation. The UPMC decision now allows a Respondent, with approval of the Administrative Law Judge, to settle a case without providing full and complete relief, so long as the resolution is “reasonable.” This approach should facilitate more settlements, and reduce the costs and uncertainty inherent in litigation (for employers and the NLRB). The dissent strongly disagreed with what it called “an eleventh hour” decision during Republican Chairman Miscimarra’s last week as a Board member. However, Chairman Miscimarra will soon likely be replaced by another Republican. 2. The NLRB seeks comments on quickie elections – is more change likely? The day after the UPMCdecision, the NLRB published a Request for Information (“RFI”) in the Federal Register seeking prompt public comments about the controversial 2014 Election Rule, commonly referred to as the “quickie election” rule. Specifically, the RFI seeks public input from December 13, 2017 until February 12, 2018 regarding the following three questions: Should the 2014 Election Rule be retained without change? Should the 2014 Election Rule be retained with modifications? If so, what should be modified? Should the 2014 Election Rule be rescinded? The “quickie election” rule, effective since April 2015, impacted NLRB elections in three main ways: It significantly shortened the time period between the date a petition for election is filed and the date of the election. As a result, elections frequently took place approximately three weeks after the petition was filed. This period shortened employers’ time to respond to the union’s campaign efforts from approximately 6 weeks to 23 days. It considerably restricted the scope of any pre-election challenges that might result in litigation, such as individual voter eligibility issues, unless the question relating to eligibility affected twenty percent (20%) of the proposed unit. Eligibility issues, including determining who is a supervisor and thus is precluded from voting, were generally delayed until after the elections if the union won. It forced employers to disclose a substantial amount of private employee information to the unions, including providing unions with employee contact information. In particular, the employer is required to disclose, for the first time, employee personal email addresses and phone numbers, including all cell phone numbers. Previously, only mailing addresses needed to be disclosed. While the “quickie election” rule has not substantially increased union election win percentage, opponents of the rule have objected to the limited time it provides employers to communicate with employees regarding the election, the deferral of election eligibility issues until after the election, as well as the procedural challenges. Takeaways Moving forward, interested parties should monitor the new Board’s actions. The recent developments indicate the new Board could likely overturn some of the decisions rendered and procedures proffered by President Obama’s NLRB.

Earlier this year, we reported that the San Francisco Board of Supervisors passed legislation to assist working mothers by requiring employers to provide additional accommodations for lactation. On January 1, 2018, the Lactation in the Workplace Ordinance (the “Ordinance”) takes effect. The City of San Francisco’s Office of Labor Standards and Department of Public Health (collectively, the “City”) has published sample forms and guidance for employers to consider when preparing such policies. As a brief refresher, the Ordinance requires virtually all employers (there is no minimum employee threshold) to provide employees a lactation location that is (1) not a bathroom, (2) free of intrusion, (3) clean and safe, (4) available as needed and (5) that has a surface (e.g., a counter or table), electricity, and a chair. There must also be a sink and refrigeration nearby. The space provided may be the employee’s normal work area or a multipurpose room to the extent it meets these requirements. Because of ambiguity regarding the Ordinance’s key terms, the City also has published a “Best Practices and Legal Requirements Checklist” for employers to consider when developing lactation policies. To be clear, the information contained on the checklist goes beyond the legal requirements, and the City advocates that employers—to the extent possible—dedicate a permanent, private room or space for lactation, to include the following: Internal lock, clock, adjustable temperature control, footstool, Wi-Fi, telephone, mirror, lockers, partition, hospital grade breast pump, tape and pen for labeling containers, amongst other things; Reservation system to use the room; External signage; Regular janitorial servicing; and Access to educational literature and resources. The City also proposes several “best practices” for employers to consider when accommodating lactation breaks requested by employees. These include providing employees, upon request, with temporary reduced hours or modifications to job duties, job sharing, flex time, alternative work schedules, and/or telecommuting. If practicable and not otherwise prohibited, the City also encourages employers allowing caregivers to bring the child to the workplace for feedings. While not expressly required by the Ordinance, these “best practices” shed light on how City regulators may interpret the Ordinance’s provisions when determining whether an employer is in compliance with the Ordinance. Please contact your local Polsinelli employment lawyer if you have questions about this Ordinance or would like us to review your company’s policy and approach to compliance with this new law.

