Employers beware: The Muldrow decision makes it easier for employees to assert claims of discrimination, when the only adverse action they suffered was a transfer. Prior to this new ruling, employees bringing Title VII lawsuits over a transfer in some Circuits had to show “significant harm” - that the alleged discrimination impacted material terms of employment such as pay. Now, the Supreme Court has uniformly lightened this burden for plaintiffs across all federal Circuits, as they only have to show “harm” rather than “significant harm” to allege a Title VII claim. Accordingly, this new ruling may pave the way for more employees to bring Title VII lawsuits in cases where employees are transferred and there is arguably “some harm,” but that harm is not significant. This change is crucial for employers, particularly those analyzing the risks of transferring employees, even where such transfers do not alter the employees’ pay or benefits. Employers and their counsel must now determine whether these often-routine employment changes could be construed as causing any sort of “harm” to employees under this new standard.
Sergeant Jatonya Clayborn Muldrow commenced a lawsuit against her employer, the St. Louis Police Department, alleging that she was transferred because she is a woman. Muldrow was transferred from her position as a plainclothes officer in the Intelligence Division and replaced with a male officer. In her new position, her rank and pay remained the same, while her responsibilities, perks, and schedule changed. Her new role involved supervising the day-to-day activities of the neighborhood patrol officers rather than working with high-ranking officials on the priorities of the Intelligence Division. She also lost access to an unmarked take-home vehicle and had a less regular schedule involving weekend shifts.
The lower court granted summary judgment to the Police Department, and the Eighth Circuit affirmed, concluding that Muldrow had not met her burden to show that the transfer out of the Intelligence Division constituted a significant employment disadvantage.
The Court rejected the Eighth Circuit’s standard for analyzing Title VII claims for transfers. The Court articulated the new standard as follows: “Muldrow need show only some injury respecting her employment terms or conditions. The transfer must have left her worse off, but it need not have left her significantly so.” While Muldrow’s rank and pay remained the same, other aspects of the transfer left her “worse off” such as being moved from a prestigious specialized division working on priority investigations and with police commanders to a role that primarily involved administrative work.
Whether Muldrow changed the law in your circuit or not at this point does not matter; all employees now have a lower burden when suing under Title VII to challenge a transfer. We can look at jurisdictions that already had this lighter standard, akin to Muldrow, for guidance as to how Muldrow will be applied.
For example, in the Second Circuit, Courts have determined that cases where an employee is transferred and the transfer does not affect pay or benefits, the transfer can still violate Title VII as long as it alters the terms and conditions of employment in a “materially negative way.” It remains to be seen how the Second Circuit and others will distinguish “worse off” from “materially negative.”
ALL employers would be well advised to take a closer look at transfers of employees and analyze whether employees can claim any type of harm from those transfers. It may be the case that even if the employee points to some kind of harm – such as an inferior schedule or more administrative work – that may be sufficient to carry a lawsuit forward under Muldrow, where before the employer may have had a shot at a dismissal.
If you have any questions about employee transfers or would like to discuss best practices in light of the Muldrow decision, please reach out to a member of Kelley Drye’s labor and employment team.
]]>It has been fifty years since the FTC issued a competition rule, and then only as an adjunct to a conventional consumer-protection measure. The lone rule required octane disclosures on gas pumps. Since then, FTC officials disclaimed competition rulemaking authority and the agency aligned its competition policy with the larger body of antitrust law.
The current FTC reversed course on both fronts. It announced its intention to distance its competition policy from the rule of reason commonly applied in antitrust. And it criticized case-by-case enforcement as inadequate to deter competitive harms. A noncompete rule would be a climactic culmination of these ambitions.
Will the FTC succeed, and what would it mean? Clues will come in the course of the meeting. Here are some of the questions the Commission will have to answer persuasively if expects a rule to survive in the courts:
The Supreme Court could consider this a Major Question, subject to the analysis of West Virginia v. EPA. For a preview of how that analysis might apply, see my article, Regulating Beyond the Rule of Reason, and our post, The FTC’s Proposal to Ban Noncompetes is on Shaky Legal Ground.
In the analysis supporting the proposal, the FTC noted that the weight of antitrust authority on noncompetes found them to be reasonable restraints. The analysis did not mention the cases from the FTC’s early years, when it held that soliciting or hiring employees from competitors was an unfair method of competition (cited at note 215 here).
Academic studies (some collected here) generally find the aggregate evidence inconclusive, including one of the studies on which the Commission relied.
A principal purpose of noncompete clauses is to prevent companies from poaching intellectual property and proprietary information from competitors. Some of the consequences of banning the clauses are outlined in Proposed FTC Noncompete Ban Throws Out Good With Bad.
Some clauses would be exempt, for example those facilitating business sales and between franchisors and franchisees, which the analysis supporting the proposal considered worthwhile. Kelley Drye’s Corporate Group summarized them in The FTC Proposes Ban on Non-Competes: The Implications for M&A Transactions, and our Employment and Labor Group looked at a future without noncompetes in FTC Proposed Ban of Noncompetes: Practical Guidance For Employers.
This proceeding has the potential to transform employer-employee relations throughout the United States. But its reverberations will be more profound. As noted in my first piece on the proposal, this is the first of a host of competition rules the FTC contemplates. Others in various stages include surveillance, the right to repair, pay-for-delay pharmaceutical agreements, unfair competition in online marketplaces, occupational licensing, real-estate listing and brokerage, and unspecified industry-specific practices. The fate of the noncompete rule will either launch a new era of industrial regulation or realign the FTC with antitrust norms.
]]>In the summer of 2021, Illinois Governor J.B. Pritzker signed into law several amendments to Illinois statutes focused on equal pay initiatives. One of those amendments requires companies with 100 or more employees in the state, who also file an EEO-1 (Annual Employer Information Report) with the Equal Employment Opportunity Commission (“EEOC”), to obtain an Equal Pay Registration Certificate (“EPRC”) from the Illinois Department of Labor (“IDOL”) and recertify on a rolling two year basis. The first EPRC Reporting deadline was March 23, 2024. The intent is to make the EPRC data – similar to that on the EEO-1 – public within 90 days of the IDOL’s receipt of the data.
While IDOL regulations state that the agency would contact every qualifying Illinois business and provide at least 120 days’ notice of the company’s compliance date for obtaining an EPRC, it is possible – even likely – that not every qualifying business heard from the IDOL or received compliance instructions.
However, employers should note that the required application materials include a current EEO-1 report and the demographic data that report entails, and an equal pay compliance certification that the average compensation of female and minority employees (as defined in the Business Enterprise for Minorities, Women, and Persons with Disabilities Act, 30 ILCS 575) is “not consistently below” the average compensation for male and non-minority employees. The company must also certify that it is in compliance with all other equal pay and anti-discrimination laws. The IDOL has an online EPRC Portal which will walk employers through the process.
Employers determine whether they have 100 or more qualifying employees by counting the number of full and part-time employees working for the business where the business’s base of operations is within Illinois. Remote employees count towards the threshold if the location from which the job done by the employee is directed or controlled is within Illinois. Remote employees who live in Illinois even if the job is directed or controlled from outside the state also count towards the qualifying threshold.
Independent contractors do not count toward the 100 employee threshold.
The IDOL FAQ’s indicate that the agency will contact employers regarding the two year recertification requirement with at least 180 days’ notice before the recertification deadline. The statute affords employers a 30 day compliance window for inadvertent failures to comply with the EPRC application requirement. Future violations of the EPRC requirements may carry a fine of up to $10,000.
