Employers want their employees focused on work tasks while at work and not on personal business. Relatedly, employers, and many employees, want the work environment to be free from co-worker solicitations, regardless of topic. To achieve these goals, some employers may seek to implement policies that broadly prohibit co-worker solicitations and the conduct of personal business in the work place. While seemingly innocuous, these policies have received increased scrutiny from the National Labor Relations Board (“NLRB”). Employers should keep several tips in mind when drafting employee solicitation policies. The NLRB was formed to administer and enforce the National Labor Relations Act (“NLRA”). The NLRA generally defines the rights of employees to organize, join or assist labor organizations, to bargain collectively, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection such as wages, hours, and working conditions. The NLRA provides that employers may not interfere with, restrain, or coerce employees in the exercise of their NLRA rights. Over the past few years, the NLRB has been increasingly focused on how certain policies may have the potential to “chill” employees’ protected exercise of NLRA rights. Here are some tips to ensure employer policies do not potentially chill employees’ protected rights: Be Precise.Be specific about the types of solicitation or personal business that is prohibited. Ensure the items that are prohibited are not protected by the NLRA. Even if you do not intend to restrict employees’ rights to engage in protected activities, over broad policies may be seen as “chilling,” and thereby impermissible. Timing is Critical. Limit carefully tailored non-solicitation or personal business prohibitions to working time. Policies that arguably prohibit activity “while at work” or during “scheduled working hours” may violate the NLRA because those phrases may cover time when the employee is exercising protected rights at the employer’s location, but not actually working, including during lunch, breaks, and before and after “on-the-the-clock” work. Be Consistent and Non-Discriminatory.If an employer permits employees to talk about non-work-related matters during work time, then policies should not prohibit discussions between employees about NLRA-protected rights during work time. Location Can Matter.If policies have some type of prohibition against the distribution or posting of materials in certain areas of a facility, then this prohibition only should apply to work areas. If an area is a non-work area or is a mixed work/non-work area, a general prohibition against the distribution and posting of materials in these areas may be unlawful, absent some special circumstance related to the interference with work or equipment. Despite employers’ best intentions, an over broad policy can unlawfully chill employees’ rights to engage in protected concerted activity. Careful drafting of handbook policies related to other business and solicitation may defrost these policies, making them permissible. Policies must be narrowly tailored so that there is no doubt that employees are allowed to communicate about wages, hours, and other working conditions and union and collective bargaining during non-working times. Given the particularity of prose needed for such policies, employers should have their handbooks reviewed and updated by legal counsel on a regular basis.

On October 17, 2016, the U.S. Equal Employment Opportunity Commission issued an update to its strategic enforcement plan (SEP), thereby unveiling the areas upon which it intends to focus over the next five years. Although the EEOC continues to enforce all of the federal employment anti-discrimination statutes, the EEOC will likely flag and pay particular attention to charges of discrimination that fall within the prioritized areas. The areas identified in the SEP are: Eliminating barriers in recruitment and hiring; Protecting vulnerable workers, including immigrant and migrant workers, and underserved communities from discrimination; Addressing selected emerging and developing issues; Ensuring equal pay protections for all workers; Preserving access to the legal system, and Preventing systemic harassment. The SEP places special emphasis on protecting “persons who are Muslim or Sikh, or persons of Arab, Middle Easter or South Asian descent” from “backlash discrimination” and on issues posed by “complex employment relationships and structures in the 21st century workplace, focusing specifically on temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.” Typically, a worker who believes that his or her employer has violated one of the laws under the EEOC’s purview files  a charge of discrimination against his or her employer with the EEOC. The EEOC then decides whether to investigate the charge of discrimination based upon the allegations. The EEOC may, either without investigating or after an investigation, dismiss the charge without finding cause to believe that the employer violated the implicated statute, or the EEOC may find cause to believe the statute was violated. If cause is found, the EEOC may file a civil lawsuit against the employer. Even though a charging party may still bring suit against the employer on his or her own within 90 days of a dismissal by the EEOC, the prospect of an EEOC cause finding and the possibility of litigating against the federal government with all of the resources that it can bring to bear, as opposed to a private litigant, renders the possibility of a cause finding daunting. Charges that implicate one of the areas identified in the SEP, especially those that allege “backlash discrimination” or relate to the employment structures recited above will draw additional scrutiny from the EEOC, are more likely to be thoroughly investigated than charges that do not implicate the SEP’s areas of emphasis. Consequently, although it is wise for employers to avoid situations that give rise to any claims of unlawful discrimination, employers would be wise to be particularly vigilant when addressing workplace situations that might implicate the areas of interest identified in the SEP. Employers should also consider assessing their employment policies to ascertain whether any of those policies implicate the SEP’s areas of interest.

For obvious reasons, reductions in force (“RIFs”) are never a happy topic. A company’s decision to lay off a substantial number of workers is a somber one. That being said, RIFs are most often undertaken to secure the long-term health of a business. Appropriate restructuring can help turn a struggling business into a growing one, thereby creating more jobs and opportunity in the long run. Employers faced with a RIF should plan carefully, to reduce the risk of litigation brought by former employees affected by the RIF. Litigation may arise when employees affected by layoffs allege that the company’s RIF was actually a pretext for discrimination. Although there is no ‘magic bullet’ to ensure a litigation-free RIF, employers who consider the below points will be at a significant advantage. Create a Business Justification Memorandum. Any employer engaging in a RIF should, in advance, create a  ‘business justification memorandum.’ The purpose of this document is to establish—in writing—the business related and objective reasons for implementing the RIF. This document should provide contemporaneous (as opposed to after the fact) proof that the company considered alternatives and demonstrate the RIF was undertaken for purely business (as opposed to discriminatory) reasons. The document should, at minimum, contain answers to the following questions: Why is the RIF happening? What are the company’s future goals? How will a RIF help achieve these goals? What alternatives to a RIF were considered? Why were those alternatives unworkable? How will the RIF be implemented? Consider a Voluntary Reduction Program (“VRP”). Employers should first consider a VRP as an alternative to mandatory layoffs. In doing so, businesses should discuss the structure of such a plan with benefits counsel, as any such plan may be subject to ERISA. A VRP can be a helpful tool to limit litigation via employee releases containing waivers of claims. Businesses should also be cautious of the risks that come with a VRP, however. These include (i) less employer control over who stays and who leaves, (ii) the risk that, if too few employees participate, the business may have to engage in layoffs anyway, and (iii) litigation exposure from ill-considered choices when offering the VRP to employees. Get Workforce Statistics. Employers should involve counsel and experts early in any RIF process. This is crucial because—before any RIF is undertaken—an employer must know how its workforce looks now, and how it will look post-RIF,  to ensure employees who are members of a protected class are not disproportionately affected (and, if they are, why). Data points should include age brackets of employees, as well as the gender and racial makeup of the workforce.   Ideally, these reports should be prepared by and with counsel  to maintain privilege over the results of any analysis.  Develop Appropriate Selection Criteria. Deciding which employees will be let go is the most important—and most dangerous—part of any RIF. Errors here can and will result in expanded litigation and exposure to significant liability. Consequently, employers must use permissible selection criteria when deciding how the RIF will be implemented. Such criteria include: Seniority Skill sets Performance level Geographic location Positions that are no longer needed Notably, employers should be careful when basing any RIF-related decisions on purely subjective performance criteria. This is particularly crucial because the subjective judgment of individual supervisors—whose performance reviews of employees may be the determining factor in layoff decisions—may be called into question if evidence emerges that a particular supervisor is biased against employees of certain protected classes. Consequently, employer performance metrics that underlie any RIF should be clearly identified, uniformly applied, measurable, and written. Ideally, these metrics should be generated by multiple evaluators in order to bolster the credibility of the process and protect against the single “bad apple” manager, whose could embroil the company in litigation by former employees. Provide Advance Notice of Layoff. The federal Worker Adjustment and Retraining Notification Act (“WARN Act”) requires many employers with 100 or more employees to provide 60 days advance notice of plant closings and mass layoffs of employees. There are many qualifications and exceptions to WARN notice requirement. Employers should confer with legal counsel to understand any WARN notice obligations under a contemplated layoff in advance of the 60 day notice window. Employers that violate WARN may be liable to each affected employee for back pay and benefits for the period of the violation, up to 60 days. In addition, several states (including California, Illinois, New York, and Tennessee) have laws that require advance layoff notices in situations not covered by the federal WARN Act.

With the holiday season approaching, now is a good time to review some practical tips for an employer when addressing suspected abuse of FMLA leave by an employee, although these tips represent best practices year round. An earlier post provided insight into measures an employer can take to prevent the abuse, but what is an employer to do when it receives information indicating the abuse is ongoing or has already happened? 1. Conduct a thorough investigation before contacting the employee. Employers may receive information, directly or indirectly, from other employees which raise suspicions about another employee’s abuse of leave. Those co-workers can be a valuable source of information to the employer. Employers can also use resources such as social media or private investigators, subject to any state law limitations, to gather information. 2. Schedule a meeting with the suspect employee. During this meeting, the employer should inquire about the employee’s reason for absences on the dates in question and whether the employee can provide any information or documents corroborating legitimate FMLA use on those days. The employee’s use of FMLA leave should track the employee’s medical certification upon which FMLA leave was approved. The employer should provide the employee a fair opportunity to account for his or her leave without “accusation” of abuse from the employer. If the employer has evidence suggesting FMLA fraud or abuse, the employer may ask the employee to explain. The employer may then assess the credibility and truthfulness of the employee’s explanation. An employer should take caution when scheduling this meeting with the suspect employee. While an employer may be anxious to address suspected abuse of leave, contacting an employee while on leave may lead to an interference claim. Counsel can advise an employer about when and how to address suspected leave abuse with the offending employee. 3. In the event of termination, document everything.Clearly worded employment policies, including social media and leave abuse policies, can legally support an employer’s decision to terminate an employee’s employment for FMLA fraud or abuse. The employer’s investigation and subsequent meeting with the employee should be documented to demonstrate the full and fair investigation conducted by the employer, and that the employer’s ultimate decision was made in good faith, based upon evidence then available to the employer. Such documentation is important for defending against any FMLA interference or retaliation claims that may follow.

In an en banc decision issued October 5, 2016, the Eleventh Circuit Court of Appeals ruled that job applicants cannot bring disparate impact claims under the Age Discrimination in Employment Act (“ADEA”). (Villarreal v. R.J. Reynolds Tobacco Co., October 5, 2016) This decision departs from previous Eleventh Circuit decisions and decision of other courts nationwide, which have held without much analysis that job applicants can pursue disparate impact claims under the ADEA. Although this ruling favors employers, it only applies to employers within the States of Georgia, Florida, and Alabama, and it seems likely to be reviewed by the United States Supreme Court. In Villarreal, a divided en banc Eleventh Circuit strictly construed the text in Section 4(a)(2) of the ADEA when deciding that job applicants lack status as an “employee” to bring disparate impact claims. The text in Section 4(a)(2) of the ADEA states in relevant part that “[i]It shall be unlawful for an employer…to limit, segregate, or classify his employees in any way which would deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” The Eleventh Circuit is the only Circuit to interpret the ADEA in this manner. No other Circuit currently prohibits prospective employees and/or job applicants from pursuing disparate impact claims under the ADEA. Indeed, the EEOC’s interpretative guidance allows prospective employees and job applicants to pursue disparate impact claims under the ADEA. The United States Supreme Court will no doubt have to clear up this newly created split between Circuits. Until this happens and at least for now, employers in the Eleventh Circuit cannot be sued for disparate impact by prospective employees and/or job applicants under the ADEA for any hiring practice, policy, or criteria that disparately impacts a class of prospective employees and/or job applicants over 40 years old. Stay tuned for future updates and developments in this rapidly changing area of the law.

