Unpaid internships can present perils for the unwary employer. Many employers are hesitant to establish unpaid internship programs for fear that they will be found to be in violation of the Fair Labor Standards Act. Conversely, students are eager to learn practical skills in an actual work setting and are motivated to seek internships. In the past, employers could simply look at the Department of Labor Wage and Hour Division’s Fact Sheet #71 for guidance on how to establish a program. Recently, numerous federal courts, including the 2nd and 11th Circuits and district courts in Illinois and California, have muddied the waters by implementing a new test for unpaid internships to comply with the FLSA. Despite the various tests, employers can still structure an unpaid internship program that is legally compliant. Here are the top 5 factors your unpaid internship program should have: The intern is the primary beneficiary of the internship, not the employer. Determine if the internship is more about the employer getting free labor or for the intern learning about his/her chosen field of study outside of the classroom. An internship must benefit the intern, it is not for the benefit of the employer.    Provide the intern with training that could be found in an academic setting that accommodates the intern’s academic work and schedule. Savvy employers may partner with the intern’s academic institution to mold a fixed-duration internship that is specifically tied to the intern’s area of study. Avoid providing tasks to the intern that are unrelated to academic training – such as making copies and sorting mail. Provide the intern with a mentor appropriate to the intern’s studies. This mentor will provide guidance, assign relevant projects, and allow the intern to shadow him/her. The intern’s work should not replace or be exactly the same as a paid employee. An unpaid intern’s work cannot displace the regular work of paid employees.  Do not promise a job at the conclusion of the fixed internship period. Instead, focus on providing practical and relevant experience to the intern during the internship.     Clearly articulate all of the expectations of the internship to the intern, including that it is unpaid. Leave no room to the imagination about all of the expectations of the unpaid internship. Unpaid internships can be rewarding to both the employer and the intern. With some careful planning, an employer can greatly reduce the legal risk associated with an unpaid intern.

On June 2, 2016, Los Angeles Mayor Eric Garcetti signed an ordinance into law that will entitle eligible employees in L.A. to up to 48 hours of paid sick leave per year. On June 7, San Diego voters approved a similar ordinance that will provide eligible employees with up to 40 hours of paid sick leave per year. Both cities’ new laws will require employers operating there to provide more paid sick leave than is required—24 hours per year—under current California state law. (Polsinelli’s coverage of California’s paid sick leave law is available here, here, and here.) Both ordinances also increased the minimum wage to $10.50 per hour in 2016, and to increase annually thereafter. L.A. Ordinance No. 184320 For employers with 26 or more employees, the ordinance takes effect on July 1, 2016, at which point employees must begin accruing or be granted paid sick leave. For employers with 25 or fewer employees, the ordinance takes effect on July 1, 2017. Eligible employees are employees who work 30 or more hours in L.A. within a year of starting their employment. And unlike state law, there are no exceptions for specific classes of employees. Employees will be eligible to use accrued sick leave after their 90th day of employment or July 1, 2016, whichever is later. Employers may either grant employees all 48 hours of paid sick leave every 12 months or have it accrue in increments of one hour for every 30 hours worked. Accrued but unused paid sick leave must be allowed to carry over to the following year up to 72 hours. Employers do not have to pay out accrued, unused sick leave when an employee separates from the company.  But employers do have to reinstate the accrued, unused leave if the employee is rehired within a year. San Diego Ordinance No. O-20390 San Diego employers must also provide employees with one hour of paid sick leave for every 30 hours worked in the City. The paid sick leave component of the ordinance takes effect July 11, 2016. In addition, while limited to 40 hours per year, employers must allow employees to carry over accrued, unused leave and the ordinance does not currently include an accrual cap. Employees will be eligible to use accrued sick leave after their 90th day of employment. An employer who provides an amount of paid leave, including paid time off, paid vacation, or paid personal days off sufficient to meet the paid sick leave requirements, and who allows that paid leave to be used for the same purposes, and under the same conditions as sick leave, is not required to provide additional paid sick leave to employees. Employers are not required to pay out accrued, unused sick leave at termination. However, they must reinstate the accrued, unused leave if the employee is rehired within six months. This post provides only a brief, selective overview of the cities’ new laws. Employers with employees in Los Angeles, San Diego, and other states and cities with paid sick leave ordinances should act now to ensure they are in compliance. We encourage employers to contact their Polsinelli employment attorneys for assistance to create or revise their sick leave policies and procedures as appropriate and to further discuss the details of these new laws.

On May 11, 2016, President Obama signed into law the federal Defend Trade Secrets Act (DTSA), which now provides a federal claim for misappropriation of trade secrets. Under the new law, owners of trade secrets may seek remedies, including damages, for any loss incurred by the misappropriation; court orders allowing civil seizure to recover stolen trade secrets; injunctive relief forbidding additional misappropriation; and, in certain cases, double damages and attorneys’ fees. The DTSA also provides immunity to whistleblowers from liability for confidential disclosure of a trade secret to the government or in a court filing. To have the full range of remedies available under the DTSA, employers must give notice of the whistle blower immunity to employees in “any contract or agreement with the employee that governs the use of trade secret or other confidential information,” including existing contracts that were updated on or after May 12, 2016. Employers must also advise employees that an individual who has filed suit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret under certain conditions. Thus, employers should begin taking action now to preserve rights and remedies under the DTSA. The terms and phrases “contract or agreement” and “trade secret or other confidential information” suggest that the notice requirement is not limited to just employment contracts or trade secrets as defined by the statute. The DTSA defines an employer’s “employees” broadly to include any individual performing work as a contractor or consultant, hence employers will need to be sure those individuals receive notice of the whistleblower immunity under the DTSA. Where the contractors or consultants performing the work are companies, employers should determine whether notice has been received by the individuals doing the work on behalf of those companies acting as contractors or consultants. The DTSA expressly prohibits employers from recovering double damages or attorneys’ fees where they have failed to comply with the notice requirements. The DTSA does not, however, prescribe prohibition as the sole penalty – which may give rise to unintended causes of action against non-compliant employers in the future. One could also imagine efforts to introduce evidence of an employer’s non-compliance by an employee who has filed suit for retaliation, in the same manner that the employee might attack a non-existent or inadequate conventional anti-retaliation policy (i.e. “the employer was just trying to keep me in the dark so I wouldn’t know my rights”). Thus, employers should take the following steps with regard to notice of the whistleblower immunity required by the DTSA to avoid the loss of remedies and prevent other unintended consequences of failing to comply with the new law: Update employee handbooks to include notice of the DTSA’s immunity exceptions to all employees. Supply notice of the whistleblower immunity under the DTSA in any contract entered into or updated as of and after May 12, 2016. Evaluate contracts or agreements with independent contractors and consultants to ensure all individuals providing the work receive statutory notice.

On April 29, 2016, the National Labor Relations Board deemed several handbook policies overbroad because employees could “reasonably construe the language [of the policy] to prohibit Section 7 rights” under the National Labor Relations Act. Most notably, the Board took exception to a “Positivity Policy” in an employment handbook stating: "The Company expects all employees to behave in a professional manner that promotes efficiency, productivity, and cooperation. Employees are expected to maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external customers, clients, co-workers, and management." In light of this ruling, employers should consider revising any “positivity” provisions in employment handbooks. The Board ruled the undefined phrases "positive work environment" and "communicating in a manner that is conducive to effective working relationships" violate the Act to the extent they are ambiguous and vague, and reasonably chill employees’ exercise of Section 7 rights. In support of its decision, the Board stated: "Because labor disputes and union organizing efforts frequently involve controversy, criticism of the employer, arguments, and less-than-'positive' statements about terms and conditions of employment, employees reading the rule here would reasonably steer clear of a range of potentially controversial but protected communication in the workplace for fear of running afoul of the rule." Additionally, the Board deemed overbroad a rule prohibiting employees from recording “people or confidential information using cameras, camera phones/devices, or recording devices (audio or video) in the workplace” and (with the exception of calls that the company records for quality purposes) prohibiting employees from making “sound recordings of work-related or workplace discussions.” The Board determined the workplace recording rule failed to distinguish between recordings protected by Section 7 and those that are not; and did not exclude recordings made on nonworking time, in nonworking areas. Employee recording policies must be carefully drawn to survive present NLRB scrutiny. The NLRB continues to scrutinize and strike down handbook policies it considers “overbroad.” Accordingly, union and non-union employers should audit their policies to ensure that they are not setting vague standards of a “positive work environment” or requiring only “positive attitudes and communications.”

In a unanimous decision on May 26, 2016, in Lewis v. Epic Systems Corporation, the United States Court of Appeals for the Seventh Circuit invalidated an individual arbitration agreement waiving class and/or collective actions and held that if such agreements are required by the employer as a condition of continued employment, then they necessarily interfere with employees’ exercise of their Section 7 rights under the National Labor Relations Act to engage in protected concerted activity, irrespective of whether the employees are represented by a union. The Seventh Circuit’s holding directly conflicts with the rulings of the Fifth, Eighth, and Eleventh Circuits on this issue, potentially setting up review by the United States Supreme Court. It is common today for employers to enter into individual arbitration agreements with their employees that require the company and the employee to arbitrate wage and hour (and other employment) claims rather than litigate those claims in court. The agreements also commonly prohibit employees from bringing those claims, even in arbitration, on a class or collective – rather than individual – basis. Although the Lewisdecision does not invalidate all individual arbitration agreements in the employment context, the decision applies to employers within the 7th Circuit’s jurisdiction and that have made entering into such agreements a condition of continued employment. Individual arbitration agreements can be valuable to an employer in that they discourage the filing of class and collective actions. In such actions, plaintiffs’ attorneys sometimes demand inflated and unsupportable damages on behalf of employees and former employees who have no intention of suing their employer. Those employers who have adopted individual arbitration agreements should understand that they may not be enforced in the 7th Circuit if they are conditioned on continued employment. For the past few years, the NLRB has invalidated individual arbitration agreements on the same rationale of the Seventh Circuit, although those rulings are not binding to other employers, and one such ruling was reversed by the Fifth Circuit. Given that other Circuits have disagreed with the Seventh Circuit and have affirmed individual arbitration agreements, the Supreme Court is likely to take up the issue in the 2016-2017 term. The ultimate resolution of the issue may hinge upon who fills the seat of the late Justice Scalia.

