When Arbitration is in Play, Class Action is off the Table

By Jennifer Fischer on Posted in Class Actions, Legislation, NLRB

In the decision rendered by the Supreme Court in Epic Systems Corp. v. Lewis, employers are able to enforce individual arbitration proceedings if arbitration was agreed to in an employment contract. Settling a Circuit split on the issue, the Supreme Court decision affirmed the Fifth Circuit holding in Murphy Oil, and remanded the Ninth and Seventh Circuit decisions in Ernst & Young, LLP v. Morris and Epic Systems Corp. v. Lewis. Justice Gorsuch, writing for the majority, found that “as a matter of law the answer is clear. [ . . . ] Congress has instructed federal courts to enforce arbitration agreements according to their terms–including terms providing for individualized proceedings.” (Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018) (slip op., at 2).

The Court, when looking at the Arbitration Act and the National Labor Relations Act (“NLRA”), decided the two provisions could be read in harmony. “When confronted with two Acts of Congress allegedly touching on the same topic, this Court is not ‘at liberty to pick and choose among congressional enactments’ and must instead strive ‘to give effect to both.’” (Id., slip op. at 10) (quoting Morton v. Mancari, 417 U.S. 535, 551 (1974). The Court was unable to find any “clear and manifest” intent, as required by Morton, of Congress to displace the Arbitration Act with the NLRA.

The Court found that their holding was consistent with the prior decisions in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991) and NLRB v. Alternative Entertainment, Inc., 858 F. 3d 393, 413 (CA6 2017) finding that the Fair Labor Standards Act and Age Discrimination in Employment Act do not displace the Arbitration Act. The Court likened the employee’s theory to an “interpretive triple bank shot” that “raise[s] a judicial eyebrow.” (Epic Systems Corp., slip op., at 15). Justice Gorsuch also reminded the employees that Congress “does not, one might say, hide elephants in mouseholes.” (Id., quoting Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468 (2001). Therefore, the Court sided with the employers and held that “Congress has instructed that arbitration agreements like those before us must be enforced as written.” (Id., slip op., at 25). Continue Reading

Arbitration Face Off between California and the Federal Government leaves California employers in Limbo

By Christina Nordsten and Kate Visosky on Posted in Legislation, NLRB

AB 3080, a bill inspired by the #MeToo movement that would bar employers from inserting binding arbitration clauses into contracts as a condition of employment, passed the California State Assembly on May 31, 2018. The bill is not the law yet – it still must get through the Senate and be signed by Governor Brown, who vetoed a similar bill in 2015. Further, its future may already be in jeopardy as it comes on the heels of the momentous decision in the U.S. Supreme Court Epic Systems Corp. v. Lewis, in which the Court held that employers can include provisions in arbitration contracts that bars workers from suing collectively.

In Epic, the Supreme Court upheld the enforceability of arbitration agreements containing class and collective action waivers of wage and hour disputes. It resolved the circuit split between the Sixth, Seventh, and Ninth Circuits – which held class action waivers violate the right to “concerted activities” under Section 7 of the National Labor Relations Act (NLRA) – and the Second, Fifth and Eighth Circuits, which held that class action waivers were enforceable under the Federal Arbitration Act. In its 5-4 decision, the Supreme Court in Epic found that Congress enacted the FAA “in response to a perception that courts were unduly hostile to arbitration.” In doing so, it not only instructed courts to enforce agreements to arbitrate, but it “also specifically directed them to respect and enforce the parties’ chosen arbitration procedures.” The majority also rejected the employee’s argument that the NLRA’s reference to the right to engage in “other concerted activities for purposes of collective bargaining or other mutual aid or protection” supersedes the FAA’s command to enforce arbitration agreements. The Court emphasized that while the NLRA grants employees “the right to organize unions and bargain collectively,” it does not provide “express approval or disapproval of arbitration” and “does not mention class or collective action procedures.” The Court held that the FAA mandates the enforcement of arbitration agreements, and that the right to pursue class or collective relief is not protected concerted activity under Section 7 of the NLRA. Continue Reading

Technology Ahead of Laws and Regulations – Or Is It?

By Steven R. Nevolis and Mark A. Konkel on Posted in Legislation

For decades, technological innovation has changed our world at a rapid pace. Across industries and departments, businesses have a plethora of new and exciting technology and tools they can utilize to deliver products and services more effectively and efficiently to their customers. This is especially true of today’s human resources department and function. Recent trends have shown an increasing number of technology innovations aimed at HR professionals that offer to help more effectively recruit employees, manage workforce productivity, and address employee and labor relations issues as they arise. However, as businesses begin to adopt these new methods of workforce management, human resource professionals must stay ahead of the curve to ensure this technology is being used effectively and, in some cases, legally.