If you have questions about the Illinois Equal Pay Act or other pay equity and transparency matters, please reach out to a member of Kelley Drye’s labor and employment team.
]]>As we discussed, the Tims and Cothron decisions made BIPA an unwieldly monster for Illinois employees. The Illinois Supreme Court in Tims held that a 5 year statute of limitations applies to BIPA claims and, in Cothron, the court held that a BIPA violation accrues with each unauthorized use of a biometric device. BIPA allows statutory damages amounts of $1,000 per violation for negligent violations and $5,000 per violation for intentional or reckless violations. Applied to the Rogers case in which Judge Kennelly used the $5,000 reckless standard, the statutory damages award under the Cothron method would have multiplied considerably from the $228 million. In Rogers, the jury held that 45,600 individuals had their biometric information used in violation of the Act, but the number of distinct violations was not calculated.
However, in June 2023, Judge Kennelly vacated his $228 million damages award upon further argument of this issue. He held that the jurors should have determined the award, not the court. Judge Kennelly set the case for a second trial on the issue of damages only. On one hand, this was a tremendous victory for BNSF – the $228 million award disappeared. On the other hand, a damages trial subject to the Illinois Supreme Court’s Cothron interpretation of BIPA could subject BNSF to an even greater damages award (45,600 individuals multiplied by the number of times each individual used the biometric device, multiplied again by the amount of damages the jury could award for each violation).
Considering the legal developments of the Rogers case and the Tims and Cothron decisions in the last year and half, the BIPA landscape still presented risks for both the Rogers class action plaintiffs and BNSF. As a result, the parties agreed to a $75 million settlement in lieu of a damages trial. The settlement amount will be divided between the 46,500 class members after attorneys’ fees and costs.
Employers nationwide remain hopeful for legislative solutions to BIPA’s draconian damage regime, though none immediately materialized in the wake of Tims and Cothron. It has been reported, however, that the Illinois General Assembly is considering the way liability accrues under BIPA.
If you have any questions about BIPA, please reach out to Matthew Luzadder or Tyler Bohman.
]]>While the decision remains—at least technically—restricted to the field of higher education, we undoubtedly observed a ripple effect throughout the private sector, both in the court of public opinion and actual court system. Following the decision, organized, well-funded, committed activist/political advocacy groups started to attack DEI programs. Efforts by groups like the American Alliance for Equal Rights (AAER) and America First Legal Foundation (AFL) included urging the Equal Employment Opportunity Commission to investigate DEI initiatives at top 100 companies and challenging initiatives at law firms and airlines in federal court. As a result, Revelio Labs estimated that the amount of DEI jobs shrunk by 8% throughout early 2024.
There remain several open questions regarding what organizations can do to protect against attacks on their DEI initiatives. On March 6, 2024, the Second Circuit presented one potential avenue to challenge the standing of organizations like the AAER or AFL. In Do No Harm v. Pfizer, Inc., the court rejected a challenge to Pfizer’s diversity fellowship program by Do No Harm (DNH), a group with the stated purpose of removing division and discrimination from healthcare professions. DNH claimed that Pfizer’s fellowship program—which seeks “to advance students and early career colleagues of Black/African American, Latino/Hispanic, and Native American descent”—discriminated against white and Asian-American applicants in violation of New York state and federal law. The court held that DNH lacked legal standing and dismissed the challenge to Pfizer’s diversity program.
The Second Circuit’s decision creates a potential roadblock for challenges levied by organizations against DEI initiatives. We will analyze the language of the opinion, evaluate the impact of the decision, and provide guidance for organizations that wish to continue to protect against attacks on their diversity, equity and inclusion initiatives.
In Do No Harm v. Pfizer, Inc., the Second Circuit majority held that DNH failed to establish standing to sue in the context of a motion for a preliminary injunction because it failed to identify by name any individual who was injured by Pfizer’s alleged discriminatory fellowship program. In its motion for a preliminary injunction, DNH alleged that two anonymous members met the eligibility requirements of Pfizer’s diversity fellowship, but did not apply because they identified as white and/or Asian-American. According to the allegations, the members felt that they were excluded from the fellowship because of their race and would be ready and able to apply if Pfizer eliminated its allegedly discriminatory criteria.
The Court rejected DNH’s standing to sue on behalf of the anonymous members. While the Court noted associations are allowed to sue on behalf of their members when those members would otherwise have standing to sue on their own, DNH was required to identify the actual names of the members harmed by the challenged program. The submission of two anonymous declarations was insufficient. Without actually naming members that were harmed by Pfizer’s diversity fellowship, DNH could not establish standing to sue under Article III of the Constitution. Without standing to file its motion for preliminary injunction, the Court dismissed both the motion and DNH’s complaint against Pfizer.
The Second Circuit carefully noted that it would not reach a determination of whether at the pleading stage DNH was required to identify its members to establish standing. The fact that DNH failed to establish standing for its motion for preliminary injunction was sufficient to dismiss all claims against Pfizer. But, the decision now presents a road map for companies to protect their diversity initiatives against organizations like AAER and AFL who cannot advance the interests of members shrouded in anonymity.
Prior to the Second Circuit’s decision in Do No Harm v. Pfizer, there were few cases tackling the issue of whether organizations need to identify their members by name to establish standing. In American Alliance for Equal Rights v. Fearless Fund Mgm’t, LLC, the Eleventh Circuit held that AAER had established standing on behalf of its members to bring forth a lawsuit against a venture capital firm focused on funding businesses that were majority-owned by Black women. Despite AAER not providing names of actual members, the Court noted it was inappropriate to require specific names at the motion to dismiss stage.
Notably, attorneys for Fearless Fund Management have already informed the Eleventh Circuit of the decision in Do No Harm v. Pfizer and noted that AAER failed to identify allegedly injured members by name. Fearless Fund Management requested that the Eleventh Circuit come to the same conclusion as the Second Circuit, and deny AAER’s standing to sue for a preliminary injunction because AAER failed to identify affected members and failed to corroborate boilerplate statements that the anonymous members are ready to apply for a grant.
The Eleventh Circuit’s decision will determine whether there is uniformity in evaluating standing issues for a preliminary injunction or whether a circuit split will have to be decided by the Supreme Court.
Do No Harm v. Pfizer presents a viable roadblock against veiled attacks by organizations seeking to challenge private sector DEI initiatives. In jurisdictions that follow the Second Circuit’s decision, companies can attack organizational standing in motions to enjoin diversity programs in an effort to dismiss the entire lawsuit. However, until the Eleventh Circuit, and potentially the Supreme Court, weighs in on the challenges to standing, there remain open questions about how reliable the defense will be. Courts will further have to opine on whether the standing challenge only applies to the enhanced requirements at the preliminary injunction stage or if the rationale can be transferred to the more lenient pleading stage analysis. For now, DEI programs are still lawful and employers who value diversity should remain diligent in checking updates to the legal landscape on how to best enact and protect their programs or initiatives.
If you have questions or would like to discuss your company’s DEI program and initiatives, please reach out to a member of Kelley Drye’s labor and employment team.
]]>The EEOC recovered $665 million for employees, representing a 29.5% increase over Fiscal Year 2022. This figure includes the recovery of $440.5 million for private sector and state and local government workers and $202 million for federal employees. Recovery refers to amounts collected through litigation, mediation, conciliation, and settlement.
