On July 17, 2017, the U.S. Citizenship and Immigration Services (“USCIS”) released a new version of Form I-9, Employment Eligibility Verification. USCIS reports that employers can use this revised version immediately or continue using the previous Form I-9 (which references a revision date of November 14, 2016) through September 17. Starting on September 18, employers must use the new version Form I-9 (with a revision date of July 17, 2017). Employers must also continue following existing storage and retention rules for any previously completed Form I-9 as well as for the new form. See the new I-9 and completion instructions here. Why This Change is Important In the event of an Immigration and Customs work site investigation, an employer’s failure to record a new hire’s identity and employment authorization on the proper version of Form I-9 may be considered a substantive violation or a technical violation. Substantive violations or uncorrected technical violations can subject an employer to civil fines ranging from $216 to $2,156 per employee. The changes made by USCIS to Form I-9 include minor revisions to the Form I-9 instructions, changing the name of the Office of Special Counsel for Immigration-Related Unfair Employment Practices to its new name, Immigrant and Employee Rights Section, and removing “the end of” from the phrase “the first day of employment.” In addition, several changes were made to the list of Acceptable Documents. The Consular Report of Birth Abroad has been added as a List C document, and USCIS renumbered all List C documents except the Social Security card. For example, the employment authorization document issued by the Department of Homeland Security on List C changed from List C #8 to List C #7. As the Administration is focusing on immigration worksite compliance, we recommend employers review current compliance practices and procedures to ensure that all requirements are being met.

The restaurant industry is a major target of Fair Labor Standards Act collective and class action litigation. Employers are experiencing an increase in lawsuits related to the 80/20 “rule” for servers’ duties and how it affects the tip credit. Under the FLSA, if a tipped employee performs two or more jobs, one that generates tips and one that does not generate tips, an employer may not take a tip credit for the non-tipped work and must pay the employee minimum wage. See 29 C.F.R. § 531.56(e). Tip-related job duties, such as “a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses,” do not constitute a dual job and the employee is not entitled to earn minimum wage for those tip-related duties. Accordingly, an employer may claim a tip credit for the tip-related duties, even though all of the duties do not produce tips, without violating the FLSA. Tip-related duties are called “side work.” The side work rule is subject to two limitations. First, if the side work is not incidental to the employee’s tipped work, the employee must be paid minimum wage for that work. Incidental work could consist of, for example, a server rolling silverware, filling salt and pepper shakers, cleaning tables, and making coffee. Non-incidental work includes, for example, sweeping the parking lot, taking out trash, and dusting the restaurant, and this sort of work is subject to payment of minimum wage. Second, if the side work, even though tip related, occupies more than 20 percent of the employee’s workweek, the employee must earn minimum wage for that work. This is known as the “80/20 rule.” Examples of side work for restaurant servers that fall under the 20 percent of the 80/20 Rule include, but are not limited to: filling bins with lettuce, tomatoes, condiments, and sauces; cutting lemons; setting up dishes and glassware at bar; slicing garnishes for the bar; lining baskets with wax paper for hamburgers; assembling stacks of sliced tomatoes, pickles, onions; breaking down sheets of prepared desserts into smaller pieces; stocking server stations with plates, glasses, silverware; rolling silverware; sweeping and mopping floors; stocking “to-go” containers; dusting window blinds and sills; cleaning and breaking down expeditor’s line, soup stations, and salad areas; taking out the garbage; breaking down and cleaning tea, coffee, and soda stations. Interestingly, the 80/20 rule is not found in a binding regulation but, rather, is found in the U.S. Department of Labor’s (“DOL”) Field Operations Handbook. Jurisdictions are split as to whether an 80/20 rule violation is a valid FLSA cause of action. The 8th and 7th Circuits have given the DOL’s Field Operations Handbook deference and held that servers have a cause of action for wages under the 80/20 rule. However, that idea has been challenged by the District of Arizona, which rejected that the FLSA’s regulations (rather than the Field Operations Handbook) provided that all“related” un-tipped work exceeding 20 percent must be paid at the minimum wage. Rather, the court found the server occupation “inherently includes side work” and thus the defendant employer was “entitled to take the tip credit for the entirety of the tipped server occupation” whether the duties being performed were actually being tipped or not. Because of this split in the Circuits, restaurants should be aware of the 80/20 rule and whether it has been held a valid cause of action in their applicable jurisdiction. Restaurants in jurisdictions where the 80/20 rule is applicable should audit the duties performed by their servers and track how much time they spend on side work to determine that their pay practices are compliant with the FLSA.

In recent weeks, we have blogged about a number of employer-friendly decisions related to Article III standing under the Fair Credit Reporting Act (FCRA). (See here and here). We have highlighted the standing doctrine and the importance of strict FCRA compliance. Another recent decision highlights the importance of compliance when obtaining consumer reports. In Graham v. Pyramid Healthcare Solutions, Inc., 2017 WL 2799928 (M.D. Fl. June 28, 2017), the plaintiff alleged that the employer utilized an FCRA disclosure that contained extraneous information in violation of the law’s standalone disclosure requirement. The employer’s disclosure improperly included: (i) the logo of the consumer reporting agency; (ii) blank lines for “Organization Name” and “Account”; (iii) the address and phone number of the consumer reporting agency; (iv) a statement that a copy of “A Summary of Your Rights Under the FCRA” was attached; (v) various state law disclosures; and (vi) an authorization “requiring … putative class members to forego their legal rights.” Id. at *1. The employer contended that the plaintiff did not have standing because the inclusion of extraneous information did not cause a concrete injury. The court rejected the argument in a three-paragraph analysis, concluding that the plaintiff established standing because the employer “procured a consumer report … without following the FCRA’s disclosure and authorization requirements.” Id. at *2-3. The court went on to certify a class of all applicants who received the non-compliant FCRA disclosure. It reasoned that whether the “disclosure forms violated the FCRA” and “whether Defendant’s conduct was willful” did not require an individualized inquiry. Id.at *7. “[A]ny violations stemming from the same FCRA disclosure form were uniformly directed to all members of the putative class.” Id. The court’s brief decision could be read to suggest that any number of technical FCRA violations (e.g., use of disclosures containing extraneous information) create Article III standing. However, this finding is arguably inconsistent with the Supreme Court’s admonition in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016) that a plaintiff “cannot satisfy the demands of Article III by alleging a bare procedural violation” of the FCRA. Id.at 1544. In any event, given the unsettled nature of federal standing doctrine, employers should be careful to comply with the strict requirements of the FCRA. What This Means for Employers The Grahamcourt’s decision highlights the costly nature of FCRA violations. Once a plaintiff establishes a violation and convinces the court of Article III standing, the statutory violation (or lack thereof) is often apparent on the face of the FCRA-related document(s) (e.g., disclosures, pre-adverse action notices, etc.), and potentially renders the case susceptible to class treatment. In cases based on the inclusion of extraneous information in mandatory disclosures, plaintiffs’ counsel may find it relatively easy to certify several-thousand-member classes comprised ofallindividuals who underwent background checks after receiving the improper disclosure(s). Thus, employers should seek to minimize their FCRA exposure by: Updating FCRA documents (including disclosures, authorizations, and state and locality-specific notices) to ensure inclusion of only required information and exclusion of “extraneous information.” Training managers and human resources professionals regarding background check processes, including the presentation of required disclosures and providing appropriate notices when taking an adverse action based on information obtained in a background check. Employers may also consider reviewing arbitration agreements to ensure individuals who undergo background checks sign arbitration agreements that contain class action waivers.

As previously reported, on November 22, 2016, the United States Department of Labor (“DOL”) was enjoined nationwide from implementing regulations that would have more than doubled the minimum salary requirement for the overtime pay exemptions under the Fair Labor Standard Act’s executive, administrative and professional exemptions, also known as the “white collar” exemptions. The injunction is now on appeal before the United States Court of Appeals for the Fifth Circuit. Recently, the Department of Labor filed its reply brief on appeal, which raises new questions about the amount and timing of potential increases in the minimum salary threshold. To recap, the enjoined amendments to the white collar overtime exemptions included the following key features: • Increasing the minimum salary to meet the white collar exemption from $455 per week (approximately $23,660 annually) to $913 per week ($47,476 annually). • Increasing the total annual compensation for highly compensated employees from $100,000 to $134,004. • Installing procedures that would update these salary thresholds every three years starting January 1, 2020. The District Court’s ruling not only enjoined the proposed salary threshold increases, but also called into question whether the Department of Labor has the authority to set any minimum salary thresholds in the first place. In its Reply Brief to the Fifth Circuit, the DOL stated that it has “decided not to advocate for the specific salary level” set by the prior administration’s rule, but argued that it is empowered to set minimum salary thresholds for the white collar overtime exemptions. The DOL further stated that a new rulemaking process will not begin unless and until the Fifth Circuit confirms the DOL’s authority to set a minimum salary threshold for the white collar overtime exemptions. Meanwhile, the DOL has submitted a Request for Information regarding the overtime rules for review by the Office of Information and Regulatory Affairs, to seek “public input on several questions that will aid in the development of” a future proposed rulemaking. It remains unclear at this time whether the minimum salary threshold will increase, by what amount, and when. Polsinelli attorneys will continue to monitor this issue.

In the past two weeks, the San Francisco Board of Supervisors passed bills to assist working mothers who are nursing their infants and to address gender pay disparities. Lactation Locations The first bill, passed on June 20, 2017, requires San Francisco employers to create lactation policies, including a written policy that provides for employees to request a lactation accommodation, and provide a space for mothers to express breast milk. Employers also will be required to provide working mothers a break for lactation. The break may run concurrently with the employee’s normal paid breaks.  However, any additional needed break time may be paid or unpaid at the employer’s discretion. Under this bill, which imposes additional space requirements beyond those called for in the California Labor Code, San Francisco employers must provide employees a location for lactation that is not a bathroom, is free of potential intrusion, is clean and safe, and has a surface (e.g., a counter or table), electricity, and a chair. There must also be a sink and refrigeration nearby. The room or location may be the employee’s normal work area provided it meets these requirements. The location may also be used for other purposes, provided the primary function of the room is designated as a lactation location for the duration of an employee’s need to express breast milk. If an employer uses a multi-purpose location, it must provide notice to employees that the primary use of the location is for lactation, which will take priority over other uses. In multi-tenant buildings where an employer cannot provide a lactation location in its own workspace, an employer can meet the requirements of this ordinance by providing a location shared by multiple employers, so long as that location will accommodate the number of employees who desire to use it. To be exempt from the proposed law, an employer must show that a lactation accommodation presents an “undue hardship,” which would require demonstrating that the requirement would cause “significant expense or operational difficulty when considered in relation to the size, financial resources, nature, or structure of the Employer’s business.” This Ordinance becomes effective on January 1, 2018. Equal Pay The second bill, first passed on June 27, 2017, and finally passed on July 11, 2017, prohibits San Francisco employers from considering the current or past salary of an applicant when determining whether to hire an applicant or the salary to offer the applicant. The law prohibits employers from asking applicants about current or prior salary, and further prohibits employers from disclosing a current or former employee’s salary unless that person’s salary history is publicly available or if the employee consents. An employer may consider an applicant’s current or past salary only if the applicant discloses his or her salary information voluntarily and without prompting. As a reminder, even if this information is voluntarily disclosed, salary history alone cannot be used to justify paying any employee of a different race, sex, or ethnicity less for doing substantially similar work under similar working conditions under California Labor Code Section 1197.5. Employers may still discuss with applicants salary expectations and any unvested equity or other deferred compensation/bonuses forfeited by the applicant resigning from his or her current employer. This Ordinance becomes effective on July 1, 2018. Upon the effective date, employers are required to post a notice in the workplace advising employees of their rights under the ordinance. San Francisco Mayor Ed Lee is expected to sign both bills. For San Francisco employers, both ordinances will require a careful review of existing policies and procedures for: (1) employees to make a request for a lactation accommodation and (2) hiring managers and recruiters to review job applications, interview candidates, and make salary determinations.