As millennials continue to negotiate workplace perks, such as flexible hours, gourmet cafeterias, gym memberships, and on-demand laundry services, employers may be confronted with employees who seek to bring pets to work for convenience, companionship, or to promote creativity and calmness. Beyond providing reasonable accommodations (absent showing an undue hardship) for disabled employees with services animals, here are some considerations for employers regarding voluntary pet policies. Pros and Cons Recent studies and articles advocate for pet-friendly workplaces, citing a number of benefits to companies and workers. Benefits include increased worker morale, co-worker bonding, attracting and retaining talent, and lower stress coupled with higher productivity. On the other hand, permitting pets in the workplace presents a number of issues. For example, according to a leading asthma and allergy organization, as many as three in ten people suffer from pet allergies, meaning someone at work is likely allergic to Fido or Fifi. A significant number of people also have pet phobias, for example, resulting from a traumatic dog bite incident. Other concerns may include workplace disruption due to misbehaved animals, mess, and time-wasting. Five Tips for Effective Pet Policies If the Pros outweigh the Cons, the next question is: “[w]hat should I put in a pet policy?” Here are five things to consider when preparing a pet-policy: Ask Around: Offer employees an opportunity to provide feedback before implementing a pet-policy. Doing this allows the company time to confirm employee interest in the idea and address any concerns or issues before employees bring pets to work. Set a Schedule: Establish a schedule for pet-friendly work days, e.g., once a week or month, to provide structure and predictability so that the company and employees can plan, either to bring their pets (or allergy medicine) or to work remotely, for days when pets may be at the office or jobsite. Provide Pet Space: Designate certain areas as pet-friendly. This benefits everyone. For areas where pets are welcome, provide perks like snacks, cleaning supplies, and toys. Designate entrances and exits that pet owners can use to bring their animals in and out. Space planning also helps employees who prefer to keep their distance, as boundaries provide notice of places to avoid. Offer Pet Benefits: Certain federal and/or state laws prohibit companies from permitting pets (not to be confused with ADA service animals) at work. Offering employees other benefits like pet insurance, pet bereavement, pet daycare, and financial help for pet adoption are other ways companies can support their pet-owning workers, even if pets can’t come to work. Waivers and Insurance: No list is complete without accounting for the chance something may go wrong. Consider requiring employees who bring pets to work to sign a waiver of liability for the company. Similarly, companies should check with their insurance to make sure that they are covered in the event an animal causes an injury in the workplace. What about the ADA? Voluntary pet policies should be considered separate from a company’s obligation to provide disabled workers with a reasonable accommodation, which may include use of a service animal at work. Three questions to consider when an employee asks to bring a service animal to work as an accommodation include: (1) does the employee have a disability; (2) is this a service animal, meaning is it trained to perform specific tasks to aid an employee in the performance of the job; and (3) is the service animal a reasonable accommodation. If a service animal results in complaints from other employees (e.g., allergies, phobias, disruption), employers may consider other accommodations, or take other steps to address these complaints. The Job Accommodation Network, a service of the U.S. Department of Labor, Office of Disability Employment Policy, has some helpful tips for accommodating service animals. Where the issue is more complicated, contact your Polsinelli employment lawyer to discuss the circumstances more closely.

Hurricane Matthew provides yet another opportunity for employers to consider the challenges presented by natural disasters. Our thoughts and prayers are with the good people of Florida and coastal Georgia, North Carolina, and South Carolina as they prepare for and recover from this significant storm. Employers may be forced to close facilities or cease operations at worksites in the path of natural disasters such as hurricanes, severe winter storms, and floods. With the myriad concerns caused by business closure (supply chain disruption, customer service, facility security), one can see how state or federal wage payment obligations could be overlooked. Wage payment obligations under the Fair Labor Standards Act vary depending on the exempt or nonexempt classification of the affected workers. Business Closures and Exempt Employees For exempt employees, an employer must pay the full salary if the employee worked even part of the week of the closure. An employer can, however, utilize an employee’s paid time off bank to account for the payments for the days during which the employer’s facility was closed. For example, if an exempt employee worked on Monday and Tuesday prior to a facility’s closure for the remainder of the week due to an approaching hurricane and recovery from damage, the employee must be paid her full salary for that week. The employer may, however, deduct 3 days from the employee’s PTO bank to cover a portion of the salary (assuming a five day work week). If the employer was closed for the entire week, it would not have to pay the exempt employee’s salary, assuming the employee performed no work on- or off-site in that week. A different result occurs for the exempt employee who cannot get to work even though the employer’s facility is open. In this common scenario—an exempt employee decides that the roads are impassable or has some other transportation issue that causes him to decide not to come to work—the employer may deduct a full day’s pay from the exempt employee’s salary because, under the FLSA, the absence is considered voluntary and personal. In either case, employers might consider finding ways for exempt employees to work remotely, if they can. In both cases, an employer can mitigate its business interruption if their exempt workers are providing valuable services from home (for example, contacting customers, or performing other work remotely) and avoid hampering morale by making salary or PTO deductions (even if permissible under the law). Business Closures and Nonexempt Employees Employers have different challenges when managing their nonexempt workers during times of natural disasters. While employers need only pay nonexempt workers under the FLSA for time actually worked, employers must be conscious of the potential for nonexempt workers to perform work from home or other off-site locations. If an employer has reason to believe nonexempt employees are performing work from home or away from their assigned location, the employer should take affirmative steps to determine (a) whether such work was performed off-site, and (b) how much time the employee worked. On-Call Time for Non-Exempt Employees Another common issue regarding nonexempt workers is the payment of on-call time or payment for employees who show up to work only to be sent home. Employers should be clear in their communications about how and when nonexempt employees should come to the facility, and take care not to tell nonexempt employees that the facility is closed but that the employees are “on-call” in case the facility can be re-opened. On-call time for nonexempt employees is compensable, and, in most cases, only select groups of nonexempt employees are truly needed on-call. Moreover, several states (including New York) require employers to pay employees certain payments if they come to work at the employer’s request only to be sent home due to facility closure. Other Considerations Different states have different requirements for the timing of wage payments to employees. In some states, these wage payment laws include monetary penalties for late payments (sometimes accruing on a daily basis). As a result, employers that rely on non-electronic payment methods should consider how prolonged facility closures may impact their ability to make timely wage payments. In severe and unexpected disasters (unexpected snowstorms, tornadoes, etc.), workers may become stranded at the employer’s facility. In this scenario, non-exempt workers need to be paid for any time spent working. To avoid wage liability in this scenario, nonexempt workers should be fully relieved of work responsibilities, ideally by providing them a separate room or area to sleep, converse with each other, or otherwise avoid the possibility of working. While natural disasters certainly present challenges for employers, ensuring that employees are properly compensated can minimize disruption to the business and buoy morale as workers deal with potentially reduced work opportunities and loss of property caused by disaster outside the workplace.

Previously – In 2012, the National Labor Relations Board issued its controversial Alan Ritchey, Inc. decision, requiring employers to bargain before making discretionary discipline decisions in certain first contract situations where there was no established contract or grievance procedure. Two years later, the U.S. Supreme Court handed down NLRB v. Noel Canning, nullifying Alan Ritchey, among other NLRB decisions, when it invalidated two NLRB members’ recess appointments during that time period. And now – In August, the NLRB reaffirmed its prior Alan Ritchey doctrine through its decision in Total Security Management Illinois 1, LLC, 364 NLRB No. 106 (August 26, 2016), requiring employers to bargain over discretionary discipline issued to newly organized employees priorto executing either a first contract or separate side letter addressing discipline. What challenges await newly unionized employers in the face of Total Security? Before Alan Ritchey, employers negotiating with a recently certified union regarding a first contract were able to impose discipline consistent with past practices without providing notice and an opportunity to bargain to the union. Following Noel Canning, employers again held that management right. With Total Security, the three-member NLRB majority, led by Chairman Mark Gaston Pearce (who also chaired the Board when it issued Alan Ritchey), held an employer in those circumstances may not unilaterally impose discretionary discipline without violating Section (8)(a)(5) of the National Labor Relations Act. Rather, the Board held, such an employer must provide the recently certified union with notice and an opportunity to bargain over the potential disciplinary action(s) that will materially alter an employee’s terms of employment (for example, termination, suspension, demotion, etc.). Conversely, the Board noted this bargaining duty does not apply to discipline that does not materially alter the terms of employment for the subject employee (for example, a verbal or written warning). In so holding, the Board provided an exception to this doctrine where the employer has a reasonable, good faith belief the employee’s continued presence on the job presents a serious, imminent danger to the employer’s business or personnel. The Total Security majority declined to order retroactive enforcement of its decision, providing – for the first time – remedies available for prospective Alan Ritchey-type violations of the Act. Moving beyond traditional NLRA remedial relief (for example, cease-and-desist orders, a requirement to bargain and the omnipresent notice-posting requirement), the majority noted make-whole remedial relief, including reinstatement and back pay, would also be appropriate. Regarding potential back pay remedies, the Board indicated, in situations where (1) there was an Alan Ritchey violation and (2) the employer and union did bargain and later reach agreement on discipline, back pay would generally run from the date of the unilateral discipline until the date of the agreement, to the extent the agreement did not provide for such back pay. In situations where an agreement provided for less than full lost back pay and purported to settle the pre-discipline bargaining violation, such an agreement, if challenged, would be subject to the Board’s standards of review for non-Board settlement agreements. Where the parties, post-violation, bargained in good faith to impasse over the Alan Ritcheyviolation, back pay would run until the date of impasse. Again, the employer’s strongest affirmative defense to such a challenge would be that the subject discipline was “for cause” under the Act. Under Total Security, however, the employer now bears the burden of the defense during the compliance phase of the unfair labor practice case to show (1) the employee engaged in misconduct and (2) the misconduct was the reason for the suspension or discharge. The General Counsel and charging party could then demonstrate disparate discipline for similar behavior or other reasons for leniency. The employer could present evidence the employee would have received the same discipline regardless of circumstances. Ultimately, and at all times, the employer now bears the burden of persuasion. Moving forward under the new light of Total Security, employers negotiating initial collective bargaining agreements with recently certified unions should be mindful of their, revived, Alan Ritchey duty to bargain. With this NLRB decision, an employer negotiating a first contract risks an unfair labor practice determination if it does not comply with Alan Ritchey’s bargaining requirements for any discipline that could, even arguably, be seen as discretionary. Such employers should consult with in-house or outside labor counsel for specific guidance concerning the potential impacts of the NLRB’s Total Security decision on their discipline procedures.