The EEOC reported filing 143 new lawsuits in 2023, which constitutes an increase of more than 50% from the previous year. Specifically, the lawsuits included 86 suits on behalf of individuals, 32 non-systemic suits with multiple victims, and 25 systemic suits involving multiple victims or discriminatory policies. Through litigation, the EEOC obtained more than $22.6 million for 968 individuals while resolving 98 lawsuits and achieving favorable results in 91% of all federal district court resolutions. The breakdown of the recovery by claims is: $16.5 million for Title VII claims, $3.8 million for ADA claims, $1 million for multi-statute claims, $800,000 for ADEA claims, and $500,000 for Equal Pay Act claims.
The statistics demonstrate an increase in demand for EEOC services. The EEOC received 81,055 new discrimination charges, 233,704 inquiries in field offices, more than 522,000 calls from the public through the agency contact center, and over 86,000 emails, representing respective increases of 10.3%, 6.9%, 10%, and 25% over Fiscal Year 2022. This increase signals a heightened awareness of the EEOC and corresponding likelihood of bringing a claim.
The EEOC identified the following as priority areas - addressing systemic, preventing workplace harassment, advancing racial justice, preventing and remedying retaliation, advancing pay equity, advancing diversity, equity, inclusion, and accessibility (“DEIA”) in the workplace, and addressing the use of technology, including artificial intelligence, machine learning, and other automated systems in employment decisions. These priorities reflect many of the hot button topics in employment law.
The PWFA addresses workers who face discrimination based on pregnancy, childbirth, or related medical conditions and was signed into law on December 29, 2022. As we previously reported, it requires covered employers to provide reasonable accommodations to a worker’s known limitations related to pregnancy, childbirth, or related medical conditions. The PWFA became effective June 27, 2023, and the EEOC began accepting charges arising from the PWFA on that date. As this change occurred towards the end of Fiscal Year 2023, it will be interesting to see the evolution of PWFA claims into the remainder of 2024.
Given the increases in charges, litigation, and demand for EEOC services, employers should continue to keep their guard up, particularly due to the increases in monetary recovery. With the upcoming presidential election, employers face the potential for the continuation of the EEOC’s aggressive agenda or a potential shift in a different direction. Below are some best practices for employers for the remainder of 2024:
On Feb. 28, 2024, USCIS launched new online organizational accounts that will allow multiple people within a company and their legal representatives to collaborate and prepare H-1B registrations, H-1B petitions, and associated requests for premium processing. The organizational accounts significantly enhance H-1B processes by enabling users to share draft filings among attorneys, attorney staff, and company representatives, and submit filings directly to USCIS. Importantly, a new organizational account is required to participate in the H-1B Electronic Registration Process starting in March 2024.
FY24 saw a record-breaking number of 758,994 eligible registrants. The true number of registrations was much higher, as over 400,000 registrants submitted multiple eligible entries. Up until now, USCIS selected lottery winners by registration, meaning that beneficiaries with multiple registrations submitted on their behalf got more bites out of the proverbial apple. Starting this spring with FY25 registrations, USCIS will select registrations by unique beneficiary, meaning that regardless of the number of registrations submitted – each beneficiary gets just one bite out of the apple. Multiple employers can still submit requests for the same beneficiary, but the Department of Homeland Security (DHS) anticipates that selecting by unique beneficiary will reduce the chances of gaming the system.
This year and beyond, the registration process requires that registrations include the beneficiary’s valid passport or travel document number while prohibiting a beneficiary from registering under more than one passport or travel document. See 8 CFR § 214.2(h)(8)(iii)(A). In order to further combat fraud, DHS is incorporating into code USCIS’ authority to deny H-1B petitions or revoke approved petitions for certain reasons, including where:
See 8 CFR § 214.2(h)(8)(iii)(A) and (D). Even more, USCIS can deny an H-1B petition or revoke an approved petition in cases where inaccurate, invalid, fraudulent or misrepresented statements on the H-1B petition, labor condition application (LCA), or temporary labor certification (TLC) are determined to be false. See 8 CFR § 214.2(h)(10) and (11). These safeguards and expanded grounds for petition denial or revocation underscore the importance for companies to retain qualified attorneys who will ensure compliance with H-1B process rules.
Once, and if, a beneficiary receives the thrilling news that their H-1B registration has been selected, they are able to choose which employer can file form I-129 Petition for a Nonimmigrant Worker on their behalf, if they have multiple offers of employment. In April 2024, USCIS will release a new edition of the form I-129. A preview is available on their website. Applications postmarked on or after April 1, 2024 must be in the new edition. Employers or their representatives can also file the form I-129 through USCIS’ online portal starting on April 1, 2024. Paper filed forms will no longer be accepted at USCIS service centers and must be filed instead at lockbox addresses, which will be posted to USCIS’ website (here) late March 2024. Applications that do not include the proper fees, incorporating the recent fee schedule changes, will be rejected.
Speaking of fees, for the first time since 2016, DHS issued a separate final rule on January 31, 2024 adjusting certain immigration and naturalization benefit request fees, some of which affect the H-1B registration and petition process. First, USCIS announced a new “Asylum Program Fee” that will be charged to employers filing an I-129 Petition for Nonimmigrant Worker (as well as an I-140 Immigrant Petition for Alien Worker), effective April 1, 2024. The Asylum Program Fee will be $600 for employers with 26 or more full time employees (FTE), $300 for employers with 25 or fewer FTEs, and $0 for nonprofits. The Asylum Program Fee will join the existing statutory fees for employers filing I-129 petitions on behalf of prospective H-1B employees. Second, also effective April 1, 2024, in addition to the Asylum Program Fee, the filing fee for the I-129 petition itself will increase by 70%, from $460 to $780. Finally, effective March 2025 for the FY26 cap season and beyond, the H-1B registration fee is increasing from $10 to $215 per registration, a 2050% increase. Luckily, the registration fee remains $10 through this H-1B cap season.
Starting this year, certain H-1B cap subject petitions will be allowed to select start dates within the relevant fiscal year that are after October 1. The added flexibility enables H-1B beneficiaries to choose more relevant start dates. The start date flexibility is particularly beneficial in circumstances where there are multiple selection rounds pushing the petition filing window past October 1, or where an employee is in the United States with legal status valid beyond October 1. However, other restrictions on the petition start date remain such as the requirement that the petition may not be filed sooner than 6 months before the start date. For a start date of October 1, the earliest a petition may be filed is April.
The upcoming FY25 H-1B cap season brings significant changes that employers and prospective H-1B beneficiaries need to be aware of. The new registration selection process by unique beneficiary aims to create a more equitable system, while increased fees like the new Asylum Program Fee add to the overall costs for employers. Start date flexibility and selection by unique beneficiary provide some welcomed improvements. However, the enhanced integrity measures and grounds for denial underscore the importance of ensuring full compliance and accuracy throughout the entire H-1B registration and petition process. As we enter the cap season and transition to the new process, employers would be wise to work closely with experienced immigration counsel to successfully navigate the complexities of the H-1B process.
]]>On January 1, 2024, a new law, SB 699, became effective, strengthening California’s Bus. & Prof. Code Section 16600, the state’s long standing non-compete ban. Under Section 16600, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind” is void. SB 699 expands the existing law to encompass certain out-of-state agreements as well and creates a private right of action for employees with agreements containing unlawful restrictive covenants, resulting in potential uncertainty for employers based outside of California but who have employees who may eventually find themselves based in California or working for a California company.
