Counseling & Compliance Training - Page 57 of 87

Split Circuit Court Decisions Create Uncertainty on Class Action Waivers and likely Supreme Court Review

Last week the 7th Circuit U.S. Circuit Court of Appeals, in Lewis v. Epic-Systems Corp., held that a company’s arbitration agreement, which prohibits employees from participating in “any class, collective or representative proceeding,” violated an employees’ right to engage in concerted activity under the National Labor Relations Act (NLRA). The ruling creates a circuit split on the enforceability of class action waivers because the 2nd, 5th, and 8th Circuits each have held that class action waivers do not violate an employee’s rights under the NLRA. Because of this circuit split, it is likely that the Supreme Court will visit this issue in the near future.

Background on Enforceability of Class Action Waivers

In recent years, federal courts have largely upheld arbitration pacts with class or collective action waiver language that provides that not only must an employee bring his or her claim exclusively in arbitration, but also that he or she must do so on an individual, and not on a class-wide basis. Specifically, in AT&T Mobility v. Concepcion (2011), the Supreme Court ordered the enforcement of arbitration agreements in a dispute involving an arbitration provision in cellphone contracts. In the process, Concepcion generally held that the Federal Arbitration Act (FAA) preempts state bans on class action arbitration waivers. The case however, did not directly address the viability of class action waivers in the employment context.

Shortly thereafter, in January 2012, the National Labor Relations Board (NLRB) ruled that an employer could not force its employees to sign arbitration agreements with class waiver provisions because such agreements were unlawful under the NLRA. See D.R. Horton, Inc., 357 NLRB 184 (2012). On appeal, the 5th Circuit rejected the NLRB’s holding that class waivers in mandatory arbitration agreements are unlawful, joining the 2nd and 8th Circuits, which had issued similar rejections.

Seventh Circuit Opinion

In Lewis v. Epic-Systems Corp., the plaintiff had entered into an arbitration agreement with his employer in which he had waived his “right to participate in or receive money or any other relief from any class, collective, or representative proceeding.” Lewis later filed a suit in federal court on behalf of himself and other employees alleging that the company had violated the Fair Labor Standards Act (FLSA) by misclassifying the employees and depriving them of overtime.

The employer moved to dismiss plaintiff’s claims and compel arbitration on an individual claim basis. The plaintiff argued that the agreement’s class and collective action waiver was unenforceable because it interfered with his right to engage in concerted activity under Section 7 of the NLRA. The district court agreed with plaintiff and denied employer’s motion to dismiss, relying primarily on a prior decision the district court had issued adhering to the D.R. Horton’s decision. The district court believed the 5th Circuit’s majority opinion “never persuasively rebutted the board’s conclusion that a collective litigation waiver violates the NLRA and never explained why, if there is tension between the NLRA and the FAA, it is the FAA that should trump the NLRA, rather than the reverse.” The employer subsequently appealed the district court’s decision to the 7th Circuit.

In its analysis, the 7th Circuit adopted the NLRB’s reasoning (as stated in D.R. Horton) that engaging in class, collective or representative proceedings is “concerted activity” and a protected right under Section 7 of the NLRA. Therefore, the court concluded, it would be an unfair labor practice under Section 8 of the NLRA for an employer “to interfere with, restrain, or coerce employees in the exercise” of this right.

Surprisingly, the 7th Circuit rejected the argument that the arbitration agreement must be enforced under the FAA—an argument adopted by all the other circuits that have ruled on this matter. In its ruling, the court focused on the FAA’s savings clause, which provides that arbitration agreements are enforceable except if the agreements themselves are unlawful. Thus, the court found that Epic’s arbitration agreement is illegal under the NLRA, and because an illegal agreement is not enforceable under the FAA’s savings clause, there is no conflict between the FAA and the NLRA.

General Takeaways for Employers

The Lewis decision leaves employers with several takeaways: First, employer need to know that class and collective action waivers will not be enforced in federal courts sitting in Illinois, Indiana and Wisconsin, which are the states within the Seventh Circuit’s jurisdiction.

Second, these same agreements will likely continue to be enforced in federal courts sitting in the circuits that have rejected the NLRB’s reasoning in D.R. Horton (for now, 2nd, 5th, and 8th Circuits).

