Key Highlights Effective April 18, 2026, New York State now generally prohibits employers from requesting or using consumer credit history for employment purposes, subject to limited statutory exemptions. The statute defines “consumer credit history” broadly enough to reach credit reports, credit scores and certain information obtained directly from an applicant or employee. New York City employers remain subject to the City’s more protective local regime because the state law expressly preserves local laws that afford greater protection. What Changed on April 18, 2026? New York employers face a significant statewide change in recruiting and other employment decision-making practices. Effective April 18, 2026, amendments to New York’s Fair Credit Reporting Act now make it an unlawful discriminatory practice for employers, labor organizations, employment agencies and their agents to request or use the consumer credit history of an applicant or employee for employment purposes, or otherwise discriminate on that basis with respect to hiring, compensation or the terms, conditions or privileges of employment. The statute also changes what may be furnished for employment purposes by requiring employment reports to exclude information bearing on a person’s creditworthiness, credit standing, credit capacity or credit history unless an exemption applies. 1. The law reaches more than hiring. The new restriction is not limited to pre-employment screening. Under the statute, “employment purposes” includes evaluating an individual for employment, promotion, reassignment or retention, and the operative ban also reaches compensation and other terms, conditions and privileges of employment. For employers that have historically used credit information in internal mobility or role-based screening, that broader reach is particularly notable. 2. “Consumer credit history” is defined broadly. The law does not target only traditional credit reports. It also covers credit scores and information obtained directly from the individual about credit accounts, late or missed payments, charged-off debt, collections, credit limits, prior inquiries, bankruptcies, judgments or liens. In practical terms, the definition reaches not only vendor-supplied reports, but also certain questions directed to applicants or employees themselves. 3. The exemptions are narrow and role-specific. The statute contains a limited set of exemptions, including roles where use of credit history is required by state or federal law or by a self-regulatory organization; peace and police officers and certain law-enforcement roles; positions subject to background investigation by a state agency; positions requiring bonding or security clearance; certain non-clerical roles with regular access to trade secrets, intelligence information or national security information; positions with signatory or fiduciary authority over at least $10,000; and positions with regular duties that allow the employee to modify digital security systems designed to prevent unauthorized access to networks or databases. 4. New York City employers still have an added compliance layer. The statewide law expressly preserves local laws that provide greater protection, which leaves New York City employers with an additional layer of compliance. City guidance continues to construe exemptions narrowly, notes that the City law applies when an employer has four or more employees or one or more domestic workers and contemplates notice and five-year recordkeeping when an employer invokes an exemption. That same guidance also describes the $10,000 funds exemption and the digital-security exemption as generally executive-level, rather than blanket exemptions for finance or IT roles. Why This Matters By extending New York City’s existing credit-check restrictions statewide, the NYFCRA expands the issues that can arise in recruiting, background-check administration and role-based exemption analysis. The April 18 effective date places renewed attention on application materials, interview practices, vendor instructions and exemption analyses—particularly in New York City, where the local law continues to add its own notice, recordkeeping and interpretive overlay. This law also joins New York State’s Article 23-A framework and New York City’s Fair Chance Act as another highly granular regulation of the pre-hire and onboarding process. Employers should review their onboarding and recruiting processes to ensure compliance with the Empire State’s increasingly technical hiring requirements and consult their Polsinelli Labor and Employment attorney with any questions.

Key Highlights Menopause protections are emerging at the state level, led by Rhode Island, which became the first state to explicitly prohibit menopause discrimination and require workplace accommodations — highlighting a growing shift in employment law. A significant gap exists in federal law, leaving employees to rely on overlapping protections (sex, age, disability), which creates uncertainty and legal risk for both workers and employers. Employers should prepare proactively, as more states are likely to follow and menopause-related claims are already gaining traction—making it important to consider accommodations and policy updates now. This just in: menopause has entered the legal spotlight. For decades, menopause has existed in a legal gray area, widely experienced but largely invisible in workplace policy. States are now incorporating menopause protections into existing anti-discrimination laws, clarifying workplace law and expectations. In 2025, Rhode Island led the charge by becoming the first state to explicitly cover menopause when it amended its Fair Employment Practices Act to prohibit menopause discrimination and require reasonable accommodations. This approach offers a framework for states looking to fill gaps left by federal law. The Federal Gap Federal anti-discrimination laws — like Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act — do not recognize menopause as a distinct protected category. Instead, employees must rely on overlapping protections — sex, age or disability discrimination — to bring claims. The gray area creates uncertainty for both employees and employers. Rhode Island’s approach cuts through that confusion by declaring menopause its own protected category and treating it as such. By incorporating menopause into an existing pregnancy accommodation framework, the state requires employers to engage in the interactive process and provide reasonable accommodations absent undue hardship. Why Menopause Matters Menopause is not niche — it affects millions of women in the workforce. Common symptoms include hot flashes, fatigue, sleep disruption, headaches, as well as difficulty concentrating, memory lapses and “brain fog.” Managing these physical changes in the workplace is no easy feat. The symptoms of menopause can affect focus, productivity, attendance and comfort — especially in environments with rigid schedules or high cognitive demands. Studies show that menopause often pushes women into early retirement, causing employers to lose valuable contributors, skills, experience, and knowledge prematurely. Put simply: menopause is a workplace issue, not just a personal one. The Expansion Playbook Rhode Island’s law did not reinvent the wheel. Instead, it built onto an existing pregnancy accommodation framework. Folding menopause into an established legal framework may become the dominant model nationwide. It allows legislatures to build upon familiar laws while extending protections to a historically overlooked condition. Momentum Beyond Rhode Island Although Rhode Island is currently the only state with explicit menopause protections, it is unlikely to remain an outlier. The issue is gaining traction in state legislatures, where broader menopause-related initiatives — from insurance coverage to provider training — have been introduced across multiple jurisdictions. For example, New York, California and Virginia are reviewing proposed bills to expand legal protections for people experiencing menopause in the workplace. Historically, the most impactful employment laws have followed a certain trajectory: one state moves first, the rest follow. Menopause protections will likely follow suit. Implications for Employers Employers around the country — listen up! Even if you do not have employees in Rhode Island, this isn’t something to ignore. Courts and agencies are already more receptive to menopause-related claims under existing laws, particularly when symptoms overlap with recognized disabilities or sex-based issues. As state laws begin to diverge, employers operating across multiple jurisdictions may face a growing patchwork of legal obligations. Policies that suffice in one state may fall short in another. Forward-looking employers may consider adopting menopause-related accommodations proactively — such as flexible scheduling, temperature adjustments or modified break policies — rather than waiting for legal mandates. A New Frontier in Workplace Law The explicit expansion of anti-discrimination statutes to cover menopause reflects a broader evolution in employment law: explicitly recognizing under-addressed health conditions. Menopause may represent the next frontier in workplace protections — one that sits at the intersection of sex, age and disability and challenges traditional categories of discrimination law. In the end, this is not a singular issue — it is a workforce reality. People navigating menopause are often at the height of their careers, managing teams and holding institutional knowledge that companies cannot easily replace. State moves to close the gap reflect a growing recognition that when women are supported, organizations succeed. For questions about this evolving legal trend, please contact your Polsinelli attorney.

Key Highlights Washington to Ban Most Noncompetes: ESHB 1155 renders nearly all noncompetition agreements void and unenforceable effective June 30, 2027. The law provides an expanded definition that targets both traditional noncompetes and contractual workarounds, and it will apply to all covered agreements, not just those executed after the effective date. Narrow Path for Permissible Restrictions: Employers may still use limited nonsolicitation, confidentiality and trade secret protections, but these must be carefully tailored to comply with the law’s stricter standards. Immediate Action Required to Mitigate Risk: Employers should begin auditing agreements, revising templates and preparing required notices now, as the law introduces new compliance obligations and significant litigation exposure for violations. Governor Ferguson signed ESHB 1155 on March 23, banning the use of noncompete agreements between businesses and workers. With this new law, Washington State joins the growing list of states prohibiting or sharply limiting the use of noncompetition agreements.    The Ban The law makes all noncompetition agreements void and unenforceable once the law takes effect, which is expected to be June 30, 2027, regardless of when they were signed. The bill also broadens what qualifies as a noncompetition covenant. In addition to traditional noncompetes, the definition includes certain agreements between performers and venues or intermediaries that restrict lawful performance, as well as provisions requiring a worker to return, repay or forfeit compensation or benefits because the worker engages in a lawful business or profession. In practical terms, this means courts will closely review compensation and benefits arrangements for provisions that may function as a penalty on post-employment competition. For example, clawback terms, forfeiture-for-competition provisions in bonus or equity plans, retention payments that must be repaid only if the worker joins or starts a competing business, and similar disincentives may now be treated as noncompetition covenants if they are triggered by the worker’s decision to engage in lawful competitive work. Permissible Activity Some restrictions remain permissible: Nonsolicitation clauses are permitted but must be “narrowly construed.” Such clauses may bar solicitation of coworkers or customers the worker developed a relationship with for up to 18 months. However, nonsolicitation clauses cannot restrict a former employee accepting or doing business with customers. The sale of business carveout from the previous law remains intact. Specifically, a noncompetition covenant does not include one “entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest,” but only if the signer is dealing with an ownership interest representing 1% or more of the business. Confidentiality, trade secret, invention‑assignment provisions, certain sale‑of‑business covenants and limited educational‑expense repayment clauses remain valid. The Notice Requirement For employers that currently use noncompetes, notice is not just a formality — it’s a central compliance obligation. By October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenants would otherwise still be in effect, advising them that those covenants are void and unenforceable. The bill does not define “reasonable efforts” to notify employees. To avoid the risks associated with that uncertainty, employers might consider documenting efforts to locate and contact workers, and immediately start identifying contracts that might be subject to this requirement. What Employers Using Noncompetes Can Do Now Review of Existing Agreements: Review employment agreements, contractor forms, separation agreements, equity documents, bonus plans, clawback provisions and other compensation-related terms for provisions that may violate the new law. Review nonsolicitation clauses carefully to ensure they do not run afoul of new restrictions to create an unlawful noncompetition restriction. Assess any repayment or forfeiture provisions that could penalize a worker for engaging in a lawful occupation. Evaluate Enforcement Plans:Evaluate offboarding documents and talking points for language that could be inconsistent with the new statute. Develop training for HR, recruiting and in-house legal teams based on the law and any revisions to the company’s documents. Develop a Notice Plan:Identify affected current and former workers, confirm contact information and document reasonable efforts to deliver written notice. Enforcement and Litigation Exposure The bill authorizes enforcement by the attorney general and private suits by aggrieved persons. If a court or arbitrator finds a violation, the violator must pay the greater of actual damages or a $5,000 statutory penalty, plus attorneys’ fees, expenses and costs. Taken together, these remedies significantly increase litigation risk, particularly for employers using standardized agreements across large workforces or a contractor population. Importantly, the law’s new definitions, rules, remedies and displacement provision, which makes this chapter the controlling framework over conflicting state laws governing worker competition, apply to cases filed on or after June 30, 2027, even if the underlying conduct or agreement predates that date. Proceedings already pending before then continue under the prior version of the statute. Conclusion Employers can begin preparing for the effective date of the new legislation now by gathering agreements, reviewing templates and building a notice process ahead of the effective date. For guidance on noncompetes, nonsolicitation clauses or other restrictive covenant issues, contact your Polsinelli attorney.

Key Highlights New York City’s Earned Safe and Sick Time Act (ESSTA) adds 32 hours of frontloaded unpaid safe/sick time to its existing paid safe/sick time requirements for employers. The ESSTA also expands the permissible uses for both types of leave under the Act to include scenarios tied to caregiving, housing or subsistence proceedings, public disasters and workplace violence. Employers, however, will no longer be required to grant a set number of temporary schedule changes; employees, instead, will enjoy a protected right to request such changes. What Is Changing on February 22, 2026? New York City employers should prepare for significant changes to the City’s ESSTA taking effect February 22, 2026—joining changes to New York state laws affecting disparate impact liability and the use of “stay-or-pay” contracts. The amended ESSTA includes a new bank of 32 hours of unpaid safe/sick time, expanded permissible uses of safe/sick time and a scaling back of obligations under the City’s Temporary Schedule Change Act (TSCA). 1. Employers must provide 32 hours of unpaid safe/sick time in addition to paid ESSTA leave. The ESSTA will require employers to provide employees, upon hire and on the first day of each calendar year, a minimum of 32 hours of unpaid safe/sick time that is immediately available for use. Employers will not, however, be required to carry over unused hours from this unpaid bank to the next calendar year. The Act further contemplates that when an employee needs time off for an ESSTA-covered purpose, the employer generally must provide paid safe/sick time first (if available), unless ESSTA paid time is unavailable or the employee specifically requests to use other leave (e.g., other PTO pursuant to an employer’s vacation policy). One potential issue for employers lies in the Act’s text. It ties the unpaid bank to “upon hire” and “the first day of each calendar year.” With a February 22, 2026, effective date, it is not clear from the statute whether employers must make the unpaid bank available to current employees as of the effective date. Given the short time before the effective date, employers likely will have to make a decision on this point before any additional guidance from the City’s Department of Consumer and Worker Protection becomes available. 2. Employees may now use paid and unpaid safe/sick time for new “covered uses.” ESSTA continues to allow leave for traditional illness/injury, preventive care and care of family members but now expands certain categories and adds new ones, including: Sick Time Additions Leave related to business closure or child school/childcare closure may now include closures tied to a public disaster—not just a public health emergency. Instances in which a public official directs an employee to remain indoors or avoid travel during a public disaster that prevents an individual from reporting for work. Safe Time Additions Circumstances where the employee or a family member is the victim of workplace violence in addition to the existing domestic violence/sexual offense/stalking/human trafficking categories. Certain instances of caregiving for minor children or other care recipients. Legal proceedings or hearings related to subsistence benefits or housing and other related steps necessary to apply for, maintain, or restore benefits or shelter. These expansions overlap with what NYC historically treated as “personal events” under the TSCA’s framework but now more expressly integrates the framework into the ESSTA. 3. The TSCA moves from “must grant” to “right to request” when it comes to temporary schedule requests. Following its effective date, the amendment softens the temporary schedule change regime in the City. Employees remain protected from retaliation for requesting a temporary schedule change, but the law provides that an employer may grant or deny the request, must respond as soon as practicable and may propose an alternative change, which the employee is not required to accept. Employers should keep in mind that independent obligations under federal, state and local accommodation laws remain unchanged, so some schedule adjustments may still be required as reasonable accommodations even where the TSCA request itself is discretionary. Why This Matters These amendments significantly expand the scope and administration of protected leave in New York City. By adding a new unpaid ESSTA leave bank, broadening the reasons that trigger protected absences, and shifting temporary schedule changes to a right-to-request framework, the City increases the risk of missteps in policy drafting, payroll administration and day-to-day management of leave requests. Employers should take time now to evaluate how these changes affect their existing leave, scheduling and reporting practices ahead of the February 22, 2026, effective date. Employers with questions about the amended ESSTA, or who would like assistance assessing or updating their policies and practices in advance of the effective date, should contact their Polsinelli Labor and Employment attorney.

Key Highlights The U.S. Department of Justice (DOJ) filed a lawsuit against the State of Minnesota challenging its affirmative action hiring program. It alleges that Minnesota’s requirement to consider race, sex and other protected characteristics in public employment decisions violates Title VII of the Civil Rights Act of 1964. The case is poised to test the limits of affirmative action in employment and could become a bellwether for similar policies nationwide and across public and private employers. DOJ Targets Minnesota’s Use of Race and Sex in Public Hiring Minnesota law mandates that state agencies take proactive steps to recruit and hire individuals from historically underrepresented groups, aiming to address workforce disparities. In a complaint filed on Jan.14, 2026, the DOJ asserts that this practice unlawfully favors certain applicants based on protected characteristics. Federal lawyers argue that the mandate amounts to intentional discrimination in violation of Title VII’s ban on making employment decisions because of race, color, religion, sex or national origin. The lawsuit acknowledges past U.S. Supreme Court decisions, such as United Steelworkers v. Weber and Johnson v. Transportation Agency, that permitted limited affirmative action plans to remedy persistent inequality. The DOJ, however, contends that those decades-old precedents are outdated and conflict with both Title VII’s text and the Supreme Court’s 2023 decision ending race-conscious college admissions. By certifying the Minnesota case as one of “general public importance,” the DOJ also seeks a special three-judge panel to hear the matter pursuant to 42 U.S.C. § 2000e-6(b), which would fast-track any appeal directly to the Supreme Court. Broader Implications for Employers and State Diversity Initiatives The Department’s challenge signals increased scrutiny of government-mandated diversity, equity and inclusion initiatives. Many employers have already grown more cautious with voluntary diversity programs following Executive Orders issued in 2025, but they were left with some uncertainty on conflicting obligations between federal and state laws. A ruling against Minnesota could further imperil similar state or local requirements for affirmative action in hiring or contracting. If the Supreme Court ultimately curtails or eliminates affirmative action in the employment context, public-sector workforces and contractor practices nationwide may need to adjust accordingly. Polsinelli Labor and Employment attorneys are closely monitoring this case and will advise clients as appropriate as developments unfold.

Key Highlights Brand ambassadors and influencers can present growing misclassification exposure. Luxury, retail and hospitality brands increasingly rely on short-term, brand-facing talent and when these workers are closely integrated into marketing, customer engagement and brand presentation, they can trigger the same wage-and-hour risks as traditional employees. California’s ABC test presents a high bar for independent contractor models. Prong B, in particular, creates challenges when brand ambassadors, stylists and pop-up personnel perform work tied to core brand functions such as customer experience and brand presentation. Control and brand standards drive risk across jurisdictions. Even outside ABC-test states, factors such as training, scripted interactions, fixed schedules, exclusivity or content approval for influencers can undermine independent-contractor classification, regardless of engagement length. Luxury brands increasingly rely on brand ambassadors, stylists, influencers and pop-up personnel to deliver curated customer experiences and reinforce brand identity. These engagements are often short-term or campaign-based and are frequently classified as independent contractor relationships. As worker-classification standards continue to tighten nationwide, however, that model carries growing legal risk. For luxury, retail and hospitality brands, misclassification claims are no longer confined to traditional retail staffing. Brand-facing marketing talent — often viewed as flexible and external — can present the same exposure as in-store employees when classification rules are not carefully applied. Why Classification Has Become a Pressure Point Misclassification can expose brands to significant liability, including unpaid minimum wages and overtime, missed meal and rest periods, payroll tax exposure, statutory penalties and representative or class actions. These risks are amplified in luxury and hospitality settings, where brand standards, customer experience and messaging consistency are central to the business. Although many brand ambassadors view themselves as independent creatives, classification turns on legal standards — not job titles or worker preferences. California’s ABC Test: A High Bar for Luxury Brands California remains the most challenging jurisdiction for contractor models. Under California Labor Code § 2775, a worker is presumed to be an employee unless the hiring entity establishes all three prongs of the ABC test: The worker is free from the control and direction of the hiring entity in performing the work, both under the contract and in practice; The worker performs work outside the usual course of the hiring entity’s business; and The worker is customarily engaged in an independently established trade or business of the same nature as the work performed. Failure to satisfy any prong results in employee status. For luxury brands, prong B often presents the greatest challenge. Brand ambassadors, stylists and pop-up representatives frequently perform work that goes to the core of the brand’s business: marketing, customer engagement and brand presentation. When the brand experience itself is the product, it becomes challenging to argue that these services fall “outside the usual course” of business. Control and Brand Standards Still Matter Elsewhere Outside California, some brands assume classification risk is lower. That assumption can be misleading. For example: New York does not apply the ABC test for wage-and-hour purposes. Instead, courts apply a common-law “control” test that examines factors such as supervision, scheduling, training and integration into the business. Illinois similarly relies on a right-to-control analysis for most wage claims, though ABC-style tests apply in certain statutory contexts, including unemployment insurance. See 820 ILCS 405/212. In practice, these standards still present meaningful risk for luxury brands. Extensive training, required attendance at brand briefings, fixed schedules, exclusivity requirements or detailed scripts and presentation guidelines can all weigh in favor of employee status, even in jurisdictions without an ABC test. The more control a brand exercises over how ambassadors interact with customers and represent the brand, the harder it becomes to sustain a contractor classification. Influencers and Pop-Up Activations: Added Complexity Influencer marketing and pop-up activations present additional classification challenges. Some influencers operate established businesses with multiple clients, supporting independent-contractor status. Others, however, function more like on-demand brand representatives. Classification risk increases when brands require pre-approval of content, dictate posting schedules, restrict work for competitors or tie compensation to strict compliance with brand directives. Engagement length alone does not eliminate exposure. Even short campaigns can give rise to misclassification claims if the underlying relationship resembles employment. Looking Ahead Luxury, retail and hospitality brands will continue to rely on flexible, brand-forward talent to remain competitive. But as worker-classification standards evolve and enforcement intensifies, contractor models that once seemed routine may no longer be defensible. Addressing classification issues at the outset of a campaign rather than after it concludes can help brands preserve flexibility while reducing legal exposure. Brands with questions about independent contractor classification or campaign staffing strategies should consult their Polsinelli Labor & Employment attorney.

At a Glance Clarified Pay Transparency Requirements Effective Jan. 1, 2026: California employers are now able to publish a good-faith estimate of the salary or hourly wage they reasonably expect to pay a new hire at the time of hire, rather than a general range for the position. Broader Scope for Equal Pay Act Claims: SB 642 expands the definition of “wages” to include nearly all forms of compensation—such as bonuses, equity, benefits, allowances and reimbursements—potentially increasing exposure in pay equity claims and underscoring the importance of reviewing total compensation packages. Longer Statute of Limitations and Expanded Liability Window: The law extends the statute of limitations for Equal Pay Act claims to three years regardless of willfulness, with a six-year look-back period for relief, emphasizing the need for proactive compliance and documentation. Job Posting Requirements Effective January 1, 2026, SB 642, also known as the Pay Equity Enforcement Act, amends pay transparency and pay scale requirements for California employers. The changes clarify the definition of “pay scale” for job posting requirements, broaden the forms of pay considered for assessing Equal Pay Act claims, and extend the statute of limitations to bring civil actions alleging violations of pay reporting statutes. As described in our prior blog post, California requires employers to publish pay scale information on job postings. SB 642 amends California Labor Code § 432.3 to expand the definition of pay scale to a “good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.” Previously, “pay scale” was defined to include the salary or wage range that employer expected to pay for the position generally. The amended definition requires disclosure of what an employer reasonably expects to pay the new hire on the date of hire as opposed to an estimate of the position in general. Equal Pay Act Claims Labor Code § 1197.5 prohibits employers from paying employees less wages for performing substantially similar work based on sex. SB 642 broadens the definition of “wages” and “wage rates” under this section. As a result, alleged violations may consider all forms of pay “including but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning and gasoline allowances, hotel accommodations, reimbursement for travel expenses and benefits.” The law also provides new guidance on when an Equal Pay Act violation may occur, including when: An alleged unlawful compensation decision or other practice is adopted; An individual becomes subject to an alleged unlawful compensation decision or other practice; and An individual is affected by application of an alleged unlawful compensation decision or other practice, including each time wages, benefits or other compensation is paid. SB 642 establishes a statute of limitations of three years after the last date of alleged violation to bring an Equal Pay Act claim, regardless of whether the violation is willful. Previously, the statute of limitations was two years and only three years if the violation was proven willful. The law introduces a look-back period limiting relief to a maximum of six years. Key Takeaways for Employers   The changes to job posting requirements provide relief to employers that provide a “good faith” reasonable estimate in their postings. With the changed definition of “wages” for the purposes of Equal Pay Act claims, employers may wish to review the equity of their pay packages including non-salary compensation to ensure compliance. Employers are advised to consult with counsel on compliance including when new compensation practices are adopted and changed. Polsinelli attorneys will be monitoring new developments in this area and remain prepared to assist employers.

Effective January 1, 2026, numerous state and local government employment laws have taken effect. Below is a non-exhaustive summary of key employment law updates for January 2026. For additional insights, register for the 2026 Employment Law Developments: Key Considerations for Employers webinar here. To navigate each employment law update by state, click here. Please note that the above is a non-exhaustive summary of recent employment law developments. For questions or assistance with employment law compliance in 2026, or to ensure you are informed about the latest updates, please contact your Polsinelli attorney.

Key Highlights New York prohibits arrangements requiring employees to repay or reimburse their employer: The newly enacted Trapped at Work Act bars employers from enforcing agreements that require workers to repay or reimburse training or other costs or payments if they leave employment before a specified period. Ambiguous language creates risk for common compensation practices: Although motivated by controversial training repayment arrangements, many commonplace practices like education stipends, tuition assistance programs, forgivable loans, advanced retention bonuses and certain consulting arrangements may now face challenges. Law applies broadly to workers beyond employees: The Act covers not only employees, but also independent contractors, interns, volunteers, apprentices and other service providers, with only limited statutory exceptions. New York employers are now prohibited from enforcing or requiring so-called “stay-or-pay” contracts that obligate employees to repay money to their employer if they leave employment prior to a stated date.  With the new “Trapped at Work Act,” New York joins other states, including Colorado and California, in protecting employees from requirements to reimburse their employer for employer-provided training. Although the Act and other similar laws have been motivated by criticisms of employer training repayment requirements, the breadth and ambiguity of New York’s new law threaten to go beyond that immediate concern and prohibit or render uncertain many commonplace employee compensation arrangements. The Act prohibits employers from using or enforcing any “employment promissory note,” which is defined as “any instrument, agreement or contract provision that requires a worker to pay the employer, or the employer's agent or assignee, a sum of money if the worker leaves such employment before the passage of a stated period of time,” including any agreement to reimburse training provided by the employer. The scope of the Act is broad, as it applies not only to traditional employees, but also to independent contractors, interns and externs, volunteers, apprentices and sole proprietors providing services. The Act does exclude certain types of agreements from its prohibition, including: Agreements to repay the employer for sums advanced to the employee, other than sums for “training related to the worker’s employment with the employer”; Repayment for property sold or leased to the employee; or Repayments pursuant to a collective bargaining agreement. Although the Act is aimed at controversial arrangements requiring employees to repay their employer for mandatory trainings, it may inadvertently sweep in other commonplace employee compensation frameworks that do not raise similar controversy. These include: Education Stipends: Employers often provide educational or tuition stipends to employees, and it is common to have retention provisions included in such arrangements. It is not clear whether such arrangements would continue to be permissible, given that the funds may not be advanced directly to the employee and the education likely relates to the employee’s position. Forgivable Loans/Advanced Retention Bonuses: Arrangements where funds are fronted to employees, subject to a retention requirement, can potentially fall within the Act’s exceptions, but they must be carefully structured to avoid penalties and enforceability issues. These types of arrangements and bonuses are common in many industries, especially financial services. Liquidated Damages for Consulting Arrangements: Given that the Act applies to independent contractors (even if properly classified as such), it is arguable that a penalty for the contractor’s early termination of the agreement would violate the Act. Even as New York Governor Hochul signed the Act, she noted that its language “was ambiguous in certain respects” and stated that she had agreed with the Legislature to “address these concerns” in the future. Unless and until clarification is provided, however, employers in New York will have to review and carefully modify any agreements that require employees or other workers to repay sums to the employer based on retention considerations.  Failure to do so can lead to the agreement being deemed null and void and subject the employer to fines, ranging from $1,000 to $5,000 for each worker with whom they have a prohibited agreement, as well as liability for attorneys’ fees incurred by the employee in defending against enforcement. For assistance reviewing agreements or other questions relating to this law, be sure to contact your Polsinelli attorney.

What You Need to Know: Washington’s new mini-WARN Act applies to smaller employers with 50 or more full-time employees, unlike the federal WARN Act, which only applies to employers with 100 or more employees. The new mini-WARN Act includes a private right of action and penalties for affected employees against employers who violate the requirements. In addition to applying to smaller employers, the mini-WARN Act has broader notice requirements in comparison to the federal WARN Act and excludes specific employees from being part of mass layoffs. On July 27, 2025, Washington State implemented its own version of the Worker Adjustment and Retraining Notification (WARN) Act, officially titled the Securing Timely Notification and Benefits for Laid-Off Employees Act, commonly referred to as a "mini-WARN Act." The mini-WARN Act is a state-level law that complements the federal WARN Act.  Washington joins thirteen other states (California, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, New Hampshire, New Jersey, New York, Tennessee, Vermont and Wisconsin) in implementing mini-WARN Acts. WARN Acts provide protections for employees facing layoffs or business closures. Key Aspects of the Act Notice Requirement: Under the mini-WARN Act, employers must provide at least 60 days' notice before a mass layoff or business closing (business closings can be permanent or temporary). This notice must be given to affected employees, the state, and local government officials and must contain very specific information (including anything required by the federal WARN Act, information regarding the site affected, contact information, specifics regarding the layoff or closure, anticipated dates, names and job titles for those affected, and information regarding relocation of operations/roles). The mini-WARN Act provides some limited exceptions for faltering companies, unforeseeable business circumstances, and natural disasters. The mini-WARN Act also has certain exceptions related to sales of business and mass layoff for specific construction projects. Who is Covered: The mini-WARN Act applies to employers with 50 or more employees in the state of Washington. This is a broader scope than the federal WARN Act, which only covers employers with 100 or more employees. The mini-WARN Act applies to mass layoffs or business closings affecting 50 or more full-time employees, which is similar to the federal WARN Act; however, the “single site of employment” requirement is different in the mini-WARN Act. Under the federal WARN Act, employee counts are based on separations at a single site of employment for both mass layoffs and business closures. Under Washington’s new mini-WARN Act, the “single site of employment” requirement is only applicable to business closings. In other words, the mini-WARN Act will apply to mass layoffs affecting multiple sites if the total layoffs accumulate to 50 or more. Additionally, of note, under the mini-WARN Act, employees are any people employed in the state of Washington by an employer. Employee Protections: By providing 60 days’ notice of a job loss, the mini-WARN Act aims to give employees time to prepare for job loss, seek new employment, or pursue retraining opportunities. The mini-WARN Act also protects employees currently on leave under Washington Paid Family and Medical Leave law by preventing an employer from including such an employee in a mass layoff. Penalties for Non-Compliance: Employers who fail to comply with the notice requirements may face penalties, including up to 60 days of back pay and benefits for each day of violation for each affected employee, $500 per day in penalties, and attorneys’ fees. Employers should familiarize themselves with the new requirements to navigate this evolving landscape effectively. As the mini-WARN Act takes effect, it is crucial for businesses to review their policies and procedures to ensure compliance, especially prior to layoffs, closures, and reductions in work. For questions and assistance regarding the Washington mini-WARN Act, other state mini-WARN Acts, or the federal WARN Act, please contact your Polsinelli attorney. 