SB 699 adds Section 16600.5 to the existing statute. Section 16600.5 contains the following provisions relevant to out-of-state contracts:
(a) Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed.
(b) An employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California.
Courts have yet to interpret how the provisions of SB 699 will be applied to out-of-state companies and agreements entered into out-of-state with their employees. The legislative history of SB 699 states, “as the market for talent has become national and remote work has grown, California employers increasingly face the challenge of employers outside of California attempting to prevent the hiring of former employees.” This statement about employers outside of California coupled with the broad language of Section 16600.5 means that this statute could have an expansive reach on employers outside of California, even if their workforce is predominantly outside of California as well.
Employers should take caution particularly in light of the prevalence of remote and mobile workforces. In that vein, some common scenarios will pose new challenges for employers. For example, if an employee was not a California resident when the employee signed a non-compete or non-solicitation agreement but later moves to California, SB 699 likely means both are unenforceable. Likewise, where an employee located outside of California works for an employer outside of California, and is bound by a non-compete, but the employee seeks employment with a competitor in California, SB 699 may be implicated. In that instance, the former employer may not be able to enforce the non-compete against the former employee. California courts, as well as those courts outside of California engaging in a choice of law analysis are now tasked with defining the contours of the national implications of SB 699, which is likely to face challenges due to its uniquely broad reach.
Section 16600.5 also strengthens California’s already robust non-compete ban by allowing employees (including prospective employees) to bring suits based on a current, former, or prospective employer’s violation of the statute. The potential for lawsuits against employers is particularly significant given the expanded scope of the non-compete ban beyond California’s borders. Specifically, SB 699 adds the following provisions:
(e)(1) An employee, former employee, or prospective employee may bring a private action to enforce this chapter for injunctive relief or the recovery of actual damages, or both.
(2) In addition to the remedies described in paragraph (1), a prevailing employee, former employee, or prospective employee in an action based on a violation of this chapter shall be entitled to recover reasonable attorney's fees and costs.
Accordingly, as employees may now bring litigation pursuant to California’s non-compete ban, which encompasses the right to seek damages, injunctive relief, and attorneys’ fees, if successful, compliance with SB 699 is essential to avoiding liability. Moreover, an employer may find itself liable for such relief simply because its employee relocates to California. Since employees have not previously had a private right of action under the statute, it is not yet known what their damages and recovery will look like in this new frontier of litigation.
Going forward, companies should review their existing employment agreements in light of SB 699. Employers should consider alternative solutions to protect their businesses such as confidentiality and trade secret protections in employment agreements. These alternatives are particularly crucial if a non-compete provision later becomes unenforceable under California law. Employers using non-compete provisions outside of California may also consider adding an explicit disclaimer in employment agreements that such provisions are not enforceable against their employees should they become California residents in the future.
Attorneys at Kelley Drye are available to assist you in navigating SB 699.
]]>On January 9, 2024, the DOL announced the final rule on the independent contractor classification under the Fair Labor Standards Act “FLSA,” effective March 11, 2024. Whether a worker is an independent contractor or an employee determines the applicability of minimum wage and overtime requirements, among other legal obligations under the FLSA. This distinction is crucial to companies’ employment policies, business decisions, and potential liability. Against that backdrop, understanding the contours of this new final rule is essential for all employers.
The final rule largely mirrors the October 2022 proposed rule and adopts a non-exhaustive six-factor test analyzing the “economic reality” of the relationship between a potential employer and worker. The six factors are as follows:
The new rule rescinds a Trump-era independent contractor rule, which focused on two factors of the economic realities test – nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss. As we previously reported, that 2021 rule never went into effect. Under this new rule, the degree of control and the opportunity for profit or loss will not necessarily control the analysis, as no factor holds more weight than the others. Additionally, other factors not listed above but relevant to the “totality of the circumstances” may be considered. Prior to the release of the new rule, the DOL noted that the rule does not contain a so-called “ABC” worker classification test like the one used by California courts, which is a particularly employee-friendly test.
The DOL’s disavowal of an explicit “ABC” test is interesting. Under the ABC test, some form of which has been adopted in California and at least 27 other states, a worker can be classified as an independent contractor only if they meet each of the following three criteria:
A. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
B. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
C. The individual is customarily engaged in an independently established trade, occupation, profession or business
The “B” and “C” in “ABC” can be the killer. They mean that if a purported contractor is doing the same thing as the company that retained them does, that worker isn’t really a contractor: they’re an employee. Example: a cabinet-making company retains a carpenter to help with building cabinets. The carpenter is an employee, not an independent contractor, even if all the other common-law factors for independent contractor status (mostly resolving around true independence and lack of company control) are present.
If you have noticed a similarity between the sixth factor in the new DOL rule (“the extent to which the service rendered is an integral part of the employer’s business”) and B and C in “ABC” (the work is “outside the usual course of the business” of a company and the worker is “engaged in an independently established trade, occupation, profession or business”), then you’re paying attention. While the new DOL rule asks employers and enforcement agencies to look at all of the factors, the fact that a worker engages in the same work as the company that retains them is significant. It means that (for example) the DOL, which generally has an interest in finding that individuals are employees rather than independent contractors, will more easily find that a worker in the same trade as the company with whom they contract is an employee. In other words: the new test makes it easier for the DOL to decide that you have misclassified certain workers.
Employers should review the final rule and work with counsel to determine if any independent contractors may be classified differently under the application of the new rule. The distinction between independent contractors and employees is crucial in determining whether a host of obligations under the FLSA are triggered and accordingly impacts numerous employment policies. In that vein, when drafting new employment agreements and reviewing existing agreements, employers should closely review this final rule and consult with counsel regarding its potential application.
In addition to reviewing employee classifications, agreements, and policies, employers should continue to monitor Labor Days regarding any successful challenges to the final rule, as it is likely that business-focused groups will commence litigation. Please reach out to a member of Kelley Drye’s labor and employment team for additional guidance and help.
]]>In this article we will review the changes in both laws to help Illinois employers, understand the legal requirements related to their employees’ paid leave and paid sick leave obligations.
Already in effect, the Illinois Paid Leave for All Workers Act (“The Act”) requires all employers to allow employees in the state of Illinois to earn and use at least 40 hours of paid leave per 12-month period for any purpose. The paid leave accrues at a rate of one hour of leave per 40 hours worked. Exempt employees are considered to work 40 hours each workweek for determining leave accrual, unless their regular workweek is less than 40 hours. Employers may not require documentation in support of an employee’s leave.
The Act does not apply to employees covered by collective bargaining agreements already in force on January 1, 2024, and unionized employees may waive the requirements of the Act in future CBAs.
Employers may set a minimum interval to use the leave of no more than two hours. Employers must allow rollover of accrued, but unused, leave from year to year, but may cap employees’ paid leave use to 40 hours per 12-month period.
Employers may also make all leave available to the employee on the first day of employment or coverage. Under such a policy, employers are not required to allow carryover of paid leave from one 12-month period to the next, and may enact a “use it or lose it” policy. The employer may set the 12-month period as desired, but must notify the employee at the time of hire of the 12-month period.
Employees must be allowed to use the paid leave 90 days after commencement and employees shall be paid their hourly rate. Tipped employees must be paid at least the full minimum wage in the applicable jurisdiction.
