Audits/Due Diligence - Page 14 of 24

SEC Charges Another Company for Anti-Whistleblower Provision in Severance Agreements

The SEC announced on Wednesday that BlueLinx Holdings Inc. has agreed to pay a $265,000 penalty for including a provision in its severance agreements that required outgoing employees to waive their rights to monetary recovery if they filed a charge or complaint with the SEC or other federal agencies. Press Rel. No. 2016-157. According to the SEC’s order, approximately 160 BlueLinx employees have signed severance agreements that contained the provision since it was added to all of BlueLinx’s severance agreements in or about June 2013.

The provision violates Rule 21F-17 of the Exchange Act, which became effective on August 12, 2011, and prohibits any action to impede an individual from communicating with the SEC about a possible securities law violation. The purpose of the adoption of Rule 21F-17 was “to encourage whistleblowers to report possible violations of the securities laws by providing financial incentives, prohibiting employment-related retaliation, and providing various confidentiality guarantees.” See In the Matter of BlueLinx Holdings Inc., Release No. 78528. Because the severance agreement required employees leaving the company to waive potential whistleblower awards or risk losing payments and other benefits under the agreement, it ran afoul of Rule 21F-17.

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A Notable Week Indeed – From OSHA to Trade Secrets to ADA Accommodations and Transgender Rights!

It’s been a busy and, let’s say notable, week in the area of employment law. Here’s a quick recap, with more to come in future posts, of what you may have missed if you were focused elsewhere this week.

First, OSHA published a new injury Rule this week. While it does not take effect until January 1, 2017, employers should not wait until then to begin thinking about what changes may be necessary to ensure full compliance in the new year. The rule changes create a new cause of action for employees if they suffer retaliation for reporting a workplace injury, and employers are expected to ensure that policies addressing safety do not discourage employees from reporting such injuries. Large employers will also have some additional reporting requirements to OSHA. And, significantly, and in line with the current administration’s agenda of transparency, OSHA will begin making injury data accessible to the public, after removing any personally identifiable information regarding employees. That’s just a summary, with more to come in a future blog post. Stay tuned.

Second, did you hear that President Obama signed into law the Defend Trade Secret Act of 2016? Yes, that’s right, claims for trade secret misappropriation are not just limited to what the applicable state law provides. The new law creates a federal cause of action for the theft/misappropriation of trade secrets that are “related to a product or service used in, or intended for use in, interstate or foreign commerce.” The law also creates a new mechanism for a court to order the civil seizure of property, ex parte, if an employer can meet certain stringent standards for such an order.

Third, not to be overshadowed by either the President or OSHA, the EEOC published its own resource document this week regarding employer duties to provide leave as a reasonable accommodations in the workplace. While the new resource tracks what the EEOC has been saying for many years (or what we, as employment attorneys, know from tracking EEOC litigation and publications), the new resource delves a little deeper into how employers should be analyzing an employee’s request for leave and may be a helpful resource for employers who may still be under the mistaken impression that simply applying a leave policy (or workplace rule) the same to everyone is acceptable under the ADA (hint: we know that employers must modify policies for individuals with a disability if doing so could be a form of reasonable accommodation). Our mantra of no more “automatic termination” policies can no longer be ignored. This is serious stuff. Lots more to come on this topic.

Fourth, the EEOC was also busy issuing a new fact sheet on bathroom access for transgender employees. The fact sheet is brief, essentially reciting the few decisions issued on the topic, and reiterating for employers that transgender employees must be permitted to use the bathroom that corresponds with their gender identity (not biological sex) and cannot be conditioned on an employee having undergone reassignment surgery. Also, employers beware, providing a separate, single-user bathroom for a transgender employee is a form of discrimination (although you can provide a single-user bathroom for use by all employees). A transgender employee must have equal access to the common bathroom that corresponds with their gender identity, regardless of whether it makes other employees uncomfortable.

These are just a few of the many things that happened this week. Stay tuned for further analysis on these topics and more (including the much-anticipated DOL overtime regulations that could be published as early as next week).

Accessibility of Retailer Websites Under the Americans with Disabilities Act (ADA)

Title III of the ADA provides that “no individual shall be discriminated against on the basis of disabilities in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or any accommodations of any place of public accommodation….” 42 U.S.C. §12812(a). When the ADA was enacted in 1991, Congress contemplated physical access to places of public accommodation, such as hospitals, schools, housing, restaurants, and retail stores. At that time, Congress did not foresee the rise of the internet or the proliferation of sales of goods and services through retail websites, and therefore did not provide any guidance as to whether or the extent to which retail websites were governed by the ADA’s accessibility requirements.