On December 4, 2017, the Department of Labor (“DOL”) proposed a rule that will rescind the 2011 regulation prohibiting restaurants, bars, and other service industry employers from requiring front-of-house employees, such as servers, to share tips with back-of-house workers, such as cooks and dishwashers. The current rule does not require tipped employees to share their tips with non-tipped employees; however, the proposed rule, which was first announced in July, will allow employers to require tipped employees to split tips with their co-workers. “The proposal would help decrease wage disparities between tipped and non-tipped workers,” the DOL said in a statement Monday. Under the Fair Labor Standards Act (FLSA), the federal law which governs minimum wage and overtime, employers may take what is called a “tip credit,” meaning they can pay tipped employees less than the minimum wage (the federal tipped minimum wage $2.13 however some states require more) so long as the tips earned by a given employee will increase their wage rate to at least $7.25 an hour (or the state minimum wage, if higher).  Under the DOL’s new rule, employers may choose to not take a tip credit by paying all employees minimum wage. If an employer pays everyone minimum wage, the employer could decide how to split tips received from customers as the tips would no longer be the property of the employee. The proposed rule only applies to employers who pay tipped employees at least the federal minimum wage of $7.25 an hour (or the state minimum wage, if higher than the federal minimum wage) and allow compensation sharing through a “tip pool” with employees who usually do not receive tips, such as cooks and dishwashers. The DOL will accept public comments on the proposed regulation for 30 days (until January 4, 2018). If you have questions about how the proposed rule will affect your business, contact the Labor and Employment attorneys at Polsinelli.

Medical leaves pose operational and legal challenges for employers. As we have previously addressed, those challenges multiply when the employee’s medical leave stems from a workplace injury and workers’ compensation laws are added to the employer’s compliance challenges. Indeed, such injuries can result in the employee seeking leave for an indefinite amount of time. To avoid the uncertainty and difficulties caused by employee absences of indefinite duration, some employers have implemented a “maximum leave” policy – a policy that limits the total amount of leave (from all laws and policies) that an employee can take in a given period of time. However, even a very generous maximum leave policy could violate the Americans with Disabilities Act (ADA), as some courts have held that extended leave can be considered a “reasonable accommodation” of an employee’s disabling condition. Similarly, the U.S. Equal Employment Opportunity Commission has taken the position that “maximum leave” policies are subject to exceptions in the interactive process and that an employer should reasonably accommodate an employee seeking an exception unless doing so will cause an undue hardship. Below are three steps that an employer can take to reduce the risk of an ADA violation when implementing a “maximum leave” policy. 1. Maintain Flexibility The EEOC has recently obtained multi-million dollar consent decrees and settlements from employers that sought to enforce maximum leave policies with respect to disabled employees.  An employer that implements a maximum leave policy may need to consider granting an employee leave beyond the “maximum” allowed leave as an accommodation under the ADA. Accordingly, employers may wish to consider including a statement in any maximum leave policy which provides that there are situations where leave time beyond the stated limit will be granted. 2. Communicate Carefully with Employees Some employers send form letters to employees who are approaching the end of the maximum leave period, which state that the employee must either return to work at the end of the maximum leave period or face termination. The EEOC’s guidance on maximum leave policies suggests that it may consider these communications to violate the ADA. Employers may wish to consider tempering those letters and adding a request that the employee advise the employer by a date certain if the employee believes they may need further leave as an accommodation. 3. Train Employees Employers may wish to train employees that leave may be granted as an accommodation under the ADA and that a maximum leave policy does not prohibit such an accommodation. In particular, employers would do well to train human resources officials, other employees who implement the policy, and all managers on the need to maintain flexibility regarding maximum leave policies to avoid running afoul of the ADA.