On August 10, 2016, a new pregnancy provision of the Colorado Anti-Discrimination Act (“CADA”) will take effect. While the CADA had previously been interpreted as prohibiting pregnancy discrimination and requiring accommodations for pregnancy, the new provision strengthens and clarifies those protections. Indeed, the amendment will require more of employers and will make it easier for plaintiffs to prevail than federal anti-discrimination law. This greater pregnancy protection, combined with the fact that the CADA was amended in 2013 to allow successful plaintiffs to collect compensatory and punitive damages (remedies previously unavailable under the CADA), make it more likely that employers will face lawsuits under the CADA. Accordingly, employers need to be especially careful to comply with the new amendment. Accommodation The bill requires an employer to provide reasonable accommodations to an applicant or employee for health conditions related to pregnancy or the physical recovery from childbirth under the following conditions: (1) an accommodation is necessary to perform the essential functions of the job, (2) the employee has requested an accommodation, and (3) the accommodation would not impose an undue hardship on the employer. As in the disability context, once an employee requests an accommodation, the employee and employer are required to engage in an interactive process. Importantly, an employer may also require a note from a licensed health care provider before providing an accommodation. While accommodations are to be tailored to the employee, the bill does give examples of reasonable accommodations, including, more frequent or longer break periods, more frequent restroom and refreshment breaks, limitations on lifting, light duty, and modified work schedule. An employer is not required to create a new position or hire additional employees to provide a requested pregnancy accommodation. However, if an employer provides or is required to provide a particular accommodation to another group of employees, the bill creates a rebuttable presumption that the same accommodations for a pregnant employee would not impose an undue hardship on the employer. Employers should also note that to preserve a pregnant employee’s ability to work, the bill prohibits an employer from requiring an employee to accept an accommodation that has not been requested or is not necessary. Similarly, the bill prohibits an employer from requiring an employee to take leave if the employer can provide another reasonable accommodation. Adverse Action The bill also prohibits taking adverse action against an employee who requests or uses a pregnancy accommodation. Significantly, the bill prohibits more employment practices than other sections of the CADA. Other sections of the CADA specifically make it improper to “refuse to hire, to discharge, to promote or demote, to harass during the course of employment, or to discriminate in matters of compensation, terms, conditions, or privileges of employment . . . ” For pregnancy, adverse action is defined as “an action where a reasonable employee would have found the action materially adverse, such that it might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Accordingly, the bill likely covers a broader range of conduct than the other sections of the CADA. Notice To help educate employees about their rights under the new law, the bill requires employers to give new employees notice of their rights under this section at the start of employment. Further, employers are required to give current employees notice by December 8, 2016. Moreover, employers are required to post a notice in the workplace (along with the other employment law posters). Although the bill does not provide a remedy for an employer’s failure to provide notice to existing or new employees, employers should comply with those provisions. Remedies Before filing a lawsuit, an employee who believes she has suffered an adverse action or improperly denied an accommodation under the new bill must file a charge with the Colorado Civil Rights Commission within six months of the conduct. Once the employee has exhausted the administrative remedies, she may sue for back pay (up to two years reduced by what the employee could have earned with reasonable diligence), front pay, compensatory damages, and punitive damages. Action Plan In anticipation of the new bill taking effect on August 10, 2016, employers should: Review all job descriptions to ensure that they clearly identify the essential functions of each job. Review handbooks and policies to ensure that they clearly define the procedures for an employee to request a pregnancy-related accommodation. Draft the required notice of rights for distribution to current employees on or before December 8, 2016. Draft the required notice of rights for distribution to new employees. Update on-boarding policies and procedures to include providing the required notice of rights. Review the accommodations provided to other classes of employees to understand the accommodations that may be presumed reasonable for pregnancy-related accommodations. Train the employee or employees who will respond to pregnancy-related accommodation requests on the requirements of the bill. Train managers on the requirements of the new bill, including the prohibitions on taking adverse actions against employees who request or use accommodations and the prohibitions on requiring employees to accept accommodations that are unwanted or unnecessary. Update employment law postings to include a notice of rights under the bill.

The United States Supreme Court may have finally offered employers some cover in their ongoing battle against Fair Credit Reporting Act (“FCRA”) class actions. On May 16, 2016, the Court handed down its decision in Spokeo, Inc. v. Robins, which vacated and reversed a Ninth Circuit ruling on the grounds that the lower court did not properly analyze both elements of the “injury-in-fact” required to confer Article III standing on a plaintiff. Spokeo operates a “people search engine” that aggregates information on individuals from a broad range of internet databases. Named Plaintiff Thomas Robins’ class action complaint alleged that Spokeo’s business model makes it a “consumer reporting agency” and thus subject to the FCRA’s detailed compliance procedures. The FCRA requires, among other things, that consumer reporting agencies “follow reasonable procedures to assure maximum possible accuracy of consumer reports” and also that “users” of consumer reports (e.g. employers who utilize background checks to determine eligibility for employment): (1) disclose that fact to individuals prior to obtaining such a report and (2) gain the individuals’ prior authorization to do so. Robins claimed that Spokeo willfully violated the FCRA when it disseminated inaccurate information regarding him – namely, that he held a graduate degree, was married with children, and was in his 50s. The Court’s opinion, authored by Justice Alito, noted that an injury-in-fact must be both “concrete” and “particularized,” and held that the Ninth Circuit’s decision properly considered the latter while neglecting to address whether plaintiffs adequately alleged “concreteness.” Though plaintiffs’ attorneys will rush to point out that the Court merely remanded back to the Ninth Circuit with instructions to analyze the concrete injury, employers can read the tea leaves and be heartened by the Court’s seeming disapproval of lawsuits based on “harmless” procedural violations: “Robins cannot satisfy the demands of Article III by alleging a bare procedural violation. A violation of one of the FCRA’s procedural requirements may result in no harm.” “In addition, not all inaccuracies cause harm or present any material risk of harm. An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” In the past few years, employers have seen a rise in situations where plaintiffs point out an alleged technical deficiency in an employer’s FCRA compliance procedure and claim a class populated by every individual who applied for employment in a given timeframe, regardless of whether even a single individual actually suffered an adverse employment action as a result. Although it is too early to tell whether Spokeowill have broad implications for cases of this type, it is a safe bet that both employers and plaintiffs’ attorneys will be closely watching the Ninth Circuit’s response in wake of the remand.

On May 4, 2016, U.S. Citizenship and Immigration Services published a notice of proposed rulemaking regarding changes to the USCIS filing fee schedule. USCIS is proposing to raise immigration benefit application filing fees by an average of over 20%. USCIS is primarily funded by immigration benefit request fees charged to the applicants, and these filing fees comprise 94% of USCIS’s annual budget of $3 billion. USCIS last raised immigration filing fees in 2010, and the agency has justified the increase as necessary to fully recover the costs of services, to maintain an adequate service level, and to allow for processing and technological improvements. Over the last six years, USCIS has seen a significant increase in the number of benefits applications filed. While applications filed by employers have remained steady, applications filed by individuals for naturalization have increased 25%, applications for permanent residence by 15%, and applications to replace expiring permanent resident cards by almost 50%. USCIS’s proposal would raise the base filing fees on employers sponsoring work visas between 20-40%. Foreign nationals filing for permanent residence will see the application fee rise to $1,140 from its current $985, a 16% increase. Those seeking US citizenship will pay an additional 8%, from $595 to $640. At the other end of the spectrum, high net worth investors seeking permanent residence through the EB-5 visa program will see the filing fee increase from $1,500 to $3,675, while the fee for entities seeking designation as EB-5 Regional Centers will skyrocket from $6,230 to $17,795, a raise of 186%! The rule increasing the fees is expected to become final later this summer. In this case, time really is money, and we strongly suggest employers and foreign nationals file their benefits applications quickly to avoid the coming price hikes.

Employees are developing a new, alternative income market, and it poses a direct security threat to employers. A recent Sailpoint survey found 20% of employees, or 1 in every 5, would sell their work-related passwords to an outsider. This is up from 1 in 7 a year ago. SailPoint, an identity and access management provider, surveyed 1,000 private office workers and found, among those willing to sell their company passwords, a striking 44% would sell for less than $1,000. Another IT and security challenge for employers: 26% admitted to uploading sensitive information to cloud apps with the specific intent to share data outside their companies. The troublesome news doesn’t stop there: 65% admitted using a single password among applications, and 33% reportedly shared passwords with co-workers. One-third of respondents admitted to purchasing subscription-based, on-demand software for company computers without their IT department’s knowledge. Finally, brace yourselves employers; more than 40% reported having access to a former employers’ corporate accounts. These, and other, security challenges keep employer IT managers awake at night and can cause some to break out in cold sweats. So, how can employers fight back? Let’s review four employer security challenges, and strategies to combat them. Challenge No. 1: The Disgruntled Employee Mass and business media are ripe with reports of internal attacks creating risks to companies’ data and IT systems. So-called “rogue” employees – particularly IT employees – who possess insider knowledge of, and access to, employer computer networks, data centers, server farms and administrator accounts can, without question, wreak havoc on an employer’s computer resources and networks. Strategy:Foremost, identify all privileged accounts and credentials. Immediately terminate those no longer in use or affiliated with former employees. Secondarily, closely monitor, control and manage privileged log-in/access credentials to prevent exploitation. Employers should also implement necessary protocols and infrastructure to track, log and record privileged account activity as well as create alerts to allow for rapid response to any suspected malicious or unauthorized activity and quickly mitigate potential damage. Challenge No. 2: The Careless or Under-Informed Employee An employee who jumps out of an Uber or taxi and forgets the unlocked work iPhone presents as much of a security risk as a disgruntled employee intentionally leaking information to a competitor. Similarly, employees not trained, or not timely trained, in security best practices and who may have weak passwords, visit unauthorized websites or click on hyperlinks in suspicious emails or open email attachments from unknown senders pose great challenges to employers’ systems and data. Strategy: Train; train; train. Train employees on security best practices and offer ongoing support and supplemental training. Such training should include password management and avoiding hacking via such improper, and sometimes criminal, activity such as phishing and keylogger scams. Require employees to use strong passwords on all work-related devices (or any device used for work-related reasons). Other password requirements could include requiring a separate password for each registered site that must be changed within a defined time period and implementing an automated password management system. Further, an employer could deploy validated encryption for company data that would allow its IT department to execute a selective wipe by revoking the necessary decryption keys specifically used for employer data when an employee’s work-related device is lost or stolen. Other lines of defense could be found in multifactor authorization identification apps such as a One Time Password, RFID, smart card, fingerprint reader or retina scanning. Even if a password becomes compromised, such apps could mitigate the risk of a breach. Challenge No. 3: The Bring-Your-Own-Device (BYOD) Employers face a heightened vulnerability when employees use mobile devices, particularly their own, to share data, access the employer’s information or neglect to change their mobile passwords. One recent study reports mobile security breaches affected more than 66 % of global organizations in the last year. As more employers embrace BYOD, they risk exposure when employees use such devices on the company network, behind a firewall (including via a virtual private network), where an app on the device could install malware or other Trojan software to access the device’s network connection. Strategy:Develop and implement a specific BYOD policy. Such a policy could better educate employees on device expectations, and employers can better monitor email and documents being downloaded to employer- or employee-owned devices. Challenge No. 4: The Cloud Strategy:The best strategy to combat a cloud-based threat is to utilize strong data level cloud encryption and retain the keys exclusively to prevent any unauthorized third party from accessing employer data, even if it resides on a public cloud. Overall Strategic Plan: For most employers today, a security or data breach is no longer a matter of “if” but “when.” To minimize any resulting impacts from a security breach and leak, employers should conduct a risk assessment to identify where valuable data resides and what controls or procedures are in place to protect it. Then, employers should build out a comprehensive incident response (including disaster recovery/business continuity) plan, identify who will be involved (IT, legal, HR, public relations, executive management) and test it.

American workers are increasingly turning away from union representation. According to the U.S. Bureau of Labor Statistics, between 2011 and 2015, the rate for union membership, which is the percent of wage and salary workers who were members of unions, fell from 11.8 to 11.1. In 1983, the first year for which comparable union data is available, the union membership rate was 20.1 percent. In what would be a major reversal of long established NLRB case law, the NLRB General Counsel announced on May 9, 2016 that he will seek to have the NLRB overrule Levitz Furniture Co. of the Pacific, 333 NLRB 717 (2001). In Levitz, the NLRB reaffirmed that an employer need not await the outcome of an NLRB election to withdraw recognition from a union. The General Counsel now wants to place before the NLRB the proposition that, absent an agreement between the parties, an employer may lawfully withdraw recognition from a union representative based only on the results of an RM election (one requested by the employer) or RD election (one requested by employees). Under the General Counsel’s proposal, no longer would employees be able to circulate their own petition and present it to the employer—employees could resort to only those mechanisms approved and provided by the federal government.   Under Levitz, the NLRB held that an employer could unilaterally withdraw recognition from an incumbent union only on a showing that the union has actually lost the support of a majority of the bargaining unit employees. The NLRB overruled earlier decisions that allowed employers to withdraw recognition merely by establishing an objectively based, good-faith reasonable doubt as to unions' majority support. In the NLRB’s view at the time of Levitz, the good-faith reasonable doubt standard was flawed because it allowed employers to withdraw recognition from unions that had not, in fact, lost majority support. Accordingly, the NLRB held that an employer that unilaterally withdraws recognition violates Section 8(a)(5) unless it can show that, at the time it withdrew recognition, the union had actually lost majority support. Further, under Levitz, an employer could obtain an RM election by demonstrating an objectively based, good-faith reasonable uncertaintyas to the union's majority status, rather than by demonstrating a good-faith doubt or disbelief. The General Counsel maintains that abandoning Levitzis warranted because experience has shown that employers have not always acted where evidence “clearly indicates” a loss of majority support and this in turn has led to protracted litigation, which has interfered with the right of employees to choose a bargaining representative. In the General Counsel’s view, an NLRB election is the best means of ascertaining employee sentiment. However, the General Counsel does not take into account that unions will likely respond to an RM or RD petition by filing blocking charges, which will delay the conduct of an election and frustrate employee free choice. Importantly, under Levitz, an employer only may rebut the continuing presumption of an incumbent union’s majority status and withdraw recognition only on a showing that the union has in fact lost the support of a majority of employees in the bargaining unit. An employer acts at its peril in withdrawing recognition. The change now sought by the General Counsel would limit the means by which employees may seek to remove an incumbent union, force employers and employees to be more dependent on the federal bureaucracy as the arbiter of their work place, and more tightly bind a union upon employees and their employers – perhaps, forever.

