Beginning on September 2, 2015, the Stop Credit Discrimination in Employment Act, which amends the New York City Human Rights Law, goes into effect and prohibits all New York City employers with four or more employers from running credit checks on most job applicants and current employees. Unlike “ban-the-box” legislation, which restricts when and how an applicant’s criminal history can be considered in the hiring process, the Stop Credit Discrimination in Employment Act prohibits employers from considering, in any way at any time, most applicants’ or employees’ credit histories, including credit scores, credit reports, details about credit accounts, late or missed payments, charged-off debts, bankruptcies, judgments, or liens. As of September 2, 2015, it is an unlawful discriminatory practice for a New York City employer (1) “to request or to use for employment purposes the consumer credit history of an applicant for employment or employee,” or (2) “[to] otherwise discriminate against an applicant or employee with regard to hiring, compensation, or the terms, conditions or privileges of employment based on the consumer credit history of the applicant or employee.”  Violations are subject to a private right of action by job applicants and employees, in addition to civil penalties. The New York City ban on credit checks does not apply to positions subject to credit checks under state or federal law or to jobs requiring bonding, security clearance, access to trade secrets, signatory authority or fiduciary responsibilities for over $10,000 in third party funds, and many IT security positions. Although several states and cities (e.g., California, Chicago, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) have already enacted laws banning credit checks in hiring, none are as restrictive as New York City’s law.  This strict credit check law comes on the heels of legislation signed on April 20, 2015, requiring the New York City Human Rights Commission to conduct at least five investigations per year using “testers” to apply for open jobs, in an attempt to identify private sector employment discrimination, including unlawful credit check discrimination. New York City employers should promptly review and update their credit check policies to ensure compliance by September 2, 2015 and consult with counsel on potentially applicable exemptions.

The Uber mobile app, which matches consumers requesting rides with nearby drivers, is available in over 200 cities worldwide.  Uber’s revolutionary business model has been a remarkable commercial success and has inspired sharing economy startups in a variety of fields—a phenomenon known as "Uberification."  This fundamental evolution in the delivery of goods and services has drawn the attention of the plaintiff’s bar like wolves into the flock.  Lawsuits challenging the staffing models underlying the sharing economy pose a substantial threat to its realized efficiencies.  Recent lawsuits  by Uber drivers argue that they are employees, rather than independent contractors, under California law, and thus entitled to overtime wages, unemployment, cost reimbursements, and other traditional employment benefits and protections.  Because these cases have broad implications for the emerging sharing economy, not to mention fair fares to and from your local airport, we will be tracking these cases in a recurring “Uber Watch” series. Riding the wave of litigation arguing for an expanded definition of employment in the franchise context, attorneys for Uber drivers seek to expand the definition of employment under California law to include Uber drivers classified as independent contractors.  If the drivers’ arguments are accepted, Uber would be subject to the wide range of legal obligations owed by an employer to its employees.  The costs associated with an expanded definition of employment could potentially upend the sharing economy business model of many ventures.   A handful of class actions have been filed against Uber in the Northern District of California and have been assigned to the same federal judge, the Hon. Edward Chen.  Despite asserting different employment-related claims under different California laws, many of these cases place at issue whether Uber’s drivers are employees or independent contractors.  Identifying a potential common issue, on May 14, 2015, Judge Chen directed counsel in several Uber employment cases to discuss how to prepare their cases for summary adjudication, or even a trial, on that question. While the Court’s suggestion of consolidated partial adjudication is not unprecedented, and may in theory serve judicial economy, any such adjudication must comply with the strict class certification requirements of Federal Rule of Civil Procedure 23.  The rigor of these requirements is amplified by the factual differences across cases, which compound factual variances within each case’s claims.  The Court’s desire for judicial economy must also cede to Uber’s Constitutional due process rights, which arguably extend beyond the procedural guarantees of Rule 23 when multiple cases are consolidated for class adjudication of a single issue.  Management remains perplexed as to why the court, in its neutrality and call for judicial efficiency, appears to lean towards the plaintiffs favor in these actions. Stay tuned for further developments in Uber litigation and other cases challenging staffing models outside the traditional employment relationship.

