Add One Line in Your Employment Contracts and Policies to Reduce Exposure to Misclassification Liability

Employers, even with the most robust and well-intentioned human resources departments, can still face the dreaded misclassification lawsuit for their salaried employers. In many cases, exempt employees are properly classified as executive or administrative employees. A misclassification lawsuit, however, is difficult to dismiss early because plaintiffs are afforded great latitude in crafting factual disputes that can only be resolved at trial. On top of that, plaintiffs generally bring such claims as class or collective actions – making litigation costly as well. Further compounding the problem, settlement of wage and hour misclassification cases is the preferred mode of resolution – but only after a range of damages can be made with some degree of certainty.

What if I told you that if you included one simple sentence in your employment contracts, handbooks and policies for salaried employees, it would likely reduce your exposure by approximately two-thirds in FLSA cases? For starters, it would make it easier to settle at the right amount by avoiding unnecessarily inflated ceiling for damage calculations by plaintiffs. So what are the “magic words” in this simple sentence?

For exempt employees, your salary is intended to pay for all hours worked during each pay period, regardless of your scheduled or tracked hours. Continue Reading

The NLRB Joins the #MeToo Movement

As we previously posted, gender discrimination issues have been a hot topic at the National Labor Relations Board (“NLRB”). Now, it seems the NLRB is even more on board the #metoo movement – but with a twist, sexual harassment by unions. On February 20, 2018, the NLRB in ILA Local 28 (Ceres Gulf, Inc.) (NLRB 2018) issued a very concise, but biting decision that vacated an administrative trial court’s decision dismissing a breach of duty of fair representation case against a union for discriminating and sexually harassing a female union member. The NLRB’s rationale – the ALJ’s “credibility determinations about the [female employee’s] claim were based on sex stereotypes and demonstrated bias.” Wow. Mic drop.

In Ceres Gulf, the union operated an exclusive hiring hall which referred employees for work and training (for certification for certain jobs) based on seniority roster. The employee alleged that she made multiple requests for training and referrals. But, instead of granting her request, the union officer in charge of administering the seniority roster subjected the employee to groping and sexual propositions on at least 10 occasions. The ALJ rejected the employee’s version of the events because – wait for it:

It is simply implausible that [the employee who] appeared to be a tough woman who performs stevedoring work on the docks and previously drove a truck in Iraq, would have meekly allowed [the union officer] to harass and assault her a whopping 10 times, without an utterance. It is even less plausible that she would have tolerated such egregious misconduct to preserve a job that only paid her less than $10,000 annually. It is still less plausible that a woman, who was empowered by having two relatives holding influential union positions … would have allowed [the union officer] to repeatedly violate her. It is also implausible that, if [the union officer] withheld training because she rejected his advances from 2010 to 2015, as she alleges, he would have then enrolled her for training in June 2015 after her rejection. It is also implausible that [the employee], who claims that she was too embarrassed to complain about sexual harassment, would have not opted to address her training problems by solely complaining about [the union officer] other reportedly less embarrassing comments (e.g., his alleged comment that, as a driver, she did not require training, or that he did not want to train her to perform grimy jobs).

Whew. I quoted the entire section for full effect. It is important to note that this ALJ decision was issued in June 2017 – certainly, tone deaf in light of current climates.

While the ALJ’s decision was vacated, the NLRB took the extra step of ordering remand for a new trial but with a newly assigned judge. The NLRB went as far to explain that reassignment was necessary because “this an unusual case where the judge relied on inappropriate bases to assess credibility and intertwined those bases with other legitimate considerations”. In short, the NLRB just could not let the ALJ’s decision stand on the record without some formal rebuke.

On the one hand, this decision could be the result of an isolated situation where one ALJ stepped too far. On the other hand, this decision was issued five (5) days after the NLRB General Counsel, Peter Robb, issued the Google Advice Memo (discussed here) which justified the termination of an employee for crossing the line into sexual harassment while complaining about Google’s diversity practices. The close timing of the Google Memo and this decision is uncanny – raising some questions on the primacy of pro-union policy over other employment rights.