Time off is important to employee morale and productivity. However, because the Colorado Wage Act requires employers to pay for accrued but unused vacation time in an employee’s final paycheck, overly generous policies can be costly. Accrued unused vacation time is not “priceless,” and we offer three legal developments and reasons for Colorado employers to re-visit their vacation and time off policies now. 1. School Activities In 2009, the Colorado legislature passed the Parental Involvement in K-12 Education Act. The legislation requires employers to provide employees with 18 hours of unpaid leave per academic year to attend certain school activities. Many employers made one of three revisions to policies in response:  provisions creating school activities leave; statements that the existing policy was sufficient to meet the statutory requirements; or increased vacation or time off allowances to provide additional time that could be used, among other things, for school activities. Because the statute included an automatic repeal provision, it ended relatively quietly on September 1, 2015. However, many employers did not revise the changes they made to their policies. 2. “Use-it-or-Lose-it” To avoid paying out large amounts to employees at separation, many employers adopted “use-it-or-lose-it” policies. Plaintiffs’ attorneys have long taken the position that such policies violate the Wage Act by forfeiting vacation time that has been earned. In late 2015, the Department of Labor informally announced that it would target employers with “use-it-or-lose-it” policies for enforcement actions. A month later, the Department of Labor issued written guidance that seemed to temper that announcement. The guidance starts with a broad statement that “use-it-or-lose-it” policies are permissible. However, the guidance later clarifies that such a policy violates the Wage Act if it deprives employees of earned vacation time and/or wages in lieu of that time. Since most “use-it-or-lose-it” policies provide no compensation for unused vacation time that is “lost,” the guidance signifies that the Department of Labor will consider such policies to be a violation of the Wage Act. Based on the language of the Wage Act, there is a significant risk that a court would agree. 3. Final Pay Many Colorado employers have abandoned traditional sick and vacation time distinctions for paid time off that can be used for any reason. Because those policies do not distinguish between sick and vacation time, the entire paid time off allowance is considered vacation time that must be paid out in an employee’s final pay check. However, many people involved with payroll and developing policies do not realize the legal impact of such policies. Action Items for Employers Review policies for references to the Parental Involvement in K-12 Education Act, which can now be removed. Consider whether to end school activities leave policies or return time off allowances to the pre-legislation levels. Review “use-it-or-lose-it” policies with counsel and assess risks and alternatives. Consider whether alternatives to lump-sum paid time off policies will better control payouts at separation.

Employees’ secret workplace recordings are nothing new to many employers, but a recent, high-profile settlement may tempt employees to record their employers more often. In early September 2016, Fox News settled sexual harassment and retaliation claims of former anchor Gretchen Carlson for $20 million. Carlson had secretly taped the network’s CEO and President Roger Ailes for more than a year. Employers should assume their employees are recording them in the workplace and act accordingly. The proliferation of smartphones with built-in recorders has made audio recordings possible at virtually all times. Most states allow one-party consent for recordings, which is accomplished when the party doing the recording knows they are recording, and therefore “consents.” Here are five tips for handling secret employee recordings: Speak carefully in disciplinary and even routine meetings in which the terms and conditions of employment are being discussed. The words and voice of a supervisor making comments can be construed as evidence of discrimination or harassment. If an employee discloses a recording of unlawful conduct, take immediate action to investigate the situation and, if warranted, discipline the employee engaging in the conduct. Refrain from disciplining the employee who secretly recorded, even if you have a company policy prohibiting secret recording. Such action – and even a tone of voice – expressing unhappiness with the employee’s conduct can be evidence of retaliation. Be aware that the National Labor Relations Board has the opinion that a blanket ban on employee recordings violates the National Labor Relations Act. This issue is not settled in the courts, but such a ban increases the risk of a claim that the employer is violating the NLRA. If you discover an employee is recording a meeting, react very carefully and without anger or accusations. Calmly tell the employee you do not want to be recorded and ask the employee to stop recording. If the employee refuses to stop recording, end the meeting and seek the advice of human resources or legal counsel. Mandate that all employees – supervisors and non-supervisors – regularly receive comprehensive anti-discrimination and harassment training, and that such policies are enforced. A positive workplace culture, with clear policies and training against unlawful workplace conduct, reduces the risk of secret recordings by employees. Finally, some plaintiff’s attorneys tell clients to record their employers as a matter of course. Knowledgeable counsel should be aware which attorneys do that. If you receive a charge of discrimination or similar claim from a plaintiff’s attorney, consult with legal counsel to discuss the likelihood that recordings exist.

As discussed in our September 12, 2016 Labor & Employment blog post, the U.S. Securities and Exchange Commission (SEC) continues to incentive employees to “blow the whistle” on their employers for alleged securities violations. What happens when the complaint of alleged securities impropriety is made only to the employer, rather than the SEC? Is the employee’s complaint protected? If you do not know the answer, you are not alone. Dozens of district courts and several appellate courts across the country have come to opposite conclusions when faced with the question of whether employees may seek the protections of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) when making purely internal complaints to their employer. The Dodd-Frank Act, which was enacted in 2010, contains anti-retaliation provisions for employee whistleblowers. The anti-retaliation provision of the Dodd–Frank Act provides that an employer may not adversely affect the terms and conditions of a whistleblower’s employment “because of any lawful act done by the whistleblower . . . in providing information to the Commission in accordance with this section . . . .” 15 U.S.C. § 78u–6(h)(1)(A) (emphasis added). The term “whistleblower” is defined as “any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.” 15 U.S.C. § 78u–6(a)(6) (emphasis added). Nevertheless, the SEC has taken the position that the Dodd-Frank Act protects even internal complaints, not just those made to the SEC. Federal courts are split on this issue, however. The Fifth Circuit, in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), disagreed with the SEC’s position and found that employees must make a complaint to the SEC. The Second Circuit, in Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2d Cir. 2015), held in a 2-1 decision that the Dodd-Frank Act protects a whistleblower who internally reports violations of the securities laws without reporting the violations directly to the SEC.  The Second Circuit found sufficient ambiguity in the statute to warrant deference to the SEC, as the agency in charge of regulating securities. To add further confusion, some federal district courts have issued opinions splitting on this issue. It does not appear that this conflict among federal courts will be resolved soon, as the defendants in the Berman case elected not to pursue Supreme Court review. For now, employers would be wise to assume that an internal complaint of alleged securities impropriety is protected. Moreover, because it may be difficult to discern between normal business concerns and protected activity, employers should address the anti-retaliation provisions of the Dodd-Frank Act (and other anti-retaliation statutes) proactively. Employers should review the seven elements of an effective whistleblower protection and anti-retaliation system provided in Polsinelli’s September 12, 2016 Labor & Employment blog post, as they are critical to a company’s efforts to comply with the Dodd-Frank Act, regardless of whether internal complaints are protected.

The impending change to the salary threshold for the “white collar” overtime exemptions under the Fair Labor Standards Act (“FLSA”) (from $23,660 to $47,476) has employers making tough decisions—“Should we raise an employee’s salary above the threshold?” “Do our employees still qualify for the exemption, even with a raise?” “Can we keep our employees’ pay the same?” Some employers, unable to make significant salary increases or concerned that an employee may not meet the exemption requirements, are increasingly considering the “fixed salary for fluctuating hours” method of compensation for non-exempt employees. This so-called fluctuating workweek method allows a previously exempt employee to continue to receive a regular salary, but does not require the employer to raise the once-exempt employee’s salary to the new threshold. Under this method, the employee will receive a fixed salary as straight-time pay for whatever number of hours he or she works in a workweek (whether 30 or 50 hours). The employee must receive extra compensation (½ times the regular rate for that workweek) for any hours worked over 40 in the workweek. In most cases, bonus or incentive compensation must be included in overtime calculations. This typically requires employers to allocate bonus or incentive compensation to the workweek(s) to which it relates, and then recalculate and pay the employee additional amounts. The fluctuating workweek method is permissible only if: The salary is sufficiently large to ensure that no workweek will be worked in which the employee’s earnings from the salary will fall below minimum wage (no matter how many hours are worked in a workweek); and The employee clearly understands that the salary covers whatever hours the job may demand in a particular workweek and that the employer pays the salary even if the workweek is one in which only a small number of hours is worked. To meet this requirement, it is always helpful to have this understanding in a memorandum or letter that the employee signs. If your company is considering its options as the December 1, 2016 change to the salary threshold looms, the fixed salary for fluctuating hours is worth a look. But, employers should be aware that it is not without its drawbacks. As with all other non-exempt employees, employers compensating employees on the fixed salary for fluctuating hours method must require employees to accurately track their time. For employees who have historically been treated as exempt, this is not as easy as it sounds. Moreover, it is crucial to have an estimation of the amount of overtime the employees in question work. If the employees often work more than 40 hours in a workweek, it may make more financial sense to increase their salary (assuming they also meet the requirements of an exemption). While it may not be a panacea, the fixed salary for fluctuating hours could be a possible solution for some recent and future FLSA headaches.

Some very loud whistles have been blowing across corporate America since 2011 – whistles valued at $107 million, in fact. The United States Securities and Exchange Commission announced on August 30, 2016, that since its whistleblower program began in 2011, they have awarded more than $107 million total to 33 individuals who voluntarily provided the SEC with original and useful information that led to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the SEC’s monetary sanctions in a matter exceed $1 million.     The SEC encourages employees to report suspected wrongdoing, because they, according to Acting Chief Jane Norberg, “are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing.” And, last year alone, employees responded by providing nearly 4,000 tips to the agency. With this kind of incentive from the SEC and other government agencies, as well as a growing number of successes in whistleblower lawsuits, it is more important than ever for companies to get advice on a regular basis from a multi-faceted team, including corporate, employment, and white collar crime attorneys. Moreover, companies must be strategic and proactive in their approach to implementing an effective whistleblower protection and anti-retaliation system.     Key elements of an effective whistleblower protection and anti-retaliation system include: Clear and visible leadership commitment and accountability. This is truly the most important piece of the puzzle. Without sincere support from the top, no internal whistleblower program can succeed. The creation of a true “speak-up” organizational culture focused on prevention, including encouraging employees to raise all suspicions and issues quickly and insuring the fair resolution of such issues. Independent, protected resolution systems for employees and third-parties who believe they are experiencing retaliation as a result of raising concerns.   Specific training to educate all employees about their rights and available protections (including both internal and external programs). Specific training for managers who may receive complaints or information from employees, requiring the manager to be considerate of the employee making the report, to be diligent, and, most importantly, to act on the information with no corporate tolerance of the “just telling me as a friend, not as a manager” excuse. Internal monitoring and measurement of corporate compliance efforts and the effectiveness of the speak-up and non-retaliation culture, without contributing to the suppression of employee reporting. Independent auditing to determine if the whistleblower protection and anti-retaliation system is actually working.