Third, this circuit split will likely involve the input of the Supreme Court in the future but perhaps not between the Presidential election, and the appointment of a ninth Justice, given the desire to avoid a 4-4 split. If the case is brought before the Supreme Court before a new Justice is confirmed by the Senate, and the Supreme Court decision is split 4-4, each of the Circuit’s decisions will remain in effect.

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).

New York City Earned Sick Time Act Amended Effective March 4, 2016

The New York City Earned Sick Time Act, originally enacted in June 2013, has been amended effective March 4, 2016. The Earned Sick Time Act generally requires employers with five or more employees in New York City to provide eligible employees up to 40 hours of paid sick leave each year for themselves or eligible family members. The new rules clarify parts of the Earned Sick Time Act, establish requirements to carry it out and meet its goals, and provide guidance to covered employers and protected employees.

Written Sick Time Policies

Employers may no longer distribute the Notice of Employee Rights promulgated by the Department of Consumer Affairs in lieu of distributing or posting their own written sick time policies. But it is important to note that distribution of the Notice of Employee Rights is still required.

The Amended Act further requires that an employer’s written sick time policies state, at a minimum:

The employer’s method of calculating sick time. If, on the first day of the calendar year, the employer provides employees with an amount of sick time that meets or exceeds the requirements of the Act by the employee’s 120th day of employment (known as “frontloading”), the written policy must specify the amount of frontloaded sick time to be provided. If the employer does not frontload, the policy must specify when accrual of sick time starts, the rate at which an employee accrues sick time, and the maximum number of hours an employee may accrue in a calendar year.

The employer’s policies regarding the use of sick time, including any limitations or conditions. Written policies must now include: (1) any requirement that an employee provide notice of a need to use sick time; (2) any requirement for written documentation or verification of the use of sick time, and the employer’s policy regarding consequences if an employee fails to provide such documentation; (3) any minimum increment or fixed period for the use of sick time; and (4) any policy on employee discipline for misuse of sick time.

The employer’s policy regarding carry-over of unused sick time at the end of an employer’s calendar year.

If an employer fails to provide an employee with a copy of its written policy, the employer cannot deny sick time or payment of sick time to the employee based on non-compliance with the policy.

Employer Recordkeeping

Employers are now required to maintain records demonstrating compliance with the requirements of the Earned Sick Time Act, including records of any policies required by the Act, for a period of three years. Employers must also maintain contemporaneous and accurate records that show, for each employee:

The employee’s name, address, phone number, employment start date, employment end date (if any), rate of pay, and whether the employee is exempt from overtime requirements;
The hours worked each week by the employee, unless the employee is exempt from overtime requirements;
The date and time of each instance of sick time used by the employee and the amount paid for each instance;
Any change in the material terms of employment specific to the employee; and
The date the Notice of Employee Rights was provided to the employee and proof that the Notice of Rights was received by the employee.

There is a penalty involved if an employer fails to follow these much more detailed requirements. An employer’s failure to maintain, retain or produce a record that is “relevant to a material fact” alleged by the Department in a notice of hearing or these rules, creates a “reasonable inference” that such fact is true.

Minimum Increments and Fixed Intervals

Employers may now set fixed periods of 30 minutes or any smaller amount of time for the use of accrued sick time beyond the minimum increment (not to exceed four hours per day) and may require fixed start times for such intervals. The Notice of Adoption of Rule issued by the Department of Consumer Affairs provides the following example: An employer maintains a four-hour minimum sick time increment and now requires that employees use sick time in 30 minute intervals that start on the hour or half-hour. An employee who is scheduled to work 8:00 a.m. to 4:00 p.m. schedules a doctor’s appointment for 9:00 a.m. and notifies the employer of her intent to use sick time and return to work the same day. If the employee does not return to work until 12:17 p.m., the employer can require the employee to use four and a half hours of her accrued sick time and require her to begin work at 12:30 p.m.

Temporary Help Firms

The Act also now defines the term “temporary help firm,” as an organization that recruits and hires its own employees and assigns those employees to perform work or services for another organization to: (i) support or supplement the other organization’s workforce; (ii) provide assistance in special work situations including, but not limited to, employee absences, skill shortages or seasonal workloads; or (iii) perform specific assignments or projects. When a temporary help firm places a temporary employee in an organization, the temporary help firm is now solely responsible for compliance with all of the provisions of the Earned Sick Time Act for that temporary employee, regardless of the size of the organization where the temporary help firm places the employee.