On July 17, 2025, President Trump announced his selection of two choices for the National Labor Relations Board (NLRB). The President tapped Scott Mayer and James Murphy to fill those seats. If confirmed, Mayer and Murphy would fill two seats that have been vacant since President Trump returned to the White House. Mayer currently serves as Boeing’s Chief Labor Counsel and has been in that role since 2022. Murphy is a longtime NLRB official who first clerked for the NLRB in 1974 and most recently served as Chief Counsel to Marvin Kaplan, chair of the NLRB. Both bring strong management-side credentials to the table. Subject to Senate confirmation, Mayer and Murphy filling two of the three vacant seats will provide the NLRB with a quorum and enable it to issue decisions, engage in rulemaking, and fulfill its statutory duties. The NLRB has lacked a quorum since President Trump’s controversial termination of former member Gwynne Wilcox. Those in opposition to their nomination argue that, procedurally, they should not be confirmed until the validity of the termination of Wilcox is resolved by the federal courts. For questions regarding these nominations, the anticipated impact of the NLRB regaining a quorum, or other labor-related issues, please contact a member of Polsinelli’s Management-Labor Relations Practice Group.

What you need to know: DOL will no longer seek liquidated (double) damages in pre-litigation FLSA settlements, limiting recovery to unpaid wages. Liquidated damages still apply in court cases, so employers remain at risk in litigation. Early in the Biden administration, the Wage and Hour Division of the Department of Labor (“WHD”) issued Field Assistance Bulletin No. 2021-2 reversing practices adopted during the first Trump administration and returning to a more vigorous pursuit of liquidated damages from employers in pre-litigation investigations regarding potential violations of the Fair Labor Standards Act (“FLSA”). Now, just a few months into the second Trump administration, the WHD has reversed course again. Pursuant to Field Assistance Bulletin No. 2025-3, FAB No. 2021-2 is rescinded and the WHD will limit all pre-litigation administrative settlements to the recovery of unpaid wages or overtime compensation. It will no longer request any liquidated damages in pre-litigation investigations or resolutions. Liquidated damages are essentially “double damages,” requiring an employer that is liable for minimum wage or overtime compensation violations pay a second amount equal to the unpaid wages. In explaining this new approach, the WHD noted that Congress had “authorized” liquidated damages “only in judicial proceedings – not administrative matters” under the FLSA’s Section 216(c), which allows the DOL to “supervise the payment” of unpaid wages or overtime compensation to employees. It is the WHD’s opinion that is it “not authorized to seek liquidated as part of any payment it supervises under § 216(c).” The WHD also pointed to Section 260 of the FLSA to support its conclusion, because that Section vests courts – not the Agency – with the authority to evaluate employer’s good faith defenses that might preclude a recovery of liquidated damages. FAB 2025-3 states that “[t]he structure of § 260 reinforces that liquidated damages are a judicial remedy, and not an administrative tool available.” The practice of seeking liquidated damages in pre-litigation investigations and settlements began in 2010 under the Obama administration. While the first Trump administration attempted to rein this practice in to an extent with FAB No. 2020-2, the current stance is more aggressive. Of course, liquidated damages remain available in any litigation involving an FLSA violation – whether that litigation is brought by the WHD/DOL or a private party. For questions and assistance regarding WHD wage-and-hour investigations or other issues involving the FLSA or other wage-and-hour laws, please contact your Polsinelli attorney. 

Colorado generally prohibits restrictive covenants, except in narrow circumstances. On May 8, 2025, the Colorado Legislature passed Senate Bill 25-083, which imposes three significant new limitations on the use of restrictive covenants for certain healthcare providers and narrows their application in business sales. These changes will apply to agreements entered into or renewed on or after August 6, 2025. Current Law Overview Under current law (C.R.S. § 8-2-113), non-compete and customer non-solicitation agreements are enforceable only in certain circumstances. For instance, non-competes are enforceable for “highly compensated individuals” when the agreement is reasonably necessary to protect an employer’s trade secrets. However, covenants that restrict a physician’s right to practice medicine after leaving an employer are already void under Colorado law. Key Changes Under SB25-083 Broader Ban on Non-Competes for Healthcare Providers The amendment prohibits non-compete and non-solicitation agreements for certain licensed healthcare providers, even if they meet the "highly compensated" threshold. This includes those who: Practice medicine or dentistry Engage in advanced practice registered nursing Are certified midwives Fall under additional categories listed in C.R.S. § 12-240-113 Liquidated Damages in Physician Contracts Previously, physician employment agreements could include liquidated damages tied to termination or competition. This amendment removes that provision, meaning that: Agreements with unlawful restrictive covenants are unenforceable. Agreements without unlawful provisions remain enforceable and may still carry damages or equitable remedies. It remains unclear whether competition-related liquidated damages are still enforceable under the new law. Expanded Patient Communication Rights Medical providers can no longer be restricted from informing patients about: Their continued medical practice New professional contact information The patient’s right to choose their healthcare provider Confidentiality and trade secret agreements are still allowed, as long as they don’t prevent sharing general knowledge. New Limitations on Business Sale Non-Competes Colorado law has long permitted non-competes in connection with the purchase or sale of a business. SB25-083 narrows this by: Allowing non-competes only for owners of a business interest Placing time limits on non-competes for minority owners or those who received ownership through equity compensation For these individuals, the non-compete duration is capped using a formula: Total consideration received ÷ Average annual cash compensation in the prior two years, or the duration of employment if less than two years. For questions and assistance regarding the upcoming changes to restrictive covenants in Colorado, please contact your Polsinelli attorney.

On June 12, 2025, the Department of Homeland Security (DHS) began sending termination notices to foreign nationals paroled into the United States under a parole program for Cubans, Haitians, Nicaraguans and Venezuelans (CHNV). The terminations are legally allowed under a May 30, 2025, decision by the US Supreme Court lifting a federal district court injunction that had temporarily barred the federal government from implementing the revocations. The termination notices inform the foreign nationals that both their parole is terminated, and their parole-based employment authorization is revoked – effective immediately. Employer Obligations The Immigration law provides that it is unlawful to continue to employ a foreign national in the U.S. knowing the foreign national is (or has become) an unauthorized alien with respect to such employment. How will an employer know if an employee has lost work authorization? For E-Verify users, E-Verify is in the process of notifying employers and employer agents that they need to log in to E-Verify and review the Case Alerts on the revocation of Employment Authorization Documents (EADs). The employer is then on notice that an employee has lost work authorization. However, many employers are not enrolled in E-Verify. Those employers may learn of a revocation when an employee presents the termination notice to the employer. Also, as the CHNV revocation is in the news, DHS may consider employers on notice, with an obligation to review the status of its employees to determine whether workers have lost authorization to work. At this point, DHS has not provided guidance to employers on their obligations, but we recommend employers act cautiously and take reasonable steps to determine whether company employees are impacted. We encourage taking these steps: Employers should review their I-9 records and supporting documents to determine if employees have employment authorization cards with the code C11, and that the country of citizenship on the card lists Cuba, Haiti, Nicaragua or Venezuela. When an employer is notified or discovers that an employee's C11 work authorization has been revoked, the employer should not immediately terminate the employee. Certain individuals, even from the impacted countries, may have C11 work authorization separate and apart from the CHNV program. These work authorizations remain valid. When an employer is reasonably certain the employee’s C11 employment authorization has been terminated, the employer should ask the employee if they have other valid work authorization (which is common). If yes, the employer should then reverify the employee's Form I-9 in Supplement B, with the employee presenting new employment authorization documentation. If an employee is unable to provide new employment authorization documentation, the employer should consider terminating employment. In the event of an Immigration & Customs Enforcement investigation, knowingly to continue to employ a foreign national who is not authorized to work in the U.S. can result in a potential charge. When an employer is uncertain regarding the correct course of action, we recommend speaking to Immigration counsel to review and determine the appropriate steps.

Sweeping changes to noncompete covenants are set to take effect on September 1, 2025, for health care employers in Texas. These changes stem from recent amendments to Texas’ noncompete statute. These changes will: Expand Texas’ heightened enforceability requirements to nearly all health care practitioners. Impose strict limits on the duration and geographic area of applicable noncompete covenants. Cap the buyout option that must be provided to covered health care practitioners. Who Is Impacted? The recent amendments to Texas’ noncompete statute were enacted through Texas Senate Bill 1318 (SB 1318) that was signed into law by Governor Abbott on June 20, 2025. It will impact Texas-licensed physicians, dentists, nurses (including advanced practice nurses), physician assistants, and health care entities that execute noncompete covenants with the aforementioned health care practitioners. Downstream, these amendments have the potential to alter various health care business models, and the value assigned to health care entities in mergers and acquisitions. What Are the Key Changes? Since 1999, the Texas noncompete statute has imposed heightened requirements for securing enforceable covenants with physicians licensed by the Texas Medical Board. SB 1318 takes these protections a step further by incorporating the following heightened requirements: Mandatory/Salary-Capped Buyout Options – Similar to physicians, mandatory buyout clauses must now be integrated into noncompete covenants with dentists, nurses and physician assistants. The amendments eliminate the statute’s open-ended “reasonable price” requirement and will now require buyout clauses to not exceed a covered individual’s “total annual salary and wages at the time of termination.” For many agreements, this will result in a significant reduction from previous buyout clauses. One-Year Duration – Noncompete covenants that are executed with physicians and other health care practitioners will be limited to one (1) year following the termination of the covered individual’s contract or employment. Five-Mile Radius – The geographic area of noncompete covenants that are executed with physicians and other health care practitioners will now be limited to “a five-mile radius from the location at which the health care practitioner primarily practiced before the contract or employment terminated.” Termination Without “Good Cause” for Physicians – The circumstances of a physician’s termination will impact the enforceability of their noncompete covenant. Noncompete covenants will be void and unenforceable against a physician if they are involuntarily terminated without “good cause,” which is defined as “a reasonable basis for discharge . . . that is directly related to the physician’s conduct, including the physician’s conduct on the job, job performance and contract or employment record.” Importantly, this distinction is limited to physicians. The enforceability of noncompete covenants that are executed with other health care providers will not be impacted by the circumstances of their termination. Clear and Conspicuous Language – Noncompete covenants that are executed with physicians and other health care practitioners must now “have terms and conditions clearly and conspicuously stated in writing.” SB 1318 does not expand further on this requirement, but it will result in noncompete covenants being susceptible to attack on this basis. Managerial/Administrative Carve-Out – Before the enactment of SB 1318, Texas’ heightened enforceability requirements extended to most physician-entered noncompete covenants “related to the practice of medicine” (excluding certain business ownership interests). This created some ambiguity regarding when these heightened requirements were triggered. SB 1318 partially resolves this by emphasizing “the practice of medicine does not include managing or directing medical services in an administrative capacity for a medical practice or other health care provider.” Stated differently, noncompete covenants that are executed with physicians employed solely in a managerial or administrative capacity will not be subject to these heighted requirements. When Do These Changes Go into Effect? The changes go into effect on September 1, 2025. Importantly, these changes are prospective in nature and only apply to noncompete covenants that are entered into or renewed on or after this date—meaning that preexisting noncompete covenants will continue to be governed by Texas’ noncompete laws existing before the effective date of SB 1318. What’s Next? These amendments are consistent with the nationwide trend towards more restrictions on the permissive use of noncompete covenants. While these amendments are not retroactive, it is conceivable that judges may still take these amendments into consideration when analyzing the enforceability of preexisting covenants in future litigation under Texas’ current “no greater than necessary” standard. In turn, employers will need to weigh whether they make these changes on a rolling basis or preemptively amend existing agreements and consider other avenues for protection. Polsinelli attorneys are available to assist covered health care entities in navigating these changes and ensuring that their protectable business interests are adequately safeguarded.

What You Need to Know: Equal Protection Under Title VII: On June 5, 2025, the U.S. Supreme Court unanimously ruled that Title VII’s protections apply equally to all individuals, regardless of whether they are in a majority or minority group, reinforcing a plain-language interpretation of the statute. DEI Implications and Legal Scrutiny: The decision comes amid increasing scrutiny of employer DEI initiatives, highlighting the need for programs to comply with Title VII’s equal treatment requirements for all protected groups. More Changes on the Way? A concurring opinion questions whether the longstanding McDonnell Douglas standard should govern at summary judgment in Title VII cases, possibly foreshadowing more changes to come. In Ames v. Ohio Department of Youth Services, the U.S. Supreme Court unanimously rejected a rule requiring that Title VII discrimination claims brought by “majority-group” plaintiffs meet a heightened evidentiary standard to establish a prima facie case of discrimination. In doing so, the Court held that Title VII applies equally to all groups within its protected classes based on the plain language of the statute that does not differentiate amongst groups. This decision is significant in light of the shifts in the Equal Employment Opportunity Commission’s position on employer diversity, equity, and inclusion (DEI) initiatives. In Ames, a heterosexual woman plaintiff alleged that she was denied a promotion and subsequently demoted due to her sexual orientation. The district court granted summary judgment to the employer on the grounds that the plaintiff failed to meet the Sixth Circuit’s "background circumstances" rule. Plaintiffs who are members of a majority group are required to establish “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” Multiple other Circuits similarly imposed heightened evidentiary burdens on majority group plaintiffs. The Supreme Court unanimously rejected the background circumstances rule, holding that Title VII's text does not support imposing a heightened standard on majority-group plaintiffs. Justice Ketanji Brown Jackson, delivering the unanimous opinion for the Court, stated that Title VII's protections apply equally to all individuals; they do “not vary based on whether or not the plaintiff is a member of a majority group.” While the decision is not necessarily unexpected, the impact of the Ames decision could be heightened given the recent focus on employer DEI initiatives. In recent guidance finding that employer DEI programs that provide benefits to employees based on race or other protected group status may be unlawful, EEOC has similarly expressed that Title VII’s protections and requirements are equally applicable to all protected groups. Also notable is a concurring opinion issued by Justices Clarence Thomas and Neil Gorsuch. In addition to noting their agreement with the majority, Justices Thomas and Gorsuch questioned the lower court’s use of the McDonnell Douglas burden-shifting standard in awarding summary judgment to the employer. The concurring opinion expressed that requiring employees to meet the McDonnell Douglas standard at the summary judgment stage was an excessive burden, and invited future challenges to the standard’s application. The Ames decision underscores the importance of treating all employees fairly under Title VII. Further, the decision emphasizes the need to assess workplace programs for vulnerabilities in light of the EEOC’s DEI focus. For questions or guidance regarding compliance, please contact Valerie Brown, Jack Blum, Earl Gilbert, or your Polsinelli attorney.

What You Need to Know: OSHA’s Updated SST Plan Targets High-Risk Workplaces Using New Data: The revised Site-Specific Targeting (SST) Inspection Plan now relies on injury data from OSHA’s Injury Tracking Application (ITA), focusing on high-hazard, non-construction establishments with 20+ employees. Key Changes Include More Inspections and Industry Focus: The plan expands the number of inspections and emphasizes industries with high injury rates, while dropping “record-only” inspections for sites mistakenly flagged. Proactive Compliance Strategies Are Essential: Companies should prioritize accurate record-keeping, comprehensive safety training, internal audits and building a strong safety culture to ensure compliance and readiness for surprise inspections. The Occupational Safety and Health Administration (OSHA) has recently updated its Site-Specific Targeting (SST) Inspection Plan, a critical development for companies across various industries. This blog will cover the SST Plan, its recent changes, and practical steps to ensure compliance and readiness for inspections. Site-Specific Targeting Inspection Plan Explained The SST Inspection Plan is OSHA's primary method for targeting high-hazard, non-construction workplaces with 20 or more employees. The Plan uses data from the OSHA Data Initiative (ODI) to identify establishments with high rates of injuries and illnesses. By focusing on these sites, OSHA aims to reduce workplace hazards and improve safety standards. Key Changes in the Updated SST Plan There are three important changes that the updated SST Plan introduces: Data Utilization: The new plan places greater emphasis on data from the OSHA Injury Tracking Application (ITA) to identify establishments for inspection. This shift underscores the importance of maintaining accurate and timely injury and illness records. The SST Plan will select establishments for OSHA inspection based on data from Form 300A for the period 2021 to 2023. Increased Inspections: The updated plan expands the scope of inspections, potentially increasing the number of establishments subject to review. This change highlights the need for companies to be prepared for inspections at any time. But there is some good news: now, if an establishment is targeted in error, OSHA won't continue on with a "record-only" inspection. Rather, it will just leave the premises. Focus on High-Risk Industries: The SST Plan now prioritizes non-construction industries with historically high rates of workplace injuries and illnesses. HR professionals and those involved with safety initiatives in these sectors should be particularly vigilant in ensuring compliance with OSHA standards. Advice for Companies To navigate the updated SST Plan effectively, companies should consider the following strategies: 1. Maintain Accurate Records Accurate record-keeping is as crucial as ever under the new SST Plan. Companies should ensure that all injury and illness records are up-to-date and accurately reflect workplace incidents. This includes regular audits of OSHA 300 logs and ensuring that all required documentation is readily available for inspection. 2. Enhance Safety Training Investing in comprehensive safety training programs is essential. HR professionals should work with safety officers to develop training sessions that address specific workplace hazards and promote safe practices. Regular training not only helps prevent accidents but also demonstrates a company's commitment to safety, which can be beneficial during an OSHA inspection. 3. Conduct Internal Audits Regular internal audits can help identify potential safety issues before they become problems. HR professionals should collaborate with safety teams to conduct thorough inspections of the workplace, ensuring compliance with OSHA standards. These audits can also serve as a valuable tool for preparing for potential OSHA inspections. 4. Foster a Safety Culture Creating a culture of safety within the organization is perhaps the most effective way to ensure compliance with OSHA standards. Companies should encourage open communication about safety concerns and involve employees in safety planning and decision-making. Recognizing and rewarding safe practices can also motivate employees to prioritize safety in their daily activities. The Importance of Compliance Compliance with OSHA's SST Plan is not just about avoiding fines and penalties; it is about ensuring the safety and well-being of employees. By understanding the updated SST Plan and implementing the strategies outlined above, companies can play a pivotal role in creating a safer workplace. What the New SST Inspection Plan Means for Employers The updated SST Inspection Plan represents a significant shift in OSHA's approach to workplace safety. For companies, this means taking proactive steps to ensure compliance and readiness for inspections. By maintaining accurate records, enhancing safety training, conducting internal audits, and fostering a safety culture, companies can not only meet OSHA's requirements but also create a safer, more productive work environment. Polsinelli understands the complexities involved with OSHA compliance and is committed to helping employers meet their obligations efficiently and effectively. If you have questions about OSHA compliance, contact Will Vail, Harry Jones, Shivani Bailey, or your Polsinelli attorney.

Key Takeaways The U.S. Equal Employment Opportunity Commission 2024 EEO-1 Component 1 Report filing opened on May 20, 2025, with a submission deadline of June 24, 2025, and no extensions being granted. Employers must select a workforce snapshot from October 1, 2024, to December 31, 2024. Filing is mandatory for private employers with 100 or more employees, federal contractors with 50 or more employees and certain affiliated private employers. As anticipated, 2024 EEO-1 Component 1 Report filing officially opened May 20, 2025, on the EEO-1 Data Collection website. The EEOC has expressed that, as part of cost savings, the filing period for EEO-1 data will be shorter than in the past. Specifically, employers will have a deadline for submission of June 24, 2025. It is important to note that no extensions will be granted this year, making timely compliance essential. In addition to the shorter time period for submission, there are additional changes to the 2024 EEO-1 reporting as discussed here. Filing Requirements The EEO-1 Report is a mandatory annual data collection that requires certain employers to submit demographic workforce data, including data by race/ethnicity, sex and job categories. The following entities are required to file: Private employers with 100 or more employees; Federal contractors with 50 or more employees; and Private employers with fewer than 100 employees who are affiliated through centralized control or ownership with other entities, totaling 100 or more employees. To complete their report, employers must select a workforce snapshot from any pay period between October 1, 2024, and December 31, 2024, for both full-time and part-time employees. Compliance Assistance Polsinelli understands the complexities involved in the EEO-1 reporting process and are committed to helping employers meet their obligations efficiently and effectively. If you have questions about EEO-1 reporting, contact Erin Schilling, Shivani Bailey or your Polsinelli attorney.

What You Need to Know The U.S. Department of Labor has announced it will no longer enforce the 2024 independent contractor rule under the Fair Labor Standards Act (FLSA), reverting to the more employer-friendly 2008 “economic reality” test. The 2008 Rule and a reinstated 2019 Opinion Letter—favorable to app-based and gig economy businesses—will guide enforcement actions, emphasizing factors like control, investment, and profit/loss potential to determine worker status. While the shift is seen as beneficial to businesses, employers must continue to monitor developments and ensure compliance with federal, state, and local classification standards to avoid misclassification penalties. On May 1, 2025, the Wage and Hour Division of the U.S. Department of Labor (“DOL”) announced that it will no longer enforce its 2024 independent contractor rule under the Fair Labor Standards Act (“FLSA”). The nixed 2024 rule previously set forth a six-factor test to classify workers as employees or independent contractors based on a “totality of the circumstances test” of non-exhaustive factors. The 2024 rule had been subject to numerous legal challenges in district courts across the country because employers considered it to skew towards classifying workers as independent contractors. Now, the DOL will revert back to the framework set out back in 2008 in Fact Sheet #13 (the “2008 Rule”) until it can develop a revised standard. The DOL’s Guiding Independent Contractor Standard (for now) The 2008 Rule asserts that “an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves.” Under this 2008 Rule, the employer-employee relationship under the FLSA is tested by “economic reality” rather than “technical concepts.” It also states that the following factors are considered significant in determining whether there is an employee or independent contractor relationship: The extent to which the services rendered are an integral part of the principal’s business; The permanency of the relationship; The amount of the alleged contractor’s investment in facilities and equipment; The nature and degree of control by the principal; The alleged contractor’s opportunities for profit and loss; The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and The degree of independent business organization and operation. Finally, the 2008 Rule provides that certain factors, such as (i) where work is performed; (ii) the absence of a formal employment agreement; (iii) whether an alleged independent contractor is licensed by a state or local government; and (iv) the time or mode of pay, are immaterial to determining whether there is an employment relationship. Impact of the DOL’s Recent Departure from the 2024 Test The DOL’s announcement does not formally revoke the 2024 rule, but it does indicate that changes to the rule will be forthcoming. The DOL will now utilize the Fact Sheet #13 and a 2019 Opinion Letter (which was previously withdrawn) to conduct audits and other enforcement actions. The 2019 Opinion Letter re-instituted by the DOL on May 2, 2025, addresses whether the workers of a virtual marketplace company that provides an “online and/or smartphone-based referral service that connects service providers to end-market consumers” are independent contractors or employees. In essence, the 2019 Opinion Letter concludes that these “on-demand” workers for virtual marketplace companies, who perform services for users (such as transportation, delivery, shopping, moving, etc.), are independent contractors, not employees. App-based rideshare companies and other similar technology-based service companies will be directly impacted by the DOL’s announcement. While these recent DOL announcements are generally viewed as more employer-friendly, time will tell if that is the practical reality of these changes. Don’t forget – state and local laws can impact the analysis of proper worker classification, so employers need to stay vigilant to ensure they are not making any major changes that would violate those pesky geographic nuances. Employers Should Proactively Monitor This Area Employers should evaluate their existing employee classifications in light of these recent developments to ensure that employees are properly classified to avoid violations of the FLSA’s requirements, including minimum wage, overtime, and recordkeeping. This is particularly important for employers to consider because misclassification issues can be costly. Additionally, employers need to stay alert for any further changes because the DOL has signaled that additional rulemaking regarding independent contractor classification under the FLSA is expected. Please contact your Polsinelli attorney if you have any questions related to this important legal development.

Key Takeaways The 2024 EEO-1 Report is expected to open May 20 pending approval of the instruction book and justification. The EEO-1 is expected to eliminate the option to report non-binary employees. Employers should confirm how their system collects data on the sex of employees to comply with binary-only gender reporting. On April 15, 2025, the Equal Employment Opportunity Commission (EEOC) submitted its 2024 EEO-1 Component 1 Instruction Booklet and justification to the Office of Information and Regulatory Affairs (OIRA), containing potential changes that may impact employers. This booklet indicates that 2024 EEO-1 Component 1 reporting will begin on Tuesday, May 20, 2025, with the deadline to file on Tuesday, June 24, 2025. The 2024 report will cover employee data from the payroll period between October 1, 2024, through December 31, 2024. These reporting dates remain tentative as OIRA must approve the booklet, which can take 30-60 days from the date of submission. Final dates will be posted on the EEO-1 reporting page. Understanding the EEO-1 Reporting Requirements The EEO-1 is an annual requirement that certain employers submit demographic workforce data, including information on race, ethnicity and sex by job group. The EEO-1 report is required for employers with 100 or more employees and employers with less than 100 employees who are related to other entities, such that combined, there are over 100 employees. Changes are Expected to the 2024 EEO-1 Executive Order 14168: Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government could have an impact on EEO-1 reporting, particularly concerning the recognition of sex. Executive Order 14168 reinforced the federal government's stance on recognizing only two sexes—male and female. In recent reporting periods, employers were instructed to report non-binary employees by footnote. EEOC is seeking approval to remove the option for employers to voluntarily report on employees who have self-identified as “non-binary” in order to comply with Executive Order 14168. This change would mean that the booklet’s instructions on “Reporting by Sex” would be restated to: “The EEO-1 Component 1 data collection provides only binary options (i.e., male or female) for reporting employee counts by sex, job category, and race or ethnicity.” What Employers Should Do Now? To ensure compliance with the new EEO-1 reporting requirements, employers should review and update their data collection processes. This includes auditing current systems to ensure they can accommodate the reporting of sex as needed. Employers should also stay informed about any updates or clarifications issued by the EEOC regarding the implementation of these changes. Polsinelli will continue to monitor developments with the EEO-1 report. If you have questions about EEO-1 reporting, contact Erin Schilling, Shivani Bailey or your Polsinelli attorney.

During her 2025 State of the State Address on January 14, 2025, New York Governor Kathy Hochul announced a plan to support workers displaced by Artificial Intelligence (AI) by requiring employers who engage in mass layoffs or closings subject to New York’s state Worker Adjustment and Retraining Notification law (“NY WARN”) to disclose whether AI automation played a role in the layoffs. Governor Hochul stated that the goal of these disclosures is to understand “the potential impact of new technologies through real data.”  The Governor’s announcement states that she is directing the New York Department of Labor to impose this requirement, so presumably the change will be imposed without the need for legislative action. Specific details about the scope of the new disclosure requirement are not yet available. The rise of AI in the workplace has been a matter of concern to many state lawmakers across the nation, as well as federal regulators. In New York, for example, New York City’s 2021 Local Law 144 placed guardrails on employers utilizing AI and other Automated Employment Decision Tools (“AEDTs”) in employment related decisions by requiring bias audits of AEDT tools and employer notice to employees and candidates of their use. Similarly, California nearly passed a law in 2024, SB 1047, requiring notice to employees when an AI system is used in employment decisions. While the bill was stalled out at the end of the 2024 California legislative session, California is expected to propose more AI safety legislation in 2025. Colorado will also impose a new requirement in 2026 for developers and users of employment-related AI to “use reasonable care to protect consumers from any known or reasonably foreseeable risks of algorithmic discrimination in the high-risk system.” At the federal level, the Equal Employment Opportunity Commission (EEOC) issued two guidance documents in 2023 concerning the issues of adverse impact and disability accommodations in the use of AI and machine learning tools in making workplace decisions. These proliferating laws show the need for employers to be intentional about their use of AI tools in making employment decisions. Legal and human resources leaders should familiarize themselves with how their organizations are using AI tools in the employment context, and design policies to ensure that the rapidly proliferating state and local requirements around AI usage are met. 

Governor Hochul signed legislation titled the “New York State Fashion Workers Act” (the “Act”), which has a widespread impact on the modeling industry as it relates to compensation, contractual restrictions, and other workplace protections. The Act takes effect on June 19, 2025. Applicability The Act is geared towards protecting models, regardless of employee or independent contractor status. The Act aims to close any loopholes by placing affirmative requirements and restrictions on model management companies and their clients. Model management companies include those persons or entities engaged in the management, procurement, or counseling of models. The Act applies to clients of model management companies, including retail stores, manufacturers, clothing designers, advertising agencies, photographers, publishing companies or any other person or entity that receives modeling services. Requirements and Prohibitions for Model Management Companies All model management companies must register with the New York Department of Labor within one year of the effective date of the Act, by June 19, 2026. After the registration is complete, the model management company must post their certificate of registration in a conspicuous place within their physical office and on their website. Model management companies may file a request for exemption if it: 1) submits a properly executed request for exemption; 2) is domiciled outside of New York and is licensed or registered as a model management company in another state that has the same or greater requirements as the requirements under this Act; and 3) does not maintain an office in New York or solicit clients located or domiciled within New York. The registration and exemption status only lasts for a two-year period. Notably, if the management company employs more than five employees, then it must post a surety bond of $50,000. The Act broadly imposes a fiduciary duty upon model management companies that is owed to their models. Acting in good faith, model management companies must, inter alia, conduct due diligence, procure opportunities, provide final agreements to models at least twenty-four hours prior to the start of modeling services, disclose any financial relationship with a client, and identify their registration number in any advertisement (including social media). The Act seeks to provide transparency to models’ compensation by requiring the management companies to clearly specify costs that the model must reimburse and providing the model with supporting documentation of those costs on a quarterly basis. The management companies must ensure that employment of a sexual nature or involving nudity complies with state civil rights law. The Act also considers the management company’s past and future use of images. For former models, the Act requires the management companies to send a written notification to the models informing them if the company continues to receive royalties. For future use of a model’s image, the management company must obtain a written consent separate from the representation agreement that details the creation, use, duration, scope and rate for that digital replica. The Act also prohibits management companies from engaging in certain activities. Among prohibitions related to compensation and fees, the Act prohibits a contractual term greater than three years and prohibits the contract from automatically renewing without affirmative consent from the model. The model management companies are prohibited from taking more than twenty percent of a commission fee. Model management companies are prohibited from discrimination, harassment and retaliation. A new topic of interest is the Act’s prohibition on altering the model’s digital replica using artificial intelligence. Finally, the Act specifies that a management company cannot present a power of attorney agreement as a necessary condition to working with the management company. Requirements of Clients The language of the Act establishes client responsibilities owed to models as it relates to compensation and safety. Clients should be aware that if a model works over eight hours in a twenty-four-hour period, they must receive overtime pay and they must receive at least one thirty-minute meal break. Clients must only offer opportunities that do not pose an unreasonable risk of danger, ensure that work opportunities of a sexual nature or involving nudity comply with civil rights law, and allow the model to be accompanied by a representative to any work opportunity. Causes of Action and Penalties Under the Act, models have a private right of action in addition to the enforcement authority of the commissioner and attorney general. The Act provides a six-year statute of limitations. The commissioner may impose penalties of $3,000 for the initial violation and $5,000 for subsequent violations. Before a court of competent jurisdiction, a plaintiff may obtain actual damages, reasonable attorneys’ fees and costs, and liquidated damages up to 100% for non-willful violations and up to 300% for willful violations. Conclusion In anticipation of the Act going into effect, model management companies should thoroughly review and update their policies and practices and prepare to register or seek an exemption. Likewise, businesses that hire models should review their practices and revise policies as necessary to ensure compliance with the Act. Polsinelli attorneys are available to assist with any questions that may arise in anticipation of the June 19, 2025, effective date and any questions that may arise thereafter.