Are employer/employee arbitration provisions containing class/collective action waivers enforceable? The law on this issue is anything but settled at this point. For now, it may depend upon where a case is filed, and the Supreme Court likely will resolve the conflicting lower court decisions on the issue. Five years ago, the United States Supreme Court in AT&T Mobility LLC v. Concepcion ruled, in a 5-4 decision written by Justice Scalia, that state laws prohibiting the enforcement of consumer contracts containing an arbitration provision with a class action waiver were contrary to the Federal Arbitration Act. Within a year of that decision, the National Labor Relations Board in D.R. Horton ruled that Concepcion did not apply in the context of employee rights under the National Labor Relations Act, specifically § 7 which vest employees with the right to engage in “concerted activities.” The NLRB found that D.R. Horton’s arbitration agreement which precluded class/collective actions was an unfair labor practice. D.R. Horton appealed the NLRB’s decision to the Fifth Circuit, which rejected the Board’s conclusion that § 7 of the NLRA prohibited class/collective action waivers in arbitration agreements with employees. In addition to the Fifth Circuit, the Second (Sutherland v. Ernst & Young LLP), Eighth (Owen v. Bristol Care, Inc.) and Eleventh Circuits (Walthour v. Chipio Windshield Repair) have ruled that class/collective action waivers in employer-employee arbitration agreements are enforceable. In June 2016, the Seventh Circuit in Lewis v. Epic Systems Corp. turned the tide, becoming the first federal court of appeals to adopt the NLRB’s rationale in D.R. Horton. The Court ruled that the class/collective action waiver in an arbitration provision which would have precluded plaintiff from pursuing a collective under the Fair Labor Standards Act violated the NLRA, and thus, was not enforceable. On August 22, 2016, the Ninth Circuit in Morris v. Ernst & Young, LLP, adopted the reasoning of the Seventh Circuit, becoming the second federal court of appeals to find that class/collective action waivers in an arbitration provision violates the NLRA. In those Circuits that have not opined on the issue, the federal district court decisions indicate the same conflicting views. Within the last week, Epic Systems Corp. and Ernst & Young have filed petitions for writ of certiorari to the Supreme Court. Given the conflicting court of appeals decisions, the Court will likely take the case. But, predicting how the Court might decide the issue is another matter. While Concepcion may support enforcement of class/collective action waivers, the 5-4 decision was written by the late Justice Scalia. When and how the Court decides this issue will likely depend on who fills Justice Scalia’s seat and when the new justice is confirmed.

In a prior post, we discussed the building momentum for “ban the box” regulations (i.e., prohibiting a criminal history check-box on an employment application) seeking to eliminate racial disparities in hiring. New research by Amanda Agan, a Princeton economist, and Sonja Starr, a legal scholar at the University of Michigan, suggests that, at least in some cases, “ban the box” rules may result in the use of race as a proxy for criminal history. This may increase racial disparity in hiring – even in the absence of criminal histories. For their research paper titled “Ban the Box, Criminal Records, and Statistical Discrimination: A Field Experiment,” Ms. Agan and Ms. Starr sent out 15,000 fictitious applications to employers in New Jersey and New York City, before and after ban the box laws took effect in those jurisdictions. Some applications were randomly assigned a criminal history and some were not; some were assigned stereotypical white names (like Scott and Cody), while others were given stereotypical black names (like Tyree or Daquan). The racial gap in callbacks before the ban the box laws was 7% at companies that asked applicants about criminal history. After the laws were enacted, it went up to 45%, suggesting that black applicants were presumed to have a criminal past if the prospective employer was not permitted to inquire. Regardless of these employers’ motives, this data is potential evidence that selection decisions have a disparate racial impact. Employers who maintain a strong internal Equal Employment Opportunity policy and train their managers, supervisors, and employees on Equal Employment Opportunity laws should be less vulnerable to attempts to use race as a screening criterion to compensate for the lack of criminal history information at the initial stages of the hiring process. Nevertheless, this research presents an occasion for all companies affected by ban the box laws to revisit their hiring practices. Employers should consider these best practices: Develop and maintain standardized recruiting and hiring processes focused on job-related qualification standards; Ensure that job selection criteria do not disproportionately exclude certain racial groups, unless the criteria are valid predictors of successful job performance and meet the employer’s business needs; and Monitor hiring data for EEO compliance to determine whether current employment practices disadvantage people of color or treat them differently.

In any merger and acquisition or other business reorganization, one critical piece should not be MIA: the consideration of immigration issues. If a purchaser ignores or postpones immigration issues until after closing, it can result in very serious consequences, ranging from losing critical employees to visits, fines or penalties from the USCIS (United States Citizenship and Immigration Service) or worse, from ICE (Immigration and Customs Enforcement). Immigration related issues should be addressed before closing, with time to correct any problems. A purchaser’s due diligence should include: Understanding the type of transaction and the difference it makes in certain types of visas. Reviewing the acquired company’s I-9s to find out if it has been complying with the  law, if it has any foreign national employees and, if so, their immigration status. If the acquiring company is assuming the liabilities for I-9 violations it must know, at a minimum, if there is an I-9 for each employee and if the I-9s are completed correctly. So-called “paperwork” I-9 violations, which can occur even if the acquired company never employed a foreign national, carry penalties ranging from $110 - $1,100 for each employee. There are also significant civil and criminal penalties for unauthorized employment of foreign nationals. Identifying the immigration status of every foreign national the acquired company employs to determine what needs to be done to keep them employed by the new company. For example, a common visa, the H-1B, requires that the employee only work for the sponsoring employer. Even if the new company qualifies as a successor in interest -- and under some types of reorganization it may not -- there are steps to be taken to protect the right of a foreign national to work for the new employer and to easily travel. Another visa, the L, is used for the transfer of international company employees and only continues to be valid if the overseas company from which the employee came is part of the acquisition. If not, the new company cannot employ that person. In addition, some foreign national employees may be at various stages of the permanent resident process, the green card, and are being sponsored by the company to be acquired. It is critical that the issues surrounding that process be identified and addressed before the closing. Considering whether the issues of successor in interest and/or the assumption of immigration liabilities, to maintain the immigration status and employment authorization of the acquired employees, require inclusion in the terms of the controlling document. Immigration issues are not second-class or post-closing issues. They need to be identified early in the acquisition process to assure that the new employer, on day one, post-closing, is not saddled with potential liabilities or does not lose valuable employees.

Congress passed the Multiemployer Pension Plan Reform Act of 2014 (MPRA) in an effort to aid the many failing multiemployer pension plans. At the time of its passage, the MPRA was regarded as the most significant legislation in decades. Importantly, the MPRA permits trustees to reduce the pension benefits of plan participants, including benefits for some retirees who are already in pay-status, if the fund is projected to become insolvent within a specified number of years. However, the MPRA requires that proposed benefit cuts be submitted to the Treasury Department for approval. The first large multiemployer pension plan to submit an application to the Treasury Department for benefit cuts was the Teamsters Central States, Southeast and Southwest Areas Pension Fund (“Central States”). Because of Central States’ financial problems (it was projected to be insolvent by 2026), the union and management trustees agreed to submit a plan calling for benefit cuts to the Department of Treasury pursuant to the MPRA. On May 6, 2016, the Treasury Department denied Central States’ application and cast doubt upon the viability of pension reform under the MPRA. Treasury officials found that the plan submitted by Central States would not avoid insolvency. Among other things, the Treasury Department found that Central States’ presumed rate of investment return, the entry age of its participants, and its demographic assumptions were too optimistic. Accordingly, the Treasury Department rejected the application submitted by Central States, and Central States is still facing insolvency by 2026 and $35 billion dollars in unfunded liability. One unfortunate consequence of the Treasury Department’s rejection of Central States’ application appears to be that many other under-funded multiemployer plans may be reluctant to expend the financial and political resources necessary to reach an internal agreement between employer and union trustees that would result in approval  of the benefit reductions needed to avoid insolvency in the future. If one of the most useful tools provided by the MPRA has been stymied because the Treasury Department is unprepared to accept what it views as overly optimistic actuarial assumptions, what is the future of multiemployer pension plan reform? One proposal that was not included in the final version of the MPRA involved the use of so-called hybrid composite plans. While there are different types of hybrid composite plans, the basic concept is the combination of a traditional defined benefit plan with a defined contribution plan. As an example, an employer under a hybrid composite plan could contribute a fixed amount, and the trustees could be required to determine benefit levels based on actuarial calculations that provided assurances that the contributions would cover 120% of the promised defined benefit level. If the investments of the trustees performed better than expected, then the employees would be eligible for greater benefits. In any event, employees would be assured of receiving at least some fixed benefits because of the very conservative assumptions underlying the defined benefit portion of the plan. The proposals involving hybrid composite plans were originally eliminated from the MPRA because of the perception by some in Congress that many unions, in 2014, would oppose hybrid plans. In light of the Treasury Department’s rejection of Central States’ application, the assumption that many unions will oppose hybrid composite plans may no longer be accurate. Government reports have estimated that up to 15% of multiemployer plans are at risk of becoming insolvent over the next 20 years and that up to 1.5 million participants are at risk from those insolvencies. In addition, many other plans remain underfunded and employers who cease doing business or sell their businesses to buyers who do not assume their pension obligations face withdrawal liability for their shares of the unfunded portions of the plans. Until such time as Congress enacts hybrid composite plans or other solutions to multiemployer pension plan underfunding, employers who contribute to multiemployer pension plans and those companies considering purchasing businesses that contribute to such plans must continue to carefully scrutinize their potential liability.

Litigation challenging the new DOL regulations that, among other things, set a minimum salary threshold of $47,476 for exempt status, white-collar workers, was recently filed in U.S. District Court for the Eastern District of Texas. A group of 21 states filed suit: Alabama, Arizona, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah, and Wisconsin. The states claim that the new salary threshold rule will force local and state governments to unfairly increase the costs of employment. The chief argument appears to be that the new rule, by more than doubling the previous minimum of $455 per week to $913 per week (or $23,660 changed to $47,476, annualized), will wreak havoc on State budgets and is in violation of the Tenth Amendment to the U.S. Constitution. (The Tenth Amendment reserves for the States all powers not specifically delegated to the federal government.) The lawsuit claims that the new DOL rule constitutes an effort to “commandeer, coerce, and subvert the States.” Although the more than doubling of the salary minimum also certainly impacts the bottom line for private businesses, this Tenth Amendment argument does not offer much of anything, at least on paper, to private employers. Most commentators are not optimistic about this argument’s impact on governmental employers, either. Governmental employers also generally have the option to provide compensatory time in lieu of time and one-half pay for non-exempt workers, an option that is not available to private employers. In 2014, President Obama directed the Department of Labor to update its regulations concerning the so-called “white collar” exemptions to overtime under the Fair Labor Standards Act. In July of 2015, proposed regulations were made public for notice and comment. More than 270,000 comments were filed. The new regulations’ impact has generated heated debate.   Despite the current litigation, it is not advisable for employers to stop their current efforts geared to December 1, 2016 compliance (or budget reviews and other planning for compliance purposes). As previously noted in blog posts on March 17, 2016, April 21, 2016, and July 5, 2016, the new salary minimum for exempt status deserves some significant thought and planning for most employers. The rule is still scheduled to go into effect on December 1, 2016, and most commentators believe that this litigation will not impact implementation of the new salary threshold for exempt status. There is some hope, however, that the litigation may alleviate the regulation’s current automatic adjustments that are slated to occur every three years, starting in January 2020. The automatic adjustments are pegged to the fortieth percentile of salaried workers in the lowest-wage Census region. The DOL has estimated that the initial increase in 2020 will be set the minimum salary amount for the white-collar exemptions at approximately $51,168. Although some employers may have been holding out hope for litigation efforts to “ride to the rescue” and save the day by December 1, 2016, this litigation is not generally anticipated to override the new $47,476 minimum rule for white collar workers. Employers should continue to prepare for the new regulations.