Technology Ahead of Laws and Regulations – Or Is It?
It’s generally accepted that technological advancement will outpace the legislatures and courts tasked with regulating that technology. But that isn’t to say the legislatures and courts won’t catch up. Just recently, we have seen social media enter the spotlight as the newest target of potential government regulation. And with the European Union enacting the General Data Protection Regulation, companies must be vigilant in how they collect and maintain job applicant information, or face the possibility of severe fines. As fast as new technology is introduced to the market, regulators are working to act just as quickly to mitigate potential harm from that technology.

However, one thing that may be lost in the shuffle is the unintended consequences of some of these technologies, and how that may expose businesses to potential claims under existing laws. Take for example a business that decides to shift its recruiting efforts from a more human-driven approach to a process that uses data to steer the course. There is a trove of data points that a company can collect on a job applicant, such as experience and education. But if HR allows these data points to drive the recruiting and interview process, they may be allowing this data to exploit innate biases, albeit unintentionally. If a data-driven process leans too heavily on quality of education, the process may filter out those candidates who may not have had a ready access to high-quality education, but still may be a good fit for the job. HR professionals need to be careful in implementing these types of processes and work to eliminate these issues, otherwise they may face heightened scrutiny.

Technology Reacting to New Laws
This past year has seen a flood of new employment laws, mainly at the state and local level, as well as the wide-reaching implications of the seismic #MeToo movement. These developments have not gone unnoticed by the technology sector. New software will help HR departments manage the various state and local employee leave laws, help employers implement employee schedules that comply with scheduling laws, and even assist companies in conducting internal investigations of employee complaints. But for each new technological advancement, there is a potential pitfall.

To illustrate this point, let’s consider a company that implements new software in order to guide and streamline the employee complaint process. This software will surely be more efficient and provide a place to store all of the information regarding the investigation. But HR professionals cannot allow the process to create a “one size fits all” approach to these investigations, providing nothing more than a checklist to mark off as the investigation moves along. Professionals must work to integrate the technology to augment their investigation process, not replace it, since a subpar investigation process can expose a business to liability down the road.

Key Takeaways
There is no doubt that technology has the potential to simplify the jobs of HR professionals in today’s fast-paced world. But that business must integrate that technology in a way that makes sense for them, and utilize professionals who can use it effectively.

Relief for Taxpayers Affected by the Reduced 2018 HSA Deduction Limits

By Kelley Drye on Posted in Uncategorized

The IRS recently released guidance providing that taxpayers may, for 2018, treat $6,900 as the maximum deductible health savings account (“HSA”) contribution for family coverage under a high deductible health plan. This change is relevant to employers who sponsor a high deductible health plan and individuals who have contributed or have had contributions made on their behalf to an HSA for 2018.

As you may recall, the maximum had been abruptly reduced earlier this year to $6,850 as a result of a change in the inflation adjustment calculations under the Tax Cuts and Jobs Act. The new IRS relief comes in response to reports of administrative and financial burdens triggered by the mid-year change, which left individuals, employers and administrators scrambling to respond as HSA participants who either had already made the maximum HSA contribution for 2018 or elected to make pre-tax HSA contributions based on the $6,900 limit faced potential tax penalties due to excess contributions.

Employers who have already adjusted deferral elections made under a cafeteria plan to reflect the inflation-adjusted $6,850 maximum need not take further action. However, individuals who receive distributions of excess HSA contributions based on the inflation-adjusted $6,850 maximum will have a choice to make as to whether they want to repay that amount to their HSAs, rely on an exclusion from gross income afforded to a return of excess contributions or, if attributable to employer contributions, apply the distribution to qualified medical expenses. Employers who sponsor a high deductible health plan may want to inform their employees of this issue either directly or through their relevant service providers.

To read the advisory on the Kelley Drye website, click here.

Has the California Supreme Court Doomed the Gig Economy?

By David Van Pelt on Posted in Wage and Hour

On Monday, the California Supreme Court adopted a new standard for determining whether a worker qualifies as an employee for the purposes of wage-hour law. To the surprise of almost no one, the standard does not bode well for many companies operating in the Golden State.