On July 3, 2017, the United States Court of Appeals for the Eighth Circuit struck down a decision of the National Labor Relations Board (“NLRB” or the “Board”) in which the Board ruled that employees who disparaged Jimmy Johns’ products were engaged in protected concerted activity. As part of an organizing campaign against a Jimmy John’s restaurant franchise (Jimmy John’s), the Industrial Workers of the World (“Union”) sought sick leave for employees.  The Union employees posted images of Jimmy John’s sandwiches on community bulletin boards, stating that: MANY JIMMY JOHN’S WORKERS DON’T GET PAID SICK DAYS.  SHOOT, WE CAN’T EVEN CALL IN SICK.  WE HOPE YOUR IMMUNE SYSTEM IS READY BECAUSE YOU’RE ABOUT TO TAKE THE SANDWICH TEST.”  The Union also distributed a press release that stated “… Jimmy John’s workers have reported having to work with strep throat, colds and even the flu.”  Attached to the release was a letter from employees complaining that “by working sick, we are jeopardizing the entirety of [the company’s] image and risking public safety.” Union supporters then disseminated throughout the area a revised sick day poster listing the owner’s phone number and inviting calls to “LET HIM KNOW YOU WANT HEALTHY WORKERS MAKING YOUR SANDWICH.”  The owner received numerous calls from people who thought it was unsafe to eat at Jimmy John’s.  After these activities, six workers who coordinated the effort were fired. The NLRB Administrative Law Judge determined that the employees were engaged in protected concerted activity, as their communications related to a labor dispute and were not “so disloyal,  reckless, or maliciously untrue as to lose the Act’s protections.”   A divided panel of the Board affirmed.  But the Appeals Court denied enforcement of this portion of the Board’s Order, and  ruled that the employees’ conduct was so disloyal as to exceed the boundaries of protected activity.  Relying upon a prior Board decision styled Jefferson Standard, the Court reasoned that the employees’ conduct was unprotected because they were urging consumers to boycott Jimmy John’s because the restaurant was offering a shoddy product to the consuming public, rather than because it was purportedly being unfair to its employees.  The mere reference to a labor dispute, said the Court, did not save the employees’ conduct. In addition, the Court rejected the Board’s subsequent construction of Jefferson Standard that the employee’s public criticism must evidence an “evil motive” to lose the protection of the Act.  Rather, it is the means of the criticism at issue, not the purpose that counts.  The Court also rejected the Board’s interpretation of Jefferson Standard that employee disparagement of an employer’s product is given blanket protection when it is tied to a labor dispute.  Instead, disloyal statements by employees may lose the Act’s protection even without a showing of actual malice, with the critical inquiry being whether the employees were targeting their employer’s labor practices or the quality of its product or services.  In the former, customers are being asked not to patronize the employer because labor practices are unfair and a subsequent settlement removes the reason for customers not to return.  In contrast, disparaging a product as unsafe, unhealthy or shoddy brings harm that outlasts the labor dispute. Here, even though the purpose of the protest was to win sick days for employees, the protest was unprotected because the employees attacked the quality of Jimmy John’s product and customers were persuaded not to eat there because they might get sick – the “equivalent of a nuclear bomb in labor-relations.” Employers that may become embroiled in labor disputes may now have added authority to attack employee statements that disparage their products.  However, employers should expect that the NLRB will not adhere to the decision of the Eighth Circuit, given the Board’s policy of non-acquiescence.  Therefore, employers should seek counsel when deciding to discipline or terminate employees who engaged in similar speech and activities.

Last week, the Northern District of Texas weighed in on the proper application of Article III standing requirements in light of the Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), and delivered a win to employers in Fair Credit Reporting Act (FCRA) cases. In Dyson v. Sky Chefs, Inc., 2017 WL 2618946 (N.D. Tex. June 16, 2017), the court held that the plaintiff in a putative class action who alleged the improper inclusion of “extraneous” information in a FCRA disclosure, lacked Article III standing.  The employer’s document did not “consist solely of the disclosure” because it contained: (a) an “ongoing authorization” clause; (2) state and municipal law notices; (3) a summary of rights; and (4) a legal disclaimer.  While the employer’s disclosure was not a standalone document (as required by the statute) it provided the plaintiff with all of the statutorily-required information. The employer moved to dismiss the action, contending that the inclusion of extraneous information was a procedural rather than a substantive violation and thus did not constitute injury in fact.  The court agreed, concluding that the plaintiff did not allege a concrete informational or privacy-based injury. In reaching this conclusion, the court distinguished the substantive right to information from the procedural right to receive it in a specified format, and made clear that the allegations in Dyson fell squarely in the latter box: “Plaintiff does not allege that he did not receive a disclosure or that he failed to understand it, he just attacks the fact that it wasn’t on its own sheet of paper.  Where … plaintiffs do not allege that they did not see the disclosure, or were distracted from it, the allegations amount to no more than a bare procedural violation of the stand-alone requirement. … Plaintiff’s allegations therefore do not confer standing on an informational injury theory.” Id. at *7 (internal citations and quotation marks omitted). The court also rejected the contention that the employer obtained the background check with “no legal right to do so” and thus caused a privacy-based injury.  Embracing the principle that violating the standalone disclosure requirement necessarily renders the background check unauthorized would “negate the entire procedural/substantive distinction” articulated in Spokeo. According to the court, the existence of a privacy and informational injury in a FCRA case turns on the same central question: whether the plaintiff received the requisite information (even if provided in an improper format) prior to knowingly authorizing the background check.  Because the plaintiff signed the authorization and did not claim ignorance regarding its content or import, he did not allege an invasion of privacy. What This Means For Employers Courts throughout the country continue to wrestle with the impact of the Supreme Court’s decision in Spokeo and are reaching divergent conclusions.  Indeed, the Dyson court explicitly declined to follow a recent contrary decision from a Virginia federal court.  Because of the unsettled nature of the law and the proliferation of high-dollar FCRA class actions predicated on highly-technical statutory violations, employers should evaluate their FCRA compliance by: • Updating FCRA documents, including disclosures, authorizations, and state and locality-specific notices. • Training managers and human resources professionals regarding background check processes such as how to present information to applicants and employees (e.g., disclosures, authorizations, etc.) and providing appropriate notices when taking an adverse action based on information obtained in a background check.

Employers must be aware of and comply with a host of state and federal laws related to employee pay.  Below, we detail five common mistakes that employers make, and how to avoid them. 1. “Exempt” Employees Misclassified. Employees must meet both a salary basis and duties test to be properly classified as “exempt” from Fair Labor Standards Act (“FLSA”) overtime pay requirements. The U.S. Department of Labor (“DOL”) proposed to more than double the salary required to qualify as “exempt” in 2016.  A decision blocking the DOL’s new rule from going into effect is currently on appeal.  The DOL recently advised that, while it is reconsidering the threshold salary level for “exempt” employees, it continues to assert its right to set a minimum level.  Employers should be prepared for the DOL’s right to regulate pay to be upheld, and must also remember the “duties” test is alive and well.  Wages, penalties, and attorneys’ fees associated with misclassification are typically significant. With an estimated 8 million employees incorrectly classified as “exempt,” neither the DOL nor private attorneys have slowed their attacks.  Employers should audit (pay attention to) the duties their exempt employees actually perform, as well as all descriptions of the employees’ duties to ensure employees are properly classified.   2. Independent Contractors Misclassified.  Employers may only classify a given worker as an “independent contractor” if the relationship between the employer and the worker in question satisfies certain tests, such as the Internal Revenue Service’s (“IRS”) “Right to Control” test, among others. The IRS, the DOL, the National Labor Relations Board, state governments, and plaintiff attorneys are highly likely to continue their high priority challenges on the misclassification of W-2 employees as independent contractors. Wages, fines, penalties, back taxes, benefit payments, and attorneys’ fees add up quickly, and more often than not, reach the six figure range.  Employers should audit (pay attention to) all independent contractor relationships in light of their employee benefit plans and all applicable laws to ensure workers are properly classified.   3. Rounding Policies. Many employers round their employees’ clock in and out times to the nearest five, ten, or fifteen minute interval, and pay employees based on the rounded time.  Rounding policies, in and of themselves, are not unlawful.  Employee attorneys continue to file suit against employers who round clock in and out times.  These attorneys point to restrictive clock in and out policies, tardiness policies, unpaid pre- or post-shift meetings, disciplinary policies, and unpaid pre- or post-shift work in an effort to prove the employer’s practice of rounding time did not equally benefit the employer and employee over time, as required by law. Employers that round time need to pay attention to their policies, create clear communications in relation to work and personal time, and ensure whether rounding benefits the employer and employee equally over time. 4. Timekeeping Auto-deductions. Employers are not required to pay employees for non-working time. Accordingly, some employers automatically deduct time when they know an employee is not working. Employee meals continue to be the most frequent period of time subject to auto-deduction.  Employees challenge such deductions when meal periods are skipped or interrupted with no change to the auto-deduction (and, accordingly, no change to the employee’s pay).  Some employers auto-deduct other periods of time at the beginning or end of a shift as well.  It is critical that employers pay attention to the language in their auto-deduct policies and provide employees with a clear and simple mechanism to override any improper deductions. 5.  Required Notices. Congress and the DOL require that employers provide employees with certain notices regarding certain aspects of their pay. Such required notices range from posters (e.g., WH 1088, “EMPLOYEE RIGHTS UNDER THE FAIR LABOR STANDARDS ACT”), to tip credit notices and other designations when employers pay their tipped employees a cash wage that is lower than the minimum wage.  Many states also have similar, specific notice or written agreement requirements. For example, specific, written agreements are required when California employees are paid commissions.  In some circumstances, employees who are properly paid, regardless of whether a notice is given, may bring claims for damages or penalties.  Employers should pay attention to (audit) the notices, forms, and designations required for each type of payment used with employees, including the date of the most recent notice, its contents, and whether new notices need to be issued and new pay designations need to be added.

On June 27, 2017, the U.S. Department of Labor (DOL) announced that “Opinion Letters are back!” During a hearing before the Senate Appropriations Subcommittee on Labor, Health, and Human Services, Labor Secretary Alexander Acosta announced that DOL will once again provide Opinion Letters to employers regarding specific compliance questions. Opinion Letters are official written opinions issued by the DOL’s Wage and Hour Division that explain how the DOL enforces the Fair Labor Standards Act (“FLSA”) in specific circumstances presented by employers, employees, or other entities requesting the Opinion Letter. Secretary Acosta’s announcement is a reversal of the March 2010 position of the DOL decision to no longer issue Opinion Letters. The DOL’s renewal of its Opinion Letter program opens the door for employers to raise specific wage-and-hour compliance situations to the DOL and seek the DOL’s opinion regarding the employer’s intended approach. Reliance on an Opinion Letter may enable an employer, when faced with a subsequent lawsuit under the FLSA, to plead and establish the complete affirmative defense that it acted in “good faith conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation” of the Wage and Hour Division. 29 U.S.C. § 259. In addition, it may also help an employer establish that any violation of the FLSA established after relying on an Opinion Letter was non-willful, thereby limiting a plaintiff’s damages to a two-year period (instead of three years for a willful violation). The type of clarity provided by Opinion Letters cuts both ways, of course. The DOL may determine that a presented pay practice violates the FLSA, in which case the employer would be wise to modify its actions to comply with the DOL’s view of the law. From a planning perspective, employers should anticipate lengthy waits for responses to requests for Opinion Letters. The DOL exercises its discretion when deciding which Opinion Letter requests it will consider, and with anticipated cuts in resources at DOL, the timeline for receiving a response may be protracted. Nevertheless, employers should welcome the return of this practical compliance guidance from official channels and should consider availing themselves of this additional option for obtaining certainty for those gray areas of wage-and-hour law.