In recent guidance, the IRS advised that policies implemented by employers to prevent part-time and seasonal employees from working 30 hours or more per week may not be sufficient to prevent liability under the Affordable Care Act (ACA) employer mandate.   If an employer is an applicable large employer (ALE), minimum essential health coverage must be offered to at least 95 percent of full-time (30 hours per week) employees (FTEs). An employer becomes an ALE when the company employs at least 50 employees (computed by aggregating part-time employees and determining full-time equivalents) who work on average a minimum of 30 hours per week. The ACA penalizes employers who fail to provide minimum essential coverage to their FTEs through a penalty tax structure.   To prevent such penalties, some employers have implemented policies to restrict part-time and seasonal employees (non-FTEs) from working an average of 30 or more hours per week. However, the IRS recently specified that these policies are not enough to avoid liability.  Actual hours count – even if performed in violation of an employer’s policy. In Information Letter 2016-0030, the IRS responded to an employee’s inquiry (yes, it was really the employee asking the question!) regarding whether an employer’s policy against non-FTEs working more than 29 hours per week could prevent the employer from being liable for penalty taxes. The IRS stated that the employer could still be liable for failing to provide minimum essential coverage if it did not offer coverage to an employee who violates the policy and works on average more than 30 hours per week in any given month. Thus, it is essential that employers closely monitor employee hours and adherence to these policies. Should a part-time or seasonal employee subject to the restricted hours policy average 30 or more hours per week in any given month, the employer still may be able to avoid the penalty.  First, if minimum essential coverage that is affordable and provides minimum value is offered to at least 95 percent of the employer’s FTEs (including any who are FTEs as a result of violation of the restricted hours policy), no penalty will apply. Further, if the employer offers minimum essential coverage (but it either is not affordable or does not provide minimum value), if the employee does not obtain coverage on the Marketplace for which the employee receives tax credit, no penalty is due with respect to that employee. As a result of the guidance, ALEs should: Implement, monitor and enforce policies against non-FTEs working in excess of 30 hours per week and reduce work schedules as necessary to avoid violations; Instruct supervisors not to approve additional hours for employees subject to the policy; Include employees that violate the policy and work on average 30 hours or more per week in the ALE computation and offer such employees coverage if necessary to comply with the ACA; and Carefully determine whether employees may be excluded from employer provided coverage, e.g., where they do not have Marketplace coverage or are not eligible for the tax credit.

In the past few years, Democratic members of Congress have introduced several decidedly pro-employee bills, none of which have yet passed, but which may be impacted by the elections in November. Such bills were first introduced in the 113th Congress when Republicans controlled the House of Representatives and Democrats controlled the Senate. Versions of these bills were reintroduced in the 114th Congress, although Republicans control both the House and the Senate. The November election not only will decide the next President, but also may change the balance of power in both houses of Congress. Healthy Families Act Would allow employees of an employer with 15 or more employees to earn 7 days of sick time per year after 60 days of employment. 113th Congress: Introduced to the House and Senate on March 20, 2013. Co-sponsored by 134 Democrats in the House and 23 Democrats in the Senate. 114th Congress: Introduced to the House and Senate on February 12, 2015. Co-sponsored by 145 Democrats in the House and 31 Democrats and 2 Independents in the Senate. Family and Medical Insurance Leave Act Would create a trust fund within Social Security to collect fees and provide compensation to employees on FMLA. 113th Congress: Introduced to the House and Senate on December 12, 2013. Co-Sponsored by 101 Democrats in the House and 6 Democrats in the Senate. 114th Congress: Introduced to the House and Senate on March 18, 2015 with 134 Democrats co-sponsoring in the House and 20 Democrats and 1 Independent co-sponsoring in the Senate. Family and Medical Leave Enhancement Act Most recent version of this Act would extend FMLA coverage to employees at worksites with 15-49 employees, including part-time workers. The Act would also protect (1) parental involvement leave to participate in school activities or programs for children or grandchildren and (2) parental involvement leave to care for routine medical needs including: (a) medical and dental appointments of an employee’s spouse, child, or grandchild, and (b) needs related to elderly individuals, such as nursing and group home visits. A version of this bill has been introduced to Congress each session since 1997. The most recent version was introduced to the House on June 16, 2016 with 7 Democrats co-sponsoring. Following the elections later this year, employers should be on the lookout for versions of these bills being reintroduced, potentially in a political climate where they have a stronger chance of passing.

On August 1, 2016, Massachusetts became the latest State to pass a so-called “pay equity” law. Massachusetts’ new law, which is modeled after pay equity statutes already implemented in other states, also amends the Massachusetts Equal Pay Act (MEPA). Even though this new legislation only applies to employers with employees working in Massachusetts, all employers should take notice, as “pay equity” legislation is being enacted in an increasing minority of states. Below are three key takeaways for employers with respect to Massachusetts’ new law, which goes into effect in July 2018. 1.    Equal Pay For “Comparable Work” The currently-drafted version of MEPA prohibits employers from paying employees of a given gender less than employees of another gender for “comparable work,” which  term was not previously defined. Massachusetts’ new pay equity law fills in this gap, defining “comparable work” to include “work that is substantially similar” with respect to “skill, effort and responsibility” that is performed under similar working conditions. Whether two employees perform “comparable work” under the new statute will be based upon the facts and circumstances of a given case. 2.    No More “Pay Secrecy” Rules The new law also prohibits employers from enacting or enforcing “pay secrecy” rules, which typically prohibit employees from discussing their compensation with each other. However, companies will not be forced to reveal salary information to an employee who asks about another employee’s salary. Furthermore, an employee is not required to divulge her or his salary to another employee if asked. 3.    No More Questions About “Past Salaries” Once this legislation is effective, employers in Massachusetts will be prohibited from asking job candidates about their salary history. Massachusetts is the first state in the country to pass such a law, which is purportedly designed to “end the wage gap.” Note that employers can still ask a job candidate how much money they are hoping or expecting to earn if they receive an offer, but an employer cannot ask a prospective employee about their previous salaries. This provision creates a new limitation for Massachusetts employers, and employers should train interviewers and hiring managers to avoid impermissible inquiries about past salaries. Employers with employees in Massachusetts should review their hiring, pay, and confidentiality policies and should make any necessary changes in order to comply with the new law prior to its implementation in July 2018. Other employers should also take notice, as these provisions are popping up in state legislative sessions across the country.

On July 6, 2016, Pokémon Go was released in the United States. Almost overnight, the location-based, augmented reality game became a national, if not global, phenomenon. You cannot turn on the television, listen to the radio, read news headlines, or even walk out your front door without hearing about the game or seeing individuals using their smartphones and tablets to “find” and “capture” digital creatures that virtually appear at specific locations. While Pokémon Go may sound like a harmless, albeit distracting, “video game,” it poses a risk to cyber security and raises concerns about data vulnerability in company databases and systems. Games like Pokémon Go require users to download and install an application on the users’ phones or tablets. Users are not always aware if they have downloaded an infected version of the application, which may allow hackers to spy on the victim’s phones and gain access to their data. Some infected versions of the Pokémon Go application have contained a backdoor called DroidJack. DroidJack gives attackers complete access to mobile devices, including user text messaging, GPS data, phone calls, camera—and any business network resources they access.    Even if an employee does not download an infected version of an application, there are still cyber security concerns. Individuals are often quick to download the latest application to access or share data for games like Pokémon Go, without scrutinizing what they are granting the application access to. In the event of a hack targeting a popular application like Pokémon Go, attackers have the potential to access all the data of application users who have not limited the application’s access to their data, including proprietary business information.   In light of the popularity of games like Pokémon Go and the inevitability that similar games or social media applications will become widespread, employers should take measures to deal with how and where business mobile devices can be used to ensure their proprietary information is not being captured by third parties. Electronic device policies can be very effective in limiting an employer’s cyber security risk where the policy requires employees to refrain from downloading and accessing smartphone apps, websites, programs and files that may pose a security risk if the electronic device is used to connect to sensitive corporate information. Employers should also consider updating electronic device policies to require employees to install company encryption software for protecting sensitive data with an agreement signed by employees to not modify the software.

Employers with nonexempt employees are familiar with the concept of regular rate of pay when calculating overtime for these employees. The regular rate of pay is more than just an employee’s hourly rate. Rather, the regular rate of pay includes the employee’s total pay for the pay period plus any additional compensation the employee earned over the total number of hours the employee works. The pitfall when conducting this analysis often occurs in determining what counts as “additional compensation.” Even if the employer has a policy to pay overtime, issues still arise when determining how to properly calculate and pay overtime. Here are four types of compensation that should be included when calculating the regular rate of pay: Nondiscretionary Bonuses.Nondiscretionary bonuses include all bonuses other than those that are truly at the discretion of the employer. The nondiscretionary bonus must be included in the regular rate of pay calculation over the entire period for which it is earned, whether weekly, monthly, quarterly, or annually. The “Gift Card” Bonus.Sometimes employers compensate employees with a gift card, or other goods, as a “good job” or “thank you.” However, if that gift card is provided based on the performance of the employee, it will be considered a bonus payment and must be included in the regular rate of pay calculation. Goods or Facilities.When non-cash payments are made to employees in the form of goods or facilities, the reasonable cost to the employer or fair value of such goods or facilities must be included in the regular rate. For example, if the employee’s wages include lodging provided by the company, the reasonable cost or the fair value of that lodging over the time period during which the lodging is provided must be added to the employee’s earnings before determining his/her regular rate. Non-overtime Premium Payments.Specific additional compensation, including premium pay for duties required by the job, such as night shift pay differentials and premiums paid for hazardous or dirty work, must be included when determining the regular rate. If you have questions about regular rate of pay compensation, please contact your Polsinelli attorney.

When employees are absent from work for an extended period of time due to injury, illness, or other reason, a common question that arises is whether employers must continue providing health insurance during the absence. The answer depends upon the circumstances, including the reason for the employee’s absence, the size of the employer, the terms of the health plan, and the applicability of one or more federal laws, including FMLA and COBRA. In many cases, the issue is resolved by answering three questions: 1. Does the FMLA apply? For employers with more than 50 employees, the Family and Medical Leave Act applies to eligible employees who have been employed for at least 12 months, who have accumulated at least 1,250 hours of service in the past 12 months, and who work where the employer has at least 50 employees within 75 miles. Eligible employees who have a serious health condition, or who take leave to care for a qualifying family member, are entitled to continue employer-sponsored health care during FMLA leave. The employer must continue to pay its share of health care premiums for the employee during FMLA leave. If an employee exhausts FMLA leave or is otherwise not eligible or entitled to FMLA leave, the employer’s obligation to continue paying its share of health insurance premiums stops. But there may remain an obligation to continue health care coverage under COBRA or analogous state law. 2. If the FMLA does not apply, is COBRA or a similar state law triggered? COBRA gives employees and their qualified beneficiaries the opportunity to continue health insurance coverage under the company’s health plan at the employee’s expense when a “qualifying event” would normally result in the loss of eligibility. “Qualifying events” include not only resignation and termination of employment, but also reduction of an employee’s hours or a leave of absence causing the employee to lose coverage under the terms of the employer’s health plan. The threshold for reduced hours or absences disqualifying an employee from plan coverage depends upon the terms of the particular health insurance plan. Where the employee loses coverage under the terms of the plan, COBRA provides an opportunity for the employee to purchase continuation coverage at the employee’s expense. Employers with fewer than 20 full and part-time employees are not subject to federal COBRA, but may be subject to state COBRA laws for small employers. 3. Is there another source of payment? Whether or not an employer must continue health coverage under the FMLA or provide continuation coverage under COBRA or a similar state law, the reason for the employee’s absence could trigger other obligations or sources for payment of medical expenses and insurance premiums. For example, if an employee is unable to work due to a workplace injury, workers’ compensation may cover injury-related medical expenses and lost wages. At the same time, the terms of the employer’s health plan may require coverage to continue during a workers’ compensation leave of absence. Finally, even where the employer’s coverage obligations cease, short- and long-term disability policies may provide an employee a source of funding for payment of insurance premiums.