In Medtronic, Inc. v. Amanda Ernst and Nevro Corporation, a state court forum selection clause in an employment agreement was not enforced, and remand to state court was denied. Because the former employer served the new employer, and the new employer removed the case before the former employee bound by the forum selection clause was served, the court ruled that the employee’s consent to removal was unnecessary and the forum selection clause was not triggered. Further, the court determined that the new employer was not a closely related party that could be bound by the employee’s contractual agreement to the forum selection clause. This case has four important lessons for employers seeking to enforce forum selection clauses in employment agreements. Parties  For many companies, the immediate impulse upon learning that a former employee has violated an employment agreement or restrictive covenant is to sue the former employee andthe new employer. Sometimes the new employer is a necessary party to stop theft and anti-competitive tactics. Other times naming the new employer is simply a matter of principle (or reflex). As the Medtronicorder demonstrates, suing a non-party to the employment agreement, such as a former employee’s new employer, can defeat enforcement of a forum selection clause and should be considered anew for each case. Joint Representation For former employees and new employers defending against lawsuits brought by former employers, sharing counsel can be efficient and cost-effective. As the Medtronicorder demonstrates, although joint representation is just one part of the closely related party analysis, it should be considered when analyzing the enforceability of a forum selection clause.   Service Especially in cases where the former employee and new employer are outside of the contractually selected forum, the same process server may not be engaged to serve the former employee and the new employer. As the Medtronicorder illustrates, it is important to coordinate service on the former employee and the new employer in cases where there is a chance of removal. Choice of Law Because of variations in state employment laws, there may be times when a company could improve its chances of enforcing one clause in a contract (e.g., forum selection and choice of law) by waiving its rights under the other clause. As this blog has pointed out before, getting too greedy can be costly – especially when it comes to enforcing restrictive covenants. Accordingly, companies should make decisions about whether to enforce a forum selection clause on a case-by-case basis. Further, a company should consult employment counsel when hiring in a new state to analyze whether to modify its existing forum selection and choice of law clauses.

As anticipated, the United States Department of Labor issued publicly this morning its final regulations amending the so-called “white collar exemptions.” The key features of the final regulations are: Increase in the minimum salary level to meet the white collar exemptions from $455 per week (approximately $23,660 annually) to $913 per week (approximately $47,476 annually). Increase in the total annual compensation level for highly compensated employees from $100,000 to $134,004. Installs an automatic update procedure, which will update the salary thresholds every three years (beginning January 1, 2020). The update will raise the minimum salaries required to meet the white collar and highly compensated exemptions to the 40th percentile of full-time salaried workers nationally. No changes to the current “duties” tests. The salary increases go into effect December 1, 2016. As we have previously discussed on this blog, Congressional Republicans have introduced legislation aimed at derailing the final regulations. Today’s DOL announcement, combined with the White House’s professed commitment to the new regulations, suggests that the legislative maneuvering will be useful for only perceived political gain, rather than a realistic chance of halting the regulations. For employers, the only good news today is that the DOL has given employers about six months to finalize their preparations for the salary increases (or re-classification, as the case may be). Stay tuned on this blog for more in-depth analysis of the final regulations and their impact on employers.

These are difficult times for employers to craft lawful policies regarding employee conduct, behavior and communications. Over the past six years, the National Labor Relations Board (Board) has issued many decisions striking down employer conduct and behavior policies because they could be read by employees to prohibit them from engaging in activities that are protected by the National Labor Relations Act (Act). For example, is it unlawful for an employer to prohibit employees from engaging in conduct that is “offensive” to customers or coworkers? In a recent decision, the Board said the answer to that question is: “It depends.” In Valley Health System LLC, 363 NLRB No. 178 (May 6, 2016), the following statement in the employee handbook was alleged to be unlawful: Certain rules and regulations regarding employee behavior are necessary for the efficient operation of the System and the Facility and for the benefit and protection of the rights and safety of all. Conduct that interferes with System or Facility operations, brings discredit on the System or Facility, or is offensive to patients or fellow employees will not be tolerated. The issue in this case was whether employees would read the rule to prohibit permissible conduct under the Act, such as discussions of unionization, wages, and working conditions with other employees. The Administrative Law Judge (ALJ) found that the ban on conduct that “brings discredit on the System or Facility” was overbroad, and the Board agreed. The ALJ ruled that the bar on “offensive” conduct was not unlawful, but the Board disagreed. The Board stated that whether the ban on “offensive” conduct is unlawful requires an evaluation of the contextin which the word it used. According to the Board, “the rule’s restriction on conduct that is ‘offensive’…appears in the same sentence as, and immediately follows, the [illegal] prohibition on conduct that ‘brings discredit on the System or Facility,’” and the ‘discredit’ phrase is impermissibly overbroad. The Board cited its decision in Palms Hotel & Casino, 344 NLRB 1363 (2005) in which it approved the employer’s ban on “offensive” conduct.  In that case, the rule was “clearly directed at egregious and unprotected misconduct—it prohibited conduct that is ‘injurious, offensive, threatening, intimidating, coercing, or interfering with’” employees or patrons. Some could argue that these adjectives individually could be found unlawful as “offensive” was in the instant case. The take-away from Valley Health System may well be that an employer can ban conduct or behavior that is “injurious, offensive, threatening, intimidating, coercing, or interfering with” customers or coworkers, but other limitations in other contexts may violate the Act. Is the Palms Hotel work rule a safe harbor for employers’ conduct and behavior policies? Time will tell.

The EEOC continues to provide protections from discrimination for the LGBT community. Last week the EEOC issued a new fact sheet on bathroom access rights for transgender employees under Title VII of the Civil Rights Act of 1964 (“Title VII”). The EEOC’s fact sheet follows guidance from the Occupational Safety and Health Commission on this issue, which we addressed last year. The new fact sheet reminds employers of the EEOC’s position that discrimination against a person based on their transgender status violates Title VII, and further, that denying an employee equal access to a common restroom corresponding to the employee’s gender identity is sex discrimination. The fact sheet also states that contrary state law is not a defense under Title VII. While the EEOC’s fact sheet is a statement of the EEOC’s position (not a regulation or statute), employers should consider the EEOC’s position when making policy decisions on restroom availability for transgender employees. The EEOC has filed a number of lawsuitsseeking to protect transgender employees from discrimination, and this new fact sheet indicates the EEOC will continue to enforce such protections. The issuance of the EEOC fact sheet follows passage of a North Carolina law, known as H.B. 2, that limits transgender people’s access to public restrooms. The state law was enacted to invalidate a Charlotte city ordinance that, as of April 1, 2016, would have extended anti-discrimination protections to LGBT individuals and allowed transgender people to use the bathroom of their choice. The battle over this North Carolina law continues to heat up. On Monday, May 9, 2016, the state of North Carolina filed a lawsuit against the federal government seeking a declaratory judgment that H.B. 2 is not discriminatory. That same day, as promised, the U.S. Department of Justice filed a lawsuit alleging that H.B. 2 violates Title VII. You can find a copy of the EEOC’s fact sheet here and further information from the EEOC on enforcement protections for LGBT workers here.

It's that time of year for parents. School is out, the kids are home, and you still have to go to work. For many households, this means it is time to consider hiring summer childcare, e.g., nannies, babysitters, or au pairs to watch the kids during the workday. Because the era of paying the teenager across the street or down the block $10 an hour for eight hours a day is gone, we offer the following reminders to parents who go the route of hiring summer help directly. Determine whether you have a household employee. The general rule is that if you directly hire someone to work in your home and you control when, where, and how his or her work is done, you are most likely an employer (at least part-time). For example, if you hire a nanny to come to your house, be there from 9am-5pm, and feed breakfast at 10am and lunch at 1pm, the government will likely consider you a household employer. If you are a household employer, you may need to pay employment taxes, including social security, Medicare, and federal/state unemployment taxes. For 2016, if you pay cash wages of $2,000 or more to a household employee, you must withhold and pay social security and Medicare taxes. If you pay total cash wages of $1,000 or more in any calendar quarter of 2015 or 2016 to household employees, you must pay federal unemployment tax (depending on where you live, you may also be required to pay state unemployment tax). To pay your household employee and the applicable taxes, you will need to obtain an Employer Identification Number (EIN). This number is issued by the IRS and will be the number you put on forms to show you paid employee taxes. It is easy to apply for and can be done at www.irs.gov. If you make an international hire, verify the applicable immigration documents and confirm that the individual is eligible to work in the United States (and for how long). Alternatively, consider hiring through an agency with responsibility for confirming immigration status, paying the employee, and paying applicable employment taxes. For more information and guidance on hiring household employees, consult your Polsinelli employment lawyers. The 2016 IRS Household Employer’s Tax Guide is also excellent resource for information on this issue. Have a great Summer!

On April 1, 2016, California will institute amended anti-discrimination regulations as part of the Fair Employment and Housing Act (“FEHA”). The new regulations broaden the scope of FEHA, including the definition of covered employers and the legal requirements for those employers. The new regulations also expand the categories of employees protected by FEHA. Compliance with these amended regulations will require employers to put additional resources and effort towards training employees and preventing discrimination. At first blush, employers may consider these new FEHA requirements onerous, but implementing the 5 steps below may provide an employer with stronger legal defenses. Step 1: All Employers, Including Those Outside California, Should Check to See if They are Covered by the FEHA Amendments The amended FEHA regulations expand the definition of “covered employer” by including companies who have a total of five employees, even if they have less than five employees in the State of California. This change will impact out of state employers with five or more employees who have any employees within California. All employers, including those who are headquartered outside of California, should check whether they fall within this new definition. Step 2: Identify Additional Individuals Now Protected Under These Amendments FEHA protections against discrimination and harassment now apply to unpaid interns and volunteers. While the revisions do not go as far as to designate these individuals as employees, for the purposes of FEHA, they must receive the same information and treatment as employees. Step 3: Broaden Your Definitions for Gender Discrimination FEHA now includes additional types of gender discrimination, including: Gender Expression - a person’s gender-related appearance or behavior, whether or not stereotypically associated with the person’s sex at birth; Gender Identity - a person's identification as a gender different from the person’s sex at birth; Transgender - a general term for a person whose gender identity differs from the person’s sex at birth; Sex Stereotyping - or making assumptions about an individual’s ability or inability to perform certain kinds of work based on appearance, myth, social expectation, or generalization about the individual’s gender. Step 4: Employers Must Update and Redistribute Their Policies Historically, in California, only sexual harassment policies have had to be in writing. Now, all anti-discrimination and anti-harassment policies must be in writing and must include: Categories of individuals protected by the FEHA; All employees and third parties are prohibited from engaging in discrimination, harassment or retaliation; A confidential, internal complaint procedure that includes specific remedial measures and provides an alternative method to file a complaint other than contacting a direct supervisor; Instructions to supervisors on how to report complaints of misconduct; Assurances that allegations of misconduct will be addressed through a fair, timely and thorough investigation; and Guarantees that the company will not retaliate against employees for lodging a complaint or participating in an investigation. Once the policies have been updated, ensure that the new policies are distributed to all employees, unpaid interns and volunteers. If appropriate, post on the company intranet site.  Provide a signature page or acknowledgment of receipt to ensure receipt by all individuals and retain such records If more than 10% of the company workforce speaks a primary language other than English, employers should translate and distribute the policies in that language. Step 5:  Training is the Cornerstone of Prevention Employers should make sure to provide training to all employees regarding these new policies and issues raised by the FEHA amendments, including proper complaint and investigation procedures. Further, employers should include all written new policies in new-hire paperwork during the onboarding process and train appropriate personnel to respond to potential complaints. For more information or to initiate a review of your own employment policies and procedures, please contact the authors or your Polsinelli attorney.

