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.

Facebook, YouTube, Instagram, Snapchat, Twitter—now ubiquitous symbols of interpersonal communication -- mere years ago were fledgling ideas or unknowns.  Today, social media is everywhere, and has brought countless new challenges for employers.   However, businesses that successfully navigate two key areas of this electronic landscape will be at a distinct advantage. The Hiring Process.  Social media has had a tremendous impact on applicant screening. Recent studies have shown that over 40% of employers use one or more social media platforms to obtain information about prospective candidates during the hiring process.  In addition, 43% of businesses report that social media searches resulted in information that led them not to hire an applicant.  The benefit is clear:   information about a potential employee can be gathered quickly and cheaply. However, the ability to gather that much substantive information about a prospective employee also comes with risk.  For example, applicants’ social media profiles often display information concerning certain legally-protected characteristics on which hiring decisions cannot be based, such as an individual’s religion, gender, disability, marital status, national origin, or race. Furthermore, some states prohibit decisions based information that can be found on social media sites, such as tobacco use, political activity, or gun ownership.  An EEOC press release from 2014 crystalized the issue when stating, in part: The use of sites such as LinkedIn and Facebook can provide a valuable tool for identifying good candidates by searching for specific qualifications…[b]ut the improper use of information obtained from such sites may be discriminatory since most individuals’ race, gender, general age and possibly ethnicity can be discerned. Consequently, employers should take care when using social media in the applicant screening process so as not to generate evidence of discrimination if a candidate is not hired.  One practice is to provide a “buffer” layer between the individual responsible for hiring candidates and those charged with reviewing an applicant’s social media presence for legitimate, non-discriminatory signs of concern.  Given the trend of performing internet searches on potential employees, businesses without any safeguards should consult with counsel to implement strategies to effectively screen applicants while simultaneously minimizing the risk of litigation. Workplace Investigations.  Social media is equally relevant in the context of workplace investigations.  Imagine this scenario:  An employee is accused of making racially-charged comments to another co-worker after hours, out of the office, and via Facebook.  The accused denies it.  Is this a personal or a workplace dispute?  As the employer, can you be responsible if you choose not to act?  According to the EEOC, social media can become an ‘extension of the workplace.’ Indeed, the EEOC issued the following guidance in March 2014: Even if employees post harassing or derogatory information about coworkers away from the workplace…an employer may be liable for a hostile work environment if it was aware of the postings or if the harassing employee was using employer-owned devices or accounts. Accordingly, employers who wholly ignore the conduct of their employees on social media may increase their exposure to costly litigation.  Thus, any employer engaging in a workplace investigation using social media must be cognizant of the following issues: •    The Stored Communications Act (“SCA”).  The SCA prohibits the intentional and unauthorized access to a facility where electronic communication service is provided—and has been held to encompass individual’s social media accounts.  A key exception to the SCA is employee consent.  Accordingly, employers who get authorization from employees via, for example, a technology monitoring clause in an employment agreement, likely would not run afoul of the statute. •    State Regulations.  State regulations can have dramatic and varying effects on employer investigations into employee misconduct, which presents a highly-confusing roadmap for employers to navigate.  For example, some states prohibit employers from accessing an employee’s social media account even in the context of an investigation into workplace misconduct.  Other states, such as Colorado and Maryland, contain an investigative exemption only in certain types of alleged misconduct (such as fraud and trade-secret theft). Employers should not ignore social media as an investigative tool—especially if allegations of misconduct stem from social media activity. Indeed, doing so is likely to exacerbate the risk of litigation. Rather, businesses inexperienced or unfamiliar with workplace investigations involving social-media should seek guidance from experienced and well-qualified counsel familiar with both the myriad of issues presented by this process.

On February 28, 2017, the Missouri Supreme Court issued its long-awaited opinion in Cooperative Home Care, Inc., et al. v. City of St. Louis, Missouri, et al., ruling that the City of St. Louis can proceed with a citywide local minimum wage increase under Ordinance 70078 of its revised city code (the “Ordinance”). The Ordinance provides a series of four graduated increases to the minimum wage for employers with employees working within the physical boundaries of the City of St. Louis. Background The Ordinance was enacted by the Board of Aldermen of the City of St. Louis on August 28, 2015.  The Ordinance provides a series of four graduated increases to the minimum wage for employees working within the physical boundaries of St. Louis, which were to be phased in beginning on October 15, 2015 at $8.25 per hour and rising to $11 per hour on January 1, 2018.  In addition, beginning January 1, 2021, the minimum wage rate in St. Louis will increase annually on a percentage basis to reflect the rate of inflation.  The Ordinance further provides: “If the state or federal minimum wage rate is at any time greater than the minimum wage rate established by this ordinance, then the greater shall become the minimum wage rate for purposes of this ordinance.” Shortly after the Ordinance was enacted, business groups in St. Louis filed a Petition seeking (1) a declaratory judgment that the Ordinance was invalid; and (2) injunctive relief to prevent enforcement of the Ordinance.  The business groups alleged that local minimum wage ordinances are preempted by Sections 290.502 and 67.1571 of the Revised Statutes of Missouri (R.S.Mo.) and that the Ordinance exceeds the charter authority granted to the city of St. Louis. Based on principles governing preemption and the Missouri Constitution’s single subject rule, the Court held that state law does not preempt the Ordinance and that the Ordinance is not beyond St. Louis’s charter authority. Looking Forward As set forth above, the minimum wage in St. Louis was scheduled to rise over the course of three years beginning on October 15, 2015.  Under the Ordinance, the minimum wage in St. Louis was scheduled to increase to $10.00 as of January 1, 2017.  While the Ordinance is effective as of the date of the Court’s ruling, Mayor Francis Slay has said he will give businesses a “reasonable grace period” to adjust to the new minimum wage.  Mayor Slay did not specify how long the grace period will last, and the City has not established a new phase-in schedule. Mayor Slay’s director of communications has stated that enforcement of the Ordinance will be complaint-driven.  The City plans to post a complaint form online for employees to alert city officials about employers who are not in compliance with the Ordinance.  Employers who do not comply with the new minimum wage are subject to prosecution in Municipal Court and could have their business license or occupancy permit revoked, in addition to the award to an employee of back wages plus interest from the date of non-payment or underpayment.  Each day that an employer pays an employee a wage below the minimum wage counts as a separate violation.

In December 2015, we broadly reviewed concerns and compliance issues for employers when managing employees engaged in workplace political speech or those accused of engaging in “hate” speech in the workplace. A brief scan of headlines so far into 2017 reveals more than 900 instances of alleged violence, hate speech, and harassment in and out of workplaces reported since late January. Human Resource professionals and in-house counsel may wonder, again—what are the company’s obligations and duties to our employees? A quick review: “Political activity” and “political affiliation” are only protected statuses for certain employees and in certain locales. Courts have held the First Amendment protects publicemployees from their employers using political affiliation as a basis for employment decisions. The Civil Service Reform Act of 1978 expressly prohibits political affiliation discrimination toward federalemployees. Several states have passed their own statutes concerning private-sector employees: Michigan prohibits direct or indirect threats against employees for the purpose of influencing their vote; Oregon prohibits threatening loss of employment in order to influence the way an employee votes on any candidate or issue; Florida considers it a felony criminal offense to discharge or threaten to discharge an employee for voting, ornot voting, in any election (municipal, county or state) for any candidate or measure submitted for a public vote; Kentucky, Ohio, Pennsylvania, and West Virginia prohibit employers from posting or distributing notices threatening to close their businesses or lay off employees if a particular candidate is elected; and California, Colorado, New York, North Dakota, and Louisiana have passed laws deeming it illegal for an employer to retaliate against an employee for off-duty participation in politics or political campaigns. Several cities, such as Lansing, Michigan; Madison, Wisconsin and Seattle, Washington, protect political affiliation similar to protections afforded race, sex, age and disability, even for private sector employees. Beyond these mandated protections, private sector employees should be mindful of workplace speech and conduct. For example, managers and supervisors who express any type of political opinion to subordinate employees may expose themselves to subsequent claims they acted out of bias against those employees on the basis of other protected statuses. How could an employee draw such a connection in his or her allegation? As we saw in the most recent election cycle, some political candidates across all levels (local, state and federal) voiced strong opinions about race relations, foreign relations policy, religious freedom, Second Amendment rights, immigration, LGBT rights and other issues directly related to characteristics protected by federal, state or local workplace anti-discrimination laws. Dropping into a workplace political debate with a subordinate employee about a candidate, elected official, political party, cause or other political issue risks allowing that employee to associate expressed opinions with some type of prohibited discriminatory bias. Best Practices Check-up Understand there could be laws relating to workplace political speech or activities in your location; Educate managers and supervisors regarding what laws impact the workplace as well as the employer’s workplace culture; training can form a vital line of defense by limiting potential exposure before it has a chance to evolve; Remind managers and supervisors how personal opinions can be viewed by subordinate employees as a form of prohibited workplace bias; and Encourage managers and supervisors to resist being drawn into workplace political discussions, particularly with subordinate employees. Should an employee file an internal complaint alleging a workplace hate-based incident, conduct a measured, consistent investigation to determine what (happened), who (was targeted) and if hate speech or other actions (based on a protected class or against company culture) is likely to have occurred. Resist assumptions. If the investigation yields a conclusion that inappropriate behavior occurred, initiate appropriate actions to (1) hold employees appropriately accountable (for example, through formal warning up to discharge) and (2) decrease the likelihood of repeated incidents. Resist any media, or social media, attention that can serve to derail thoughtful consideration of the facts and promote an atmosphere leading to impulsive decisions.

Earlier this month, the Ninth Circuit further confirmed the importance of strict compliance with the Federal Credit Reporting Act’s (FCRA) disclosure requirements. In Syed v. M-I, LLC, the Ninth Circuit held that the employer willfully violated the FCRA by including a liability waiver in its disclosure form. The FCRA specifically requires an employer to provide a disclosure form to a prospective employee consisting “solely of the disclosure” in advance of the background check if the results of the background check will be used or considered for “employment purposes.” The FCRA separately provides that the disclosure form may also include the employee or applicant’s written authorization, which the employer must also obtain in advance of the background check. As detailed in an earlier post, the simpler the form, the more likely the form is compliant with the FCRA’s technical requirements. The employer argued that because the FCRA allows a disclosure form to include an employee authorization, the term “solely”, as used in the statute, did not really mean solely, and thus the disclosure could also include a liability waiver signed by the employee. The court explicitly rejected this argument, and highlighted the fact that the FCRA expressly provides for a singular exception to include the employee authorization in the disclosure form, which reflected Congress’s intent to exclude any implied exceptions. The court further determined that the inclusion of a liability waiver in the disclosure form constituted a willful violation of the FCRA, which exposes an employer to punitive damages in addition to damages assessed per violation (per employee or applicant receiving a defective disclosure form), plus attorneys’ fees. Although Syed is a case of first impression, the decision confirms the strict approach district courts across the country have taken in interpreting the provisions of the FCRA. Seemingly innocent violations of the FCRA—such as extraneous language in the FCRA-mandated disclosure form—can expose an employer to extensive liability. Employers cannot simply rely on the forms provided to them by consumer reporting agencies, and should consult legal counsel for a review of their processes related to background checks.