OSHA’s recently announced rulemaking changes have major implications for employers.  Effective January 1, 2017, certain employers will be required to electronically submit injury and illness data to OSHA, which will then be posted to the OSHA website. Currently, employers are expected to log the data on OSHA Injury and Illness forms, which remain with the employer until OSHA requests that the logs be produced in the course of an inspection or investigation. Another major change is OSHA’s heightened emphasis on injury reporting and anti-retaliation protections. There are four things that you need to know about these changes. 1. Employers Must Establish Procedures To Report Work-Related Injuries And Illness And Inform Employees Of The Right To Use These Procedures Without Fear Of Retaliation. Under the new rule, an employer must specifically inform employees (i) of the procedure to promptly and accurately report work-related injuries and illnesses; (ii) that employees have the right to report work-related injuries and illnesses; and (iii) that employers are prohibited from discharging or in any manner discriminating against employees for reporting work-related injuries or illnesses. 2. Employers Must Carefully Review Their Drug Testing and Safety Incentive Programs to Determine if the Programs Interfere with Reporting Injuries and Illnesses. Many employers have implemented mandatory post-incident drug testing programs. OSHA will take a close look at these programs to ensure that the testing requirement is reasonable and is not implemented for the purpose of dissuading an employee from reporting an injury or illness.  OSHA appears to sanction drug-testing when an employee’s drug use is likely to have contributed to the accident and the drug test can accurately identify impairment from drug use. However, an automatic rule for drug testing in all work-related accidents, regardless of whether it appears that drug use contributed to the accident, will most likely not be approved by OSHA unless the program is implemented to comply with the requirements of a state or federal law or regulation. Along the same lines, safety incentive programs which provide monetary rewards to employees for “accident free” months could give rise to a record keeping violation if OSHA determines that the program discourages the reporting of workplace injuries without improving workplace safety. 3. OSHA Can Now Issue Citations And Penalties For Retaliation Claims, Even Where There Is No Complaint From An Employee. Currently, OSHA can investigate a complaint of retaliation under Section 11(c) of the OSHAct upon receipt of a complaint from an employee. The new rule gives OSHA a new regulatory enforcement mechanism which allows OSHA to cite an employer for retaliation if evidence is found during a routine OSHA inspection or OSHA investigation arising out of an injury or accident. As a result, the new rules will allow OSHA to assess statutory penalties for retaliatory conduct – which could be as high as $121,710.00 if a willful violation is found – in addition to the effected employee filing a complaint under Section 11(c). 4. Employers Must Take Action Now. Although the new requirements concerning anti-retaliation protection become effective on August 10, 2016, OSHA recently announced that it would not enforce the new rules until November 1, 2016. In the meantime, employers are well-advised to conduct a self-audit of their reporting procedures, drug testing and safety incentive programs to ensure compliance with the expanded obligations imposed under the new rule.

The Colorado General Assembly recently enacted a statute that gives employees the right to review and copy their personnel file at least annually and at least one time after the termination of employment. House Bill 16-1432 passed the legislature by a 22 to 13 vote, and was signed into law by the governor on June 10, 2016. The law becomes effective on January 1, 2017. A similar bill died in the General Assembly last year, but this year opponents and proponents worked out a compromise. The bill received bipartisan support, including from small business groups like the National Federation of Independent Business. Colorado employers should become familiar with the main provisions of the new law and take note of several exceptions and limitations. The new Colorado law does not require employers to create or keep a personnel file for current or former employees. Moreover, it does not require that an employer keep any particular type of document in the personnel file, or maintain the file for a specified period. However, when a personnel file exists, it must be accessible to the employee at least one time annually and at least one time after the termination of employment. A personnel file is defined by the legislation as "the personnel records of an employee, in the manner maintained by the employer and using reasonable efforts by the employer to collect, that are used or have been used to determine the employee's qualifications or employment, promotion, additional compensation, or employment termination or other disciplinary action."  The definition is broad, and includes documents that employers might not generally consider to be part of the personnel file, such as desk files maintained by supervisors. The statute provides that the employee’s personnel file may be inspected at a mutually convenient time inside the employer's office. The employer may have a manager present during the inspection. The employee is allowed to ask the employer to copy all or part of the file, which is to be done at a reasonable cost to be paid by the employee. The statute contains several exceptions from its coverage. The following are excepted from the disclosure requirements: Documents required by federal or state law to be placed or maintained in a separate file from the regular personnel file; Records pertaining to confidential reports from previous employers; Active criminal or disciplinary investigations or active investigation by regulatory agencies; Information which identifies another person who made a confidential accusation against the requesting employee; and Personnel files maintained by financial institutions, including banks and credit unions. The law does not create a private right of action or create any new record retention policies. Next Steps for Employers Before the law goes into effect on January 1, 2017, employers should consider taking several steps.  First, employers should consider segregating those documents from the personnel file that are not required to be disclosed under the law. Employers should also create a standardized process and train human resources professionals on how to administer employee access.

The U.S. Equal Employment Opportunity Commission (EEOC) and several other federal agencies recently participated in a series of roundtable meetings through the Combating Religious Discrimination Today initiative. In July, the initiative released a report containing several recommendations which may impact employers. The roundtable participants’ recommendations in the report include: Improving education and awareness for employees. The agencies suggest outreach to employees about the process of filing charges with the EEOC and other government agencies; ensuring that posters in the workplace notifying employees about their rights are prominently displayed, and the use of multi-media platforms. Improving education and awareness for employers. Ideas included outreach by the EEOC to employers with additional materials to ensure that employers fully understand their obligation to comply with existing non-discrimination and civil rights laws. Improving processing times for EEOC charges and increasing transparency. Following the report, the EEOC released a new resource document to assist workers in better understanding their rights and responsibilities under laws prohibiting religious discrimination in the workplace and announced its plans to improve data collection and outreach on religious discrimination.  The EEOC announced that it will implement changes to its collection of demographic data from individuals who file charges of religious discrimination to collect more precise identification data about the religion of such individuals. In an online press release on July 22, 2016, the EEOC also referenced its historical guidelines to educate employers, employees, and the public about religious discrimination, including Questions and Answers: Religious Discrimination in the Workplace and Best Practices for Eradicating Religious Discrimination in the Workplace. It also reiterated its guidance for employees and employers focusing on discrimination against people who are or are perceived to be Muslim or Middle Eastern and reminded readers of its technical assistance publications regarding the proper handling of religious garb and grooming in the workplace. With the EEOC’s renewed interest and emphasis on religious discrimination in the workplace, employers would be well-served to review their training materials and policies to ensure that they conform with the applicable law. Employers should also ensure that posters outlining employees’ rights are properly displayed.

On July 11, 2016, a combination punch thrown by the National Labor Relations Board (“NLRB”) scored a technical knockout of a decades old joint employer relationship test. The uppercut landed against employers who use temporary/contracted employees and, combined with the left cross of last year’s Browning Ferris decision, may leave some employers in pain. In  Miller & Anderson, Inc., 364 NLRB No. 39 (2016), the NLRB held that a Union seeking to organize employees of a primary (or user) employer and employees from a staffing/ contracting firm, in the same bargaining unit, does not need employer consent before an election is conducted. By doing so, it overturned its 2004 decision in Oakwood Care Center, 343 NLRB 659 (2004), which held that unions seeking to represent employees in bargaining units that combine traditional employees with contracted employees must first obtain consent from both the employer and the staffing agency before an election can be conducted. The primary beneficiaries are temporary/contracted workers, who now may have an easier time seeking union representation. Monday’s decision aligns with last year’s decision inBrowning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015), where the NLRB held that joint employer status can be conferred where an employer exercises indirect control or incidental collaboration. Whereas Browning Ferris lowered the bar for joint employer status and made it easier for a company to be a joint employer with temp agencies, contracting firms, or franchisees, Miller & Anderson makes it easier for Unions to organize temporary workers. Under the old standard, the primary/user employer could withhold consent, which would end the organizing effort. With this decision, primary/user employers can be stuck with a collective bargaining agreement and relationship, even if the temporary employees who pushed for union representation no longer work for them. Perhaps the greatest potential problem is that primary/user employers could be liable for actions solely attributable to the temp agency/contracting firm. For example, if the staffing agency fails to pay several of its employees overtime, by virtue of being parties to the same collective bargaining agreement, primary employers now run the risk of being jointly liable for the payment, even though they may have paid the staffing company and ordinarily would not have any duty to pay compensation directly to the temporary employees. Likewise, a primary employer may risk liability for any unfair labor practices committed by the staffing company. While Miller & Anderson was remanded to the local NLRB office for further proceedings, there likely will be an appeal. In the interim, employers that currently use staffing firms may want to reconsider the contracts under which they use them. Should temporary employees be necessary, consider the organization of the workforce such that the temporary employees perform separate and distinct duties from the primary employees (so that they do not share the same community of interests). Using a legal professional to avoid the effects of Miller & Anderson and Browning Ferris is advisable.

In an April 13, 2015 blog post, we discussed a Ninth Circuit ruling holding that the FLSA’s Dealership Exemption did not apply to individuals employed as service advisors. In Navarro v. Encino Motor Cars, LLC, the Ninth Circuit validated the Department of Labor’s 2011 regulations redefining the words “salesman,” “partsman” and “mechanic” to remove service advisors from the overtime pay exemption. The matter was appealed and heard by the United States Supreme Court earlier this year. On June 20, 2016, the Supreme Court held that the DOL’s 2011 redefinitions did not follow the basic procedural requirements of administrative rule-making and, thus, should not be considered when determining whether service advisors are exempt under the FLSA’s dealership exemption. In its decision, the Supreme Court recognized that when an agency is authorized by Congress to issue regulations and does so to interpret a statute, the interpretation receives deference if the statute is ambiguous and the agency’s interpretation is reliable. However, deference is not warranted when the regulation is “procedurally defective”—in other words, where the agency err by failing to follow the correct procedures in issuing the regulation. One procedural requirement is that an agency must give adequate reasons for its decision to change an interpretation. The Court stated that where an agency has failed to provide even a minimal level of analysis, its action is arbitrary and capricious and cannot carry the force of law. Agencies are free to change their existing policies and interpretations, but they must explain their changed position and must be cognizant of long-standing policies that have created reliance by various industries. In this case, the DOL’s 2011 regulation removing service advisors from the Dealership Exemption was issued without any reasoned explanation for the change. Before 2011, and since 1978, service advisors had been included in the exemption by the DOL. The DOL did not provide a reasoned explanation for change in an almost 30-year-old regulation, the Supreme Court held that the 2011 regulation did not receive deference and should not be considered by courts when determining if service advisors meet the Dealership Exemption. This ruling is important because the Supreme Court is explicitly requiring the DOL to provide detailed explanations when it changes its interpretations of the FLSA – interpretations that have been long relied upon by numerous industries. While dealerships may have a won this round, it may be short-lived. As the Court acknowledged, the DOL still has an opportunity to issue another regulation removing service advisors from the Dealership Exemption – and such a regulation may be given full deference if the DOL provides a sufficient rationale for the change. We will continue to monitor DOL actions following the Supreme Court’s ruling.