A well-drafted employee confidentiality and non-disclosure agreement can protect confidential information from flying out the door with current and former employees. Employers should, however, carefully define the “confidential information” sought to protect. A boilerplate definition of “confidential information” may risk a seemingly routine agreement invalidated for chilling discussions of wages and other protected activities under the National Labor Relations Act—even for non-union employers. Take the 2014 case of Flex Frac Logistics, LLC v. NLRB from the Fifth Circuit Court of Appeals. Flex Frac—a non-union employer—required employees to sign confidentiality agreements that prohibited the dissemination of “Confidential Information” outside of the company. Flex Frac’s agreement defined its “Confidential Information” to include “our financial information, including costs, prices; current and future business plans, our computer and software systems and processes; personnel information and documents, and our logos, and art work.” A former Flex Frac employee filed a charge with the National Labor Relations Board, alleging that the company agreement violated the NLRA because it prohibited employees from discussing wages. An administrative law judge and the NLRB found that Flex Frac’s confidentiality agreement violated the NLRA, despite the fact that the agreement contained no direct reference to wages or other terms and conditions of employment. The agreement was deemed “overly broad” for including language that an employee could reasonably interpret as restricting the exercise of Section 7 rights, which include discussions of wages with other employees and third parties to concertedly seek higher wages. In enforcing the Board’s order, the Fifth Circuit reasoned that, by including such phrases as “financial information” and “costs,” the confidentiality clause necessarily included wages, which created the inference that the agreement prohibited wage discussion with outsiders.  Further, the agreement gave no indication that some personnel information, including wages, were outside its scope, and that by specifically identifying “personnel information” as a prohibited category, Flex Frac implicitlyincluded wage information within the ambit of the restrictions. Importantly, the Fifth Circuit stated that the outcome might have been different if Flex Frac had included a disclaimer noting explicitly that the prohibitions of the agreement were not intended to prohibit the employee form discussing information pertaining to the terms, conditions, wages, and benefits of her employment with other employees or third parties. Ultimately, employers should consider some type of disclaimer language in confidentiality policies and agreements to avoid the risk of those agreements being deemed unlawful. Indeed, even confidentiality agreements that do not expresslyprohibit discussing the terms and conditions of employment may run afoul of the NLRA and create liability. Such disclaimer language should take heed of the Fifth Circuit’s reasoning, and note that the definition of “confidential information” is not meant to include discussions of the terms, conditions, and benefits of their employment.

The presumptive appropriateness of a single site unit of production and maintenance employees has for many years been a given under well-established law of the National Labor Relations Board. J & L Plate, Inc., 310 NLRB 429 (1993). The NLRB typically defines a production and maintenance bargaining unit using the description “all hourly paid production and maintenance employees” employed at a designated location. This unit description can be found in numerous NLRB cases. See e.g., Allis Chalmers Corp., 237 NLRB 290 (1978).  Production operations and maintenance operations were typically not separated for unit purposes, but rather grouped together and distinguished from other types of work (e.g., building and construction). Background In Specialty Healthcare, 357 NLRB No. 83 (2011), the NLRB formulated a new standard for determining appropriate bargaining units. Under this decision, if a petitioned-for unit is for a clearly identifiable group of employees, the Board will presume the unit is appropriate and it falls to the employer to show that a larger group of employees share an "overwhelming" community of interest with those in the petitioned-for unit. Although Specialty Healthcare involved an acute care hospital, the NLRB applied this test in Nestle-Dreyer’s Ice Cream, Inc., 361 NLRB No. 95 (2014). The NLRB reasoned that maintenance employees were identifiable as a separate group: they formed their own department; worked in different job classifications; used different skills; and performed functions different than production employees. Further, explained the NLRB, the employer failed to demonstrate that maintenance employees shared an “overwhelming community” of interest with production employees because there was no significant interchange between production and maintenance employees and they did not have common supervision with production employees. Maintenance employees, in the NLRB’s view, did not constitute an arbitrary grouping of employees and a bargaining history for a production and maintenance unit was inadequate to prove that production and maintenance employees shared an overwhelming community of interest with one another. Recent Decision The United States Court of Appeals for the Fourth Circuit recently affirmed the Board’s decision, finding that the maintenance unit was appropriate and that the employer unlawfully refused to bargain for this unit. Nestle-Dreyer’s Ice Cream, Inc., v. NLRB, 2016 WL 1638039 (April 26, 2016). The Court held that the Board acted within its discretion, and rejected all of the employer’s contentions.  It first concluded that the NLRB had not given controlling weight to the extent of the union’s successful organization because maintenance employees shared community-of-interest factors separate and apart from production employees. The Court next said that the NLRB had not failed to provide a reasoned explanation for its adoption of the overwhelming community of interest test, which, according to the employer, resulted in a “repudiation of more than forty years of precedent.” This was because the NLRB had done no more than clarify its unit-determination analysis. The Court went on to reject the employer’s remaining arguments that it was unreasonable for the NLRB to use the same overwhelming community of interest test in this context that it has historically used in the context of accretions and that the issue of whether to adopt the overwhelming community of interest test had not been before the NLRB in Specialty Healthcare. In sum, the Court concluded that the Board did not violate the Administrative Procedure Act. The decision of the Fourth Circuit is part of a trend to approve so-called “micro units” as appropriate for purposes of collective bargaining. This trend may result in union petitions for smaller units that reflect the extent of the union’s efforts to successfully obtain support.

Compliance with the Family and Medical Leave Act (“FMLA”) continues to cause employers frequent confusion and consternation. Even human resources professionals well-versed in the FMLA’s ins and outs throw their hands in the air in exasperation over how to handle a unique leave situation. For those of you who can relate, the Department of Labor (“DOL”) has issued its new Employer’s Guide to the Family and Medical Leave Act (“Guide”) to, according to the DOL, “provide essential information about the FMLA, including information about employers’ obligations under the law and the options available to employers in administering leave under the FMLA” and “increase public awareness of the FMLA.” The 76-page Guide should be a useful tool for employers. It is organized in chronological order and tracks the regulations, from analyzing coverage and eligibility issues through an employee’s return to work. One of the early pages of the Guide sets forth “The Employer’s Road Map to the FMLA,” providing a quick-reference flowchart of the FMLA cycle and referencing required forms and notices. Each section discusses the steps in the FMLA process and includes helpful “Did you Know?” sections that touch on issues employers may overlook or not be aware of, along with practical examples. For example, the Guide discusses the certification process and suggests what an employer may and may not do in connection with the certification paperwork it receives (e.g., authentication, clarification, etc.). The Guide also provides an in-depth analysis of military caregiver leave—often a less familiar area for employers. In addition, the Guide references the specific FMLA regulations applicable to each section and includes illustrations of the forms and notices required for each step of the FMLA process. Employers should keep an electronic version of the Guide handy, as the Guide links to the applicable FMLA regulations, notices, and forms. Overall, for those new to handling the process and seasoned human professionals alike, the Guide may help to navigate the FMLA process. The Guide, however, does not provide any guidance beyond the letter of existing regulations. And, stay tuned—the DOL has indicated that it will be issuing a new FMLA notice poster soon.

As we have noted in prior blog posts, the Department of Labor (DOL) anticipates soon publishing and making effective its final amendments to the so-called “white collar exemption” regulations, which define the FLSA exemptions for certain executive, administrative, and professional employees. The primary anticipated change relates to the minimum salary amount to meet the white collar exemptions. Currently, to qualify for the white collar exemptions, an employee must receive a minimum of $455 per week on a salary basis (the equivalent of $23,660 annually). The proposed regulations dramatically increase that amount to about $970 per week ($50,440 annually). The DOL has also proposed mechanisms to adjust the minimum salary level annually—tied to either the 40th percentile of weekly earnings for full-time salaried workers or the Consumer Price Index. As with other pending significant executive and legislative action in this presidential election year, executive (agency) actors and Congress are maneuvering to either implement or thwart the proposed regulations. On March 14, somewhat ahead of schedule, DOL sent the final regulation to the Office of Management and Budget (OMB) for OMB’s review. The length of time for OMB’s review varies, but usually ranges from 30 to 60 days. Most likely, then, the final regulations will be revealed before mid-May. Commentators have speculated about the motivation for this accelerated action by DOL (as well as other executive agencies): the Congressional Review Act. Under the Act, Congress has 60 legislative days to veto (via a resolution of disapproval) the proposed regulation. Of course, the disapproval may be overridden by Presidential veto. Note that legislative days are limited, and could cause a resolution of disapproval to be addressed by President Obama’s successor. If that successor is one of the Republican contenders, it appears likely that a Congressional resolution of disapproval would stand, nullifying the final proposed regulation and the accompanying increase in the salary levels. If, however, a resolution of disapproval reaches President Obama (or a Democratic successor), it would face likely veto. Congress isn’t waiting around for OMB to complete its review of the regulations. On March 18, House and Senate Republicans introduced the “Protecting Workplace Advancement and Opportunity Act,” which would nullify the proposed changes to the white collar regulations, require DOL to conduct an economic analysis of its impact, prohibit automatic increases in the salary level, and require that future changes to the duties test be subject to notice and comment. The proposed legislation is broader than a mere resolution of disapproval would be—it provides for prospective limitations on DOL’s efforts to modify the white collar duties test and otherwise limits DOL’s ability to implement automatic changes to the regulations. These remaining disputes over the final regulations provide employers additional time to review currently exempt white collar employees, and consider and prepare to implement changes to classification or operational practices to accommodate the anticipated increase in salary requirements under the proposed regulations.

On April 7, 2016, the U.S. Citizenship and Immigration Service (USCIS) announced that it had received “enough” H-1B petitions to reach the statutory cap – 236,000 for the combined 65,000 visas for fiscal year 2017 and the 20,000 additional petitions filed under the advanced degree exemption. On April 9, the lottery process – the computer-generated random selection system – selected the 85,000 and receipts are now being received for those petitions selected. The statistics are stark: there were, once again, more than three times the number of H-1B petitions submitted than will be selected.Multiple employers in nearly every professional field are waiting to find out if their lottery ticket is a winner: if their engineer, health care analyst, accountant, winemaker, international financial analyst, IT genius, etc. that they need for their business can be hired. Over two thirds will be very disappointed. While there is no perfect solution, there are 6 visa options that, depending on the facts, may be at least a temporary solution. 1. Cap Exempt H-1Bs/“At” Exemption/Concurrent H. Certain entities and certain foreign nationals are exempt from the H-1B caps and may provide a way to avoid the cap. These examples are: employees of institutions of higher education; employees of nonprofit affiliates of institutions of higher education ( including some hospitals); employees of government or non-profit research organizations; employees who are employed by a for-profit entity or a non-profit non-affiliated entity, but who are placed “at” an exempt entity, such as an affiliated hospital, university or research facility, to perform work “directly and predominately to further the essential purposes of the qualifying exempt institution;” employees who have an H-1B for part-time work for an exempt entity may also work for a non-exempt employer who has filed a concurrent H petition for the employee; that concurrent H-1B petition is exempt from the cap; an employee who was counted against the H-1B cap for a job in the last 6 years and has not been outside the U.S. for one year. 2. F-1 Optional Practical Training (OPT). Graduates from U.S. universities qualify for one year of work on their student visa in their field on OPT. Those who have a STEM degree may work in their field for an additional 17 months if the employer is enrolled in E-Verify. Effective in May, those with a STEM degree may work an additional 24 months; those on a current 17 month STEM extension may have it increased to 24 months if they still have 5 months remaining on the original extension. More employers may benefit not only due to the extension, but also because prior degrees may be considered, not just the most current degree. This may enable a STEM extension for a foreign national with, for example, an MBA (not a STEM), and a prior STEM (engineering) bachelor’s degree. 3. NAFTA Visa (“TN”). A TN is an excellent option for a Canadian or Mexican professional. Jobs that qualify are listed in Appendix 1603.D.1 to NAFTA and include most jobs that are typical for H-1Bs. A TN is good for 3 years, is renewable and is an economical, efficient solution for these nationals. 4. O-1A Visa: Extraordinary Ability. Certain foreign nationals who qualify for an H‑1B specialty occupation may qualify for the O-1A if they have “extraordinary ability or achievement” in science, arts, education, business, athletics or the motion picture/television industry. There is no quota for Os and if your candidate has an advanced degree and national or international recognition, an O can be a viable alternative and is worth exploring. 5. J-1 Visa for Intern or Trainee.Foreign national employees on a J visa are typically brought in through an umbrella organization that serves as the sponsor and the employer is the host company. While these are short-term visas (12 months for an intern, 18 for trainee), and typically require a training program, some employers have found them very useful, particularly if the specific J does not require the person to return to their home country for two years. 6. Country Specific Visas: E-3/H-1B1. An E-3 visa is available to Australian nationals for work in a specialty occupation, just like those for an H-1B. While there is a quota, it almost never fills. The H-1B1 visa is available for professionals from Chile (1,400 annually) and Singapore (5,400 annually). In addition to these 6 options, there may be others, such as Curricular Practical Training for part-time work if your proposed employee can enroll in a new degree program as an F-1; an L visa, if the desired employed is employed by an affiliate of your company overseas; or even an E-2 investor or trader visa. All of the visa options are fact-specific and the utility and efficacy of each is driven by the needs of the employer and the country and abilities of the foreign national. The key for the employer is to make that evaluation with an immigration lawyer, exploring all options before deciding to give up on hiring a very desirable employee.