Tuesday, June 4, 2024, is the deadline to submit and certify the 2023 EEO-1 Component 1 Report to the Equal Employment Opportunity Commission (EEOC). While the deadline has been extended occasionally in prior years, no such announcement has been made to date. Accordingly, all covered employers should take steps to comply by the deadline. The importance of meeting this annual reporting requirement was further emphasized this week when the EEOC filed suit against 15 employers in various industries across 10 states for failing to submit their EEO-1 Component 1 Reports for past years, including for the years 2021 and 2022. Additional information regarding reporting requirements and whether your company is required to submit and certify can be found here. Polsinelli will continue to monitor developments with EEO-1 reporting and the above-referenced EEOC lawsuits. If you have questions about EEO-1 reporting or need assistance preparing this report, contact your Polsinelli attorney.

Effective October 1, 2024, Maryland will become the sixth state (plus the District of Columbia), to require that employers provide an upfront disclosure of the wage or salary range for open positions in job listings. The new law follows a recent proposed rule similarly seeking to require federal contractors to disclose pay information in job postings. These proliferating pay transparency requirements demonstrate the need for employers to continue focusing on achieving pay equity throughout the workforce. Maryland’s law is applicable to all employers within the state, regardless of size, and applies to any position that will be physically performed, at least in part, in Maryland. As with transparency laws enacted by other states, this leaves uncertainty about the law’s application to fully remote positions that can conceivably be performed from anywhere. The new law requires that employer job listings, whether posted directly or through a third party like a recruiting firm, include a wage and salary range, as well as a general description of the benefits offered for the position. The wage or salary range must be set in good faith by reference to: (1) Any applicable pay scale;  (2) Any previously determined minimum and maximum hourly rate or minimum and maximum salary for the position; (3) The minimum and maximum hourly rate or minimum and maximum salary of an individual holding a comparable position at the time of the posting; or (4) The budgeted amount for the position. The law also applies to internal postings for promotions or transfers.  If this information is not included in a job posting, it must be provided to the applicant before any discussion of compensation takes place, or earlier upon the request of the applicant. Notably, the factors that must be referenced in setting the wage range could potentially be inconsistent – for example, an employer could be hiring for a position in which comparable employees make between $80,000 and $120,000 but have $100,000 budgeted for the hire. The law does not provide guidance on how employers should navigate such discrepancies. In addition to the job posting requirements, the law sets forth anti-retaliation and recordkeeping obligations for employers. Penalties for violation of the new law range from $300 to $600 and take effect only upon a second or subsequent offense, as the law provides that employers will receive a compliance warning for a first offense. The law is enforceable only by the Maryland Department of Labor and does not contain a private right of action. Employers with jobs that can be performed, at least in part, in Maryland should review their pay equity and transparency practices in light of this new law. If you have questions about pay equity and pay transparency practices, contact your Polsinelli attorney.

On Tuesday, April 30, 2024, the Equal Employment Opportunity Commission (EEOC) will open the 2023 EEO-1 Component 1 Report for employers to report the race, ethnicity and gender of their employees. The EEO-1 reporting period is scheduled to remain open until Tuesday, June 4, 2024. This reporting is mandatory for private sector employees with 100 or more employees and certain federal contractors with 50 or more employees. In addition, employers with less than 100 employees who are related to other entities, such that combined, there are over 100 employees, may also be required to file. The EEOC anticipates posting updates regarding the 2023 EEO-1 Component 1 data collection by Tuesday, March 19, 2024, including the 2023 EEO-1 Component 1 Instruction Booklet and the 2023 EEO-1 Component 1 Data File Upload Specifications. Polsinelli will continue to monitor developments with the EEO-1 report. If you have questions about EEO-1 reporting or need assistance preparing this report, contact your Polsinelli attorney.

Late last year, the EEOC quietly announced its most recent Strategic Enforcement Plan, covering 2024–2028. To no surprise, the EEOC has indicated that it will implement a concerted effort to focus its resources on employment practices that often result in class and collective action lawsuits. More specifically, the EEOC announced the following “subject matter priorities” for the next four years: “Eliminating Barriers in Recruitment and Hiring” (including use of artificial intelligence for hiring, apprenticeship/internship programs, online-focused application processes, screening tools for hiring—such as pre-employment tests and background checks, and the underrepresentation of women and workers of color in industries such as manufacturing, tech, STEM, and finance, for example); “Protecting Vulnerable Workers and Persons from Underserved Communities from Employment Discrimination” (including immigrant workers, persons with mental or developmental disabilities, temporary workers, older workers, and workers traditionally employed in low-wage jobs); “Addressing Selected Emerging and Developing Issues” (including the use of qualification standards or other policies that negatively affect disabled workers, protecting workers affected by pregnancy, childbirth or related medical conditions, preventing discriminatory bias towards religious minorities or LGBTQIA+ individuals, and the use of artificial intelligence or automated recruitment tools for hiring); “Advancing Equal Pay for All Workers” (including a focus on employer policies that prevent or attempt to limit workers from asking about pay, inquiring about applicants’ prior salary histories, or prohibiting workers from sharing their compensation with coworkers); “Preserving Access to the Legal System” (including the use of overly broad releases or nondisclosure agreements, the implementation of unlawful mandatory arbitration provisions, and any failure to keep records required by statute or EEOC regulations); and “Preventing and Remedying Systemic Harassment.” The EEOC has indicated that it will focus on Charges that touch on the above topics while also intentionally prioritizing systemic enforcement actions and impact litigation to eradicate what it perceives to be discriminatory employment practices. As demonstrated briefly above, the EEOC has a keen interest in scrutinizing artificial intelligence and mass hiring practices via automatic recruitment tools, in addition to a renewed focus on employment practices that could have an adverse impact on those with intellectual or health-related disabilities, among other things. This could directly lead to an increase in Commissioner Charges, systemic investigations, pattern or practice lawsuits, and class action litigation regarding the topics listed in its Strategic Enforcement Plan. Employers should be vigilant in monitoring these key areas of risk related to the EEOC’s new Strategic Enforcement Plan, as EEOC investigations can quickly escalate to regional or even nationwide systemic investigations and corresponding litigation. Contact your Polsinelli attorney for further guidance on how you can bolster your employment practices to minimize the risk of potential EEOC enforcement actions, as well as class and collective actions, in your workplace.

Around the world and across the United States, we see so many languages spoken. People around the world communicate in thousands of different languages. Given the wide origins of workers and companies with international operations, the question arises: to what extent should employers accommodate language needs, as in translating handbooks, policies, notices, or memos? Legally, the answer is murky: states and foreign jurisdictions adopt varying approaches. For example, in the United States, there is a varied patchwork of federal law that can apply requiring notices in languages besides English, while we have some states (Georgia, North Carolina, Michigan, Arizona, Missouri, etc.) that do not have any requirements for translating employment-related documents. In contrast, states like Ohio, Indiana, Maryland, and Washington encourage employers to provide translation or guidance for employment-related documents, while states like New York, Illinois, Virginia, and Massachusetts require notices and posters in languages besides English. Finally, some states like Tennessee, Colorado, Texas, and California have more specific laws and case law on requirements for translating employment-related documents. For employers with international operations, the answer will significantly vary based on an employee’s location. Some countries (like Australia and Switzerland) do not have any requirements, while many countries in Latin America, the United Kingdom, New Zealand, Singapore, etc. have recommended or preferred languages. Other countries like Israel, Denmark, India, South Africa, and Japan have requirements that employers ensure employees understand employment-related documents or that a document in a specific language will prevail in a dispute. However, many countries, such as Belgium, Canada, France, Romania, Ukraine, the United Arab Emirates, China, etc., do have specific language requirements, and some of them are based on regions within countries. It is clear that there is a lot of variety across the United States and around the world on whether employers must translate workplace documents. Employers should tread carefully with languages for employment documents, especially in light of ever-changing statutes across countries. Polsinelli is monitoring these requirements around the world. Contact our International Employment Law group for assistance with employment document translation in jurisdictions around the world, including those that may not have been discussed in this summary.

On January 9, 2024, the U.S. Department of Labor released the final details of their Independent Contractor test. This test addressing when companies can classify workers as independent contractors has been hotly debated since the last proposed rule by the Trump administration was struck down by the current DOL. The new rule will take effect on March 11, 2024. The new Independent Contractor focuses on the “economic realities of the working relationship” to determine if whether the worker is economically dependent on the company for work or if the worker is in business for themselves. The test is based on the “totality of the circumstances” and includes the following six factors: The opportunity for profit or loss depending on managerial skill; Investments by the worker and the company; Degree of permanence of the work relationship; Nature and degree of control of the worker – including whether the employer uses technological means of supervision (such as by means of a device or electronically), reserves the right supervise or discipline the worker, or places demands on a worker’s time that do not allow the worker to work for others or work when they choose; The extent to which the work performed is an integral part of the company’s business; and The skill and initiative of the worker – i.e., whether the worker possesses and uses specialized skills that they bring to the job, or is the worker dependent on training from the company to perform the work. While the DOL identified these six factors, it is clear that no factor has a predetermined weight, and also indicated that other “additional factors” may be relevant if they are indicative of whether the worker is in business for themselves. Pending the effective date, the DOL has issued FAQs which can be found at: https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking/faqs With this new test, companies should carefully review whether the workers they have classified as independent contractors meet the new requirements and take any appropriate action if they believe they are misclassified. Polsinelli attorneys are available to assist with this review and analysis.

Employee Handbooks are an important tool to help communicate policies, establish company culture, and protect an organization. However, they can also cause problems for a company if not drafted and implemented carefully, or used across borders without aligning with local law and custom. Join Polsinelli attorneys Harry Jones and Emily Tichenor next Tuesday, October 24, as they address what to include in a Handbook, what you may not want to include in a Handbook, important Handbook updates to make for 2024, and how to make the best use of your Employee Handbook. Register for the SHRM-KC webinar taking place on October 24 at 12:00 PM CT.

On October 31, 2023, the Equal Employment Opportunity Commission (EEOC) will open the 2022 EEO-1 Component 1 Report for employers to report the race, ethnicity and gender of their employees (by job category) with a due date on December 5, 2023. Of note, the relevant data should be gathered based on an employer’s workforce from October 1, 2022 to December 31, 2022. This reporting is mandatory for private sector employees with 100 or more employees, employers with less than 100 employees who are related to other entities so there is a combined employee count over 100 employees may be required to report and certain federal contractors with 50 or more employees. The EEOC is in the process of releasing numerous resources to assist employers in reporting, including the Filer Support Message System that will open on October 31, 2023, the Instruction Booklet released on September 6, 2023, and the Data Upload Specifications which is anticipated to be released on September 13, 2023. At this time, there are no known changes to the substance of what employers must report but the actual report may look different and likely will be streamlined; however, that is only for the 2022 EEO-1 Reporting and is subject to change in the following years. Polsinelli will continue to monitor developments with the EEO-1 report. If you have questions about EEO-1 reporting, contact your Polsinelli attorney.

In May 2022, the EEOC filed an age discrimination lawsuit against a group of affiliated companies employing English-language tutors. According to the EEOC, for a brief period in the spring of 2020, those companies programmed application software to automatically reject female applicants over 55 years old and male applicants over age 60. The lawsuit alleged this screening process affected over 200 applicants that were above the programmed age thresholds. The parties have now reached a settlement. The settlement itself is expansive. As is typical with many EEOC settlements, the provisions extend beyond monetary payments. Here, in a consent decree filed in federal court, the employers agreed to various non-monetary obligations, including providing notice of the lawsuit to high-level executives and HR employees, retaining a third-party group to conduct extensive training on all federal equal employment opportunity laws, and inviting the rejected applicants to re-apply (with reporting obligations to the EEOC). This lawsuit and the subsequent settlement is likely just the first of many of its kind, but it highlights the need to proceed with caution when relying on automated decision-making processes, as well as AI usage generally. Employers should accordingly critically assess the use of technology – such as the application software at issue in the EEOC’s lawsuit – and ensure that its use complies with applicable employment laws. For additional guidance regarding the use of AI in the workplace, contact your Polsinelli attorney.

Under Title VII of the Civil Rights Act, private sector employers with 100 or more employees and certain federal contractors with 50 or more employees are required to provide demographic information of their workforces—otherwise known as EEO-1 Component 1 reporting. This includes data such as sex, race, ethnicity, and job categories. The 2022 reporting period has been delayed. It is currently scheduled to open in the fall of 2023—with no date set in stone. The EEOC is in the process of doing a three-year renewal of EEO-1 Component 1 reporting with the Office of Management and Budget (“OMB”) which is required by the Paperwork Reduction Act. While the Biden administration has expressed support for collecting compensation data with the EEO-1 report, EEOC has made clear on the EEO-1 Component 1 page that it is not making changes to the EEO-1 Component 1 data collection categories.  Rather, EEOC is seeking to update how the data is collected from employers and to reduce the burden of this collection on employers, including no longer requiring “multi-establishment filers” to submit separate reports based on the size of establishments. While EEOC has not announced a deadline for 2022 EEO-1 Component 1 reporting, required employers and contractors should continue ensuring they are collecting the necessary demographic data to be ready for the deadline. Once a deadline is determined, it will be posted on the EEO-1 Component 1 page, and employers should note that the actual reporting process may look different (and may be less burdensome) if the OMB approves changes to the data collection methods. If you have questions about required notices, contact your Polsinelli attorney.

Governor Greg Abbott recently signed House Bill No. 567, also known as the CROWN Act, into law. Following the bill’s enactment on September 1, 2023, Texas law will prohibit race-based hair discrimination in employment, schools, and housing. Under the new law, Texas Labor Code provisions referring to racial discrimination include “discrimination because of or on the basis of an employee’s hair texture or protective hairstyle commonly or historically associated with race.” A “protective hairstyle” includes braids, locks, and twists. Additionally, the CROWN Act makes it unlawful for employers, labor unions, and employment agencies to adopt or enforce grooming policies with race-based hair discrimination. Texas joins twenty-one other jurisdictions in prohibiting such discrimination: Alaska, California, Colorado, Connecticut, Delaware, Illinois, Louisiana, Maine, Massachusetts, Maryland, Minnesota, Nebraska, Nevada, New Jersey, New Mexico, New York, Oregon, Tennessee, Virginia, Washington, and the U.S. Virgin Islands. Texas employers should review their dress and grooming policies for compliance before the CROWN Act goes into effect on September 1, 2023.  If you have any questions regarding these new protections or need assistance in revising your company’s policies, please consult your Polsinelli attorney.

So far in 2023, artificial intelligence (AI) has been at the leading edge of the technological revolution, as the potential applications for tools like ChatGPT have drawn considerable buzz.  In April 2023, we reported on New York City’s first-in-the-nation ordinance imposing notice and audit requirements on the use of artificial intelligence tools by employers.  More recently, the Equal Employment Opportunity Commission (EEOC) issued two guidance documents addressing AI in the HR context, specifically tackling the issues of adverse impact and disability accommodations. Employers are increasingly using AI and machine learning (ML) tools to help optimize employment decisions like hiring, promotions, and terminations.  Some examples of these tools identified in the EEOC guidance include resume scanners to identify promising candidates, employee monitoring software that rates employees based on productivity metrics, virtual assistants or chatbots that question applicants about their qualifications, video interviewing software that evaluates facial expressions and speech patterns, and testing software that provides job or cultural fit scores.  Generally, an AI/ML tool is one that wholly or partially relies on a computerized analysis of data to make employment decisions.  As with many new technologies, however, in some cases, technological advancement may jeopardize legal compliance.  Employers will have to consider the implications of these tools under both new laws (like New York City’s) and older laws like those administered by the EEOC. EEOC’s first guidance document assessed the employer’s obligation to ensure that AI/ML tools used in employment selection procedures do not adversely impact protected classes under Title VII (e.g., gender, race).  An AI/ML tool that has a “substantial” disproportionate impact on a protected class may be discriminatory if it is not job-related and consistent with business necessity or if more favorable alternatives are available.  An adverse impact can occur if a tool awards higher ratings or is more likely to select or reject, members of a certain protected class in comparison to other protected classes.  A few important takeaways from EEOC’s guidance on adverse impact: Employers may be responsible for the effect of third-party software.  EEOC’s guidance signals the agency will look to hold employers responsible for adverse impact even if the AI/ML tool in question is third-party software the employer did not develop.  The guidance states that this responsibility can arise from either the employer’s own administration of the software or a vendor’s administration as an agent of the employer. Employers rely on vendor assurances at their own risk.  Although EEOC encourages employers to “at a minimum” ask their AI/ML software vendors about steps taken to assess adverse impact, EEOC’s position is that reliance on the vendor’s assurances is not necessarily a shield from liability.  Employers still face liability “if the vendor is incorrect about its own assessment.” Self-audits are advisable.  Given the inability to rely on a vendor’s assurances, employers are best served by periodically auditing how the AI/ML tools they use impact different groups.  To do such an audit, employers need access to the AI/ML tool’s underlying data, which is best ensured at the time the tool is implemented. EEOC’s second guidance document addressed the impact of AI/ML tools on individuals with disabilities under the Americans with Disabilities Act (ADA).  The ADA guidance makes clear that this is an altogether different analysis than the Title VII adverse impact analysis described above.  Moreover, because of the individualized nature of the impact of disabilities and the ADA reasonable accommodation analysis, validation of an AI/ML tool, or a statistical finding that the tool does not adversely impact individuals with disabilities generally, are not sufficient to ensure ADA compliance.  Instead, EEOC anticipates a more individualized process in which the employer assesses whether the limitations of a particular employee or applicant’s condition would cause the employee or applicant to be “screened out” or unfairly rated by the AI/ML tool.  EEOC’s guidance anticipates that employers, as a best practice, would provide relatively in-depth notice of the operation of AI/ML tools and the availability of alternative processes in order for the accommodation process to occur. AI/ML offers the potential to transform the workplace, among other business processes, by allowing employers to sort through vast quantities of data and quickly glean actionable insight.  However, EEOC and jurisdictions like New York City have identified the potential for discriminatory biases to be built into AI/ML algorithms, or for these algorithms to disadvantage individuals with disabilities.  In order to avoid running afoul of new laws designed to address AI/ML, and existing laws like Title VII and ADA that went into effect decades ago but nonetheless govern AI/ML use, employers should carefully review their processes for using these tools in the human resources and recruitment context.

Recent layoffs at several high profile companies, and the putative class actions filed in their wake, highlight the importance of legal compliance when making and effecting these difficult decisions. A patchwork of laws at both the federal and state level requiring advance notice of layoffs and closures to employees and state and local government officials may be implicated.  This includes the federal Worker Adjustment and Retraining Notification Act (“WARN”) and state-counter parts (often called “mini-WARN” acts). Determining whether the WARN Act will apply involves first analyzing both the number and type of employees an employer has (i.e., full-time or part-time, as defined in the statute).  Covered employers must then determine if WARN’s notice requirements are triggered, which may happen when closing facilities or conducting mass layoffs. If WARN does apply, the employer must provide 60 days advance notice to the union representative (if applicable), the employee, and state and local government officials, unless an exception applies that will shorten the period. Violations are subject to back-pay damages, attorneys fees and civil penalties.  Most state mini-WARN include similar provisions, though the triggering thresholds are often lower. Navigating these requirements is key for ensuring legal compliance and minimizing exposure to legal claims, including claims that are ripe for class treatment. Employers should consult with legal counsel early to best address any WARN implications.

On April 25, 2023, the Office of Federal Contract Compliance Programs (OFCCP) issued an updated self-identification form for applicants and current employees to voluntarily self-identify as an individual with a disability.  Federal contractors and subcontractors subject to Section 503 of the Rehabilitation Act must invite applicants for employment to self-identify at the pre-offer and post-offer stages, as well as invite current employees to update their self-identification every five years.  Contractors and subcontractors must use the information provided in this form in their Section 503 affirmative action program for individuals with disabilities. The revised form implements updates based on the preferred language for disabilities and includes additional examples of disabilities, among other changes.  The changes are relatively non-substantive in nature, and do not materially alter the contractor’s obligation to invite applicants and employees to self-identify. Employers are required to begin using the revised form by July 25, 2023.  Employers must continue using the prior version of the form until they implement the revised form. The revised form is set to expire on April 30, 2026. Employers can get the new form in English here. The OFCCP is expected to provide the form in additional languages in the coming months. The self-identification requirement for individuals with disabilities is just one of the unique requirements that OFCCP imposes on federal contractors and subcontractors in the recruitment and onboarding processes.  The updated self-identification form presents a good opportunity for employers that have newly become federal contractors or subcontractors, or that have not reviewed their processes for a number of years, to bring their recruiting and onboarding processes into greater compliance (including requirements for third-party recruiters acting on the contractor’s behalf), as failure to collect the sometimes granular information required by OFCCP can have negative consequences in the event of a compliance evaluation. If you have any questions about the updated Voluntary Self-Identification of Disability form, please contact Polsinelli’s OFCCP and Affirmative Action Plans team.

On April 6, 2023, the New York City Department of Consumer and Worker Protection issued its final rule interpreting the City’s Local Law 144 regulating the use of "automated employment decision tools," which went into effect on January 1, 2023. These AI-powered tools—ranging from programs that screen resumes for basic qualifications to those that assess and assign scores to candidates based on mannerisms and responses in video interviews—are increasingly being used by employers, but have generated controversy due to the potential for bias. The new regulations provide important guidance and clarification on Local Law 144’s requirements, and employers in the City should ensure that any automated tools used in their human resources processes are compliant with the new requirements. First, the regulations clarify the types of "automated employment decision tools," or AEDTs, that are subject to Local Law 144. The ordinance defines AEDTs as a "computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence, that issues simplified output, including a score, classification, or recommendation, that is used to substantially assist or replace discretionary decision-making for making employment decisions." The regulations clarify when an AEDT will be found to "substantially assist or replace discretionary decision-making, listing three scenarios that will subject an AEDT to Local Law 144: The employer relies “solely” on the AEDT’s score, ranking, or recommendation in making employment decisions; The employer relies on other factors in addition to the AEDT’s output, but weighs the AEDT’s output more heavily than any other criterion; or The AEDT’s output is used in a way that can overrule conclusions from other factors, including human decision-making. Employers using AEDTs in their hiring or promotion selection processes would therefore be well-served to adopt policies explicitly setting out how the AEDT’s output is used in the process. The regulations also address the bias audits required by Local Law 144. An employer’s use of an AEDT in the City is unlawful unless the AEDT has undergone a bias audit within the year prior to its use. Bias audits must be conducted by an independent auditor who, as the regulations provide, (i) has not been involved in the use, development, or distribution of the AEDT, and (ii) does not have an employment relationship with or financial interest in, the employer or a vendor that develops or distributes the AEDT. The bias audit must assess the selection or scoring rate and impact ratio for each rating or classification assigned by the AEDT based on EEO-1 sex, race, and ethnicity categories, as well as intersectional categories of sex, ethnicity, and race (i.e., white females vs. Hispanic males). The regulations also prescribe what types of data (i.e., single employer data, multi-employer data, or test data) can be used in the audit. Employers implementing AEDTs will need to obtain and closely review bias audits for the AEDT to ensure compliance with Local Law 144. Finally, the regulations address the notices of AEDT usage required by Local Law 144. Employers using an AEDT must provide notice to employees and applicants of the AEDT’s use and publish a summary of the results of the most recent bias audit for the AEDT. The regulations confirm that these notices can largely be provided through the employer’s website if certain conditions are met, but to the extent AEDTs are used in promotion decisions, additional notice must be circulated to existing employees through a written policy or other means. The regulations confirm that although the employer must notify employees and applicants of a procedure to request an alternative selection procedure not utilizing an AEDT, employers are not required to provide an alternative if requested. Finally, the regulations also outline the employer’s obligation to retain documents regarding the use of AEDTs and produce them to employees upon request, unless releasing the records is otherwise barred by law. New York City’s Local Law 144 is the most comprehensive regulation to date of the use of artificial intelligence and machine learning applications in human resources, but employers should expect other jurisdictions to quickly follow suit given the recent media attention to ChatGPT and other AI applications. In light of the new regulations, employers will need to take stock of what AI applications they are using in their human resources processes and how those applications are being used, and ensure that the applications are supported by appropriate bias audits and notices.

Employers utilizing staffing agencies should be on high alert given the Department of Labor’s (“DOL”) recent investigations targeting these arrangements. Specifically, the DOL has been actively investigating businesses that contract with certain types of staffing agencies that rely on placing 1099 independent contractors for labor. Due to unprecedentedly tight labor markets, employers increasingly rely on staffing agencies to provide them with supplemental workers necessary to run their businesses. The businesses contracting for staffed labor often assume that the staffing agency is following the law and will take responsibility for any liability related to the workers they place.  Unfortunately, all too often, this is not the case. In many situations, staffing agencies treat the workers they place as independent contractors, which can result in a misclassification finding when those workers are assigned a routine schedule at a facility or in another office setting and subject to supervision. The most troubling development regarding the staffing agency and staffed business dynamic is that the DOL has recently been targeting the staffed entity for liability associated with non-payment of overtime due to the staffing agency’s misclassification of the workers as independent contractors. In other words, the DOL is attempting to hold the staffed businesses accountable for the staffing agency’s alleged misclassification. For example, the DOL recently sued a healthcare management business for a staggering $19 million allegedly owed in back wages as a result of unpaid overtime to workers the company obtained from a staffing agency that failed to pay the overtime.  The staffing agency, which was not named in the lawsuit, did not pay overtime to the workers based on the position that they were independent contractors and not employees. The legal theory for holding a staffed business liable for the unlawful pay practices of the staffing agency is called “joint employment.” Joint employment liability may exist when two or more employers share control or supervision over a worker, resulting in legal obligations and liabilities for all parties involved. A joint employment finding generally results in joint and several liability for all entities or individuals held to be joint employers. A joint employment finding may occur under a variety of employment-related laws including wage and hour, workplace safety, union organizing and anti-discrimination. Joint employment claims are often brought as class actions, which focus on large groups of workers with the potential for substantial recovery. Independent contractor misclassification cases are frequently brought as class actions with the common thread being the theory that the classification decision was incorrectly applied to a group of similarly situated workers. Similarly, the DOL will generally focus their investigation on all allegedly misclassified independent contractors rather than certain individuals. Staffing agencies typically recruit, screen, and hire workers, and then assign them to work at the staffed employer's preferred work site. However, in some cases, staffing agencies may classify these workers as independent contractors instead of employees. Likewise, the staffed business also treats the worker as independent contractors even when the characteristics of an employment relationship may exist, such as the worker being subject to the employer's control, supervision, and direction. When this happens, the staffed business may be subject to misclassification exposure based on a joint employment theory of liability. The takeaway is that an employer should carefully vet any staffing agency providing supplemental workers to determine how the staffing agency classifies the workers and confirm the business is legally compliant. These workers may be entitled to various legal protections, such as minimum wage, overtime pay, workers' compensation, medical insurance and unemployment benefits. If these workers are misclassified as independent contractors, the staffed business may be exposed to legal claims (usually on a class and/or collective basis) and face significant financial damages. Employers should also carefully review the indemnification and other provisions of the contract entered into with staffing agencies to ensure the staffing agency takes sole responsibility for ensuring the staffed workers are treated in a legally complaint manner.

On November 1, 2022, job postings for positions in New York City – including remote positions that can be performed in New York City – must include a salary range listing the minimum and maximum salary or hourly wage amounts the employer believes it will offer for the advertised job.  New York City’s law follows a similar measure in Colorado, with additional pay transparency requirements in California, Washington state, and potentially New York State slated to follow. The New York City law is relatively typical of the new wave of pay transparency laws that are being considered by state legislatures nationwide.  It applies to all employers with at least four (4) employees or independent contractors (even if properly classified as such), and at least one (1) employee working in New York City.  Such employers must include in any job advertisement or listing a description of the lowest and highest salary or hourly wage that the employer believes in good faith as of the time of the posting that it will pay for the position.  Unlike Colorado’s pay transparency law, employers need not include amounts payable as benefits, bonuses, commissions, or other compensation – only hourly wages or salary.  The law applies not only to external job postings but also to internal promotion or transfer opportunities.  The law applies to any job opportunity that can or will be performed, in whole or part, in New York City, including remotely from the employee’s home.  The law provides for steep maximum penalties of up to $250,000 per violation, though employers can avoid penalties for a first-time violation by correcting the job posting within 30 days of receiving notice of the violation. Employers face several challenges from pay transparency laws like New York City’s.  For example, some employers regard their pay data as proprietary information, which now must be disclosed publicly in job listings.  That said, many employers also find benefit in setting applicants’ pay expectations prior to investing time in interviewing applicants who would not be willing to accept an eventual offer.  Likewise, pay transparency laws can bring pay disparities among existing employees to light.  For example, if an employer discloses that a position has a pay range of $100,000 - $250,000, an employee on the lower end of the scale may assume that they are paid less than others due to their sex or other protected characteristic.  The employer then has the burden to justify the differential under many existing pay discrimination laws. With pay transparency becoming a nationwide trend, employers across the country – particularly those with employees in the affected states or who offer remote positions – should take several steps to identify and address pay equity issues that may be brought to light by pay transparency laws: Evaluate Employee Compensation for Potential Disparities:  An ounce of prevention is worth a pound of cure, and if employers review and address pay disparities before disclosing a pay range, the risk of disclosure can be greatly reduced. Create, Bolster, and Publish Compensation Policies:   Private sector compensation is often based on numerous factors about the employee’s position and background, and employer transparency about these factors both bolsters arguments that differences are justified by legitimate concerns and may educate employees on why they are paid differently, so they do not jump to the conclusion of discrimination. Consider Whether Positions Should Be Fully Remote:   Pay transparency laws offer few options for employers that do not wish to publish pay ranges, but in some cases, the laws may not apply if a position is tied to a specific geographical area based on legitimate, business justifications. From their start in Colorado and New York City, pay transparency laws will likely proliferate to numerous other jurisdictions, including some of the country’s major commercial centers.  The best way for employers to mitigate the risks created by the new pay transparency laws is to tackle pay equity issues within their workforces.  For questions regarding the new pay transparency laws, contact your Polsinelli attorney.