Employers may require up to seven days’ of notice if the reason for the leave is reasonably foreseeable.
Payout of accrued unused leave is not required on separation. Insurance coverage must be maintained during periods of leave taken by employees, and employers must notify employees taking leave that they will be subject to paying for their share of the premiums while on leave.
The Act does not apply to employers covered by other municipal or county paid sick leave ordinances, aka those in Cook County and the City of Chicago.
In November 2023, the City of Chicago passed its new Chicago Paid Leave and Paid Sick and Safe Leave Ordinance, requiring ALL employers with employees working in Chicago to provide paid sick leave and general paid leave. For purposes of this article, we will refer to the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance as the “Ordinance” (though I prefer the “CPLPSSLO” -- the mandates of the Ordinance are as convoluted as the acronym itself.) I will refer to Paid Sick Leave as “PSL” and general Paid Leave as “PL.”
In short, the Ordinance provides that covered employees are entitled to take up to 40 hours of paid sick leave per year and another 40 hours of general paid leave to use for any reason. Unfortunately, failure to comply may lead to fines for violations by the Department of Business Affairs and Consumer Protection and or private action by aggrieved employees.
The most current definition of a “covered employee” is a non-union exempt or non-exempt employee who works at least 80 hours within any 120-day period within the geographic boundaries of the City of Chicago. The 80-hour trigger includes compensated travel time in or through the City but excludes non-compensated travel time. Once a covered employee, a person remains a covered employee for as long as they work for the employer.
The Ordinance does not apply to construction industry employees covered by a collective bargaining agreement (“CBA”), and non-construction industry employees covered by a CBA are excluded from coverage during the term of current CBAs and can waive the requirements of the ordinance in future CBAs, but must do so clearly and unambiguously.
The point at which a covered employee is hired or an employee becomes a “covered employee” begins the relevant 12-month period. Note: This mandates a 12-month period unique to each covered employee, requiring administration of the policy based on anniversary date rather than a calendar year or other uniform basis.
Starting on July 1, 2024, or the first day of employment thereafter, a covered employee’s leave begins to accrue.
Paid Leave and Paid Sick Leave accrue at 1 hour each for every 35 hours worked. PL and PSL accrue in whole hour increments only. Exempt employees are assumed to work 40 hours a week for purposes of accrual, unless actual normal workweek is less, then the actual workweek should be used. PSL can be used no later than 30th day after covered employee starts employment. PL can be used no later than 90th day after covered employee starts employment
Employers may cap each type of leave at 40 accrued hours of per 12-month period. The applicable 12-month period must be rolling from when leave began to accrue for the covered employee.
Note: The City of Chicago Department of Business Affairs and Consumer Protection issued proposed regulations interpreting the Ordinance, they are not final or in-force. The proposed regulations provide that only hours worked in City boundaries count towards PL and PSL accrual. This provision could greatly affect the accrual of PL and PSL under the Ordinance. We will need to remain attentive to the final regulations whenever they are promulgated.
The employer’s policy may require up to 7 days notice if the need for PSL is reasonably foreseeable. If a covered employee is absent more than three consecutive work days, the employer may require certification for use of PSL (e.g. a signed doctor’s note).
Employers may set a reasonable minimum use increment of four hours per day. Employers may not use qualifying PL or PSL time off as absences that trigger discipline under an absence policy.
The pay rate for non-exempt covered employees while using PL or PSL is calculated by:
This calculation should not include overtime pay, premium pay, gratuities, or commissions. But the pay rate must be at least the full applicable minimum wage (even for tipped employees, i.e. not the tipped minimum wage). Leave time must be paid with same benefits as hours worked.
PSL balances are not required to be paid out. The answer for PL depends on the size of your business.
Employers with a non-complying leave paid sick leave policy prior to July 1, 2024 that allows for paid leave time rollover, must allow employee to roll over their accrued but unused time under the old policy as PSL under this Ordinance.
Reminder: employers may cap the accrual for each type of leave at 40 hours of PL and 40 hours of PSL per 12-month period. The maximum amount of leave the employee may rollover from one 12-month period to the next is 16 hours of PL and 80 hours of PSL. This effectively sets the maximum amount of paid leave a covered employee may possess at 56 PL hours and 120 PSL hours per 12-month period.
The Ordinance does not explicitly contemplate employers capping the use of accrued leave time during a 12-month period. However, see the options for “frontloading” leave below where PL is effectively capped at 40 PL hours rather than 56 PL hours.
Employers may not contract around the Ordinance or contract for employees to waive their rights to PL or PSL, or to waive their right to payout on separation.
Employers with employees who work within the City of Chicago for at least two hours every two weeks need to quickly assess their leave policies and consider several factors as they consider changes to come into compliance with the Ordinance.
First, employers should determine how many employees or what percentage of the workforce will be “covered employees” under the Ordinance. Next, employers should determine if the employer’s current paid sick leave and paid time off policies are compliant with the Ordinance. If the current policies are not compliant, based on the answer to the first consideration, employers must determine whether it makes sense to administer more than one paid leave policy for covered employees and non-covered employees. Finally, employers need to modify their paid leave policies to come into compliance.
The ordinance requires a written paid leave and paid sick leave policy. Employers must notify a covered employee on leave that employee still must pay their share of premiums for health care benefits, if any. If the employer has facilities in City, the approved workplace notice must be posted. Employers must send a notice with first paycheck to covered employee, and again every year within 30 days of July 1st, of employee rights under the Ordinance.
Finally, employers have two options to notify employees of their leave balances. The first requires employers send employees their PL and PSL balances with each pay check (unless PL awarded monthly, then once a month), as follows:
The updated amount shall include accrued paid time off since the last notification, reduced paid time off since the last notification, and any unused paid time off available for use.
Alternatively, employers may choose a reasonable system for providing this notification, including, but not limited to, listing available paid time off on each pay stub or developing an online system where Covered Employees can access their own Paid Leave and Paid Sick Leave information.
The Ordinance provides for fines of $1000-$3000 per employer offense in addition to liability for 3-times the amount of leave improperly denied or lost, plus interest, plus reasonable attorneys’ fees. The private right of action for PSL accrues on July 1, 2024, but the private right of action for PL does not accrue until July 1, 2025.
If you have questions concerning employment leave or other workplace related questions, please contact a member of Kelley Drye’s Labor and Employment team.
The Governor’s veto strongly indicates that legitimate concerns about the protection of confidential information and customer relationships will prevent New York from “killing” all noncompetition agreements. However, the veto does not resolve the issue conclusively, and New York’s legislature will be tempted to try again. Employers should continue to monitor any new New York legislation aiming to limit the use of noncompetition agreements, particularly in light of the Governor’s statements in her veto memo and the scrutiny of these agreements on a federal level.
Governor Hochul wrote, “I have long supported limits on non-compete agreements for middle-class and low-wage workers, protecting them from unfair practices that would limit their ability to earn a living.” She further expressed that she had hoped to find a balance between protecting low-wage workers and “allowing New York’s businesses to retain highly compensated talent.” Going forward, she is “open to future legislation that achieves the right balance.”
As we previously wrote, this balance was always one that the legislature—and, for that matter, federal agencies like the Federal Trade Commission and the National Labor Relations Board—was always going to have to strike. Forcing a frontline McDonald’s employee to promise not to leave for Burger King is, in a word, silly. Asking a senior executive responsible for confidential business strategy or a high-level engineer developing trade secret tech not to take that information to a direct competitor, on the other hand, certainly seems reasonable. The Governor’s statements suggest that any newly-proposed legislation in New York will take this balance into account, particularly as lawmakers distinguish between working-class, low-wage workers and higher-level employees and job functions.