The scope of the Americans with Disabilities Act (“ADA”) was broadened through the ADA Amendments Act of 2008 (the “Amendments”). Prior to the Amendments, various Supreme Court holdings had narrowed the scope of what qualified as a disability under the ADA. The Amendments rejected a number of these rulings and expanded what qualified as a disability.  Since then, it had been an open issue as to whether obesity, in and of itself, could qualify as a disability under the ADA. The EEOC Compliance Manual has indicated that the EEOC believed extreme obesity could be a disability in and of itself. This was the issue presented to the Eighth Circuit Court of Appeals in Morriss v. BNSF Railway Company. Mr. Morriss, who was conditionally hired as a machinist for BNSF, was 5’10” tall and weighed over 270 pounds. As part of BNSF’s standard medical review, Mr. Morriss participated in two medical examinations, which resulted in findings that his body mass index (“BMI”) was 40.9 and 40.4, respectively. As a result, BNSF revoked the conditional offer of employment based on its policy of not hiring individuals for the machinist position who have a BMI of 40 or greater. Mr. Morris subsequently filed suit against BNSF alleging that his obesity was a disability under the ADA. Ultimately, the case hinged on the meaning of the term “disability” under the ADA. Rejecting Mr. Morriss’ claim that his obesity was a stand-alone disability, the Eighth Circuit noted that Mr. Morriss admitted that his obesity was not caused by an underlying condition, and that it did not result in any physical limitations. As a result, the Court focused on the EEOC’s interpretive guidance, which states that physical characteristics like weight do not qualify as disabilities unless they are (a) outside a “normal” range and (b) result from a physiological disorder. As a result, the court held that even severe obesity does not qualify as a disability unless it results from an underlying physiological disorder. The Eighth Circuit’s holding provides some much needed clarity on this issue following the Amendments. Nevertheless, the ruling is narrow. Specifically, whether extreme obesity is the product of an underlying physiological condition generally requires inquiry of the affected employee or a medical examination. As a result, employers must still use caution before making employment decisions based on an individual’s weight.

Employers take heed: the landscape with respect to state marijuana laws is shifting, seemingly week to week. Currently, almost half of the states have legalized marijuana in some form or fashion, with four states and the District of Columbia legalizing the drug for recreational use.   With laws respecting the use of marijuana for either or medical or recreational purposes constantly cropping up, employers should be aware of their respective rights and obligations. Below are four things employers should keep in mind about marijuana and the workplace. Drug-Free Workplace Policies Remain Valid Zero-tolerance policies in the workplace are explicitly allowed pursuant to the laws of the majority of states who have legalized marijuana either for recreational or medical use. Employers should thus ensure that they have implemented a drug-free workplace policy. In order to further protect themselves, employers should disseminate the policy to all employees and direct employees to sign a form acknowledging their receipt of same. Employers Can Terminate Employees Who Use Marijuana at Work Marijuana has been legalized for recreational use in Alaska, Colorado, Oregon, Washington, and the District of Columbia. However, marijuana is still classified as a Schedule 1 drug pursuant to the federal Controlled Substances Act, and is thus illegal under federal law. As a result, employers can legally terminate an employee who uses, sells, possesses, or transfers marijuana in the workplace in violation of a workplace policy. And employers who do business with the federal government may be required to terminate any employee who possesses, uses, or sells marijuana at work.   Carefully Consider the Marijuana Cardholder Even though marijuana remains illegal under federal law, almost half of the states have legalized medical marijuana in some form or fashion. Problematically for employers, the laws of at least three states (Arizona, Delaware, and Minnesota) provide that an employee cannot be terminated for testing positive for marijuana metabolites alone, so long as that employee is in possession of a valid medical marijuana card. Employers in those states should be able to demonstrate evidence of an employee’s impairment in the workplace prior to discharging them for testing positive for marijuana metabolites. Furthermore, at least nine states (Arizona, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New York, and Rhode Island) prohibit employers from discriminating against employees on the basis of their possession of a medical marijuana card. Accordingly, employers in those states cannot discipline or terminate an employee simply for being a marijuana cardholder. Marijuana Use in the Workplace Is Not a Disability Accommodation It is currently unclear how the Americans with Disabilities Act’s (ADA) reasonable accommodations requirements will interact with state marijuana laws. But keep in mind that if an employee informs their employer that he or she is a medical marijuana user, the employer likely has been put on notice that the employee is potentially disabled pursuant to the ADA. Even though the ADA does not require an accommodation based on an employee’s use of medical marijuana, it does afford certain protections to employees (and applicants) with disabilities, such as the confidentiality of medical information.

Experienced business people and lawyers are aware of the thorough due diligence necessary during the acquisition of any business. When a purchaser is exploring the acquisition of a business whose employees are represented by a union or by multiple unions, the purchaser is confronted with risks and financial exposure that require additional and sometimes complex due diligence. The first document that a purchaser must explore when considering the purchase of a business that has employees who are represented by a union or unions is the collective bargaining agreement or agreements (“CBAs”) by which the potential seller may be bound.CBAs detail the wages, hours and working conditions covering employees represented by a union or unions. However, because the National Labor Relations Act (“NLRA”) governs the interactions between unions and employers, a CBA is different from other contracts. As an example, a CBA does not expire when the term of the CBA is over. Absent a specific provision in the CBA, it continues indefinitely and an employer may not change its terms without first bargaining with the union to impasse. Second, a purchaser should determine whether the prospective seller is obligated to contribute to multi-employer pension plans.The CBAs will reflect whether the potential seller is so obligated, but the details of the employer’s obligations are set out in separate pension plan trust documents. Multi-employer pension plans are defined benefit contribution plans to which many employers contribute on behalf of their union employees. Most multi-employer pension plans are underfunded; this means that they have insufficient assets to cover the defined retirement benefits they have promised to pay employees. If an employer that contributes to a multi-employer pension plan ceases to make pension contributions or ceases to have an obligation to make contributions, then it is assessed “withdrawal liability.” The calculation of withdrawal liability is complex, and requires the use of an independent pension actuary. In many instances, the actuarial calculations result in significant liability that may have a material effect on the potential purchase of a business. Third, a purchaser must determine whether it is prepared to adopt the CBA or CBAs already in place between the potential seller and its union or unions.If the purchase is a stock purchase, assumption of the CBAs is automatic. If the purchase is an asset purchase, then the purchase agreement must reflect whether or not the purchaser is assuming the CBA, or any of the obligations under the CBA, and must detail which of the contract obligations, including the pension obligations, are the responsibility of the purchaser and which are the responsibility of the seller. Fourth, the purchaser should determine whether it wishes to hire the existing workforce, but not adopt the CBA. A purchasing employer may hire the existing workers, but not assume the existing CBA, although the process for achieving this result has become more difficult due to recent National Labor Relations Board (“NLRB”) decisions. If a purchaser announces in advance of closing that it does not intend to adopt the existing CBA, sets forth in detail the initial terms and conditions of employment that it intends to put in place, and offers to bargain with the union about possible changes to those terms and conditions after it acquires the business and begins operations, then, based on traditional interpretations of the NLRA, it would not have an obligation to adopt the existing bargaining agreement. However, recent memoranda by the NLRB’s General Counsel have left open the question of whether an employer may be required to adopt the CBA when it is “perfectly clear” it intends to hire all or substantially all of the existing workforce. Because this is a dynamic area of the law, employers should take particular care before attempting to hire an existing workforce but not adopt the existing CBA. The above discussion outlines only some of the potential issues facing purchasers who wish to acquire a business that is bound by union agreements. Purchasers must undertake careful due diligence, with the assistance of experienced labor counsel and pension actuaries, to analyze the risks associated with purchasing a unionized business.

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.

It happens often: a key employee notifies her supervisor that she has accepted a job with a competitor and will be leaving the company.  The initial reaction is panic—“she can’t leave, she knows everything about our business, she knows all of our trade secrets, and she knows our confidential business strategies.”  A call is made to outside counsel and everyone gears up for litigation against the former employee and her new employer.  But, is that the only course of action? Make every reasonable effort to retain the employee. If you are dealing with a key employee whose departure will be costly to the organization, you should assess whether it is possible and desirable to retain the employee.  Do not automatically assume the employee is out the door and cannot be convinced or enticed to stay.  Whether it is an issue of compensation, additional vacation time, freedom to work on projects of her choosing, or some other non-monetary perk or benefit, employers should fully explore all available options at their disposal to retain the employee.   Negotiate assurances with the departing employee. If retaining the key employee is not an option, meet with the person, ideally prior to the exit interview, to address the departing employee’s post-employment obligations with respect to the employer’s trade secrets and confidential information:   •    Explain the importance of preserving the secrecy of the trade secrets and confidential information they had access to or developed during their employment.   •    Discuss all confidentiality, nondisclosure and covenants not to compete that the person may have executed.   •    Ask them if they have any questions or concerns about any areas of their work and any matters which may not be clear to them.   •    Find out where the departing employee is going, what they will be doing, and when they plan to begin work for the new employer. •    Ask the employee two important questions:  1) are you certain that you can perform your new job without using or disclosing our trade secrets and confidential information? 2) will you notify us if you are ever asked to use or disclose any of our trade secrets or confidential information?   •    Have at least two persons present for the meeting and document the meeting with a checklist that the employee initials to indicate that you covered the topics in your meeting. Contact the new employer. Consider contacting the new employer after your meeting and before the employee’s start date.  The purpose of this contact is to inform the new employer that the departing employee executed one or more written agreements in which they agreed not to use or disclose confidential information and trade secrets belonging to the company.  Describe the former employee’s work in general terms, but provide enough specificity to place the new employer on notice of the areas that you are most concerned about.  Detail the efforts you have undertaken to obtain assurance from the departing employee that she will honor her obligations of confidentiality and that she has provided assurance that her new job will not require her to use or disclose your trade secrets.  Request confirmation from the new employer that they will not ask nor allow her to use or disclose any of your trade secrets in her work for them. Taking these steps will not eliminate the need for litigation in every departing employee situation.  Sometimes, litigation may prove to be the only means of protecting against imminent use and disclosure of your trade secrets.  But, when followed these steps may reduce the number of lawsuits filed merely out of an abundance of caution, because an employee “inadvertently” disclosed trade secrets, or because a new employer was not aware of the former employee’s previous work.  And if followed, these steps will strengthen the foundation of any trade secret litigation that you may be forced to initiate. Next week’s blog post will discuss the steps to follow preparing for such a lawsuit.