Federal law requires employers to post a notice for employees regarding federal anti-discrimination laws. The Equal Employment Opportunity Commission (the “EEOC”) provides the notice, and the EEOC recently released an updated workplace discrimination notice. The notice is titled “Know Your Rights: Workplace Discrimination is Illegal” and is available now on the EEOC website. The updated notice is more “reader-friendly” than the previous version because it uses simpler language and is more visually appealing. The updated notice also provides employees information not previously provided in the previous version. For example, the updated notice notes that harassment is a prohibited form of discrimination; clarifies that sex discrimination includes discrimination based on pregnancy and related conditions, sexual orientation, and gender identity; and provides information about equal pay discrimination for federal contractors. It also includes a QR code that links to the EEOC website about how to file a Charge of Employment Discrimination. Per the EEOC, the notice must be placed in “a conspicuous location in the workplace where notices to applicants and employees are customarily posted.” Employers should also consider sharing the notice digitally to inform remote or hybrid workers of their rights. The EEOC has not set a deadline for employers to post the updated notice, but employers should post the updated notice soon to ensure that they satisfy the posting requirements. Additionally, employers that use a subscription service for required workplace notices should contact their service provider to ensure that they receive the updated version. If you have questions about this notice or other required notices, contact your Polsinelli attorney.

As we previously reported, on August 26, 2022, the U.S. Court of Appeals for the Eleventh Circuit issued a decision narrowing the nationwide injunction against the COVID-19 vaccination mandate for federal contractor employees set forth in President Biden’s Executive Order 14042. Although the Eleventh Circuit found the vaccination mandate to be unlawful, it found the nationwide injunction (applicable to all federal contractors across the country) to be overbroad, and reduced to scope of the injunction to apply only to the States and parties that challenged the mandate in the case.  This allows the vaccination mandate to go into effect for federal contractors in the majority of the country.  On October 14, 2022, the Safer Federal Workforce Task Force issued guidance about its intentions and course of action following the Eleventh Circuit’s decision. The new Task Force guidance strongly implies that the federal government will resume enforcing Executive Order 14042’s vaccine mandate.  Before the government does so, however, the Task Force outlines a three-step process that will occur: First, the Office of Management and Budget will notify federal agencies regarding their obligations to comply with the remaining injunctions against Executive Order 14042, which continue in effect. Second, the Task Force will update its guidance regarding COVID-19 safety protocols for federal contractor and sub-contractor workplaces.  Due to the injunctions, the Task Force has not updated its contractor guidance since November 2021, despite great changes in the state of the COVID-19 pandemic since that time.  The October 14, 2022 notice does not provide any hints as to what types of updates the Task Force may make. Third, and finally, OMB will provide additional guidance to federal agencies regarding the resumption of enforcement of contract clauses implementing Executive Order 14042’s requirements.  Prior to this notice, the federal government will continue to not enforce any of Executive Order 14042’s requirements. The timeframes under which these steps will occur are not defined by the Task Force’s notice. As noted above, the Eleventh Circuit’s decision did not affect other pending injunctions prohibiting enforcement of the vaccination mandate against contractors and subcontractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida.  In addition, members of the Associated Builders and Contractors also retain the protection of the former nationwide injunction. All other contractors not covered by pending injunctions will need to resume their efforts to comply with Executive Order 14042.  That said, it is unknown at this time how the Task Force will modify its guidance.  For example, will the Task Force now require that covered contractor employees obtain booster shots, in addition to the initial vaccination.  Although the exact contours of the modified guidance are important, there are steps federal contractors can take to begin preparing now, to avoid being caught under potentially short deadlines as the three-step process unfolds over an unknown timeline.

The U.S. Department of Labor is set to issue a Proposed Rule that will have a significant impact on the test used to determine whether someone is an independent contractor or an employee under the Fair Labor Standards Act (“FLSA”). The DOL’s intent in issuing this Proposed Rule is made clear by Secretary of Labor Marty Walsh’s comments: “While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers.  Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.” An unpublished version of the Proposed Rule indicates it will make it easier for the DOL to find that workers have been misclassified as independent contractors rather than employees. The current test, in effect since March, 2021, analyzes five factors and places the greatest weight on two “core factors”: the nature and degree of control over the work and the worker’s opportunity for profit or loss based on personal initiative or investment.  The DOL now seeks to rescind the 2021 test and replace it with the new Proposed Rule. The new Proposed Rule will focus on the “economic reality” of the worker’s situation, ultimately asking – Are the workers economically dependent upon an employer for work (and therefore an employee) or are they in business for themselves (and therefore an independent contractor)? The economic reality test in the Proposed Rule will return to a “totality of the circumstances” analysis, under which no specific factors have greater weight, and all are considered in view of the economic reality of the whole relationship. The DOL is further proposing to return the consideration of investment as a stand-alone factor, and to provide additional analysis of the control factor, including detailed discussions of how scheduling, supervision, price-setting, and the ability to work for others should be considered. Furthermore, the Proposed Rule will not limit control only to control that is actually exerted. The Proposed Rule will also re-focus the analysis on the “integral” factor, which considers whether the work is integral to the potential employer’s business. The permanency of the relationship is another factor under the Proposed Rule that often weighs against independent contractor status for many workers who provide services for the same entity over an extended period of time. The Proposed Rule is scheduled to be published in the Federal Registry on October 13, which will begin a 45-day comment period. For more information regarding the anticipated Proposed Rule, contact your Polsinelli attorney.

Employers considering a reduction in force involving remote workers may be subject to the Worker Adjustment and Retraining Notification Act (the “WARN Act”) (29 U.S.C. §2100 et. seq.) and corresponding state regulations. The WARN Act applies to employers with at least 100 full-time workers or 100 full-time and part-time workers who work an aggregate of at least 4,000 hours per week. It is triggered when at least 50 full-time workers comprising no less than one-third of the full-time workforce at a “single site of employment” suffer an employment loss. In general, the WARN Act requires an employer to provide 60 days’ advance written notice when there will be a plant closing or mass layoff to impacted non-union workers, union representatives, and certain government officials. Regarding remote workers, the U.S. Department of Labor recently published guidance stating that a “single site of employment” is the location “to which they are assigned as their home base, from which their work is assigned, or to which they report.” Thus, if an employer has a sole physical office in Chicago, for example, with 25 in-person full-time workers, but also has 100 remote full-time workers who all report to that office, the WARN Act would be triggered if the employer reduced 45 remote workers, despite the fact that none of the in-person workers in the Chicago office were impacted. In addition to the federal WARN Act, employers conducting a reduction in force involving remote workers may be subject to mini-WARN state laws. For example, Illinois has an unforeseeable business circumstances exception to the written notice requirements, but the state’s Department of Labor must first determine the applicability of that exception. See 820 ILCS 65/15. This is significant because it may require an employer to delay sending the written notice under the WARN Act until the state determines whether the exception under its law applies. Aside from Illinois, the following states also have mini-WARN laws: California, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Tennessee, Vermont, and Wisconsin. The law regarding reductions in force involving remote workers is in its infancy and there will be plenty of related litigation. Accordingly, employers should seek advance consultation with their Polsinelli attorneys when considering reductions in force that stand to affect remote workers.

The District of Columbia Council passed the Non-Compete Clarification Act of 2022 (“Act”) in late July 2022, setting standards for how and when employers can use and enforce covenants not to compete. The Act notably clarifies and narrows the scope of D.C.’s Ban on Non-Compete Amendments Act passed in 2020, which (as its title suggests) banned the use of new non-compete agreements for all but certain medical employees. The new, clarified Act now allows the use of non-compete agreements for “highly compensated employees,” set at $150,000 per year in total compensation, as well as certain medical employees, and implements new substantive and procedural requirements for non-compete agreements. Employers May Use Non-Competes for Highly-Compensated Employees The biggest change implemented by the Act is restoring the ability of employers outside of the medical field to use non-compete agreements.  Employers may now enter and enforce non-compete agreements with “highly compensated employees” making over $150,000 in total compensation.  Employers can use a wide variety of forms of compensation to meet the threshold, including hourly or salary wages, bonuses, commissions, overtime, and vested equity, but may not include non-cash fringe benefits.  The Act continues to prohibit non-compete agreements for employees who do not meet this threshold.  However, the Act also scales back its application to employees who do not work primarily in D.C.  Whereas the original non-compete ban arguably applied to any employee who worked in D.C. for any period of time at all, the Act clarifies that the non-compete ban now applies only to employees who spend 50% or more of their time working in D.C. or who spend a “substantial” amount of work time in D.C. and do not spend more than 50% of their work time in another jurisdiction. The Act retains and modifies the prior non-compete ban’s exception for “medical specialists.”  Employers may permissibly enter a non-compete agreement with these employees if the employee is licensed to practice medicine, acts as a physician, has completed medical residency, and receives $250,000 or more in total compensation. Certain Agreements Not Subject to the Non-Compete Ban The Act excludes several types of agreements from its prohibition on non-competes for employees making less than the $150,000 threshold.  First, non-competes remain enforceable in connection with the sale of a business.  Second, the Act makes clear that non-disclosure agreements are not subject to the ban.  Finally, the Act contains an interesting, though somewhat ambiguous, exclusion for agreements providing a “long term incentive,” defined as bonuses or equity-type compensation “for individual or corporate achievements typically earned over more than one year.” Unfortunately, the Act does not clarify the prior non-compete ban’s ambiguity with respect to customer and employee non-solicitation agreements.  Although these agreements impose more limited restrictions on the employee’s activity and do not in most cases prohibit the employee from working in a particular field like a non-compete does, other states that have limited or prohibited non-compete agreements have taken varying and inconsistent positions on whether those limitations also apply to non-solicitation agreements.  Employers using non-solicitation agreements in D.C. should take care in structuring those clauses to avoid arguments that the non-solicitation acts in effect as a non-compete. Requirements for Non-Competes The Act imposes new substantive and procedural requirements that an employer must meet to enforce a non-compete against a highly-compensated employee: The agreement must specify the scope and nature of the non-compete (e.g. services, roles, competitive entities covered); The agreement must specific the geographic scope of the non-compete restriction; The duration of the non-compete may be for a maximum of one year for non-medical specialists or two years for medical specialists; The employer must provide the non-compete agreement 14 days in advance of the employee’s start date or the date the employee is required to sign the agreement. Employers Permitted to Limit Outside Employment The Act also restores D.C. employers’ ability to use “moonlighting” policies that limit or prohibit employees from working with other employers.  Previously, D.C.’s non-compete ban prohibited these policies, such that an employee could even work for a competitor during employment.  Now, employers may restrict employees from accepting outside employment when the employer reasonably believes working for a second employer will: Cause the employee to disclose confidential and/or proprietary information; Conflict with industry-specific or professional rules regarding conflicts of interest; or Impair the employer’s ability to comply with a contract, grant, or any law or regulation. New Notice Requirements The Act includes new notice requirements to employees. First, when an employer has a policy that includes one of the exclusions to the definition of “non-compete provision” (e.g. a policy limiting outside employment) the employer must provide such policy (1) within 30 days after October 1, 2022, (2) within 30 days of an employee’s first day of employment, and (3) after the employer makes a change to such policy. Additionally, employers must include a notice when presenting a highly compensated employee with a non-compete provision. D.C. employers should carefully review the Act and update their employment agreements to ensure that they continue to have the benefit of non-compete protection after the Act becomes effective in October 2022.

On June 7, 2022, the D.C. Council approved a bill that limits an employer’s ability to test for cannabis.  Under the Cannabis Employment Protections Amendment Act, most D.C. employers may not fire, fail to hire, or take other personnel actions against an employee for using cannabis, participating in D.C.’s or another state’s medical cannabis program, or failing an employer-required or requested cannabis drug test.  The bill also provides that employers must allow employees to use medicinal marijuana as a disability accommodation in most circumstances. The new employment protection for cannabis use is subject to several exceptions.  Adverse actions based on an employee’s or applicant’s cannabis usage are not prohibited where the employee’s position is designated as “safety sensitive,” the employer’s action is required by a federal statute, regulation, contract, or funding agreement, the employee engaged in cannabis-related conduct (i.e., use, possession, transfer, display, sale, growth) at the employer’s premises, while working, or during working hours, or in situations where an employee is impaired while working or during working hours. The bill defines “safety sensitive” positions as those “in which it is reasonably foreseeable that, if the employee performs the position’s routine duties or tasks while under the influence of drugs or alcohol, he or she would likely cause actual, immediate, and serious bodily injury or loss of life to self or others.”  These positions include police, special police, hazardous machine operators, and active construction site workers.  The bill also does not prohibit employers from adopting or implementing drug-free workplace policies or testing employees for cannabis after an accident, upon reasonable suspicion of drug use, or if the employee works in a safety-sensitive position. Under the bill, employers will be required to issue a notice of employee rights regarding cannabis use within 60 days after the bill becomes “applicable,” and annually thereafter.  The notice must also include whether the employee’s position has been designated a safety sensitive position and state the employer’s protocols for any testing for alcohol or drugs. Employers who violate the bill could face civil fines for each violation, payment of lost wages, compensable damages, and attorneys’ fees. Mayor Muriel Bowser has until July 17, 2022 to sign the bill. If the Mayor signs the bill, it will become law after a 60-day Congressional review. However, many of the above-referenced provisions will not be “applicable” to employers until their fiscal effect is included in an approved budget plan or 365 days after Mayor Bowser approves the act, whichever is later. Covered employers in the District should begin reviewing their drug testing and drug-free workplace policies to ensure compliance with the new bill.  In addition, it will be critical to designate safety-sensitive positions that remain subject to testing requirements (other than post-accident or reasonable suspicion).  Finally, due to the requirement that adverse actions based on an employee’s impairment be supported by specifically articulable symptoms, employers that are concerned about employee drug usage should train managers on recognizing and documenting workplace impairment.

The Supreme Court addressed the intersection of the First Amendment’s Establishment and Free Speech clauses as they relate to a public employee’s personal religious expression when done in the public eye. In a 6-to-3 decision, it held that public employers are not required to suppress employees’ religious expressions where the expression is not within the employee’s scope of employment, there is no evidence the employee was coercing others to join the expression and the public employer tolerates similar secular speech. The case is Kennedy v. Bremerton School District. The case involved a former high school football coach who was suspended (and ultimately his contract was not renewed) for participating in three postgame prayers on the field. His players did not join in the prayers (though members of the public and opposing team did), and, at the times the coach engaged in the prayers, other coaches were permitted to engage in private secular actions, such as checking their phones or visiting with family and friends. The coach had previously ended the practice of team-wide, pregame prayers. Importantly, the majority stated that courts no longer use the three-part test outlined in Lemon v. Kurtzman for evaluating Establishment Clause issues, and instead look to “historical practices and understandings.” For public employers—local, state and federal—the Court’s holding could make the choice to discipline or terminate an employee for religious exercise or speech feel precarious. If you have questions about how the Kennedy decision impacts your employer-employee relationship, contact your Polsinelli attorney.

On September 15, 2021, the Ninth Circuit, in a 2-1 split decision, partially upheld a California law passed in 2019 governing the use of mandatory arbitration agreements by employers in California.  The state law, AB 51 (codified as California Labor Code section 432.6), prohibits employers in California from requiring employees to agree to arbitration as a condition of employment.  Before AB 51 went into effect on January 1, 2020, a group of employers and the U.S. Chamber of Commerce challenged the law in federal district court as preempted by the Federal Arbitration Act (“FAA”), and the federal court issued a preliminary injunction on January 31, 2020 temporarily preventing enforcement of the law. A Ninth Circuit panel reviewing the district court’s decision on appeal disagreed, vacating the preliminary injunction and holding that the provisions of AB 51 prohibiting employers in California from requiring employees to agree to arbitration as a condition of employment and from retaliating against applicants who refuse to sign an arbitration agreement are not preempted by the FAA. Curiously and somewhat confusingly, the Ninth Circuit distinguished in its analysis between an employer’s conduct before and after an employee signs an arbitration agreement.  The Court held that, while the FAA does not preempt AB 51 insofar as AB 51 regulates an employer’s pre-signing conduct (including an employer’s requiring that an employee sign an arbitration agreement as a condition of employment), the FAA does preempt AB 51’s attempt to prevent enforcement of executed arbitration agreements (even those that are mandatory and, therefore, consummated in violation of AB 51) by imposing civil and criminal penalties on employers as punishment for entering into arbitration agreements otherwise enforceable under the FAA. The upshot for California employers is that the ruling does not impact the enforceability of executed arbitration agreements, including existing mandatory arbitration agreements. However, for new employees or those who have not already signed an arbitration agreement, the Court’s decision preserves AB 51’s ban on employers requiring that such employees sign arbitration agreements as a condition of employment, and continues to prohibit employers from retaliating against an employee for refusing to do so.  Although the ruling eliminates the imposition of civil and criminal penalties in connection with an executed arbitration agreement, civil and criminal penalties could still be imposed if the employer were to terminate, refuse to hire or otherwise retaliate against an employee or applicant because they refused to sign an arbitration agreement. Following the Ninth Circuit’s decision, AB 51 will go back to the district court pending another appeal, where the case has been remanded for further proceedings.  However, the Ninth Circuit’s decision does not immediately allow for enforcement of AB 51.  The Court’s decision takes effect only once the Court issues its “mandate” relinquishing jurisdiction over the case.  Additionally, the U.S. Chamber of Commerce has been granted an extension of time to file a Petition for Rehearing en banc of the Ninth Circuit’s decision, and issuance of the Ninth Circuit’s mandate is likely to be automatically stayed if and when such a Petition is filed.  Moreover, the U.S. Chamber of Commerce may ultimately file a Petition for Certiorari to the U.S. Supreme Court, in which case the Chamber may move to stay issuance of the Ninth Circuit’s mandate pending review by the U.S. Supreme Court. Practically speaking, employers in California are left in limbo while they await final resolution of this case and a final determination as to AB 51’s constitutionality.  Employers with existing mandatory arbitration agreements in place and those who wish to continue to require their employees to enter into arbitration agreements as a condition of employment should reach out to employment counsel to discuss their various options and the associated risks.  As always, Polsinelli attorneys continue to monitor new developments relating to AB 51 and mandatory arbitration issues, and they remain prepared to assist employers with navigating these issues.

Texas Governor Greg Abbott recently signed two new bills, effective September 1, 2021, which will arm employees with new tools and protections for asserting sexual harassment in the workplace claims. Here is what Texas employers need to know: The definition of an “employer” has expanded. Currently, an employer must have 15 or more employees to be covered by the Texas Labor Code’s anti-sexual harassment laws. As of September 1st, Senate Bill 45 (Tex. Lab. Code § 21.141), will define an “employer” as a person who (1) employs “one or more employees;” and (2) “acts directly in the interests of an employer in relation to an employee.” First, the new definition means that all employers, including those with only one employee, could be held liable for damages as a result of sexual harassment claims. Second, supervisors, managers, and co-workers may also be named as defendants in sexual harassment lawsuits and held personally liable for damages. This is a major change because it creates the potential for individual liability against the alleged harasser (which previously only arose within the employment context when there was a common law claim for assault). As a result, far more Texas employees are now able to sue for unaddressed sexual harassment than before, in state court, and removing cases to federal court will be more difficult. It is also conceivable that the plaintiff’s bar will attempt to argue that independent contractors, vendors, clients, and other third-parties may qualify as “employers” under this new statute. This underscores the importance of employer’s not only reviewing their own internal policies and procedures, but also their vendor and service agreements with contract partners. The definition of “sexual harassment” is more detailed. The new law provides a clear, detailed, description of prohibited behavior. Specifically, sexual harassment is defined as “an unwelcome sexual advance, a request for sexual favor, or any other verbal or physical conduct of a sexual nature if: (a) submission to the advance, request, or conduct is made a term or condition of an individual’s employment, either explicitly or implicitly; (b) submission to or rejection of the advance, request, or conduct by an individual is used as the basis for a decision affecting the individual’s employment; (c) the advance, request, or conduct has the purpose or effect of unreasonably interfering with an individual’s work performance; or (d) the advance, request, or conduct has the purpose or effect of creating an intimidating, hostile, or offensive working environment.” This definition gives employers further direction when analyzing employee behavior and investigating complaints. Employers must act quickly after receiving a complaint of sexual harassment. Employers should always take sexual harassment complaints seriously and investigate allegations immediately. However, in light of the recent #MeToo movement and influx of sexual harassment claims, Senate Bill 45 (Tex. Lab. Code § 21.142) appears to intensify the pressure on employers to look for concerning employee activity and act swiftly upon receipt of a sexual harassment complaint. The new law specifically provides that an unlawful employment practice occurs if an employee is subjected to sexual harassment and the “employer or employer’s agents or supervisors (1) know or should have known that the conduct constituting sexual harassment was occurring; and (2) fail to take immediate and appropriate corrective action.” Although immediate and appropriate corrective action is not defined, which makes it difficult to predict how the courts will interpret and apply the new language, employers should avoid any delays in addressing concerns and complaints. Employers often rely on the Faragher-Ellerth affirmative defense to defend their actions by establishing that the company took reasonable care to prevent harassing behavior and prompt corrective action when presented with complaints about a supervisor in federal court. This new Texas law appears to codify those expectations of employers and their agents in the workplace. Employees have more time to file charges of discrimination for sexual harassment. Historically, Texas employees who believe they have been subjected to unlawful employment practices (e.g., discrimination based on race, nationality, color, age, etc. or retaliation) have 180 days from the date of the alleged event to file a charge of discrimination with the Texas Workforce Commission. House Bill 21 (Tex. Lab. Code § 21.201(g)) extends that time to 300 days. The change in Texas is consistent with the broader national shift to expand protections against sexual harassment. In short, the speed and accuracy of investigations, as well as effective remedial measures, are more important than ever. Employers should also review their employee handbooks, policies, and procedures to ensure the language appropriately reflects the new laws. Polsinelli attorneys will continue to monitor further developments related to these amendments and provide updates. If you have any questions about the changes, including the potential impact on your company’s operations, contact your Polsinelli attorney.

This is part three of a 3-part series, and the second of several posts addressing remote work considerations arising out of the COVID-19 pandemic. This series explores tips from companies that have figured out how to run a business with a remote workforce, with advice on how to help re-engage your remote workforce, or, if you already have a good system in place, how to make sure you keep employees productive and satisfied.  Don’t miss Tip One and Tip Two. Tip Three: Decide on Communication Rules. And tell employees. If employers leave the choice of the communication venue - and the way employees should communicate with management and each other - up to employees, employers may be disappointed. If there is no set standard, and no one knows what is expected of them, there is likely going to be frustration from both sides. However, you can create a synchronous culture where your team is expected to communicate at regular intervals during the day, or via a certain platform when they need to share ideas, ask questions, or merely check-in. For some office cultures, that could mean employees know they must communicate with each other and share when they will be away, whether for lunch, a rest, or dealing with homeschooling (which is where flexibility comes in). Setting standards and executing communication strategies can easily be done through technology, by having employees change their status, or send a Teams message, or Slack their colleagues with updates throughout the day. This past year has shown that with remote work comes a lack of situational cues; we do not have the in person interactions that help us understand and see our colleagues’ efforts and output (reducing trust). This results in miscommunications, and a host of problems that follow. Therefore, drafting a well-designed remote work policy with communication as a key component will go a long way. If the remote work environment has been set up well, with expectations clearly defined, and continued and ongoing communication as a key component, there is no reason it cannot work just as good, or better, than an in-office set-up. The overall advice is to treat employees like professionals, and your workforce will thank you for it by making your organization more successful.

As expected, this week, the Biden administration has formally withdrawn a Trump administration rule that was set to change the standard applicable to independent contractors. Whether a worker is an independent contractor or an employee has long been determined by the “economic realities” of the relationship. Several factors are considered in this analysis: the nature and degree of the employer’s control and the permanency of the worker’s relationship with the employer; the worker’s investment in facilities, equipment or helpers; the amount of skill; the worker’s opportunities for profit or loss; the extent of the integration of the worker’s services into the employer’s business. The Trump administration’s proposed rule would have elevated two of the factors of the “economic realities” above the others by deeming the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss as “probative.” This would have been a marked departure from past practice as previously, none of the factors were dispositive or more probative. The Biden administration’s Department of Labor noted that the Trump administration rule had not been used by any court or any wage and hour agency. The Department further questioned whether the rule was fully aligned with the Fair Labor Standards Act’s text and purpose or case law describing the economic realities test. In withdrawing the rule promulgated under the Trump administration, the Department of Labor specifically said it “is not creating a new test, but is instead leaving in place the current economic realities test, which allows for determinations that some workers are independent contractors.” While not issuing a new test in this repeal, it is widely expected that the Biden Administration will eventually issue a new rule for evaluating independent contractor status. Secretary of Labor Marty Walsh recently has gone as far as to say “in a lot of cases, gig workers should be classified as employees.” Employers should continue to be cognizant of and comply with any applicable state and local laws regarding worker classification, which may not be identical to the economic realities test. Employers should consult with their Polsinelli attorney if they have any questions and should stay tuned to future blog postings with updates on future rule changes.

This is part two of a 3-part series, and the second of several posts addressing remote work considerations arising out of the COVID-19 pandemic. This series explores tips from companies that have figured out how to run a business with a remote workforce, with advice on how to help re-engage your remote workforce, or, if you already have a good system in place, how to make sure you keep employees productive and satisfied.  Don’t miss Tip One and Tip Three. Tip Two: Be Flexible and Trust. The companies that were working remotely before the pandemic have been teaching and guiding us through this past year, and one major lesson is the ability (and need) to be flexible in the remote environment. For most employers, there is less of a need to require employees to be “on” at all moments of the day. If nothing else, remote work during a pandemic - with home schooling and child and family responsibilities increased during the normal workday - has shown us that employees can manage their time to work best for them, and still get their work done. Flexibility depends on trust. The remote work environment presents us with the requirement to trust employees, yet building trust in a remote environment can be difficult. Without the opportunity to observe a coworker working diligently, or bringing notes to a meeting, or sharing insights with colleagues in the hallway, can make trust hard to embrace. But rapport between coworkers and interpersonal trust is what helps employees understand and ultimately help each other (which is critical to a successful enterprise). So how do you get it? Monitoring and micro-managing to ensure output does not tend to work (in fact, it never works). Employees under surveillance know they are not trusted, and that results in employees with higher levels of anxiety and stress. This, then, results in increased burnout and dissatisfaction, undermining the entire point of a company’s goal, which is to improve work product and output. The first step in building trust is for leadership to show, and put trust in, employees who will then in turn trust leadership; according to the Harvard Business Review this is called reciprocal leverage. The more trust your employees have in the leadership of the company, the more stability they feel, and the more likely they will be to work productively and seek to impress. But how do you know if they are doing the work?  Check-ins and a review of employee production will generally tell you what you need to know. Is your workforce producing work product and output? If it has declined, or is notably absent, there is a problem that must be addressed. If not, perhaps embracing flexibility and trust is working. Employers can and should take action through discussions or discipline when the remote work requirements are not being met. Trusting the employee to continue to perform and produce quality work does not mean remaining on the sidelines if that does not appear to be successful. The idea, however, is that it can be the exception, not the rule.

This is part one of a 3-part series, and the second of several posts addressing remote work considerations arising out of the COVID-19 pandemic. This series explores tips from companies that have figured it out, and have advice on how to help re-engage your remote workforce, or, if you already have a good system in place, how to make sure you keep employees productive and satisfied. For employers that did not have much experience with remote work pre-pandemic, 2020 was a steep learning curve. Part of this change has been how to manage – and maintain – office culture and employee engagement when everyone is behind a screen. Because employee engagement and productivity are so directly linked, it is imperative that employers consider both. Leadership should keep in mind that it matters – and is worth the effort – to ensure that workers are in an environment (whether remote or otherwise) where they can thrive, are appreciated, and feel they are providing value. Employee engagement also coincides with better communication, lower absenteeism, fewer health and safety issues, and ultimately, reduced legal risk. Tip One: Make Small Talk a Part of Your Meetings. This idea may make many cringe, considering a large number of employees are suffering from “Zoom fatigue,” and the endless work day that bleeds into home and family time. But a small act of deliberately making space for colleagues to just talk, on a more personal level, can increase a team’s connection and bring a bit of levity to what can become overly structured, endless, meetings. This can be as simple as starting a team meeting with a check-in, or an icebreaker, or perhaps including an agenda item that requires participants to share opinions and conjecture. What we have learned over this year of increased remote work environments is that maintaining and growing a company’s culture should not – and does not have to – stop because we are not all in the same room. Casually chatting with a colleague while grabbing coffee, or stopping to talk in the hallway, or catching up over lunch, leads to feeling part of something bigger, sparks ideas, and helps increase happiness and satisfaction at work. Now we just have to do it a little differently, and be more purposeful to ensure that it happens. Click here to read Tip Two. Click here to read Tip Three

Illinois employers have long been prohibited from using arrest records as the basis for employment decisions under Section 103 of the Illinois Human Rights Act (“IHRA”).  On March 23, 2021, Illinois Governor J.B. Pritzker signed Senate Bill (SB) 1480 (the “Amendment”) into law, which added a new Section 103.1 to the IHRA that severely restricts the ability of employers to rely on conviction records in making employment decisions.  Section 103.1 is effective immediately, and prohibits use of a conviction record as the basis for an employment decision unless (1) there is a “substantial relationship” between one or more of the candidate’s prior convictions and the job at issue; or (2) employment would involve an “unreasonable risk to property or to the safety or welfare of specific individuals or the general public.” To determine whether a “substantial relationship” exists, employers are required to evaluate six factors set forth in the Act: (1) the length of time since the conviction; (2) the number of convictions that appear on the conviction record; (3) the nature and severity of the conviction and its relationship to the safety and security of others; (4) the facts or circumstances surrounding the conviction; (5) the age of the employee at the time of the conviction; and (6) evidence of rehabilitation efforts.  If an employer determines that such a relationship exists, it must then engage in an interactive process comparable what is required under the federal Fair Credit Reporting Act (“FCRA”). The Illinois Department of Human Rights has provided additional guidance through an FAQ, but it still leaves a number of open questions.  Ultimately, an employer will need to be prepared to offer a thoughtful, well-reasoned explanation for why it considered a conviction disqualifying. One final point for consideration is the opening clause of Section 103.1, which prefaces the prohibition with the words “Unless otherwise authorized by law….”  There may be other legal obligations that require an employer to disqualify an employee based on certain convictions.  For example, the Illinois Health Care Worker Background Check Act establishes a number of “disqualifying offenses” that would likely fall within the parameters of the Amendment’s prefatory language. Ultimately, the legal pitfalls for Illinois employers seeking background information regarding applicants and employees continue to multiply.  In addition to the Amendment and the FCRA, Illinois employers should remember that the Illinois Employee Credit Privacy Act places restrictions on an employer’s ability to take action based on an employee’s credit history.  As this landscape continues to get more complex, it is wise for employers to get legal assistance both in terms of developing background check processes and navigating next steps following receipt of a negative background check.

