New York State’s Paid Family Leave Benefits Law – Are You Ready?

By Lynne Anne Anderson

Private employers in New York will need to be ready to provide paid family leave to eligible employees as of January 1, 2018. However, by July 1, 2017, employers may start withholding from employee paychecks to fund the program.

As a brief background, the New York Paid Family Leave Law (NYPFL) is effective January 1, 2018, and has been touted as the nation’s most comprehensive paid family leave program. The NYPFL provides for a phased schedule of paid leave entitlement for employees that need to take time off to:

  • bond with their child during the first 12 months after the child’s birth, adoption or foster care placement:
  • assist a “close relative” with a serious health condition such as inpatient care, outpatient chemotherapy or at-home recuperation from surgery; or
  • for reasons outlined in the federal Family and Medical Leave Act (“FMLA”) with regards to assisting a family member called to active military service.

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New York City Enacts Predictable Scheduling Law

By William R. Horwitz

On May 30, 2017, New York City Mayor Bill de Blasio signed legislation regulating employee schedules in the retail industry. The new “predictable scheduling” law, which is set to take effect on November 26, 2017, prohibits “on-call” shifts and otherwise limits employer flexibility in creating work schedules.

Employers Covered By the Law

The law applies to any “retail employer,” which is defined as an employer:  (1) with at least 20 employees (including fulltime, part-time and temporary employees); and (2) that is primarily engaged in selling “consumer goods” at a store or stores in New York City.  The law defines “consumer goods” as “products that are primarily for personal, household, or family purposes, including but not limited to appliances, clothing, electronics, groceries, and household items.”
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The Unanswered Question: Do “Call-In” Schedules Trigger California Reporting Time Pay Obligations?

By Cheryl D. Orr, Philippe A. Lebel and Irene M. Rizzi

On June 8, 2017, plaintiffs Mayra Casas and Julio Fernandez (“Plaintiffs”) filed an unopposed motion seeking approval of a $12 million settlement reached against defendant Victoria’s Secret Stores, LLC (“Victoria’s Secret”) in a closely watched case challenging the legality of Victoria’s Secret’s “call-in” scheduling practices. The case, Casas v. Victoria’s Secret Stores, LLC, was pending before the Ninth Circuit Court of Appeals at the time the parties’ settled the case, and was one of many currently pending class action lawsuits challenging similar practices by retailers. As a result of the parties’ settlement, the ultimate question in Casas remains unanswered: Are employees who are required to call their employer to determine if they are required to show up for call-in shifts entitled to reporting time pay?

Retail Industry Reporting Time Pay Requirements

In addition to the Labor Code, employers in California must adhere to the requirements of industry-specific Wage Orders, promulgated by the now-defunct Industrial Welfare Commission. Wage Order 7, which applies to the “mercantile” industry (i.e., retailers), requires employers to pay non-exempt employees for certain unworked but regularly scheduled time. Such compensation is known as reporting time pay. Under Wage Order 7, retailers are required to pay reporting time pay if an employee “is required to report for work and does report, but is not put to work or is furnished less than half …[of his or her] usual or scheduled day’s work.” When this occurs, the employee must be paid the greater of (1) half his or her usual or scheduled day’s work (up to four hours), or (2) two hours at his or her regular rate of pay.

In the past, most reporting time pay litigation concerned situations where non-exempt employees were called in to work for special meetings or were sent home early on regularly scheduled days of work.

Casas v. Victoria’s Secret Stores, LLC

Filed in 2014, Casas called into question the legality of call-in scheduling, a common practice among retailers. Victoria’s Secret’s call-in policy required employees to call their managers two hours before the start of certain scheduled call-in shifts to determine if the employees needed to show up for work. When employees were required to come in to work, they were paid for their work time. However, when employees were told that they did not need to report to work, they were not paid. Plaintiffs argued that this policy violated Wage Order 7 because employees “reported to work” by calling their manager and were thus entitled to reporting time pay when Victoria’s Secret failed to furnish or cut short their call-in shifts.

In December 2014, U.S. District Court Judge George H. Wu rejected Plaintiffs’ argument and dismissed their call-in claims, reasoning that both the common meaning of “report” and legislative history held that “reporting for work” entailed physically appearing for work. Thereafter, Plaintiffs took an interlocutory appeal to the Ninth Circuit.

During oral argument, the three-judge Ninth Circuit panel expressed concerns about rendering a decision on the legality of uncompensated call-in procedures, and suggested that the question might be better resolved by the California Supreme Court.

Following oral argument, but before the Ninth Circuit rendered any decision, the parties settled the case, depriving the appellate court of the ability to render an opinion. Under the terms of the proposed settlement, Victoria’s Secret will pay $12 million to settle the claims of the 40,000 putative class members.