Employers should monitor new legislative updates—but don’t lose sight of the forest for the trees. In our experience, the greatest threat to successful noncompete enforcement isn’t the legislative or administrative hostility to restrictive covenants now in vogue. Rather, the threat has been employers’ failure to consider the longstanding standards that have always governed the use of noncompetes, including by using “one size fits all” agreements for every employee regardless of level or access to information and attempting to tie up employees for too long of a post-employment period. If you haven’t done so lately, it is always a good idea to get a handle on the way your company actually deploys restrictive covenants and to make sure that you can specifically defend their use based on facts that are specific to the employees you ask to sign them.
In that sense, employers should review their current agreements and focus on alternatives to noncompetition provisions, including nonsolicitation and confidentiality provision. Governor’s Hochul’s comments indicate that she would support future legislation geared towards lower income workers rather than executives and other highly compensated employees, who are most likely to harm a former employer by working for a competitor or starting a competing business.
We will continue to update you on all major legislation effecting noncompetition agreements. In the meantime, please reach out to one of our attorneys on our labor and employment law team for help with reviewing and tailoring your use of noncompetes and other restrictive covenants.
]]>All U.S. employers are required to complete a Form I-9 for every individual they hire for employment in the United States, including for U.S. citizens and noncitizens. As of November 1, 2023, Employees must use the new Form I-9 edition. The edition date is located on the lower left corner of the form. A revised Spanish Form I-9 dated “08/01/2023” is also available for use in Puerto Rico only. The new version contains improvements to the layout as well as the following significant changes:
DHS and USCIS also updated the Form I-9 instructions by including the addition of instructions for a new alternative procedure, which permits employers who participate in E-Verify in good standing to examine employee documents for employment authorization remotely. Employers must comply with several requirements in order to perform a remote examination, including conducting a live video interaction with the individual presenting the document.
Failure to comply with Form I-9 requirements can have severe consequences for employers, including civil and even criminal penalties. In recent years, U.S. Immigration and Customs Enforcement (ICE) has increased the number of investigations and enforcement actions taken against Form I-9 violators. Employers who fail to comply with Form I-9 requirements can be fined anywhere from $272 to $2,701 for each incorrect Form I-9. In 2022, the Office of the Chief Administrative Hearing Officer (“OCAHO”) issued one of the largest I-9 penalty decisions, ordering a staffing company with over 2,000 Form I-9 violations to pay penalties of $1,527,308. The amount of the fine depends upon the size and if the conduct was intentional, seriousness of the violation, individuals’ work authorization status, and the employer’s history of previous violations.
The new changes simplify and streamline the review process by reducing the length of the Form I-9 and permitting remote verification of documents. It is highly recommended that companies review Form I-9 training and procedures to ensure compliance with the latest I-9 verification rules. If you have any questions concerning Form I-9 compliance, please contact a member of Kelley Drye’s Labor and Employment Team.
]]>As we reviewed in earlier posts, the Supreme Court’s June 2023 decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA) promised to be a game changer not just in education but in the employment context as well. While the SFFA decision did not directly apply to private employers, its strong language criticizing affirmative action has had the effect many argued the Court wanted it to have: it caused universities and employers to reevaluate their DEI programs. The decision further prompted potential plaintiffs and members of the plaintiff’s bar to challenge employment decisions allegedly made on the basis of a lack of membership in a group viewed as diverse and inclusive.
Now, nearly six months after the Court’s decision, we are finally starting to see the ramifications of this holding in the private sector and are better able to predict how the burgeoning legal landscape may continue to take shape.
By way of review, the SFFA decision struck down the race-conscious admissions programs of Harvard University and the University of North Carolina at Chapel Hill. The Court found that the universities violated both the Equal Protection Clause and Title VI of the Civil Rights Act by utilizing race as a stand-alone “plus” factor in admissions evaluations. Ultimately, the majority opinion concluded that the programs “lack sufficiently focused and measurable objections warranting the use of race, unavoidably employ race in a negative manner, involve racial stereotyping, and lack meaningful end points.”
While a significant development in the field, the decision remains—at least technically —restricted to the field of higher education. However, in the months since the decision, aggressive organizations and plaintiffs have been actively attacking diversity programs beyond the realm of higher education.
In the aftermath of the SFFA decision, DEI programs have been under attack, both in the court of public opinion and actual court system.
Federal courts are beginning to see a small uptick in claims that seek to challenge DEI initiatives. Critically, there appear to be two different cohorts of potential plaintiffs emerging in these litigation efforts: (1) organized, well-funded, and committed activist/political advocacy groups pursuing injunctions and non-monetary resolutions; and (2) traditional single- or multi-plaintiff efforts seeking to recover more traditional damages.
At this point in time, the first group is more actively litigious. Indeed, within just months of the SFFA decision, the American Alliance for Equal Rights—the same organization that brought suit against Harvard and the University of North Carolina in the SFFA decision—began to aggressively challenge diversity initiatives at private employers, which they argued are illegal and discriminatory. Unsurprisingly, large firms and companies with public-facing and prominently displayed DEI initiatives proved to be primarily targeted by these initial efforts. Worth noting is that these groups tend to first engage with the employer prior to filing suit, although these efforts are often accompanied by publicly-released media statements.
Interestingly, the American Alliance first targeted the legal industry and law schools, both writing to and then suing several multinational law firms. They also challenged DEI programs at large companies. The group filed lawsuits that resulted in those institutions having their scholarship and recruitment efforts publicly scrutinized via the filing of three prominent complaints. The group’s efforts seek to challenge companies that fund award programs, diversity scholarships, and grants to minority-led employees, applicants, or businesses.
The American Alliance may argue that these efforts have been largely successful. In response to the charges and lawsuits, several defendants have already opted—publicly or privately—to revise their internal policies in an effort to avoid active or threatened litigation. Many of these programs have been revised to no longer outwardly identify race as a factor in the selection of applicants for DEI fellowships and other internal programs. Indeed, in recent public comments the American Alliance has declared a brief pause in the group’s planned activities, citing the belief that many organizations revised policies that the group viewed as objectionable. For example, a recent stipulation of dismissal in one of the lawsuits identified the removal of the phrase “membership in a disadvantaged and/or historically underrepresented group in the legal profession” from the targeted DEI program.
The effect of the SFFA decision is also still being felt in the realm of higher education. In October, SFFA filed suit against both the U.S. Naval Academy in Annapolis and West Point Academy, arguing that affirmative action in its admissions processes violates the Fifth Amendment. No. 1:23-cv-02699-ABA (D. Md. Oct. 5, 2023); No. 7:23-cv-08262 (S.D.N.Y. Sept. 19, 2023). Beyond the question of admission, other institutions have been sued by aggrieved students for allegedly using race, sex, or gender preferences in selecting members for particularly prestigious organizations within the University. Doe v. New York University, No. 1:23-cv-09187 (S.D.N.Y. 2023).
In addition to the above, individual employees are pursuing legal challenges to adverse decisions that the employee believes were motivated by the employer’s desire to advance internal diversity and inclusion targets. Meyersburg v. Morgan Stanley & Co. LLC, No. 1:23-cv-07638 (S.D.N.Y. Aug. 29, 2023). Such claims are likely continuing to work their way through enforcement agencies such as the EEOC before appearing on public dockets.