Penalties

If the Department finds that an employer has a policy or practice of not providing or refusing to allow employees to use paid sick leave required under the Act, employers now will be subject to penalties for “each and every employee” affected by the policy.

Employer Considerations

In light of these recent amendments and the increased penalties for non-compliance with the Act, New York City employers should ensure that part of their “spring cleaning” involves a thorough review of their existing written sick time policies and recordkeeping practices. Such a review with counsel should include preparation of compliant employee notice materials and recordkeeping forms.

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.

Paid Parental Leave: San Francisco Will Require Employers to Provide Paid Leave and California Will Increase Benefits Available Under State Law

On Tuesday, April 5, 2016, the San Francisco Board of Supervisors unanimously approved legislation that would require private employers in the city to provide partial compensation to employees taking leave to bond with a newborn child under the California Paid Family Leave (“PFL”) program. In practice, when combined with existing partial wage replacement from the PFL program, employees who earn up to a maximum of $106,000 annually will receive complete wage replacement during a covered parental leave as a result of the legislation. If the ordinance is signed into law, San Francisco will become the first municipality in the United States to enact such a program.

Before becoming law, the proposed legislation will need to be approved in a second vote by the Board of Supervisors and signed by Mayor Edwin Lee. At this point, these procedures are considered formalities, and the proposed ordinance is widely expected to take effect in its present form.

Under existing state law, employees in California who contribute to the California SDI fund are entitled to six weeks of partial pay (55%) each year while taking leave to care for a seriously ill family member or new child under the state’s PFL program. When such leave is taken to care for a newborn child, newly adopted child, or new foster child, the new San Francisco ordinance would require employers to make up the difference by providing employees with the remaining 45% of the employee’s normal gross weekly wage for up to six weeks. Once the wage replacement rate paid under the California PFL program increases, as it is expected to do in 2018, the San Francisco ordinance would require employers to pay the remainder of an employee’s gross weekly wage based on the new state rate.

When Will the Legislation Take Effect, and Who Will It Cover?

If signed into law in its present form, the legislation will take effect in three phases. Starting on January 1, 2017, San Francisco employers with 50 or more employees will be required to pay employees at least 45% of their regular gross weekly wage during the six-week leave period. On July 1, 2017, the legislation will expand to include San Francisco employers with 35 or more employees. Finally, on January 1, 2018, it will apply to employers with 20 or more employees.Employers will only be required to provide the 45% wage replacement to employees who (1) have worked for the employer for at least 180 days; (2) work at least eight hours per week; (3) spend at least 40% of their total weekly hours within the city limits of San Francisco; and (4) are otherwise eligible to receive paid family leave under the PFL program for the purpose of bonding with a new child. In addition, the legislation establishes a maximum cap on wage replacement. The maximum weekly benefit is defined by reference the maximum benefit available under the state PFL law. Thus, under existing regulations, San Francisco employers would be required to pay a maximum of $924 per week (which equals 45 percent of an annual salary of $106,740).

Employers will only be required to provide the 45% wage replacement to employees who (1) have worked for the employer for at least 180 days; (2) work at least eight hours per week; (3) spend at least 40% of their total weekly hours within the city limits of San Francisco; and (4) are otherwise eligible to receive paid family leave under the PFL program for the purpose of bonding with a new child. In addition, the legislation establishes a maximum cap on wage replacement. The maximum weekly benefit is defined by reference the maximum benefit available under the state PFL law. Thus, under existing regulations, San Francisco employers would be required to pay a maximum of $924 per week (which equals 45 percent of an annual salary of $106,740).

San Francisco Employers Will Be Required to Cover a Smaller Portion of Employees’ Wages When Benefits Paid Under the California PFL Law Increase in 2018.

Based on state legislation signed by Governor Jerry Brown this week (A.B. 908), starting on January 1, 2018, the wage replacement rate paid under the California PFL program will increase from 55% to 60% for employees who earn more than 33% of the California average weekly wage. The rate will increase to 70% for employees who make up to 33% of the average weekly wage in California. Once the higher PFL rates take effect, the net payment obligation of San Francisco employers will fall by a corresponding amount. Thus, starting January 1, 2018, San Francisco employers’ wage replacement obligation will decline from 45% to either 30% or 40% of each covered employee’s weekly wages, depending on the size of the relevant employee’s weekly earnings relative to the state average.