Separation and severance agreements are intended to provide finality to the employment relationship. Without careful drafting, however, this goal can be frustrated by the National Labor Relations Act (“Act”), which applies to non-management employees, both union and non-union, including when employees sign separation or severance agreements. In Quicken Loans, Case 28-CA-146517 (Mar. 17, 2016), an Administrate Law Judge of the National Labor Relations Board invalidated three common severance agreement provisions (a confidentiality clause, a company property return clause, and a non-solicitation of employees and customers clause) as over broad and chilling the exercise of rights protected by the Act. Understanding why these common severance agreement provisions were invalidated can assist with drafting non-management severance agreements to include lawful restrictions protecting business information and assets. Confidentiality Clause The Act permits employers to prohibit current and former employees from misappropriating trade secrets and other legally protected confidential and proprietary information.  A confidentiality clause requiring secrecy of documents or information not maintained in secrecy by the employer, or which concern wages, work rules, or other terms and conditions of employment, should not be subject to a post-employment confidentiality clause.  Company Property Return Clause Employers have the right to demand that departing employees return computers, phones, and other tangible and intangible property (including documents containing trade secrets and legally protected confidential information) to the employer.  Company property subject to return, however, should not include employment handbooks and manuals with generally applicable employment policies, which generally do not qualify as legally protected information.   Non-solicitation of Employees Clause Employers should avoid separation agreement language prohibiting solicitation of employees “for any reason,” or for specified reasons that are an unlawful restraint of trade under applicable state law.  Under the most recent NLRB administrative rulings, an over broad non-solicitation clause may reasonably chill communications about wages and working conditions, and inhibit NLRB investigations, protected by the Act. When drafting employee severance and separation agreements, employers should be mindful of the breadth of post-employment restrictions and how they may implicate rights protected under the Act.

Human resources employees might assume they cannot be held individually liable for actions taken within the scope of their employment. A recent decision by the Second Circuit Court of Appeals, however, calls this assumption into question, at least with respect to the Family and Medical Leave Act (“FMLA”). In Graziadio v. Culinary Institute of America, decided on March 17, 2016, the court found that an HR director can be individually liable under the FMLA under certain circumstances. In June 2012, while working for Culinary Institute of America (“Culinary”), Cathleen Graziadio requested and took leave under the FMLA to care for her son who was suffering from diabetes. As required under the FMLA, she submitted a medical certification supporting her need for leave to care for him. Then, as she was preparing to return to work, her other son fractured his leg, which necessitated a second leave of absence for Graziadio.  During her second leave of absence, Graziadio requested that she be allowed to return to work on a reduced, three-day week schedule for a few months. It was at this point that Shaynan Garrioch, Culinary’s Director of HR, got involved. She sent Graziadio a letter stating that Graziadio’s FMLA paperwork did not justify her absences from the workplace and that she needed to provide updated paperwork or she would not be allowed to return to work. Although Graziadio made repeated attempts to determine how she could remedy the deficiency in her paperwork, Garrioch merely reiterated the deficiencies in her documentation. Attempts to coordinate a meeting between Garrioch and Graziadio to discuss Graziadio’s return to work also failed. Ultimately, Culinary terminated Graziadio for abandoning her position. Graziadio filed suit in district court, bringing claims against the company and against Garrioch individually for FMLA interference and retaliation. The court granted summary judgment in favor of Garrioch, finding that she was not an “employer” under the FMLA, and, therefore, could not be held individually liable. Not so fast, according to the Second Circuit, which found that Garrioch couldbe classified as an “employer” under the FMLA based on the economic-realities test if she possessed the power to control, in whole or in part, the worker’s rights under the FMLA. The Second Circuit concluded that “a rational trier of fact could find that Garrioch was an ‘employer’ in economic reality and under the FMLA.” Consequently, it vacated the district court’s dismissal of FMLA claims against Garrioch and remanded the case for further proceeding consistent with its opinion. HR directors should be vigilant when complying with the requirements of the FMLA so as to avoid exposure to individual liability. This warning also extends to supervisors, managers, and others who possess the power to control a worker’s FMLA rights.

On April 4, 2016, California Governor Jerry Brown signed into law a bill that will increase California’s minimum wage statewide to $15 per hour by 2022. The Governor and Legislature reached a compromise deal in recent weeks to thwart a scheduled ballot initiative that threatened a more aggressive increase to the state’s minimum wage.   The new law gives the Governor discretion to delay the scheduled minimum wage increases for one year if there is an economic downturn or budget shortfall. It also gives businesses with fewer than 26 workers an extra year to comply with the wage increase. The current $10 per hour minimum wage will increase according to the following schedule (if no increases are delayed by the Governor): $10.50 per hour on January 1, 2017, for large businesses (January 1, 2018, for smaller employers with 25 employees or less); $11 per hour on January 1, 2018, for large businesses (January 1, 2019, for smaller employers); $12 per hour on January 1, 2019, for large businesses (January 1, 2020, for smaller employers); $13 per hour on January 1, 2020, for large businesses (January 1, 2021, for smaller employers); $14 per hour on January 1, 2021, for large businesses (January 1, 2022, for smaller employers); $15 per hour on January 1, 2022, for large businesses (January 1, 2023, for smaller employers); Future wage increases will be tied to inflation as measured by the national Consumer Price Index, up to 3.5% per year and rounded to the nearest 10 cents. The law also provides for In-Home Supportive Services employees to receive up to three days of paid sick leave annually on a phased-in schedule beginning in July 2018: one sick day in July 2018, a second day when minimum wage hits $13 per hour, and a third day when minimum wage reaches $15 per hour. While several municipalities have passed legislation increasing the minimum wage in recent years to offset higher costs of living, the new law will take effect statewide. California is the first state in the nation to pass such a minimum wage, in response to a growing demand to improve working conditions for low-income workers. However, the law will affect not only those earning minimum wage, but also those employees who may currently be exempt from overtime under state law. Currently, to be exempt from overtime under California law, employees must not only perform exempt duties but also must earn at least two times the state minimum wage for full-time employment. With the current $10 minimum wage, that calculates to a salary of at least $41,600. With each increase in minimum wage, the minimum salary amount for exemptions will similarly increase—for example, with the increase in minimum wage to $10.50, the exempt level will increase to $43,680. Once the full $15 minimum wage is phased-in, the minimum salary for an exempt employee in California will need to be at least $62,400. If the salaries of exempt employees do not keep pace with the minimum wage increases, then more employees will fall below the salary threshold and need to be reclassified as non-exempt and eligible for overtime, meal and rest breaks, and other protections under California’s wage and hour laws. Similarly, minimum wage also affects commissioned sales employees who must earn 1.5 times the state minimum wage and more than half their income from commission. The increase in minimum wage will increase the amount of income these employees must earn to be classified as exempt. Because of these changes, it is recommended that well before the end of the year, employers with employees in California look closely at their compensation practices to make adjustments to pay as needed to comply with the new law, not only for low-income workers but also the exempt workforce. For further guidance on these issues, contact the author or your Polsinelli lawyer.

Employers with Kansas operations should be familiar with the 2013 amendments to the wage withholding and deduction provision of the Kansas Wage Payment Act (KWPA). The amendments added two new subsections to expand when employers may withhold or deduct wages. The amendments were intended to allow more discretion to withhold or deduct wages for more reasons. However, the imprecise drafting of the amendments, coupled with Kansas Department of Labor (KDOL) regulations that have not been updated, have left several open questions. Here are three practical tips to consider. 1.   Have a “signed written agreement” in your new-hire paperwork for certain withholdings and deductions. The amendment permits employers to deduct for the following purposes, “pursuant to a signed written agreement between the employer and employee.” To allow the employee to repay a loan or advance which the employer made to the employee during the course of and within the scope of employment; To allow for recovery of payroll overpayment; and To compensate the employer for the replacement cost or unpaid balance of the cost of the employer’s merchandise or uniforms purchased by the employee. Before the amendments, employers needed only to obtain a “signed authorization” for certain deductions, including those for erroneous wage overpayments. Similarly, employers did not need a written authorization from employees to deduct or withhold wages for an employee’s repayment of a loan or advance, if the employee had requested it in writing. Now, in both scenarios, employers need a “signed written agreement between the employer and the employee.” Kansas employers should consider including such an agreement in its new-hire paperwork to cover these deductions and those that the unchanged KDOL regulations permit with a “signed authorization.” Without such a prospective agreement, employers could be left with few desirable options if an employee refuses to sign such an agreement. Employers should also consider a signature line for a company representative to sign the form during onboarding to avoid a potential argument from the employee or KDOL that the form does not constitute a “signed written agreement between the employer and the employee.” The third permitted deduction, for the “replacement cost or unpaid balance of the cost of the employer’s merchandise or uniforms purchased by the employee,” raises many unanswered questions. For example, how do we calculate “replacement cost”? Until further guidance is provided, Kansas employers should consider deducting wages only of the unpaid balance to avoid possible disputes over replacement-cost computation. 2.  KDOL regulations that state which deductions are not permitted are still in effect. Both the earlier and current versions of the KWPA permit deductions “for a lawful purpose accruing to the benefit of the employee” so long as the employer has a “signed authorization by the employee.” The regulations interpreting that provision remain in effect. In general, permitted deductions include those for contributions to employee welfare and pension plans, those made pursuant to a collective bargaining agreement, and similar deductions. However, deductions that KDOL states do not accrue to the benefit of the employee, and are not allowed (regardless if the employer has a signed authorization), include those for breakage or losses resulting from alleged negligent acts (among others). Kansas employers should continue the practice ofnotdeducting or withholding wages from current employees for these reasons. The ban on deductions for “breakage” or “alleged negligent acts” likely precludes wage deductions for repair costs to mobile phones or other electronic equipment. 3.  Exercise caution when withholding final wages to “recover” employer property. The amended statute permits Kansas employers to withhold “any portion of an employee’s final wages” for certain purposes.  The employer must provide the employee with “written notice and explanation” for the withholding. Employers may withhold final wages to “recover” the employer’s property provided to the employee in the course of the employer’s business, including computers, electronic devices, and mobile phones (among others). Employers may also withhold to recover “proprietary information such as client or customer lists and intellectual property.” Before withholding final wages for this reason, employers considering a trade-secret or unfair competition claim should question whether to withhold final wages as a tactic. Perhaps the company has a corresponding breach of a non-compete agreement, and such withholding could pressure the employee to comply with the agreement, but how will the employer ensure the proprietary information is fully recovered? The employer should also consider whether it wants KDOL to decide (via a wage complaint) such important issues such as whether the departing employee possesses proprietary information, which often involves complicated electronic discovery issues, or whether the information is proprietary or confidential in the first place. Due to these and other unanswered questions, employers should consult with counsel before implementing policies to withhold or deduct current or final wages.