In Acclaim Systems, Inc. v. Infosys, Ltd, et al., the Third Circuit demonstrated that ignorance can sometimes be bliss when it comes to restrictive covenants. In that case, a large cable provider contracted with Acclaim Systems to provide information technology consulting services for a customer relations platform. Partway through the project, the cable provider transferred the work to Infosys. One Acclaim Systems employee and three subcontractors followed the project to Infosys. Each of the four workers had non-competes that prohibited them from working for another company on the cable project. Infosys never learned of those agreements despite asking the workers (including a question on the job application) and asking the staffing company providing the subcontractors. The Third Circuit affirmed summary judgment for Infosys because it could not intend to interfere with non-competition covenants of which it was unaware. This case highlights four important employment practices. 1.    Ask Questions When On-Boarding As the decision in Acclaim Systems demonstrates, asking potential employees, contractors, and staffing companies whether a worker or contracting company has signed any restrictive covenants can be a key strategy to avoid tortious interference claims. In particular, a question on a job application and a covenant in a contract can be important evidence that the employer or contracting principal performed due diligence. Indeed, the decision in Acclaim Systems suggests that a company that does not ask about restrictive covenants to avoid claims of tortious interference could still be liable for tortious interference, particularly in industries like information technology consulting where restrictive covenants are common. 2.    Provide a Copy of Agreements at Departure In addition to verbally reminding workers of any applicable restrictive covenants during exit interviews, companies that obtain restrictive covenants should provide the worker with a copy of the executed restrictive covenant agreement (and should document what was provided). This practice not only ensures that the worker can consult the actual terms (as opposed to his or her potentially faulty memory), but it also makes it possible for the worker to provide the agreement to potential employers and contracting principals. 3.    Notify Subsequent Potential Employers and Contracting Principals As explained in a prior blog post,  contacting potential and subsequent employers and contracting principals can be an important strategy in enforcing restrictive covenants. In addition to verbal contact, companies should consider sending a copy of the agreement containing restrictive covenants to potential and subsequent employers and contracting principals before or even after an alleged breach. 4.    Get Permission to Notify Potential and Subsequent Employers and Contracting Principals A company obtaining restrictive covenants should consider including a provision permitting the company to notify potential and subsequent employers and contracting principals of the restrictive covenants. The company can make the new employer or contractor aware of the worker’s obligations while minimizing the risk of contractual interference or other claims from the worker.

On February 6, 2017, The Center for Individual Rights (CIR)—a Washington, D.C. non-profit, public interest law firm—filed a federal lawsuit on behalf of a group of California public school teachers against the State and California Teachers Association to challenge California’s “agency shop” law, which requires teachers to pay certain union fees even when they are not union members. In the Complaint, the non-union, teacher plaintiffs allege that requiring them to pay union fees violates the First Amendment because, among other things, the teachers have political, moral, and/or religious objections to activities and efforts on which unions spend money and allocate resources. CIR previously represented plaintiff teachers in the recently-decided case Friedrichs v. California Teachers Association, which we discussed at length here. In a March 26, 2016, per curiam decision, the United States Supreme Court left in place the Ninth Circuit Court of Appeal decision upholding the legality of the union fees. The Court affirmed the Ninth Circuit’s decision without analysis due to a 4-4 split among the sitting justices, as the case came up for review following the death of Justice Antonin Scalia. Many commentators opined that the Court likely would decide the case in favor of the teachers challenging the law, for reasons we previously noted, including Justice Samuel Alito’s view that “no person in this country may be compelled to subsidize the speech of a third party that he or she does not wish to support.” By renewing this challenge, CIR and teachers are likely anticipating that Tenth Circuit Court of Appeals Judge Neil Gorsuch— President Trump’s nominee to replace Justice Scalia—will not only be confirmed, but also will be the fifth vote necessary to strike down the law. We will continue to monitor this case and provide updated information and analysis as it moves through the courts. The case is Yohn et al. v. California Teachers Ass’n, Case No: 8-17-cv-00202 (C.D. Cal. Feb. 6, 2017). The complaint is available here.

The Department of Labor’s (DOL) final rule establishing paid sick leave for employees of federal contractors is effective as of January 1, 2017. The final rule follows President Obama’s September 7, 2015 Executive Order 13706 (the “Executive Order”) on this subject, which we wrote about here. Is Your Organization Covered? The Executive Order and the DOL’s final rule apply to “new” contracts awarded on or after January 1, 2017. Contracts entered into before that date will be considered “new” contracts if the contract is renewed through bilateral negotiation on or after January 1, 2017, or in some cases if the contract is amended or extended. The DOL’s final rule covers four major types of contracts: A procurement contract for construction covered by the Davis-Bacon Act (DBA); A contract for services covered by the Service Contract Act (SCA); A contract for concessions, including any concessions contract excluded from coverage under the SCA by Department of Labor regulations at 29 CFR 4.133(b); or A contract in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public. If Covered, 4 Steps To Take Now If your organization’s contracts are subject to the final rule, consider taking these steps now: A. Make sure your sick leave policy allows for carryover that meets the final rule’s requirements and implement an accrual method if you do not already have one. The final rule requires an employee be allowed to carryover up to 56 hours of leave. The DOL has clarified that if the company uses an accrual method, it can cap accrual at 56 hours. In contrast, the DOL also clarified that if the company provides sick leave to its employees as a lump sum at the beginning of the year, then the company would have to give each employee an additional 56 hours of sick leave each year. B. Make sure your leave policy provides leave for domestic violence. Domestic violence-related leave includes leave for care from a health care provider or for physical or mental conditions arising from domestic violence, as well as leave to obtain counseling, seek relocation, seek assistance from a victim services organization, take related legal action, including preparation for or participation in any related civil or criminal legal proceeding, or to assist certain family members with these actions. C. If state law allows, do not provide for payout of accrued, but unused sick leave.The final rule does not require employers to pay out accrued, but unused sick leave. Employers should note that if the employer rehires an employee within 12 months of separation, the employer must reinstate the employee’s accrued, but unused sick leave balance as it existed on the separation date. D. Consider whether it makes sense to have a PTO policy that includes sick leave or a separate sick leave policy.The DOL has stated that a company’s existing PTO policy could fulfill the requirements of the final rule, but some companies may find it advantageous to have separate policies for sick leave, especially with the varying sick leave requirements under state and local law. For more information on other paid sick leave laws see our earlier blog posts.

On January 19, 2017, the U.S. Court of Appeals for the Eighth Circuit determined that a claim for compensatory damages under the Americans with Disabilities Act (“ADA”) survives the death of the aggrieved party. In Guenther ex rel. Guenther v. Griffin Construction Co., an employee learned that cancer had spread throughout his body and informed his employer that he would need three weeks’ leave to undergo radiation therapy. Rather than accommodate this request, the employer terminated him and immediately cancelled his insurance policies. The employee then filed a timely charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”). While the EEOC charge was still pending, the employee passed away. The special administrator of the employee’s estate subsequently received a right-to-sue letter from the EEOC and filed suit on the employee’s behalf. The district court dismissed the suit, adopting the state tort survival statute as the federal rule of decision and holding that the employee’s ADA claim abated at his death. The Eighth Circuit reversed. After determining that the issue of claim abatement under the ADA is governed by federal common law, the Eighth Circuit faced the question of whether it should adopt a uniform rule of survivability under the ADA or instead utilize state law. The Guenther court first looked to Congress’s purpose in passing the ADA, which was to provide a comprehensive national mandate with clear, strong, consistent, and enforceable standards for addressing disability-based discrimination. Against that backdrop, the court made two salient observations: First, the abatement of ADA claims would pose a special threat to the ADA’s enforcement. Indeed, unlike other civil rights protections, the very nature of the ADA is a matter that could lead to the death of a party before a case is complete, as a result of the same health issue that provided him with protections under the statute. Second, a uniform federal rule would ensure consistent and evenhanded application of the ADA’s provision, while the application of state law may present an absolute barrier to a plaintiff (or his estate), irrespective of his diligence in asserting his rights, depending on his residency. Consequently, the Guenther court held that federal law did not incorporate state law to determine whether claims for compensatory damages under the ADA survive upon the death of the aggrieved party. Instead, the court held that an individual’s estate could bring such claims in the place of the decedent.

It is full steam ahead from the executive and legislative branches on plans to “repeal and replace” the Affordable Care Act (ACA). As a result, employer medical plan coverage may again be significantly altered. On January 23, 2017, Senators Bill Cassidy (R-LA) and Susan Collins (R-ME) proposed the Patient Freedom Act 2017, to serve as a replacement for the ACA. The key feature of the proposed legislation would allow states to select the form of health care regulation to implement for residents. Under the legislation, states may either: Opt to comply with the ACA, including mandates; Opt not to seek federal assistance; or Opt to receive funding equal to 95% of the federal premium tax credits and subsidies and federal match for Medicaid expansion. Such funding would be used to create Health Savings Accounts (HSA) for residents. The legislation further provides that states would be allowed to select the regulatory format of their choice in 2018, and start providing coverage by 2019. Under the proposal, the individual mandate, employer mandate and benefit mandates of the ACA would be repealed. However, consumer protections such as the prohibitions on annual and lifetime limits on coverage, pre-existing condition exclusions and discrimination will remain in place. Additionally, the Patient Freedom Act would continue to allow dependent children to remain covered by their parents’ insurance until age 26, and would provide coverage for serious mental health and substance abuse disorders. The introduction of the Patient Freedom Act follows an Executive Order by President Trump that instructs the Department of Health and Human Service (HHS) to “waive, defer, grant exemptions from, or delay the implementation” of provisions of the ACA. While the Executive Order does not fully repeal the ACA, it provides HHS with discretion regarding the extent to which the law will be enforced. Polsinelli will continue to monitor developments surrounding this issue. Please contact the authors or your Polsinelli attorney if you have any questions.

Following the 2016 election of Missouri’s Republican governor, Eric Greitens, the majority Republican legislature wasted no time reviving amendments to the Missouri Human Rights Act (MHRA) that were vetoed by then Governor Nixon in 2011. One of three separate bills filed this year, each identical to the bill passed and vetoed in 2011 (SB43, HB550, and HB552), is expected to pass and be signed into law by Gov. Greitens this year. The legislation generally modifies the MHRA causes of action to mirror those under Title VII. More specifically, the legislation amends the MHRA and key Missouri Supreme Court rulings as follows: Changes the burden of proof from the current “contributing factor” to a higher burden that will require the plaintiff to establish that the claimed act of unlawful bias was a “motivating factor” in any challenged employment decision. Imposes the following caps on damages for a prevailing plaintiff: $50,000 for employers with 6-99 employees; $100,000 for employers with 100-200 employees; $200,000 for employers with 201-500 employees; $300,000 for employers with more than 500 employees. Excludes supervisors and others from individual liability by expressly removing them from the definition of “employer.” Requires Missouri courts to “rely heavily upon judicial interpretations” of Title VII, the Age Discrimination in Employment Act, and the Americans with Disabilities Act. If requested, the court must give a business judgment instruction to the jury which states that, when considering the employer’s reason for the challenged employment decision, it is not the jury’s role to second-guess a business decision by the employer so long as it was not made for a discriminatory reason. Encourages Missouri courts to utilize the summary judgment mechanism to remove “factually insubstantial cases [] from crowded dockets.” When considering summary judgment motions, courts are to analyze the cases following the U.S. Supreme Court’s shifting burden framework used in Title VII cases. Precludes the award of punitive damages against the state or political subdivisions of the state. The pending legislation also contains a section to be known as the “Whistleblower’s Protection Act,” which has the stated purpose of “codify[ing] the existing common law exceptions to the at-will employment doctrine and limit[ing] their future expansion by the courts.” This section, along with the discrimination provisions of the MHRA, provide the sole remedies for any and all unlawful employment practices articulated in their respective chapters of the Missouri Revised Statutes and “abrogates any common law causes of action to the contrary.” Should the pending legislation become law in August 2017 as expected, it will be more difficult for plaintiffs to prove their claims of discrimination and retaliation, and severely limit their remedies.