Recognizing this trend is important for several reasons:
While a true “explosion” of DEI-centric litigation has not yet occurred, the current trend unmistakably indicates that companies need to be aware of their litigation risks going forward. Firms that wish to continue adopting a best-practices approach should review internal and public-facing DEI communications and avoid statements that explicitly mention protected characteristics as “plus” factors for employment decisions. In line with these recommendations, executives and other high-ranking officers should exercise care in making statements that indicate any sort of racial or ethnic preference. This is not to say that diversity programs must be abandoned—indeed, the opposite remains true—however, it is important for businesses to remain educated about the realities imposed by the current DEI climate and properly protect themselves.
In the interim, employers will continue to grapple with the potential exposure that DEI programs may create and the public relations implications that accompany litigation. Through what is likely a combination of tightening economic conditions and the specter of potential litigation, there has been a growing dearth in DEI practitioners at the management level. When DEI programs are not directly targeted for budgetary concerns, certain industries—particularly information and technology—have experienced significant turnover in DEI team leaders and other officer roles. In addition, job postings for DEI positions fell 19% in 2022, a trend that appears to have continued into 2023. In fact, since 2018, the average tenure of a DEI role within an S&P 500 company has been less than two years.
Ultimately, if and until the Supreme Court weighs in on the legality of DEI programs within the private sector, the controlling advice has not changed—employers who value diversity need not immediately abandon their initiatives. However, employers should be prepared and even expect that their programs may come under public scrutiny or even be challenged in court.
Here are some points to consider:
While such statistics are disconcerting, the SFFA decision should not ultimately be a cause for panic for private sector employers. Simple, easily replicable steps will likely allow for the majority of entities to avoid potential litigation.
If you have questions concerning your company’s DEI program, please contact a member of Kelley Drye’s Labor and Employment team.
]]>The new law provides that a release of any claim including unlawful harassment, discrimination or retaliation is not enforceable if it contains any of the following provisions:
In addition, the new law makes several key changes to Section 5-336.
Employers should carefully review any settlement agreements entered into after November 17th and any release agreements currently being drafted and negotiated, particularly if they contain nondisclosure provisions relating to the facts or circumstances of the underlying claims, a liquidated damages provision or a forfeiture provision.
If you have questions concerning employee settlement agreements, please contact a member of Kelley Drye’s Labor and Employment team.
]]>There are three challenges to the rule. On November 6, 2023, the Service Employees International Union (“SEIU”) filed a petition in the D.C. Circuit, seeking to further expand the scope of the new rule. Shortly after the SEIU filed, on November 9, 2023, the U.S. Chamber of Commerce and a coalition of business groups filed a suit in the Eastern District of Texas, asking the Court to block the rule. The business groups argue that the new rule violates both the common-law foundation of the joint-employer test and the National Labor Relations Act. The suit also alleges that the Biden-era NLRB violated the federal rulemaking process by replacing the current joint-employer rule without a good reason.
In addition to the pending litigation, on November 9, 2023, a bipartisan group of lawmakers introduced a resolution seeking to eliminate the new rule under the Congressional Review Act. Even if this resolution gains traction, President Biden is likely to veto the legislation if it reaches his desk.
While awaiting the effective date of this rule, employers should continue to examine their business structure to determine whether any agreements they have in place fall under the purview of the new rule, including outsourcing and staffing agency agreements. This examination is particularly important as status as a joint employer potentially gives a company a role at the bargaining table and subjects it to liability. Kelley Drye will provide an update if the NLRB alters the proposed new rule in light of these recent challenges.
]]>This amendment will permit any employee who makes less than $1300 a week (approximately $67,000 a year) to bring wage theft claims in court or before the New York Department of Labor (NYDOL). Previously, only employees who made $900 a week or less could bring such claims before the NYDOL.
Governor Hochul recently also signed Senate Bill S2832A, the Wage Theft Accountability Act, which amends the penal law to include “wage theft” in the definition of larceny, making this a felony offense encompassing nonpayment or underpayment of wages. Both bills are part of a larger initiative in New York that seeks to protect employees and their wages, resulting in potentially more severe, and even criminal penalties for noncompliant employers.
Many of you are asking: what is wage theft? I am not stealing my employees’ wages.
As background, Article 6 of the NYLL regulates how frequently employees must be paid, as well as other aspects of wage payment such as direct deposit. Employers who violate Article 6 are now technically guilty of ‘wage theft.’
For example, New York employers:
Any employer who fails to do these things is potentially guilty of wage theft. Claims for wage theft include those for unpaid wages, illegal deductions, unpaid wage supplements, minimum wage, and overtime pay.
Before the new amendment, any employee working in an executive, administrative, or professional capacity making more than $900 per week, was exempt from Article 6.
Starting March 2024, that group will be much smaller. Employees working in an executive, administrative or professional role and making $1300 per week or less, (under $67,000) are covered by Article 6. Put another way, anyone making less than $67,000 can now sue their employer for wage theft. This new law effectively expands protection to cover even more employees under Article 6, resulting in two key changes:
The ability to bring a wage theft claim increases liability for employers. For one, an employee may file a complaint at the NY Department of Labor, which can open your company up to a company-wide DOL audit.
Qualified employees may also bring civil action in state court under Article 6. If an employer is found liable for wage theft, there is a potential penalty of between $500 to $20,000 per offense, depending on the severity of the violation. And if the employer is found guilty of wage theft, the employee’s attorney can recover their legal fees. Wage theft claims are thus popular ‘add on’ causes of action, often tacked on at the end of a discrimination or wrongful termination claim.
Employers may be found guilty of wage theft, for failing to pay benefits or wage supplements to employees are now potentially guilty of a misdemeanor.
Starting in March 2024, New York employers will likely have a larger group of employees who are covered by Article 6 and who can bring wage theft claims at the NYDOL. From an administrative standpoint, employers should proactively work with their payroll, human resources, and other relevant departments to implement any necessary changes to payroll procedures before the law goes into effect. Specifically, employers should obtain written consent for direct deposit for this class of employees by providing a form during onboarding, or prior to March 2024 for current affected employees.
In addition to the payroll component, employers should work with counsel to evaluate whether the composition of their workforce puts them at risk for a potential increase in NYDOL claims. Employers may consider increasing salary for workers who are at the ‘edge’ of the exemption, to avoid a potential increase in NYDOL claims, but that decision comes at a cost, especially amidst recent increases to the New York minimum wage.
Finally, employers should recognize that the Bill concerns different thresholds than the recently-increased minimum wage and overtime thresholds under Article 19 of the NYLL, though all of these laws warrant special attention to the changing wage payment landscape in New York.
If you have questions concerning wage and hour practice and compliance, please contact a member of Kelley Drye’s Labor and Employment team.
]]>The new rule specifically provides that a company may be considered a joint employer if it has authority to control the essential terms and conditions of employment, whether or not such control is exercised. Significantly, the control may be direct or indirect. The new rule broadens the definition of “essential terms and conditions of employment” to include “work rules and directions governing the manner, means, or methods of work performance.” Essential terms and conditions of employment also include wages, hours of work, assignment and supervision of duties, discipline, hiring and firing, and working conditions.
