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New FLSA Regulations Are Here . . . But We’ve Got Miles To Go Before We Sleep

After months of anticipation and many rumors about when the U.S. Department of Labor would release new proposed rules on which employees are eligible for overtime pay, the day has finally arrived. After a speech on the topic by President Obama the night before, the DOL publically announced on the morning of June 30th its proposed regulations, thereby starting the process necessary for the regulations to take effect. HR pros need to understand these new proposed regulations, but also the timeline they will be on before they can have the force of law.

Currently, the salary threshold for a “white collar” employee (a bona fide executive, administrative or professional) to be exempt from the Fair Labor Standards Act’s (FLSA) overtime requirement is $455 a week ($23,660 a year). That figure was last revised more than a decade ago in 2004. The new proposed rule would more than double that minimum salary amount to an estimated $970 a week ($50,440 a year). Employers are required to pay non-exempt employees overtime (a rate not less than one and one-half times the worker’s regular rate of pay) when they work more than 40 hours in a workweek.

The proposed regulations would also put in place a method for updating the salary level – it would be pegged to the 40th percentile of weekly earnings for full-time salaried workers. So the amount would change rather than be static (requiring new DOL regulations to be increased, as has historically been the case). The DOL estimates that the 2016 level will be approximately $970 per week, but no estimate is offered for future years.

Another notable change proposed by the new rules is an increase in the total annual compensation requirement needed to exempt workers that the FLSA defines as “highly compensated employees.” The proposed rules would increase this amount from a fixed minimum of $100,000 per year to a changing amount based on the 90th percentile of weekly earnings of full-time salaried workers (estimated to be $122,148 a year in 2016).

Notably, while the proposed rules would dramatically change these salary thresholds, the DOL is not making specific proposals to modify the standard duties tests also required to be met for an employee to be exempt from the FLSA. But, the DOL is seeking comment on whether those tests “are working as intended to screen out employees who are not bona fide white collar exempt employees.” Undoubtedly, employee-aligned stakeholders will push for tougher or more limiting tests on who meets those exemptions.

While these changes are big – the DOL estimates that the proposed rules would make nearly 5 million more white-collar workers eligible for overtime pay within the first year alone – they do not take effect immediately (as the Robert Frost-inspired title to this post suggests). Rather, once these proposed rules are published in the Federal Register (which should happen soon), there will be a required period for public comment before the DOL can issue final regulations (either making changes based on those comments or not) that employers will then have to follow. That process, plus possible court challenges, will likely keep any new rules from going into effect until sometime in 2016.

Nonetheless, it makes sense for employers to start thinking about these salary numbers and types of employees that will see either significant pay increases to stay exempt, or will become non-exempt and therefore entitled to overtime. Job duties and salary levels of exempt employees should be carefully reviewed, and plans – and budgets – should be assessed now, rather than only after these rules take effect. The DOL has posted a fact sheet explaining the proposed rules which, along with contacting your trusted attorney, is a good place to start.

July 1, 2015   No Comments

Employees Can Be Terminated for Using Marijuana – Even in Colorado

More than a year ago we wrote about the intersection of state laws permitting certain medicinal and recreational use of marijuana and employers’ lawful ability to enforce policies prohibiting drug use.  (A Hazy Area of the Law:  The Impact of Medicinal and Recreational Marijuana Laws on Employers.)  At that time, we noted that a Colorado Court of Appeals’ ruling strengthened the position that an employer can lawfully terminate an employee for using medicinal marijuana in violation of its drug policies, even if the employee was not impaired at work and did not use marijuana while at the worksite or during work hours.  The Colorado Supreme Court recently confirmed that proposition, giving employers a big sigh of relief.

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In that case, Brandon Coats, a telephone customer service representative with a satellite communications company, tested positive for marijuana during a random drug screening, and his employer fired him for violating the company’s drug policy.  Coats, a registered medical marijuana patient in Colorado, used the drug while at home to treat painful muscle spasms caused by his quadriplegia.

After his termination, Coats sued, alleging that his firing violated Colorado’s “lawful activities statute” by discharging him due to his state-licensed use of medical marijuana at home during nonworking hours.  Coats argued that Colorado’s Medical Marijuana Amendment made such use “lawful” under the state’s lawful activities statute.  The trial court dismissed Coats’s complaint after finding that medical marijuana use is not “lawful” under that statute.  In 2013, the Colorado Court of Appeals affirmed.