This is the first of several posts addressing remote work considerations arising out of the COVID-19 pandemic. We are now well into 2021 and more and more employers are considering the return to office plan. But what if you don’t? There are many reasons why you might be considering keeping most, or all, of your employees remote. Many employees want this option, for all the reasons you might expect: flexibility, no commute, meetings are actually easier and quicker via video, the wardrobe becomes much simpler, and the list goes on. A recent Gallup poll found "three in five U.S. workers who have been doing their jobs remotely from home during the coronavirus pandemic would prefer to work remotely as much as possible…" But what are some of the biggest concerns employers have with a more permanent remote workforce? Here are a few important considerations: Properly paying employees when you cannot see them come and go. Employers are required to pay employees for all hours worked, including work not requested but permitted; this of course includes work performed at home outside of the normal workday. This past summer, the Department of Labor provided guidance, reiterating that if an employer knows or has reason to believe that work is being performed, the time must be counted as hours worked. Courts will assess whether the employer should have acquired knowledge of hours worked through reasonable diligence. Therefore, employers must ensure they are properly accounting for their employees’ hours, even emails or messages that come through after hours. Managers should be aware of these rules, and ensure that work is not happening outside of normal hours (unless it is accounted for). Privacy and confidentiality. With a larger number of employees handling employers’ information from the comfort of their homes, the way data is stored and shared needs to be reassessed. If your employer policies that cover confidentiality and security have not been updated to address the work-from-home environment, take time to review those and make necessary changes. Include training for employees on how to transfer data, how to recognize when information is confidential or highly sensitive, and make sure you know what devices employees are using (and where they are storing company information). There are many software solutions available for employers to allow them to monitor their networks and flag suspicious activity or receive alerts if large amounts of data is being downloaded. Employees living…anywhere and everywhere. One of the big surprises some employers faced with a new remote workforce was finding out some employees moved (and sometimes without telling their employer). Employees’ ability to live anywhere is, generally speaking, a great perk to the remote work option, but employers need to be aware of the issues.  There are different tax and payroll concerns when you live in a different state and, as an employer, you have to be prepared to handle the insurance and benefit issues in that new location. For example, in New York, after only two weeks of working there, an employer will be subject to payroll tax implications, and will need to address business license fees. Employers are required to register and obtain workers’ compensation and unemployment insurance in the state where the employee is working. Typically, these state rules are based on where the employee is working, even if at home, and not where the business is located. Therefore, it is important for employers to draft policies to ensure employees alert the employer to their intention – or desire – to relocate. To avoid headaches in new states, employers can implement policies that require employees stay within a certain vicinity of the employer’s location. If you have questions or would like more detailed information regarding remote work considerations, Polsinelli’s Labor & Employment team is here to assist.

On January 14, 2021, the California Supreme Court held that the “ABC Test” for classifying workers as independent contractors applies retroactively.  The high court first articulated this standard, which makes it tougher for businesses and employers to classify their workers as independent contractors, in its 2018 decision in Dynamex Operations West, Inc. v. Superior Court.  Under the ABC Test, a worker is presumed to be an employee unless the employer can show that all three of the following conditions are satisfied: 1) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, 2) the worker performs work that is outside the usual course of the hiring entity’s business, and 3) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Last week, in Vazquez et al. v. Jan-Pro Franchising International, the California Supreme Court considered the question of how to classify workers in suits that were pending at the time that the Court first articulated the ABC Test in Dynamex.  The Court declined to depart from the general rule that judicial decisions are given retroactive effect unless stated otherwise, holding that the ABC Test applies to workers in all cases that were pending at the time Dynamex was decided.  Notably, the Court declined to take up the issue of whether an employer’s use of franchising arrangements with its workers has any effect on the applicability of Dynamex and the ABC Test.  The Ninth Circuit has previously determined that it does not.  The case now returns to the Ninth Circuit where the court will determine whether the Jan-Pro franchisees were employees or independent contractors using the ABC Test. The Vasquez decision does not, however, apply to AB 5, which codified and expanded the ABC Test by integrating the standard into California’s Labor Code and Unemployment Insurance Code. Polsinelli attorneys are continuing to monitor the evolution of worker classification issues in California and remain prepared to assist with navigating these critical matters.

The Equal Employment Opportunity Commission (EEOC) announced this week that it will open the EEO-1 Component 1 Report in April 2021.  The EEO-1 requires covered employers to report by job category the race, ethnicity and gender of its employees.  Because the EEOC postponed the filing deadline for the EEO-1 in 2020, covered employers will be required to file both the 2019 and 2020 EEO-1 Component 1 Reports beginning in April 2021. Covered employers include those with 100 or more employees and federal contractors with 50 or more employees and a federal contract of $50,000 or more.  Note that employers with less than 100 employees who are owned or affiliated with another entity such that the combined employee count is over 100 employees may also be required to file this report. Covered employers are encouraged to confirm that all employees have had the opportunity to voluntarily self-identify their gender, ethnicity and race.  If an employer identifies employees who have not responded to this voluntary invitation, employers may re-extend the invitation and/or rely on employment documents such as an I-9 or visual observation.  If an employer needs to rely on visual observation, it will be easier to gather this information now rather than waiting until April 2021. Polsinelli will continue to monitor developments with the EEO-1 report.

Employers now have a clearer picture of how to determine whether a worker is classified as an employee or independent contractor under the Fair Labor Standards Act (FLSA) thanks to a new final rule from the U.S. Department of Labor (DOL), effective March 8, 2021. This test is significant for employers because under the FLSA, independent contractors are not eligible for minimum wage or overtime compensation. Many state courts and agencies have already adopted tests similar to this “economic reality” test codified by the DOL’s new rule. The “economic reality” test is a multi-factor test that has been used by the DOL in the past to determine whether a worker is an employee or independent contractor. This final rule is similar to the initial rule proposed by the DOL last September. Ultimately, the key question is whether the worker is dependent on the employer, indicating the worker is an employee, or is in business for the worker’s benefit, indicating the worker is an independent contractor. This final rule “sharpens” the economic reality test by enumerating five factors to determine whether a worker is considered an employee under the FLSA: The nature and degree of the worker’s control over the work (e.g., the worker’s ability to set a schedule, select projects and work for others). The worker’s opportunity for profit or loss (e.g., through the exercise of personal initiative, skill or business acumen, and through investments or capital expenditures). The amount of skill required for the work (e.g., whether the work requires a specialized skill or the worker depends on the employer for training). The degree of permanence of the working relationship between the worker and the potential employer (e.g., whether the work is definite or indefinite in duration). Whether the work is part of an integrated unit of production (or is segregable from the employer’s production process). The first two factors are given the most weight. If both of these “core factors” indicate the same classification, then there is a “substantial likelihood” that the resulting classification is correct. However, if the application of the first two factors leads to different conclusions, the remaining three factors should be considered, as well. With this additional guidance, employers have more information to help structure their relationships with workers and define which workers qualify as independent contractors, though it may not necessitate many immediate practical changes.  Employers should continue to be cognizant of and comply with any state and local laws regarding worker classification, which may not be identical to the DOL’s rule. It is also possible that the Biden administration will affect changes to this new rule or its implementation.  Please contact your Polsinelli attorney if you have any questions about the new final rule.

On November 3, 2020, California voters passed Proposition 22, a ballot measure that classifies certain app-based rideshare and delivery drivers as independent contractors. Under the new law, which will take effect immediately following the certification of California’s election results in mid-December, app-based drivers may be properly classified as independent contractors if the hiring entity: Does not unilaterally prescribe specific dates, times of day, or minimum number of hours during which the driver must perform services; Does not require the driver to accept any specific service request or assignment as a condition of maintaining access to the company’s application or platform; Allows drivers to perform rideshare or delivery services for any other company, including direct competitors; and Does not restrict the worker from performing any other kind of lawful work. Proposition 22 also provides certain benefits and protections to app-based drivers who are classified as independent contractors. These benefits and protections are similar to but less comprehensive than those provided to employees, including, but not limited to, a guarantee of 120% of the applicable minimum wage for “engaged time” spent on rides or deliveries, healthcare subsidies for workers driving 15 hours per week or more, certain vehicle expense reimbursements, and occupational accident insurance for on-the-job injuries. Proposition 22 also requires companies to adopt anti-discrimination and anti-harassment policies and practices, provide background checks and safety training, and enter into written agreements with their drivers that protect workers from termination for reasons other than those specified in the agreement. It remains unclear whether Proposition 22 will apply retroactively and/or whether it will render moot pending or future claims for misclassification or violation of AB 5 prior to the passage of Proposition 22. Although Proposition 22 has limited application to app-based drivers, California employers should pay close attention as courts grapple with these issues and others surrounding the recent amendments to AB 5, as these changes will no doubt continue to affect the classification landscape in California and nationally. Polsinelli attorneys will continue to monitor and analyze the evolution of these issues and remain prepared to assist clients with navigating the changes to come.

Among the 2020 ballot initiatives, California voters had the opportunity to weigh in on a 24-year ban on affirmative action in California.   In 1996, California voters approved the California Civil Rights Initiative (Proposition 209) which amended the California Constitution to prohibit the consideration of race, sex, color, ethnicity or national origin in public education, employment and contracting.  California became the first state to enact such a measure.   Proposition 16, which appeared on the 2020 ballot, would have repealed Proposition 209, meaning that public institutions could have considered race, gender or ethnicity as a positive element in admission, hiring, and contract decisions.   Californians voted against this measure, maintaining the current ban on affirmative action in the state. While Proposition 16 failed, California employers should bear in mind that the ballot measure applied to public employers and concerned the ability to use race, sex, color, ethnicity, or national origin as a positive factor.  The measure, whether or not it passed, did not alter the numerous safeguards in place, at both the state and federal level that protect against discrimination.  At the federal level, Title VII of the Civil Rights Act of 1964 specifically prohibits employers from discriminating on the basis of race, color, religion, sex, and national origin.  California has adopted even broader protections for employees, earning its title as the most employee-friendly state in the nation.  The California Constitution and state statutes offer a broad range of protections against arbitrary discrimination based on protected characteristics.  Arguably the strongest protection against employment discrimination comes from the California Fair Employment and Housing Act (“FEHA”), which applies to both private and public employers.  The FEHA prohibits employers from discriminating against job applicants and employees because of a protected category, or retaliating against them because they have asserted their rights under the law.  Additionally, for larger employers (50 or more employees) with qualifying federal contracts or subcontracts, there are additional affirmative action requirements under the Rehabilitation Act of 1973, Executive Order 11246, and the Vietnam Era Veterans’ Readjustment Assistant Act (“VEVRA”). Despite the defeat of Proposition 16, California remains an employee-friendly state with a host of broad protections and nuances that employers must carefully consider in making business decisions.

On September 22, 2020, President Trump issued an Executive Order Combating Race and Sex Stereotyping that will prohibit federal contractors and grantees from engaging in many forms of diversity, inclusion, and implicit bias training that have gained popularity in recent months. The new Executive Order announces a federal policy “not to promote race or sex stereotyping or scapegoating” and not to permit contractors to “inculcate such views in their employees.”  To that end, the order requires agencies to include in most new federal government contracts a clause prohibiting contractors from using any workplace training program that includes the concepts that: One race or sex is inherently superior to another race or sex; An individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously; An individual should be discriminated against or receive adverse treatment solely or partly because of his or her race or sex; Members of one race or sex cannot or should not attempt to treat others without respect to race or sex; An individual’s moral character is necessarily determined by his or her race or sex; An individual, by virtue of his or her race or sex, bears responsibility for actions committed in the past by other members of the same race or sex; An individual should feel discomfort, guilt, anguish, or any form of psychological distress on account of his or her race or sex; or Meritocracy or traits such as a hard work ethic are racist or sexist, or were created by a particular race to oppress another race. The Executive Order also prohibits trainings that “assign[] fault, blame, or bias to a race or sex, or to members of a race or sex because of their race or sex.”  The Order also requires the Attorney General to consider whether these types of trainings violate Title VII by contributing to a hostile work environment.  These prohibitions follow a previous Executive Order prohibiting similar trainings by federal agencies. Contractors are required to post a notice with the substance of the Executive Order in a conspicuous place in the workplace, and include the Executive Order’s prohibitions in any subcontracts.  The Office of Federal Contract Compliance Programs (OFCCP) is directed to establish a hotline and investigate complaints of prohibited training programs.  As sanctions for noncompliance, the Executive Order requires agencies to consider such drastic measures as terminating, suspending, or canceling contracts, or even debarring contractors.  The Executive Order does provide that it does not prevent contractors from promoting racial, cultural, or ethnic diversity and inclusiveness in a manner consistent with the Order. The Executive Order appears to target diversity and inclusion training programs like the popular White Fragility that focus on concepts of implicit bias.  These trainings have gained prominence in the wake of the George Floyd shooting earlier this year.  New federal contracts or grants would prohibit contractors from implementing these types of efforts with severe consequences.  It is anticipated that the constitutionality and validity of the Executive Order will be challenged in litigation.  Federal contractors and grantees should keep close track of these developments due to the heavy potential penalties for noncompliance.

The Equal Employment Opportunity Commission (EEOC) announced May 7, 2020 that it will delay until March 2021 the annual filing of the EEO-1 Component 1 Report, which requires covered employers to report by job category the race, ethnicity and gender of its employees.  At that time, pending approval from the OMB, covered employers will be required to file both the 2019 and 2020 EEO-1 Component 1 Reports. Covered employers include those with 100 or more employees and federal contractors with 50 or more employees and a federal contract of $50,000 or more.  Note that employers with less than 100 employees who are owned or affiliated with another entity such that the combined employee count is over 100 employees may also be required to file this report. Covered employers are encouraged to confirm that all employees have had the opportunity to voluntarily self-identify their gender, ethnicity and race and to make sure records are kept of this information for future reporting in 2021.  If an employer identifies employees who have not responded to this voluntary invitation, employers may re-extend the invitation and/or rely on employment documents such as an I-9 or visual observation.  If an employer needs to rely on visual observation, it will be easier to gather this information now rather than waiting until 2021. Polsinelli will continue to monitor developments with the EEO-1 report.

States and businesses are on their own based on a CDC official’s statement to the Associated Press that the much-anticipated “Guidance for Implementing the Opening up America Again Framework” (“Guidance”) will “never see the light of day.” The 17-page CDC Guidance report or playbook was expected to be released on Friday, May 1. Reports this morning, however, stated that the Guidance was “shelved.” The document, described in various news stories last week, was “far more detailed” than prior CDC materials related to the reopening of businesses across the nation. News articles also reported that the Guidance had "site-specific decisions related to reopening schools, restaurants, summer camps, churches, day care centers and other institutions." One explanation for shelving the project focused on concerns that the virus is affecting different states and communities in unique ways; there simply is no “one-size-fits-all.” While this sentiment is true in certain respects, there are many common questions businesses / employers must ask themselves, strategically analyze, and plan to handle as they bring employees, customers, and other third parties back into their work spaces. The materials available in a new 40+ page Polsinelli “COVID-19 411, Employer Playbook for Occupational Health and Business Continuity” and at Polsinelli’s COVID-19 Blog: What Your Business Needs To Know will help businesses think through state and local requirements, and health department recommendations. Polsinelli attorneys are also prepared to assist in the development or review of new forms, checklists, signage, policies, and procedures businesses must develop on their own, given this new information. Section 1 of Polsinelli’s “Employer Playbook” provides an easy to use “Opening up America” chart for employers based on guidelines from the United States, along with a summary of orders in various states (effective as of May 1, 2020). Section 2 provides employers guidance as they plan to re-open – analyzing policies and new compliance requirements, continuing to build their pandemic response plan, and preparing to communicate how new requirements, recommendations, policies, and procedures will affect employees and others personally. Section 3 discusses how, as employees return to work, employers should or may develop an illness detection program, including screening employees and others for symptoms, taking temperatures, and even (when appropriate) requiring testing. Section 4 describes how employers can set up and begin their Advance Contact Tracing programs even before anyone reports an infection. Section 5 provides employers with immediate steps to take when someone reports an exposure in the workplace. And, finally, a list of Do’s and Don’ts is available as a general reminder of various actions employers should or should not take. Additional information, including up-to-date interactive maps and financial assistance for businesses, may be found on at the Polsinelli’s COVID-19 Blog: What Your Business Needs to Know. We strongly encourage you to contact your Polsinelli attorney or a member of the Labor & Employment Department for assistance as you plan your successful future. If you would like to receive a copy of the “COVID-19 411, Employer Playbook for Occupational Health and Business Continuity” or speak to a Polsinelli attorney, please email 411_Employer_Playbook@Polsinelli.com.

Due to the COVID-19 pandemic, schools in the United States have generally suspended brick-and-mortar operations nationwide and are almost exclusively conducting classes through remote learning for the remainder of the academic year. Providing learning support and other care to children staying home due to school closures necessitates a meaningful level of adult supervision by parents who would often otherwise be working. Relatedly, parents of younger children are grappling with a need to work while supervising their toddlers as many child care facilities, including before and after school care programs, are also closed. In light of the ongoing nature of the pandemic, various summer programs for children are following suit. As the pandemic continues without a vaccine or other effective drug therapies, federal, state, and local governments are attempting to develop more advanced infection control plans for re-opening public activities including schools, child care facilities, and summer programs. Whether those programs do, in fact, re-open, many families may opt to keep their children home to minimize the risk of COVID-19 infection. As children idle longer at home and parents struggle with an ongoing gap in child care, U.S. employers and their workforce face significant uncertainty in addressing child care matters during this unprecedented pandemic. Juggling child care and work will likely continue to affect workforce productivity and adversely impact employers of all sizes well into the summer. The federal government attempted to provide some relief to families through the passage of the Families First Coronavirus Response Act (“FFCRA”), which requires most employers with fewer than 500 employees to provide certain pandemic-related paid leave benefits to employees. Details regarding the benefits provided under the FFCRA can be found here, but they include paid leave benefits for employees who are unable to work due to the need to care for one or more minor children whose school or place of care [1] is closed, or whose child care provider is unavailable, due to COVID-19 related reasons.  As it relates to child-care related leave connected to COVID-19, the FFCRA requires employers to foot the bill for up to 12 weeks of paid leave for eligible employees. The first two weeks of leave (up to 80 hours) may be paid under the Emergency Paid Sick Leave Act (“EPSLA”) [2].  After the initial two weeks of leave, an eligible employee may take up to an additional 10 weeks of paid leave under the Emergency Family and Medical Leave Expansion Act (“EFMLA”). The paid leave benefit is capped at $200 per day and $10,000 total for each eligible employee, and employers may take a dollar-for-dollar credit against their quarterly payroll tax payments. However, considering the pandemic may continue for many months, the paid leave provisions of the FFCRA are unlikely to be adequate in addressing the challenges employers and employees now face, and will continue to face as they head into summer. Unfortunately, the fact that the school year will be ending soon will not eliminate the need for child-care based leave if the pandemic persists. The FFCRA recognized this by including summer camps and summer enrichment programs. As a result, maintaining a flexible approach relating to the use of these paid leave benefits may prove crucial to allowing caregivers to effectively continue in the workforce into the summer.  Ultimately, however, it appears increasingly likely that employers need to prepare for longer term implications of children staying at home through the summer. While employees and employers must both agree for these paid leave benefits to be taken intermittently, reaching an agreement that allows for the pacing of a workforce’s utilization of EPSLA and EFMLA leaves may extend the benefit longer than it would otherwise be available. For example, an employee may be able to work half days over 20 weeks rather than take a full 10 sequential weeks off, or work two or three days a week, similarly extending the benefit. Where employers and employees can reach agreement on flexible scheduling, such staggering of leave may help struggling parents patch together a schedule that both allows productive time for their job every week as well as allows necessary supervision of their children while they are at home. However, unlike traditional FMLA, the Paid FMLA Leave is just that - a paid benefit, and therefore, employees may be less incented to stagger the use of this benefit. That said, staggering this benefit over the course of the remaining academic year and summer may be exactly what is required for employees to manage through what everyone hopes to be the worst of the pandemic. If your company has questions about the legal implications of their employees’ longer term child care challenges and those employees’ rights under the Families First Coronavirus Response Act, contact the authors of this article or the Polsinelli attorney with whom you regularly work. [1] “Place of care” is defined for purposes of the benefits described in this post as a physical location where care is provided for the child while the employee works for the employer.  Place of care is broadly defined as a physical location that does not have to be solely dedicated to such care and includes day care facilities, preschools, before and after school care programs, schools, homes, summer camps, summer enrichment programs and respite care programs. [2] This is provided the eligible employee has not already taken all or part of available EPSLA leave for a COVID-19 another qualifying reason.  If the eligible employee has exhausted such entitlement, the employee may utilize accrued but unused paid leave to cover the gap under EFMLA leave becomes available.

Nearly every essential business that remains open during the Coronavirus Disease 2019 (COVID-19) pandemic is faced with the possibility that coronavirus could show up in the workplace, or that its employees are concerned that it will. This leaves employers with the potential to receive a complaint from the Occupational Safety and Health Administration (OSHA), the principle federal agency designed to ensure workplace safety, a sub agency within the U.S. Department of Labor (DOL).  Because these complaints require a written response within a week, employers must be ready. As of early April, nearly 4,000 complaints have already been filed with OSHA across the country. These complaints claim employers have not done enough to protect employees from COVID-19, including claims of insufficient personal protective equipment (PPE), a lack of COVID-19 response training, and the failure to maintain social distancing in the workplace. Of those complaints, just under 30% of them were from the health care industry, and the other 70% came from various sectors, including manufacturing and retail. So what do employers need to know? OSHA has now issued an Interim Enforcement Response Plan to guide its area offices and compliance safety and health officers in handling and responding to COVID-19 complaints. The enforcement plan includes instructions for regional offices to assess complaints, when inspections may be warranted, and to move certain claims to the top of the priority list. Importantly, OSHA is directing its officers to maximize their review electronically before attempting an inspection and will consider an employer’s “good faith efforts” to comply with OSHA standards. In response to an OSHA complaint, and to potentially avoid an on-site inspection, employers should be prepared to provide the following information to OSHA: A written pandemic plan as recommended by the CDC. Procedures in place for hazard assessment and protocols for PPE use with suspected COVID-19 employees. A summary of decontamination procedures. Recorded and maintained medical records related to worker exposure incidents and other OSHA required recordkeeping, including whether any employees have contracted COVID-19, have been hospitalized as a result of COVID-19, or have been placed on precautionary removal or isolation. Where applicable, information regarding the respiratory protection program, and respirator policies related to COVID-19, in compliance with 29 CFR § 1910.134. Training records, including records of training related to COVID-19 exposure and prevention. Documentation and provisions created regarding obtaining and providing appropriate PPE (though OSHA is instructing its field offices to exercise “discretion” when assessing PPE complaints, considering the nationwide shortage during the outbreak). Where applicable, information regarding airborne infection isolation rooms or areas and periodic testing procedures. (OSHA is referencing previously published Tuberculosis guidance). Employers should also keep in mind the relevant OSHA standards at play. There is no specific OSHA standard that covers COVID-19. However, the recent guidance has provided a list of OSHA standards that may be applicable: 29 CFR § 1904, Recording and Reporting Occupational Injuries and Illness. 29 CFR § 1910.132, General Requirements - Personal Protective Equipment. 29 CFR § 1910.133, Eye and Face protection. 29 CFR § 1910.134, Respiratory Protection. 29 CFR § 1910.141, Sanitation. 29 CFR § 1910.145, Specification for Accident Prevention Signs and Tags. 29 CFR § 1910.1020, Access to Employee Exposure and Medical Records. Section 5(a)(1), General Duty Clause of the OSH Act. Most commonly referenced is the General Duty Clause, 29 USC 654(a)(1), which requires employers to furnish to each worker: employment and a place of employment, which are free from recognized hazards that are causing or are likely to cause death or serious physical harm. This clause has been interpreted to require employers to understand their industry and safety standards, provide information to employees regarding rights and duties, and to generally ensure that employees have available safe tools and equipment in their workplace.  A violation of the general duty clause exists when: (1) the employer failed to keep the workplace free from a recognized hazard that (2) caused or was likely to cause death or serious physical harm and (3) a feasible option existed that – had it been implemented – would have materially reduced the likelihood of the existence of the hazard. Overall, the guidance explains that the most recent CDC guidelines should be used to assess potential workplace hazards and – importantly – to evaluate the adequacy of an employer’s protective measures for its workers. This means employers should continue to monitor the CDC website and update their procedures and actions based on the most current CDC recommendations. Employers who receive a complaint from OSHA should seek advice from counsel to ensure a timely and thorough response is provided.

On March 31, 2020, the U.S. District Court for the Southern District Court of California entered partial summary judgment in Erhart v. BofI Holding, Inc., a prominent, long-running whistleblower lawsuit under the Sarbanes-Oxley and Dodd-Frank Acts. The court’s decision provides welcome limitations on the scope of protected activity under these statutes, but also emphasizes the need for employers to be diligent in protecting their confidential data and documents against theft by internal actors. The plaintiff, Charles Erhart, was an internal auditor for the Bank of the Internet, a publicly-traded financial institution. Although Erhart claimed he battled upper management to confront illegality in a turbulent corporate environment, the Bank contended that he was, in the court’s words, an “auditor gone rogue - a loose cannon who recklessly handled confidential information and conducted unauthorized investigations.” Among other things, the Bank claimed Erhart instructed staff to run unauthorized due diligence reports to find “dirt” on another executive’s son, improperly accessed the Bank’s CEO’s personal tax returns, and disseminated confidential compensation data to other employees. Wherever the truth lies, Erhart ultimately filed a whistleblower lawsuit under Sarbanes-Oxley and Dodd-Frank, claiming he had been retaliated against for reporting illegal conduct. The next day, the New York Times ran a story about the lawsuit and the stock price of the Bank’s holding company fell by thirty percent. Numerous securities lawsuits asserting similar claims to those alleged in Erhart’s lawsuit followed. The Bank later filed its own lawsuit against Erhart, asserting contract and tort claims based on his alleged theft of confidential information. The court’s summary judgment ruling significantly narrowed both Erhart’s and the Bank’s claims. With respect to Erhart’s whistleblower claims, the court ruled that the bulk of his alleged internal and external reporting did not constitute protected activity under either Sarbanes-Oxley or Dodd-Frank. Erhart claimed he reported illegal or improper conduct spanning eleven categories of wrongdoing, including, among other things, late 401(k) contributions, the lack of Board approval of the Bank’s strategic plan, high deposit concentration risk, the failure to disclose to regulators the Bank’s receipt of subpoenas, and improprieties with respect to the CEO’s brother’s account. The court noted that Sarbanes-Oxley and Dodd-Frank do not generally protect alleged whistleblowers who report any type of wrongdoing, but only extend protection to certain types of reports of certain types of fraud and securities violations. Seeking to evade Sarbanes-Oxley and Dodd-Frank’s limitations on protected activity, Erhart advanced expansive arguments based on the SEC’s “Books and Records” and “Internal Controls” rules. The court rejected these arguments. The court found that the Books and Records rule implicated only the accuracy of records necessary to accurately and fairly reflect the transactions and dispositions of a corporation’s assets, not any and all corporate records. Similarly, the court limited the Internal Controls rule to procedures to assure accurate financial reporting and prevent unauthorized financial transactions, rejecting the argument that it required compliance with any and all laws or risk management objectives. Based on these narrow interpretations, the court granted the Bank summary judgment on Erhart’s claims based on reporting alleged illegal conduct and wrongdoing outside of the scope of the SEC rules, finding they did not constitute protected activity. Although the court’s narrow construction of the scope of Sarbanes-Oxley and Dodd-Frank protected activity is a welcome sign for employers, its rulings on the Bank’s claims against Erhart for document misappropriation are not. After previously ruling in the case that the Bank could not enforce Erhart’s confidentiality agreement with respect to confidential documents and information he removed that directly related to his whistleblowing activity, the court also struck down the bulk of the Bank’s tort claims relating to Erhart’s document misappropriation. The court ruled that California’s uniform trade secret act preempted the Bank’s tort claims for Erhart’s misappropriation of confidential business information. The Bank’s claims were limited to Erhart’s alleged misappropriation of confidential documents containing personally identifiable information of the Bank’s customers and employees. The court’s ruling emphasizes the need for employers to enforce the rigorous security measures required to obtain trade secret protection, such as marking documents as confidential, limiting internal distribution and access, maintaining and enforcing confidentiality agreements, and ensuring information is protected by information security best practices. Although the court’s decision limited the Bank’s ability to seek redress for Erhart’s misappropriation of confidential information, it continues a trend of employer victories on the scope of Sarbanes-Oxley and Dodd-Frank protected activity. Polsinelli will continue to monitor this trend and other developments in the whistleblower space.