On January 9, 2017, the 7th Circuit (in a decision by Judge Richard Posner) issued a timely reminder that employers should exercise caution when reneging on work-at-home promises. In Wink v. Miller Compressing Company, the employer initially granted an employee’s request for intermittent Family and Medical Leave Act (FMLA) leave to take her autistic child to therapy and daycare. Approximately six months later, the employee’s son could no longer attend daycare, and the employer granted the employee’s request to work from home two days per week and use FMLA time while she was caring for her son rather than working. After the employee successfully worked from home for several months, the employer informed her that it was undergoing serious financial difficulties and could no longer allow the remote work arrangement. On a Friday, a human resources (HR) representative gave the employee an ultimatum: show up for work on Monday at the office or face termination. The employee responded it would be nearly impossible to find care for her son on such short notice. The HR representative then made a costly mistake: he incorrectly informed the employee that the FMLA covers leave from work only for doctor’s appointments and therapy. In actuality, the FMLA entitles employees to take leave to care for family members with serious health conditions, which includes those with autism. While not addressed in this specific case, HR directors can be held individually liable under the FMLA. The following Monday, the employee appeared at work and informed her employer that she was unable to find care for her son and that she needed to return home. She then left work and was immediately terminated. The employer reflected in paperwork that the employee’s last day of work was the preceding Friday. The employee then brought suit, alleging, among other things, that she was terminated in retaliation for exercising her FMLA rights. The jury returned an award for the employee on her FMLA retaliation claim. The employer appealed and the 7th Circuit upheld the award and even raised the award of attorney’s fees from 80% to 100%. In the decision, Judge Posner reasoned that since the employee had successfully worked from home in the preceding months, the jury’s best inference was that the company was angered by her request to stay home. This inference was supported by the HR representative’s “phony line” that she could not use FMLA leave to care for her child, which contradicted the express language of the statute. The FMLA can present difficult scenarios for employers, especially when addressing remote work arrangements. Moreover, when an employer has agreed to arrangements for mid- to long-term periods of time, the employee is more likely to claim that the employer has implicitly acknowledged that the arrangement is covered by the FMLA and should continue on without any foreseeable conclusion, even if it exceeds the 12 week limit under the statute. Employers and their HR personnel benefit from training on the FMLA and its regulations as well as legal counsel on the developing case law in this area.

Mediation of employment matters is on the rise. When faced with an employment case, your company may be ordered to mediation or the court rules may require it. It is also common to receive a letter from the Equal Employment Opportunity Commission (EEOC) or state agency advising the company that by choosing to mediate, the company will not be required to go to the time and expense of a charge investigation or submit a position statement. Below are four issues to know before considering whether mediation is right for your case. 1. Cost EEOC mediations are typically no-cost, so long as the parties use an EEOC mediator. The same is true with respect to state agencies. If, however, the parties choose to use a private mediator, then they will be required to pay for the mediator’s time, which the parties then must agree at the outset as to the split of payment by the parties. If the case is settled, mediation costs may be shifted to one party as part of any settlement. 2. Formalities   Mediation is sometimes confused with arbitration. Mediation is usually – even if it is not EEOC or state-sponsored mediation – non-binding. By contrast, an arbitration proceeding is usually a binding proceeding on the merits of the claims and similar to a “mini-trial.” At an arbitration, there will be a person, or a panel of persons, acting in a capacity similar to a judge, who hears and evaluates the evidence and then renders a decision the claims. In mediation, the mediator listens to the parties discuss their positions in an informal setting, but does not render a decision on the claims. Instead, the mediator serves in the role of a facilitator, pointing out the strengths and weaknesses of both sides’ cases and attempting to reach an agreed upon resolution of the claims. 3. Mediation Framework The ground rules for the mediation will typically be available, in writing, for review before the mediation. This document will include privacy considerations for the mediation. A mediator will often ask the parties to submit a mediation position statement in advance of the actual session to become familiar with the issues. An opening session, with all parties present, may be part of a mediation. At this time, the parties, generally through counsel, summarize the strengths of their cases. Thereafter, the mediator will move forward with the primary focus of the mediation, which is private sessions with each side, often called caucuses. During these private sessions, the mediator will generally work with each side to help them understand the strengths and weaknesses of their positions. Mediators use a variety of techniques in these sessions to help the parties understand the risks of continued litigation and to reach an agreed resolution. 4. Requirement of Settlement? There is no requirement that a case settle at mediation, but many times cases settle or reach a point where settlement negotiations can be more readily pursued later. Even if the case is not resolved, mediation can sometimes provide the parties with input that helps them look at the case differently, such that with some additional evidence, the case will be resolved shortly thereafter. Should your company be presented with an offer of mediation, contact your employment lawyer to discuss your options. In certain circumstances, a well-timed mediation could save you time and resources.

In August 2016, the Arizona legislature implemented a new statute governing the relationship between independent contractors and the entities with which they contract. Here are four key questions raised by the new law, known as the Declaration of Independent Business Status law (DIBS), codified at A.R.S. § 23-1601, with corresponding answers: 1.    How can Arizona companies prove the existence of an independent contractor relationship under the new law? DIBS allows Arizona companies to prove the existence of an independent contractor relationship by: (a) obtaining a declaration of independent business status from the independent contractor that complies with DIBS; and (b) acting in a manner substantially consistent with the declaration. A signed declaration creates a rebuttable presumption of independent contractor status. 2.    What must be included in the declaration? To comply with DIBS, the declaration signed by the independent contractor must substantially comply with the sample language provided in the statute, which includes acknowledging that the contractor: Is an independent contractor, not an employee; Is not entitled to unemployment benefits or any other right arising from an employment relationship; Is responsible for all tax liability associated with payments received from or through the contracting party; and Is responsible for maintaining any required registration, licenses or other authorization necessary to perform the services rendered. The contractor must also affirm at least six of the following criteria: The contractor is not insured under the contracting party’s health insurance coverage or workers’ compensation insurance coverage. The contracting party does not restrict the contractor’s ability to perform services for or through other parties. The contractor has the right to accept or decline requests for services by or through the contracting party. The contracting party expects that the contractor provides services for other parties. The contractor is not economically dependent on the services performed for the contracting party. The contracting party does not dictate the performance, methods or process the contractor uses to perform services. The contracting party has the right to impose quality standards or a deadline for completion of services performed, or both, but the contractor is authorized to determine the days worked and the time periods of work. The contractor will be paid by or through the contracting party based on the work the contractor is contracted to perform and the contracting party is not providing the contractor with a regular salary or any minimum, regular payment. The contractor is responsible for providing and maintaining all tools and equipment required to perform the services performed. The contractor is responsible for all expenses incurred by the contractor in performing the services. In addition, the independent contractor must acknowledge that the terms set forth in the declaration apply to the contractor’s employees and independent contractors. 3.    Is a declaration required to establish independent contractor status? No. Obtaining a declaration is discretionary; the statute expressly states that the execution of a declaration is not mandatory in order to establish the existence of an independent contractor relationship. Further, the failure of a party to execute a declaration does not create any presumptions and is not admissible to deny the existence of an independent contractor relationship. 4.    Can the independent contractor status still be challenged if a declaration is obtained? Yes. The statute expressly states that the law does not affect any investigatory or enforcement authority related to the determination of the independent contractor or employment status of any relationship as provided by Arizona’s labor statute or federal law. This is a state statute and does not affect the well-developed federal law that determines whether one is an employee or independent contractor, as well as the IRS code and regulations that speak to this issue.

With the New Year, minimum wage increases have taken effect in nineteen states. Two of these states, Massachusetts and Washington, now require employers to pay $3.75 more per hour than the federal minimum wage of $7.25, which has remained static since 2009. Employers in the below-listed states should ensure that employees are paid in accordance with these new standards for pay periods beginning January 2017. The following states have a new minimum wage, effective January 2017: Alaska  -  $9.80 Arizona  -  $10.00 Arkansas  -  $8.50 California*  -  $10.50 Colorado  -  $9.30 Connecticut  -  $10.10 Florida  -  $8.10 Hawaii  -  $9.25 Maine  -  $9.00 Massachusetts  -  $11.00 Michigan  -  $8.90 Missouri  -  $7.70 Montana  -  $8.15 New Jersey  -  $8.44 New York*  -  $9.70 Ohio  -  $8.15 South Dakota  -  $8.65 Vermont  -  $10.00 Washington  -  $11.00 The minimum hourly wage a given California employer must pay depends upon the employer’s headcount. Employers with 25 employees or fewer must pay employees at least $10.00 per hour. Employers with 26 employees or more must pay employees at least $10.50 per hour. Similarly, New York has enacted a minimum wage law that takes into account both an employer’s size and where the employer is located. Employers in New York City with 10 employees or fewer must pay employees at least $10.50 per hour. Employers in New York City with 11 employees or more must pay employees at least $11.00 per hour. Employers in Nassau, Suffolk, and Westchester counties, no matter how large the workforce, must pay employees at least $10.00 per hour. Employers in the rest of New York state, no matter how large the workforce, must pay employees at least $9.70 per hour.    In addition to state minimum wage laws, employers must be aware of municipalities that require employers to pay a higher minimum wage than state or federal law. Employers concerned about their pay obligations should speak with able counsel to avoid any potential wage-related liability.

The Americans with Disabilities Act of 1990 (“ADA”) treats mental illness the same as physical disabilities for purposes of coverage. However, dealing with an employee’s mental health condition can be particularly challenging for employers because the traits that confer protected status are not always visible or otherwise noticeable. An employee’s diagnosis of depression or other mental illness can easily subject a well-meaning employer to potential liability. According to charge data from the Equal Employment Opportunity Commission (“EEOC”), the number of charges of discrimination filed with the EEOC based on mental health conditions are on the rise. During the 2016 fiscal year, the EEOC resolved almost 5,000 charges of discrimination based on mental health conditions, obtaining approximately $20 million for individuals with mental health conditions who were discriminated against based on a disability. The EEOC has responded by issuing a publication on the rights of job applicants and employees with mental health conditionsto raise awareness about the protections the ADA affords individuals with mental health conditions and using its enforcement power to protect individuals with mental health conditions. The EEOC continues to aggressively pursue such cases. For example, on November 30, 2016, the EEOC filed suit against Stevens Transport, Inc. (“Stevens Transport”), alleging that Stevens Transport discriminated against a U.S. Air Force veteran because of his bipolar disorder. Specifically, the EEOC alleges that the individual was a qualified candidate and Stevens Transport unlawfully refused to hire him in violation of the ADA. According to the EEOC’s complaint, the candidate applied to be a commercial truck driver with Stevens Transport. As part of the application process, candidates are required under Federal Motor Carrier Safety Administration (“FMCSA”) regulations to take a physical exam, submit a sample for drug testing, and fill out a medical history questionnaire. The EEOC alleges the candidate was told he could not be hired as a truck driver for Stevens Transport “per company policy” because of the medicine he takes to control his bipolar disorder, even though he presented a report from his medical provider indicating he was safe to drive. However the physician with whom the company contracted to conduct FMCSA-required medical examinations advised that he not be hired because of his medications. Given the rising number of charges of discrimination filed with the EEOC based on mental health conditions, the EEOC’s interest in protecting individuals with mental health conditions, and the challenges posed by mental illnesses, employers should consider the following steps to minimize liability: Remind Managers and Supervisors to involve human resources personnel when employees indicate they may need an accommodation for a mental health condition, and/or exhibit behavior affecting their work such as difficulty concentrating, interacting with others, communicating, eating or sleeping; Document objective concerns regarding an employee’s behavior; and Engage in one-on-one discussions with the employee to determine if the nature of the employee’s mental health condition impacts the employee’s ability to perform the essential functions of their job, with or without an accommodation.