In a highly-anticipated opinion, Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court held that in order for a worker to be properly classified as an independent contractor rather than an employee, the company bears the burden to show that the individual is performing work that is “outside of the hiring entity’s business.” This standard threatens to put an end to much of the independent contractor workforce in California.

The Court adopted what is known as the “ABC” test of evaluating whether workers classified as independent contractors in fact qualify as employees. The test starts with the presumption that all workers are employees, and utilizes three factors, all of which must be satisfied for an independent contractor classification to pass muster. The first factor – whether the worker is “free from the control and direction” of the company – essentially reflects the current legal standard and is not controversial. Continue Reading

The New Jersey Paid Sick Leave Law is Here

By Jennifer Fischer and Mark A. Konkel on Posted in Legislation

(This blog post was updated 5/2/2018 to reflect changes in the law that was enacted.)

On March 26th, the New Jersey Assembly passed legislation that requires employers in New Jersey to provide earned sick leave to their employees. The legislation was then passed by the New Jersey Senate on April 12th, and Governor Phil Murphy signed it into law on May 2, 2018. He tweeted out that he believes that enacting the law will “support working families and strengthen our economy.”

What is the New Law?

The new Paid Sick Leave law allows New Jersey workers to accrue paid sick leave for every 30 hours worked. The number of hours of leave that can be accrued per year is capped at 40 hours. There is no minimum amount of time an employee must be employed before they are able to start accruing paid sick leave. Employers are required to give employees the same pay rate and benefits for earned sick leave that the employees would regularly receive for working hours. Employers may offer to pay workers for their unused earned sick leave in the final month of the year. The sick leave can be used for physical and mental illness, to care for an ill or injured family member, to attend a school-related event for a child, to obtain services if the employee or a family member is a victim of domestic or sexual abuse, or circumstances arising from a public health emergency. Employers are prohibited from retaliating or discriminating against an employee for using their paid sick leave. Employers also must not discipline, discharge, demote, suspend, or take any other adverse action against employees who are using their sick leave.

Why was this Law Enacted?

The intent of the new law is to ensure an employee does not have to choose between a paycheck and going to work sick. Governor Murphy tweeted “No one should lose a day’s pay due to sickness or because a loved one has fallen ill.” When signing the bill he stated, “There is no reasons anyone should have to choose between economic security and their health. After today, New Jerseyans will no longer have to face such a choice. I am proud to sign into law one of the strongest earned leave protections in the country for every hardworking employee who deserves the basic right of a paid sick day.”

Who has to Comply?

The new law preempts all existing municipal and county sick leave laws. However, if an employer is already offering full paid leave that is accrued at a rate equal to or greater than that in the new policy, they will be in full compliance with the new law. Employers are permitted to create more generous policies that provide additional leave time.

Any exceptions?

  • Small businesses: Even small businesses must comply with the new legislation. There is no exception for small employers, regardless of number of workers employed. A motion was made by Assemblyman Robert Auth (R-Passaic) before the Assembly to exempt employers with less than 10 employees from the new legislation, but that motion was tabled.
  • Exempt workers: The new legislation does not cover per diem health care workers, construction workers covered by a collective bargaining agreement, or public employees who are already provided with sick leave with full pay.

When Will the Law Go into Effect?

The law will go into effect 180 days after it was signed by Governor Murphy, October 29, 2018.

If you have any questions about the new law, feel free to contact Jennifer Fischer (jfischer@kelleydrye.com) or Mark Konkel (mkonkel@kelleydyre.com).

“Times Up” for New York Employers – Governor Cuomo Signs Historic Anti-Harassment Legislation

By Barbara E. Hoey on Posted in Legislation

On April 12, 2018, New York Governor Andrew Cuomo signed into law the New York State budget bill, which makes some big changes in the obligations of New York employers relative to sexual harassment.

The new law has both immediate and rolling implications for all New York employers.

EFFECTIVE IMMEDIATELY (I.E., RIGHT NOW)

The New York State Human Rights law now extends protections to certain non-employees, including contractors, subcontractors, vendors, consultants, and other persons providing services pursuant to a contract.

This means that employers may now be held liable for the sexual harassment of non-employees if the employer, its agents, or supervisors knew or should have known that the non-employee was subjected to sexual harassment and the employer failed to take appropriate corrective action.

This is a significant change in the law and employers should make sure that Human Resources and managers are aware of it. Continue Reading

EEOC’s New Guidance Takes Us Back to the Basics

By Barbara E. Hoey and Diana R. Hamar on Posted in EEOC

Anti-harassment policies are nothing new and we would be shocked to find an employee handbook without one.