The Colorado Supreme Court recently affirmed the lower courts’ decisions.  It noted that the term “lawful” was general and not restricted in any way.  The court declined “to engraft a state law limitation onto the term” by holding the term “lawful” means activities that are “permitted by law” and those that are “not contrary to, or forbidden by law.”  Consequently, the court concluded that any activity that is unlawful under either federal law or state law cannot be “lawful” under Colorado’s lawful activities statute.  The court declined to address whether medical marijuana use is lawful under Colorado’s Medical Marijuana Amendment because the behavior was unquestionably unlawful under federal law.

As we suggested in our earlier article, this ruling further strengthens an employer’s right to discipline or terminate an employee for violating the company’s drug policy, even if that employee was not under the influence while at work and did not consume illegal drugs during work hours.  Colorado companies can continue to enforce drug policies that prohibit the use of marijuana because both the medicinal use and recreational use of the drug are prohibited under federal law.  Employers outside of Colorado should continue monitoring judicial decisions interpreting medicinal and recreational marijuana laws as they quite likely become law in other states.

June 30, 2015   No Comments

Breaking News: U.S. Supreme Court Upholds Health Care Subsidies

The U.S. Supreme Court has today upheld another challenged provision of the Affordable Care Act, this time related to government subsidies.  We’ve gathered some of the top news articles on the decision:

Of course, there will be more legal analysis to come.  But clearly, as a result of the decision, employers will still have to continue navigating the many challenges presented by the ACA.

Watch for more details and analysis about the Supreme Court’s decision posted here soon.

June 25, 2015   No Comments

“Good” and “Bad” Employee Handbook Rules in Light of Increasing Section 7 Violations: The NLRB GC’s Report

National_Labor_Relations_Board_logo_-_colorEarlier this year, on March 18, 2015, NLRB General Counsel Richard F. Griffin, Jr. issued a report covering recent cases on employee handbook rules that encroached on employees’ Section 7 rights under the National Labor Relations Act.  Griffin’s report (GC Memo 15-04) stated that the vast majority of handbook violations are due to employers’ failure to comply with the first prong of the Lutheran Heritage test.  The report also provides timely guidance to employers in light of a recent NLRB decision against a fast-food restaurant’s finding Section 7 violations in its employee handbook.

This post will begin by introducing the Lutheran Heritage test and this and following posts will discuss examples of lawful and unlawful handbook rules from Griffin’s report.  Future posts will use the Lutheran Heritage test to examine the violations found in that fast-food restaurant’s employee handbook and how the unlawful rules were revised pursuant to a settlement agreement.  Finally, additional posts will discuss best practices for employers to ensure employees’ Section 7 rights remain protected.

The Lutheran Heritage Test

The Lutheran Heritage test originated from Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), a case that came before the NLRB when an employer’s work rules were challenged on the grounds that they chilled employees’ exercise of Section 7 activity (i.e., “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities”).  The Board held that when an employer’s rule does not explicitly restrict activity protected by Section 7, it will still be deemed unlawful if “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.”  Griffin’s report focuses on the first prong of this test.

Rules Regarding Confidentiality

Employers have an interest in protecting confidential company information.  However, employers must be careful not to create an overbroad restriction against sharing company information that may lead employees to reasonably believe that their Section 7 activity is being prohibited.  An employer’s policy that “either specifically prohibits employee discussions of terms and conditions of employment – such as wages, hours, or workplace complaints – or that employees would reasonably understand to prohibit such discussions, violates the Act.”  See Flamingo-Hilton Laughlin, 330 NLRB 287, 288 n.3, 291-92 (1999).  Also, a rule that is broad enough to encompass “employee” or “personnel” information without sufficient clarification would be considered unlawful.  For instance, restricting employees from disclosing information about other associates that was “obtained in violation of law or lawful Company policy” is too overbroad because a reasonable employee would not know what constitutes a “lawful Company policy.”

Below are some examples of unlawfully overbroad provisions:

  • Prohibiting employees from “[d]isclosing…details about the [Employer].”
  • Prohibiting the “sharing of [overheard conversations at the work site] with your co-workers, the public, or anyone outside of your immediate work group.”
  • Requiring that employees “discuss work matters only with other employees who have a specific business reason to know or have access to such information….” and “not discuss work matters in public places.”
  • Instructing employees that “if something is not public information, you must not share it.”

In contrast, the following provisions were found to be facially lawful because the definition of “confidential information” was not overbroad, there was no language to otherwise restrict Section 7 communications, and there was no reference to employee terms and conditions of employment:

  • No unauthorized disclosure of “business ‘secrets’ or other confidential information.”
  • “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [Employer] is cause for disciplinary action, including termination.”
  • “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.”