The Worker Adjustment and Retraining Notification Act (“WARN”) requires an employer with 100 or more full-time employees to provide 60 days’ notice to all employees who will be affected by a mass layoff or plant closing at a single site. If the WARN notice requirement is violated, each affected employee is entitled to damages equal to compensation and benefits as defined under the Act for a period of 60 days. Nothing under the WARN Act, however, requires employers to continue to employ affected employees during the 60 day notice period. Subsequently, employers may “pay in lieu” of providing WARN notice. Before “paying in lieu” of notice, employers should consider all of the necessary elements in valuing the requisite payments under WARN. Failure to properly compensate affected employees may result in litigation, attorneys’ fees, and civil penalties. For these reasons, it is important to heed the following five “Warnings” when paying in lieu of providing WARN notice: Properly count the 60-day period.Affected employees are entitled to 60 days of compensation and benefits. Some jurisdictions require that damage calculations be measured by 60 work days rather than 60 calendar days, which can significantly affect an employer’s calculation of back pay and benefits under WARN. Back pay may not be equivalent to current pay. Back pay is defined under the WARN act as the higher of “the average regular rate received by such employee during the last three years of the employee’s employment” or the “final regular rate by such employee.” If an employer simply uses an affected employee’s current rate of pay to compute back pay, the employer may inadvertently violate WARN.   Benefits may include non-ERISA benefit plans.Benefits are defined under WARN to include all benefit plans that are subject to ERISA. Benefits, however, may also include non-ERISA benefit plans. Some jurisdictions require that non-ERISA benefit plans such as vacation pay policies and/or equity incentive plans be included in computing payments in lieu of providing notice.   Benefits also include the cost of medical expenses.Benefits also include “the cost of medical expenses incurred during the employment loss, which would have been covered under an employee benefit plan if the employment loss had not occurred.” To avoid liability under WARN, employers might want to consider extending health insurance coverage. Health benefits may not be extended to terminated employees. The applicable health insurance plan may not allow an employer to extend coverage to terminated employees. Employers faced with this situation may want to consider paying for the employees’ COBRA premiums for 60 days. Employers are well-advised to take precaution and seek counsel when considering “paying in lieu” of providing WARN notice. There are a number of risks associated with valuing payments under WARN that can inadvertently lead to legal claims.

On March 23, the U.S. Department of Labor issued a Final Rule that significantly expands reporting requirements by employers and their consultants and attorneys related to “advice” given regarding employees joining a union or collective bargaining.  As a result, employers and the consultants/lawyers they engage regarding union organizing activity or contract negotiations will be required to file reports with the Department of Labor within 30 days after entering into an agreement to provide reportable services, and the reports will be available to the public online.  The reports must include fees paid by the employers and fees collected by the consultants/lawyers. The Way It Was— Previously, when employers hired consultants (including lawyers) to provide advice and assistance related to employees’ rights to organize and/or engage in collective bargaining, the employers and consultants were required to disclose the terms of their agreements and the fees paid only when the consultants/attorneys had direct communication with employees.  Other activities commonly undertaken by consultants/attorneys were not reportable, such as written communications, strategy and tactics, and training or coordinating supervisor activity regarding a union organizing campaign or collective bargaining.  These activities were not reportable because they were deemed to be “advice.” The Way It Will Be — The revised rule substantially narrows the definition of “advice,” and the intended consequence is to make reportable many of the arrangements that were not reportable previously.  “Advice” that does not trigger reporting is “an oral or written recommendation regarding a decision or course of conduct.”  Arrangements under which a lawyer provides legal services or representation in court or in collective bargaining negotiations are not reportable.  However, any work or advice where the “actions, conduct or communications by a consultant [lawyer] on behalf of an employer that are undertaken with an object, directly or indirectly, to persuade employees concerning their rights to organize or bargain collectively” must be reported. The following situations were previously not reportable but must be reported under the revised rule: The consultant/lawyer coordinates the activities of supervisors; The consultant/lawyer creates persuasive materials or communications in any form to be disseminated to employees; The consultant/lawyer revises or edits employer-created materials to increase the persuasiveness of a document; The consultant/lawyer conducts seminars that assist employers in developing anti-union tactics and strategies to be used by the employers’ supervisors or other representatives; The consultant/lawyer develops or implements human resource policies or actions that have as an objective to, directly or indirectly, persuade employees. The following situations are examples that are not reportable: The consultant/lawyer counsels employer representatives on what they may lawfully say to employees, ensures a client’s compliance with the law, offers guidance on human resource policies and best practices, or provides guidance on NLRB practice or precedent; The consultant/lawyer provides advice on the legality of a persuasive document created by the employer; The consultant/lawyer conducts a seminar that does not develop or assist the attending employers in developing anti-union tactics or strategies to be used by them, but instead provides guidance; The consultant/lawyer conducts employee attitude/engagement surveys or union vulnerability assessments, under most circumstances; The consultant/lawyer provides “off-the-shelf” persuasive materials. Trade associations are not required to report when they select “off-the-shelf” persuader materials for their members or distribute newsletters to their member-employers.  However, trade associations must report if an association employee is a presenter in a reportable union avoidance seminar or they undertake persuader activities for a particular member-employer. The revised rule becomes effective on April 22, 2016, and it will apply to all arrangements and agreements, as well as payments and reimbursed expenses, made on or after July 1, 2016.

Recent NLRB decisions have expanded Weingartenrights – especially as they affect drug and alcohol testing procedures and an employer’s right to conduct a prompt test. For decades, union represented employees had the right to the presence of a union steward during an investigative interview that could reasonably lead to disciplinary action - so called Weingartenrights, named after the Supreme Court case, NLRB v. J. Weingarten, 425 U.S. 251 (1975). Non-represented employees do not currently have Weingartenrights. But the National Labor Relations Board (NLRB) has changed its position on application of Weingartenrights to non-represented employees four times over the past forty years – most recently inIBM, 341 NLRB 1288 (2004). Current NLRB General Counsel Richard Griffin is seeking to restore Weingartenrights to non-represented employees, Gen. Counsel Memo. 14-01. Weingartenrights apply to drug testing too. An employee has a right to consult a union stewardprior to taking a drug test. However, two recent NLRB decisions have required employers to delay any drug testing until the employee has had sufficient time to locate a union steward. In Ralph’s Grocery Store, Co., 361 NLRB No. 9 (2014), an employee refused to take a drug test without first discussing the test with his steward. Unfortunately no steward could be found in person or by phone in the fifteen minutes allotted by the employer. When the employee refused to be tested because he had been unable to speak with his steward, he was terminated. The NLRB concluded the employer violated the Act by terminating the employee because it should have delayed the test to give him more time to find a steward. Last August, NLRB held, for the first time, that Weingartenrights included a right for a union steward to be physically present for the alcohol or drug test so the employee can obtain advice about testing protocols. Manhattan Beer Distributors, L.L.C., 362 NLRB No. 192 (2015).  In Manhattan Beer, the employer, after concluding an employee “reeked of marijuana,” directed the employee to be tested for drugs. The employee spoke with his steward by phone and requested he accompany the employee to the test. However, the steward declined to give up his day off to be present for administration of the test. After a two hour delay, the employer demanded the employee submit to the test or be terminated. He refused - and was fired. The majority of the NLRB held that, an employer is not required to postpone the test indefinitely, but is required to wait a reasonable period of time for the employee to secure union representation to accompany the employee to the testing site. The NLRB pointed out that marijuana remains detectable for months so the Employer’s discharge of the employee for a delay of two hours was unreasonable and unlawful. The dissent argued the presence of another party in the midst of a physical administration of a drug or alcohol test poses “substantial risks of inaccuracy and adulteration”. The dissent also argued there was “no basis to extrapolate from the Supreme Court’s Weingartendecision that employees have a right to have a union representative for the actual administration of drug or alcohol testing.” These two cases present challenges for employers. How long must employers delay drug testing waiting for a steward? The majority in Manhattan Beer stated it would continue to take “careful account of the particular circumstances of each case.” Thus, the Board appears to concede that not all drug and alcohol testing situations are the same. Unlike marijuana, alcohol and many controlled substances can be difficult to detect after a number of hours. Therefore, while a lengthy delay awaiting a steward may be reasonable for marijuana, it may not be reasonable if alcohol or a drug other than marijuana is suspected. Nonetheless, some reasonable waiting period to secure a steward for alcohol or some types of drug testing is likely required. But the exact parameters are unknown. The Board majority in Manhattan Beer, noted that parties to labor agreements “are free to negotiate appropriate procedures – including having a union representative on call at all times that might include such testing.” But that suggestion, if implemented, doesn’t guarantee a steward will be present at the testing site. Employers should meet with labor unions representing employees to proactively anticipate and discuss the issues presented by these decisions. Weingartenprocedures can be modified if the union “clearly and unmistakably” waives Weingartenrights or procedures. Employers should seek to convince unions to agree to waive the right for an employee to insist a steward be present at the testing facility or agree to other accommodations. Agreements on drug and alcohol testing procedures could well lessen the risk of untimely testing of employees suspected of being under the influence and unlawful terminations for failure and refusal to be tested.

The maximum penalty that the Occupational Safety and Health Administration (OSHA) can assess for a violation of an OSHA standard has been a constant source of consternation within the agency as well as with workers’ rights advocates. The statutory maximum, which currently is set at $70,000 for willful and repeat violations and $7,000 for serious and other than serious violations, has remained unchanged since 1990. The Protecting America’s Workers Act (PAWA), first introduced by Senator Edward Kennedy in 2004, and reintroduced in each congressional session since 2004, sought to increase the maximum amount of statutory penalties as well as make other changes to the Occupational Safety and Health Act. In each congressional session, PAWA died in committee. But a little known section of the Bipartisan Budget Act of 2015, which authorized funding for federal agencies through September 30, 2017, will change all of this. Section 701 of the Bipartisan Budget Act of 2015 contains the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, which requires OSHA and most other federal agencies to implement inflation-adjusted civil penalty increases. The Inflation Adjustment Act requires a one time “catch-up adjustment” that is based upon the percent change in the Consumer Price Index in October of the year of the last adjustment and October, 2015. Subsequent annual inflation adjustments are also required. On February 24, 2016, the Office of Management and Budget issued guidance on the implementation of the Inflation Adjustment Act. This guidance set the catch-up adjustment multiplier for OSHA penalties at 1.78156 – which roughly equates to an increase in the maximum penalty per violation as follows: The Inflation Adjustment Act allows OSHA to request a reduced catch-up adjustment if it demonstrates the otherwise required increase of the penalty would have a negative economic impact or that social costs would outweigh the benefits. But given published comments from OSHA administrators over the years, which were openly critical of the current statutory maximum amount, the prospect for any such reduction request is remote. OSHA is required to publish the new penalty levels through an interim final rule in the Federal Register no later than July 1, 2016. The new penalty levels will take effect on August 1, 2016. Because OSHA is subject to a six-month statute of limitations, it is possible that violations occurring on or after March 2, 2016 will be subject to the new maximum penalty amounts if OSHA uses the entire six month period before issuing the citation and assessment of penalties. The Inflation Adjustment Act does not impact OSHA’s discretion to reduce a proposed penalty in accordance with its current procedures, which take into account the size of the employer, the gravity of the violation, the employer’s history of prior violation, good faith compliance and “quick fix” abatement measures. The Act also does not govern those States which have OSHA approved plans. However, because States have to establish that their plan is as effective as federal OSHA, one would expect that OSHA will develop guidance that requires the States to increase their maximum penalty levels to comport with the new federal penalty amounts. In the meantime, employers would be well-advised to conduct a self-audit of their workplace safety programs to ensure compliance with applicable state and federal OSHA standards.

Employers subject to collective bargaining agreements should consider how to address changes to health insurance and other plans and that arise during the term of the agreement. It is well established that no unlawful unilateral change occurs under Section 8(a)(5) of the National Labor Relations Act where an employer has a practice of sharing premium costs with employees according to a particular percentage, and simply allocates the carrier's premium increase in a manner that maintains that percentage. Maple Grove Health Care Center, 330 NLRB 775 (2000). Other changes to health insurance plans may entail something different than merely passing along increased costs on an agreed percentage basis. In those situations, the Board applies a different standard to allegations of unilateral changes. For example, in one case submitted to the Division of Advice, an employer announced that it was changing its short-term disability plan for all employees and would require all employees to pay 100% whereas previously the employer had paid 70%. During the course of collective bargaining, the employer and the union had agreed to a “me-too” arrangement whereby the employer could unilaterally change the provisions as long as the changes applied equally to all non-unit and unit employees as well. APL Limited, 2015 WL 2156793 (N.L.R.B.G.C.) (April 22, 2015). The union challenged the change on the ground that the employer had unilaterally changed terms and conditions of employment without bargaining (which it had). The Division of Advice directed that no complaint issue because the employer had “a sound arguable basis” for its position that the parties collective bargaining agreement permitted it to make the unilateral changes at issue. In other words, the basic issue was not whether there had been a unilateral change, but whether the employer’s position was defensible under the applicable agreement. The “sound arguable basis” standard means that changes to health insurance plans as well as other benefit plans will be found unlawful only if an employer cannot plausibly assert that its actions are permissible under the parties’ collective bargaining agreement. In practical terms, this means that when negotiating agreements employers should: 1) seek language that affords flexibility and allows modifications to benefit plans; 2) avoid provisions that require union approval for any changes or only after bargaining with the union or that state that any changes to be “equal or better” than those presently offered; 3) attempt to limit the employer’s obligation to one of notification only.