The U.S. Citizenship and Immigration Services (USCIS) announced on May 19, 2015 that the agency will temporarily suspend premium processing for all H-1B Extension of Stay petitions until July 27, 2015. This action reflects the need to shift resources in light of the upcoming Employment Authorization for Certain H-4 Spouses final rule, which will drain resources based on the expected initial high volume. The agency confirmed, however, that it will continue to premium process H-1B Extension of Stay petitions for requests filed prior to May 26, 2015. USCIS further stated that H-1B petitions subject to the H-1B cap that are requesting a change of status or consular notification will continue to be processed without incident. Still, suspension of premium processing may have a substantial impact on H1B workers over the next few months. Premium processing of a case allows a company to pay an extra $1,225 in addition to all standard filing fees for premium service.  This means an expedited response within 15 days. With the unavailability of premium processing, employers can expect extended processing times.  Adjudications of H1B filings are currently taking 2 months. The temporary suspension of premium processing is likely to impact H-1B employee summer travel plans as well as business trips.  Most H-1B workers applying for an Extension of Stay will also require a visa renewal the first time they travel abroad. A valid H-1B approval is required to apply for the new visa.  Accordingly a petition approval is necessary prior to traveling outside the United States. Employers are urged to contact immigration counsel to discuss these travel related implications and the overall impact of the suspension of premium processing. MAY 20, 2015

Over the past few years, the National Labor Relations Board (“NLRB”) has increasingly focused on employer handbooks and policies as part of employee protections under the National Labor Relations Act (“NLRA”). This focus impacts both non-union and unionized workplaces. As the NLRB has admitted, this effort is simply part of the NLRB’s goal to remain “relevant’ to the modern and increasingly non-union workforce. As a result, increased NLRB scrutiny over employer handbooks and policies is a legitimate concern for all employers. The NLRB’s recent focus on employee handbooks is illustrated in Macy’s and UFCW, Local 1445. The Administrative Law Judge ruled that provisions in Macy’s handbook restricting the use of employee information, barring employee use of the company’s logo and intellectual property, and requiring employees to consult with the company before participating in a government investigation violated Section 7 of the NLRA, which prohibits employer interference with employee rights to organize and engage in “protected and concerted” activities. Several handbook provisions limiting the disclosure and release of employee and vendor identifying information (e.g., names and home and office contacts) were also found to be over broad because they prevented employees from engaging in protected activity, such as talking to each other about wages and terms of employment or soliciting each other to join a union. The ALJ also found that a provision prohibiting employees from using the Macy’s logo was unlawful because it unlawfully prohibited employees from using an effective communication tool. In addition, the handbook provision requiring employees to notify company representatives before participating in a government investigation was unlawful because it chilled employee participation. Finally, the ALJ rejected Macy’s argument that its “safe harbor” or “savings clause” rescued the otherwise unlawful policies. The savings clause, which specifically stated that the handbook “is intended to comply with all federal state, and local laws, including, but not limited to … the National Labor Relations Act, and will not be applied or enforced in a manner that violates such laws” was deemed too broad to be effective. Macy’s was ordered to rescind and revise each provision found to be unlawful. The decision in Macy’s should concern all employers. The handbook provisions deemed unlawful in Macy’s, or some variation thereof, are often found in handbooks that are not regularly revised for compliance with NLRB rulings. Employers should review their policies governing confidentiality, employee conduct toward coworkers and management, employee use of company logos, email access policies, and at-will employment statements to ensure that such policies comply with the NLRA and the evolving NLRB guidance.