Clearly, employer rules involving confidentiality require careful attention to detail as the NLRB’s decisions on these cases are often very fact-specific.  Savvy employers will be sure to vet their confidentiality requirements with legal counsel to make sure they do not run afoul of the NLRB’s cases described in Griffin’s report.

Our next post on the report will cover rules regarding:  (i) employee conduct towards the Company and supervisors, (ii) employee conduct towards fellow employees, and (iii) employee interaction with third-parties.

June 24, 2015   No Comments

Distinguishing “Motive” and “Knowledge” – The Supreme Court’s Decision In EEOC v. Abercrombie & Fitch Adds New Considerations To The Hiring Process

Last week the Equal Employment Opportunity Commission (EEOC) won  what has become known as the “headscarf case” before the U.S. Supreme Court. The case, EEOC v. Abercrombie & Fitch, deals with provisions of Title VII that make it illegal for an employer to refuse to hire a job applicant just to avoid accommodating a religious practice. The decision expands Title VII liability to instances where a job applicant has not informed the employer of a need for an accommodation―a novel concept to many employers.

In Abercrombie, the EEOC brought suit on behalf of Samantha Elauf claiming that the company violated Title VII by not hiring her. At the time, Abercrombie had a “look policy” that governed employees’ attire and prohibited employees from wearing “caps.” Elauf is a Muslim teenager who wears a headscarf as a part of her religious practice. She wore the headscarf to her interview at Abercrombie. The company suspected (but did not confirm) that Elauf wore the headscarf due to her religious beliefs. Yet, Elauf was not hired because her headscarf violated the “look policy.”

The EEOC prevailed in the district court, receiving money damages for Elauf. However, the Tenth Circuit Court of Appeals reversed and held that an employer does not violate Title VII’s ban on religious discrimination unless management actually knows that a job applicant needs an exception from a work rule due to a religious practice. The EEOC appealed arguing that Title VII contained no such knowledge requirement.

At the Supreme Court, Abercrombie argued that unless the applicant told the interviewers that she intended to wear a headscarf for religious reasons she could not sue for failing to accommodate that religious practice. In essence, Abercrombie sought to put the burden on the applicant to tell the employer of the need for an accommodation. This argument was squarely rejected by the Supreme Court in concluding that Title VII does not include a burden-shifting test that would put the burden on plaintiffs to seek a religious accommodation. Even more, the Supreme Court explained that unlike the Americans with Disabilities Act (ADA), Title VII includes no requirement that an employer have actual knowledge of the reason for an applicant’s need for an accommodation.

But how can an employer intentionally discriminate without knowledge of the need for a religious accommodation? The Supreme Court explained that “motive and knowledge are separate concepts.”  Intentional discrimination prohibits certain motives, regardless of the state of the actor’s knowledge. Thus, an applicant need show only that her need for an accommodation was a motivating factor in the employer’s decision, not that the employer actually knew of her need. So, “an employer may not make an applicant’s religious practice confirmed or otherwise, a factor in employment decisions.”

The question not squarely answered by the Supreme Court is whether an employer’s motive to avoid accommodating a religious practice requires knowledge that the practice is religious in nature. While the majority stated that it is “arguable” that the motive requirement is not met unless the employer at least suspects that the practice in question is a religious practice, the Court left this question for another day because Abercrombie knew―or at least suspected―that the scarf was worn for religious reasons.

Following this decision, employers may be tempted to ask explicitly whether an accommodation is based on a religious belief or if a candidate ascribes to a particular faith. Of course, it is risky to ask any questions about someone’s protected characteristics during a job interview. So this decision creates a difficult situation where an employer risks suit for both asking and not asking certain questions. Regardless, employers now know that an applicant does not have to explicitly put the employer on notice of his or her religious practice to set forth a Title VII claim. Employers should therefore be on high alert when they know or suspect that something is being worn for religious reasons. Moreover, an employer who has a reason to believe or suspect that accommodation may be necessary (regardless of the source) will need to consider engaging in an interactive process over the possible accommodation with the applicant.

June 10, 2015   No Comments

Federal Court Ruling Expands Reach of Non-Compete Law in California

California employers have long been aware that California state law prohibits inclusion of non-compete clauses in standard employment agreements.  But, in a first of its kind case, a divided federal appeals court panel has interpreted California Business and Professions Code Section 16600 to also bar “no-employment” contract terms that prevent a former employee from working for the former employer or any entity in contract with the former employer.  The court held that this type of provision limits an employee’s ability to work in contravention of the terms of Section 16600.