In January 2016, the U.S. Equal Employment Opportunity Commission (EEOC) proposed revising the Employer Information Report EEO-1 (otherwise known as the EEO-1 Report) to require all employers with 100 or more employees, including federal contractors, to also provide a summary of data on wages paid to their employees, categorized by gender, race and ethnicity beginning with the September 2017 report. The January 2016 proposal involved reporting this information across 10 job categories and by 12 pay bands. Based upon comments submitted on the EEOC’s proposed changes, on July 13, 2016, the EEOC amended its proposed revisions to the EEO-1 Report. As revised, the EEOC has proposed a calendar year reporting schedule and moved the 2017 EEO-1 reporting due date from September 30, 2107 to March 31, 2018. This change will allow employers to use annual W-2 wage data, already compiled for tax purposes, which would reduce costs for employers to compile the reportable pay data, and would provide a full 18 months for the transition to the new reporting requirements. Employers would provide this data through an online form. The revised proposal will be subject to a 30-day comment period that ends on August 15, 2016.  As the EEOC may not issue a final proposal until this winter and the new deadline a few months to follow, it may be advisable for covered employers to review and become familiar with the sample EEO-1 form to anticipate the pay data that may need to be gathered.

Although no federal statute explicitly prohibits employment discrimination based on gender identity, the Equal Employment Opportunity Commission has actively sought out opportunities to ensure coverage for transgender individuals under Title VII’s sex discrimination provisions under its Strategic Plan for Fiscal Years 2012-2016. After the EEOC issued its groundbreaking administrative ruling in Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 012012081 (April 23, 2012), where it held that transgendered employees may state a claim for sex discrimination under Title VII, some courts have trended to support Title VII coverage for transgendered employees. To address potential challenges and lawsuits that may arise, employers should consider updating codes of conduct as well as non-discrimination and harassment policies. While policies may differ based on an employer’s business, there are some key features to consider: Include “gender identity” or “gender expression” in non-discrimination and anti-harassment policies. Gender identity refers to the gender a person identifies with internally whereas gender expression refers to how an employee expresses their gender—i.e.how an employee dresses. The way an employee expresses their gender may not line up with how they identify their gender.  Establish gender transition guidelines and plans. A document should be established and available to all members of human resources and/or managers to eliminate mismanaging an employee who is transitioning. The guidelines may identify a specific contact for employees, the general procedure for updating personnel records, as well as restroom and/or locker room use.  Announcements. After management is informed, and with the employee’s permission, management should disseminate the employee’s new name to coworkers and everyone should begin using the correct name and pronoun of the employee. Misuse of a name or pronouns may create an unwelcome environment which could lead to a lawsuit.  Training and compliance. Employers should review harassment and diversity training programs and modules to ensure coverage of LGBTQ issues. All employees should be trained regarding appropriate workplace behavior and consequences for failing to comply with an organization’s rules. In addition to the potential liability under federal law, some state laws provide a right of action for transgendered employees who are discriminated against at work; therefore, employers should review the laws of the jurisdictions in which they operate to ensure compliance.

On June 27, 2016, Governor Jerry Brown signed the California budget for the upcoming fiscal year. This budget, approved by the legislature on June 15, 2016, makes a number of significant changes to the California Labor Code’s Private Attorneys General Act (PAGA) of 2004. Since the early months of 2016, Governor Brown emphasized publicly that he intended to use his budget proposal to “stabilize and improve the handling of PAGA cases,” in light of a recent surge in such actions. According to the Governor’s administration, Brown hoped to expand the Labor and Workforce Development Agency’s (LWDA) oversight of PAGA claims in order to “reduce unnecessary litigation” and lower “the costs of doing business” in the state. Of course, ensuring that California receives its fair share of any settlement may also be of interest to the state. California employers should take note of the changes to PAGA. Although the Legislature ultimately whittled down many of Brown’s more wide-reaching PAGA-related budget proposals, the following changes survived and will be in effect for all PAGA cases filed prospectively: An aggrieved employee must now submit his or her PAGA claim online rather than by certified mail, and must also submit a $75 filing fee with each claim. A copy of the claim is to be sent by certified mail to the employer. All employer cure notices or other responses to PAGA claims must be filed online, with a copy sent by certified mail to the aggrieved employee or the employee’s representative. An aggrieved employee cannot file a civil PAGA action until 65 days after providing online notice to the LWDA, rather than the current 33 days. The LWDA will have 60 days, rather than 30, to review PAGA notices and to inform parties that it is not planning to investigate an alleged violation. The LWDA may extend its time to investigate by an additional 60 days if the agency deems this additional time necessary, effectively giving the agency 180 days (previously 120 days) to investigate PAGA claims. Where a PAGA complaint is filed in court, the LWDA must be provided with a copy of the filed-stamped copy of complaint (applies only to cases in which the initial PAGA claim notice was filed on or after July 1, 2016). Parties must now provide a copy of a proposed settlement to the LWDA at the same time they provide it to the court for the court’s approval. A court must approve any settlement of a PAGA action, whether or not the settlement includes PAGA penalties. Any approved settlement must be provided to the LWDA through its online system within 10 days after the entry of judgment. A prevailing employee may be entitled to recover filing fees in certain circumstances. Employers must now submit PAGA cure notices to the LWDA online. Whether these changes ultimately affect the scope and volume of litigated PAGA claims is still uncertain. However, it is likely that the amendments will lead to heightened LWDA involvement in PAGA claims from initial filings through final, court-approved settlements. The extent to which the LWDA utilizes its newfound powers of review also remains to be seen, but will certainly add a new layer of administrative oversight and bureaucratic red tape to the investigation and resolution of a PAGA claim. In the meantime, employers should be prepared that these changes may increase the lifetime of a PAGA claim and potentially lead to increased complications and litigation costs.

Now that the DOL has released its salary threshold for “white collar” overtime exempt employees (from $23,660 to $47,476 annually, effective December 1, 2016), employers may be faced with decisions to change the pay classification of employees under the Fair Labor Standards Act. For example, will an employee who is currently classified as exempt from overtime receive a pay raise to meet the new salaried threshold, or will the employee be re-classified as nonexempt? The numbers are important. But, in addition to crunching the numbers – which typically involves weighing the economics of a salary increase versus having the employee on the clock at an hourly rate (and at time and one- half for potential overtime) - there is another, equally important issue to review for exempt employees: the job duties tests. The DOL did not change the job duties tests for white collar exemptions at this time. That said, it would be short-sighted to focus exclusively on numbers for decision making. Before any money is spent on a significant salary increase, employers should audit whether the employees being considered for potential pay increases actually are assigned and perform job duties that qualify them for the white collar exempt job they currently occupy. Job titles are not determinative. As companies transition to the new DOL regulation, they should not automatically assume that an exempt employee who was originally correctly classified continues to be. Unfortunately, sometimes, employees are just assumed to be continuously correctly classified because “we’ve always done it this way.” The “big three” white collar exemption categories are: the professional, the executive, and the administrative exemptions. The highly-compensated employee, the outside sales exemption, and the computer professional also have exempt status, but for the sake of space, this post focuses on these three categories, which can be challenging to analyze. Generally speaking, the professional exemption requires that the employee perform work that is predominantly intellectual and that required him or her to pursue lengthy, specialized instruction in an advanced field of science or learning. This type of work requires consistent exercise of professional skills and judgment. The executive exemption generally requires that the employee manage an enterprise or a department and that s/he direct the work of at least two or more employees, as well as have significant input into, or the authority to, hire and fire. To be within the administrative exemption, the employee should perform office or non-manual work that is directly related to the management of, or the general business operations of, the employer or the employer’s customers. This employee should exercise discretion and independent judgment over “matters of significance.” There are many other fine points that the DOL regulations fill in, but the above concepts can help determine whether an employee being considered for a salary increase was actually an exempt employee in the first place. If it is not an exempt position, paying an increased salary just to meet the new DOL salary threshold may not be the best step, economically speaking. For employees who meet the job duties tests and that the employer continues to treat as exempt, the new minimum salary amount must be met. Otherwise, the employee will be entitled to overtime pay for hours worked over 40 in each week.

Earlier this year, the United States Supreme Court, in Campbell-Ewald Co. v. Gomez, applied contract principles to hold that an unaccepted Rule 68 offer of judgment did not moot an individual’s claims or class or collective actions claims. The Court reasoned that an unaccepted offer remained a mere proposal with no binding effect on either party. However, the Court still has employers guessing. In April 2013, in Genesis Healthcare Corp. v. Symczyk, the U.S. Supreme Court was faced with a Rule 68 offer of judgment rejected before the plaintiff filed a motion for conditional certification in a putative FLSA collective action. The Court assumed that the Rule 68 offer mooted the individual’s claims, and then held that, absent a plaintiff with a live individual case (and absent any claimants opting in), the action could not be maintained. This left open the question of whether a Rule 68 offer really can moot an individual’s FLSA action. It also begged the question of what happens in a Rule 23 class action. The Supreme Court attempted to answer these questions in January 2016 in Campbell-Ewald Co. v. Gomez. The court was faced with a rejected offer of judgment in a Rule 23 class action. The majority applied contract principles to hold that a rejected offer is merely a proposal with no binding effect on either party. Therefore the parties remained adverse and the individual claims were not mooted by the rejected offer.  Thus, the class could also proceed. The Court in Gomezleft open two critical questions. Would the result be different if a defendant deposits the full amount of a plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount? If the individual’s claims were so mooted, what about Rule 23 class claims? Since Gomez, employers have tried a number of different ways to moot individual claims, and thereby moot Rule 23 claims. Such efforts have included requesting permission under Rule 67 to deposit the amount of an earlier Rule 68 offer into the court’s registry, delivering a certified check and making an offer to deposit funds with the court, depositing money into an escrow account for the plaintiff’s benefit, and tendering a simple check. District courts’ reactions are all over the board. Some have held that these actions are still insufficient to moot even an individual’s claim because the conduct is still a mere offer or because the plaintiff must be provided, under Gomez, “a fair opportunity to show that certification is warranted.” Some, courts, however, have mooted individual claims and even expanded Genesis to moot Rule 23 actions. Employers seeking to utilize Rule 68 to moot claims should survey cases in the applicable jurisdiction, but they still may be left guessing about the appropriate procedure and outcome.  Cutting off putative class and collective actions early through Rule 68 is not as clear as it used to be, if it ever was, in many jurisdictions. The future of Rule 68 offers may very well depend on the future composition of our Supreme Court bench.