Questions Left Unanswered

While Casas was pending, numerous other retailers (including Club Monaco, Hollister, Abercrombie & Fitch, and Zumiez) were hit with similar putative class action lawsuits challenging their respective call-in scheduling practices. Several of those cases were stayed pending resolution of Casas, and will now proceed without a definitive answer from the Ninth Circuit regarding the law.

Several large retailers, including Victoria’s Secret, have done away with call-in shifts. However, such practices remain commonplace in the retail industry. Whether employers—retailers in particular—are required to pay reporting time pay for unworked call-in shifts remains an open issue.1 We will continue to monitor case law and legislative developments in this area.

1 Several state attorneys general have put pressure on large retailers to abandon call-in scheduling and certain jurisdictions (e.g., San Francisco) have proposed and/or enacted legislation prohibiting employers from such practices. However, to date, California has not passed any state-wide legislation addressing the practice.

Do You Have At Least 20 Employees in California?

By Pascal Benyamini

Currently, if you are an employer with 50 or more employees within 75 miles, you are required, under the federal Family and Medical Act (FMLA) and the California Family Rights Act (CFRA), to provide an unpaid protected leave of absence of up to 12 weeks during any 12 month period to eligible employees for various reasons, including, for the birth or placement of a child for adoption or foster care; to care for an immediate family member with a serious health condition, or to take medical leave when the employee is unable to work because of a serious health condition.

A pending California Senate Bill (SB), if passed, would extend some of the benefits of the FMLA and CFRA to California employers with 20 to 49 employees. SB 63, aka Parental Leave, would add Section 12945.6 to the Government Code, and prohibit employers with 20 to 49 employees within a 75 miles radius from refusing to allow an employee with more than 12 months of service and at least 1,250 hours of service with the employer during the previous 12-month period, to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption, or foster care placement.

SB 63 would also prohibit employers from refusing to maintain and pay for coverage under a group health plan for an employee who takes this leave (assuming an employer has a group health plan). Further, under proposed SB 63, eligible employees will be entitled to utilize accrued vacation pay, paid sick time, or other paid time off during the period of parental leave.

If an employer employs both parents who are eligible for leave, SB 63 would authorize, but not require, the employer to grant simultaneous leave to both employees.

This bill would also prohibit an employer from taking any adverse action, such as refusing to hire, or from discharging, fining, suspending, expelling, or discriminating against, an employee for exercising the right to parental leave or giving information or testimony as to his or her own parental leave, or another person’s parental leave, in an inquiry or proceeding related to rights guaranteed under this bill.

Finally, SB 63 would prohibit an employer from interfering with, restraining, or denying the exercise of, or the attempt to exercise, any right provided under this bill.

It remains unclear whether SB 63 will pass and be signed into law by Governor Brown. We will continue to monitor any developments on SB 63 and other pending bills that may impact employers in California.

Donald Trump’s Labor Secretary Revokes Obama-Era DOL Joint Employer and Independent Contractor Guidance

By Philippe A. Lebel

On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the U.S. Department of Labor (DOL) is withdrawing two major pieces of informal guidance issued during the Obama administration, pertaining to joint employment and independent contractors under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq.

The two Administrator Interpretations Letters were issued by the former head of the DOL’s Wage and Hour Division, David Weil. The first guidance letter, Administrator’s Interpretation No. 2015-1, took an aggressive position regarding misclassification of employees as independent contractors. It stressed that the “economic realities” of worker-employer relationships were paramount—i.e., whether, as a matter of economic reality, a worker was dependent on the putative employer—and suggested that most workers should be classified as employees. Although it relied on case law, the Administrator Letter provided additional refinements and, significantly, de-emphasized consideration of “control”—a major element under most common law tests.

The second letter, Administrator’s Interpretation No. 2016-1, pertained to joint employment relationships. It relied largely on regulations promulgated under the Migrant and Seasonal Worker Protection Act, 29 U.S.C. §§ 1801 et seq., and also focused heavily on “economic realities.” The joint employer guidance took a very expansive approach to the entities that potentially could be held liable for wage and hour violations.

The DOL issues Administrator Interpretations Letters to provide cross-industry guidance on wage and hour laws and regulations. Administrator Interpretations Letters are not—strictly speaking—“binding” on courts, although they are generally entitled to deference. Although the two at-issue Administrator Interpretations Letters were in place for a relatively brief period, they were nonetheless influential. Notably, Administrator’s Interpretation No. 2015-1 was cited by U.S. District Court Judge Edward Chen in the O’Connor v. Uber Technologies, Inc. class action pending in the Northern District of California.