The Equal Employment Opportunity Commission’s (EEOC) final rules on wellness programs have withstood an initial legal challenge from the American Association of Retired Persons (AARP). On May 16, 2016, the EEOC issued final rules that, among other things, clarified how certain terms of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) apply to wellness programs. Specifically, the final rules explain how a wellness program may be “reasonably designed” to promote health or prevent disease, an EEOC requirement for wellness programs. The final rules also define how an employee can be deemed a “voluntary” participant in a wellness program. These terms had been left undefined prior to the adoption of the final rule, and had caused consternation for employers seeking to comply with the EEOC wellness program rules. In addition, the rules allow employers to provide incentives up to 30 percent of self—only coverage for workers participating in a wellness program that includes a disability related inquiry or medical examination (including a tobacco related screening). In October 2016, AARP filed suit challenging the final rules and seeking a temporary injunction to prevent the rules from taking effect on January 1, 2017. Specifically, AARP argued that the final rules did not protect the privacy of its members because they effectively allowed employers to force workers to participate in wellness programs by allowing employers to levy a penalty upon employees who choose not to participate. The United States District Court for the District of Columbia denied AARP’s motion for preliminary injunction, and thus the rules have gone into effect as scheduled. Employers may proceed with implementing their wellness programs by relying on the final rules – but proceed with caution. Although the court did not enter a preliminary injunction, AARP’s case against EEOC is still going forward, and a permanent injunction is still possible after further briefing.

This past election, voters in California, Maine, Massachusetts, and Nevada approved ballot measures to legalize marijuana for recreational purposes. As discussed in a previous blog post, California’s ballot measure passed overwhelmingly in favor of legalization. Below, we discuss Maine, Massachusetts, and Nevada’s approved ballot measures, and whether those measures affect an employer’s ability to enact and enforce policies restricting the use of marijuana by employees. Maine Maine voters approved "Question 1," which allows for the recreational cultivation, possession, use, and sale of marijuana to adults over the age of 21. Maine’s new law does not affect an employer’s ability “to enact and enforce workplace policies restricting the use of marijuana by employees or to discipline employees who are under the influence of marijuana in the workplace.” However, an employer is prohibited from refusing to employ a person 21 years of age or older “solely for that person’s consuming marijuana outside of” the employer’s property. Maine employers should seriously consider whether drug testing applicants for employment is necessary and consistent with business necessity, as rejecting an applicant solely because they use marijuana could lead to liability. Massachusetts Massachusetts voters voted “yes” on "Question 4," which legalizes the recreational use, cultivation, possession, and sale of marijuana. Like the new Maine measure, Massachusetts’s new law does not require an employer to permit or accommodate the use of marijuana in the workplace. Nor does the new law “affect the authority of employers to enact and enforce workplace policies restricting the consumption of marijuana by employees.” Nevada Nevada voters approved "Question 2," which legalizes the recreational possession, cultivation, sale, and use of marijuana for adults over the age of 21. Nevada’s new law does not prohibit employers from “maintaining, enacting, and enforcing a workplace policy prohibit or restricting” the use of marijuana. In addition, Nevada employers may conduct workplace drug testing in limited circumstances, such as upon a contingent offer of employment or if the employer has a reasonable suspicion an employee is impaired at the workplace. Key Takeaways Currently, eight states allow for the possession, cultivation, sale, and use of recreational marijuana, and approximately half of the states have legalized marijuana for medicinal purposes to varying degrees. However, marijuana is still classified as a "Schedule I Drugs" and remains illegal under federal law, and the above-listed sates still allow employers to craft policies limiting marijuana use by employees. With the patchwork of state marijuana laws continuing to change, employers should consult with able counsel to enact sensible drug polices in the workplace.

On December 22, 2016, the California Supreme Court issued its decision in Augustus v. ABM Security Services, Inc. and held that, during required rest breaks, “employers must relieve their employees of all duties and relinquish any control over how employees spend their break time.” The Court interpreted the California Labor Code and IWC Wage Orders and its decision in Brinker Restaurant Corp. v. Superior Court(2012) 53 Cal.4th 1004 — which addressed meal break requirements — and determined that meal breaks and rest breaks should receive parallel treatment by employers. ABM required security guards, while on break, to keep radios and pagers on and to respond to tenant calls while on break. In a split opinion, the majority of the Court held that even though state law and regulations don’t mention this sort of on-call time, “one cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest periods.” Specifically regarding rest breaks, the Court determined: On-call rest breaks do not meet the requirements of Labor Code §226.7 or the IWC Wage Orders. An employer must ensure rest breaks are provided and no work is required during that time, in the same way that meal breaks are required under Brinker. How can your business comply with Augustus? Your business may be unintentionally subject to liability for these rest break claims. Below are five tips employers should consider to avoid running afoul of the Augustus decision: Check your handbooks and policies and review your rest break provisions; Relieve employees of allduties during their rest breaks; Have employees separately clock their time during their rest breaks; Train managers and supervisors to not disturb employees taking their rest breaks; and Discontinue the use of on-call duties during rest breaks. By aligning rest break requirements with meal break requirements, the California Supreme Court is sending a message that businesses should manage their rest breaks in the same way they manage meal breaks. Given this signal, we expect there to be an uptick in California litigation on the provision of off-the-clock rest breaks. If you have concerns that your business may have unintended liability under Augustus or you have concerns about remaining compliant with the California rest break requirements, please contact your Polsinelli attorney.

In this series, we consider changes that President-elect Trump’s administration could effect through federal agency action (or inaction), including at the Equal Employment Opportunity Commission (EEOC), the Department of Labor (DOL), the Occupational Safety and Health Administration (OSHA), and the National Labor Relations Board (NLRB). Our first post focused on changes at the DOL. This second blog focuses on changes that might be made at the Occupational Safety and Health Administration (“OSHA”) and the Equal Employment Opportunity Commission (“EEOC”). Occupational Safety and Health Administration (OSHA) The Trump administration could appoint new OSHA leadership with officials who are less enforcement-minded. In addition, these new appointments could advocate for the adoption of less stringent regulations, and could direct their focus on compliance assistance as opposed to enforcement and litigation. The Obama administration’s Severe Violator Enforcement Program (SVEP), launched in 2010,  currently concentrates “OSHA's resources on inspecting employers who have demonstrated indifference to their OSH Act obligations by committing willful, repeated, or failure-to-abate violations.” Pursuant to the SVEP, enforcement actions for severe violator cases include, among other things, mandatory follow-up inspections, corporate-wide agreements (where appropriate), and enhanced settlement provisions. Given President-elect Trump’s repeated campaign promises to decrease regulation and create a “business-friendly” atmosphere, OSHA may not prioritize follow-up inspections, and could impose lower fines or less severe penalties upon employers that violate the Act. Equal Employment Opportunity Commission Similarly, the Trump administration could alter the EEOC’s current employment priorities regarding systemic discrimination, binding arbitration agreements, and LGBT rights. Systemic Discrimination Enforcement Currently, one of the EEOC’s major priorities is to investigate and file systemic discrimination cases as a means to enhance recoveries to larger groups. Systemic investigations increased by 250 percent from 2011 through 2015, and the EEOC has successfully prosecuted 94 percent of its systemic lawsuits over the past ten years. In addition, the EEOC tripled the amount of monetary relief recovered for victims of systemic discrimination from 2011 through 2015, compared to the relief recovered from 2005 through 2010. However, President-elect Trump’s nomination of Andrew Puzder to the position of Secretary of Labor suggests that he will also appoint individuals to the EEOC who are less concerned with investigation and enforcement, and more focused on compliance assistance. Binding Arbitration Agreements The EEOC currently takes the position that forcing an employee to agree to arbitrate any discrimination claims against their employer is unlawful. The commission’s position stems from a policy statement issued in 1997, which provides that “agreements that mandate binding arbitration of discrimination claims as a condition of employment are contrary to the fundamental principles evinced in [the employment discrimination] laws.” In a bid to appear more “employer friendly,” the Trump administration may de-emphasize the EEOC’s focus on binding arbitration agreements, which would allow employers more freedom to determine the best way to resolve disputes with their employees. LGBT Rights The EEOC’s Strategic Enforcement Plan makes clear that applying the protections of Title VII to lesbian, gay, bisexual and transgender individuals is a “top Commission enforcement priority.” Over the last eight years, the EEOC’s attorneys have repeatedly litigated cases in support of this position, and have had success at the ALJ level. For example, in Macy v. Holder, the EEOC ruled that transgender bias is a form of gender discrimination prohibited by Title VII. In addition, in Baldwin v. Foxx, the EEOC “issued an administrative opinion that held for the first time that Title VII extends to claims of employment discrimination based on sexual orientation.” Moreover, the EEOC filed its first-ever federal court Title VII suits over transgender rights in 2015, asserting that Title VII’s prohibition on sex discrimination include discrimination based on gender stereotyping. While President-elect Trump has not made his enforcement priorities clear, it is possible that he could direct the EEOC to temper its focus on LGBTQ protections in the workplace, particularly because at least one Circuit court is currently considering whether Title VII’s protections apply to LGBTQ individuals.

In Miller & Anderson, 364 NLRB No. 39 (2016), the National Labor Relations Board (“NLRB”) ruled that employer consent would no longer be required for bargaining units consisting of employees both solely and jointly employed. “Employer consent,” wrote the NLRB, “is not necessary for units that combine jointly employed and solely employed employees of a single user employer.” Id. at 2. The NLRB added that “we are persuaded that a unit combining employees solely employed by a user employer and employees jointly employed by that same user employer and a supplier employer logically falls within the ambit of a 9(b) employer unit.” Id. In this case, the union sought to represent employees of an HVAC contractor, Miller & Anderson, plus some additional employees furnished through a separate staffing company, Tradesmen International. Some employees were solely those of Miller & Anderson and others were jointly employed by both companies. The union’s petition was dismissed by the Regional Director because the two employers did not consent to a combined unit. The Regional Director relied on the NLRB’s decision in Oakwood Care Center, 343 NLRB 659 (2004) (employers’ consent to bargaining units of solely and jointly employed employees required). On appeal, the NLRB overruled Oakwood Care Center, reversed the Regional Director, and reinstated the petition. The NLRB held that consent to multi-employer bargaining by both employers is not necessary for units that contain employees who are solely and jointly employed, provided the petitioned-for unit is appropriate under the NLRB’s traditional community of interest standards (i.e., whether the employees share wages, hours, and other terms and conditions of employment). Miller & Anderson builds upon the NLRB’s decision in Browning-Ferris, 362 NLRB No. 186 (August 27, 2015), in which the NLRB reinterpreted the joint employer concept and broadened the circumstances in which it would find that two or more entities constitute a joint employer. The NLRB ruled that “it will no longer require that a joint employer not only possess the authority to control employees' terms and conditions of employment, but also exercise that authority,” and that the “[r]eserved authority to control terms and conditions of employment, even if not exercised, will now be relevant to the joint-employment inquiry.” The NLRB also held that it will no longer require that a statutory employer's control must be exercised directly and immediately. Control exercised indirectly - such as through an intermediary - may now establish joint-employer status. Together, Miller & Anderson and Browning-Ferris make it easier for unions to organize groups of employees in units that the NLRB would previously have found inappropriate, and conversely they make it more difficult for employers to plan for the use of contingent employees. The decisions also raise questions for employers that have existing collective bargaining units and find it necessary to supplement their work force by using outside staffing companies. Are staffing company employees to be considered part of the bargaining unit? Do staffing company employees have access to the grievance procedure of the employer to whom they are assigned? What, if any, seniority or recall rights can staffing company employees claim? To what extent may a union seek to apply its collective bargaining agreement to the staffing company, beyond the operations of the user employer? Employers would be wise to discuss these, and other questions, with labor counsel.