A few ambitious lawyers in Arizona have been hitting commercial property owners and tenants with lawsuits for not complying with the Americans with Disabilities Act (ADA), specifically alleging that the properties have certain barriers that restrict access for disabled individuals. Something as seemingly inconspicuous as the height of a parking lot handicap accessibility sign could constitute a violation and form the basis of a lawsuit. In the past few months alone, more than 500 Arizona businesses have been sued under the ADA for an assortment of accessibility violations, most commonly for lack of compliance with the ADA’s standards for parking lots and bathrooms. One particular firm has been filing lawsuits against Arizona companies for parking lot violations. In most instances, the lawsuits focus on whether the business has sufficient handicapped designated parking spaces, and whether the location, dimension, and signage for those spaces are up to the ADA’s accessibility standards. In many of these lawsuits, the only violation alleged is that one or more of the parking lot signs is posted a few inches lower than what is set forth in the statute. Two particular individuals are most often bringing lawsuits against Arizona restaurants and bars for bathroom accessibility and other violations. In most instances, the lawsuits focus on the height and placement of urinals, mirrors, soap and toilet paper dispensers, and grab bars. The plaintiffs also commonly object to the height of service counters and lack of seating for those with disabilities. Arizona businesses with facilities not meeting ADA accessibility requirements, risk an ADA claim by affected patrons. While there is a “safe harbor” provision in the ADA for businesses complying with earlier ADA standards, it seldom applies. Businesses in doubt about ADA accessibility compliance should consider hiring an ADA compliance specialist or attorney to inspect the premises and promptly make any necessary changes.

As many employers are keenly aware, misclassification claims under the Fair Labor Standards Act (“FLSA”) are becoming more prevalent. Employers may face a number of pitfalls that can expose them to potential liability. First, whether or not an employee is “exempt” from overtime payments under the FLSA can be difficult to determine factually, and classification errors can subject employers to wage and hour claims to collect unpaid overtime. Employers of home care workers face an additional hazard under the FLSA: the uncertainty of the law. On October 1, 2013, the Department of Labor (“DOL”) issued the Home Care Final Rule (“Final Rule”) to extend minimum wage and overtime protections to almost 2 million home care workers, by revising the regulations defining companionship services so that many direct care workers are subject to the overtime pay provisions of the FLSA. The Final Rule also revised the DOL’s regulations concerning live-in domestic services workers. The Final Rule had an effective date of January 1, 2015. In June 2014, associations of home care companies filed a lawsuit in federal court challenging the Final Rule. In December 2014 and January 2015, the U.S. District Court for the District of Columbia issued orders vacating and revising certain portions of the Final Rule, thus affecting the applicability of the Final Rule to many employers. The DOL filed an appeal of the orders to the U.S. Court of Appeals for the District of Columbia Circuit. On August 21, 2015, the Court of Appeals issued a unanimous opinion affirming the validity of the Final Rule and reversing the District Court’s orders.  On October 13, 2015, the Court of Appeals’ opinion upholding the Final Rule became effective when the Court of Appeals issued its mandate. On November 24, 2015, the home care associations filed a petition for certiorariwith the U.S. Supreme Court. Given the effect of the pendency of the Final Rule on the DOL’s ability to enforce the Final Rule from the original “effective date” of January 1, 2015 to October 13, 2015, the date the Court of Appeals’ opinion became effective, there is a question as to whether employers affected by the Final Rule were required to follow the Final Rule during that interim period. In Beltran v. InterExchange, Inc., 2016 WL 1253622, No. 14-cv-03074-CMA-KMT (D. Col. Mar. 31, 2016), the U.S. District Court of the District of Colorado recently ruled that domestic service workers had viable claims for overtime for any work performed after January 1, 2015 due to the Final Rule. In contrast, in Foster v. Americare Healthcare Svcs, Inc., 2015 WL 8675518, No. 2:13-cv-658 (S.D. Ohio Dec. 11, 2015),  the U.S. District Court for the Southern District of Ohio held that the Final Rule was not effective until October 13, 2015. Despite the uncertainty of whether the Final Rule was effective as of January 1, 2015 or October 13, 2015, employers with home health workers should take steps to comply with the Final Rule. The DOL has increased its efforts to address wage and hour violations, including the development of a smartphone app to help employees track hours worked. Accordingly, if an employee is considered “non-exempt” in the wake of the Final Rule, it is critical that employers accurately record their time worked to ensure that they are paid overtime for all hours worked over 40 hours in a workweek.

On Monday, June 27, the U.S. District Court for the Northern District of Texas issued a nationwide preliminary injunction barring the U.S. Department of Labor from implementing the revised Persuader Rule that was scheduled to become effective on July 1, 2016. Designed to amend certain provisions of the Labor Management Reporting and Disclosure Act (LMRDA), the now-enjoined Persuader Rule sought to impose onerous reporting obligations upon employers and threaten to disrupt the attorney/client relationship relating to union organization activities. The Court held that “the new rule is defective to its core because it entirely eliminates the LMRDA’s advice exemption.”  Further finding that DOL’s rule “nullifies” the exemption for advice, and fails to provide notice to employers, lawyers and consultants of what activities relating to persuasion are covered by the advice exemption, which means those impacted have to “guess what activities with an object to persuade fall within the LMRDA’s advice exemption.” However, this likely is not the final word on the Persuader Rule.  The Department of Labor may appeal this ruling and there are similar lawsuits pending in federal courts in Arkansas and Minnesota (where the district court found similar problems with the Final Rule, but refused to issue a preliminary injunction). Therefore, employers should give consideration to entering into agreements—before July 1, 2016—with their lawyers (and consultants) regarding the provision of indirect persuader activities, as the impact and status of the Persuader Rule is uncertain.

Both federal and California agencies have long permitted employers to round employees’ start and stop work times to the nearest quarter-hour, so long as such policies are applied in a neutral manner.   Despite the widespread use of rounding, the legality of this practice in the Ninth Circuit remained unsettled.   On May 2, 2016 the Ninth Circuit addressed the issue in Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, affirming that neutral rounding practices are lawful. In Corbin, the plaintiff employee claimed that the employer’s timekeeping system, which rounded time entries up or down to the nearest quarter hour, unlawfully denied him compensation for all time  worked.  The court held that Time Warner’s timekeeping policy and use of rounding were valid methods of tracking employee time.  Although the plaintiff suffered a small net loss due to rounding, the evidence indicated he had actually gained compensation during other time periods, and this pattern of gains and losses proved that Time Warner’s method was neutral both facially and as applied. Dismissing the suit, the court took a common-sense stance towards rounding and emphasized that the primary issue is not whether an individual employee loses or gains time in a discrete time period, but rather whether the employer’s policy is intended to average out all employees’ gains and losses in the long-term.   The court made clear that the purpose of rounding is to allow employers a practical and neutral method of recording time without turning to tortuous timekeeping and accounting calculations.   However, a rounding policy which, for instance, solely rounded time punches down would likely be invalid. In light of the Ninth Circuit’s decision, employers currently utilizing timekeeping methods which round employees’ punch times may breathe a collective sigh of release.   We recommend that employers routinely audit their timekeeping methods to ensure that such practices are neutral in theory and in application.  Towards that end, rounding policies must round both up and down and must not serve to consistently benefit the employer over a period of time.

Several large employers announced the adoption of paid family leave policies in 2015. Some employers have implemented these policies as “good ideas” and others because several states have passed legislation that mandates paid family leave. Since California enacted the first paid leave mandate in 2004, several states have passed similar laws, including Rhode Island, New Jersey, Connecticut and New York. Additionally, Maryland has proposed a paid leave mandate. As more states mandate paid leave, employers should understand the implications these laws can have on the workplace. State mandated paid family leave allows employees to take time away from work to: 1) provide care for and bond with newborn or recently adopted children, and/or; 2) act as a caregiver to a family member suffering from a “serious illness.” The period of paid time granted varies from state-to-state, with a range of 4 to 12 weeks. However, some legislative measures, such as a new ordinance in San Francisco, include a threshold minimum number of employees before an employer is subject to the mandate. During paid family leave, employees are generally entitled to receive a percentage of their regular compensation, capped at a fixed amount. In California, employees will transition from an entitlement of 55% to 70% of their wages during their leave in 2018. The increase will be capped at one third of the State’s average weekly wage of $1,121. Similarly, New York’s newly enacted law will entitle employees to 50% of their weekly wage, capped at 50% of the statewide average weekly wage of $1,300. Additionally, some mandates require protection of an employee’s job security. In New York, New Jersey and Rhode Island, the law requires employee to be restored to the position they previously held or a position that provides equivalent seniority, status, benefits and pay. The mandates do not increase, reduce or modify the employee’s current benefits. Key questions to consider regarding the impact of mandated paid family leave on the workplace include: What percentage of compensation has your state’s law mandated be paid? How long does your state’s law provide for a leave of absence? Does your state’s law require job protection? Does your state’s law provide a cap on benefits? If so, what is the cap? How does your state’s law define a “family member” for the purpose of providing care for a family member with a serious illness? Does your state’s law require a threshold number of employees before paid leave becomes mandatory? If you have employees in multiple states, will you adopt a uniform policy for all employees, only provide state mandated benefits, or adopt a policy somewhere in between? How will you manage the additional cost incurred by complying with these laws, particularly with laws increasing minimum wages? As paid family leave laws gain national attention, additional states may begin to consider implementing similar laws. We will continue to follow changes and monitor how the changes affect employers and benefit plans. Please contact us if you would like assistance drafting a paid family leave policy.

Now that the two major parties have presumptive presidential nominees, the heated discussions and press coverage of the primary season will turn to conventions and the general election.  Divisive political discourse may continue to escalate.  While many employees will heed the familiar adage not to discuss politics and religion in public, political discussions may enter the workplace and invite debates, arguments, and tension.  Consequently, Employers should understand what political conduct can be regulated or prohibited in the workplace, and what political conversations must be allowed. Some employees may presume they have a First Amendment right to free speech, unaware that those guarantees apply only in the public sector.  While most private employers have considerable leeway when crafting workplace rules about whether politics can be discussed during working time, laws vary from state to state.  For example, laws in states such as California, New York, and Washington DC (and some cities) prohibit employers from taking job related action based on political affiliation.  Other states and municipalities, such as Colorado and North Dakota, have laws limiting an employer's ability to take action based on off-duty activities (which could include political activity).  And, given the nature of some of the key issues in this year's national elections (such as immigration reform and the proper division between church and state), all employers still have an obligation to ensure compliance with the various federal laws against discrimination, as well as with Section 7 of the NLRA, given the NLRB's continued aggressive enforcement of that provision of the law. Earlier this month, the EEOC published proposed revisions to its Enforcement Guidance on National Origin Discrimination, signaling an emphasis on enforcement in areas such as immigration status, "English only" or accent policies, and discrimination against foreign nationals.  When this emphasis is coupled with the public debate on the issue of immigration reform and national security, employers will walk a thin line when determining what political discussion is appropriate in the workplace and what discussion could violate anti-harassment and anti-discrimination policies.  Similarly, the continued emphasis of the National Labor Relations Board on Section 7 concerted activity will affect policies employers may institute or enforce.  For example, it may be appropriate and lawful to enforce a "no political buttons" or “no political speech on t-shirts” rule (assuming the employer is not subject to a state law to the contrary).  The employer must recognize, however, that a difference may exist between a union worker wearing a button enforcing a particular candidate and wearing a button stating that the union supports that same candidate. Thus, as the conventions and general elections approach, employers should consider the following: Remind employees of all anti-harassment and anti-discrimination policies; Remind employees that a discussion of politics does not give license to bully or harass other employees, notwithstanding what is reported on the news; Private employers in many states (but not all) can ban political discussions among employees or between employees and customers, vendors or other third parties (but if this choice is made, the policy must be enforced consistently); Review and update dress code policies if the employer wants to prohibit political speech on clothing, buttons, etc.; and If the company maintains a "non-solicitation" policy, make sure that it is enforced consistently.