With the recent nominations of William Emanuel and Marvin Kaplan to the two vacant positions on the National Labor Relations Board (“NLRB” or “Board”), the current composition of the NLRB consists of two Democrats and one Republican appointment. Employers continue to watch as this Administration and its agencies roll back prior initiatives and wonder when (if) similar initiatives can be expected at the Board. Earlier this month, the U.S. House of Representatives introduced three bills to amend the National Labor Relations Act (“Act”) and reverse some of the policies advanced by the Board over the last eight years. The Employee Privacy Protection Act, if passed, will amend the Act and require that “lists of employees eligible to vote in organizing elections be provided” directly to the NLRB within seven days of the direction of an election. Currently, employers are obligated to submit that list within two days to the Union. Additionally, employers would need only to provide one form of contact (i.e., an employee’s home address, personal email address, home or mobile phone number); now, they must provide all such forms, if known. The Employee Rights Act would amend the Act to, among other things, only allow secret ballot elections, require selection of the bargaining representative by a majority of unit employees (as opposed to the majority of employees who vote in an election), and require representation elections in existing bargaining units that have experienced great turnover or expansion. The Workforce Democracy and Fairness Act would roll back the “quickie” or “ambush” election rules that the Board passed in 2015. The bill would change existing law in three material ways: It would require a hearing within fourteen days of the filing of a petition for election so that the parties can identify any “relevant and material pre-election issues;” It would require a period of at least thirty-five days between the filing of a petition for election and an election (an average increase of eleven days); and It would revert back to the “community of interests” standard that existed prior to the Board’s 2011 decision in Specialty Healthcare. Presently, the NLRB will direct elections in micro-units unless the employer can show that there is an “overwhelming community of interests” to include/exclude other job descriptions. Last week, Senator Lamar Alexander of Tennessee introduced the Senate’s version of the Workforce Democracy and Fairness Act. That bill, which combines aspects of the House version and the Employee Privacy Protection Act, also would not permit a union election within thirty-five days after the filing of a petition for election so that an employer has time to mount its own educational campaign.

Recently, top level executives in the media and tech industries have departed from their positions in the midst of investigations into allegations of workplace conduct that involved comments that were construed to create a hostile environment.  Two cases decided this month, one by a New York court and one by an Illinois court illustrate the potential liability to an employer if a supervisor utters comments that are seemingly race or gender neutral when correcting the behavior of an employee who is not performing his or her duties in a manner consistent with company culture or policies. In Wooding v. Winthrop University Hospital,  the employer hospital asked the trial court to dismiss a lawsuit filed by a former physician’s assistant, who was the only African-American employee in his department.  The hospital asserted that it discharged the plaintiff for disclosing patient information in violation of HIPAA.  However, the employee alleged that several of his supervisors treated him differently because of his race, including three who disciplined him for engaging in conduct that was "disrespectful" and "overbearing," terms he contended were "code words" for racial discrimination.  The trial court refused to dismiss the lawsuit as to these three supervisors, noting that while the words used by the supervisors "are typically used in an innocent fashion," some words that are facially non-discriminatory "can invoke racist concepts that are already planted in the public conscious." Consequently, a jury could determine that the words, when used toward the plaintiff, were motivated by racial animus. A week after the court's decision in Wooding, an Illinois federal court judge reached a similar result in Young v. Control Solutions, LLC.  The employee in Young alleged she was discharged because of her race, while her employer asserted that the discharge was a result of Young's failure to correct performance issues that were documented through a performance improvement process.  Specifically, the employee claimed she had presented evidence of discriminatory intent because the performance improvement plan repeatedly described her as "angry," which she contended was "an attempt to invoke the stereotype of the 'angry black woman.'"   There was no evidence that anyone at the employer ever referred to Young as an "angry black woman," or that the anger was attributed to her race.  However, the trial court allowed the case to proceed to a jury trial, finding that certain words have a long history "as part of a stereotypical depiction of black women," and could be interpreted by a jury as racially motivated. These decisions serve as a reminder to employers that care should be taken to train all employees regarding proper workplace conduct, how best to document employee behavior when providing discipline,   as well as on issues of implicit bias.  As the EEOC noted in a report issued last year on harassment in the workplace,  simply training employees that an anti-harassment policy exists may not be sufficient to avoid liability.  Words, even facially neutral ones, do matter -- and employers who fail to train their employees as to best practices in a rapidly changing legal environment may find themselves in litigation.

School’s out for summer. While some students will sit by the pool, others are seeking summer employment. Youth employment may provide a relatively simple and cost-effective resource that can help fill seasonal staffing needs. However, employers should be mindful of federal and state laws that regulate the employment of minors (generally individuals under 18 years of age) to avoid being subject to considerable penalties. For instance, the Fair Labor Standards Act (“FLSA”) sets federal wage, hours worked, and safety requirements for minors. The regulations vary based on the minor’s age and the particular job involved. Generally, the FLSA provides: Minors under 14 years of age can only be employed in certain jobs such as babysitting on a casual basis, working for a parent, or delivering newspapers; Minors ages 14 to 15 can only work a limited number of hours outside of school time in certain jobs including, but not limited to, retail occupations, errands or delivery work, and work in connection with cars and trucks such as dispensing gasoline or oil and washing or hand polishing. Minors ages 14 to 15 must be paid at least the federal minimum wage; and Minors ages 16 to 17 may work unlimited hours in any nonhazardous occupation and must be paid at least the federal minimum wage. Additionally, many states regulate the employment of minors, and employers are required to comply with both state and federal law. In instances where state law provides more stringent protections than the FLSA, the employer must adhere to the state law to ensure compliance. Finally, the Occupational Safety and Health Act (“OSHA”) provides that employers of minors must: Ensure that minors receive training to recognize hazards and are competent in safe work practices. Training should be in a language and vocabulary that minors can understand and must include prevention of fires, accidents, and violent situations and what to do if injured. Implement a mentoring or buddy system for minors. Have an adult or experienced young worker answer questions and help the new minor employee learn the ropes of a new job. Encourage minors to ask questions about tasks or procedures that are unclear or not understood. Tell them whom to ask. Remember that minors are not just "little adults." Employers should be mindful of the unique aspects of communicating with minors. Ensure that equipment operated by minors is both legal and safe for them to use. Employers must label equipment that minors are not allowed to operate. Tell minors what to do if they are injured on the job. In light of the various regulations surrounding youth employment, employers should consider the following best practices: Consider requesting age certificates from minors as a document for proof of age. Implement training directed to minor employees regarding safety, emergency, and workplace standards. What may be obvious to an adult employee may not be clear to a minor employee entering the workforce for the first time. Clearly communicate workplace policies, practices, and procedures. Ensure minor employees are completing tasks safely. Once a minor employee demonstrates that they can complete a task safely, check again later to be sure they are continuing to do so.

Earlier this week, the Eleventh Circuit Court of Appeals held that the Fair Labor Standards Act (“FLSA”) does not provide for a private right of action for withheld tips when minimum wage and overtime claims are not in play. The district court dismissed a proposed collective action brought by a valet driver who claimed that her employer took a portion of all valets’ tips to pay for business expenses in violation of the tip credit provisions of the FLSA. The valet driver’s collective claims relied exclusively on a 2011 U.S. Department of Labor regulation (29 C.F.R. § 531.52), which states that “[t]ips are the property of the employee whether or not the employee has taken a tip credit.” The claims were not supported by any specific statutory language in the FLSA authorizing a private right of action for withheld tips. The U.S. Department of Labor (“DOL”) agreed, in amicus briefs, that there is no statutory authority for a private suit by employees who claim only that tips were withheld, but who do not also allege that they received less than the minimum wage or unpaid overtime. For these reasons, the Eleventh Circuit Court of Appeals affirmed the district court’s ruling and upheld the dismissal of the proposed collective action. The Eleventh Circuit’s decision noted, however, that “nothing about our present holding undermines the DOL’s ability to investigate or enforce violations of the FLSA or a plaintiff’s ability to collect unpaid tips through an appropriate state law claim.” Thus, it appears that withheld tip class action claims must be brought under applicable state law, which means that they could be litigated under state equivalent Rule 23 procedures and not FLSA collective action “opt-in” procedures.

Recently, the Fourth Circuit reversed an $11.7 million verdict in a 69,000 member Fair Credit Reporting Act (FCRA) class action. In Dreher v. Experian Info. Solutions, Inc., 856 F.3d 337 (4th Cir. 2017), the Fourth Circuit applied the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016) and concluded that the plaintiffs failed to demonstrate a concrete injury and thus lacked Article III standing to pursue the claims. The plaintiff in Dreher underwent a background and credit check to obtain a federal government security clearance, which revealed a delinquent credit card account. The plaintiff alleged that Experian violated the FCRA by listing the incorrect name (but the correct address) of the delinquent account holder on his credit report. The district court, in a decision pre-dating Spokeo, awarded summary judgment to the plaintiff. When finding that plaintiff had standing, the district court reasoned that “any violation of the [FCRA] sufficed to create an Article III injury in fact.” The Fourth Circuit – applying Spokeo – reversed, concluding that the plaintiff failed to demonstrate a concrete injury. While Experian may have denied plaintiff access to statutorily-required information (i.e., the correct name of the account holder), that was insufficient to satisfy Article III. Rather, a plaintiff must demonstrate an injury cognizable at common law, or a statutory violation coupled with the kind of injury Congress sought to prevent by enacting the statute in question. The plaintiff in Dreher demonstrated neither. Specifically, the misidentification of the account holder did not impede the credit resolution process, or plaintiff’s ability to obtain a security clearance. The plaintiff’s mere “nebulous frustration resulting from a statutory violation” that was “divorced from any real world effect” did not satisfy Article III. What Does This Mean for Employers? The Fourth Circuit is the latest appellate court to weigh in on standing under the FCRA after the Supreme Court’s decision in Spokeo. Dreher may serve as useful ammunition for employers defending against increasingly common FCRA class actions which seek to predicate standing upon technical statutory violations, such as: Including “extraneous” information in FCRA disclosures. Failing to follow statutory procedures before taking an adverse action based on information contained in a background check (e.g., providing a pre-adverse action notice). Failing to provide the FCRA “notice of rights.”

The attorney-client privilege continues to cause issues for in-house counsel who frequently play different roles at different times, and for employees involved in legal communications. The basic elements of the privilege are equally applicable to individual clients as they are to corporate clients, but tend to be far more problematic in the corporate setting. The basic elements of the privilege include: A confidential communication between a lawyer and a client, Related to legal advice, or with the expectation of legal advice, Without waiving the privilege. Counsel must consider whether those basic elements have been met for each communication. Whether a particular communication is protected by the privilege depends, in part, on the role in-house counsel is playing at the time they are engaged in the communication. In the simplest context, when in-house counsel wears their “legal hat” and provides clear legal advice, the likelihood a communication will be deemed privileged is high. But often in-house counsel serve as business advisors as well. When in-house counsel provides business advice, as opposed to legal advice, communications with others within the business is far less likely to be considered privileged. Complicating matters further, in-house counsel often serves as both a business and a legal advisor simultaneously. In such situations, sending an email to multiple recipients about issues that involve both legal and business advice, as but one example, may not be deemed privileged. It is also important to train employees to ensure that privileged communications remain protected. In the age of email and electronic information exchange, the privilege is easily waived. For example, an employee may waive the privilege by forwarding a privileged communication to recipients whose duties are not impacted by the legal advice and/or are not within the protection of the privilege. Then there are employees who wrongly assume that if they label something “privileged,” it will automatically become or remain privileged. Here is a list of five privilege pitfalls that employees and in-house counsel should remember: If you do notinvolve legal counsel on a legal issue, asserting a claim of privilege later will be virtually impossible. Being Loose Lipped!Discussing privileged communications with someone outside the protections of the privilege – including other coworkers – can waive the privilege. Assuming that if Legal Counsel is copiedon the email, the communication will be privileged. It is not that simple: the communication must involve legal advice or pending or threatened litigation. Labeling everythingwith the header or footer “Privileged & Confidential,” even when it should not be, undermines the credibility and jeopardizes the treatment of communications that should be privileged. E-carelessness! Too often a privileged communication is waived when an email is sent to individuals who are not directly involved or impacted by the legal advice. Or if legal advice is provided in a Reply All to more individuals than should be included. The overall rule is that attorney thoughts and analysis are protected, but not when they are shared improperly. Remind employees that sharing legal advice with third parties (“our lawyers don’t think your non-compete is enforceable….”) or attributing business decisions to the legal team (“we hate to do this, but we talked to legal and we have to let you go…”) may jeopardize attorney work product that would otherwise be protected by the attorney-client privilege.