Originally initiated by the National Federation for the Blind and other advocacy groups, a cottage industry has sprung up challenging accessibility to retail websites by the blind and visually impaired. Every major retailer has been or will soon be subject to these claims. The plaintiffs’ law firms that regularly bring these cases use a handful of blind or visual impaired individuals on a repeating basis.

These lawsuits, which have been filed against retailers such as Sears, Footlocker, Target, and Toys R Us, allege that experts working on behalf of their blind and visually impaired clients have investigated the company websites and have identified limitations and obstacles in the ability of a blind or visually impaired individual to navigate the websites effectively with screen readers or other assistive devices. The failures include the failure of the website to provide alternative explanations of “non-text content,” such as illustrations, and alternatives to non-text prompts or navigational features. The plaintiffs allege that websites are in fact places of public accommodation under the ADA and seek attorneys’ fees and broad remedial relief that requires significant changes to the website’s format, program and content that permit access by the blind and visually impaired.

But the “fix” is easier said than done. First, the courts have not definitely ruled that websites are places of public accommodation covered by Title III, and even presuming they are, there are no current regulations defining the level of accessibility. The plaintiffs’ bar has assumed that the Web Content Accessibility Guidelines (WCAG) AA 2.0, published by the World Wide Web Consortium, are the appropriate compliance standard under the ADA because the United States Department of Justice has adopted the WCAG standards for federal agencies and federal contractors. Also, the Department of Justice has indicated that it intends to issue proposed rules for the private sector, but this proposed rulemaking, now scheduled for July 2016, has been postponed several times in recent years, and many believe that it will be delayed again.

Second, the WCAG’s are themselves vague, subject to broad interpretation and, in many cases difficult to implement. This problem is further compounded when one attempts to apply these standards under the ADA’s language that speaks to “reasonable access,” “alternative means of compliance,” and “under burden.” The truth is that the vast majority of websites are not 100 percent compliant, and none will be because the websites are constantly changing and adding additional content. For example, retailers are increasingly using third-party content, which is often not accessible to the visually impaired.

To illustrate this point, the websites of the National Federation for the Blind (NFB) and the law firms that bring these cases are themselves far from 100 percent compliant. Software programs that are used to conduct preliminary evaluations of websites typically give the website a score or grade. NFB’s website scored a “C+” at one time but has since improved. No website of which this author knows has scored an “A.” Given that 100 percent compliance is not practical, what level of compliance is sufficient? The courts have yet to address this question because very few cases have been litigated on the merits.

When litigating these lawsuits, retailers should consider the appropriate level of achievable compliance and the timeframe involved. Engaging with knowledgeable internal IT personnel or with external IT consultants is important to do at the outset. The cases are as much or more about the technical aspects of website compliance and implementation as they are about the law.
In these lawsuits, the plaintiffs typically propose broad remedial relief that includes development of compliance policies, training, on-going monitoring, and appointment of outside consultants. Each of these individual components has to be considered carefully.

These lawsuits are often brought as individual actions, presumably to permit a quick settlement and to avoid the challenges posed by Rule 23 class certification standards and court approval. Nonetheless, as individual actions, there is no legal bar to additional lawsuits by other individuals. However, the settlements can be confidential.

These lawsuits are not just about remedial relief; they are also about legal fees. In some cases, plaintiffs’ counsel proposes an attorneys’ fee award that is based on the number of URLs or websites, rather than on the reasonable amount of attorney time that would be involved in bringing the case to settlement, which is the appropriate legal standard. Their theory is that the plaintiffs’ attorneys have to pay for future monitoring of the website(s) to ensure compliance with the settlement terms.

Given the nuances of such claims, retailers are well-advised to use experienced counsel that is familiar with these lawsuits to handle the defense.

Takeaways

Seemingly, the courts will likely eventually find that private retail websites are places of public accommodation under the ADA, even though such a result was never considered by Congress when the ADA was enacted.
Although the plaintiffs’ bar has “assumed” that the courts will require compliance with the WCAG 2.0 AA, it is far from clear what will constitute compliance in a particular case.
Retailers that have not faced this issue should conduct evaluations of their websites to determine their levels of compliance, the costs, and the realistic time frames for any remediations. Retailers should use the appropriate legal and IT expertise.
Latent privacy claims may surround notice and acceptance of the websites’ terms and conditions of use.