After the inauguration in January 2017, President-elect Trump will be presented with a number of regulatory issues that can change the labor and employment landscape. Congressional and administrative action are not required to effect all such changes in the way the federal government regulates private employers. Rather, the new administration can make significant and lasting changes in employment enforcement at certain federal agencies, including the Equal Employment Opportunity Commission (EEOC), the Department of Labor (DOL), the Occupational Safety and Health Administration (OSHA), and the National Labor Relations Board (NLRB). In this and upcoming blogs, we will examine ways in which the new administration can quickly and dramatically pivot the landscape of labor and employment laws simply by changing enforcement and litigation priorities. This first blog focuses on changes that might be made at the U.S. Department of Labor. Department of Labor Mr. Trump named Andrew Puzder as his pick to lead the U.S. Department of Labor (DOL). Mr. Puzder, the chief executive officer of the company that owns Carl’s Jr and Hardee’s restaurant chains, in his role as a business owner, has criticized higher overtime pay rules and opposed increasing the minimum wage to $15 per hour. The DOL could alter course for key priorities of the prior Obama administration: the Fair Labor Standards Act (FLSA) overtime rules, the “persuader rule,” and the fiduciary duties for retirement advisors. FLSA Overtime Rule On May 18, 2016 the Department of Labor published a new final rule updating the nation’s overtime regulations, which would automatically extend overtime pay protections to over 4 million workers if fully implemented. In November, 2016, a federal judge in Texas issued a nationwide injunction halting enforcement of the rule. That decision is currently being appealed by the Obama administration to the 5th Circuit Court of Appeals. The Trump administration could effectively terminate the litigation and end the overtime rule by withdrawing the government’s appeal, and thus leave the lower court’s decision intact. This course of action may be in the cards. Mr. Puzder has expressed his dislike of the new rule and “has argued that the Obama administration’s recent rule expanding eligibility for overtime pay diminishes opportunities for workers.”  The U.S. Court of Appeals for the Fifth Circuit granted an expedited appeal on the issue, with oral argument to be scheduled after January 31, 2017. With oral argument scheduled after the inauguration, the DOL, under the leadership of Mr. Puzder, could reverse position and withdraw the appeal before the court hears oral argument. If so, the injunction would stand and the new overtime rule would not take effect. Persuader Rule Similar to the overtime rule, the DOL currently faces an injunction barring the “persuader rule” from taking effect. The persuader rule “requires that employers and the consultants they hire file reports not only for direct persuader activities – consultants talking to workers – but also for indirect persuader activities – consultants scripting what managers and supervisors say to workers.” The U.S. District Court for the Northern District of Texas issued a preliminary injunction on June 27, 2016 and recently issued a nationwide permanent injunction against the rule on November 16, 2016. The DOL can appeal the permanent injunction to the Fifth Circuit, but even if it does, the Trump administration will have time to withdraw the appeal before it reaches a decision by the appellate court. Fiduciary Rule The Trump administration could also change course for the DOL’s new fiduciary rule, which requires financial advisors to act in the best interest of their clients with respect to retirement accounts. The DOL issued the final rule on April 6, 2016, to be applicable April 10, 2017. Although Mr. Puzder has not yet voiced an opinion on the fiduciary rule, his general remarks about less government regulation makes some experts believe the new administration “will kill or significantly weaken the fiduciary rule.” Edward Mills, an analyst at FBR & Co., “predicts the new administration will first delay the implementation of the rule through an administrative action and then repeal or overhaul it.”  Since the DOL has already issued a final rule, the new administration would have to go through the onerous public notice and comment process prior to making any changes. Although the fiduciary rule was not directly addressed during the campaign, an advisor to President-elect Trump suggested the President-elect could seek to reverse it. Republicans in Congress have expressed their desire to do so as well.

On December 9, 2016, Los Angeles Mayor Eric Garcetti signed the “Fair Chance Initiative” prohibiting employers from considering a job applicant’s criminal history, except in limited circumstances. Private employers in Los Angeles may no longer ask job applicants about their criminal histories prior to making conditional job offers. Los Angeles joins over 150 cities and counties in 24 states nationwide, including San Francisco, that have adopted such “Ban the Box” ordinances. View the City of Los Angeles ordinance here. Coverage The Los Angeles ordinance applies to employers with 10 or more employees as well as city contractors. To qualify for the new protections, an employee must work at least two hours per week, on average, within the geographic boundaries of Los Angeles. Unlawful inquiries The ordinance bars employers from inquiring about an applicant’s criminal history via application forms, interviews, and/or criminal history reports. Rather, an employer must first make a conditional job offer to the candidate before assessing a candidate’s criminal history. Rescinding offers of employment Employers that choose to rescind an offer of employment based on an applicant’s criminal record must now follow a number of steps mandated by the ordinance before taking an adverse action. Similar to other “ban the box” initiatives, an employer must: Assess factors identified by the United States Equal Employment Opportunity Commission as relevant to the consideration of conviction records in employment; Create a “written assessment that effectively links the specific aspects of the Applicant’s Criminal History with risks inherent in the duties of the Employment position sought;” and Provide the applicant with its evaluation. The ordinance does exempt employers from its requirements where, for example, state or federal law either bars an employer from hiring an applicant convicted of a specific crime or requires that an employer obtain conviction information prior to hire. Penalties Employers that violate the City’s ordinance may be liable for administrative penalties up to $500 per violation, and could also be subject to private lawsuits brought by individual applicants and/or employees. Employers in the Los Angeles area should review their job application policies and practices with the assistance of employment counsel prior to February 1, 2017 to ensure compliance. Stay tuned for future analysis of how the new ordinance interacts with state and federal background check requirements.

In a decision issued December 5, 2016, the Seventh Circuit ruled that Division I student athletes are not entitled to minimum wage under the Fair Labor Standards Act (“FLSA”). (Berger, et al., v. National Collegiate Athletic Association, et al., No. 16-1558.) Former track and field athletes at the University of Pennsylvania (“UPenn”) initiated the case against UPenn, the National Collegiate Athletic Association (“NCAA”), and more than 120 Division I universities and colleges, arguing that they were entitled to minimum wage under the FLSA. The district court disagreed, and the Seventh Circuit upheld the district court’s ruling in a rather straightforward opinion. “Simply put, student-athletic ‘play’ is not ‘work,’ at least as the term is used in the FLSA,” the Seventh Circuit held. Instead, the Seventh Circuit stated that student participation in collegiate athletics “is entirely voluntary,” and emphasized there was a long standing and revered tradition of amateurism in college sports which did not include any real expectation that student athletes should earn income. Indeed, the Seventh Circuit refused to find any analogy between student athletes and private-sector interns and the multifactor test for paid interns established by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc. The Seventh Circuit also interpreted DOL guidelines regarding students who participate in work-study programs and those who participate in extracurricular activities, finding that NCAA-regulated sports are “extracurricular” in nature and therefore are not considered “work” under the FLSA. This opinion effectively strikes down student athlete petitions for compensation under the FLSA in the Seventh Circuit, but perhaps leaves the question open in other Circuits that could utilize a rigid multi-factor test, such as the Second Circuit. It also presents an interesting question should the NCAA or other college-affiliated conferences decide to compensate student athletes in some form, which in turn could effectively alter the landscape of the long-standing tradition of amateurism.

On November 8, California, along with Massachusetts and Nevada, legalized the recreational use of marijuana. With marijuana now legal in seven states, “the percentage of Americans living in states where marijuana use is legal for adults rose above 20 percent[.]” In light of this change, California employers have expressed concern regarding the continuing viability of their existing drug testing and use policies, which often contain general prohibitions on the use of illegal substances. Fortunately, Proposition 64 directly addresses this concern, making clear that it does not affect: “[t]he rights and obligations of . . . private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees, or prevent employers from complying with state or federal law.” This provision codifies and extends the California Supreme Court’s decision in Ross v. Ragingwire Telecommunications, Inc., 42 Cal.4th 920 (2008) holding that employers are not required to accommodate an employee’s use of medicinal marijuana, even though its use was legal under state law. The court also concluded that employers could conduct, and make employment decisions based on pre-employment drug tests that screened for marijuana. In light of the holding in Ross and the clear language of Proposition 64, employers with policies containing blanket prohibitions on the use of drugs (including marijuana) likely remain lawful. Nevertheless, employers may observe an uptick in marijuana use of as a result of the Proposition. Thus, employers should review their existing policies and practices regarding drug testing current employees, as California law imposes numerous limits on such tests. For example, employers may generally not compel employees (except those in safety-sensitive positions) to undergo a drug screening without “reasonable suspicion” of impairment. Mandating an improper test could result in claims for invasion of privacy and wrongful termination. Compliance-minded employers should consult with experienced employment counsel to review policies and practices regarding drug screenings. In addition, management and human resources professionals should be prepared to address employee inquiries regarding marijuana use in light of Proposition 64.