On June 7, 2017, the Department of Labor (“DOL”) announced that legal guidance promulgated during President Obama’s term in office regarding both joint employment and the classification of workers as independent contractors has been withdrawn. In July 2015, the DOL’s Wage and Hour Division issued a 15-page Administrator’s Interpretation regarding the determination of workers as independent contractors or employees. Specifically, the Administrative Interpretation considered the Fair Labor Standards Act’s (“FLSA”) definition of “employ,” meaning to “suffer or permit” work, and the impact of the legal test for whether workers are considered employees or independent contractors. At that time, the DOL’s Wage and Hour Division took the position that, under the FLSA, “most workers are employees.” In January 2016, the Wage and Hour Division released another Administrator’s Interpretation, which indicated that “[t]he concept of joint employment, like employment generally, should be defined expansively under the [Fair Labor Standards Act] and [Migrant and Seasonal Agricultural Worker Protection Act].” In this guidance, the Wage and Hour Division considered the concept of “vertical joint employment”, where an employee has a relationship with an intermediary employer and the entity that engages the intermediary in providing labor. In the Administrator’s Interpretation, the Wage and Hour Division explained that its joint employer regulations would not be considered when analyzing whether vertical joint employment exists. Instead, the Wage and Hour Division adopted an “economic realities test.” When rescinding these Administrator’s Interpretations, the DOL stressed that its actions do not “change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.” Accordingly, it is unclear what effect, if any, rescinding these Administrator’s Interpretations may have. By contrast, the National Labor Relations Board continues to press its expansive definition of “joint employer” as two or more entities that possess 1) a common law relationship and 2) those entities share or codetermine matters governing employees’ essential terms and conditions of employment. As such, employers cannot rely exclusively on the DOL’s decision to withdraw the Administrative Interpretation as sounding the all clear. The law with respect to joint employment issues and whether a given worker is an independent contractor is currently in flux. We will be following these and other legal developments closely.

In 2016, U.S. private employers and government agencies reported more than 1,000 data security breaches, up 40 percent from 2015. Recent high profile examples include: 2014 theft of unencrypted laptops at Coca-Cola, which compromised sensitive data concerning 74,000 then-current and former employees; 2016 incident in which a Boeing employee sent personal data regarding 36,000 employees across a four-state area in a spreadsheet to his spouse; and 2017 breach that compromised data from 95,000 job applicants at McDonalds Canada. Employers confronting the seemingly daunting task of protecting sensitive and private employee data may look to computer security expert Gene Spafford’s famous conclusion: “The only truly secure system is one that is powered off, cast in a block of concrete and sealed in a lead-lined room with armed guards.” But, in the real world, employers must power on their computer systems absent a protective concrete barrier and armed guards. What steps must employers take when the security of employee data is breached or an unauthorized access and compromise has occurred? Let’s take a look. All states, except for Alabama and South Dakota and the District of Columbia, require notification to affected individuals when personal information regularly gathered and stored by employers, such as Social Security numbers and driver’s license information, is compromised. In the last few years, twelve states have reinforced data breach notification laws. Some notable examples include: Illinois – In 2016, Illinois amended its data breach notification law to expand the categories of protected data to include health insurance information, medical information, unique biometric data and an individual’s user name or email address, in combination with a password or security prompt and corresponding response that would permit access to an online account (for example, log-in credentials). Tennessee– In 2016, Tennessee amended its data breach notification law to define a breach as any “unauthorized acquisition of computerized data that materially compromises the security, confidentiality, or integrity of personal information maintained by the information holder.” The Tennessee law defines personal information to include an individual’s first name or first initial and last name, when combined with his or her (1) Social Security number, (2) driver’s license number or (3) information that would permit access to a financial account. Earlier this year, the Tennessee legislature clarified that its 2016 amendment does not apply to information encrypted pursuant to the Federal Information Processing Standard 140-2, so long as the encryption key is not obtained by an unauthorized person. Virginia – Last year, Virginia became the first state to expand its data breach notification law to specifically require employers and payroll service providers to notify the attorney general upon discovering “unauthorized access and acquisition of unencrypted and unredacted computerized data containing a taxpayer identification number in combination with the income tax withheld for that taxpayer” where the employer or provider reasonably believes the breach “has caused, or will cause, identity theft or other fraud.” In an effort to thwart W-2 phishing scams, the attorney general’s office will notify the Department of Taxation of the compromised employer. The Department may, in turn, use that information to flag taxpayers whose W-2 information might be misused to obtain a false tax return. As recent years demonstrate, data breach notification laws continue to develop as breach risks increase and data scammers adapt to changing laws. Employers seeking to manage and reduce their liability risk for data breaches can adopt certain practices as they monitor continuing state law developments: Exercise reasonable care when collecting and maintaining personal identification or other sensitive information regarding employees and applicants. Actively monitor applicable state law requirements in states where offices or other operations are maintained. Develop, review and revise as necessary administrative, physical and technical personal information safeguards. Develop, review and revise as necessary a security incident response plan in accordance with applicable breach response requirements. Develop and implement a security incident response team trained to comply with pertinent data breach notification laws. Develop relationships with identity protection services and vendors that support the security incident response plan. Conduct mock breach incident simulations/drills testing safeguard and incident response effectiveness.

With job candidates posting extensive information on social media and other information available on the Internet, technologists are developing ways to mine and use that data in the hiring process. This field (sometimes referred to as “people analytics”) is marketed as full of promise, including the possibility of identifying unrealized potential, increasing diversity, reducing turnover, improving employee satisfaction, and improving the company and individual performance. However, for employers inclined to embrace people analytics, there are a number of employment law-related issues to consider. 1.    Statistics Are Not Inherently Objective People analytics may help reduce the subjective assessments that are inherent in the interview process. However, to create a tool to predict success on the job or identify “desirable” traits for job applicants, an employer must first define what makes an employee successful or the traits that are desirable. Typically, the logical starting point is an employer’s current workforce. The current workforce may not include “successful” employees as the employer would now define the job or the “desirable” traits for the job going forward. As such, tools based on the current workforce may perpetuate the issues found in the current work environment. Employers may wish to consider whether the data used or the tool itself should be adjusted to counter those tendencies. In addition, employers should consider whether augmenting their own data with data from outside of the company could improve the objectivity of the data. 2.    Correlation Is Not the Same as Causation Analysis of data about existing employees or workers in the industry will likely reveal many interesting connections. It is easy at first to erroneously assume that a connection is causal. For example, even if there is a correlation between playing team sports in school and ultimately succeeding on the job, participating in team sports may not be the reason that the employees are ultimately successful. If the technologist or employer focuses more on the measurable indicator (team sports) than what the measurable indicator reflects (e.g., time management), the predictive value of the tool may suffer and the tool may have unintended effects. Accordingly, technologists and employers should not limit their thinking to finding correlations and should consider what the correlations mean about the applicant or employee’s skills and abilities. 3.    Technologists, HR and Legal Teams Should Partner on People Analytics An employer might save time and reduce legal risk by having technologists develop or implement a people analytics tool alongside the employer’s HR and legal teams. The HR and legal teams can help the technologists avoid creating or implementing a tool that results in discrimination or violates other laws, such as privacy laws and the Fair Credit Reporting Act.

A National Labor Relations Board (“NLRB” or “the Board”) Administrative Law Judge (“ALJ”) has issued another reminder to employers to be careful when drafting employee handbooks. In May 2017, a Board ALJ invalidated 10 different sections of the company’s employee handbook, including a section that required employees to report their co-workers’ potential violations of handbook rules or other conduct that could “hurt” the company. The consolidated ruling resolved five separate cases filed by the Communications Workers of America (“CWA”). The CWA challenged many different provisions of the company’s employee handbook on the grounds that the rules were unduly ambiguous, or so overbroad that they could cause employees not to exercise rights under the National Labor Relations Act (“NLRA”) to engage in protected and concerted activities. These rights, guaranteed by Section 7 of the NLRA, include the right to discuss wages, hours, and other terms and conditions of employment. The ALJ accepted the CWA’s arguments, and struck down as unlawful a rule that required employees to report conduct that “could” be “viewed as dishonest, unethical or unlawful,” or that “could cause” the company “to lose credibility with its customers, business providers or investors.” Indeed, the ALJ explained that the rule, referred to as the Speak Up Provision, infringed upon employees’ Section 7 rights to “criticize or protest” their employer’s business practices. The Speak Up Provision was also found to be overbroad as drafted. Specifically, the Speak Up Provision could chill employees from such conduct as discussing wages and hours or other conditions of employment, as such conduct could conceivably “cause” the company “to lose credibility with its customers, business providers or investors.” Moreover, the rule did not pass scrutiny because it “fail[ed] to explain what would be permissible conduct, leaving it up to the employees to guess . . . at their own peril.” In addition, the ALJ invalidated other handbook rules that 1) barred employees from using company resources, “including emails,” to solicit or distribute information; 2) prohibited employees from disclosing their employee records; and 3) prohibited employees from disparaging the company, its services, its products, or other employees. This recent decision is another timely reminder to employers that any employee handbook policies must be carefully drafted so that employees understand that protected Section 7 activities are not prohibited.

The U.S. Equal Employment Opportunity Commission’s (“EEOC”) broad-ranging jurisdiction covers, in short, claims of age, disability, equal pay, gender/pregnancy, genetic information, national/ethnic origin, race/color, and religious/creed discrimination. The EEOC typically sends notice of a charge of discrimination and requests a response, but can exercise subpoena power to enforce requests for information. When an employer receives a charge of employment discrimination, what should you do? The five steps outlined below are designed to help you respond to the charge of discrimination effectively. 1. Promptly contact legal counsel with whom you work on employment matters.Legal counsel may have specific ideas for next steps, overall strategy, and priorities, based on your company’s culture or the particular facts of a charge. 2. Promptly notify any applicable insurance carrier.Coverage may be available through employment practices liability insurance (“EPLI”). General commercial policies may also be of some assistance. Check the charge to see if any individuals are named as respondents so the insurer can be informed. You may need to discuss this with counsel. Individuals can be held liable, depending on the jurisdiction or statute involved. 3. Notify applicable personnel to preserve documents as soon as possible.Be sure they understand the need to carefully save any and all pertinent documents (emails, text messages, hard copy items – everything - even calendar entries and sticky notes). Destroying or deleting documents can land your organization in severe legal difficulties. 4. Notify individuals in the chain of command that any proposed discipline or other negative job action toward the person who filed the charge should be discussed with you prior to any action being taken against them.Adverse actions based upon an employee’s decision to file a charge of discrimination are prohibited by law. 5. Prepare an effective and accurate response to the charge.