Unemployment benefits are a joint federal-state program. While the federal government provides some guidelines, every state has its own rules on unemployment benefits, making navigation of the rules challenging for employers who have employees in multiple states. Complicating the unemployment process are quickly evolving changes to state unemployment standards in response to COVID-19. The general questions that determine unemployment eligibility are: A. Is the employee out of work or did the employee experience a reduction in work income through no fault of the employee? B. Is the employee ready and able to work? C. Does the employee meet qualifying work and wage requirements? (Each state has requirements for wages earned or time worked during an established period of time referred to as a “base period.”) D. Is the employee receiving income replacement such as sick, disability, or severance pay that offsets or replaces unemployment? (Some states reduce unemployment benefits for qualifying employees by other income replacement the employee may be receiving.) In operation, the availability of unemployment benefits will depend on the circumstances surrounding the employee’s unemployment and state law: If an employee is on leave by choice, such as to care for himself/herself or others, self-quarantine, or FMLA, then unemployment benefits are generally not available because the employee is unable to work. Note that some states are making exceptions here for absences related to caring for oneself or others who have tested positive for or have been exposed to COVID-19. If there is a layoff or furlough (temporary or otherwise), then unemployment benefits are typically available to affected employees because the affected employee is able to work. If an employer reduces an employee’s hours, then unemployment benefits are typically available depending on the state and the amount of the reduction in hours. In many states, benefits are available under a “work share” program if certain criteria are met. If there is forced leave by an employer, such as a 14-day quarantine, the availability of unemployment benefits will depend on the jurisdiction. The United States Department of Labor (“DOL”) has clarified in published guidance that individual states have the authority to make changes to unemployment based on COVID-19, concerns such as extending the availability of unemployment benefits to eligible employees when: (1) An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work; (2) An individual is quarantined with the expectation of returning to work after the quarantine is over; or (3) An individual leaves employment due to a risk of exposure or infection or to care for a family member. In addition, federal law does not require an employee to quit in order to receive benefits due to the impact of COVID-19. A majority of states have taken action to modify their usual unemployment rules. For example, California has stated it will remove the waiting week period that usually applies to unemployment, meaning that employees will receive benefits starting on day one. Missouri has specifically stated that it would allow benefits for a forced quarantine by the employer. In light of the global pandemic, unemployment benefits rules may rapidly change in coming weeks. Pending federal legislation proposes further relief including additional money for unemployment benefits and relief to employers for charges related to unemployment benefits paid due to COVID-19. In addition, states continue to monitor their processes and institute changes to respond to the current economic landscape. Employers are free to offer employees information on filing for unemployment, but should note that state unemployment agencies are making frequent changes that may provide for unemployment benefits for COVID-19-related issues. Below is a list of resources for states that have taken action in response to COVID-19 issues and, for states where action has not yet been taken, a link to the general unemployment site:

Despite many politicians and employers discussing the option for employees to work at home, there are millions of employees who simply cannot do that. Bartenders, restaurant servers, cashiers, and many others have no one to serve and nothing to ring up when they work at home. Employers of such employees accordingly have a difficult decision to make when business is at an all-time low or they have been shut down. Most cannot afford to pay employees during this time period and hope employees will qualify for unemployment benefits. The question for these employers thus becomes–to fire, or not to fire. This is where a work furlough comes into play. A work furlough is essentially a temporary layoff that qualifies for unemployment benefits. Furloughs rose in popularity some years ago when businesses had to cut costs. Most employers knew employees who worked from paycheck to paycheck would suffer a financial hardship if the employees lost their jobs. Employers did not want to terminate employment. These employers wanted to minimize the negative impact, psychologically and monetarily, a termination brings, and the hard feelings an employee may carry following termination. Employers wanted employees who were already-trained to return to work at the end of a furlough, rather than having to start the hiring process from scratch. Work furloughs generally have a set beginning and end date, similar to the 15-day shut-down ordered in many cities. The employer does not pay the employee during the furlough. Employees, however, generally qualify for unemployment compensation benefits. Employers who want to maintain better relations should tell their employees to apply for unemployment benefits on the first day of the furlough. This ensures the employees will receive the maximum compensation possible. Even an employee who uses vacation time or personal time may qualify for unemployment benefits. Usually there is a one week waiting period before an employee is eligible to receive any unemployment benefits. Many states have benevolently waived this one week waiting period for job losses suffered due to the pandemic. In these states, employees will receive benefits beginning “day 1.” The employee will receive compensation during the second week and any later weeks during which the employee is not working. Any employee who files after the first week of the furlough must use the second furlough week as the waiting period. The employee, therefore, loses a week of unemployment compensation. Even if the furlough period is only one week in length, employees should file for benefits. This helps the employee if the employer is forced to extend a furlough or put employees on furlough again later that same year. The one-week waiting period only applies to the first week when the employee did not work during the first furlough. The employee does not have to wait yet another week to receive benefits (compensation) during any furloughs that take place within 12 months of the first furlough. While furloughs are an excellent option for employers to consider, any employer considering termination or a furlough must carefully consider all state and local laws; the state emergency declarations and laws issued, given the pandemic; and federal law, including any relief package or whether the number of employees furloughed triggers obligations under WARN.

As you are aware from various updates this past weekend, certain cities have closed their schools (bars and restaurants, etc.), and are encouraging or requiring employees to work from home. People who return from risky travel or learn they may have been exposed are self-quarantining. These are certainly signs that many more employees will be working from home or telecommuting regardless of where they are located. A few tips you may send to employees. We hope they may help you and your employees prepare for and, ultimately, work from home for a period of time. Take home, each day, everything you need for telecommuting in case (1) we move to a “telecommuting” or a “work at home” recommended or required policy, (2) your child’s school is closed, (3) you wake up feeling ill (in any way), (4) a loved one wakes up feeling ill and needs your help or you prefer to self-quarantine, (5) you are in a high-risk health category, or (6) you decide at some point you prefer to telecommute. Consider whether meetings of any size, internal or external, might or should be postponed or handled by telephone or videoconference (rather than in person). Use the terms “working from home,” “telework,” or “telecommuting,” rather than we closed our office. The office may be physically empty or mostly empty, depending on what is needed, but “we closed our office” sounds like we are not working. We want to avoid giving anyone that impression. Treat your day like a normal work day to the greatest extent possible. Get up at your regular time, shower, get dressed for work, set up a desk or office area for yourself if you do not already have such an area. End work when you normally stop. Contrary to popular belief, individuals who telecommute often over-work in the beginning, which leads to burn out. Try to remove or limit distractions, including children, puppies, laundry, etc. Having a specified desk / work area, especially one where you can shut a door, will help set boundaries around working time and “no distractions.” If two parents or adults are working from home, work together to share all responsibilities. Try to schedule your most mentally intensive work during, for example, the early morning before anyone else is awake, during your child’s nap time, when your kids are engaged doing something, etc. Synchronize breaks with your children’s or pets’ schedule. (We all know some of this is not as easy as it sounds, especially when children are involved.) Make sure your working area is safe, clean, comfortable (in an ergonomically correct manner), well ventilated, and well-lit. You should have enough electrical outlets to safely power all equipment needed with all wires and electrical cords secured and out of the way. Prepare in advance for periods during which there may be a lack of focus or motivation. This is natural when the energy around your work is not as high as it might be when numerous others are working around you. Use one of many productivity methods available, including the Pomodoro Technique, or my favorite – Eating Live Frogs: Do the Worst Thing First, to help maintain periods of focus and streamline productivity. Anticipate technical problems, which are a huge hassle in the office but even more frustrating when out of the office. Make sure you have a good WiFi or MiFi connection (or both available). Call the Help Desk as often as needed. Arrange for your equipment to be swapped out if the problem is severe. Beware of feelings of isolation or loneliness. The statistics support that people who telecommute tend to lose their sense of community, belonging, etc. Reach out to co-workers in a meaningful, professional AND social way via phone, FaceTime, Zoom, etc. Send funny stories, jokes. In other words, stay in touch as human beings. Working from home or telecommuting is not an ideal situation. We accordingly hope this is a SHORT experience for each of you and your employees. Please do not hesitate to reach out to your Polsinelli contacts if you have additional questions or issues.

UPDATE:  California Governor Gavin Newsom signed AB5 into law on September 18, 2019.  In his signing statement, Governor Newsom stated that the “next step is creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work.”  Businesses that retain workers as independent contractors in California should now immediately begin planning to defend these arrangements under the new law or adapt them to avoid or reduce potential misclassification liability (September 19, 2019). On September 10, 2019, the California Senate passed AB5, a sweeping bill to control the use of independent contractors in the nation’s largest state.  With the California Assembly concurring in the Senate’s amendments to the bill on September 11, 2019, the legislation now proceeds to Governor Gavin Newsom who is expected to sign it into law. AB5 codifies the California Supreme Court’s holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, and adopts an “ABC” test to determine whether a worker is classified as an “employee” for purposes of California’s Labor Code, unemployment insurance law, and wage orders.  Under the “ABC” test, for a worker properly to be classified as an independent contractor, the putative employer must satisfy three conditions: The worker is free from the employer’s control and direction in connection with the work performed, both under the contract and in fact; The work being performed is outside the usual course of the employer’s business; and The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. The bill contains numerous exceptions for occupations and contracting arrangements that will not be subject to the ABC test under either AB5 or Dynamex.  Certain professionals, including lawyers, doctors, engineers, accountants, investment advisors, insurance brokers, and others, will continue be governed by the pre-Dynamex common law standard.  Independent contractors providing certain types of services (including, marketing, human resources, design, photography, writing, and editing) will not be subject to the ABC test if they meet a separate, six-factor test focusing largely on whether they operate an independent business.  Construction subcontractors and bona fide business-to-business contracting relationships are also exempted from the ABC test. Although AB5 states that it applies only prospectively to work performed after January 1, 2020, it is an open question whether the Dynamex ruling will be applied retroactively.  The U.S. Court of Appeals for the Ninth Circuit previously ruled that it did, but then vacated that ruling and certified the issue to the California Supreme Court, which has not decided the issue.  AB5 is not helpful to employers on this point, providing that its test “does not constitute a change in, but is declaratory of, existing law.” It is anticipated that Governor Newsom will sign the bill, though he has stated he will continue to negotiate with major California gig economy employers about its scope.  If passed, the bill will upend numerous independent contractor relationships in the state and subject businesses that retain independent contractors to a patchwork of local minimum wage laws (21 in the Bay Area alone), meal and rest break requirements that are difficult for employers to police, and the requirement to provide wage statements containing nearly a dozen categories of information.  Businesses in California that use independent contractors should immediately begin working with counsel to plan for AB5’s January 1, 2020 effective date by either ensuring that existing contractor relationships pass the ABC test or meet the requirements of one of AB5’s exceptions and/or preparing to transition certain contractors to W-2 employment status.

Recently, Illinois amended its Equal Pay Act to include a ban on salary-history inquiries, with the stated goal of reducing gender pay inequities.  Specifically, the amendments prohibit employers from asking questions regarding job applicants’ pay history either in the job interview or on the job application. Further, an employer may not screen applicants based on their salary history, or request salary history information from applicants’ previous employers.  The amendments are effective September 29, 2019. While a job applicant may voluntarily disclose their salary history, this information cannot be considered when deciding whether to hire the job applicant, or when determining the salary of an applicant who has been hired.  However, employers may ask job applicants about compensation expectations for a given role.  In addition, the amendments provide that employees may talk about their compensation with their colleagues without fear of retaliation.  Note the amendments grant individuals a private right of action, and allow prevailing plaintiffs to recover special damages up to $10,000, civil penalties up to $5,000 for each violation, injunctive relief, and attorney’s fees and costs. Given these amendments, employers may wish to consider assessing the role compensation history plays in their hiring processes (if any).  Employers with questions regarding the Equal Pay Act, or salary inquiries generally, would do well to consult with competent counsel.

In a recent decision, Marshall v. Montaplast of North America, Inc., the Supreme Court of Kentucky reaffirmed that a cause of action for wrongful termination based on a violation of public policy may proceed only if the public policy at issue is: (a) found in an existing law; and (b) has an “employment related nexus.” In Marshall, the plaintiff filed a complaint against her former employer for wrongful discharge in violation of public policy, claiming that she was terminated in retaliation for informing her co-workers that their supervisor was a registered sex offender. The plaintiff argued that her termination for disseminating information from the sex offender registry is against public policy because, pursuant to the Kentucky Sex Offender Registration Act (“Act”), the sex offender registry should be open and accessible to everyone.  In contrast, the employer argued that the plaintiff’s claim must fail because no such public policy could be divined from the Act. The Supreme Court sided with the employer.  When ruling, the Court made clear that “the public policy involved must have an employment related nexus.” Specifically, the public policy must be “clearly defined by statute and directed at providing statutory protection to the worker in his employment situation.”  And in this case, the Act did not meet the employment-related nexus requirement because its primary purpose was to protect the public generally, and not “the worker” specifically.  While the Act did provide criminal and civil immunity for anyone who disseminated information from the registry in good faith, it did not create a private right to disseminate information from the registry in a private workplace. This decision comes as good news to Kentucky employers.  Nevertheless, employers in Kentucky that are considering terminating an employee would do well to consult with competent counsel to minimize the risk of a possible public policy claim.

The Equal Employment Opportunity Commission (EEOC) requires employers with at least 100 employees (and federal contractors with at least 50 employees) to file an EEO-1 Report with a count of employees by establishment and job category with race, ethnicity, and gender information for each employee.  This part of the EEO-1 is now referred to as Component 1. In 2016, the EEOC implemented a pay data requirement for the EEO-1 Report, referred to as Component 2.  Component 2 requires the disclosure of the total number of full- and part-time employees by demographic category divided into 12 pay bands for each EEO-1 job category, and hours worked by all employees in each band. Before the original deadline for Component 2 pay data, the Office of Management and Budget (OMB) paused the U.S. Equal Employment Opportunity Commission’s collection of Component 2 pay data. A lawsuit initiated by both the National Women’s Law Center and the Labor Council for Latin American Advancement followed, arguing that the OMB’s decision halting the expanded data collection was without cause. National Women’s Law Center v. Office of Management and Budget, Case No. 1:17-cv-02458-TSC. This case remains pending in the U.S. District Court for the District of Columbia.  The Court’s August 25, 2018 ruling in this case reinstated the requirement to collect Component 2 data. What now? Employers must report Component 1 gender, race and ethnicity information for all covered employees on a single payroll date between October 1, 2018 and December 31, 2018. The portal will remain open for filing Component 1 data until May 31, 2019.  Employers who need an extension to meet the Component 1 deadline may contact the EEOC for a one-time 2-week extension by contacting E1.EXTENSIONS@EEOC.GOV.  An employer requesting a longer extension must provide the EEOC with a rationale therefor. Requests for extensions will not be accepted after May 31, 2019. When is Component 2 pay data due?  Following the Court’s ruling in National Women’s Law Center, the EEOC first indicated it would likely begin collecting Component 2 data for both calendar years 2017 and 2018 starting sometime in mid-July. Further, the current published deadline for submission Component 2 data is September 30, 2019. EEOC Chair Victoria Lipnic acknowledged that these “first-ever pay data collections,” which are now required in a relatively short time frame, will be difficult to accomplish. However, the EEOC is “committed to meeting the Court’s order, working with employers, and making this happen by the end of September.” On May 3, 2019, the Department of Justice filed a Notice of Appeal in the National Women’s Law Center case, which does not stay the current district court orders or alter EEO-1 filers' obligations to submit Component 2 data. What now? Employers should review our previous post for additional insights on EEO-1 reports, and how to avoid common pitfalls when preparing employer Component 1 data. Employers should also consider hiring experienced counsel to assist with filing their Component 1 and 2 data, in light of these new requirements. Polsinelli will continue to provide updates on the filing of Component 2 data when as it becomes available.

Colorado appears poised to join a number of states that prohibit employers from inquiring into a job applicant’s criminal history on an initial employment application.  On April 30, 2019, the Colorado legislature sent House Bill 19-1025 (the “Bill”) to Governor Polis’ desk.  Assuming Governor Polis signs the Bill, Colorado will join a number of other states and “ban the box.”  If the Bill is signed into law, Colorado employers will be prohibited from: Stating in an employment advertisement that a person with a criminal history may not apply for the position; Stating on any form or application for employment that a person with a criminal history may not apply for the position; and Inquiring into or requiring an applicant to disclose any criminal history on an initial employment application. Employers may still obtain a publicly available criminal background report on a job applicant at any time. The above-listed prohibitions will not apply if: Federal, state, or local law or regulations prohibit employing a person with a specific criminal history to the position; The position is designated by the employer to participate in a federal, state, or local government program to encourage the employment of people with criminal histories; or The employer is required by federal, state, or local law or regulation to conduct a criminal background check for the position, regardless of whether the position is for an employee or an independent contractor. Critically, the Bill does not create a private cause of action or a new protected class under existing anti-discrimination laws.  However, the Bill does include staged penalties after the first violation. If signed into law as expected, the Bill’s provisions will become effective September 1, 2019 for employers with 11 or more employees, and September 1, 2021 for all other employers.

Many employers offer paid leave, including sick leave or paid time off, as a benefit beyond the unpaid leave entitlements of the Family and Medical Leave Act (“FMLA”).  State or local laws may also require paid leave beyond FMLA entitlements.  Seeking to maximize time off work, employees may ask to take paid leave before commencing 12 weeks (or 26 weeks, in the case of military caregiver leave) of unpaid FMLA leave.  While generous employers may consider approving such a pro-employee arrangement, by Opinion Letter dated March 14, 2019, the United States Department of Labor (“DOL”) prohibited this approach. The DOL’s March 14, 2019 Opinion Letter requires the FMLA entitlement period to run from the earliest possible date, regardless of employers’ paid leave policies or employees’ preferred sequencing of leave.  In addition, employers “may not designate more than 12 weeks of leave (or 26 weeks of military caregiver leave) as FMLA leave.”  The DOL’s March 14, 2019 Opinion Letter departs from DOL Opinion Letter No. 49 (1994), which authorized employers to “extend” FMLA benefits by delaying the start of the FMLA leave period until after employees exhausted paid leave benefits. With appropriate notice in written policies and in the FMLA-required Rights and Responsibilities Notice, employers may continue to require employees to take paid leave concurrently with unpaid FMLA leave.  Alternatively, employers may let employees choose whether to take paid leave concurrently with FMLA leave, or take FMLA leave as unpaid and save paid leave for later use.  In all cases, according to the DOL, the first 12 (or 26) weeks of FMLA-qualifying leave in the calendar year must be designated as FMLA leave. The many procedural requirements of the FMLA can be a trap for the unwary.  Guidance from experienced counsel can help to avoid interference with employees’ FMLA rights, while minimizing the risks of FMLA fraud and misuse.

On March 4, 2019 the U.S. District Court for the District of Columbia issued a ruling that immediately reinstated the EEO-1 pay data reporting requirement. The government has not yet appealed or sought to stay the ruling, leaving employers unclear about their EEO-1 reports, which are due by May 31, 2019. On March 18, 2019 the EEOC issued a statement that it would only require the submission of Component 1 data regarding the demographics of employer workforces. Regarding Component 2 pay and hours data addressed in the Court’s ruling, the EEOC has stated only that it “is working diligently on next steps in the wake of the court’s order” and “will provide further information as soon as possible.” After the EEOC issued its statement, the National Women’s Law Center and Labor Council for Latin American Advancement, the plaintiffs in the case challenging the withdrawal of approval for the collection of Component 2 data, filed a motion with the Court asserting that the EEOC’s statement was not compliant with the March 4, 2019 decision and requesting an emergency hearing. The Court requested further briefing from the parties, which must be filed by April 8, 2019. Accordingly, the EEOC is not requiring the submission of Component 2 data for now, but we await further guidance from the Court. With EEO-1 submissions due by May 31, 2019, we will continue to follow these developments closely.

Since 2011, the number of Fair Credit Reporting Act (FCRA) lawsuits filed annually has continued to climb. The data demonstrates that employers struggle with compliance, especially regarding the FCRA’s disclosure requirements. Under the FCRA, an employer must provide an applicant or an employee with a “clear and conspicuous” disclosure that a “consumer report” -- commonly referred to as a background check -- may be obtained for employment purposes.  Importantly, before running the background check, the disclosure must be provided in a document that consists solely of the disclosure.  These disclosure requirements have proven problematic for employers in practice. In 2017, the U.S. Ninth Circuit Court of Appeals clarified that a FCRA disclosure cannot contain a liability waiver. Just last month in Gilberg v. California Check Cashing Stores LLC, the Ninth Circuit ruled that the FCRA disclosure cannot contain any additional disclosures that may be required by applicable state law. In that case, the Court reinstated class claims that the employer’s disclosure violated the FCRA because the disclosure provided to job applicants was not clearly written, nor was it contained in a “standalone” document. The Gilberg case makes clear that a court will closely scrutinize any extraneous information contained in the FCRA-required disclosure, regardless of the purpose for its inclusion. The offending language in Gilberg contained disclosures mandated by separate state laws. Stated simply, if the language included in the disclosure is not necessary to clearly and conspicuously advise an applicant or employee of FCRA rights, it likely should be excluded. Employers should take care to review any FCRA disclosures with legal counsel to ensure compliance, as any mistake, no matter how small, may expose the employer to liability on an individual or class-wide basis. Employers with questions regarding the FCRA would do well to consult with able counsel.

In Wadler v. Bio-Rad Laboratories, Inc., the U.S. Court of Appeals for the Ninth Circuit adopted a limited, plain meaning construction of the types of reports that are protected by the Sarbanes-Oxley Act’s (SOX) whistleblower provision and in the process partially reversed an $11 million jury verdict in favor of a corporate general counsel. In Wadler, a corporation’s general counsel believed that the corporation was violating the Foreign Corrupt Practices Act’s (FCPA) bribery prohibition and recordkeeping requirements and reported his findings to the corporation’s board.  After an outside investigation found no evidence of an FCPA violation, the corporation terminated the general counsel’s employment.  The general counsel filed SOX and other claims against the corporation alleging, among other things, that he was retaliated against for reporting the suspected FCPA violation.  The general counsel subsequently prevailed at trial. The Ninth Circuit reversed the judgment in favor of the general counsel as to his SOX claims because his reporting of alleged FCPA violations was not protected activity under SOX.  The Court found that SOX only protects employees who report violations of specific statutes, of which FCPA is not one.  The district court had ruled that FCPA fell into the category of “any rule or regulation of the Securities and Exchange Commission,” which is identified in SOX, because FCPA is an amendment of and codified in the Securities and Exchange Act and is enforced by the SEC.  But, the Ninth Circuit held that under plain meaning construction of SOX, an SEC “rule or regulation” encompassed only administrative rules or regulations and not a statute like FCPA.  The Ninth Circuit also rejected the general counsel’s argument that the remedial purpose of SOX – i.e., to clamp down on corporate misconduct – required a broader interpretation of what constituted protected activity. Since Section 806 of SOX was enacted in 2002, federal courts have generally adopted expansive interpretations of the scope of protected activities. This Ninth Circuit decision is one of several recent federal decisions which instead limit protected activities to complaints concerning the specific statutes, rules, and regulations enumerated in SOX.Stay tuned to Polsinelli at Work for further updates.

Employers may choose to implement arbitration programs to manage the costs and risks of employment-related litigation. Arbitration may minimize negative publicity, and may further assist employers to keep costs low and reduce the availability of class or collective actions. A recent District of Columbia federal court decision shows how implementing a workplace arbitration program can be tricky.  In Jin v. Parsons Corp., 2019 WL 356902 (D.D.C. Jan. 29, 2019), the employer instituted a mandatory arbitration program, and e-mailed all of its employees to ask them to acknowledge receiving the arbitration agreement. The e-mail stated that if the employee did not sign the agreement, continuing employment with the employer would constitute acceptance of the arbitration agreement’s terms. The employer sent the plaintiff employee this e-mail and three follow-up reminders, but he never responded.  Thereafter, the employee sued the employer, alleging age discrimination, and claimed he had never read the e-mails or agreed to arbitrate his claims. The court refused to send the case to arbitration, finding that while a signed arbitration agreement is not necessarily required, the employer needed to offer some evidence that the employee had agreed to arbitrate his claims.  Mere continuing employment was not sufficient evidence of such an agreement where the employer could not prove that the employee knew that his agreement to arbitrate was a condition of employment.  In that situation, the court reasoned, the employee’s failure to dispute the agreement to arbitrate could be explained by his testimony that he did not know that such an agreement even existed. The Jin case highlights some of the challenges employers face when implementing arbitration programs.  The employer tried to implement its program by sending an e-mail and claiming that lack of action would constitute an agreement to arbitrate any claims against the employer.  However, avoiding confronting the employee about his failure to sign the arbitration agreement left the employer without the evidence of consent it needed to enforce the agreement. Implementing a workplace arbitration program can be tricky to get right. Employers with questions regarding arbitration policies – and the risks and benefits associated therewith – would do well to consult with competent counsel.

There is a growing trend to use biometric data for business purposes.  For employers, this often includes using fingerprints or facial recognition software for employees to clock-in and out.  Using an employee’s unique biometric data in this way helps reduce common problems, like one employee clocking-in for another.  However, it is not a panacea, as many states have begun to place restrictions on the use of biometric information.  Illinois is one of those states, and its Supreme Court just issued an opinion that should make all employers sit up and take notice. The Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/1 et seq., places restrictions on the collection of “biometric identifiers,” which includes retina or iris scans, fingerprints, voiceprints, scans o hand or face geometry, or biometric information.  These restrictions extend to employers, and require specific compliance steps, including: Notice and Consent. BIPA prohibits any private entity, including employers, from collecting, capturing, purchasing, or otherwise obtaining a person’s biometric identifiers or information without (i) informing the person in writing of the collection or storage (including the specific purpose and length of term for which a biometric identifier or biometric information is being collected, stored, and used); and (ii) obtaining a written release from the person to do so. 740 ILCS 14/15(b). Written Retention & Destruction Policy.  A private entity in possession of biometric identifiers or biometric information must develop a written policy, made available to the public, establishing a retention schedule and guidelines for permanently destroying biometric identifiers and biometric information when the initial purpose for collecting or obtaining such identifiers or information has been satisfied or within 3 years of the individual’s last interaction with the private entity, whichever occurs first. Absent a valid warrant or subpoena issued by a court of competent jurisdiction, a private entity in possession of biometric identifiers or biometric information must comply with its established retention schedule and destruction guidelines.  740 ILCS 14/15(a). Prohibition on Disclosure or Redisclosure. BIPA prohibits any private entity in possession of biometric identifiers or information from disclosing, redisclosing or otherwise  disseminating such information unless (i) the person consents to the disclosure or redisclosure; (ii) the disclosure or redisclosure completes a financial transaction requested or authorized by the person; (iii) the disclosure is required by state or federal law or municipal ordinance; or (iv) the disclosure is required pursuant to a valid warrant or subpoena issued by a court of competent jurisdiction.  740 ILCS 14/15(d). Safeguarding. BIPA requires any private entity in possession of biometric identifiers or information to “store, transmit, and protect from disclosure all biometric identifiers and biometric information using the reasonable standard of care within the private entity’s industry,” which must be at least “the same as or more protective than the manner in which the private entity stores, transmits, and protects other confidential and sensitive information.” 740 ILCS 14/15(e). The failure to comply with BIPA creates a private right of action for the “aggrieved” party that, if successful, can result in monetary damages, attorneys’ fees and costs, and injunctive relief.  In evaluating what it meant to be “aggrieved” under BIPA in Rosenbach v. Six Flags Entertainment Corp., the Illinois Appellate Court held that while the “injury or adverse effect need not be pecuniary…it must be more than a technical violation of the Act.”  The Illinois Supreme Court disagreed. In Rosenbach, the plaintiff was required to submit a thumbprint in order to utilize a season pass and alleged that Six Flags collected and used that thumbprint without complying with BIPA’s requirements.  While there was no evidence that the plaintiff’s thumbprint had been improperly used or disclosed, the Illinois Supreme Court nevertheless held that the plaintiff qualified as an aggrieved party under the statute because his legal right was “invaded by the act complained of.” In other words, a technical violation of BIPA entitles a plaintiff to the remedies available under the statute, including the lesser of liquidated or actual damages.  BIPA provides for liquidated damages of $1,000 for negligent violations and $5,000 for intentional or reckless damages.  Given that violations of BIPA are likely to by systemic, claims under the statute lend themselves to class actions.  Consequently, any employer with Illinois employees using biometric data should audit its procedures to ensure BIPA compliance.

In New Prime Inc. v. Oliveira, -- U.S. – (2019), the Supreme Court made two primary holdings: First, notwithstanding its recent decision affirming the ability of parties to an arbitration agreement to delegate issues of arbitrability to an arbitrator through contractual agreement, there are still limits on that ability.  Second, the Federal Arbitration Act’s (FAA) “transportation” exception applies to transportation workers, regardless of their classification as employees or independent contractors.  As such, employers should be wary of relying on form arbitration agreements and the FAA to default disputes with transportation workers to arbitration. New Prime is an interstate trucking company that entered into an operating agreement with truck driver Oliveira.  The operating agreement classified Oliveira as an independent contractor and contained a mandatory arbitration provision whereby the parties agreed that any disputes arising out of the parties’ relationship, including disputes over the scope of the arbitrator’s authority, should be resolved by an arbitrator.  Oliveira believed that he and other drivers were employees entitled to minimum wage, and, thus, the arbitration provision could not be enforced because they were covered by the FAA’s “transportation” worker exception.  New Prime argued that, due to the parties’ delegation of gateway issues to an arbitrator, an arbitrator should decide whether the “transportation” exception applies, and that it should not apply because it applies only to employees, not independent contractors like Oliveira. The Court first held that before it can use the FAA’s power to enforce a contractual agreement of the parties to delegate issues of arbitrability (also called “gateway” questions) to an arbitrator, the Court (not an arbitrator) must decide whether the FAA applies to the contract at all.  Thus, the Court was required to consider whether Oliveira falls into the FAA’s “transportation” worker exception.  This holding is not inconsistent with the Supreme Court’s decision last week in Henry Schein Inc. v Archer & White Sales, Inc., which reaffirmed the right of parties to delegate gateway questions to an arbitrator. The Court next decided whether Oliveira, who very well might be an independent contractor, falls into the “transportation” exception.  The “transportation” exception provides that “nothing” in the FAA “shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  The parties did not dispute that Oliveira was a “worker[] engaged in . . . interstate commerce,” leaving the Court to decide the term “contracts of employment.”  After reviewing the plain meaning and usage of the word when the FAA was enacted in 1925, the Court concluded that at that time it usually meant “nothing more than an agreement to perform work,” and held that the FAA’s transportation worker exception applies to employees and independent contractors. While the trend of court decisions has favored enforcement of arbitration agreements, employers cannot assume that delegation provisions in arbitration agreements will immediately remove an arbitration dispute from a court to an arbitration proceeding under the FAA.  For classes of workers excluded from the FAA, like employee and contract truck drivers, it will not.  Employers should seek counsel to help maximize the enforceability of arbitration agreements under the FAA, if applicable.  Such agreements must evidence a transaction involving commerce and not trigger an exception to the FAA.  Alternatively, employers may be able to use state arbitration laws or state contract common law to help funnel disputes to arbitration.

On December 7, 2018, the U.S. Eighth Circuit Court of Appeals held that an employee who was terminated for refusing to take a rubella vaccine was not discriminated or retaliated against, under the Americans with Disabilities Act, as amended (“ADA”).  See Hustvet v. Allina Health System, Case No. 17-2963. In this case, Janet Hustvet worked as an Independent Living Skills Specialist. In May 2013, Hustvet completed a health assessment, during which she stated she did not know whether she was immunized for rubella.  Subsequent testing confirmed she was not.  Her employer -- Allina Health Systems -- then told Hustvet she would need to take one dose of the Measles, Mumps, Rubella vaccine (“MMR vaccine”).  Hustvet stated to an Allina representative that she was concerned about the MMR vaccine because she had previously had a severe case of mumps and had “many allergies and chemical sensitivities.”  Later, Hustvet refused to take the MMR vaccine, and was terminated for failure to comply with Allina’s immunity requirements.  Hustvet then sued Allina, alleging discrimination, unlawful inquiry, and retaliation claims under the ADA and Minnesota state law.  The district court granted Allina’s motion for summary judgment, and Hustvet appealed. On appeal, the Eighth Circuit first addressed Hustvet’s unlawful inquiry claim; specifically, Hustvet alleged that Allina violated the ADA when it required her to complete a health screen as a condition of employment.  When affirming the district court’s grant of summary judgment, the court explained that the information requested and the medical exam, which tested for immunity to infectious diseases, were related to essential, job related abilities.  Indeed, Allina sought to ensure their patient-care providers would not pose a risk of spreading certain diseases – such as rubella – to its client base.  Thus, the inquiry was job-related and consistent with business necessity. The court then did away with Hustvet’s discrimination claim based upon failure to accommodate because Hustvet was not disabled and, thus, she could not state a prima facie case of disability discrimination. There was simply no record evidence to support the conclusion that Hustvet’s purported “chemical sensitivities” or allergies substantially limited any of Hustvet’s major life activities. She was never hospitalized due to an allergic or chemical reaction, never saw an allergy specialist, and was never prescribed an EpiPen.  Rather, Hustvet suffered from “garden-variety allergies,” which was not enough to conclude she was disabled. Finally, the court affirmed the district court’s grant of summary judgment regarding Hustvet’s retaliation claim. In pertinent part, the court reasoned that Hustvet could not show that Allina’s proffered reason for terminating her employment – her refusal to take an MMR vaccine – was a pretext for discrimination.  The record evidence demonstrated that Allina terminated Hustvet’s employment because her job required her to work with potentially vulnerable patient populations, and she refused to become immunized to rubella, an infectious disease. This decision comes as welcome news to employers that provide health care-related services, and confirms that health care providers may condition employment upon taking certain vaccinations, so long as the vaccination is job-related and consistent with business necessity.  Employers with questions regarding implementing or enforcing such policies would do well to consult with able counsel.