The new salary minimum for the so-called white collar exemptions for certain executive, administrative, and professional employees may soon take effect, according to the Department of Labor (DOL). Solicitor of Labor, M. Patricia Smith, was on record at a recent American Bar Association Fair Labor Standards Legislation Committee meeting that the DOL anticipates publishing the final amendments to the white-collar regulations by late spring or summer of 2016. The DOL is apparently committed to making the amendments effective before the end of the year. Under the current regulations, a white collar employee must be paid only $455 per week (equivalent to $23,660 annually) to meet the salary amount test for an exempt executive, administrative, or professional employee. In addition to the salary amount test, the salary basis test and duties tests must be met to satisfy the white collar exemptions. The anticipated change to the salary amount test will more than double the minimum threshold, to the 40th percentile of weekly earnings for full-time salaried workers. This would raise the salary threshold from its current level of $455 a week (the equivalent of $23,660 a year) to about $970 a week ($50,440 a year), based upon 2016 data. The DOL is also considering an alternative proposal to link the salary increase to the Consumer Price Index (Urban index). Under either standard, the minimum salary threshold would vary from year to year, and likely increase over time. Needless to say, this is a big change. Businesses trying to budget for an upcoming fiscal year will need to take into account this ready-to-be enacted regulation. This anticipated regulatory change will likely impact payroll budgets and general operations planning for employees who will not be in line for a pay raise to keep their exempt status. This regulation could also impact salary budgeting if employers change pay scales to maintain exempt status.

The Department of Homeland Security has released a much anticipated final rule, amending regulations on the F-1 nonimmigrant student visa optional practical training (“OPT”), for certain students with U.S. degrees in science, technology, engineering, or mathematics (STEM) fields. Significantly, the final rule allows qualifying F-1 STEM students who elect to pursue 12 months of OPT employment to extend that OPT period by an additional 24 months. Previously, such students could only apply to extend their initial OPT period by 17 months. The extension will be available for applications filed on or after May 10, 2016. One advantage of the new rule for STEM OPT students and their U.S. employers is the additional opportunities they will gain to submit petitions in the annual H-1B lottery, to obtain H-1Bs for the students. The extension recognizes American businesses’ need for STEM OPT students to fill skills gaps in the United States. In addition to the longer extension, the final rule also improves and increases oversight over STEM OPT extensions by, among other things, requiring employers to implement formal training plans, adding wage and other protections for STEM OPT students and U.S. workers, and allowing extensions only to students with degrees from accredited schools. As with the prior 17-month STEM OPT extension, STEM OPT extensions are only available for students employed by employers who participate in E-Verify. Under the new regulations, before applying for a STEM OPT extension, a STEM OPT student must work with his or her employer to complete and submit the new Form I-983. The form contains questions that determine a student’s eligibility for the extension, and requires that the employer outline the training plan for the OPT student. Specifically, the form requires: A description of the student’s role in the organization and how that role is related to enhancing the student’s knowledge obtained through her STEM degree; An explanation of how the assignments the student will receive will help the student meet his or her specific objectives for work-based learning; An explanation of  how the employer will provide oversight of the individual, with copies of training or other policies that guide such oversight and supervision included; and A description of how the employer will measure whether the student is acquiring the desired skills. Employers must also certify that the terms and conditions of employment (including compensation) for OPT students are commensurate with the terms and conditions of employment offered to similarly situated American workers. Employers are encouraged to consult their immigration attorneys to determine whether students on existing their OPT programs are eligible to apply for the extension and to ensure compliance with the new requirements.

Colorado, like a number of other states, has enacted a state statute that prohibits job action, such as termination of an employee, for engaging in lawful off-duty conduct during non-working hours. The Colorado statute contains two primary exceptions that allow employers to take job action if: (1) the off-duty activity relates to a bona fide occupational requirement or is reasonably and rationally related to the employee’s employment activities and responsibilities; or (2) is necessary to avoid, or avoid the appearance of, a conflict of interest with any of the employee’s responsibilities to the employer.  Employers in Colorado (and states with similar laws) should be mindful of case law that seeks to morph the exceptions to fit modern technology and social trends. Originally proposed by the tobacco industry to protect off-duty smokers from employment termination, the Colorado off-duty conduct statute has been consistently applied in a myriad of contexts far beyond off-duty smoking.  For example, last year the Colorado Supreme Court held in Coates v. Dish Network that an employer did not violate the off-duty conduct statute when it terminated an employee for smoking marijuana while off work, even though possession of marijuana is legal under state law in Colorado. Because possession of marijuana remains illegal under federal law, the court concluded that smoking marijuana was not lawful off-duty activity. In a recent case, Williams v. Rock-Tenn Services, Inc., the Colorado Court of Appeals addressed the question of whether an employee who was terminated for failing to attend a work-related meeting while he was on pre-approved vacation triggered protection under the off-duty conduct statute. The Colorado Court of Appeals affirmed the trial court’s dismissal of the claim, finding that the employee’s actions (missing a senior management meeting) were not protected under the Colorado statute. The court found that the employee’s allegations established that the conduct was reasonably and rationally related to his employment activities, and was therefore excepted from the statute. Specifically, required attendance at a meeting to discuss a failed audit of the plant the employee managed was inherently connected with the employee’s job. The court noted that the off-duty conduct statute is designed to protect employees from termination for private, personal activities, not from adverse employment consequences resulting from going on a vacation that conflicted with a meeting reasonably and rationally related to the employee’s job. The court noted that, while firing the employee for missing a post-audit meeting to take pre-approved vacation may seem unfair, it was within the company's business judgment to do so.

With the recent death of Supreme Court Associate justice Antonin Scalia, the highest court has lost its most staunch conservative voice.  His absence will likely impact the outcome of pending cases, including several employment law cases. There are several labor and employment cases that remain ripe for a decision before this new Court. Any opinion that Justice Scalia voted on but had not formally released as of his death is void and must be reconsidered. The remaining members of the court will be tasked with reconsidering those cases, and entering a new era (at least at the outset) of potential deadlock on galvanizing issues.  These likely 4-4 decisions, could result in the lower court’s decision standing. Or, if it chooses to follow historical precedent, the Court could order the cases reargued when a new justice is confirmed.  Of course, if the vote was not a “tie,” then the decisions will be issued this Term. Here is a look at several cases the Court has in store in the employment and labor context: Tyson Foods v. Bouaphakeo. Oral argument was already heard in this case, which involves whether differences among individual class members may be ignored and a class certified under Federal Rule of Civil Procedure 23(b)(3) (or a collective action certified under the Fair Labor Standards Act)  when statistical modeling is used that presumes all members are alike, or where the class contains hundreds of members that were not injured or have no legal right to damages.  Tyson is attempting to overturn a verdict of nearly $6 million in damages awarded to workers in a pork processing plant in Iowa, filed by a group of six plaintiffs on behalf of a class of current and former hourly workers. With Justices Kennedy and Kagan leading the discussion during oral argument, the outcome may not turn on a missing Justice Scalia vote.   Friedrichs v. California Teachers Association. More recently the Court heard argument on whether public employees who do not join a union can be required to pay an “agency” or “fair share” fee to cover costs that the union incurs, for example, for collective bargaining. This has been the law since the Court last ruled on the issue in its 1977 decision in Abood v. Detroit Board of Education finding such fees permissible. After oral argument, public employee unions were feeling nervous – the Court’s more conservative justices had appeared ready to overrule the Court’s Abood decision. Green v. Brennan. The question in this case is straight forward: whether under federal employment discrimination law the filing period for a constructive discharge claim begins to run when an employee resigns – which has been held by five circuits – or at the time of an employer’s last alleged discriminatory act that gave rise to the resignation – which three circuits have held. Following oral argument some found the Court’s focus to have shifted to what qualifies as a resignation, which is an answer the Court is expected to provide in resolving the circuit split. Gobeille v. Liberty Mutual Insurance Company.  Following oral argument in this case the consensus was there would notbe a unanimous opinion from the Court. The case presents a question of preemption under the Employee Retirement Income Security Act of 1973 (ERISA), but the focus of oral argument was on the Affordable Care Act. The Second Circuit invalidated Vermont’s all-payer database as preempted by ERISA. Now the question before the Court is whether ERISA preempts state statutes that provide for “all payer” health care databases which are “designed to provide comprehensive state-level information about the distribution of health care services provided in the state and the costs of providing them.” Spokeo v. Robins. This case involves a Virginia man who alleges that the internet “people search engine” published inaccurate information about him. The question is whether Spokeo having violated the Fair Credit Reporting Act, without more, gives a legal right (standing) to sue. Here again the Court was expected to be closely divided. There are additional cases that have yet to be heard by the Court but are on the docket this spring.  CRST Van Expedited v. EEOC involves the EEOC’s conciliation obligations, and is a closely watched case because of the largest fee sanction award that has ever been issued against the Commission in favor of an employer, at approximately $4.7 million.  Zubik v. Burwell is expected to see a split decision, as it addresses whether the government places an undue burden on religious nonprofits by requiring contraceptive-coverage.  Finally, not yet set for argument, MHN Government Services v. Zaborowski involves California’s arbitration-only severability rule and whether it is preempted by the Federal Arbitration Act. To see the outcome of these matters, please refer to our updated post from April 2017,here.

In recent years, churches, movie theaters, schools, and office buildings have all been affected by headline-grabbing violence.   Not all workplace violence makes the news, however.  The United States Department of Labor defines workplace violence as “any act or threat of physical violence, harassment, intimidation, or other threatening disruptive behavior that occurs at the work site,” noting that workplace violence may include anything from  “threats and verbal abuse”  to physical assaults and  homicide.  Workplace violence has its origins in many places, including acts of domestic violence that manifest in the workplace.  While no particular workplace is exempt, OSHA statistics reveal that significant injuries resulting from assault disproportionately affect the health care and social services sectors, while the Bureau of Labor Statistics notes that workplace violence occurs more frequently for individuals employed in the retail, transportation and protective service occupations.  Overall, nearly 2 million American workers report having been victims of workplace violence each year. Liability for workplace violence can occur in a variety of contexts, including under OSHA’s “general duty” clause, state workers’ compensation laws, and/or general theories of negligence.  Because many states have recently enacted and/or amended their conceal/open carry laws, and others have enacted some type of law specifically addressing the presence of guns at work, employers may want to review work place violence policies to ensure that the policies not only comply with the relevant state and local laws, but also consider providing training and/or drills to insure that workers know how to respond in the event of an actual or potential threat of violence. Workplace violence policies should account for all types of “violence”-ranging from verbal threats to physical assaults to gun violence.  Employers should consider supplementing workplace violence policies with policies designed to reduce tension in the workplace, including “open door” policies to air grievances and EAP counseling programs designed to allow for both counseling and support (recognizing that many instances of workplace violence arise in the context of domestic assault).   Employers should schedule regular drills so employees know how to react in the event a situation does arise.  In addition, workplace violence policies should include, at a minimum, the following provisions: Zero tolerance policy for possession of weapons, threats and/or violence Training for supervisors, HR and executives on how to recognize threats and respond appropriately Compliance with state law conceal/open carry, “parking lot” or other laws relating to the presence of guns in the workplace Anti-discrimination provisions indicating that employees will not be discriminated against due to firearm status, especially in those states where questioning on such factors is prohibited; If an employer leases space,   coordinating  with the owner of the property to comply with relevant laws Postings regarding any prohibitions on possession of firearms in connection with state law Procedures for reporting threats of violence or fear of violence in the workplace Compliance with any state laws relating to protection of domestic violence victims