By adopting this new standard, this rule reverts from the NRLB’s 2020 rule which had narrowed the joint-employer test to include only those situations where the company exercises direct control over the conditions of employment. The 2020 rule had reversed an employee-friendly, Obama-era decision, Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 (2015), which held that a company could be considered a joint employer where the company indirectly controlled the essential working conditions of another company’s employer. Now, in another reversal by the NLRB, the new rule marks a return to a broad, employee-friendly standard akin to the BFI standard.
As the new rule broadens the definition of joint employer, companies should evaluate whether their business structure means they could be considered joint employers due to any “indirect” control over another company’s employers. This change is particularly important for companies who outsource staffing, employee management, or human resources or those who are considering entering into such relationships. As both traditional outsourcing and managed services providers have grown into multi-billion-dollar industries, large and small businesses often outsource to fill skill gaps, cut costs, and maintain flexibility. Common sectors for outsources include payroll, IT, cybersecurity, human resources, and customer service. Given this increasing trend of utilizing outsourcing, companies should pay special attention to the NLRB’s new rule in analyzing their business relationships. With that backdrop, companies should take a fresh look at any staffing and third party agreements to determine whether they contain reserve control provisions, which are likely probative of joint-employer status.
Companies should recognize that status as a joint employer gives them a role in the following areas:
The proposed guidance lays out in detail the legal standards applicable to harassment claims under the federal law and provides a variety of illustrative examples coupled with references to recent case law.
One of the most notable aspects of this guidance is the incorporation of the Supreme Court’s decision in Bostock v. Clayton County. In Bostock the Supreme Court ruled that Title VII’s protections extended to claims for discrimination on the basis of sexual orientation and gender identity. Although that case dealt with a discriminatory termination, and not harassment, in the proposed guidance, the EEOC has noted: “[t]he Supreme Court’s reasoning in the [Bostock] decision logically extends to claims of harassment.”
The proposed guidance unequivocally states that Title VII extends to claims for harassment on the basis of sexual orientation or gender identity, “including how that identity is expressed.” Beyond these overt protections for LGBTQ+ employees, the proposed guidance also expressly acknowledges pregnancy, childbirth, and “related medical conditions,” encompasses harassment claims based on a woman’s reproductive decisions, including those related to contraception and abortion.
The EEOC’s proposed guidance lays out a playbook for how employers can show that they have exercised “reasonable care” both to prevent and correct harassment by describing in detail features of effective anti-harassment policies, processes, and training.
But the guidance is not final just yet. It is anticipated that the guidance will be published in the Federal Register on Monday, October 2, and once published the draft guidance will be open for public comment for 30 days.
Although the guidance itself will not be legally binding, employers would be wise to review this lengthy document and understand myriad ways that employees can pursue harassment claims against employers. If anything, it is a reminder that the best defense to these kind of claims is working to foster a respectful workplace and maintaining effective policies to mitigate issues that may arise. If you have any questions concerning compliance of your business’s current harassment policies or procedures, please contact a member of Kelley Drye’s Labor and Employment team.
]]>In a recent webinar, Kelley Drye Partners, Kimberly Carter and Katherine White, and General Counsel & Deputy Comptroller for Legal Affairs, NYC Office of the Comptroller, Justina K. Rivera, explored the current AI legal and regulatory landscape in the U.S. and the opportunities and challenges associated with using AI-related technologies in the employment context. In this blog post, we summarize the high-level takeaways from the session.
AI Legal and Regulatory Landscape in the U.S.
Currently, no federal law specifically regulates the use of AI-related technologies. However, in recent years, federal regulators, including the Equal Employment Opportunity Commission (EEOC) and the Department of Justice (DOJ), have taken certain steps that demonstrate that they have been (and will remain) focused on the use of AI in the workplace.
More notably, in April 2023, the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), the DOJ’s Civil Rights Division, and the EEOC issued a joint statement noting that existing laws apply to the use of AI-related technologies and affirming that each agency/department will use its existing statutory authority to protect against unlawful discrimination in AI systems.
Moreover, in the absence of federal legislation regulating the use of AI-related technologies, certain state and local lawmakers have enacted laws that regulate the use of such tools in the employment context.
Several other states, including California, Massachusetts, New Jersey, and Vermont, are considering legislation that would also regulate AI in the workplace.
Putting It Into Practice
As federal, state, and local lawmakers and regulators continue to respond to the proliferation of AI-related technologies, an organization that is using these tools in the employment context should take certain steps to ensure legal compliance and help avoid regulatory scrutiny, including the following:
Representation Process
On August 25, 2023, the NLRB issued a Final Rule expediting the representation process, which takes effect on December 26, 2023. Typically, the representation process commences with representation petitions filed by employees, unions, or employers seeking an election. The election determines whether employees wish to be represented for purposes of collective bargaining with their employer. The NLRB will review the petition and determine if an election should be conducted and will direct an election. In cases where the parties do not agree on the voting unit or other issues, the NLRB’s regional office holds a pre-election hearing to decide whether an election should be conducted. The NLRB’s recent rule expedites each step of the representation process, including the election and pre-election hearing procedures, thereby benefiting employees seeking to unionize.
How does the Final Rule Change the Election Process?
There are ten key changes to the pre-election hearing process, notifications of election information, and election process, which depart from the 2019 rule, and are set forth below.
If employers anticipate that their employees may file a representation petitions, employers should familiarize themselves with the updated representation process and work with counsel to address any concerns.
In the event that a representation petition is filed, employers should be prepared to move quickly in complying with all procedural requirements and challenging the representation petition, if necessary. As employers’ ability to obtain additional time throughout the representation process is significantly curtailed by these changes, employers will also have less time to engage in negotiations during the election and pre-election processes and must have counsel who can capitalize on tight timelines.
Changes in Protected Activity
In Miller Plastic Products, Inc., the NLRB announced its return to a “totality of the circumstances” test for determining what constitutes protected concerted activity by employees under Section 7 of the National Labor Relations Act (the “Act”). Miller Plastic Products, Inc. involved the termination of a worker who raised concerns about COVID-19 safety protocols and the company’s decision to stay open in the beginning of the pandemic. The NLRB ruled that the company violated the Act as the worker was engaged in protected concerted activity. In Miller Plastic Products, Inc., the NLRB overruled its 2019 Alstate Maintenance, LLCdecision, which had narrowed the test for determining concerted activity using a checklist of factors and returned to the 1986 rule in Meyers Industries Inc., providing a fact-specific examination that looks at the totality of the circumstances. The NLRB also addressed the issue of whether single-worker actions constitute protected organizing activity and concluded a holistic approach evaluating whether an individual’s protests have some connection to group or concerted action is warranted.
Similarly, in American Federation for Children, Inc.,the NLRB held that federal labor law protects workers who advocate for nonemployees, such as interns, reversing a Trump-era ruling that allowed employers to penalize employees for aiding unprotected colleagues. Specifically, the NLRB overruled its 2019 Amnesty International decision, which held that the statutory concept of “mutual aid or protection” did not encompass the efforts of statutory employees to help themselves by helping others who are not statutory employees. In American Federation for Children, Inc., the NLRB concluded that the Act protects the efforts of employees who take action to support nonemployees when those actions can benefit the employees who undertake them.
After the shifts announced by Miller Plastic Products, Inc. and American Federation for Children, Inc., employers should be prepared to address employee complaints that could fall into the category of concerted activity or protected advocacy on behalf of nonemployees in a manner that complies with the Act.
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