In Golden v. California Emergency Physicians Medical Group, et al., a majority opinion from the Ninth Circuit Court of Appeals (which covers California) reasoned that Section 16600 is not limited solely to traditional non-compete agreements but instead covers any employment agreement that restrains people from engaging in a lawful profession, trade or business.  At issue in the case was a settlement agreement between an emergency room physician and his former employer that contained a provision that waived the doctor’s rights to employment with the medical practice or at any facility that the practice may own or with which it may contract in the future.  When the doctor refused to execute the written agreement, his attorney sought to enforce the agreement against him and the trial court held that Business and Professions Code § 16600 did not void the settlement agreement as it did not inhibit the doctor from competing with his former employer.

On appeal, the doctor argued that Section 16600 voids the agreement because the no-employment provision may impermissibly restrain his professional practice.  The dissent did not agree with that position, noting that such a possibility was at best hypothetical and did not limit his current ability to practice his profession.  However, the majority ruled that Section 16600 does not limit itself to non-compete clauses and may apply to this case.  In doing so, the court noted that Section 16600 does not use the word “competition” and is written in a very broad manner that contrasts with the later sections that detail specific exemptions to the rule.  The court declined to determine whether the contract was actually void; instead, it sent the case back to the trial court for additional fact-finding to determine whether the contract term created a substantial restraint on his professional practice.

California employers who include no-employment provisions in their severance or settlement agreements with former employees should take caution when including such terms and tailor them carefully to avoid challenge under Section 16600.  Provisions that allow an employer to terminate employment if a former employee is found to later be employed by a contractor or a company acquired by the employer may be deemed overly restrictive based on this ruling and may result in a void agreement.  That is a significantly dangerous result, as other rights created by the agreement regarding the former employee could also be lost to the employer.

April 24, 2015   No Comments

Not an April Fool’s Joke

Protecting alleged “whistleblowers” has become a greater and greater priority of government agencies in recent years.  When agencies believe employers are taking actions that stifle the “whistleblowing” of employees, they are quick to take strong action.  For the first time, an agency that gets plenty of attention from companies has joined in this effort.

The Securities and Exchange Commission (SEC) today issued an order in an administrative proceeding that found KBR, Inc. had violated SEC Rule 21F-17, which states: “No person may take any action to impede an individual from communicating directly with [the SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.”—Rule 21F-17(a))

KBR has now amended its form confidentiality statement which the SEC found violated that Rule.  Previously, it stated that witnesses were “prohibited from discussing any particulars regarding [business conduct interviews] and the subject matter discussed…unauthorized disclosure may be grounds for…termination of employment.”  KBR has to pay $130,000 in sanctions along with notifying its employees over the past 3 1/2 years that KBR does not require authorization to disclose information to the SEC and other agencies’ Inspectors General.

According to the attached press release from the SEC: “Other employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”  That is wise advice — unless you want to have the SEC investigating your business or you want to be a “test case” to challenge the SEC’s action.

Read the press release issued by the SEC.

April 1, 2015   No Comments

Can Employers Prohibit Secret Workplace Recordings?

Our very own HR Law Matters contributor Jim McCabe has written an insightful analysis on whether employers can prohibit employees from secretly recording conversations in the workplace.  The article was published yesterday on Law 360 and can be viewed here.

The article discusses the types of legal challenges to policies and practices limiting secret workplace recordings that have been brought under federal whistleblower statutes, federal nondiscrimination laws, and the National Labor Relations Act.

Jim’s article reviews these challenges and offers thoughts on the risks employers face when they consider enacting or enforcing such policies on secretly recording conversations in the workplace.  He offers considerations all employers must weight before deciding to take an action — such as terminating an employee — for secretly recording conversations.

This article is a must-read for employers, whether they have such a policy, have considered creating one, or just want to be sure they are aware of the benefits and risks such a policy could have for their workplace.  If you have more questions or want to discuss this topic further, be sure to call or email Jim — he’d be happy to hear from you.

March 10, 2015   No Comments

Cyber Threats and Online Defamation: Options When Former Employees Won’t Let Go

Online forums where anyone can post comments, reviews, or opinions about a company are growing in popularity.  As a result, employers are finding postings by former employees who may have left on “bad” terms and now share their unhappy feelings with the world.  Often such postings – while annoying and potentially embarrassing – are well within an employee’s rights.  Companies need to remember that the former employee will likely soon grow tired of the cyber smear campaign, and such posts do not often cause meaningful damages (particularly the type that can be proven in court).  Additionally, where such posts are on sites like Twitter or Facebook, the daily volume of postings means that any bothersome posts get moved down the feed pretty quickly.  Most of the time the employer’s best bet is to follow the advice of Disney’s “Frozen” and just “Let it Go.”