Most employers are keenly aware of the state and federal taxes they must pay to fund unemployment benefits.  Many employers routinely include “no contest” provisions in their separation agreements whereby they agree not to contest unemployment benefit applications.  While a “no contest” provision seems like an easy, no-risk and inexpensive bargaining tool, the inclusion of a “no contest” provision can expose an employer to potential liability. In 2011, Congress passed the Unemployment Insurance Integrity Act (“UI Integrity Act”) to reduce payments of unemployment compensation to ineligible claimants attributed to employer non-responsiveness to unemployment claim notices.  The UI Integrity Act required states to enact laws by October 21, 2013 to (1) enhance penalties for fraudulent unemployment insurance claimants; (2) revise the timing of “new hire” reports; and (3) impose new obligations on employers with respect to responding to unemployment insurance claim notices. States’ responses to the UI Integrity Act have varied.  To date, almost all states, with the exception of Missouri, have successfully enacted legislation to comply with the UI Integrity Act. In states such as Kansas, Texas, South Carolina, Washington and California, employers that have established a “pattern” of failing to timely or adequately respond to unemployment claim notices are penalized. Under the legislation in these states, if an unemployment compensation payment is made to a claimant and it is later determined that the claimant was ineligible, the employer’s unemployment insurance account will be charged with the overpayment if (1) the employer failed to provide an adequate or timely response to the claim that has been deemed an overpayment, and (2) the employer has established a pattern of failing to timely or adequately respond. “Pattern” is defined differently by state. In addition, the legislation in Kansas, Oklahoma, and Washington contain provisions that disqualify an employer from having standing to appeal a determination regarding an unemployment benefits claim if the employer fails to respond to a claim within a certain period. California’s provisions are particularly strict, penalizing willful withholding of information, willful failure to report any relevant information, or willful failure to report a material fact concerning termination. In light of the varying state laws that have been enacted, employers should review and consider revising any standard “no contest” provisions in their separation agreements.  Doing away with language indicating that an employer will “not contest” a claim for unemployment benefits can insulate the employer from liability under the new state laws as well as liability for potential breach of contract claims if a state agency requires the employer to provide additional information that could be construed as opposition to a claim for benefits.

Among other things, the Fair Credit Reporting Act (“FCRA”) regulates how credit agencies operate and how employers use consumer reports to vet job applicants.  The Plaintiffs in Sweet, et al. v. LinkedIn Corporation, No. 3:14-cv-04531 (N.D. Cal.), seek to apply the strict FCRA notice and reporting requirements to LinkedIn, based upon prospective employers’ use of LinkedIn to obtain the identities of potential references for job applicants.  This novel theory has far reaching implications for employers nationwide; fortunately, the Sweetcourt ruled that, as pled, the theory has no basis in law. The Plaintiffs in Sweetclaim to have lost job opportunities due to prospective employers who allegedly checked references through LinkedIn, without notifying the Plaintiffs or obtaining their consent.  Each of the Plaintiffs connected on LinkedIn with an employee of a prospective employer, usually an internal recruiter.  Once so connected, the prospective employer allegedly identified and contacted one or more of its mutual connections with the applicant for a reference, by using a proprietary search offered by LinkedIn. Granting LinkedIn’s motion to dismiss without prejudice, the Court found that the Plaintiffs failed to plead facts plausibly establishing that the LinkedIn reference information is a “consumer report” and that LinkedIn is a “consumer reporting agency.”  The Court found that LinkedIn’s reference information was not pled to be a consumer report because the information is not obtained from third-parties, it is not covered by the FCRA (in that the information does not “bear on” the applicants’ character, reputation, or mode of living), and the information, alone, is not the basis for employer hiring decisions.  The Court found that LinkedIn was not pled to be a consumer reporting agency because its purpose is not to make consumer reports and furnish them to third-parties.  Plaintiffs, however, were permitted leave to file an Amended Complaint. Employers should closely monitor Sweetand other cases seeking to apply the FCRA to social media that may be used to vet job candidates.  If LinkedIn and the reference information it provides is found to be covered by the FCRA, then its disclosure and consent requirements may apply to employers that use such information to vet job applicants.  Although neither of those outcomes is likely given the purpose and structure of the FCRA and given the types of information covered by the FCRA, proactive employers may reduce the risk of litigation and potential liability by amending existing FCRA consent forms to include the fruits of social media. Employers might also consider refraining from viewing applicants’ social media accounts when vetting candidates.  Unrelated to the Sweetcase but noteworthy for employers are the rules under FCRA, as amended by the FACT Act, for proper “disposal” of consumer information, which includes backgrounds checks that employers may use.  Despite these rules, employers must stay cognizant of federal and state law requirements for record retention and must not immediately destroy documents in an effort to comply with FCRA.  For example, the OFFCP and the ADEA each have applicant record-keeping requirements.  Government, private, for-profit, and non-profit employers are all subject to FCRA’s rules, which apply for all types of applicants, including prospective interns, contractors, and volunteers.