Although some retailers are currently being assailed, the claims will no doubt expand to the education, finance, professional services, and healthcare industries, all of which should conduct a similar analysis of their websites.

Have a Seat: The California Supreme Court Clarifies the Wage Orders’ Suitable Seating Rules

On April 4, 2016, the California Supreme Court issued an opinion concerning the Industrial Welfare Commission’s (IWC) Wage Orders’ suitable seating rules. According to the California Supreme Court, whether an employer must provide seating while employees are actively engaged in duties depends on employees’ tasks performed at given work locations. The Court determined that if the tasks being performed at any given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, an employer must provide a seat. The Court held that the determination of whether work “reasonably permits” sitting is a question to be resolved objectively, based on the totality of the circumstances. While an employer’s business judgment and the physical layout of the workplace are relevant factors, they are not dispositive. However, an employer’s preference that employees stand and/or individual employees’ physical characteristics are not to be considered. Finally, the Court held that the burden of establishing that no suitable seating is available falls on the employer.

The Wage Orders’ Seating Provisions

Over a century ago, the California Legislature established the IWC to investigate various industries and to promulgate Wage Orders establishing minimum wages, maximum work hours, and conditions of labor. The majority of Wage Orders currently in effect contain a section devoted to the provision of seating to employees—Section 14. Section 14(A) of the Wage Orders in question provides that “employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” Section 14(B) provides that “when employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area, and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.”

The Issues from Kilby and Henderson

The certified questions before the California Supreme Court arose from two related federal appeals, Kilby v. CVS Pharmacy, Inc. and Henderson v. JPMorgan Chase Bank NA. The cases involved application of identical seating provisions contained in Wage Orders 7 (Mercantile Industry) and 4 (Professional, Technical, Clerical, Mechanical and Similar Occupations), respectively.

In Kilby, the plaintiff, a CVS Pharmacy, Inc. (CVS), customer service representative, sought to represent other CVS retail employees who, like her, were denied seats while performing their jobs. The plaintiff’s duties in Kilby included operating a cash register, straightening and stocking shelves, organizing products in front of and behind the sales counter, cleaning the register, vacuuming, gathering shopping baskets, and removing trash. The district court concluded that Sections 14(A) and 14(B) of the applicable Wage Order were mutually exclusive. It reasoned that section 14(A) applied when an employee was actually engaged in work, while section 14(B) applied when an employee was not actively working. In evaluating the “nature of the work” under Section 14(A), the district court held that an employee’s entire range of assigned duties had to be considered together. Because it was undisputed that some of the performed duties required the employee to stand, the district court ruled that the plaintiff was not entitled to seating during her work time and granted summary judgment for CVS. The plaintiff appealed.

Henderson was a putative class action brought by three bank tellers at JPMorgan Chase Bank NA (Chase). Chase tellers had duties associated with their teller stations, including accepting deposits, cashing checks, and handling withdrawals. They also had duties away from their stations, such as escorting customers to safety deposit boxes, working at the drive-up teller window, and making sure that automatic teller machines were working properly. These duties varied, depending on the shift or branch location and on whether the employee was a lead or regular teller. On the basis of these differences, the district court denied class certification, and the plaintiffs appealed.

Faced with Kilby and Henderson, the Ninth Circuit certified three questions for the California Supreme Court to answer:

Does the phrase “nature of the work” (used in Section 14 of most Wage Orders) refer to individual tasks that are performed throughout the workday, or to the entire range of an employee’s duties that are performed during a given day or shift?
When determining whether the nature of the work “reasonably permits” use of a seat, what factors should courts consider? Specifically, are an employer’s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?
If an employer has not provided any seat, must a plaintiff prove that a suitable seat is available in order to show that the employer has violated the seating provision?

A Location-Driven “Nature of the Work” Standard

As to the first certified question, the defendants argued that examining when the “nature of the work reasonably permits the use of seats” requires consideration of an employee’s job as a whole, i.e., a “holistic” consideration of all of an employee’s tasks and duties throughout a shift. In the defendants’ eyes, if the majority of an employee’s duties favored standing, no seat would be required. By contrast, the plaintiffs argued that whether the “nature of the work reasonably permits the use of seats” turns on a task-by-task evaluation of whether any single task may feasibly be performed seated. In their eyes, if any individual task could be done sitting down, a seat had to be provided.