Earlier this year, the U.S. Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) issued new guidance and rules pertaining to retirement plans.  Now is a good time for employers to audit their plans to ensure compliance with applicable laws and, if not, to take corrective action. On April 1, 2018, the DOL’s final regulations updating the Employee Retirement Income Security Act’s (“ERISA”) claim and appeal requirements for disability-related benefit determinations went into effect. Importantly, the new rules apply to any retirement plan – including a 401(k) plan – that makes a determination of disability.  Employers that sponsor a retirement plan should ensure that their plan documents have been updated by the end of this plan year (December 31, 2018 for calendar year plans) to reflect these new disability-related claims procedures. Additionally, the IRS, through the EP Team Audit (“EPTA”) Program, issued helpful guidance regarding the “Top Ten” issues found in EPTA Audits, which are: 1.       Termination of Partial Termination – Potential Vesting/Distribution Issues 2.       Acquisitions 3.       Deferral Percentage Tests 4.       Compensation 5.       Plan Document 6.       Vesting 7.       Distributions and Loans 8.       Assets 9.       Limits 10.   Miscellaneous This “Top Ten” list telegraphs to employers which issues the IRS would likely focus on during an EPTA audit.  Thus, employers would do well to conduct self-audits on their plans to determine whether they are in compliance and avoid potential penalties. The IRS also updated its Employee Plans Compliance Resolution System (“EPCRS”) effective January 1, 2019. Although there are no significant changes to the Self-Correction Program or the Audit Closing Agreement Program, the updated system will require, beginning April 1, 2019, that all Voluntary Correction Program (“VCP”) submissions and payments be made electronically (there will be a three month transition period from January 1, 2019 – March 31, 2019 where online submissions and payments will be optional, but not mandatory).  Employers should review their fiduciary insurance policies to ensure they include attorney and filing fees associated with any and all corrections, and should file a claim should errors requiring a correction filing be uncovered. Employers with questions regarding the above issues would do well to consult with competent counsel.

Recently, a hospital was sued for negligent hiring after one of its surgical technicians exchanged a vial of saline solution for a vial of painkiller before a surgery was set to commence.  The surgical technician was caught and promptly fired, and turned over to law enforcement authorities.  However, a subsequent investigation revealed that the surgical technician had a history of drug diversion at his former jobs that had gone undiscovered, despite the fact that the hospital hired a background check company to perform a pre-hire check.  What can companies do to minimize the risk of hiring unqualified workers?  Below, we outline the reasons employers should consider adopting a pre-employment background check process. There are a number of reasons for employers to develop an effective pre-employment background screening process.  The most basic reason is that it is just good business; reduced employee turnover from hiring the right person will likely save the employer money and time.  In the United States, the median length of time U.S. workers stayed with their employer was estimated to be 4.2 years, down from 4.7 years in 2014 and 4.3 years in 2015.  Robust hiring practices can help reverse this trend. The indirect costs to employers of replacing employees, such as 1) the loss of institutional knowledge that comes with a revolving work force; 2) increased training and ramp-up time; and 3) the damage caused to valuable customer relationships because of employee inexperience  can be even higher.  Higher quality candidates – procured through a robust screening process – can result in the delivery of higher quality products and service. Moreover, the failure to implement an effective system for pre-employment screening can lead to legal exposure.  What can employers do to minimize these costs and risks?  Key elements of a robust pre-employment background screening system often include: Verifying a candidate’s stated previous employment; Verifying a candidate’s stated education and credentials; Checking whether a candidate was arrested or convicted for a felony or misdemeanor; Verifying a candidate’s stated military records, if appropriate; Reviewing available credit reports. Also, consider whether to review a candidate’s social media profile. Employers with questions regarding implementing or conducting background screenings of potential new-hires would do well to consult with competent counsel.

Employers may face risks of departing employees, particularly involuntarily terminated employees, taking the employer’s confidential information or trade secrets with them when they leave.  Putting aside  the employee’s motivation—a desire to compete, spite, or something else entirely—employers should consider protective measures to limit, if not completely cut off, an employee’s access to confidential information and trade secrets attendant to termination of employment. Here are four best practices to limiting an employee’s access to confidential information and trade secrets proximate to termination of employment: 1.  Cut off the employee’s access to Company computer systems during, but not before, the termination meeting.  Use the element of surprise to the Company’s defensive advantage.   An employee who notices that access to Company computer systems has been cut off may sense the impending termination and take efforts to obtain conceal, access, or destroy Company confidential information in paper form or on electronic media. 2.  Remind the employee of all post-employment confidentiality obligations and restrictive covenants during the termination meeting.  The termination meeting may be the last point of direct communication between a departing employee and the employer.  Whether or not the employee heeds the warnings given, the Company is in a better position to enforce its rights having given the departing employee notice of the employee’s obligations, and a paper copy of any applicable agreements. 3.  Gather all Company devices from the departing employee as soon as possible.  The longer the departing employee has access to Company devices, the more likely the devices (and any confidential or proprietary data thereon) will become lost or compromised.  The employee should be given a deadline by which devices at the employee’s home or elsewhere outside the workplace should be returned to the Company. 4.  Consider financial incentives for departing employee compliance.  Employers may condition severance pay, if offered to the departing employee, upon the return of all Company confidential information and devices.   Likewise, in some but not all states, employers may implement policies that condition payout of accrued and unused vacation upon prompt surrender of Company devices and compliance with post-employment confidentiality obligations.

Employers should be able to definitively identify their “trade secrets” and non-public information.  Indeed, employers may miss out on opportunities for relief from misappropriation of their trade secrets by former employees and competitors if they do not take time to specifically identify and understand their trade secrets.  Before an employer can effectively protect against the theft, disclosure, and misuse of its trade secrets, it must first clearly understand what is—and what is not—a trade secret.  Once the trade secrets are identified, employers should take careful steps to protect trade secrets and confidential information from competitors, as well as departing employees. What are trade secrets? To begin, anything that gives an employer a competitive advantage may be a trade secret.  Trade secrets are a subset of an employer’s confidential information, and can include information about customers or clients, business methods, pricing data, machinery, marketing strategies, techniques, formulas, processes, or virtually anything else that is secret, unique,  and valuable to the employer.  Considered this way, every employer inevitably has some potential trade secrets. Another way to recognize possible trade secrets is by evaluating who has access to the information.  For example, if the information is subject to measures to maintain its secrecy, such as limited physical or electronic access, it may be a trade secret.  Alternatively, if the employer uses contracts with its employees and business partners to protect the confidentiality and limit the disclosure of the information, said information may very well be a trade secret, too. What qualifies as a trade secret? To qualify as a trade secret, the information must generally 1) be subject to measures to maintain its secrecy and 2) derive independent value from being secret.  If the trade secret is not sufficiently protected or becomes public -- even inadvertently -- it could lose its status as a trade secret, decreasing its worth to the employer.  But an employer cannot realistically be expected to adequately protect its trade secrets if it does not first know what it must protect.  That is why it is so important for employers to regularly audit their trade secrets and update their protective measures, as needed. Employer takeaways Departing employees with access to trade secrets pose a significant threat to an employer’s trade secret security, thus necessitating a consistently-enforced protocol to off-board those employees and ensure compliance with any continuing post-employment obligations owed to the employer.  However, upon discovering that a departed employee may be misappropriating trade secrets, courts expect swift action from the employer to protect its assets—including, early, specific identification of exactly what the employer considers as its stolen trade secrets. With proper planning, including routine auditing of its trade secrets and protective measures, an employer can position itself for greater success if it chooses to pursue relief for the theft in court.  Employers with questions regarding trade secret identification or protection should consult with competent counsel.

Today, the United States Supreme Court ruled unions cannot compel public employees they represent but who are not members to pay “agency fees,” which cover the cost of collective bargaining and processing grievances.  In Janus v. American Federation of State, County, and Municipal Employees, Council 31, No. 16-1466, the Court overruled its 1977 decision that permitted unions to extract agency fees from non-consenting, non-member employees they represented. In Janus,Illinois law allowed unions to require represented employees to choose either to become dues-paying union members or be non-members and pay an “agency fee” to cover collective bargaining and other related costs. The plaintiff in Janus refused to join the union because he opposed some of its policy positions.  However, under the collective-bargaining agreement, he was still required to pay an “agency fee” of approximately $535 per year.  He filed a lawsuit challenging the Illinois law, claiming that it violated the First Amendment.  The trial court and the United States Seventh Circuit Court of Appeals rejected his argument based on the Supreme Court’s prior decision in Abood v. Detroit Board of Education, 431 U.S. 209 (1977), which found such public-sector agency-fee arrangements were permissible.  The Supreme Court granted certiorari to consider whether to overrule Abood on First Amendment grounds. In its 5-4 decision, the Janus Court observed that compelled subsidization of private speech “seriously impinges” on an individual’s First Amendment rights.  The Court noted that recent cases had applied “exacting” scrutiny when judging the constitutionality of agency fees.  Under that standard, a compelled subsidy must serve a compelling state interest that cannot be achieved through means significantly less restrictive of associational freedoms.  The Court found the two justifications adopted by the Court in Abood– labor peace and the risk of free riders – failed to meet such scrutiny. The Court presumed that labor peace – the avoidance of conflict and disruption that would occur if employees in a unit were represented by multiple unions – was a compelling state interest, but determined that the fear of pandemonium was imagined.  In the Court’s view, labor peace could be readily achieved through less restrictive means than the assessment of agency fees.  The Court concluded that avoiding free riders was not a compelling interest and could not overcome a First Amendment objection.  Accordingly, the Court found that neither of these grounds articulated in Abood justified an infringement on agency fee payers’ free speech rights. The implications of the Court’s decision are significant.  Unions that represent public employees will see reduced revenue from employees who stop paying agency fees, and possibly from dues-paying employees who resign their memberships when they are able to do so.  To replace the lost revenue, unions may seek to reduce operating costs through layoffs or other means, or reduce their political spending regarding issues in local, state, or national elections.  Unions may also embark on aggressive organizing campaigns to add dues-paying members to replace lost revenue. At least for the near term, unions that represent public-sector employees are likely to face financial and operational headwinds as a result of the Janus decision.

If an employer is being audited by the US Department of Labor (DOL), there are several steps the employer can take to proactively prepare for and ultimately defend its practices: 1. Review immediately and react to the audit request. Carefully review the DOL’s audit request and promptly advise management and legal counsel. In certain circumstances, the employer may work with the auditor regarding scheduling the date(s) of the audit. 2. Provide responsive existing documents; check your employee rights posters.  Work with legal counsel to provide documents responsive to the auditor’s request for information.  Note employers are not required to specially create new documents for an audit.  Prior to the visit by the DOL, ensure applicable employee rights posters are displayed, including Family and Medical Leave Act (“FMLA”) rights (if the FMLA applies to your business). 3.  Expect employees to be interviewed.  Determine whether the auditor will request employee interviews.  Auditors may interview employees regarding a host of issues, including, but not limited to, exempt/non-exempt status, overtime pay, payroll scheduling, child labor, travel time, on-call time, PTO, training time, volunteer time, wage deductions, and FMLA practices (where applicable). During interviews, employees are often asked to describe their regular daily duties. Note an employee’s own description of his/her work duties is generally determinative regarding any Fair Labor Standards Act (“FLSA”) exemptions. 4.  Beware Protected Health Information. Ensure any protected health information (“PHI”), including medical records, remains separate from employees’ general personnel files.  Note employers must retain certain FMLA documentation including, but not limited to, any records of disputes between the employer and employee about FMLA-related issues. 5.  Protection of Commercial and/or Proprietary Information. Trade secret information may need to be protected or redacted (and marked as redacted).  In other situations, it may be possible to mark documents as “Business Confidential” or “Proprietary/Privileged.” 6. Expect DOL Follow-up.  Often, an auditor will conduct follow-up interviews or request additional information from the employer.  The DOL may also conduct a debriefing discussion with the employer regarding any legal issues that may exist and whether any penalties or back wages may be due.

Employers face a host of compliance challenges under state and federal law when an employee suffers a workplace injury.  As we recently reported, employers must consider the legal implications of the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA) when litigating workers’ compensation claims.  Employers should also be cognizant of their obligations under the Occupational Health and Safety Act (OSHA) and the Genetic Information Nondiscrimination Act (GINA). Workers’ Compensation and the FMLA Generally, state workers’ compensation laws require the provision of benefits to employees who sustain relatively minor, temporary job-related injuries as well as for permanently disabling serious injuries.  Additionally, the FMLA provides eligible employees with up to twelve weeks of unpaid, job-protected leave per year.  Eligible employees may take leave under the FMLA to care for a spouse, child or parent who has a serious health condition or because of their own serious health condition.  Under the FMLA, a “serious health condition” includes an illness, injury, impairment, and physical or mental condition involving inpatient care in a hospital, hospice, or residential medical care facility or continuing treatment by a health care provider.  Thus, a workplace injury or illness that qualifies as a serious health condition may entitle an eligible employee to FMLA leave. Workers’ Compensation and the ADA The ADA prohibits employers from discriminating against qualified individuals because of their disability.  The ADA defines a disability as (1) a physical or mental impairment that substantially limits a major life activity, (2) a record of such an impairment, or (3) being regarded as having such an impairment.  If an employee suffers a workplace injury that qualifies as a serious health condition and meets the ADA’s definition of an individual with a disability, the ADA, FMLA, and state workers’ compensation laws are implicated, and the employee could be entitled to job-protected leave and may also require a workplace accommodation. OSHA and GINA OSHA requires employers to provide a safe and healthful workplace to employees.  Among other obligations, OSHA requires employers to timely report and keep records of work-related injuries and illnesses.  In addition, employers are prohibited from discharging, retaliating or discriminating against any employee because the employee has exercised rights under OSHA. Finally, GINA prohibits employers from discriminating on the basis of genetic information.  Among other obligations, GINA requires employers who seek medical certifications in support of leave or accommodation requests- including FMLA leave- to affirmatively notify employees of GINA’s limitations on requests for genetic information. In light of the interplay between state workers’ compensation laws, the FMLA, ADA, OSHA, and GINA, employers should pro-actively evaluate and manage their workers’ compensation, FMLA, and ADA issues concurrently at the time of an employee’s injury, while an employee is on leave due to a workplace injury or illness, and after an employee has exhausted any leave or workers’ compensation benefits to ensure compliance with OSHA and GINA.

On April 30, 2018, the California Supreme Court adopted a new test to establish independent contractor status pursuant to the California Industrial Wage Orders.  In Dynamex Operations W. v. Superior Court, 2018 WL 1999120 (Cal. Apr. 30, 2018), the court held that “the suffer or permit to work standard [in the California Wage Orders] properly applies to the question of whether a worker should be considered an employee or … an independent contractor[.]”  The court determined that the burden of proof in such a case is on the company to establish that the worker is an independent contractor.  In addition, to meet its burden, the company must establish each of the three factors in the “ABC test.” The New “ABC” Test Unlike the traditional multi-factor balancing test that courts have used for decades when analyzing independent contractor classifications, an individual will be considered an employee under the ABC test unless  the hiring entity can satisfy all  three prongs: (A)  Right to Control The first prong of the ABC test is the traditional “right to control” standard.  A worker will be classified as an employee if “either as a matter of contractual right or in actual practice” s/he is subject to “the type and degree of control a business typically exercises over employees.” (B)  Work Performed Outside Scope of Employer’s Business To satisfy the second prong, the hiring entity must show that the individual’s work is outside the scope of the hiring entity’s usual business.  To clarify this standard, the court provided the following examples: [O]n the one hand, when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store’s usual course of business and the store would not reasonably be seen as having suffered or permitted the plumber or electrician to provide services to it as an employee. On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will thereafter be sold by the company … the workers are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees. Entities in related industries should closely watch developments in this area for guidance on the application of the Dynamex decision and its impact on the classification of workers. (C)  Worker is Engaged In Independent Business To satisfy the third prong, the hiring entity must show that the worker is engaged in an independently established business.  Evidence that a worker is engaged in an independent business includes “incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential customers, and the like.” Impact on Employers Dynamex has changed the playing field regarding the classification of independent contractors in California.  A company that classifies workers as independent contractors and are   central to day-to-day operations of the business should be particularly concerned about this decision, as it may affect the viability of the classification within the business model. All California companies that utilize independent contractors should revisit their contractual arrangements and day-to-day business operations to evaluate the impact of Dynamex.

The Ninth Circuit Court of Appeals recently considered the United States Supreme Court’s landmark 2016 decision in Spokeo, Inc. v. Robins. Spokeo provided employers some hope in the area of litigation of background checks when it hinted that “harmless” technical violations of the Fair Credit Report Act’s (FCRA) procedures might not satisfy Article III of the Constitution’s requirement that a plaintiff suffers a “concrete” injury. Spokeo and its aftereffects, covered at length in a May 2016 blog post and a November update, remains in front of the Ninth Circuit on remand. The Ninth Circuit must now determine whether Thomas Robins suffered a “concrete” injury or a mere “bare procedural violation” when Spokeo disseminated incorrect information about him on the internet. Plaintiffs’ attorneys are no doubt hoping that the Ninth Circuit tipped its hand with a series of rulings in another FCRA case, Syed v. M-I, LLC. TheSyed decision, discussed here, appeared to hold that the defendant employer M-I engaged in a “willful” FCRA violation by including a release of liability in its pre-employment “disclosure and authorization” form. As to a “concrete injury,” Syed merely alleged that he was harmed when “he “discovered Defendant M-I’s violation(s)…[i.e. that] M-I had procured…a ‘consumer report’ regarding him for employment purposes based on the illegal disclosure and authorization form.” Weeks after the opinion was rendered, M-I filed a Petition for Rehearing, arguing that Syed “pled no real-world injury aside from a technical violation of the act,” and claiming that“[t]he panel repeated the mistake this Court made in Spokeo, dispensing with one of the irreducible requirements of Article III standing” (i.e., a “concrete injury”). In response, the Court denied the Petition for Rehearing and instead proffered an Order and Amended Opinion. The Court’s Order and Amended Opinion seemed to agree with Plaintiff’s Petition for Rehearing. Indeed, the most prominent addition to the Order and Amended Opinion was a new paragraph analyzing the “concrete injury.” Nonetheless, the Order and Amended Opinion reached the same conclusion as the original: Syed had Article III standing to move forward with his lawsuit based merely on being “deprived of the right to information and the right to privacy” when he signed the noncompliant form. If the tone of recent filings in Spokeo and Syedare any indication, the Supreme Court may soon be asked to clarify the analysis it delivered in Spokeo the first time around.

On February 8, 2018, the U.S. District Court for the Northern District of California ruled that meal delivery drivers working for GrubHub, Inc. are properly classified as independent contractors and not employees. This closely watched case provides “gig economy” companies with a trial decision and (at least temporary) guidance regarding how to classify certain workers. The Court’s decision relies on California’s multi-factor “Borello test” for determining whether workers are independent contractors. In this case the Court found that “Grubhub’s lack of all necessary control over [Plaintiff’s] work, including how he performed deliveries and even whether or for how long [he worked], along with other factors [such as providing his own vehicle and working for other companies]” was enough to tip the balance in favor of concluding that Plaintiff is properly classified as an independent contractor. Accordingly, Plaintiff is not entitled to minimum wage, overtime, expense reimbursement, worker’s compensation benefits, or other benefits of employment.  Consequently, he also could not prevail on his claims against GrubHub for violations of the California Labor Code or the California Private Attorneys General Act (PAGA). The watershed ruling provides at least temporary reassurance to gig economy companies in California that classify certain workers as independent contractors.  This relief could be short-lived, however, as the California Supreme Court recently heard oral argument in Dynamex Operations West Inc. v. Superior Court, which also addresses worker classification. The California Supreme Court is expected to decide whether the Borello test is the proper mechanism to determine whether a given worker has been correctly classified as an independent contractor, or whether the more rigorous “suffer and permit” test drawn from the California Industrial Welfare Commission wage orders (or another test entirely) should apply. We expect the California Supreme Court’s opinion to be issued in the next 90 days. Misclassification of employees remains an issue of great concern to both the California Industrial Welfare Commission and the U.S. Department of Labor. Employers with questions regarding whether a worker is properly classified would do well to work with counsel to avoid legal liability associated with misclassifying its workforce.  We will continue to follow this issue closely, so stay tuned for further updates. The Federal Court case is Lawson v. GrubHub, Inc., Case No. 15-cv-05128 (N.D. Cal.). The California Supreme Court case is Dynamex Operations West Inc., v. Superior Court, Case No. S222732.

Following last year’s trend, the Office of Federal Contract Compliance Programs’ (“OFCCP” or “Agency”) website indicates that February 1, 2018, the Agency mailed 1,000 Corporate Scheduling Announcement Letters (“CSALs”). The CSALs do not commence an audit – only a scheduling letter can do that – but they provide an advance courtesy notice that an organization has been identified by the Agency and may receive a scheduling letter for an audit. What does this mean? Organizations that receive CSALs should take the extra time provided to ensure their affirmative action programs and supporting documents are up to date and fully compliant. Organizations should also review their adverse impact data and any potential pay disparities. The CSALs have once again been sent directly to the attention of the Human Resources Director; therefore, it is important to alert HR representatives to watch for the letters. Take note, CSALs are not required by law prior to the issuance of a scheduling letter for an audit, which means federal contractors and subcontractors that do not receive a CSAL may still be scheduled for an audit. Whether an organization receives a CSAL or not, contractors can still receive scheduling letters, which the OFCCP’s website notes will be issued on March 19, 2018.  As a reminder, once an organization receives a scheduling letter, there are only 30 days to respond with the initial submission. Shifting from past practices, the OFCCP will limit audits in 2018 to: No more than 10 establishments of a single contractor placed on the scheduling list; No more than four establishments of a single contractor placed on the scheduling list for a single district office; and No establishment with an audit closed in the last five years is placed on the scheduling list. The OFCCP has not indicated which industries will be targeted, as it has done in past years. Polsinelli will continue to monitor developments and will provide updates as they become available. In the event your organization received a CSAL, we recommend you contact counsel immediately.

The U.S. Department of Transportation’s (“DOT”) new Final Rule modifying DOT regulation 49 CFR Part 40 (“Final Rule”) became effective January 1, 2018.  Specifically, the Final Rule affects employers of employees in safety sensitive positions, and includes changes to the types of drugs for which employers can test, as well as the manner in which employers submit specimens for testing. Changes to Drug Testing Panel The Final Rule modifies the drug testing panel to include testing for semi-synthetic opioids (i.e., hydrocodone, oxycodone, hydromorphone, and oxymorphone). In addition, the Final Rule 1) changed the name of the category of drugs to be tested from “opiates” to “opioids;” 2) removed testing for methylenedioxyethylamphetaime (MDEA); and 3) added testing for methylenedioxyamphetamine (MDA).  Now, the drugs for which employers must test employees subject to the Final Rule include marijuana, cocaine, amphetamines, phencyclidine, and opioids. Changes to Specimen Collection Employers and Consortium/Third Party Administrators are no longer required to submit blind specimens to laboratories. Under the prior regulation, an employer sent a blind specimen to a laboratory, accompanied by a Federal Drug Testing Custody and Control Form, with a fictitious donor name for quality control purposes to see whether the laboratory’s results matched the known contents of that particular blind specimen. Because no false positive results have been found in the last 25 years of drug testing through testing blind specimens, the DOT removed the blind specimen testing requirement. Other Notable Changes The Final Rule additionally changed Medical Review Officer (MRO) practices. In particular, a “prescription” is now defined as a legally valid prescription consistent with the Controlled Substances Act (CSA). This is a significant change: the CSA classifies marijuana as a Schedule I drug, so a prescription for medical marijuana under state law does not qualify as a legally valid prescription for DOT drug testing purposes. Furthermore, the Final Rule modifies the timing regarding when a MRO must communicate to a third party that the MRO considers an employee may be medically unqualified for their position or may pose a significant safety risk when performing a safety sensitive function.  Specifically, if an MRO determines that a legally prescribed medication may make the employee medically unqualified or cause him/her to pose a significant safety risk, the MRO must provide the employee with up to five business days to have his/her physician contact the MRO to discuss whether the medications can be changed to either a prescription that does not make the employee medically unqualified or a prescription that does not pose a significant risk before the MRO may report a safety concern to a third party, including the employer. Employers would do well to examine their DOT drug testing procedures to ensure compliance, and may do so with the assistance of able counsel.

The U.S. Department of Labor ( “DOL”) recently announced that it is abandoning its six-factor test and will use the “primary beneficiary” test first enunciated by the 2nd Circuit in Glatt et al. v. Fox Searchlight Pictures, Inc. et al., 811 F.3d 528 (2d Cir. 2015)   The DOL stated the primary beneficiary test “eliminate[s]unnecessary confusion among the regulated community” and will provide DOL’s investigators increased flexibility to “holistically analyze internships on a case-by-case basis. The DOL’s website provides a Fact Sheet that identifies seven factors employers should consider when determining whether an intern is an employee: The extent to which the intern and the employer clearly understand that there is no expectation of compensation, and any promise of compensation, express or implied, suggests that the intern is an employee. The extent to which the internship provides training that would be similar to that which would  be given in an educational environment, including  the clinical and other hands-on training provided by educational institutions. The extent to which the internship is tied to the intern’s formal education program by integrated course work or the receipt of academic credit. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic year. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern. The extent to which the intern and the employer understand that the internship is conducted without an entitlement to a paid job at the conclusion of the internship. When applying the new test, employers should keep in mind that no single factor is decisive.  Each analysis should apply all seven factors to the facts and circumstances of each internship. The DOL’s decision to adopt the primary beneficiary test comes as welcome news for employers.  Specifically, the primary beneficiary test seems to allow employers to utilize interns to the extent the intern understands the internship will not be paid, is conducted without a guarantee of a paid job at its conclusion, and provides hands-on training, among other things.  When considering bringing on an intern, an employer would do well to define the parameters of the internship in writing, and should further consider putting to writing an agreement with the intern reflecting the unpaid nature of the internship.

Employers take note: a provision contained in the recently-passed Tax Cuts and Jobs Act of 2017 (the “Act”) now limits tax deductions for certain types of settlement agreements. Specifically, Section 13307 of the Act, styled “Denial Of Deduction For Settlements Subject To Nondisclosure Agreements Paid In Connection With Sexual Harassment Or Sexual Abuse,” (“Section 13307”) prohibits employers from taking income tax deductions for: Any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement; or Attorney’s fees related to such settlements. Previously, when the parties in a dispute involving allegations of sexual harassment or misconduct settled those claims, they agreed to a nondisclosure provision in the settlement agreement. In other words, both parties would be prohibited from disclosing the terms and amount of the settlement (with corresponding penalties resulting from any violation of the provision). The nondisclosure provision did not affect whether any monies paid pursuant to the terms of the settlement agreement were tax-deductible. Now, however, if a settlement agreement subject to Section 13307 of the Act contains a nondisclosure provision, then the parties to the settlement agreement may not take a tax deduction for the amount of the settlement or any corresponding attorneys’ fees. Another potential problem that employers may face relates to settlements that resolve multiple claims. Indeed, instances arise where employees and employers settle matters that resolve sexual harassment claims and non-sexual harassment claims in one fell swoop. Section 13307 does not define the terms “related to sexual harassment or sexual abuse” so careful drafting of the settlement agreement and/or ancillary agreements is recommended to maximize opportunities to deduct payments that are not subject to Section 13307. Furthermore, a portion of attorney’s fees attributable to non-Section 13307 claims may also be deductible. Stated simply, the scope and breadth of Section 13307 remains murky, and it will take time before clear answers to the above-listed questions emerge. Thus, employers defending against allegations of misconduct covered by Section 13307 would do well to discuss the implications of settling such claims with competent counsel.

Employers across the country should think twice before asking job applicants about their salary history. As we reported earlier this year,  a number of state legislatures (and some local governments) considered legislation this past session designed to prohibit inquiries into wage history, in an effort to fight wage discrimination and the gender pay gap. Philadelphia's ordinance is currently on hold pending a legal challenge. However, New York City's law became effective on October 31, 2017, and the city recently released guidelines for both employersand employees regarding proper--and improper--inquiries.  Albany County, New York also recently banned inquiries regarding wage history; the ordinance was signed by the County Executive on November 6, 2017 and will become effective 30 days after filing with the New York Secretary of State. Likewise, San Francisco enacted a salary history ban ordinance this summer. A ban on such inquiries will go into effect for the entire state of California effective January 1, 2018. Asking about applicant's salary history in Oregon is prohibited effective October 2017 (although some provisions of the law will not be effective until 2019) and the law in Puerto Rico also became effective earlier this year. Delaware's statute becomes effective in December 2017. Moreover, the Illinois legislature passed a salary history ban this past term, but Governor Bruce Rauner vetoed the legislation. The Illinois House of Representatives voted to override the veto, but earlier this month the Senate failed to obtain the votes needed to override the veto. Governor Rauner stated that he was not opposed to the legislation, but wanted the law to more closely match what had been enacted in other states, such as Massachusetts, where an employer may ask about wage history after an applicant has been offered a job. Governor Rauner's objection to the Illinois legislation highlights a significant issue for employers: differences between laws enacted in various jurisdictions where a company may have employees. While the law in one jurisdiction (such as Delaware and New York City) may allow an employer to ask an applicant about salary expectations, the law in other jurisdictions is not so clear. Similarly, while California and New York City allow employers to take voluntarily disclosed salary history into account, laws in other jurisdictions are silent as to whether (and how) voluntarily disclosed salary history may be used by the employer. It is widely expected that the Illinois legislation will be reintroduced in the upcoming legislative session. In addition, a number of other states (including Idaho, Maryland, New York, Rhode Island, Texas and Virginia) will likely re-visit the issue during their respective 2018 legislative sessions. Consequently, employers wishing to act proactively should consider taking the following steps as part of their routine interviewing and hiring practices: Eliminate wage history questions from job applications, especially those that are used in multiple jurisdictions; Train both hiring managers and human resources personnel regarding what inquiries are permissible in a given jurisdiction, taking into account that in some instances an applicant may reside in a state with a different law than that of the physical location of the company headquarters or the individuals involved in the hiring decision; Evaluate how wages are set for particular positions and create salary bands based on market wage conditions; and Create a system of documenting when an applicant voluntary discloses salary information to insure compliance with laws.