On April 20, 2015, the EEOC issued a notice of proposed rulemaking (“Proposed Rule”) designed to clarify how employer wellness programs that are part of a group health plan interact with Title I of the Americans with Disabilities Act (“ADA”).  The Proposed Rule provides clarity to an area that had created a lot of confusion for employers.  Under the Health Insurance Portability and Accountability Act (“HIPAA”) and the Affordable Care Act, employers can provide “wellness programs” that vary benefits and/or premiums based on a health factor.  Under the ADA, however, an employer cannot require medical examinations that are not job related and consistent with a business necessity – in other words, to comply with the ADA, a wellness program needed to be voluntary.  The difficult question for employers was whether a wellness program became involuntary if the employer offered an incentive for participation. Under the EEOC’s Proposed Rule, this issue is clarified…a bit.  Specifically, an employer may offer incentives up to 30% of the cost of employee-only coverage under the employer’s health plan to employees who participate in a wellness program and/or for achieving health outcomes.  The guidance makes clear that the 30% cap is based on the total cost for coverage, not just the employee’s individual cost, and is an attempt to establish consistency between ADA and HIPAA regulations related to wellness program incentives.  It is unclear, however, how this cap will be applied with respect to individuals with family coverage. The Proposed Rule also provides detail as to what factors render a wellness program “voluntary”.  Specifically, (1) participation cannot be required; (2) access to health coverage cannot be denied or generally limited due to non-participation; and (3) there can be no adverse action against an employee resulting from non-participation.  It also provides a notice obligation on behalf of employers regarding the use of any medical information obtained in relation to the wellness program, and makes clear that such programs cannot be used as a subterfuge for discriminating under the ADA. However, some questions remain under the Proposed Rule.  Specifically, how does it interact with the Genetic Information Nondiscrimination Act of 2008 (“GINA”)?  As a general matter, GINA prohibits employers from discriminating based on, or collecting genetic information, which includes family health histories.  This type of information is routinely gathered in connection with wellness programs, and compliance with the ADA does not ensure compliance with GINA, or any other statutory obligation. The Proposed Rule is open for public comment until June 19, 2015, after which time some version of the new regulations will likely go into effect.

Yesterday, Secretary of Labor Tom Perez announced via the U.S. Department of Labor Blog that the DOL has submitted its proposed rules revising the regulations concerning the Fair Labor Standards Act’s so-called “white collar exemptions” for review by the Office of Management and Budget. The DOL originally expected to publish the new rules in February 2015.   Speculation in business and legal circles has swirled since President Obama directed the DOL to review the current “outdated” overtime pay exemptions and revise them to “modernize and streamline the existing overtime regulation.” See  3/13/2014 Presidential Mem. to Sec’y Lab. Most commentators opine that an increase to the minimum salary threshold will be the keystone of the regulation reform, but the DOL proposal will certainly include additional refinement to other aspects of the regulations.    The wait is nearly over—OMB officials will review the proposal for at least several weeks, after which time the proposed regulations will finally surface for public review and comment. Stay tuned.