The California Supreme Court, however, took a middle-of-the-road approach instead. The Court held that, when evaluating whether the “nature of the work reasonably permits the use of seats,” courts must examine subsets of an employee’s total tasks and duties by location, such as those performed at a cash register or a teller window, and must consider whether it is feasible for an employee to perform each set of location-specific tasks while seated. According to the Court, the focus should be on the actual tasks performed by employees (or those reasonably expected to be performed), as opposed to abstract characterizations, job titles, or job descriptions. In the Court’s view, tasks that are performed with more frequency or for a longer duration are more germane to the seating inquiry than tasks performed briefly or infrequently.

The Court also clarified that Section 14(A) and 14(B) of the Wage Orders are not mutually exclusive, although they do not apply at the same time. If an employee’s actual tasks at a discrete location make seated work feasible, he or she is entitled to a seat under Section 14(A) while working there. However, if other job duties take the employee to a different location where he or she must perform tasks while standing, the employee would be entitled to a seat under Section 14(B) during “lulls in operation.”

The Multifactor “Reasonably Permits” Analysis

According to the California Supreme Court, whether an employee is entitled to a seat under Section 14(A) depends on the totality of the circumstances. The analysis starts with an examination of the relevant tasks, grouped by location, and whether the tasks can be performed while seated or require standing. In undertaking this analysis, consideration must be given to the feasibility of providing seats. Feasibility considerations may include, for example, an assessment of whether providing a seat would unduly interfere with other standing tasks, whether the frequency of transition from sitting to standing may interfere with the work, or whether seated work would impact the quality and effectiveness of overall job performance. The analysis is to be qualitative in nature—not a rigid counting of tasks or amount of time spent performing them.

The Court held that an employer’s business judgment about the nature of work could be considered. However, the Court rejected the notion that an employer’s mere preference for standing—as opposed to sitting—could be part of the analysis.

As to work location, the Court held that the physical characteristics of the area where the work is performed should be part of the assessment. On the other hand, just as an employer’s preference for standing could not constitute a relevant “business judgment,” the Court held that employers are not permitted to deliberately design workspaces to further a preference for standing or to deny a seat that might otherwise be reasonably suited for the contemplated tasks.

Finally, the Court held that the analysis should focus on the nature of the tasks at issue and should take into account the location where they are to be performed, as opposed to specific employees’ experiences and abilities in performing tasks. Thus, whether a seat is required depends on the work, as opposed to the physical characteristics of any employees.

Showing That Seating Is Not Feasible Is an Employer’s Burden

The California Supreme Court also held that an employer that seeks to be excused from Section 14(A) bears the burden of showing that compliance is infeasible because no suitable seating exists. There is no obligation on plaintiffs to demonstrate that they requested a seat or that it would be feasible to provide seating for any position.

Takeaways

While the California Supreme Court’s opinion clarifies the Wage Orders’ seating requirements, it may require many California employers to dramatically alter their work environments by providing employees with seats. The decision has particularly significant implications for employers in customer-facing environments where seating may be less common and more difficult to implement, including in the retail and hospitality industries.

In light of this new guidance, employers who do not currently provide seats at all times should examine the nature of their employees’ job duties and work environments to determine whether certain types of work (and work locations) are amenable to seated employees. In addition, employers should ensure that they have suitable seats for employees when they are not actively engaged in their duties. For assistance with ensuring compliance, employers should seek advice from qualified California employment counsel.

Get the Most Out of Your Employee Payroll Audit

Employee payroll audits, which have long been recommended as a best practice for corporations that want to stay on the right side of the law, have become even more critical with the current proliferation of labor and employment laws at the state level. Among other things, the California Fair Pay Act, which went into effect on January 1, 2016, places new demands on California employers that in many cases can only be effectively satisfied by means that include a payroll audit.

Earlier this month, we held a webinar to discuss the CA Fair Pay Act requirements and what employees should do to comply. Below you will find some of the key takeaways.

What is the California Fair Pay Act?

The new law goes further and imposes more obligations on employers than longstanding federal and state equal-pay and employment-discrimination laws. More than simply requiring employers to pay men and women equal pay for the same work, the California statute prohibits employers from paying members of one sex less than the rates paid to employees of the opposite sex “for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” And the employees of opposite sexes whose jobs and pay are being compared need not work together in the same establishment. There are several important defenses to liability under the law, such as the employer’s use of a bona fide factor that is not sex-related.

How can a payroll audit help?

Determining what types of work are “substantially similar” in terms of skill, effort, responsibility and working conditions is no easy task. That’s where a payroll audit can help.