In recent months, we have written about the limits Article III places on plaintiffs bringing Fair Credit Reporting Act (FCRA) claims. (Seehere, here, and here). In October, two federal district courts further illustrated these limits by dismissing FCRA actions based on lack of Article III standing. In Saltzberg v. Home Depot, U.S.A., Inc., 2017 WL 4776969 (C.D. Cal. Oct. 18, 2017), the plaintiff completed the employer’s disclosure and authorizations forms, which consisted of two pages. The plaintiff alleged that the background check authorization was invalid because the two forms constituted one document and thus the employer violated the FCRA’s standalone disclosure requirement.See 15 U.S.C. § 1681b(b)(2)(A)(i). The court dismissed the plaintiff’s claim for failure to allege Article III standing. It concluded that the plaintiff’s complaint merely contained “an allegation of a statutory violation, not an injury-in-fact.” Such a “violation of the FCRA is insufficient without connecting it to a concrete injury.” A Florida federal district court reached a similar conclusion in Riley v. United Parcel Serv. of Am., Inc.,Case No. 6:17-cv-00254, Dkt. 58 (M.D. Fl. Oct. 2, 2017). In Riley, the employer made a conditional offer to the plaintiff, which it subsequently rescinded based on the results of a background check. The plaintiff brought FCRA claims against the employer for failure to provide him with: (a) a pre-adverse action notice before rescinding the offer; (b) a copy of the background report; and (c) a description of rights under the FCRA. While the employer’s background check provider furnished this information to the plaintiff, he contended that disclosure from the provider “cannot take the place of the notice UPS was required to provide[.]” The plaintiff claimed to have suffered a concrete injury because the employer failed to provide the requisite information, and the employer’s non-compliance “deprived him of the opportunity to learn of the charges against him and … tell[] [the employer] his side of the story.” The employer moved to dismiss, arguing that the plaintiff lacked Article III standing because he did not allege his consumer report was inaccurate, and he received all of the required information, albeit it not from the employer. The court granted the employer’s motion because the plaintiff did not adequately allege “a harm or a material risk of harm that Congress identified or intended to curb when it passed the FCRA.” It reasoned that the plaintiff did not sustain a cognizable “informational injury” because “he was already in possession of [the required] information” even though he received it from a third party. Moreover, the court disregarded the plaintiff’s “conclusory assertion that he had no opportunity to learn of the charges against him or that he was prevented from discussing the contents of his consumer report with [the employer] before it revoked its conditional job offer.” What This Means for Employers As discussed previously on this blog, courts throughout the country continue to address the contours of Article III standing in the context of the FCRA. Compliance is the best defense to such actions, and employers should analyze their background check disclosure and authorization forms to avoid costly class litigation. Employers faced with FCRA litigation should consult with experienced counsel to explore the potential for early dismissal based on lack of Article III standing.

On October 23, 2017, a National Labor Relations Board (NLRB) Administrative Law Judge (ALJ) ruled that Heartland Coca-Cola Bottling Co. (Heartland) unlawfully fired a union steward who uttered profanity during a meeting attended by company executives and employees. While the company argued the union steward was terminated for violating a work rule prohibiting misconduct, the ALJ determined the union steward’s comments were sufficiently related to his fellow union members’ working conditions, and remained protected activity under the National Labor Relations Act (NLRA). The case arose when Heartland experienced a backlog of customer orders and told its employees, who were represented by the Teamsters, they would have to work “extensive overtime.” In early March, 2017, Heartland needed workers to assist with back orders on a Friday, which typically was a group of employees’ day off. Problematically for Heartland, the company inadvertently did not provide the group of workers with advance notice of the need for overtime. Without such advance notice, Heartland could not require the employees to work on their scheduled day off. The Teamsters suggested Heartland ask for volunteers to work. No one volunteered, so Heartland convened a meeting to discuss the need for employees to work overtime. During the meeting, the union steward spoke. He urged his fellow union members to “step up” and help, and then added, “If you come in, do your business, do what you need to do, and if they [Heartland] lie to you and you’re still doing 16 hours, f--- ‘em.” The union steward was fired soon thereafter, and the Teamsters filed unfair labor practice charges, contending the union steward was terminated for engaging in statutorily-protected activity. The ALJ sided with the Teamsters. When ruling the union steward was unlawfully terminated, the ALJ explained that an employee who discusses terms and conditions of employment during a meeting with management is engaged in protected activity. Furthermore, the union steward’s use of profanity did not destroy this protection, as the profanity was not “sufficiently egregious or opprobrious.” Moreover, the comments occurred in a meeting with employees and management, and were tied to the union steward’s discussion of the employees’ conditions of work. Accordingly, the unfair labor practice charge was sustained, and the ALJ required Heartland to reinstate the union steward without prejudice to his seniority. Heartland was also required to compensate the union steward for any “search for work” or “interim employment expenses, regardless of whether those expenses exceed his interim earnings.” This decision reminds employers to tread carefully when considering whether to reprimand or otherwise discipline an employee for crass or profane speech in the workplace. To the extent the employee may have advocated on behalf of themselves and others regarding terms and conditions of employment, that speech, however untoward, could be protected. Disciplining or terminating that employee would risk an unfair labor practice charge.

The Fair Credit Reporting Act (FCRA) continues to cause issues for employers that run afoul of its provisions when reviewing consumer background reports as part of the hiring process. Most recently, a proposed class action was filed against Starbucks Corporation. On September 20, 2017, plaintiff Kevin Wills filed a proposed class action in federal court in Georgia, alleging that Starbucks rejected job applicants after reviewing the applicants’ respective consumer background reports without first providing them with a copy of their reports or notifying them of their rights, in violation of the FCRA. The plaintiff seeks to certify a nationwide class of Starbucks job applicants who were denied at least five days’ notice of an adverse employment action based on their consumer background reports. As a reminder, the FCRA requires employers to: Certify to job applicants that consumer background reports will be used for a “permissible purpose”; Provide written disclosure and receive written authorization from job applicants before obtaining consumer reports; Provide notice to job applicants, including a copy of the consumer background report relied upon and notice of the applicant’s rights under the FCRA, before making any adverse employment decisions; and Provide job applicants, orally, in writing, or electronically, with an adverse action notice after making any adverse employment decisions based on a consumer background report. In addition, state laws may restrict an employer’s use of consumer background reports, especially credit reports, when making employment decisions.

When a company receives information concerning potentially hidden wrongdoing, the old axiom, “the cover-up is worse than the crime,”becomes top of mind. To be sure, this principle should be a guiding force when an employer conducts a workplace investigation of reported misconduct. Below are five things every employer must know when misconduct in the workplace is reported. 1.    Conduct an Investigation A properly conducted investigation can reveal the nature and extent of any wrongdoing, result in accountability for individual(s) involved, and foster a safe, inclusive, and healthy work environment for company employees. The business and financial benefits of conducting an appropriate workplace investigation are equally compelling. Indeed, the difference between exposure to financial liability stemming from employee misconduct or avoiding such risk often rests in whether and how the employer handled an investigation. For example, proper and thorough investigations decrease the likelihood that the employee complaining of misconduct will file a charge of discrimination with the EEOC or other agency. Additionally, evidence the employer conducted a thorough investigation of purported misconduct or malfeasance can mitigate the threat of a punitive damages award. Moreover, certain defenses to liability are unavailable to employers that fail to conduct investigations. Specifically, the ‘Farager/Ellerth’ defense—which can shield an employer from liability in harassment cases—requires an employer conduct a prompt, appropriate investigation of the alleged misconduct. 2.    Begin the Investigation Promptly Investigations into misconduct should begin as soon as reasonably possible after the alleged misconduct is reported to preserve certain defenses. While no explicit rule for “promptness” exists, courts have often held that an employer’s response must occur within days of receiving notice of the alleged issue. The Ninth Circuit Court of Appeals, for example, held that an employer’s response was sufficient when it began an investigation into reported sexual harassment within three days. Conversely, the Southern District of New York held that an investigation that was initiated four weeks after a harassment complaint was not sufficiently ‘prompt.’ The purpose underlying these response rates is for the company to consider the reported conduct, determine the facts and, where appropriate, take action. 3.    Determine Who Should Conduct the Investigation In general, most businesses face three choices with respect to who performs the investigation: (1) internal employees/business people, (2) in-house counsel, or (3) outside counsel. Executives, for example, should almost never conduct investigations of serious misconduct because they may become fact witnesses subject to questioning at deposition or trial. Further, business people may often be seen as biased towards the employer and against the complainant. In-house lawyers have the benefit of familiarity with the personnel, structure, and policies of the business being investigated, but also may be viewed as biased. In addition, while in-house counsel may attempt to cloak the investigation in the privilege, many courts have found the efforts of in-house counsel to be “business” advice, not legal advice. By contrast the ultimate results of an investigation undertaken by outside lawyers may be more easily protected—if necessary—by the attorney/client privilege. 4.    Know the Basics before Meeting with Witnesses Employers should know and understand certain basic tenets before interviewing witnesses as part of a workplace investigation. For example, the interviewer should inform each witness/employee that their statements may not be completely confidential. Employers may wish to instruct the witness to maintain the confidentiality of the interview and investigation to protect the attorney-client privilege, prevent subsequent witnesses from learning of the investigation, and minimize the possibility of leaks. However, the National Labor Relations Board (NLRB) has held that blanket confidentiality mandates are unlawful and that an employer must provide a “legitimate business justification” for any such confidentiality instruction. These justifications may include preventing evidence from being destroyed, protecting witnesses, or avoiding a cover-up. Similarly, if counsel for the company is conducting the investigation, the witnesses should be advised that the lawyer represents the company, not the witness, and that any attorney-client privilege belongs to the company, not the witness. Finally, if possible include a third person in the interview who can take notes and, if needed, resolve any future disputes about what may have been said. 5.    Craft Policies for Effective Investigations Well-drafted policies governing workplace investigations can be crucial to their ultimate effectiveness—both during the investigative process and afterwards. An employer that lacks policies or procedures governing investigations risks generating an incomplete and poorly-done inquiry that may not stand up to scrutiny. Such policies also serve as training tools for the inexperienced and can provide needed guidance. Ultimately, having guideposts in your company policies for investigative procedures will prove beneficial in both the short and long term.

The discussion in the wake of the United States Supreme Court’s ruling in Spokeo Inc. v. Robbinshas focused on an employer’s ability to obtain dismissal of a claim under the Fair Credit Reporting Act (“FCRA”)—where the plaintiff or class alleges nothing more than a “bare procedural violation,” absent of any concrete injury or real harm. As detailed in prior posts, Spokeo clarified that a statutory violation of the FCRA alone does not create an injury in fact sufficient to support standing; a plaintiff must allege something more by way of real harm resulting from the purported violation. Some courts, including the Fourth Circuit Court of Appeals, have followed Spokeo to the letter and dismissed such claims, concluding no discernable concrete injury to the plaintiff existed, and, therefore, the plaintiff lacked Article III standing to pursue the claim. However, courts in California, Missouri, and Washington have recently accepted a tangential, aggressive argument that could be troubling for employers defending FCRA claims: that upon removal, a court must remand the case to the state court from which it originated because the plaintiff or class has not alleged a concrete injury in fact sufficient to establish Article III standing to allow the case to proceed in federal court. And because the removing party bears the burden of establishing federal jurisdiction, with all doubts being resolved against removal, this argument is gaining some traction, resulting in the remand of FCRA claims to proceed in state court. Even more problematic for defendants is the result if remanded to state court. Because the state courts are not constrained by the Article III requirements for standing, and state standing requirements can be less demanding, a claim for a “bare procedural violation” of the FCRA may survive a motion to dismiss in state court where it may not have in federal court, or in certain state courts, but not others. With the growing popularity of this maneuver among FCRA plaintiffs, it is important that employers ensure compliance with the FCRA in all employment decision-making processes involving consumer reports. If litigation should result, employers should work with counsel to make strategic decisions regarding removal or early-filed motions to dismiss to allow for the strongest defense possible to these “no-injury” FCRA claims.

On August 8, 2017, the United States District Court for the District of Connecticut held in Noffsinger v. SSC Niantic Operating Co., LLC d/b/a Bride Brook Health & Rehab Ctr. that federal law does not preempt the Connecticut Palliative Use of Marijuana Act (PUMA). PUMA prohibits employers from firing or refusing to hire qualified applicants or employees who are legally prescribed medical marijuana, even following a positive drug test. This case of federal first impression may have wide-ranging implications for employers that conduct drug testing in states that have legalized medical marijuana and have laws that protect medical marijuana users from adverse employment decisions based solely on their use of medical marijuana. Plaintiff Katelin Noffsinger was prescribed a daily dose of Marinol (capsulated synthetic marijuana) to treat symptoms arising from post-traumatic stress disorder, which she took only at night. Bride Brook, a nursing home, extended an offer of employment to Noffsinger, contingent upon passage of a drug test. Noffsinger disclosed her Marinol prescription to Bride Brook, and, as anticipated, tested positive for marijuana metabolites. Thereafter, Bride Brook rescinded her job offer. Noffsinger filed a lawsuit against Bride Brook alleging a violation of PUMA’s anti-discrimination provision. Bride Brook moved to dismiss, and argued that PUMA is preempted by the Americans with Disabilities Act (ADA), the Controlled Substances Act (CSA), and the Food, Drug and Cosmetic Act (FDCA) based on the theory of “obstacle preemption,” whereby state laws are preempted if they “stand as an obstacle to the objectives of Congress.” The court denied Bride Brook’s motion, and held that PUMA did not create an “actual conflict” with any of the three federal statutes. First, the CSA did not preempt PUMA because the CSA does not prohibit employers from hiring or employing individuals who use illegal drugs. Second, the ADA did not preempt PUMA because, while the ADA allows employers to prohibit the illegal use of drugs in the workplace, PUMA does not authorize individuals to use marijuana while at work, and the ADA does not address use of drugs outside of the workplace. Finally, the FDCA did not preempt PUMA because the FDCA does not regulate employment, but PUMA does. The Noffsinger decision creates further complications for employers that conduct drug testing for marijuana, particularly in states that have enacted laws that protect medical marijuana patients from adverse employment actions based solely on their use of medical marijuana. While the Noffsinger decision is not binding on other courts, courts in other jurisdictions with similar medical marijuana statutes might follow its lead. Therefore, employers may wish to reevaluate policies that either automatically deny employment to, or require termination of, an employee following a positive drug test resulting from the employee’s use of prescribed medical marijuana.

On August 15, 2017, the Ninth Circuit Court of Appeals, in Robins v. Spokeo, Inc., Case No. 11-56843, reversed the district court dismissal of an action, holding that the plaintiff had sufficiently alleged a “concrete injury” to maintain a Fair Credit Reporting Act (FCRA) claim against a consumer reporting agency that had published false information about, among other things, his employment history. The Facts Spokeo, Inc. (“Spokeo”) operates a website that collects consumer data and builds individual consumer profiles. It markets its services to businesses to learn information about prospective business associates and employees. The plaintiff became aware that Spokeo published an inaccurate report about him, which included false information about his age, marital status, wealth, education level, profession and employment status, and listed a photo of a different person. The plaintiff alleged that this false report harmed his employment prospects when he was actually unemployed and caused him emotional distress. The Decision This case went to the United States Supreme Court, which remanded it back to the Ninth Circuit to determine whether the plaintiff suffered a concrete harm, not a mere statutory violation. The Ninth Circuit held that the plaintiff had established “concrete interests in truthful credit reporting” and the errors to his report were significant enough to meet the Supreme Court’s standard. The Ninth Circuit noted that harm to the plaintiff’s ability to search for a job was more than a mere “technical violation” of the FCRA. Caution for Employers This decision impacts employers in at least two ways. First, many employers rely on third-party reporting services for information about prospective employees. With federal and state laws increasingly narrowing the circumstances under which employers may consider credit reports in employment decisions, employers should weigh the benefits of using such reports against the risk of being swept into litigation for relying on a reporting company’s report. Second, this case was filed as a class action. The Ninth Circuit’s analysis of the plaintiff’s “concrete injury” focused on the facts particular to him, e.g., the errors relating to his age, marital status, wealth, education level, profession and employment status, and the use of the wrong photo. Companies that become embroiled in similar litigation should argue that the analysis will require an individualized inquiry not subject to class action adjudication.

Massachusetts and 28 states have legalized medical marijuana, and an additional 16 states permit “low THC” use. Federal law, however, still outlaws marijuana use, regardless of ailment or disability. In light of these conflicting laws, how should an employer handle a medical marijuana user who fails an employer’s drug test? While courts in New Mexico, California, and Colorado have held that employers are not required to accept an employee’s medical marijuana usage, a recent Massachusetts decision shows that employers should proceed with caution. On July 17, 2017, the Supreme Judicial Court of Massachusetts held that employers may be required to allow disabled employees to use medical marijuana outside of work. In Barbuto v. Advantage Sales and Marketing, LLC, the plaintiff used medical marijuana at home two to three nights a week to treat her Crohn’s disease, as permitted under Massachusetts’ Medical Marijuana Act. Subsequently, the plaintiff accepted an entry-level position and was presented with the employer’s required drug test. The plaintiff disclosed her medical marijuana use, provided a doctor’s certification, and stated she would not use marijuana before or during work. Initially, the employer stated that failing the drug test “should not be a problem,” but then terminated the plaintiff when the test came back positive. The plaintiff filed suit against the employer for disability discrimination under Massachusetts law (among other claims), which the trial court dismissed, and the plaintiff appealed. On appeal, the plaintiff argued that she was a “handicapped person” due to her Crohn’s disease, and that she was capable of performing the essential functions of her job with a reasonable accommodation – i.e., using marijuana at home. The employer argued that the accommodation was unreasonable because using marijuana violated federal law. The Supreme Judicial Court of Massachusetts found that using medical marijuana was a permissible accommodation when “medical marijuana is the most effective medication for the employee’s debilitating medical condition, and where any alternative medication whose use would be permitted by the employer’s drug policy would be less effective.” The court noted that the potential for violating federal law was inconsequential because the “only person at risk of Federal criminal prosecution for her possession of medical marijuana is the employee.” Thus, the plaintiff should have been permitted to pursue her disability discrimination claim. The court cautioned that its decision did not mean that the plaintiff would ultimately prevail on her claim. The employer still had an opportunity to prove that using marijuana would impose an undue hardship on performance or safety, or would cause the employer to violate contractual or statutory obligations. Employers with employees in multiple states would do well to familiarize themselves with the current plethora of marijuana laws, as states such as Arizona, Delaware, and Minnesota provide that an employee cannot be terminated for testing positive for marijuana, so long as that employee is in possession of a valid medical marijuana card. As the court in Massachusetts made clear, running afoul of state marijuana laws could expose an employer to liability.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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.

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!

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.

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.

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.

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.

An internet news search containing the keywords “FCRA Settlement 2016” returns over 1,800 results in less than a second. Just a few weeks from Valentine’s Day, it’s clear that plaintiffs’ love letters to the 45-year-old federal law are still being answered at an alarming rate. The FCRA governs an employer’s use of so-called “consumer reports” (e.g., criminal background checks, credit reports, etc.) for employment purposes. Essentially, the FCRA sets out a list of steps that employers must follow if they wish to take an “adverse action” against an applicant or employee based on information contained in the consumer report. Yet a simple question remains: “Why?” Why do plaintiffs’ attorneys so regularly file monetarily successful claims – especially class action claims – against employers under the FCRA? Three features of the FCRA answer that question and can guide employers seeking to minimize the risk of an FCRA violation. 1. The FCRA is Confusing And not just to laypeople! – the United States Supreme Court has poetically criticized the FCRA as “less-than-pellucid.” Plaintiffs’ attorneys have exploited this uncertainty to great effect. 2. Classes are Frequently Certified The most common FCRA class action lawsuits allege some kind of technical deficiency in the employer’s “Disclosure and Authorization” form. Because many employers use boilerplate language in forms distributed to all applicants, Plaintiffs argue that a procedural violation is more likely to affect an entire group of employees or job applicants in a uniform way than in other employment contexts, which depend more on individualized facts and circumstances. An employer’s dutiful consistency can be a hindrance if an unlawful Disclosure and Authorization form is utilized. 3. Costs and Fees are a Breeze FCRA violations are broken down into two camps – “willful noncompliance” and “negligent noncompliance.” Though plaintiffs must meet the stricter “willful” standard if they want to pursue statutory and punitive damages, simple negligence will work for an award of actual damages, costs, and attorney’s fees. This relatively low bar gives plaintiffs’ attorneys a financial incentive to doggedly pursue even the most seemingly minor violations.       Though “certainty” and “the FCRA” can seem fundamentally incompatible, gaining an understanding of plaintiffs’ motivations can be the first step in preventing them from making an employer another costly statistic in a Google search.

Many employers work with consumer reporting agencies to conduct background checks on applicants and current employees.  When a background check report raises a red flag on an applicant or employee, employers must be careful to comply with the federal Fair Credit Reporting Act (“FCRA”) and applicable state law prior to taking any adverse employment action.  Before obtaining a background check on an applicant or employee through a consumer reporting agency, the employer must obtain the individual’s written consent through a disclosure and authorization form. In the event that the background check identifies information that causes an employer to make an adverse employment decision, such as rejecting an applicant or terminating an employee, the employer should follow these steps. 1.  Send the applicant or employee a pre-adverse action notice, including a copy of the background check report and the Consumer Financial Protection Bureau’s A Summary of Your Rights Under the Fair Credit Reporting Actform.  The pre-adverse action notice should indicate that information in the report could negatively impact the individual’s employment or opportunity for employment with the employer. 2.  Allow the applicant or employee at least five business days to dispute or correct any negative information contained in the background check report. 3.  If the applicant or employee fails to dispute the negative information in the background check report, the employer may take adverse action against the individual.  The employer must again provide notice to the applicant or employee indicating that due in whole, or in part to, information contained in the background check report, the employer is taking the adverse action (such as rejecting an applicant or terminating an employee).  The adverse action notice must also contain the following: The name, address, and phone number of the consumer reporting company that supplied the report (and, if a national consumer reporting agency, a toll free number); A statement that the consumer reporting agency that supplied the report did not make the decision to take the unfavorable action and cannot give specific reasons for it; A notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished; and A statement of the applicant’s or employee’s right to receive an additional free report from the consumer reporting agency if the person asks for it within sixty days. In addition, employers should also be vigilant of the federal Equal Employment Opportunity Commission’s guidance on using arrest and conviction records to make employment decisions, as well as any applicable state and local laws, such as ban the box laws or ordinances.

Most likely, you have heard employment attorneys speak about the importance of documenting employee performance, behavior and discipline.  Because such documentation can be key evidence when defending against a claim or litigation brought by a current or former employee, employers should be vigilant when training on effective documentation.  Here are six best practices to consider:     Best Practice No. 1: Consider WHO will be reading the documentation The potential audience of documentation should be considered when framing the scope of and the manner in which the documentation is prepared. Documentation may be read internally within the company, by an administrative (state or federal) agency investigator in response to an employee claim or agency audit, by a current/former employee’s attorney to draft a demand letter or by a judge and jury in litigation. In addition, be sure to include legal counsel on any communications addressing legal issues or the advice or instruction of counsel to maintain the attorney-client privilege of such matters.   Best Practice No. 2: Consider WHAT events to document There are a number of opportunities where creating effective documentation can later serve to protect the company if a conflict arises: (1) counseling, discipline and termination of employment; (2) discrimination  and harassment complaints; (3) promotions and demotions; (4) events that could lead to adverse employment actions (e.g., attendance, co-worker altercations, customer complaints, insubordination and layoff/RIFs); (5) the interactive process for ADA accommodation requests; (6) EEO or harassment training provided to employees; and (7) other situations - use business judgment and common sense. Best Practice No. 3: Consider WHEN to document (and when to destroy) Employment-related documentation should be created contemporaneously to the event (at or very near the time the event occurs). Documentation can also be in the form of a supervisor’s log that may involve more frequent, brief entries. Any follow-up discussions on issues previously documented should also be memorialized. For the destruction of documentation, it is important to have a well-organized, well-publicized (to managers and HR) document retention policy and timeline, which addresses exceptions for the receipt of a claim, litigation, a government investigation or audit or the instruction of legal counsel. Best Practice No. 4: Consider WHERE to maintain the documentation Employment documentation should be maintained in a secured location. In most cases, the documentation should be stored in the employee’s personnel file (or a separate medical file, if related to medical issues). If supervisors maintain files separate from central personnel records, care should be given to document forwarding practices and procedures to ensure that documentation is not lost when a supervisor or employee terminates employment. Best Practice No. 5: Consider WHY you are preparing the documentation It is more difficult to refute a fact if there is a contemporaneous writing to support it.  Although preparing documentation may be a time-consuming process, there are a number of tangible benefits to consistent documentation processes. Today, there are an increasing number of discrimination charges being filed (that may lead to lawsuits) and audits conducted by agencies. Memory lapses and time lags can diminish the accuracy of information that may be needed later. Written documentation may bolster the credibility of testimony. Detailed documentation also can serve as evidence to counter allegations of pretext and inferences of discrimination, which may be instrumental in supporting the summary judgment of claims in litigation. Best Practice No. 6: Consider HOW to prepare the documentation If the employment documentation is handwritten, ensure it is legible. Typed or electronic documentation is preferred, because its text can be readily searched. Standardized forms generated using performance management software can reduce reliance on email and other more transitory forms of communication, and reduce the associated burdens of preservation and searching. When preparing the documentation, give careful thought to the language used. Below is a suggested list of “dos” and “don’ts”: DON’T use: Editorial comments / personal opinions (e.g., “Employee gave more whiny excuses about doctor’s appointments”) Unsupported conclusions / accusations (e.g., “Employee is a drunk”) Derogatory comments Generalities (e.g., “Employee has a bad attitude”) Legal terms / labels (e.g., “Employee engaged in sexual harassment”) Absolutes (e.g., “Employee always misses deadlines”) Proxy adjectives (e.g., “too emotional”) Hedge language (e.g., “Employee seems to be making mistakes”) Abbreviations Sarcasm Promissory language (e.g., placing Employee on “six months’ probation”) Speculation Excuses for the Employee (e.g., “We know Employee tried his best, but . . .”) Inaccurate statements, even if they are to be “nice” (e.g., providing “restructuring” as reason for discharge when it is really for cause) Confusing language, spelling and grammar errors DO use: Date (including year) Specific facts (e.g., “Employee is disrespectful to her co-workers and said.…”) Accurate and honest statements Explanations regarding document’s purpose Direct quotes Witnesses / others involved Meeting attendees (names and titles) Reference to Company rules, policies, procedures for support Confirm Employee’s access to Company policies and procedures Drafter’s printed name, signature and title For disciplinary documents, previous counseling that may not have been documented For disciplinary documents, Employee’s signature (or reference refusal to sign) and any comments Be direct (e.g., include specific expectations of the Company and why the Employee said they are not meeting those expectations) Action plan / next steps (e.g., specific changes Employee needs to make, goals and how Employee is going to achieve those goals, consequences for failing to achieve goals) Finally, when in doubt about taking adverse employment action, consider seeking the advice of counsel.

The first webinar is now available in our year-long analysis of Ruby R. Breaker, a fictitious employee whose workplace behavior is based on real life employment situations.  Listen here. "Non-Exempt and the DOL Audit? It Really Isn’t a Question" follows Ruby as she applies to work at a hospital, is hired as a Unit Manager, and is classified as an exempt manager. Her job description includes duties such as helping the employees she supervises, but Ruby ends up spending most of her time performing clerical duties. Frustrated, Ruby calls the Department of Labor (“DOL”) to complain about not getting paid over-time, and a subsequent DOL investigation of the hospital ensues. Meanwhile, Ruby requests time off from work during the work day to attend in-vitro fertilization appointments, claiming FMLA and ADA coverage.  Polsinelli’s Labor and Employment and Health Care attorneys dissect interactions between Ruby and her manager, and provide take-aways that can be applied to your business. More on "The Ruby Files": Over the course of 2016, we will follow Ruby throughout a period in her career during which she will work for various industries, including health care and technology. Ruby will claim to be misclassified, constructively discharged, and sexually harassed. Ruby will present additional challenges to her employers, raising current issues with which all employers can identify. This will be an advanced series which will delve into real life, complex issues with legal analysis and practical solutions.  Learn more about the series and upcoming dates here.

On August 27, 2015, the National Labor Relations Board, according to its own press release, “refined its standard for determining joint employer status” in the Browning-Ferris Industries of California decision.  In reality, the NLRB did far more than “refine its standard.”  The NLRB has, in fact, completely overhauled its joint employer test to the detriment of businesses that contract with third parties for the provision of labor. Under the new standard, a provider of contract labor and its customer will be considered joint employers even if the customer does not actually exercise control over the terms and conditions of the contract laborers’ employment, but only reserves to itself the right to exercise such control.  Although avoiding such a determination under the National Labor Relations Act should be sufficient motivation for companies that utilize contract laborers to take steps to avoid a joint employer determination, it is likely that other government agencies and plaintiffs’ attorneys will attempt to generalize the Browning-Ferris test to other statutory schemes—including the Fair Labor Standards Act and its state equivalents. There are several practical steps that customers of providers of contract labor can take to reduce the likelihood of a finding of joint employer status: Review their written agreements to determine whether those agreements contain provisions that expressly reserve to the customer the right to exercise control over the terms and conditions of the contract laborers’ employment. If possible, renegotiate their agreements to include terms that expressly disavow any such reservation of rights.  Irrespective of the contents of their contract labor agreements, contract labor customers should review the policies under which contract laborers perform services in their facilities. Perhaps most importantly, conduct an audit on the implementation of those policies to ensure that their employees are not engaging in conduct with respect to the supervision of contract laborers that could contribute to the potential for a finding of joint employer status. In addition to these steps, businesses that utilize contract laborers should continuously reevaluate, based upon developments such as the Browning-Ferris holding, whether the benefits of utilizing contract laborers outweigh the potential risks.