Employees Who Quit Within 90 Days of Returning from Leave Are Required to Reimburse the Employer for the Supplemental Income They Received During Their Leave.

As a precondition to receiving supplemental wage replacement during their leave, covered employees under the San Francisco legislation will be required to sign a form agreeing to reimburse the full amount of supplemental compensation paid by their employer if (1) they voluntarily quit within 90 days of the end of their leave period; and (2) the employer requests the reimbursement in writing.

Employers May Require Employees to Exhaust Some Paid Vacation to Satisfy Their Wage-Replacement Obligations.

If the San Francisco legislation takes effect in its current form, employers, if they wish, may require the employee to exhaust up to a maximum of two weeks of unused, accrued vacation time to help satisfy the employer’s obligation to provide supplemental wage replacement during the leave.

Penalties for Non-Compliance.

An employee alleging non-compliance with the ordinance may file a complaint with the San Francisco Office of Labor Standards Enforcement (“OLSE”). In addition, in its current form, the ordinance authorizes “the City” or “any person or entity acting on behalf of the public as provided for under applicable State law” to bring a civil action in a court of competent jurisdiction for the non-payment of replacement wages and corresponding civil penalties.

Three Steps to Prepare for the Labor Department’s Proposed Rule on Paid Sick Leave

The U.S. Department of Labor (DOL) released a proposed rule that requires federal contractors and subcontractors to provide workers with seven days of paid sick leave on an annual basis. The proposed rule, released on Feb. 25, was created in response to President Barack Obama’s Executive Order 13706, which directed the DOL to issue and finalize regulations this year.

The proposed rule is projected to extend paid sick leave to more than 800,000 employees, 400,000 of which don’t currently receive any paid sick leave, within a five-year period, according to DOL estimates.

Although the DOL has extended the comments period on the proposed rule through April 12, employers and human resources professionals should start preparing for implementation. Here are three things companies can do to prepare:

1. Review and revise policies

HR professionals should compare their employer’s existing policies with the proposed rule to see where revisions are needed. Employers may find that the changes are not as drastic as expected, and they can plan for changes in existing policies to comply with the proposed rule.

For example, the proposed federal rule explains that existing sick leave policies can be used to satisfy the new requirements if they provide at least as much paid time off (i.e., 56 hours a year), and allow the employee to use the existing time off for the reasons covered by the new rule. Many employers likely already have similar policies in place, especially if they have employees in states and municipalities that currently require paid time off for attending to family illnesses, or if the employee has been a victim of domestic violence, including California, Connecticut, Philadelphia, New York City and Seattle, among others.

2. Track and evaluate employee reasons

Employers should also confirm that they are tracking the reasons why employees are taking time off from work. This is already important in terms of compliance with the Family and Medical Leave Act (FMLA) and corresponding state laws, and will make it easier to comply with the record keeping obligations under the new law. We often find that records may inaccurately report that the employee took vacation when the time was actually taken due to an employee’s illness or to care for a sick family member.

3. Document and verify

The proposed rule allows employers to require certification from an employee’s health care provider attesting to the need for leave if the employee is/was absent for three or more consecutive full work days, as is done in the context of FMLA leave or when providing time off as a reasonable accommodation under disability laws. That will help to prevent any possible misuse of the benefit.

Existing leave laws and the proposed rule also require employees to give as much advance notice as practicable regarding the need for paid time off. Employers should require compliance with reasonable “call-out” policies to minimize the disruption caused by absences covered by applicable leave laws.

The future of paid sick leave

While it is possible that this proposed rule may not come to fruition following the presidential election in November, it is indicative of a larger national push for paid sick leave. We are seeing a trend towards allowing employees to use sick time for reasons covered by this proposed new rule, such as care of family members. We are also seeing a trend in employers adopting general ‘PTO’ or paid time off policies that combine days off for personal time, such as attending a child’s school function or a routine doctor appointment, with vacation time and sick time.

With many state and local governments already leaning towards adding paid sick leave benefits, it would be wise for federal contractors and subcontractors to review their policies and make sure they are in compliance with this proposed rule.