On a step-by-step basis, a properly conducted audit will identify potential problems under the California Fair Pay Act by identifying positions that have “substantially similar work,” analyzing the pay of these workers by gender, finding any disparities in pay, and determining whether any defenses apply. For example, does the company have a bona fide seniority system or merit system, or is there a business necessity for the disparities in pay?

In addition to these complex Fair Pay Act questions, employee payroll audits remain desirable or necessary for other purposes, such as ensuring that employees are treated fairly under the company’s employee benefit plan and that certain employees or groups of employees are not excluded from the plan.

What steps should be taken?

When conducting a payroll audit, it should be done with review and consultation of attorney with the end goal of identifying and quickly addressing disparities that cannot be explained adequately or need to be corrected. It is important to note that the audit is subject to attorney/client privilege and/or work product protection. The following are key steps in the audit process:

Consider all job titles/descriptions across all geographic regions
Consider how to identify or sort based on disparate geographical locations
Compare the positions that have “substantially similar work”
Determine if the statutory exemptions apply
Identify explanations for disparities
Address disparities that can’t be explained
Determine what action needs to be taken

Ongoing Compliance

From a compliance perspective, the number one benefit to conducting employee payroll audits is the ability to determine what action needs to be taken to address and correct disparities if they exist. Failure to address disparities that can’t be explained within the requirements of the California Fair Pay Act or the Federal Pay Act can result in penalties, sanctions and, in some cases, litigation with the DOL and/or IRS. Ongoing compliance should include regular review of the following:

Handbooks and policies to remove outdated references to “equal” work
Policies that prevent employees from discussing or asking about other employees’ compensation
How compensation decisions are made and adjust if necessary
Job descriptions – update and describe as comprehensive as possible
Record keeping – records must be kept for three years
Training of HR personnel, senior management on the new law and how it should be applied in setting compensation at hiring

Click here to watch the full presentation.

Click here to view a PDF of the presentation.

The NLRB Rules That Chipotle’s Handbook Policies Violated the NLRA

As we have previously covered here, here and here, the NLRB has opined that various common handbook provisions are unlawful under the NLRA because they may have the effect of inhibiting employees from engaging in protected activities, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.

Last week, an NLRB judge provided further guidance in this area in ruling in Chipotle Services LLC and Pennsylvania Worker’s Organizing Committee (Nos. 04-CA-1437314; 04-CA-149551) that Chipotle violated the NLRA by maintaining unlawful policies, improperly forcing an employee to delete social media posts critical of Chipotle, and terminating the employee for his attempts to have his co-workers sign a petition protesting Chipotle’s alleged denial of work breaks.

The last part of the ruling was not entirely surprising – the facts strongly indicated that Chipotle terminated the employee because of, and shortly after, his attempts to have his co-workers sign the petition. However, in finding unlawful various Chipotle policies related to confidentiality, social media, solicitation, ethical communications, and political activities, the decision highlights the difficulties employers face in crafting policies that balance the competing interests of an employee’s right to engage in concerted activity and, among other interests, an employer’s need to protect its confidential information and brand. Some of the policies which the NLRB held were unlawful included:

• A social media policy that prohibited “false” and “misleading” social media posts, on the basis that “an employer may not prohibit employee postings that are merely false or misleading . . . it must be shown that the employee had a malicious motive,” as well as the provision of the policy prohibiting the disclosure of “confidential” information, where the term “confidential” was vague and undefined;
• A policy prohibiting “improper use” of Chipotle’s name or trademarks, on the basis that “employees would reasonably interpret any non-work-related use of [Chipotle’s] name to be improper”;
• An “ethical communication” policy that “prohibit[ed] exaggeration, guesswork and derogatory characterizations of people and their motives,” on the basis that it could be read to prohibit criticism of managerial decisions.

The decision reiterates the NLRB’s previous guidance that broad or vague rules relating to (or not carefully defining) concepts such as “civility,” “respect,” “disparagement” and “confidential information” will be found unlawful because some employees may read them to prohibit protected activity, even where (as here) the policies also contain a disclaimer that they do “not restrict any activity that is protected or restricted the NLRA . . .”

Finally, it should be noted that the policies at issue in the case were, in fact, outdated versions, with Chipotle having replaced them with new versions at the time of the events at issue. The judge found this fact irrelevant, as the Chipotle supervisors (for reasons unclear) relied upon the prior versions of the policies in counseling the employee and ultimately terminating him. Employers, therefore, should take care to properly distribute new policies to staff and counsel them on their application, lest they lose the benefits of any remedial policy updates.