On May 8, 2017, the California Supreme Court provided clarification on three important issues related to California’s mandatory day of rest that have long been murky under existing California law: 1.    The Seven Day period for determining the “Day of Rest” is Calculated by the Workweek and Not a Rolling Seven-Consecutive Day Period California’s Labor Code prohibits employers from requiring employees to work more than six days in a seven-day period--entitling every employee to a day of rest in every seven days. However, the Labor Code does not specify if this mandatory rest day is based on the workweek or a calendar week. See Labor Code §§551, 552. In February 2015, the Ninth Circuit asked the California Supreme Court to clarify this issue, and the California Supreme Court provided the answer in Mendoza v. Nordstrom, Inc. (Cal. S.Ct. May 8, 0217) S224611. The Court held that a day of rest is guaranteed for each workweek and that where periods of more than six consecutive days of work stretch across more than one workweek, there is no per se violation of Labor Code §§ 551 or 552. As a result, if an employer staggers its workweek to cross two consecutive calendar weeks, it is possible that an employee may not accrue the required day of rest until after twelve consecutive days of work. It is important for employers utilizing staggered workweek schedules to remember that Labor Code § 554 requires that an employee receives the equivalent of one day’s rest in seven, or at least four days of rest each calendar month. Therefore, if an employer is taking advantage of the staggered workweek, it needs to make sure employees are still receiving the mandatory days off on a monthly basis for compliance. 2.    Labor Code §556 Exemption for Workers Employed Six Hours or Less Only Applies to Employees Who Never Exceed Six Hours of Work on Any Day of the Workweek Labor Code §556 provides an exemption to the mandatory day of rest for workers employed six hours per day or less. It has been an open question whether the §556 exemption applies when an employee works six hours or less on at least one day of the applicable workweek, or if it only applies when an employee works no more than six hours on each and every day of the workweek. In Mendoza, the California Supreme Court clarified that, while employees who work schedules of less than six hours per day are exempt from the seventh day of rest requirement, if the employee works even one single shift of more than six hours in the workweek, they are not exempt. 3.    An Employer Must Not “Cause” an Employee to Go Without a Day of Rest Labor Code §552 requires that an employer not “cause” an employee to go without a day of rest. When determining whether the employer has “caused” an employee to work the seventh day in a workweek, the Court in Mendoza stated that an “employer‘s obligation is to apprise employees of their entitlement to a day of rest and thereafter to maintain absolute neutrality as to the exercise of that right. An employer may not encourage employees to forgo rest or conceal the entitlement to rest, but is not liable simply because an employee chooses to work the seventh day.” However, it is important for employers to remember that if an employee does work the seventh day in a work week, then the employer may be liable for a day of rest violation and any associated penalties. Additionally, California’s overtime laws require that the entire seventh day of work be paid as overtime consistent with state and federal pay requirements. In light of this recent guidance by the California Supreme Court, employers should (1) review their workweek and scheduling policies and update as necessary for compliance; and (2) consider conducting an internal audit to determine whether any seventh-day violations are occurring and corrections with the benefit of these new clarifications.

On May 12, 2017, a divided Tenth Circuit addressed the level of detail that must be contained in an EEOC charge when a plaintiff alleges quid pro quo harassment. In Jones v. Needham, No. 16-6156 (10th Cir. May 2, 2017), the plaintiff alleged he was fired because he would not have sex with his direct supervisor, who was also a shareholder of the business. The plaintiff completed an EEOC intake questionnaire, checking the boxes for “Sex” and “Retaliation” as the basis for his discrimination claims and also writing out “sex har[as]sment.” In response to questions seeking further details on his claims, the plaintiff wrote: “[s]ee attached.” The referenced document included a six-paragraph statement, which concluded with the following: “I was terminated because I refused to agree to [the supervisor]’s sexual advances and I rejected all such efforts by her.” However, the document referred to as the attachment was not submitted to the EEOC, and the EEOC never alerted plaintiff that the document was not attached. Instead, the EEOC prepared a generic charge that, while referencing that the plaintiff was sexually harassed and terminated at some point after complaining about harassment, the charge did not specifically mention Qi. The plaintiff subsequently filed a lawsuit alleging he was subjected to both hostile work environment and quid pro quo forms of sexual harassment. The district court subsequently dismissed the plaintiff’s quid pro quo harassment claim, finding that he failed to exhaust his administrative remedies. The Tenth Circuit observed that, before filing suit, a plaintiff must file an administrative charge with the EEOC that generally determines the scope of the claim the plaintiff may eventually file in federal court. Yet the court further explained that quid pro quo and hostile work environment claims are not wholly distinct and that both “lead to the same place: sexual harassment that violated Title VII’s proscription against sex discrimination in the workplace.” While the elements needed to prove these claims differ, the facts of —and investigations into—the two scenarios could overlap. Turning to the contents of the plaintiff’s charge form, the court noted that the plaintiff stated he was subjected to sexual remarks, indicated the alleged harasser terminated his employment and alleged that no reason was given for the termination. The Tenth Circuit found these statements were sufficient to alert the employer to the sexual harassment allegations and to trigger an investigation into whether the sexual remarks and plaintiff’s firing were connected. Accordingly, the court reversed the district court’s dismissal of the plaintiff’s quid pro quo claim, remanding the matter to the district court for further proceedings. The Jones decision serves as a reminder that courts often express a willingness to construe EEOC charges liberally when assessing whether a plaintiff has met his administrative obligations under Title VII.

On May 8, 2017, the Missouri House gave final approval to a much anticipated, heavily debated, and still highly controversial bill that will significantly modify the law applicable to “unlawful employment practices” in the state. Governor Eric Greitens has until July 14, 2017, to sign or veto the bill. So long as he does not veto, the bill will become law on August 28, 2017. Among other things, if the bill becomes law, employers may expect: More stringent proof in discrimination cases:The amendments require employees who allege employment discrimination (or retaliation) under the Missouri Human Rights Act (MHRA) to prove unlawful discrimination or retaliation was “the motivating factor” in a complained-about adverse employment action. To qualify as “the motivating factor,” unlawful discrimination or retaliation must have “actually played a role” in and “had a determinative influence” on the adverse action. This change is a significant departure from the current requirement that plaintiffs need merely prove unlawful discrimination or retaliation “contributed” to an employer’s decision. No individual liability: Individual supervisors and other employees will no longer be personally at risk for liability in a discrimination or retaliation case under the new law. A "Business Judgment Rule” jury instruction:Jurors sometimes want to substitute their judgment for an employer’s. The new law’s requirement that courts give jurors a “business judgment rule” instruction counters this tendency, mandating that jurors not return a verdict in favor of an employee simply because the jurors disagree with an employer’s judgment in making an employment decision or believe the employer’s decision was harsh or unreasonable. Reduced damage awards:The MHRA currently allows juries to award a plaintiff uncapped emotional distress damages and up to “five times the net judgment” in punitive damages. While a jury might award a moderate amount in damages to a plaintiff-employee, Missouri courts interpreted “net judgment” to include the frequently higher amount courts awarded in attorneys’ fees. The new law continues to allow employees to recover back pay, plus interest on back pay, but limits the calculation for future pecuniary losses, emotional distress, and punitive damages to: $50,000 for employers with 6 to 100 employees; $100,000 for employers with 101 to 200 employees; $200,000 for employers with 201 to 500 employees; or $500,000 for employers with 501 or more employees. Codified whistleblower protections for employees:Codifying, in part, existing common law exceptions to the employment-at-will doctrine, the amendments create a “Whistleblower’s Protection Act,” which makes it unlawful for employers to fire certain employees who, for example, report their employer’s unlawful acts or serious misconduct or refuse to carry out illegal employer directives. The Act allows successful plaintiffs to recover only limited actual damages, plus an additional liquidated damages award equal to actual damages provided the plaintiff proves an employer’s conduct was outrageous. Finally, the bill specifically identifies the MHRA, Missouri Workers’ Compensation Law, and new Whistleblower’s Protection Act as the exclusive remedies for all claims of unlawful employment practices in Missouri, effectively stopping Missouri courts from creating new employment-related causes of action.

The Missouri legislature recently sent a new bill designed to severely limit the use of project labor agreements to Governor Greitens’ desk. Known as Missouri Senate Bill 182 (“S.B. 182”), its stated purpose is to ensure a more competitive and fair bidding process for public works projects. A project labor agreement is a collective bargaining agreement that requires public construction projects (e.g., improving infrastructure, or building schools, libraries, or police stations) to be performed only by contractors that agree to sign a labor union agreement for that project. While Missouri’s current system allows both union and non-union contractors to bid on a project, in practice non-union contractors are effectively compelled to engage union labor and abide by terms of a collective bargaining agreement. S.B. 182 passed the House 104-52 on April 27, 2017, and would prohibit the use of project labor agreements on any project where the state of Missouri or its subdivisions is funding the majority of the project. However, projects that are funded by 50 percent or less of state funds may still be subject to project labor agreements on a project-by-project basis if a certain process is followed. If signed into law by Governor Greitens, Missouri will join 23 other states that have already enacted laws to either limit or ban project labor agreements. We will keep you posted on the bill’s progress.

On May 4, 2017, Mayor de Blasio signed a bill passed by the New York City Council that prohibits private employers from asking applicants how much money they make or otherwise making salary history inquiries. The legislation, which will go into effect on October 31, 2017, amends the New York City Human Rights Law by adding a provision that makes it an “unlawful discriminatory practice” for an employer to make a salary inquiry of the applicant. Employers may not ask the applicant, the applicant’s current or former employer, or even someone the employee works with about the applicant’s current wages, benefits, or bonus compensation. However, if an applicant provides their salary history “voluntarily and without prompting,” then this information can be used lawfully by the employer. The legislation leaves the terms “without prompting” undefined and begs the question as to whether voluntary waivers would violate this law. The legislation does, however, explicitly permit the employer and applicant to discuss the salary offered, including any deferred compensation that the applicant would forfeit if they left their current employer. Following the lead of Massachusetts and Philadelphia, New York City will be the third jurisdiction to enact legislation banning private employers from making prior-salary inquiries. Other states, including Illinois, Maine, Maryland, New Jersey, Pennsylvania, and Rhode Island, are considering similar measures; however, none have passed to date. Massachusetts’ state law will take effect on July 1, 2018. The Philadelphia ordinance has temporarily stayed in litigation filed by the Chamber of Commerce of Greater Philadelphia. Private employers will need to stay alert and assess whether to modify their employment applications and interview practices as this area continues to develop.

Equal Pay litigation continues to cause angst for employers doing business in California. In addition to the federal Equal Pay Act, employers operating in California must comply with laws requiring equal pay for men and women for substantially similar work unless a statutory defense applies. The landscape of the equal pay protections is ever-changing, having been recently expanded in California to include not only sex but also race and ethnicity. Additionally, the new amendments to the California Fair Pay Act preclude employers from using prior salary as the sole justification for a pay differential. State and local jurisdictions are also considering and passing more legislation prohibiting prospective employers from even asking applicants about salary history as a way to minimize historical pay disparities. Despite legislative efforts to curb inquiries into salary history, employers may be feeling more confident after a recent win in Rizo v. Yovino, where the Ninth Circuit confirmed that prior salary can be a “factor other than sex” under the Equal Pay Act for pay differences, provided that the employer shows that prior salary “effectuate[s] some business policy” and the employer uses prior salary “reasonably in light of [its] stated purposes as well as other practices.” However, the employer has the burden of proof on this defense. They also must exercise caution on whether they can inquire about prospective or current employees’ prior salaries depending on the application of local and/or state laws that preclude such an examination. And under California’s amended Fair Pay Act, relying on prior salary history alone to justify a pay differential is prohibited. In Rizo v. Yovino, a female math consultant for a school district sued the superintendent, claiming a violation of the Equal Pay Act because she was paid less than the other math consultants in the School District, all of whom were male. The superintendent argued that the School District’s pay schedule was based on the previous salaries of the employees, and the difference in pay between Rizo and her male counterparts was based on a factor other than sex. The District Court denied the superintendent’s Motion for Summary Judgment and concluded that “when an employer bases a pay structure ‘exclusively on prior wages,’ any resulting pay differential between men and women is not based on any other factor other than sex.” On appeal, the Ninth Circuit found that the superintendent offered four business reasons for using a standard pay structure that was based primarily on salary history. Indeed, the superintendent contended the policy to use prior salary (1) was objective; (2) encouraged candidates to seek employment with the County because they would receive a 5% pay increase over current salary; (3) prevented favoritism and ensured consistency in application; and (4) was a judicious use of taxpayer dollars. Upon remand, the superintendent would have the burden of proving the business reasons articulated and that the use of prior salary was reasonable. Despite this recent ruling in Rizo v. Yovino, employers doing business in California should continue to be vigilant in their compensation practices to ensure that they are not paying employees differently based on sex, race, or ethnicity, or basing the new compensation solely on prior salary. Keeping up to date on the hot issue of whether and how employers can ask about and use prior salary information is critical to compliance.