This week, Jimmy John’s Enterprises, LLC (Jimmy John’s), a sandwich chain known for its “freaky fast” delivery service, promised to end its practice of forcing its employees to sign non-competition agreements. In doing so, Jimmy John’s settled a June 2016 lawsuit filed by the Attorney General of the State of Illinois, which accused the Charleston, Illinois-based sandwich company’s non-competition agreements as unenforceable under Illinois law. For years, Jimmy John’s required its employees to sign non-competition agreements. Specifically, as a condition of employment, employees were required to agree in writing that for a two year period post-employment, they would not work at another business that 1) earns ten (10%) percent of its revenue from selling subs or deli sandwiches, and 2) was located three miles from any Jimmy John’s store (regardless of the location at which the employee worked). The Illinois Attorney General alleged that such an agreement was unenforceable under Illinois law because it was not premised on a legitimate business interest or narrowly tailored. As part of the settlement, Jimmy John’s agreed to rescind all signed non-competition agreements and inform all of its current and former employees that the agreements they signed are unenforceable. The company also agreed it will not require new hires to sign any agreements restricting them from working for other sandwich shops. Finally, Jimmy John’s agreed to pay $100,000 to the State of Illinois for the purpose of increasing public awareness about the legal standards for such restrictive covenants. Jimmy John’s likely intended to change its practice of requiring employees to sign non-competition agreements at the end of this year. Starting on or after January 1, 2017, the Illinois Freedom to Work Act prohibits Illinois employers from requiring employees who make less than $13 per hour to sign non-competition agreements. This settlement in Illinois comes on the heels of a similar settlement between Jimmy John’s and the Attorney General for the State of New York. Earlier this summer, Jimmy John’s agreed to stop using non-competition agreements in New York, and further promised it would not enforce such agreements against current or former employees. These settlements should remind employers that non-competition agreements are not appropriate for all employees, even if reasonable in duration and scope. In states like Illinois, non-competition agreements must be narrowly tailored and premised on a legitimate business interest to be enforceable. Also, some states and courts disfavor non-competition agreements as restraints on trade, especially where they restrict lower wage earners who do not receive confidential information or trade secrets. Thus, employers should review the use of non-competition agreements with counsel prior to their implementation. RESTRICTIVE COVENANTSDECEMBER 14, 2016

The California legislature has given employers a slew of reasons to be nervous in recent years. From mandatory paid sick leave to the Fair Pay Act, the waters remain treacherous for California employers. The following summarizes the notable legal changes for 2017 employers should prepare for in the New Year. 1. Wage and Hour Increased Minimum Wage: Effective January 1, 2017, the California minimum wage will increase to $10.50 per hour for employers with more than 25 employees. Employers with 25 or fewer employees are not subject to the increase until 2018. The statute provides for annual increases until the minimum wage reaches $15.00 per hour for large employers in 2022 and for small employers in 2023. Increases in the minimum wage will also increase the minimum salary requirements for exempt employees, because exempt employees in California must generally earn a minimum salary of at least twice the state minimum wage for full-time work. Thus, employers should review and, if necessary, adjust the salaries of their exempt employees to avoid losing their exempt status. Notably, a number of localities, including Berkeley, San Jose, and Los Angeles will also increase the required minimum wage in 2017. Employers must consider the increasing number of local minimum wage ordinances when reviewing their wage and hour practices . Overtime for Private School Faculty: Presently, the faculty at private elementary or secondary academic institutions are generally exempt from overtime if, among other things, they earn a monthly salary of at least twice the state minimum wage for full-time employment. AB 2230 provides that effective July 1, 2017, the salary requirement for the overtime exemption will be tied to the salary paid to public school employees in the district or county in which the private school is located. Note that AB 2230 does not apply to tutors, teaching assistants, instructional aides, student teachers, day care providers, vocational instructors, or similar employees. Posting Requirements for Salons: AB 2437 requires that any entity regulated by the Board of Barbering and Cosmetology post a notice in English, Spanish, Vietnamese, and Korean regarding misclassification, minimum wage and overtime, tips, and other wage and hour issues. The Board is required to ensure compliance with the posting requirements when it conducts facility inspections. AB 2437 further directs the Labor Commissioner to create a model notice on or before June 1, 2017. The posting requirement is effective July 1, 2017. Other Legal Changes: The legislature made other changes to existing law regarding wages, including: Effective January 1, 2017, AB 2535 clarifies that itemized wage statements issued to employees exempt from minimum wage and overtime need not indicate the number of hours worked. Effective July 1, 2018, SB 3 expands the Healthy Workplaces, Healthy Families Act of 2014 to provide paid sick leave to providers of in-home support services. 2. New Requirements Regarding Fair Pay In 2015, California passed landmark legislation intended to address sex-based pay disparities. See Lab. Code § 1197.5. Critically, the law made it more difficult for employers to legally justify sex-based pay differences. SB 1063, which is effective on January 1, 2017, expands the new Fair Pay Act’s standards to race and ethnicity-based pay disparities as well. 3. Employment Agreements and Forum Selection SB 1241 imposes significant limits on forum selection and choice of law provisions in employment agreements. Effective January 1, 2017, employers cannot require, as a condition of employment, that employees agree to: Adjudicate a claim arising in California outside of the state; Forfeit any substantive protection of California law with respect to a controversy arising in California. These limits do not apply if the employee is represented by legal counsel when negotiating the disputed contract. SB 1241 permits a court to award attorneys’ fees to an employee enforcing his or her rights under the new law. 4. Notice, Record-Keeping, and Background Checks The legislature created numerous new record-keeping and notice requirements in 2016, including: AB 1978 imposes new training and record-keeping requirements on employers in the janitorial industry related to wages and sexual harassment. California law requires employers to notify employees that they may be eligible for the Federal Earned Income Tax Credit. AB 1847 requires employers to also provide employees with a specified notice regarding potential eligibility for the California Earned Income Tax Credit. AB 2337 requires employers with 25 or more employees to provide a notice of rights regarding leave for victims of domestic violence, sexual assault, or stalking and related protections against retaliation. The new law directs the Labor Commissioner to prepare a notice satisfying the requirements of AB 2337 on or before July 1, 2017. The employer is not obligated to provide notice until the Labor Commissioner posts the required form. Finally, the legislature imposed a new limitation on employer background checks. AB 1843 prohibits employers from asking an applicant to disclose “any adjudication by a juvenile court or any other court order or action taken with respect to a person who is under the process and jurisdiction of the juvenile court law.” Employers further may not utilize such an adjudication as a factor in determining a condition of employment. The law provides a limited exception to this rule for certain health care facilities. In conclusion, compliance-minded employers should consult with experienced employment counsel to ensure they are ready for the New Year. Contact Michele, Brian, or the Polsinelli Labor and Employment practice for advice on complying with new laws in 2017.

With the gift-giving season upon us, many employees are looking for opportunities to work extra hours to earn more money. This raises questions regarding the proper treatment, classification, and compensation of employees performing both non-exempt and exempt work, as well as how to treat non-exempt employees working jobs at different rates of pay for the same employer. How to Properly Classify Employees Pursuant to FLSA regulations, an employee cannot hold multiple statuses: he or she is classified as either exempt for all purposes or non-exempt for all purposes. The employer must determine whether exempt duties or non-exempt duties constitute the employee’s “primary duty.” “Primary duty” is defined by the FLSA as “the principle, main, major or most important duty that the employee performs.” Determining an employee’s primary duty is accomplished by considering all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Because an employee can only hold one status, a non-exempt employee (i.e., whose primary duty is performing non-exempt work) still will be considered non-exempt under the FLSA when performing exempt duties. Similarly, an employee whose primary duty is exempt will still be exempt even when performing non-exempt duties. The percentage of time spent performing either exempt or non-exempt duties is important, but does not necessarily determine exempt status under federal law. While the FLSA provides that employees who spend more than 50% of their time performing exempt duties will generally be exempt, there is no regulation requiring that employees spend more than 50% of their time performing exempt duties. Keep in mind, however, that some state laws impose a requirement that an employee perform exempt duties for a particular percentage of time to qualify for an exemption. Determining Lawful Compensation Generally, if an employee is an exempt employee working more than 40 hours in a week, he or she is exempt from overtime and is not entitled to additional compensation. But, FLSA regulations state that an employer may provide exempt employees with additional compensation without losing the exemption or violating the salary basis requirement under certain circumstances. For example, if an exempt employee has a salary of $1,000.00 per week, but an employer agrees to pay the employee $25.00 per hour any time the exempt employee works over 50 hours in a work week, the employee is not automatically converted to non-exempt. This assumes that the employee’s duties meet an FLSA exemption and that the employee is paid the $1,000.00 on a true salary basis. If a non-exempt employee works extra shifts at their same rate of pay and the employee works over 40 hours in a work-week, the calculation of overtime is required – the employee is paid time and a half their hourly rate for time over 40 hours. But what happens if a non-exempt employee picks up an extra shift for the same employer, and that shift pays a different rate of pay than the employee’s normal hourly rate? The FLSA provides multiple solutions. The employer can calculate a modified regular rate to which overtime is calculated. For example: If Employee works 40 hours a week at his normal job at $10/hr, and works 20 hours in the same week in an extra shift for a job that week at $7.50/hr, The Employee’s pay would be calculated as follows: ($10 x 40 hrs) + ($7.50 x 20 hrs) = $400 + $150 = $550 $550/60 hrs = $9.17 (this is the new regular rate) Employee worked 60 hours total, so has 20 hours of overtime. ($9.17 x 20)/2 = $91.70 $91.70 (overtime pay) + $550 (pay at Employee’s regular hourly rate) = $641.70 So Employee’s paycheck for that week is $641.70 Alternatively, where an employee performs two or more different kinds of non-exempt work for which different straight time hourly rates are established, the employee may agree with their employer in advance that she or he will be paid during overtime hours at a rate not less than one and one-half times the regular rate established for the type of work she or he is performing during such overtime hours. In other words, the employee may agree with their employer in advance that any overtime the employee works will be paid at the applicable overtime rate for the job performed. It is imperative to properly classify employees to ensure they are compensated properly for all time worked. Of course, it is recommended to engage qualified wage and hour counsel to help you identify your employees’ “primary duties” so you can compensate them appropriately.

With the New Year just weeks away, employers with Illinois employees should be aware of several new statutory sick leave provisions that will go into effect in 2017. Specifically, Chicago, Cook County (which encompasses Chicago and many of its surrounding suburbs), and the State of Illinois have each provided employees with various sick leave protections scheduled to go into effect: Chicago – The Chicago Minimum Wage Ordinance was amended to provide eligible employees up to 40 hours of paid sick leave during each 12-month period. The eligibility threshold is relatively low: an employee need only (a) perform 2 hours of compensable work within the City of Chicago, and (b) work at least 80 hours for a covered employer within any 120-day period. To qualify as a “covered employer”, an entity must maintain a business facility within the City limits or be subject to any of the City’s licensing requirements. There is no minimum employee threshold. The leave provided is not in addition to any leave already provided by an employer, but any plan already in place must meet the Ordinance’s minimum requirements. Qualifying employees accrue one hour of leave for every 40 hours worked, up to the 40 hours during each 12-month period. The amendment goes into effect on July 1, 2017, and can be found here. Cook County – The Cook County Earned Sick Leave Ordinance also goes into effect on July 1, 2017, and largely mirror’s Chicago’s ordinance. A covered employee is anyone who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of Cook County. Because Cook County encompasses the suburbs surrounding Chicago, a significant number of additional employees will qualify for the benefit. As with the Chicago Ordinance, employees can carry over 20 hours of accrued, but unused sick leave into the following year; provided, however, that if the employer is subject to the federal Family Medical Leave Act, the carryover limit is raised to 40 hours. The Cook County Ordinance can be found here. Illinois – The Illinois Employee Sick Leave Act does not establish a minimum sick leave benefit; rather, it allows employees to use accrued sick leave to care for a family member. An employee may use up to half of the employee’s accrued sick leave for absences related to the illness, injury, or medical appointments of a family member. The term “family member” is defined to include the employee’s child, spouse, domestic partner, sibling, parent, mother or father-in-law, grandchild, grandparent, or stepparent. The statute becomes effective on January 1, 2017, and can be found here. There are various exceptions and qualifications applicable to each provision. Employers should evaluate their coverage under each if they maintain employees and facilities in any of these locations.