California employers should take note of Golden v. Cal. Emergency Physicians Medical Group, No. 12-16514 (9th Cir. Apr. 8, 2015), in which the Ninth Circuit used a broad interpretation of California Business and Professions Code Section 16600 to create a new framework under California law for the enforceability of “no-rehire” clauses commonly found in severance and settlement agreements.  While the Court’s decision does not invalidate all no-rehire clauses, employers can no longer presume that no-rehire clauses are enforceable in California.  Importantly, merely including a no-rehire clause in a California severance or settlement agreement may invite legal challenges that invalidate the entire agreement and expose an employer to unfair business practice claims. The Ninth Circuit in Golden noted, contrary to the district court’s analysis, that Section 16600 is a statute of “considerable breadth” that is not limited in its application to covenants not to compete.  Accord Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008), Construing the holding in Chamberlain v. Augustine, 156 P. 479 (Cal. 1916), the panel majority held that “the crux of the inquiry under section 16600 is not whether the contract constituted a covenant not to compete, but rather whether it imposes a restraint of a substantial character regardless of the form in which it is cast." Although Golden does not hold that all no-rehire clauses are void under Section 16600, it may, in certain factual instances, practically foreclose no-rehire clauses in California severance and settlement agreements where the employer seeks finality regarding the employment relationship at issue, particularly if the scope of the no-rehire clause extends to future entities the employer may acquire an ownership or management interest in.  The mere presence of the no-rehire clause in Golden was enough for the Ninth Circuit to remand for a factual inquiry as to whether the clause “imposes a restraint of substantial character” on the employee’s ability to practice his chosen profession.  This factual inquiry, as noted by dissenting Judge Kozinski, invites speculation about whether the no-rehire clause will affect the employee’s ability to obtain future employment and thus presents an unworkable and unpredictable legal standard. Unless the California Supreme Court interprets California law differently in a future case, Golden will remain a difficult decision for employers. The perils of Golden for employers are further compounded by the California public policy invalidating choice of law clauses governing restrictive covenants and applying Section 16600 to any employment matter arising in California.  An employee with unique or specialized skills who is bound by a no-rehire clause valid under the law of another state may retreat to California and seek to negate the no-rehire clause for purposes of seeking re-employment in California under Golden.  Employers with offices in California should consult with experienced counsel to assess the effect of Golden on existing no-rehire clauses nationwide and whether to seek enforcement of such clauses when former employees outside California seek re-employment in California.  In addition, employers with offices in California may consider carving out California from the scope of future no-rehire provisions.

In Mach Mining, LLC v. EEOC, No. 13-1019, 575 U.S. ____ (2015), the United States Supreme Court ruled that the Equal Employment Opportunity Commission’s pre-suit obligation to attempt to conciliate alleged unlawful workplace practices is subject to judicial review.  When credible evidence suggests that the EEOC has failed to comply with its statutory conciliation obligations, courts are empowered to stay any litigation filed by the EEOC until the EEOC attempts conciliation.  The Mach Miningruling confirms that any exercise of the EEOC’s expansive powers to investigate and litigate against employers must fall within the express statutory limits. Rejecting the EEOC’s position that its conciliation actions are not subject to judicial review, Justice Kagan’s unanimous opinion held that the conciliation process “necessarily involves communication between the parties, the exchange of information and views.”  At a minimum, the EEOC must: tell the employer about the claim, essentially what practice has harmed which person or class; and provide the employer with an opportunity to discuss the matter in an effort to achieve voluntary compliance. The Mach Mining decision underscores that there is “a strong presumption” favoring judicial review of administrative action.  Just this term, we have seen the Supreme Court interpret and reject the Government’s position that DHS regulations are “the law” in Department of Homeland Security v. MacLean,  reaffirm the distinction between legislative and interpretive DOL rules in Perez v. Mortgage Bankers, and cast doubt on the EEOC’s Guidelines for Pregnancy Discrimination in Young  v. UPS.  The Mach Mining conciliation requirement may benefit employers in several ways.  First, it underscores the importance of confidentiality when employers negotiate with the EEOC and charging party, in an attempt to resolve the dispute without public or costly litigation.   The Court addressed the need for the parties to rely on the non-disclosure provisions of the statute to promote candor in settlement discussions, and noted that conversely that “minimum results will be achieved if a party can hope to use accounts of the discussions to derail or delay” the matter. Second, the employer can obtain information about the claim from the EEOC and charging party during conciliation.  Although “[n]othing said or done during” conciliation may be used as evidence in a subsequent proceeding, such information can be helpful when assessing risk and determining whether and how to litigate. Third, if the EEOC’s conciliation efforts are essentially nonexistent, the employer may move to stay the litigation.   To that end, an employer may consider filing a motion to stay an EEOC lawsuit pleading a “pattern or practice” claim implicating a group of employees where the EEOC attempted conciliation of only individual claims. More broadly, Mach Mining teaches that the EEOC’s expansive powers to investigate and litigate are not limitless and are subject to review.  Those limits are defined by statute and the allegations made in the charge of discrimination.