But sometimes a former employee’s postings cross the line into false and defamatory statements that truly affect the company.  Employers have options to consider to try to stop these postings and prevent further damage.  Some of these options are:

1. Issue a press release/formal response.  Where the criticism is so extraordinary that it is damaging the business, an employer could post its own statement or respond via Twitter/Facebook.  But be careful; this approach might fuel more attention on the original post.  

2.  Contact the internet service provider (ISP).  The company could demand that the ISP: (1) remove the post(s), (2) identify the poster, and (3) retain all evidence concerning the origin of the postings.  Where the postings themselves demonstrate  defamatory/blatant misrepresentation intended to cause harm, an internet site may remove the postings as a violation of its terms of service (though this outcome is somewhat rare because ISPs are typically immune from liability for the defamatory statements of third-party users under the Communications Decency Act of 1996).  

3. Cease and Desist Letter.  A letter demanding the poster stop may be sent – if the company can identify the poster.  The letter should outline claims that the company would bring against the former employee, including a request for attorneys’ fees and an injunction.  Depending on whether the former employee is covered by an arbitration provision that survived termination (such as in a severance agreement), such an action may have to proceed via arbitration rather than in court.

4. Litigation.  A lawsuit (or demand for arbitration) may be brought seeking damages and retraction of damaging, malicious misrepresentations as well as for breach of any relevant employee confidentiality agreements.  Defamation claims are difficult to win for companies because they typically require proof not only that the postings caused actual damages to the company, but also that they were malicious misrepresentations rather than mere opinions.  Where statements are made on social media sites where readers expect to see opinions, courts have found that such postings are more likely opinions rather than misrepresentations of fact.  This is significant because, unless enough specificity is provided to convince a court that measurable economic harm has been done by the disparaging postings, the poster’s opinion may be viewed as protected speech, and fees and costs can be awarded against the employer under anti-SLAPP statutes.

While often the former employee is simply blowing off steam and the defamatory postings will peter out without much fanfare, employers should know that these (and other) options are available  to help stop defamatory postings or any further damage to the company’s reputation.  Just be careful that the cure is not worse than the harm itself.

February 13, 2015   No Comments

OFCCP’s 2014 in Review: Regulatory Changes Abound, Systemic Hiring Claims Remain Priority

In 2014, the biggest headlines out of the Office of Federal Contract Compliance Programs (OFCCP) were the slew of regulatory and directive changes announced and finalized.  These included:

  • significant changes to the VEVRAA (veterans) and Section 503 (disabled) regulations;
  • an amendment to Executive Order 11246 (as well as new related regulations) to add sexual orientation and gender identity to the non-discrimination and affirmative action requirements;
  • a new Executive Order requiring contractors to provide  information regarding employment and labor law violations in connection with contract bids (and related other requirements);
  • release of proposed regulations that would require contractors to submit annually their compensation information by race and gender (that are expected to be finalized in early 2015);
  • an overhaul of the federal contractor compliance manual; and
  • a revised and significantly expanded compliance audit letter.

While these changes have dominated the articles and discussions of the prior year, contractors should not lose sight of what remains the OFCCP’s continued priority in audits – pursing systemic hiring claims.  Some of the more significant hiring-related claims and settlements from 2014 included:

  • $1,500,000 in back wages and interest to 3,651 affected applicants, plus 113 job offers to the original class members as positions become available
  • $475,000 in back wages and interest to settle allegations of sex discrimination affecting 1,293 female job seekers, and 116 job offers to the original class members as positions become available
  • 104 women and 91 African-Americans who were denied jobs as valets who received a total settlement of $275,000 and placement of 65 of the women and 27 of the African-American class members into valet positions – with retroactive seniority and benefits for the new hires
  • $1 million in damages and providing 48 job opportunities to 5,557 qualified African-American
  • $200,000 to 247 minority workers who were rejected for engineering positions comprised of 152 Asian Americans, 51 Hispanics, 29 African-Americans, 3 Native Americans and 12 individuals who identified as two or more races
  • $2.2 million in back wages and interest to nearly 3,000 African-American, Hispanic, Caucasian and female job applicants after OFCCP investigators found that hiring managers at each location used inconsistent and subjective practices to favor one group over another based on race and sex
  • $537,000 in back wages and interest to 102 women who were rejected for entry-level attendant positions

Most of these claims were based on a statistical analysis of the number of applicants who were minorities or females as compared to the number of those hired.  In light of this continued OFCCP focus, contractors would be well advised to make it a priority to review their applicant data, especially the impact of any tests utilized in their application process, and make any changes possible to avoid a statistical result showing adverse impact discrimination.

January 28, 2015   No Comments