Key takeaways:

  1. Although no formal proposition of law was announced, the NLRB is undoubtedly adopting a very strong cultural position on gender stereotypes and evidentiary standards concerning sexual harassment. Notably, the primary targets in this decision are not the employer but the union through DFR charges and the NLRB’s administrative law judges. The union world (fairly or unfairly) is still largely male dominated. Women may now have an easier opportunity to raise claims against unions which has in large part been male dominated.
  2. In the same way that gender discrimination played into the DFR charge, the question is whether there will be more cases where gender discrimination and harassment will play a significant role in charges against employers. On a macro level, there is some debate as to whether (or the degree to which) activity under other employment statutes are appropriate for the NLRB’s jurisdiction. At the very least, employers can expect a much more gender-sensitive approach by the NRLB’s enforcement staff and administrative law judiciary.
  3. Last – is this a direct shot at unions and the institutional staff/judges at the NLRB? Some employers (fairly or unfairly) complain that unions and the NLRB staff maintain too cozy of a relationship. Pro-union advocates have quietly bemoaned the Google Memo’s legal framework because it utilizes the balancing test announced in the The Boeing Company (NLRB 2017) which rejected the union/employee friendly test in Lutheran Heritage (NLRB 2004). Many unions have a real vulnerability on gender and race discrimination issues. This is an issue that the NLRB can challenge unions while gaining public support for its efforts.

Is Misogyny Protected Activity? Part 2

Earlier, we blogged about James Damore, an engineer at Google who was terminated for his memo, which openly expressed his belief that women were not “biologically suited” for certain types of positions and criticism of the company’s efforts to diversify its work force.

The engineer challenged his termination by filing a charge with the National Labor Relations Board and launched a media offensive arguing that he was fired for his ‘conservative’ views.

I am pleased to report that the NLRB’s general counsel issued an advice memorandum affirming that Google was indeed acting lawfully when it terminated Mr. Damore. Among the conclusions, the NLRB General Counsel Jayme Sophir found that any employer must be given “particular deference” when it is acting to promote and comply with state and federal employment laws, and to promote diversity in their workplaces.  Thus, “employers must be permitted to ‘nip in the bud’ the kinds of employee conduct that could lead to a ‘hostile workplace’, rather than waiting until an actionable hostile workplace has been created before taking action.”

The general counsel also confirmed that the Board has already found that employee conduct, which “significantly disrupts work processes, creates a hostile work environment, or constitutes racial or sexual discrimination” is not protected.

Using that rationale, the Board concluded that Mr. Damore’s “use of stereotypes based on purported biological differences between women and men should not be treated differently than the types of conduct the Board found unprotected in these cases,“ as such comments “were likely to cause serious dissension and disruption in the workplace.”  Therefore, while “much of” the memorandum may have been protected, his statements about “biological differences  between the sexes were so harmful, discriminatory and disruptive as to be unprotected”.

The Board also noted that Google “carefully tailored” its message to explain Mr. Damore’s termination and to ensure employees were aware of their right to engage in protected speech.

The Takeaway for Employers – This decision confirms that, while it may be fine, there is a line which employees cannot cross when they are “protesting” employer actions with which they disagree. Employees may not engage in speech in the workplace (verbally, in written or electronic form), which is openly discriminatory, or which is likely to cause dissension or disruption in the workplace. This should be empowering to all employers. While employers certainly need to be careful when disciplining or discharging an employee under these circumstances, they do have the right to set some reasonable limits on what type of speech will be tolerated in the workplace.

2018 Outlook on Federal Labor Laws

While President Donald Trump is not known for a deliberate approach, the long-anticipated shifts in labor law and policy is starting to take shape in an efficient and measured form. The National Labor Relations Board (“NLRB” or the “Board”) closed out 2017 with several key decisions overturning significant pro-unions policies. These decisions came on the heels of newly minted NLRB General Counsel Peter Robb’s “Mandatory Submissions to Advice” Memo (the “Memo”) directing regional offices to defer to the General Counsel on certain hot-button labor enforcement actions – a clear signal that many more Obama-era policies will be challenged and likely reversed.

It took little time for both the NLRB and the NLRB’s GC under the Trump administration to get started – contrasting the difficulties the Obama Administration faced in confirming appointees to the NLRB. But, the Trump administration’s unusual patience in ensuring that its pieces were in place has paid off. Now that the ball is rolling, we can expect to continue to take forceful and efficient action in the administration’s second year.

Let’s take a look at what to expect for 2018: Continue Reading

New Disability Claims Procedures

As we communicated in our previous advisory, the U.S. Department of Labor has issued new Disability Claims Procedures rules. The original effective date of these rules was extended with the result that the new rules are now effective April 1, 2018.

The new rules are not limited to disability plans. They also apply to any retirement plans, medical plans, and other welfare plans where a participant’s disability has an impact under the plan and the existence of a disability is not based on an independent party’s determination, such as, for example, where an employee’s disabled status references disability as determined by the Social Security Administration or another employee benefit plan (like a long-term disability plan).

Plan sponsors and administrators of ERISA plans that have a disability feature need to take action now to analyze their plan documents, including summary plan descriptions, administrative practices and procedures, and participant notices, to determine the applicability and impact of these new rules and what documentary and procedural changes are needed to ensure compliance with the new rules.