The pervasive explosion in technology has blurred the line between the workplace and home. Nowhere is this line less clear than for employees who prefer (or are encouraged by their employer) to bring their own electronic devices to work. When personal computers first burst on the scene, most of the software necessary for handling work tasks was not readily available to individual users. For that reason, employees usually performed work tasks exclusively on their work computer. However, now that many work tasks can be easily performed on a personal computer, tablet, or smartphone, employees are naturally inclined to use their own electronic devices for personal as well as work-related tasks. Similarly, many companies recognize that it is cost-effective to allow employees to bring their own devices into the workplace to perform work function. A recent survey found that eighty-four percent of employees use the same smart phone for work and pleasure. But employers who allow employees to use their own devices at work need to be mindful of potential security and other risks caused by such a practice. It is important that employers who permit employees to use their own electronic devices at work have a policy.  A BYOD policy should, at a minimum: ·         Identify who may participate. ·         State what devices are covered. ·         Define permissible and impermissible uses of devices for work purposes. ·         Alert employees to the potential pitfalls of using personal devices for work. ·         Set the company’s expectations for employee behavior while using the device for work. In addition to having a BYOD policy, the company also needs to have plans in place that allow the company to maintain data security over proprietary and trade secret information that is stored on personal devices, and that protects the company's computer network from malicious software that is loaded by use of a personal device.  Additional BYOD risks: Lost Devices: A device which is lost or stolen can present a significant risk to an employer, especially when that device contains confidential or proprietary business information.  Fortunately, software is readily available that allows employers to remotely wipe or erase a device in the event of loss or theft.   But because the use of such a wiping program might affect the employee’s personal data on the device, employers need to have policies in place that make employees aware of the risks of using their devices at work. Malware: Personal device could become infected with a virus or malicious software (malware) which might infect other devices or systems at work. Employers need to be careful to ensure that personal devices that are plugged into the company computer network are scanned for malware or viruses. Social Media:Because Facebook and LinkedIn have become so ubiquitous, many employees blur the lines between personal communications and company related communications. Indeed, many employees use their company email address as their primary email address for Facebook or LinkedIn. When employees blur the line between their personal life and their workplace life in that way, it is natural that people reading social media posts also blur the line. For that reason, companies are well advised to adopt a social media policy that explains to employees what is and is not permissible with regard to use company devices or company email addresses for social media. Document Preservation:  Finally, when companies allow employees to use personal devices at work, both the employer and the employee need to be aware that this practice could subject the employee’s personal device to discovery in the event of litigation. For that reason, it is important that a company have a policy in place that all employees sign that alerts employees to the fact that the use of a personal device at work might make those devices subject to preservation and discovery obligations under Federal and state court rules.

Abercrombie & Fitch announced this week it is discontinuing its iconic "Look Policy" The former policy banned French-tip manicures and certain hair-styling products, as well as extreme makeup or jewelry. The Supreme Court of the United States is expected to decide a case in June involving a teenager who applied for a job at a Tulsa, Oklahoma store while wearing a headscarf. The store manager declined to hire the applicant because of the headscarf, not knowing whether the hijab was worn for religious reasons. The EEOC claims that by not asking, the manager violated EEOC guidelines and may have created a loophole for religious discrimination. Click here to listen. Click here to read previous coverage on the matter.