An earlier post noted an internet search of “FCRA Settlement 2016” returned over 1,800 results. In the three months since that post, that number has grown exponentially—to nearly 55,000 results—demonstrating the current popularity of both individual and class FCRA claims. This is particularly important for employers. The FCRA’s restrictions on the use of background checks (known as “consumer reports”) applies to any employer obtaining a background check on an applicant or existing employee through a consumer reporting agency, for employment purposes. Background checks can be particularly useful for employers when vetting applicants, but (1) the employer must provide proper disclosures and (2) the employee must provide lawful authorization before the background check is run.      I.  Disclosure by the Employer The FCRA requires that the employer provide a written clear and conspicuous disclosure to the applicant that a consumer report may be obtained for employment purposes. Importantly, this disclosure must be in a document that consists solely of the disclosure. If using a paper application, the disclosure should be included on its own separate page. If using an electronic application, the disclosure should be separated or isolated from other parts of the application in some discernable fashion. Additional disclosures may be necessary if the consumer reporting agency is running investigative consumer reports (consulting references personally as part of the background check) or proscribed by applicable state law.   II.  Authorization by the Employee The FCRA also requires the employer obtain the consent of the applicant or employee for the employer to have the background check run. Notably, this authorization, if obtained in writing, may be contained in the same document as the previously mentioned disclosure. The FCRA permits oral authorization, although a written or electronically obtained authorization will be more effective if the authorization is later challenged by, for example, an applicant who was denied employment on the basis of information contained in the background check. There are additional requirements under the FCRA if an employer intends to take adverse action against an employee or applicant based on the contents of the background check. But even before the background check is run, an employer can expose itself to extensive liability, including attorneys’ fees and punitive damages, if it fails to properly disclose and obtain consent for the background check. Employers most commonly face problems when their disclosure and authorization form contains too much information, potentially violating the requirement that the disclosure consist solely of the disclosure. Many employers assume (incorrectly) that more language in the disclosure equals more protection. Employers should take care to work with their consumer reporting agency and legal counsel to ensure they are compliant with the FCRA’s technical disclosure and authorization requirements.

On May 2, 2017, the U.S. House of Representatives passed the Working Families Flexibility Act (the “Act”), which would extend the option of accruing compensatory time to private sector employees. Presently, and for many years under the Fair Labor Standards Act (“FLSA”), only public sector employees were entitled to receive compensatory time in lieu of overtime for hours worked in excess of 40 in a work week. That is, public sector employees can elect to receive compensatory time off at a rate of not less than one and one-half hours for each overtime hour worked, instead of cash overtime pay. Law enforcement and fire department employees can accrue up to 480 hours, and other government employees can accrue up to 240 hours of compensatory time. Public sector employees are entitled to use compensatory time on the date requested unless doing so would “unduly disrupt” the public entity’s operations, and upon termination, all accrued compensatory time must be paid to an employee. The Working Families Flexibility Act, proposed as an amendment to the FLSA, would entitle private sector employees to accrue up to 160 hours of compensatory time in a year at a rate equal to one and one-half hours of compensatory time for each overtime hour worked. The 40 hour work week remains, and only after working 40 hours in a given workweek would compensatory time become available in lieu of overtime pay. The Act would apply to employees who worked at least 1,000 hours in a period of continuous employment with the employer during the preceding 12-month period. The Act would also require a mutual, written agreement between an employee and their employer evidencing the employee’s acceptance of compensatory time in lieu of overtime pay for hours worked over 40 in a work week. Critically, that agreement may not be made a condition of employment. If the employee is represented by a union, the provision for use of compensatory time must be made part of a written collective bargaining agreement. Further, whether to accrue compensatory time or to be paid overtime would, under the Act, be the employee’s choice, and employers are forbidden from requiring employees to use compensatory time. Democratic members of the House opposed the Act on the grounds that it would weaken the overtime requirements of the FLSA and diminish take-home pay for working families. We will monitor the Act’s progress as it moves through the Senate.

After millions of Americans celebrated Easter and Passover this month, the National Labor Relations Board (NLRB or the “Board”) provided a “celebration” of sorts to labor unions. In four decisions—three from the Board and one at the Baltimore regional office—the NLRB lowered the bar for organizing employees of religious institutions. In Saint Xavier University, the Democratic members of the Board allowed a Service Employees International Union (SEIU) local to organize the University’s housekeepers, notwithstanding the University’s religious mission. Characterizing their jobs as “wholly secular,” the majority held: “The housekeepers do not have any teaching role or perform any specific religious duties or functions but are confined to the secular role of providing cleaning services to the university.” The NLRB concluded that it could properly assert jurisdiction over the matter because the housekeepers’ duties were not related to the University’s “possible religious mission.” Less than a week later, the NLRB rejected an appeal from Duquesne University, which asserted that the school’s Catholic affiliation deprived the Board of jurisdiction. Taking the rationale in Saint Xavier University a step further, the Democratic majority distinguished part-time professors who taught theology and those who pursued more secular disciplines, and held that the latter can be organized. The same reasoning was applied in a case involving Manhattan College, where the Board held that it had jurisdiction over adjunct faculty, except those in the religious studies department, notwithstanding the college’s affiliation with the Roman Catholic Church. The distinction between religious and secular activities was further highlighted when the Baltimore regional office directed an election over a group of employees working for the Council on American-Islamic Relations (CAIR). There, the Regional Director held, “The evidence establishes that the employer’s purpose is a secular one – to promote a greater understanding of the Islamic faith and Muslim people to people, organizations, and governments, regardless of creed.” Despite its religious message and distribution of publications featuring verses of the Quran and a “glossary of Muslim terms,” CAIR’s commitment to “protecting the civil rights of all Americans, regardless of faith” was held not to further a religious mission. The lone Republican member, Acting Chairman Philip Miscimarra dissented in the Saint Xavier University, Duquesne University of the Holy Spirit, and Manhattan College cases. In those cases, Acting Chairman Miscimarra argued that distinguishing between secular and religious activities raised First Amendment concerns between the separation of church and state. His dissents focused on the Supreme Court’s NLRB v. Catholic Bishop of Chicagodecision, which held that the Board could not assert jurisdiction over the non-religious teachers at religious schools because doing so would create “a significant risk that the First Amendment will be infringed.” Acting Chairman Miscimarra further opined that the individuals in the proposed bargaining units play a role in maintaining their respective school’s religious educational environment, and consequently, the NLRB lacked jurisdiction in each case. These decisions should give religious organizations pause. While it may take several more months for the Board’s composition to transition to a Republican majority, the NLRB currently remains in activist mode. Certain organizations should not take for granted the fact that because they are a religious organization; they are for all purposes outside the Board’s jurisdiction. As secular aspects of a religious entity now seem ripe for organizing, religious entities concerned about the Board’s rulings should prepare to undertake legal challenges in the courts to challenge Board decisions extending jurisdiction into their workforces.

This past year has seen an increase in gender discrimination and sexual harassment claims. More recently, these claims have not only been brought by women, but also by individuals using Title VII’s “sex” protected class to bring claims for harassment and discrimination based on sexual orientation, being transgender, and other LGBTQ classifications. With these claims becoming more prevalent, employers should review their current policies and train their employees on these policies. Below are four steps employers can take to avoid these types of claims. 1.    Be Specific Many well-intentioned employers assume that their employees know the actions that constitute “harassing” behaviors. In an effort to capture all harassing behaviors, many policies speak to harassment in general terms while giving few specific examples. Speaking of “harassment” in general terms may not properly educate employees regarding the behaviors the employer specifically considers discriminatory and/or harassing. Accordingly, employers should take a pragmatic approach and spell out exactly the conduct that is prohibited and/or may result in disciplinary action. While a policy does not have to be exhaustive, it should provide real life examples of discriminating and harassing conduct the company will not tolerate. Some examples include: Forwarding emails with derogatory/harassing jokes, memes, website links, images, etc. Negative jokes or comments based on sex, gender or other protected classes (including LGBTQ) at any time. Repeatedly asking a co-worker for dates, etc. Using derogatory slang terms relating to a person’s sex or sexual orientation. 2.    Training While it is important to have a policy in place that prohibits discrimination and retaliation, the policy is only one part of the equation. Another important aspect to enforcement is proper training. The majority of employers review their discrimination and harassment policies with employees during orientation. However, this training alone is not enough. Employers should review these policies with all their employees with some reasonable frequency. This is particularly true when there are changes, revisions, or new interpretations of protected categories (e.g., the increased protection for LGBTQ employees) or prohibited practices. Also, managers should be regularly trained and reminded about the conduct that constitutes discriminating and harassing conduct, how to appropriately address complaints of harassment and/or discrimination, how to properly document complaints, how to properly investigate complaints (e.g., how to interview witnesses, take notes, etc.), and how to make a proper determination at the end of an investigation and implement any corrective action. This also includes instructing managers on how to properly discipline and evaluate all employees honestly and consistently. 3.    Encourage Reporting An employer should be very clear that it takes all complaints of harassment and discrimination seriously and does not retaliate or tolerate retaliation against employees who make a complaint and/or participate in an investigation. This includes making it very clear to all employees that there is no such thing as a “formal” or “informal” complaint. If an employee makes a complaint to management – whether it is in writing, in passing, etc. – that complaint will be investigated thoroughly and addressed appropriately. Employees cannot avoid an investigation by making a request that the employer ignores the complaint or by stating they “don’t want to get anyone in trouble.” The employer must be clear that it has a strict stance against harassment and discrimination, fully investigates all complaints, and does not tolerate retaliation. 4.    Consistency Employers must be consistent when disciplining and evaluating their employees, applying their policies to employees, and when addressing and investigating all complaints of harassment and discrimination. Indeed, consistent application of policy helps to insulate employers from claims brought by employees alleging the employer treated employees who fall under a protected class in a discriminatory manner. Demonstrating that an employer is consistent in its treatment of employees also assists the employer when defending discrimination and harassment actions brought by employees through the EEOC, state administrative agencies, and litigation. Harassment and discriminatory claims can cost a company not only dollars in defending but time and business disruption. An employer that creates a culture that prohibits harassment and discrimination clearly communicates such policies and practices to its employees, and provides proper training to its management, will have a workforce that feels appreciated and protected and has a better chance of avoiding litigation.

The employment and labor law cases we previously reviewed have now been resolved by the eight Justices. Despite the possibility of deadlock, a majority ruling was issued by the Court in most of the cases. A brief update: The Court affirmed and remanded with a 6-2 vote Tyson Foods v. Bouaphakeo, finding the district court did not err when certifying and maintaining a class of employees who alleged the employer’s failure to pay them for the additional time required to don and doff protective gear violated the Fair Labor Standards Act; The Court vacated and remanded in a 7-1 vote Green v. Brennan, holding the filing period for a constructive discharge claim begins to run when the employee resigns; The Court affirmed in a 6-2 vote Gobeille v. Liberty Mutual Insurance Company, finding ERISA pre-empts Vermont state law that requires certain entities – including health insurers – to report payments to the state, a program designed “to provide comprehensive state-level information about the distribution of health care services provided in the state and the costs of providing them.”; The Court vacated and remanded Spokeo v. Robins in a 6-2 vote, finding the Ninth Circuit failed to consider both aspects of the injury-in-fact requirements of the Fair Credit Reporting Act; The Court vacated and remanded CRST Van Expedited v. EEOC in an 8-0 vote, a case involving the EEOC’s conciliation obligations, holding that a favorable ruling on the merits is not a required predicate to find the defendant is a prevailing party for purposes of an award of attorney’s fees; The Court was deadlocked 4-4 in In Friedrichs v. California Teachers Association, which involved whether public employees who do not join a union can be required to pay an “agency” or “fair share” fee to cover costs that the union incurs. The case was affirmed by an equally divided court per curiam, which means the decision of the court below is affirmed, but the case is not considered to be binding precedent; The Court also vacated and remanded Zubik v. Burwell, a case involving religious freedom and contraception, in a per curium opinion; and The much anticipated MHN Government Services, Inc. v. Zaborowski, which involved California’s arbitration-only severability rule, settled. Perhaps this was in light of the Court’s recent resolution of DIRECTV, Inc. v. Imburgia, which rejected the California Supreme Court’s refusal to enforce the arbitration agreement in the case. Notably, in early February of this year, the Court informed litigants in Epic Systems Corp. v. Lewis that the Court will defer hearing argument in that case until the October 2017 term. The Epic Systems case involves the question of whether an employer’s use of mandatory arbitration clauses in employment contracts violates the National Labor Relations Act. In spring 2016, the Seventh Circuit determined such class action waivers were unlawful and unenforceable, in contravention of rulings from the Second, Fifth, and Eighth Circuits.