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

Health Care Reform–Cadillac Tax and Other Updates

This Advisory supplements our previous advisories dated December 2016, December 2015 (as supplemented in January 2016), October 2014, October 2013, November 2012, November 2011, and October 2010, addressing certain requirements of the Affordable Care Act (“ACA”). Below is a summary of recent developments impacting some of those requirements.

Cadillac Tax
The budget deal recently struck by Democrats and Republicans further delays, until 2022, the Cadillac Tax. As you recall, the tax, designed to impose a 40 percent tax on the cost of employer-sponsored health coverage over a threshold amount (e.g., $10,200 for individual coverage and $27,500 for family coverage, indexed to the CPI), was originally scheduled to go into effect in 2018. President Obama then signed into a law a two-year delay. That law further provided that the Cadillac Tax (if imposed) will be deductible. While bipartisan support exists for repealing the Cadillac Tax, there is no consensus on how to replace the lost revenue. As a result, employers should continue reviewing their health plans to assess whether future changes to avoid the tax may be required.

ACA Reporting Deadline and Good Faith Transition Relief Extended
For employers subject to the ACA’s 2017 information-reporting requirements, the due date for delivering the 2017 Form 1095-C or -B to employees was extended from January 31, 2018 to March 2, 2018. The deadline for filing the appropriate forms with the IRS was not changed; those forms must be mailed by February 28, 2018 or filed electronically by April 2, 2018. Updated 2017 forms and instructions are available on the IRS website.

Additionally, penalties will not be assessed for incomplete or incorrect information on the 2017 ACA forms, provided the forms are filed or furnished on time and completed in “good faith.” In determining good faith, the IRS will consider whether reasonable efforts were made to prepare for reporting and furnishing the required information and the extent to which an employer is taking steps to ensure that it can comply with next year’s reporting obligations. The IRS does not anticipate extending its transition relief (i.e., due dates or good-faith relief) to reporting for 2018.

To read the full advisory, click here.

Fiscal Year 2017 EEOC Statistics are Here (and So Is Retaliation!)

Last week the EEOC released its annual report breaking down charges received during the fiscal year. In fiscal year 2017, the agency received 84,254 charges and took in $398 million between voluntary resolutions and litigation.

What’s striking is the number of retaliation charges – with 41,097 charges it is an overwhelming 48.8% of total charges filed in 2017. In second place was race with 28,528 charges, followed closely by disability in third place with 26,838. Charges based on sex were not far off with 25,605 charges in the year. The EEOC received 6,696 sexual harassment charges, which is a slight drop from fiscal year 2016’s 6,758 charges.

As employers face more internal complaints of harassment – this retaliation number further highlights the critical importance of a robust and well-honed investigation process. Employers need to handle investigations very carefully, and be mindful that the complainant (and the witnesses) may also be the source of your next retaliation complaint. Investigators and managers must be carefully trained to avoid situations which can lead to complaints or retaliation.

Overall, the EEOC resolved close to 100,000 charges in fiscal year 2017 (99,109), reducing the charge workload to the agency’s lowest inventory in a decade.

Predictive Scheduling: New York (State) of Mind

Retail employers beware: New York City’s predictive scheduling law went into effect on November 26, 2017, and now New York State is now getting in the mix. The New York State Department of Labor (“NYSDOL”) recently released draft regulations that would amend the rules for scheduling employees covered by the Minimum Wage Order for Miscellaneous Industries and Occupations. The NYSDOL comment period recently came to a close on January 22, 2018. Likely on the heels of the NYSDOL’s issuance of a final rule, we break down what employers need to know. But before diving into the proposed NYSDOL draft regulations, let’s recap the New York City predictive scheduling law that recently went into effect.

New York City Predictive Scheduling Law
On November 26, 2017, New York City’s “Fair Workweek” legislation went into effect, which is a collective of laws aimed to protect fast food and retail workers. This blog focuses on the provisions for retail workers. The following Q+A provides an overview of the law’s key provisions applicable to retail businesses:

  • Does the new law apply to all retailers? No. The law applies to “retail businesses” which are defined as entities with 20 or more employees engaged primarily in the sale of consumer goods at one or more stores within New York City.
  • Does the new law apply to all employees? Almost all. This law applies to full-time, part-time, and temporary workers. This law does not apply to employees covered under a valid collective bargaining agreement.
  • What kind of notice is required? Employers must provide each individual employee with a final schedule at least 72 hours before the employee’s schedule begins. Employers can provide employees with their schedules in the manner in which they usually contact employees so text or email works. Employers must also post the schedule in-store in an area where all employees can view it.
  • On-call outlawed? Yes. What used to be a standard industry practice is now outlawed; an employer cannot require an employee to call in fewer than 72 hours before a shift beings to determine if he or she should come to work.
  • Can you add a shift? Not with less than 72 hours’ notice. However, this does not prohibit an employer from asking an employee if he or she would be willing to do so. If the employee is willing, the employer must obtain the employee’s written consent.
  • Can you cancel a shift? Not with less than 72 hours’ notice except under limited circumstances including: 1) threats to employees or the employer’s premises; 2) public utility failure; 3) shutdown of public transportation; 4) fire, flood, or other natural disaster; or 5) a government-declared state of emergency.
  • I have to keep what for how long? An employer must retain employee work schedules for at least three years. An employer is also required to provide employees with their work schedules for any previous week worked for the past three years within 14 days of the employee’s request.

Continue Reading

Employer Vaccine Programs: A Case Where Religion is NOT a Factor

This year flu season came early and with a vengeance. As we mentioned in our October post, The Rise of Employee Religious Discrimination Claims, mandatory flu vaccines present a common pitfall for employers. As employers seek to avoid flu outbreaks in the workplace, they may unknowingly head toward a flu case in the courtroom. Issues arise when employees present sincerely held religious beliefs, or medical issues, that may preclude their flu vaccine. This is a particular challenge in hospitals.

A recent Third Circuit decision should be heartening to employers who are trying to manage vaccination programs. In Fallon v. Mercy Catholic Medical Center of Southeastern Pennsylvania, No. 16-3573, LINK the Third Circuit affirmed the dismissal of a complaint by an employee who was fired for refusing a vaccine, concluding that an employee did not have a valid religious objection and could be lawfully fired.

The plaintiff, Paul Fallon, had worked at Mercy Catholic since 1994. It was only in 2012 that Mercy Catholic began requiring employee vaccinations. In both 2012 and 2013, Fallon submitted requests for exemption that were approved. Each time Fallon submitted his exemption request, attaching a twenty-two page essay outlining his “sincerely held beliefs” that the vaccine was harmful. However, in 2014, Fallon submitted his same request and received a denial in response, along with an explanation that Mercy Catholic had changed its standards for the exemption. Mercy Catholic requested a letter from a clergyperson supporting his exemption request. Fallon was unable to provide a letter and was ultimately terminated.

Following termination, Fallon filed suit in federal court alleging disparate treatment, religious discrimination and failure to accommodate his religion. After the District Court granted Mercy Catholic’s motion to dismiss, Fallon appealed the decision to the Third Circuit which affirmed the dismissal. In doing so, the Third Circuit undertook an examination of whether Fallon’s beliefs were “religious,” ultimately concluding they were not. Continue Reading

New Tax Law Impact on Employee Benefits and Compensation

At the end of 2017, President Trump signed into law The Tax Cuts and Jobs Act (the “Act”) that includes significant changes in the employee benefits area, most of which became effective on January 1, 2018. The following is a brief description of some of the notable changes, and we expect additional guidance on many of the Act’s provisions.

Executive Compensation

IRC §162(m) Changes for Public Companies. The Act repeals the performance-based compensation exception to the $1 million pay cap under IRC §162(m) and expands the definition of “covered employee” to include anyone who holds the CEO or CFO position at any time during the tax year plus the three highest paid executive officers for the year. Under the new rules, once a covered employee, always a covered employee with respect to compensation paid in future years – including compensation that becomes payable following retirement (e.g., severance and deferred compensation) and amounts payable to beneficiaries. Under a transition rule, compensation payable pursuant to a written binding contract in effect on November 2, 2017 that is not materially modified thereafter is exempt from the new requirements.

Qualified Retirement Plans

Loan-Offset Rollovers. Previously, a terminated participant who defaulted on a plan loan was deemed to have taken a taxable distribution for the outstanding loan balance unless that amount was contributed to another qualified plan or IRA within 60 days of termination. The Act extends the 60-day period to the due date (including extensions) for filing the participant’s tax return for the year the loan default occurs.

2016 Disaster Relief. Much like the relief provided by the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (see our previous Client Advisory), the Act provides individuals impacted by major disasters in 2016, including Hurricane Matthew, with penalty-free access to retirement funds through qualified distributions of up to $100,000, allows the amount distributed to be repaid over 3 years, and allows taxpayers who cannot repay the distribution to spread out any income inclusion over 3 years. Plan amendments implementing these provisions must be adopted on or before December 31, 2018 (for calendar year plans).

Hardship Withdrawals. Defined contributions plans that allow for safe-harbor hardship withdrawals should examine the extent to which hardship withdrawals may be permitted due to casualty losses as the Act restricts what may be classified as a casualty loss.

To read the full advisory, click here.