Timely preservation of documents and electronically stored information can be costly and challenging to implement, particularly when defending collective and class actions under the Fair Labor Standards Act and state wage & hour laws. The preservation duty evolves with each technological innovation integrated into the workplace. With advancing technology, more data relating to the manner of performance, frequency, and duration of disputed job duties is generated than ever. Drawing your preservation road map before litigation is imminent may minimize costs and reduce the risks of data spoliation. The preservation obligation is triggered when litigation is reasonably anticipated, which may pre-date the filing and service of a lawsuit, typically when an employee or counsel threatens to initiate a lawsuit. Once the preservation obligation is triggered, it is critical to define the appropriate scope of preservation of ESI. Failure to preserve sufficient information may result in a finding of spoliation, resulting in legal sanctions, adverse inferences, and potential forfeiture of legal defenses. On the other hand, over-preservation of ESI may unnecessarily divert company resources and disrupt business operations. The margins of error are often magnified in statewide class and nationwide collective actions, which can involve thousands (or more) of employees. There is little case law defining the appropriate scope of preservation in class and collective actions. General guideposts are provided by the maxims of proportionality and undue burden under Federal Rule of Civil Procedure 26 and the watershed Zubulakeadmonishment to preserve “what [a party] knows, or reasonably should know, is relevant to the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003). These principles, however, do not define the extent to which the preservation obligation extends to pled, but as yet uncertified, class and collective action allegations. Cf. Tracy v. NVR, Inc., No. 04-CV-6541L, 2012 WL 1067889, at *9 (W.D.N.Y. Mar. 26, 2012). This critical gap in the law requires employers to carefully consider any decision not to preserve data that may relate to a potential class member or opt-in plaintiff, and the data that may be overwritten in the ordinary course of business prior to a class or conditional certification motion or ruling. Arguably, preserving data for hundreds or thousands of employees who may potentially join a putative class or collective action is not proportional to the litigation value of such data until the plaintiff takes some action toward moving for class certification or joining putative opt-in plaintiffs in the lawsuit. However, a party’s unilateral assessment that preservation of data is not proportional to its probative value or poses an undue burden is not a sufficient justification to avoid preservation. One reported federal court decision counsels against using the “highly elastic concept” of proportionality as a shield to preservation in the absence of opposing counsel’s agreement on the scope of preservation or a court’s protective order.  Pippins v. KPMG LLP, 279 F.R.D. 245, 255 (S.D.N.Y. 2012). Given the potentially substantial consequences of a wrongful failure to preserve, in the absence of definitive guidance, employers should address the preservation of documents and data consistent with the scope of class and collective allegations at the outset of a case, even where the plaintiff has not moved to certify those allegations. First, employers should identify the sources of potentially relevant ESI, which may require an iterative process of interviewing internal database custodians. Database custodians should also be consulted at the outset to determine whether any data readily preserved may nevertheless be unduly burdensome to produce for all members of the class and/or collective, due to the manner in which it is stored or other factors.  As sources of potentially relevant ESI are identified, employers may avail themselves of several strategies to limit the scope of such ESI to preserve. Employers may seek opposing counsel’s consent on the scope of preservation, which may be defined in whole or part by any number of objective criteria, including a date range, office locations, a particular supervisor, or a random sample, among others. If consent is refused for ESI that is particularly burdensome to preserve, the employer may propose shifting the cost of preservation to plaintiff’s counsel. If cost shifting is refused, the employer may move for a protective order limiting the scope of preservation, even prior to any motion for certification of the putative collective or class action. Addressing these issues early in litigation may, no matter the outcome of the issue, pay dividends later in litigation, as the risk of spoliation may be greatly reduced through an agreement, stipulation, or court order on the scope of the employer’s duty to preserve. In the absence of such protective measures, employers will most likely bear the risk of not preserving data later requested in discovery and deemed discoverable (i.e., reasonably calculated to lead to the discovery of admissible information).  As the scope of preservation is defined, the employer should expediently issue and enforce proper litigation hold memoranda and suspend procedures and processes that overwrite data to be preserved in the ordinary course of business. The litigation hold should be sent not only to “key players” with physical possession of potentially discoverable documents and information, but also to the custodians of databases containing potentially discoverable information. Early and detailed discussions with database custodians are essential in cases where the timing and duration of tasks on computers is at issue, as such data tends to be transient and, in some cases, difficult to extract from the aggregate data gathered by a computer system in the ordinary course of business. In summary, proactively tackling ESI preservation at the outset of a case generally pays dividends for employers, particularly employers facing class and collective action claims of statewide or nationwide scope. Given the legal tools at an employer’s disposal to limit the scope of preservation where a dispute arises, courts generally have little sympathy for employers that fail or delay to take steps to preserve discoverable data at the outset of a case. Experienced counsel can help to navigate these issues and pose solutions that minimize spoliation risks and burdens to businesses’ operations and bottom line.