Reversing prior Seventh Circuit precedent, an en banc opinion from the United States Court of Appeals for the Seventh Circuit held that Title VII of the Civil Rights Act of 1964 extends to discrimination based on sexual orientation.  In doing so, the court did not add a protected class to the litany set forth within the statute; rather, it held that “discrimination on the basis of sexual orientation is a form of sex discrimination.”  The opinion acknowledges that it is reversing prior Seventh Circuit precedent on this issue, and is at odds with opinions from almost every other circuit on the issue, including an Eleventh Circuit opinion from March of this year.  The Seventh Circuit’s opinion is based on two Supreme Court opinions interpreting the protections of gender discrimination under Title VII.    In Price Waterhouse, a 1989 case, the Supreme Court held that making decisions based on gender stereotypes is sex discrimination under Title VII.  A decade later, in Oncale, the Supreme Court held that same-sex harassment is actionable under Title VII as gender discrimination.  Resting its analysis on these opinions, the Seventh Circuit held that while a policy that discriminates on the basis of sexual orientation would not impact every woman, or every man, equally, it would nevertheless arise out of the assumptions based on the proper behavior for someone of a given sex.  Specifically, “[a]ny discomfort, disapproval, or job decision based on the fact that the complainant—woman or man—dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex,” and is therefore prohibited by Title VII. The Seventh Circuit also found support for its opinion under the associational theory, which holds that “a person who is discriminated against because of the protected characteristic of one with whom she associates is actually being disadvantaged because of her own traits.” Here, the court focused on the Supreme Court’s opinion in Loving v. Virginia, in which the Supreme Court invalidated a miscegenation statute under the Equal Protection Clause.  The Seventh Circuit extended the logic of Loving to establish that if changing the sex of one of the partners in a same-sex relationship would lead to a different result, it follows that the challenged action is because of sex and thereby discriminatory under Title VII. The Seventh Circuit’s opinion directly conflicts with established precedent from other Courts of Appeals.  However, it is consistent with the position currently taken by the Equal Employment Opportunity Commission (“EEOC”).  As a result, it may soon find its way before the Supreme Court.  The Supreme Court’s Oncale opinion, which held that any discrimination because of sex violated Title VII, was unanimous, and authored by the late Justice Scalia.  Additionally, even if the opinion were to split along the traditional conservative-liberal divide on the Court, Justice Kennedy’s opinions in Windsor and Obergefell, two recent same-sex marriage cases from the Supreme Court, suggest that the Seventh Circuit’s reasoning might be persuasive to him if he once again finds himself as the swing-vote.  Until the Supreme Court decides, however, given the EEOC’s position on the matter and the many state and municipal laws prohibiting discrimination based on sexual orientation, employers would be wise to view Title VII’s prohibition of discrimination based on sex as encompassing sexual orientation. Hively v. Ivy Tech Comm’y College of Indiana, No. 15-1720, --- F.3d --- (7th Cir. Apr. 4, 2017)

On April 3, the U.S. Supreme Court held that a district court’s decision whether to enforce or quash an Equal Employment Opportunity Commission (EEOC) subpoena should be reviewed only for an abuse of discretion, not de novo, by the Circuit Courts. The decision,  in McLane Co, Inc. v. Equal Employment Opportunity Commission,  explains that a reviewing court cannot reverse a district court’s decision regarding whether to enforce an EEOC subpoena absent a definite and firm conviction that the district court committed a clear error of judgment. BACKGROUND INFORMATION   Title VII of the Civil Rights Act of 1964 permits the EEOC to issue subpoenas to obtain evidence from employers that is relevant to pending investigations. If an employer believes that the information sought is too broad or indefinite, is being issued for an illegitimate purpose, or is unduly burdensome, the employer may petition the EEOC to revoke the subpoena.  If the EEOC declines to revoke the subpoena and the employer refuses to comply, the EEOC may then request that the district court issue an order enforcing the subpoena. THE COURT’S DECISION The case arose when McLane Co., a supply-chain services company, refused to comply with EEOC subpoenas seeking “pedigree information” such as names, Social Security numbers, addresses and telephone numbers of employees as part of its investigation into age and sex discrimination. The district court declined to enforce the subpoenas, finding that the pedigree information was not relevant to the charges.  The Ninth Circuit reversed after conducting a de novo review of the lower court’s decision. When deciding that abuse of discretion was the proper standard of review, the U.S. Supreme Court looked at the history of appellate practice when reviewing subpoenas and considered whether the district or appellate court was better positioned to decide the issue. The Court found that Title VII confers on the EEOC the same authority to issue subpoenas that the National Labor Relations Act (NLRA) confers on the National Labor Relations Board (NLRB), and that “[d]uring the three decades between the enactment of the NLRA and the incorporation of the NLRA’s subpoena-enforcement provisions into Title VII, every Circuit to consider the question had held that a district court’s decision whether to enforce an NLRB subpoena should be reviewed for abuse of discretion.” Moreover, the Supreme Court found that district courts have judicial expertise determining relevancy and are better suited to resolve the “fact-intensive, close calls” that subpoena enforcement cases raise.

Your company has worked hard to ensure that its trade secrets are protected under the applicable state laws, and modified its contracts and policies to reflect the new federal trade secret protection standards. When your company has grown internationally, what happens then to trade secret protection? What can your company do to ensure that secrets fundamental to your business remain protected, even internationally? The answer is both complicated and surprisingly simple. There are various international treaties as well as individual national (and sometimes regional) laws that are implicated. For the purpose of this blog, we will focus on strategies for developing a trade secret protection program that takes into consideration commonalities found in trade secrets laws throughout Asia and Europe. Of course, each country has its own laws, and each contains certain nuances that your company will want to address when implementing country-specific protection programs. Companies are advised to seek counsel on the application of each country’s specific trade secret laws as well as the applicability of any treaties. For purposes of developing a baseline trade secret protection policy, many of the country-specific laws have some similarities, which will help a U.S. company looking to expand internationally to protect their trade secrets. Here are three commonalities expanding companies should consider when drafting trade secret protection program: Agreements.Many countries around the world value agreements between parties and employees that establish the expectations regarding the protection of the company’s trade secrets. Generally, the agreement should include a clear identification of the applicable trade secrets, the specific confidentiality expectations, and the penalty for wrongful disclosure. While each country may have their own contractual standards and the weight given to a non-disclosure agreement, a clear description of the expectations of each party is generally valued. Employment Policies. If a U.S. corporation has employees in another country, the company should have employment policies related to the protection of trade secrets. The protective policy should clearly delineate the trade secret and confidential information, the expectations the company has in regard to the protection of its trade secrets, and the role employees play in protecting the trade secrets, during and after the termination of the employment relationship. In addition, policies should include the penalty an employee can expect if the policy is violated. In some countries, for example, the U.K. and Germany, policies that unambiguously demonstrate the company’s expectations may even form the basis of an enforceable duty under tort law. Segregation of Trade Secrets.Many countries value a company that takes internal action to protect its trade secrets. One common method for the internal protection of trade secrets is segregating the trade secrets, either electronically or physically, from all other items and materials. Access to trade secrets should only be given to those who are required to use the protected materials. South Korea, for example, requires that trade secrets be maintained as confidential with “substantial effort” on the part of the company. Similarly, German courts will scrutinize the steps a company takes to ensure that only those who need to know the trade secrets are granted access. Companies expanding internationally should consider the appropriate methods to protect their trade secrets and should plan in advance to ensure their materials are secure. By taking some general steps, along with complying with each country’s unique laws, a company will be equipped to protect those things that make it unique in the marketplace.

In two unpublished decisions this month, the Ninth Circuit ruled in Wulfe v. Valero Refining Co. California and Valdez v. Terminix International Company, et al. that California Private Attorney General Act (PAGA) claims can be forced into arbitration based on arbitration clauses in employees’ contracts to which the State of California is not a party. While the Wulfe and Valdez decisions are unpublished and without precedential value, they do provide guidance on the Federal Court’s interpretation of how individual arbitration agreements impact potential PAGA claims in California. In Wulfe, an employee asserted wage claims against his employer, including a PAGA claim. He signed a mandatory arbitration agreement as a condition of employment. The employer moved to compel arbitration of the entire case, including the PAGA claim. The District Court granted the motion to compel arbitration and left the scope of the agreement to arbitrate, including whether the PAGA claim could be heard in arbitration, up to the arbitrator. The Ninth Circuit affirmed. The Court recognized the ruling of the California Supreme Court in Isakanian v. CLS Transportation Los Angeles, LLC and its own recent ruling in Sakkab v. Luxottica, in which both courts held that “pre-dispute agreements to waive the right to bring a representative PAGA claim are unenforceable and that this rule is not preempted by the FAA.” Nonetheless, the Ninth Circuit held that “the district court’s order compelling arbitration did not run afoul of Sakkab and Iskanian because the order did not prevent Wulfe from bringing a representative PAGA claim in arbitration…” Similarly, in Valdez, Terminix appealed from the District Court’s order denying its motion to dismiss or compel arbitration of the Plaintiff’s representative PAGA claim. The Ninth Circuit reversed the lower court’s ruling finding that an individual employee, acting as an agent for the government, can agree to pursue a PAGA claim in arbitration. The Court addressed the holdings of Isakanian and Sakkab, but found that Isakanian and Sakkab “clearly contemplate[d] that an individual employee can pursue a PAGA claim in arbitration, and thus that individual employees can bind the state to an arbitral forum.” Further, the Ninth Circuit held that “[a]n individual employee, acting as an agent for the government, can agree to pursue a PAGA claim in arbitration. Iskanian does not require that a PAGA claim be pursued in the judicial forum; it holds only that a complete waiver of the right to bring a PAGA claim is invalid.” The Ninth Circuit’s decisions in Wulfe and Valdez demonstrate a clear split in authority between Federal and California State Court. While the Ninth Circuit held in Wulfe and Valdez that PAGA actions can be compelled to arbitration in Federal Court, several California State Courts have held otherwise. On March 7, 2017, the Fourth Appellate District of the California Court of Appeal held in Betancourt v. Prudential Overall Supply, that “a defendant cannot rely on a predispute waiver by a private employee to compel arbitration in a PAGA case, which is brought on behalf of the state.” Betancourt is consistent with two other California Court of Appeal cases in which the courts also held that PAGA claims are not subject to pre-dispute mandatory arbitration agreements – Tanguilig v. Bloomingdale’s, Inc. and Hernandez v. Ross Stores, Inc. The practical impact of these decisions and this split in authority is significant and much will unfold in the coming months, especially as the United States Supreme Court considers the enforceability of class action waivers in the next term. For example, an individual employee subject to an arbitration agreement who brings a PAGA claim can theoretically be compelled to prosecute that representative action in arbitration, at least in federal court. The arbitration of those PAGA claims would impact the rights of other individual employees who may not have agreed to arbitrate employment claims. And employers may decide the prospect of arbitrating a PAGA claim is not so attractive after all. Accordingly, employers should review their arbitration agreements carefully to determine whether PAGA claims are excluded and discuss with experienced counsel whether it is advantageous to have PAGA claims litigated in arbitration and whether edits to current agreements are necessary.