In withdrawing the two Obama-era Administrator Interpretations Letters, Secretary Acosta did not indicate whether the DOL under the Trump administration would issue further guidance on joint employment or independent contractors, but this certainly sends a signal that the current administration may take a much narrower view of what constitutes an employer-employee relationship. In a news release, the DOL stated that withdrawal of these two letters “does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Worker Protection Act, as reflected in the department’s long-standing regulations and case law.”

It remains unclear what the lasting implications of the withdrawal will be. We will continue to monitor developments on the federal and state levels regarding joint employment and independent contractor issues.

Part IV of “The Restricting Covenant” Series: Coaches and Colleges

By Lawrence J. Del Rossi

This is the fourth article in a continuing series, “The Restricting Covenant.” It discusses the concept of protectable “playbooks” in restrictive covenant cases and the individuals that use them to compete.

Let’s Play Ball, but with Restrictions

This year’s NFL Super Bowl LI ended in spectacular fashion when the New England Patriots made an historic comeback to win in overtime against the Atlanta Falcons. After the game, there was much discussion about the Patriots’ unique “playbook,” their coach, and his game strategy for winning the Super Bowl for the fifth time in nine appearances.  This discussion led me to the question of whether a sports organization can restrict a coach from leaving one team and coaching another competing team.  Can it restrict a departing coach from recruiting athletes for a new team?  Can it demand the return of all “playbooks” or restrict the coach from using other records that he or she developed while coaching?

Despite the fact that thousands of sports teams, colleges, and universities employ coaches for their athletic programs, there are no federal or state laws that regulate the applicability of non-competes for coaches. In addition, there are very few reported court decisions in the United States that involve coaches and the enforcement of non-competes against them.

It is not that non-competes and other forms of restrictive covenants (e.g., non-disclosures and non-solicitations) in employment contracts with coaches do not exist—they do.  One such contract that received some media attention a few years ago was the University of Arkansas’s employment contract with Bret Bielema, the school’s head football coach.  Bielema’s employment contract contained several restrictive covenants commonly found in C-suite level employment agreements.  It contained a “covenant not to compete,” which prohibited the coach from accepting “employment in any coaching capacity with any other member of the SEC” during the term of his employment.  Bielema’s agreement stated that the competitiveness and success of the University’s football program affects the overall financial health and welfare of the Athletic Department, and that the University maintains a vested interest in sustaining and protecting the well-being of its football program.  Bielema’s agreement did not contain a post-employment non-compete to prevent him from working for another team after he left.  However, it contained a broad “covenant not to disclose trade secrets,” which outlined a long list of non-public information that the University believed gave the Razorback Football Program a competitive advantage over other football teams.  This non-disclosure restriction was not limited to the coach’s tenure with the Razorbacks, and it survived his termination.

Where Does Your Team Loyalty Lie?

There is precedent for a University suing and successfully enjoining a head coach from “contract jumping” to a competing team, even without a written non-compete agreement. In a particularly scathing decision, Northeastern University v. Donald Brown, Jr. (2004), a Superior Court of Massachusetts judge preliminarily enjoined Northeastern’s former head football coach Donald Brown, Jr. from working as an employee, consultant, or in any other capacity, for the University of Massachusetts at Amherst (“U.Mass.”).  Brown was under a multi-year contract with Northeastern as its head football coach.  The dispute began after Brown, who had given “his word to Northeastern and the student athletes that he was not leaving Northeastern . . . in fact, within a day . . . was cleaning out his room to move to U.Mass.”

At the hearing on Northeastern’s application for a preliminary injunction, Brown’s attorneys attempted to justify Brown’s actions by arguing that, “Everyone in collegiate football does this,” and “What is the big deal?” Citing to another decision that involved coach jumping, New England Patriots v. University of Colorado (1st Cir. 1979), the court’s response to Brown was simply stated: “Well, a contract is a contract for major universities, just as it is for the rest of the world.”  The judge found that Brown’s breach was “obvious, brazen, and defiant,” and that “U.Mass., as the Commonwealth’s premier higher educational institution was and is so callous in its duty to provide ethical and moral values for its students.”

Brown and U.Mass. cited to a $25,000 liquidated damages clause in Brown’s contract with Northeastern, and argued that this would adequately compensate Northeastern for its loss of Brown as the football coach. However, the court found that this liquidated damages provision did not prohibit injunctive relief if the test for the issuance of an injunction was established.  There was “strong evidence of irreparable harm to be sustained by Northeastern and its football program.”  With respect to U.Mass.’s competitive advantage in hiring Brown, the judge observed:

U.Mass. is a member of the same football conference as Northeastern, and the teams play each other every year. Northeastern’s entire football program and its playbook will be available to U.Mass.  These two universities compete with each other in the same league, compete for fans to attend their games, compete for media coverage, compete for many of the same football recruits, and compete with each other for television to cover their games on a regional basis. There should be no doubt that college sports and the revenue that they draw are a major business for a university.  (Emphasis added)

Coach Brown knew the program, the plays, and procedures used at Northeastern. In the court’s view, he would be able to use that knowledge unfairly against Northeastern.  Not holding back any punches, the judge further commented that, “at times, at some universities, football and basketball programs appear to be more important than the universities’ duty to educate and their duty to instill in college students basic concepts of ethical conduct and adherence to legal and moral obligations.”