On April 14, 2015, the U.S. Department of Labor (“DOL”) released a controversial proposal that would require financial advisors to put their clients’ interests ahead of their own when recommending retirement investments. Businesses and financial advisors that manage retirement investment accounts should be aware of the new rule and how it might affect their business. While speculation about the expansion of the so-called “Fiduciary Standard” has been rampant for years, yesterday’s release confirms that government regulators intend to expand the Fiduciary Standard. Specifically, the expansion will result in coverage of a larger number of financial advisors by closing two loopholes in the definition of “retirement investment advice.” Although firms would still be allowed to set their own compensation rates, the DOL’s proposed rule would: Establish a best-interest contract exemption that would legally require brokers to act in their clients' best interest and; Require brokers to disclose all conflicts of interest to their clients. To view the full alert, click here. To receive Polsinelli L&E alerts directly to your email, click here.

Car, boat, and farm equipment dealerships that pay their service advisors on a salaried or commission basis should take note of a recent Ninth Circuit case holding that service advisors may not be exempt from overtime compensation under the Fair Labor Standards Act, potentially entitling those service advisors to overtime pay for all time worked beyond 40 hours in a week.  Employers can expect to see an uptick in FLSA and state wage claims nationwide seeking to apply a narrow reading of the FLSA Dealership Exemption from overtime compensation. The FLSA Dealership Exemption exempts from overtime “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.”  While the Dealership Exemption clearly exempts vehicle salespersons and mechanics from overtime pay, it does not directly address whether it applies to service advisors and other employees who solicit repairs, warranties, supplemental services, and parts. Several court rulings and a United States Department of Labor Opinion Letter from the 1970s applied the Dealership Exemption to service advisors.  In 2011, the United States Department of Labor issued regulations defining the words “salesman,” “partsman,” and “mechanic” as used in the Dealership Exemption. On March 24, 2015, the United States Court of Appeals for the Ninth Circuit ruled in Navarro v. Encino Motorcars, LLC that service advisors were not covered by the exemption under these Department of Labor definitions interpreting the Dealership Exemption.  The Court reasoned that because the Department of Labor’s regulations were a reasonable interpretation of an ambiguous statute, the Court was required to apply the Department of Labor’s regulations strictly as written, to exclude any employee not expressly described therein.  Although the Ninth Circuit’s ruling on Navarro only applies to states within that judicial circuit (e.g., California, Oregon, Washington, Nevada, Montana, Idaho, Wyoming, Arizona, Hawaii, Alaska), the reasoning in Navarro may be adopted by courts nationwide addressing this issue for the first time.  In addition, the Navarro opinion may inform courts interpreting state wage payment laws, which often apply the same or similar exemptions as the federal FLSA. Going forward, the Navarro ruling may be extended to dealership employees other than service advisors, who are not primarily engaged to sell vehicles, repair vehicles, or requisition, stock or dispense parts. Dealerships that pay such employees or service advisors on a salary or commission basis should consult with experienced employment attorneys to assess the effect of the Navarro ruling on their businesses and what steps may be taken to reduce the risk of future claims or potentially qualify such employees for other overtime exemptions.

The Department of Labor recently published its final rule amending the definition of “spouse” in the Family Medical Leave Act ("FMLA") regulations to include eligible employees in legal same-sex marriages. Beginning on March 27, 2015, same-sex spouses will be covered under the FMLA if the employee was legally married under the law of any state, regardless of the employee’s state of residency. To view the full alert, click here. To receive Polsinelli L&E alerts direct to your email, click here.

On March 25, 2015, in a case that garnered significant attention from employers prior to hearing, the U.S. Supreme Court created by a 6-3 vote a new approach for proving and defending against pregnancy discrimination and accommodation cases. The Court's ultimate question – "Why, when the employer accommodated so many, could it not accommodate pregnant women as well?" – and subsequent ruling should provide insight for employers today. To view the full alert, click here. To receive L&E alerts direct to your email, click here to subscribe.