While it remains to be seen what effect a Trump presidency will have on federal employment laws, the EEOC has made clear that it will continue to emphasize protections afforded to individual employees based on their national origin. The Agency’s updated Strategic Enforcement Plan, issued in October 2016, noted that immigrant rights will be a priority for the agency over the course of the next five years, with a focus on recruitment and hiring practices that affect members of ethnic groups (among others). The Enforcement Guidance on National Origin Discrimination, issued on November 21, 2016, is the Agency’s first interpretation of the law surrounding national origin discrimination. The Guidance on National Origin Discrimination contains a broad definition of “national origin discrimination,” which includes discrimination or harassment because an individual (or his or her ancestor) is from a certain place or shares the physical, cultural or language characteristics of a national origin or ethnic group. Under this definition, national origin can include a particular country or a group of individuals who share a common language, culture or social characteristics. While the definition does not include citizenship or immigration status, the Guidance contains a reminder that the protections of Title VII apply to all individuals, regardless of their citizenship, immigration, or foreign national status. In addition, the Guidance notes that individuals may receive the protections of the law if they are discriminated against or harassed because they associate with someone of a particular national origin. Employers should consider the following aspects of their policies and practices which may be under increased scrutiny as a result of the Guidance: whether English-only or fluency policies exist for legitimate business reasons; are applicants for positions sought through diverse sources or only through word of mouth, increasing the possibility of a non-diverse applicant pool; how dress code policies are enforced and whether they disproportionately affect individuals from particular ethnic or national backgrounds; and are job duties distributed without regard to customer preferences and/or perceived to segregate employees by national origin In addition, employers should review the Agency’s Q&A on the guidance, as well as the Fact Sheet for Small Employers, both of which contain high level summaries of the key points of this document.

Employers in Silicon Valley now face another local hike in the minimum wage. On Tuesday, the San Jose City Council unanimously approved a multi-year increase in the City’s minimum wage, which will reach $15.00 per hour on January 1, 2019 after increasing in annual $1.50 increments. San Jose joins the Silicon Valley cities of Mountain View, Sunnyvale, Los Altos, Palo Alto, and Cupertino to adopt a $15.00 minimum wage in effect in either 2018 or 2019. The municipalities of Campbell, Milpitas, Santa Clara, and Saratoga are also considering similar increases. The Silicon Valley increases come on the heels of the upcoming increase in California’s state-wide minimum wage that takes effect on January 1, 2017 and will ultimately reach $15 per hour in January 2022. (See Polsinelli’s update on the California minimum wage legislation here). San Jose's minimum wage increase will come in four phases: a hike to $10.50 in January 2017, $12.00 per hour in July 2017, to $13.50 in January 2018 and to $15.00 by January 2019. After 2019, the San Jose minimum wage will increase annually based on the consumer price index, with increases capped at 5 percent. The San Jose City Council rejected a more conservative timetable proposed by city staff, which suggested that the minimum wage reach $15.00 in 2020. A city-commissioned study found that the minimum wage increase will have a significant impact on San Jose workers and employers. Notably, the study found: The minimum wage increase will generate “an average pay increase of $3,000 (18 percent of annual earnings) for 115,000 San Jose workers (31 percent of workforce).” While the study anticipates a small 1.3 percent increase in payroll cost across industries, it anticipates a 10.1 percent increase for restaurant employers. California employers should be mindful of city and county ordinances, as an increasing number of local jurisdictions require minimum wages in excess of California state law. As the minimum wage increases in California, employers should evaluate the salaries of their exempt employees to ensure compliance with all exemption salary requirements tied to the minimum wage. Contact your Polsinelli lawyer for advice on complying with the myriad of state and local wage and hour laws, including the applicable minimum wage.

On November 8, 2016, voters in Arizona approved a ballot measure requiring Arizona businesses to provide employees with paid sick leave. In approving the new Minimum Wage and Paid Time Off Initiative, Arizona joins a handful of states (as well as some municipalities) that have enacted paid sick leave laws. Below are five things Arizona employers need to know prior to the law taking effect on July 1, 2017. 1. How much paid sick leave must be provided? Most private sector employers in with operations in Arizona are subject to the new law. The minimum paid sick leave requirements are as follows: Employees working for employers with 15 or more employees are entitled to accrue up to 40 hours of paid sick leave per year. Employees working for employers with fewer than 15 employees are entitled to accrue up to 24 hours of paid sick leave per year. 2. How does sick leave accrue? Regardless of the size of the employer, employees must accrue paid sick leave at the rate of at least one hour for every 30 hours worked. 3. How can employees use paid sick leave? Employees can use their paid sick leave hours for a variety of reasons, including: Their own mental or physical illness, injury, or health condition; The mental or physical illness, injury, or health condition of a family member; Absences related to abuse, stalking, sexual violence, or domestic violence of either the employee or the employee’s family member; and/or When a public health emergency causes the employee’s workplace to close, or the employee’s child’s school or daycare to close. 4. Who is a “family member”? The new law defines a “family member” broadly to include: Children of any age (including biological, adopted, or foster children, as well as legal wards and children of a domestic partner); Parents (including biological, foster, stepparents, adoptive parents, and legal guardians of the employee or the employee’s spouse or domestic partner); Spouses and domestic partners; Grandparents, grandchildren, or siblings of the employee or the employee’s spouse or domestic partner; or Other individuals related by either blood or affinity whose close association with the employee is the equivalent of a family relationship. 5. What happens when an employee leaves their job? Employers need not pay out unused and accrued paid sick leave time to employees whose employment ends for any reason. However, employees who are rehired by the same employer within nine months of termination are entitled to reinstatement of all accrued paid sick leave time. So for example, employers who conduct temporary layoffs and bring back employees within nine months must reinstate all of those employees’ accrued sick leave time. Arizona employers take note: the new Minimum Wage and Paid Time Off Initiative also contains important notice and record keeping requirements. Please contact Polsinelli attorneys with any questions regarding compliance

On November 22, 2016, U.S. District Judge Amos Mazzant enjoined the Department of Labor (DOL) from implementing amendments to certain overtime rules, including an amendment that would approximately double the minimum salary requirement for an employee to be considered for the Fair Labor Standard Act (FLSA) “white collar” or executive, administrative and professional (“EAP”) exemption to overtime requirements.   The injunction applies nationwide. To recap, as previously written, the DOL final regulations 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). Increase the total annual compensation for highly compensated employees from $100,000 to $134,004. Install procedures that would update these salary thresholds every three years staring January 1, 2020. While the final DOL regulations were set to take effect on December 1, 2016, the injunction prevents implementation of the regulations indefinitely, pending further Court proceedings. In its analysis, the Court agreed with the twenty-one (21) Plaintiff States and associated business organizations that they had satisfied the requirements for a preliminary injunction: (1) a likelihood of success on the merits, (2) the threat of irreparable harm, (3) that the threatened harm outweighs any damage to the Government, and (4) the injunction will not disserve the public interest. The good news for employers is that they do not have to implement salary increases for white collar/EAP employees or consider re-classifying any employees (if applicable) by December 1.  Employers should, however, continue to prepare to potentially implement the new regulations in the event the preliminary injunction is lifted, which could occur based on the Court’s decision on the Plaintiff States’ pending motion for summary judgment.  It is unknown when the Court may decide the summary judgment motion, when the decision might be appealed, or whether the new Congress may take action. Stay tuned, as we continue to monitor this case and provide updated information and analysis as it becomes available.  The case is State of Nevada et al. v. United States Dep’t of Labor, et al., Case No. 4:16-cv-00731 (E.D. Tex. 2016).

The New York Regional Director of the National Labor Relations Board (NLRB) recently issued a decision asserting jurisdiction over employees of an airline independent contractor (“AIC”) and ordered that the contractor’s workforce vote concerning whether to unionize. See PrimeFlight Aviation Services, Inc., 02-RC-186447 (2016). This is just another example of a growing trend that we have seen at both the NLRB and the National Mediation Board (NMB) in finding that air carriers are not asserting enough control over AICs to bring them under the jurisdictional umbrella of the Railway Labor Act (RLA). The NLRB’s recent decisions, encapsulated by PrimeFlight, indicate that the NLRB, rather than the NMB, will continue to assert its jurisdiction over an AIC absent air carrier ownership or robust carrier control. Relying on a jurisdictional test articulated by the NMB, the NLRB engages in a two-part analysis to determine whether such jurisdiction is appropriate. First, the Board determines whether the work at issue is traditionally performed by carrier employees.  Second, the Board assesses whether a carrier directly or indirectly owns or controls the AIC or both the AIC and the carrier are under common control. See, e.g., Airway Cleaners, LLC, 41 NMB 262, 267 (2014). The NMB will not assert jurisdiction unless both prongs of the test are satisfied. Id. The growing trend of NLRB jurisdiction over AICs not only complicates labor relations between AICs and their employees, but also impacts airline carriers’ operations, labor relations, and contract administration. In the November 4, 2016 PrimeFlight Aviation Services decision, the NLRB held that baggage handlers and wheelchair and line queue agents employed by PrimeFlight Aviation Services, an AIC providing services to carriers JetBlue and AFCO AvPorts Management, LLC at the Westchester County Airport in New York, properly fell under the jurisdiction of the National Labor Relations Act. Although both carriers could recommend personnel decisions and had access to records directly related to services provided by the AIC’s on-site employees, the AIC remained ultimately responsible for hiring, supervising, disciplining, and terminating its employees. The NLRB’s Regional Director weighed these factors under the NMB’s two-part test and ultimately determined that the airlines failed to exert sufficient control over PrimeFlight Aviation and its employees to establish RLA jurisdiction. As a result, the Regional Director granted the International Brotherhood of Electrical Workers’ petition seeking to represent the workers at issue via election. The wave of recent decisions similar to PrimeFlight by both the NMB and NLRB suggests that the pendulum has swung away from the NMB and towards the NLRB in overseeing labor relations for airline contractors. This move has important ramifications not only for AICs but also for airline carriers, including whether employees critical to an airline’s operations may strike, the scope of bargaining units for such employees which are not on a systemwide basis under the NLRA and can even include so-called “micro units”, and whether these decisions portend indirect NLRB jurisdiction over carriers themselves under the NLRB’s new Browning-Ferris joint employer standard. Whether this trend will continue remains to be seen, however, in light of the election giving a Republican President and Republican-led Congress power to shape federal labor relations policy. Although President-elect Donald Trump has so far remained relatively quiet on his plans for the NLRB, he will likely fill the Board’s two empty seats with pro-business appointees.  This new Board majority may return to earlier agendas and stave off or even turn back the Board’s increasingly aggressive labor-friendly decisions and initiatives, including issues surrounding independent contractors. We will continue to monitor these developments as we wait to see the effect the election may have on labor relations, particularly for the airline industry and its contractors.