Finally, the court found that Northeastern had showed that it was likely to prevail on the merits of its breach of contract claim against Brown, and noted that, “the breach of contract is as clear as it was by Mr. Fairbanks in New England Patriots.”  The irreparable harm suffered by Northeastern and its chance of success on the merits far outweighed “the irreparable harm, if any, to Brown or U.Mass. and their negligible chance, if any, to prevail in this case.”

Game, Set, Match Point

Another interesting case involving dueling coaches and the concept of restraints on trade is Graham v. Fish (2011).  This case involved a dispute between two varsity tennis coaches at Harvard University.  The University’s head coach for the women’s varsity tennis team, Graham, and the head coach for the men’s varsity tennis team, Fish, had formed a corporation, The Tennis Camps at Harvard, Inc., to conduct private summer tennis camps at Harvard.  Importantly, they did not enter into a written non-compete agreement.  Graham’s tenure as head coach ended.  Harvard hired a new head coach for the women’s varsity tennis team, Green.  Thereafter, Green and Fish formed The Tennis Academy, LLC, to run summer tennis camps at Harvard.  In forming The Tennis Academy, Fish and Green created a new website, new promotional materials, and purchased new office and tennis equipment.  However, Fish used the mailing list that he had developed with Graham to contact prospective campers for his new venture with Green.

Graham sued Fish and alleged that Fish had breached his fiduciary duty to act scrupulously, in good faith, and in complete candor toward Graham. The court rejected this claim and found that that “[i]n the absence of an agreement fixing the duration of the parties’ joint venture or a covenant not to compete, Fish was free to seek dissolution and engage in a new tennis camp business.”  There was no evidence that Fish had operated “in some clandestine manner” in setting up the Academy.  In addition, Graham had testified at his deposition that he and Fish, as co-owners, had equal rights to use the mailing list of The Tennis Camps.

Similarities Between Coaches and C-Suite Executives

What similarities can be gleaned between coaches at public or private universities and C-suite executives at private or public companies? Coaches of sports teams, like executives, can be highly valuable to the institutions for which they are hired.  They usually are paid significant sums of money to represent and lead their organizations.  They play a critical role in the leadership and direction of the team.  They might have access to sensitive information, such as current and prospective student-athlete contact lists (customer lists), coaching contact lists (business contacts), playbooks (marketing and sales strategies), player development programs (promotion and performance metrics), coaching and leadership philosophies (business development strategies), game plan techniques (research and development processes and procedures), practice drills, training sequences and methodologies (product development), and pre-game, in-game, and post-game coaching practices and strategies.

As a general matter, a court would consider the type of information that these individuals have in determining whether the team, or the company, as the case may be, has a legitimate business interest to impose reasonable restrictions on business activities, either during employment or after the employment relationship has ended.

As explained in other articles in this Series, restrictive covenants are state-by-state specific, and therefore the laws of the applicable state must be reviewed. However, it is worth noting that some courts have adopted the sports “playbook” analogy in private-sector business dispute cases.  A Michigan judge in a medical device case, for example, referred to the information that the company’s former manager had (including physician contacts, schedules, prescribing habits, sales data, order history, and wholesale prices), as the company’s “playbook.”  In another case, a television broadcasting company in Maine that sought to enjoin one of its former employees from working for a competitor, referred to the elements of branding its show as its “playbook.”  And, in one of the leading cases discussing the doctrine of “inevitable disclosure” (a doctrine discussed in more detail in other articles in this Series), the Court of Appeals for the Seventh Circuit adopted the “playbook” analogy directly:

PepsiCo finds itself in the position of a coach, one of whose players left, playbook in hand, to join the opposing team before the big game.

The goal of this Series is to provide a brief overview and some interesting insights and practical pointers when dealing with unique issues that might arise in the context of restrictive covenants and a particular occupation or industry. It is not intended to provide and should not be construed as providing legal advice.  Each situation is different, and if legal advice is needed, you should seek the services of a qualified attorney who is knowledgeable and experienced in this area of the law to address your specific issues or needs.  Stay tuned for future articles in this Series, which will discuss the restrictive covenant landscape for many other occupations and industries, including dentists, directors, designers, and others.

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