But, have they really worked?

In the #MeToo era, it has become clear that these policies have not really been effective and employers are facing increasing scrutiny over why they cannot prevent harassment, and how they handle claims of harassment once they are filed.

Layering onto this is recent federal and state legislation, which makes harassment more expensive and public — like the federal tax law that prohibits companies from deducting harassment settlements if the settlement is subject to a nondisclosure agreement, and New York State’s anti-harassment legislation which will prohibit mandatory arbitration of those claims.

These laws coupled with the increased scrutiny make it essential for employers of all sizes to take a hard look at their anti-harassment program, and determine whether it is doing its job — namely: preventing, disclosing, and dealing with bad behavior in the workplace, before that behavior becomes a lawsuit or explodes on the front page. Continue Reading

LGBTQ Rights Making News and Making Law In Recent Weeks

By Barbara E. Hoey on Posted in Discrimination, EEOC, LGBTQ

In the past two weeks, we saw two major decisions in the area of LGBTQ rights in the workplace.

First, the Second Circuit in New York held that Title VII does prohibit discrimination based on sexual orientation. Zarda v. Altitude Express, Inc., No. 15-3775, 2018 WL 1040820 (2d Cir. Feb. 26, 2018). In Zarda, the New York court overturned past precedent and held that the late Donald Zarda, a skydiving instructor who claimed that he was fired because he was gay, had a viable claim of gender discrimination under Title VII.

Second, the Sixth Circuit Court of Appeals reversed a district court’s decision on EEOC v. R.G. &. G.R. Harris Funeral, rejecting the notion that religious beliefs offer an excuse or reason to discriminate. This case took a sharp turn last week when the court held that the Harris Funeral Home had violated Title VII when it terminated Aimee Stephens, a transgender female employee, because she wanted to wear a skirt to work. No. 16-2424 (6th Cir. March 7, 2018). Ms. Stephens transitioned from male to female and the owner of the home (Thomas Rost) claimed that it violated his religious beliefs to allow plaintiff, a biological male, to wear a skirt to work. Ms. Stephens was ultimately fired over this issue. The District Court agreed with Mr. Rost citing the Religious Freedom Restoration Act (RFRA), which entered final judgment on all counts in the Funeral Home’s favor in August 2016.

On appeal, the Sixth Circuit found that Mr. Rost’s Christian beliefs did not override the employee’s right to express her gender. Thus, even considering the employer’s rights under the RFRA, Mr. Rost did not have the right to dictate his employee’s attire. In other words, Ms. Stephens had a right to wear a skirt to work and therefore, was unlawfully terminated. Continue Reading

Employer FMLA Tax Credit

By Kelley Drye on Posted in FMLA

As mentioned in our January 2018 Client Advisory, the Tax Cuts and Jobs Act (the “Act”), signed into law at the end of 2017, contains a temporary employer tax credit, ranging from 12.5 percent to 25 percent, that may be claimed by eligible employers for certain wages paid to qualifying employees during family and medical leave, pursuant to a written policy and subject to certain maximums and other limitations. This advisory explores some of the limitations of the new tax credit, highlighting issues employers should consider pending the issuance of additional guidance explaining and interpreting the Act’s provisions.

Eligibility Requirements. The tax credit is available to eligible employers regardless of whether they are covered by the Family and Medical Leave Act of 1993, as amended (“FMLA”), but to be eligible for the tax credit, employers’ policies must provide FMLA-like protections to their employees. That is, such employers must ensure that the employer will not interfere with the exercise of rights under the policy or discriminate against individuals opposing any practice prohibited by the policy. Furthermore, an employer must provide both full-time and part-time employees a minimum amount of annual paid family and medical leave at a rate not less than 50 percent of regular wages.

Worthwhile? In evaluating whether the potential tax credit is worth complying with the Act’s numerous requirements, employers should consider the costs and benefits of doing so. For example, for employers who pay 100 percent of regular wages during the leave, the credit is subject to a 25 percent cap; employers who pay 50 percent of regular wages are eligible for a 12.5 percent credit. The amount of credit allowed with respect to any employee is also subject to a cap based on such employee’s normal hourly wage rate for each hour of actual service performed for the employer and the number of hours for which family and medical leave is taken. In addition, the credit only applies to wages paid to employees who are employed for at least one year and who earn no more than 60 percent of the highly compensated employee limit for the preceding year (the limit is $120,000 for 2017 and 2018).

To read the full advisory, click here.

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