It seems that employers were right to be concerned with the United States Supreme Court’s decision to “punt” in its May 2016 opinion in Spokeo Inc. v. Robins, after two United States District Courts reached opposite outcomes in opinions issued last month. Spokeore presents one of many recent putative class actions brought under the Fair Credit Reporting Act (“FCRA”), wherein plaintiffs allege “technical” or “procedural” violations of the FCRA’s oft-byzantine compliance requirements. Most employers are by now aware that the FCRA’s broad scope sets out strict compliance procedures for employers who wish to use criminal background checks for “employment purposes.”  In the Spokeo opinion, which was discussed in greater depth in a prior blog post, the Supreme Court remanded back to the Ninth Circuit with instructions to determine whether plaintiffs’ alleged harm was sufficiently “concrete” to confer Article III standing. Though the Court openly hinted at its disapproval of such procedural class actions (e.g. “It is difficult to imagine how the dissemination of an incorrect zip code…could work any concrete harm.”), it did not definitively hold that such claims could never satisfy Article III’s standing requirements. Taking cues from Spokeo, class action defendants in Nokchan v. Lyft, Inc.and Moody v. Ascenda USA, Inc. filed motions to dismiss on the grounds that plaintiffs had not alleged “concrete” injuries. In both cases, plaintiffs had previously advanced the now well-worn argument that defendants’ “disclosure and authorization” forms were not compliant with 15 U.S.C. §§ 1681b(b)(2)(A)(i)-(ii). In Lyft, the United States District Court for the Northern District of California agreed with defendant, granting its motion and dismissing the case without prejudice. The Lyft court noted that plaintiff “has not alleged that he suffered any real harm,” nor had he claimed to have been “harmed by the background check in any way.” In Ascenda, however, the United States District Court for the Southern District of Florida, denied defendant’s motion to dismiss, holding on strikingly similar facts that noncompliance with §§ 1681b(b)(2)(A)(i)-(ii) was not “akin to the dissemination of an incorrect zip code” and did in fact represent a sufficiently “concrete” injury. While the recent FCRA case law might be divergent, the message to employees remains clear: make sure your FCRA forms are compliant.

The number of collective class actions filed continues to rise year after year. Employers should be vigilant in ensuring compliance with the Fair Labor Standards Act (“FLSA”). With the new Department of Labor (“DOL”) regulations going into effect December 1, 2016, now is an optimal time for employers to review pay classifications and pay practices. Here are six steps to address when conducting an FLSA audit: 1) Employee duties: The first step of the audit is to monitor employee duties and responsibilities. It is important to identify the exact job duties and responsibilities employees actually perform, prior to assessing whether employees are classified and compensated properly. 2) Job descriptions: The next step of the audit is to review employee job descriptions to match the duties employees are actually performing. Because job responsibilities may change over time, employers should make sure that they regularly monitor and update job descriptions. 3) Job classification: After job descriptions have been updated, employers should analyze whether employees are properly classified as independent contractors, non-exempt employees, or exempt employees. Misclassification of employees as exempt from overtime pay may subject employers to liability under state law (minimum wage, unemployment insurance, workers’ compensation funds,  and state taxes) and federal law (overtime compensation, benefits, including health insurance or FMLA, and minimum wage). 4) Compensation review: Effective December 1, 2016, the salary threshold for “white collar” overtime exemption increases from $455 to $913 per week, and the annual compensation requirement for highly compensated employees increases from $100,000 to $134,004 annually. Employers must review exempt employee salaries to ensure compliance with the new regulations. Employers may use non-discretionary bonuses and incentive payments, including commission, to satisfy up to 10% of an exempt employee’s salary, as long as payments are made on a quarterly or more frequent basis. 5) Record keeping: Next, employers should review whether they are maintaining required time and pay records for employees, including potential overtime. Employers need to put systems in place to track potential time off of the clock such as 1) access to company email, 2) automatic lunch deductions for breaks that employees may not have taken, 3) instant messaging or text messages on company issued cell phones, 4) donning and doffing time or 5) whether an employee has to log into computer systems before clocking in. Employers should retain records for a minimum of three years. 6) Safe harbor policy: Finally, employers should implement a policy in employee handbooks or manuals clearly prohibiting off-the-clock work by non-exempt employees and improper pay deductions, along with a complaint mechanism, reimbursements for mistakes, and a good faith commitment to comply with all applicable pay laws. It is important to note that the Safe Harbor Provision of the FLSA does not protect employers who willfully violate the statute after employees have complained about pay practices. Conducting an audit can be daunting and tedious while leading to many twists and turns. Because many of the regulations may be difficult to interpret, contact the wage and hour attorneys at Polsinelli with any questions.

With some of the strongest equal pay laws in the country, California recently expanded its equal pay protections with the passage of two new bills which will take effect on January 1, 2017:  (1) The Wage Equality Act of 2016 (California SB 1063) and (2) AB 1676, Concerning the use of prior salary to justify wage disparities. (1)  Wage Equality Act of 2016—California SB 1063 California’s Fair Pay Act (CFPA) provides that employers must not pay employees of the opposite sex less wages for “substantially similar work, when viewed as a composite of skill, effort and responsibility and performed under similar working conditions.” Effective January 1, 2017, Senate Bill 1063, also known as the “Wage Equality Act of 2016,” will extend the equal pay requirements of the Fair Pay Act amendments to Labor Code §1197.5 to cover race and ethnicity, in addition to gender. With these recent amendments, employers must not compensate employees at a rate less than that paid to employees of a different race or ethnicity for “substantially similar work.” These new amendments supplement existing protections under the Fair Employment and Housing Act (FEHA) for potential claims of discrimination for race and ethnicity. However, similar to last year’s amendments to the CFPA, employers may utilize a successful defense if they can establish that any wage differential is based upon a seniority system, merit system, or system that measures earnings by quantity or quality of production, or bona fide factor other than sex, race or ethnicity, such as education, training or experience.  Employers relying on a bona fide factor other than sex, race or ethnicity must demonstrate that the factor is: (1) not derived from a differential in compensation based on the protected category; (2) job related to the position at issue and; (3) consistent with “business necessity.” The employer has the burden of proof, so employers should retain statistics and give thought to how they will prove and can justify pay differentials, both on an individual and systemic basis. (2)  AB 1676—California’s Twist on Salary Inquiries Not for lack of trying, California has not been able to match Massachusetts’s recent law prohibiting employers from inquiring as to an applicant’s salary history. In fact, AB 1017, a predecessor bill to AB 1676, attempted to prohibit such inquiries only to be vetoed by California Governor Brown last year on the grounds that the bill prohibited employers from obtaining relevant information with “little evidence” that it would result in more equitable compensation. Accordingly, as a compromise, the Legislature passed AB 1676 which amends Labor Code §1197.5 to prohibit employers from using prior salary as the sole justification for a current pay disparity. While in California, employers can technically still request salary history information from applicants, they should tread carefully and err on the side of open ended questions to the applicant about their salary expectations as opposed to history. Employers who utilize a nationwide application form will still need to review in light of the recent prohibition in Massachusetts. Next Steps With the enactment of the Fair Pay Act and the anticipated rise in equal pay litigation in California, many employers have been conducting reviews of their compensation structures and written policies to ensure compliance. Such reviews should be continued and these additional amendments to the Fair Pay Act should also be considered for compliance as these new laws go into effect on January 1, 2017. Companies that have already completed equal pay audits and/or reviews regarding gender should now review their policies and practices with a focus on race and ethnicity to ensure compliance and that any wage disparities are justified under these newest amendments to the CFPA. Employers should conduct these reviews with the assistance of counsel in order to protect the results under the attorney work product doctrine and attorney client privilege.

The number of charges filed with the US Equal Employment Opportunity Commission alleging disability discrimination has increased steadily over the past five years. In its recently updated Strategic Enforcement Plan, the EEOC announced that one of its key priorities will be pursuing claims of pay disparity among disabled workers. Employers must be prepared to respond appropriately when they learn that employees have medical restrictions which may affect the employees’ ability to perform an “essential function” of the job. While most employers are generally aware of the duty to engage in the “interactive process” to determine if an accommodation is reasonable (or necessary), conventional wisdom provides (and the applicable regulations confirm) that an employer need only discuss possible accommodations when an employee affirmatively puts the employer on notice of the need for an accommodation. In Kowitz v. Trinity Health, a divided Eighth Circuit Court of Appeals (covering the states of Missouri, Iowa, Minnesota, North Dakota, South Dakota, Nebraska, and Arkansas) appears to have changed the standard, suggesting that the onus is on employers to discuss possible accommodations upon learning that an employee is returning to work with some type of restriction which may affect the individual’s ability to perform his or her job duties. Kowitz worked as a Respiratory Therapist and later took on additional duties as a lead technician in the blood gas laboratory. Her employer, a medical facility, required all employees in the department where Kowitz worked to be certified in Basic Life Support (BLS) to respond to potential medical emergencies. Kowitz took FMLA leave for surgery related to spinal stenosis and, after her leave concluded, returned to work with some additional restrictions, which were accommodated. At about the same time as Kowitz returned to work, the medical facility realized that several employees in the department, including Kowitz, did not have current BLS certification. All employees were asked to recertify by a date certain. While Kowitz took, and passed, the written portion of the BLS test, her physical restrictions prevented her from taking the physical part of the test (which requires actual physical compressions to establish CPR skills) by the established deadline. After Kowitz sent a letter to her employer noting that she would not be able to take the test for at least four additional months due to her physical limitations from the surgery, she was terminated. The trial court found that the employer had no duty to accommodate because Kowitzwas unable to perform the essential function of her job (completing the required BLS certification). The Eighth Circuit (in a 2-1 decision) reversed, holding that since the employer knew from the letter and the prior FMLA leave that Kowitz may need additional time to take the physical portion of the test, it had a duty to engage in the interactive process, even though Kowitz  did not make a specific request for an accommodation (such as a longer time period to take the test). In light of the Court’s decision in this case, employers should consider the following steps to minimize liability for failure to accommodate claims: Remind Managers and Supervisors of the need to involve human resources personnel when employees return from leave and  have restrictions; Insure that employees returning from FMLA or similar leave have a return to work release stating they have no restrictions or, in those cases where they have  restrictions, engage in one-on-one discussions with the employee to determine if the restrictions can be accommodated; Review job descriptions to verify that they accurately list the essential functions of a position so that, if the situation arises, there is no question as to which job functions are “essential” and which are not.

Employers that use background checks should be familiar with the requirements of the federal Fair Credit Reporting Act (“FCRA”). As we have discussed on this blog, prior to obtaining a consumer report on an employee or applicant for employment, an employer must provide notice and obtain written consent. If an employer decides to take adverse action against an employee or applicant based in whole or in part on the contents of a consumer report (such as deciding to terminate an employee’s employment or deciding not to hire an applicant), the employer must comply with the FCRA’s adverse action requirements. In addition to the requirements of the FCRA, employers should be aware that some states have laws which impose additional restrictions or obligations on employers with respect to consumer reports. State laws can increase employers’ obligations concerning the use of employee and applicant background checks. For example, the FCRA does not restrict employers from obtaining credit reports, a type of consumer report, on employees or applicants. Under California law, however, an employer may only request a credit report for employment purposes when an individual holds or is applying for one of the following positions: A managerial position. A position in the California’s Department of Justice. A sworn peace officer or other law enforcement position. A position for which the information contained in the report is required by law to be disclosed or obtained. A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person: Bank or credit card account information. Social security number. Date of birth. A position in which the person is, or would be, any of the following: A named signatory on the bank or credit card account of the employer. Authorized to transfer money on behalf of the employer. Authorized to enter into financial contracts on behalf of the employer. A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information. A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday. See Cal. Lab. Code § 1024.5(a). Prior to requesting a credit report on a California employee or applicant, California’s Consumer Credit Reporting Agencies Act requires, among other things, that the employer provide notice to the individual identifying the specific basis under the Labor Code allowing the employer to request a credit report. California is just one example. Other states that have enacted laws regulating employer use of consumer reports, often called mini-FCRAs, include Arizona, Georgia, Kansas, Maine, Massachusetts, Minnesota, New Jersey, New York, Oklahoma, and Washington. Employers should be careful to comply with any applicable state law requirements, in addition to the provisions of the FCRA, when requesting consumer reports on employees or applicants.