A recent decision by the United States District Court for the District of Delaware serves as an important reminder that employers may be held liable for acts of harassment by individuals with whom their employees come in contact, even when those individuals are not employees. In Poe-Smith v. Epic Health Services, Inc., a home health care worker filed suit against her employer alleging that the relative of one of the home health patients to whom she was assigned had created a hostile environment. Specifically, the plaintiff alleged the family member of the home health patient directed sexual innuendos and other inappropriate comments toward her and, on one occasion, physically assaulted her. When she complained to her supervisor about the conduct, the supervisor acknowledged that the family member had made inappropriate comments to her over the phone previously. The home health care agency responded to the complaint by speaking with Plaintiff about the situation and immediately removed her from the assignment. The agency also offered her another assignment located further from her home. When she refused that assignment, the agency continued to offer her other opportunities, one of which she ultimately accepted. The employer attempted to have the case dismissed on the ground that it immediately responded to the complaint and addressed the situation. The trial court refused to dismiss the case, finding instead that because the supervisor acknowledged that the same family member had made inappropriate comments over the phone during approximately the same time period, it was plausible that the health care company had constructive knowledge of a hostile environment that it had failed to promptly correct. The court’s decision underscores the importance of employers ensuring that they have policies and practices in place which protect employees from harassment by third parties. While the possibility of third-party harassment exists in many industries, employers in health care, retail, and hospitality and service industries are vulnerable to such claims because their employees come in direct contact with customers, vendors and other outsiders on a regular basis. Like cases involving direct employment relationships, employers may be liable for third-party harassment if an employee can establish that the company “knew or should have known” of the possibility that a customer or other third party was engaged inappropriate behavior. 29 C.F.R. §1604.11(e). To minimize the risk of liability for the actions of non-employees, employers should take the following steps: Review the company’s anti-harassment policy for specific references to third-party harassment and instructions for reporting it. Provide regular training to all employees, and especially to supervisory personnel, regarding the appropriate steps to take if they become aware that a non-employee is making inappropriate comments in the workplace or engaging in conduct that would otherwise violate the employer’s anti-harassment policies. Proactively consider how to respond if a vendor or customer is accused by an employee of inappropriate conduct without taking action that may be considered retaliatory against the employee (such as removing the employee from the account or workplace in order to avoid interaction with the alleged harasser).

Third-party litigation funding is marketed as a means of broadening access to justice by providing plaintiffs with resources to litigate in exchange for a cut of any monetary recovery. Some commenters have rebuked third-party litigation funding as an ethical quagmire and illegal champerty—stirring up litigation merely for a share of the proceeds. But where the plaintiff, at least on paper, remains in control of the litigation, courts have generally permitted third-party litigation funding. With presently few legal restrictions, third party litigation funding has the potential to fund almost any lawsuit, including employment class and collective actions. How can employers sued on the back of third-party litigation funding discover this fact and use it to their advantage in litigation? One federal court—the Northern District of California—requires disclosure of third-party litigation funding in class and collective actions as part of the Joint Case Management Statement. In the absence of such automatic disclosure rules, an employer may request that the Case Management Order require the plaintiff to disclose any third-party litigation funding. See  Fed. R. Civ. P. 26(f)(3)(F). Once disclosed, the existence of third-party litigation funding could be leveraged by an employer to reduce litigation costs and gain strategic advantages: Scope of Discovery:The “parties’ resources” is one factor in defining the scope of discovery. See Fed. R. Civ. P. 26(b)(1). A plaintiff’s resources fairly include any available third-party litigation funding, which may reduce the scope of discovery shouldered by the employer. Discovery Cost Shifting: Third-party litigation funding may erode a plaintiff’s claimed inability to pay for requested discovery. SeeFed. R. Civ. P. 26(c)(1)(B). Adequacy of Representation of Putative Class: Courts must examine the resources that putative class counsel will commit to the class and “any other matters pertinent to counsel’s ability to fairly and adequately represent the interests of the class.” Fed. R. Civ. P. 23(g)(1)(A)(iv), (B). Class certification should be denied where the plaintiff fails to carry the burden of proving that third-party litigation funding will not conflict with or adversely impact class members’ interests. Sanctions:A third-party litigation funder playing a role in litigation misconduct may be subject to sanctions. See Fed. R. Civ. P. 37(a)(5)(A). Settlement:Settlement efforts may be complicated by a third-party litigation funder influencing a party’s settlement posture. A mediator should be apprised of this fact. As the wave of third-party litigation funding rises, employers should work with competent counsel to determine whether any of the above tools could bolster their case.

In an important decision for the airline industry and its contractors, the United States Court of Appeals for the DC Circuit in ABM Onsite Services – West, Inc. v. NLRB overturned a decision by the National Labor Relations Board (NLRB) asserting jurisdiction over an airline contractor in a representation dispute involving baggage handlers at the Portland airport. The Court specifically held that by adopting the National Mediation Board’s “whittl[ed] down version of its “control test,” the NLRB acted arbitrarily and capriciously when asserting jurisdiction over an entity that is a contractor for airlines (which historically have been subject to the RLA, not the NLRA). As a result, the Court remanded the case to the NLRB to either offer a reasoned explanation for departing from the traditional six-factor jurisdictional test, or refer the matter to the NMB to explain why it changed its jurisdictional analysis so the NLRB could determine whether it (the NLRB) agreed with the NMB’s modified approach. The case initially arose when the International Association of Machinists and Aerospace Workers (IAM) sought to organize a group of ABM Onsite Services – West, Inc. (ABM) employees. A consortium of airlines at the Portland airport hired ABM to handle baggage at the airport. In response to the IAM’s petition to represent the baggage handlers, ABM objected to the NLRB’s jurisdiction and argued it is subject to the Railway Labor Act (RLA), not the National Labor Relations Act (NLRA), since ABM is controlled by airlines. The Regional Director of the NLRB rejected this argument, which was affirmed by the NLRB, and ordered an election. The IAM won the election, which required ABM to bargain with the union. ABM refused to bargain, to challenge the jurisdictional decision, and the IAM filed an unfair labor practice charge. The NLRB granted summary judgment against ABM and this appeal followed. When determining whether a given company is “controlled by” an airline, the NMB considers:(1) the extent of the airline’s control over the manner in which the contractor conducts its business, (2) the airline’s access to the contractor’s operations and records, (3) the airline’s role in the contractor’s personnel decisions, (4) the degree of supervision by the airline over the contractor’s employees, (5) whether the contractor’s employees are held out to the public as the airline’s employees, and (6) the extent of the airline’s control over employee training. Air Serv Corp., 33 NMB 272, 285 (2006). The NLRB adopted this test as its own when deciding cases before it. However, since 2013, without overruling its traditional test or prior precedent, the NMB has required airlines to exercise a “substantial ‘degree of control over the firing[] and discipline of a company’s employees’ before it would find that company subject to the RLA.” Following the NMB’s lead, the NLRB adopted this heightened test when finding that the airlines did not exercise sufficient control over ABM. The DC Circuit explained that the NLRB’s decision was arbitrary and capricious because once the NLRB “adopted and applied the NMB’s traditional test, it bound itself to continue doing so; any deviation would require a reasoned explanation.” When asserting jurisdiction over ABM, the NLRB relied exclusively on the NMB’s more stringent control test without explaining its departure from the standards the NLRB has previously adopted. Overturning the NLRB’s order, the Court held “when the Board fails to explain – or even acknowledge – its deviation from established precedent, ‘its decision will be vacated as arbitrary and capricious.’” This case is important for airlines and airline contractors because by requiring the NLRB to continue to follow its precedent or justify its departure from the traditional application of the jurisdictional test, the NLRB may be more likely to find RLA jurisdiction applies -- particularly given the shifting composition of the NLRB in today’s political landscape. The unique protections of RLA jurisdiction -- chief among them system-wide bargaining units and procedural obstacles to work stoppages-- are important for airline contractors to provide greater stability in labor relations in the airline industry.

On February 28, 2017 the California Court of Appeals confirmed in Vaquero v. Stoneledge Furniture LLC, that non-exempt commissioned employees are entitled to enhanced compensation during rest and recovery periods.  This ruling brings commissioned employees into alignment with the recent statutory changes for “piece-rate” employees in California. AB 1513, codified as Labor Code §226.2 is known as California’s “piece rate law.”  The piece rate law took effect on Jan. 1, 2016 and requires employers to pay piece-rate employees for rest and recovery periods and other nonproductive time.  For employees who qualify, the law mandates that they shall be compensated for rest and recovery periods at a regular hourly rate that is no less than the higher of: (i) an average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods; or (ii) The applicable minimum wage. Labor Code §226.2(a)(3)(A) Labor Code §226.2 explicitly states that it shall apply to employees who are compensated on a piece-rate basis.  However, in a case of first impression, the Second District Court of Appeals in Vaquero clarified that the need to compensate legally mandated rest and recovery periods at an enhanced rate also applies to non-exempt employees compensated on a commission basis. Specifically, the Court stated: “the DLSE Manual treats commissioned and piece-rate employees alike for purposes of applying the minimum wage requirement to non-productive working hours. There is no reason California law should not treat these categories of workers the same for purposes of complying with the requirement to provide paid rest periods.” The Vaquero decision is a cautionary reminder to employers with non-exempt commissioned employees that rest periods –the 10 minute breaks required by California law - must be separately tracked and compensated at the rates dictated by the statute. Concerned employers should consult with counsel to determine whether commission agreements adequately compensate non-exempt commissioned employees for non-productive time and reflect the proper method of calculation for the employees’ wage statements.  Failure to comply with this new guidance may create significant potential wage and hour liability for California employers.

Beginning on April 3, 2017, the United States Citizenship and Immigration Services (USCIS) will suspend processing of all H-1B petitions. USCIS reports the suspension may last up to six months. The suspension applies toallH-1B petitions filed on or after April 3, 2017, and as H-1B petitions filed as part of this year’s H-1B lottery may not be received prior to April 3rd, all H-1B lottery petitions are also included in the suspension. According to USCIS, the suspension is needed to better allocate adjudications resources and help reduce overall H-1B processing times, which are presently running six to eight months. What is Premium Processing? Premium processing service provides expedited processing for certain employment-based petitions and applications. The fee for premium processing is $1,225—which is in addition to the other required government application filing fees. USCIS guarantees 15 calendar day processing to those petitioners or applicants who choose to use this service or USCIS will refund the Premium Processing Service fee. Some Practical Implications of the Suspension Employees in H-1B status are allowed to remain and continue working for up to 240 days while an H-1B extension is processed. However, many states link the expiration date of a driver’s license to the end date of approved H-1B employment, and some of these states will not allow for an extension of the license without an approved (rather than filed) H-1B extension. The premium processing suspension may leave H-1B nonimmigrants without legal driving privileges which could impact their ability to travel to/from work. In addition, H-1B employees traveling outside the United States require a valid H-1B visa stamp issued by a U.S. Consulate to return to the U.S. In order to apply for a visa an H-1B employee must have a current H-1B approval, which means that employees with H-1B extensions on file with USCIS, but not yet approved, will not be allowed to renew H-1B visas. The suspension of premium processing may require employers to defer H-1B employees’ international travel to avoid having employees stranded outside the U.S. waiting for H-1B approval under regular processing. Requesting Expedited Processing During the Suspension While premium processing is suspended employers may submit a request to expedite an H-1B petition if they meet the following criteria: severe financial loss, emergency situation, humanitarian reasons, a nonprofit organization whose request is in furtherance of the cultural and social interests of the United States, USCIS error, or a compelling interest of USCIS. USCIS will review expedite requests on a case-by-case basis and requests will be granted at the discretion of USCIS leadership. The burden is on the applicant or petitioner to demonstrate that one or more of the expedite criteria have been met. At this point, we do not know how generous USCIS may be in granting expedited processing. Steps for Employers to Take We recommend employers immediately review all employees in H-1B status and determine if extensions should be filed under premium processing before the April 3, 2017 suspension takes effect. Employers may file an extension within 180 days from the end date of H-1B status. In addition, employers should review international travel plans for all H-1B employees for the coming year and determine whether travel is advisable or should be delayed. Finally, employers should determine whether H-1B employees may be delayed in renewing driver’s licenses and develop transportation contingencies to ensure H-1B employees are able to make it to work.