LaborSphere, Author at Laborsphere

2015 Elections — Roundup of Employment-Related Ballot Initiatives

Local governments or voters often pass statutes or ordinances on employment-related subjects that require employers to ensure that their policies are compliant not just on a state-by-state basis, but even on a city-by-city or county-by-county basis within the same state. During this past week’s election, voters around the country considered a number of local employment-related ballot initiatives, some noteworthy examples of which are below:

Voters in Elizabethtown, New Jersey Approve Paid Sick Leave

Elizabethtown, New Jersey joins a number of other cities (including several in New Jersey) in enacting a paid sick leave ordinance. Voters approved a measure that requires employers to offer one hour of paid sick time to employees for each 30 hours worked.

Voters in Houston, Texas Reject Anti-Discrimination Ordinance

Many cities have enacted local anti-discrimination ordinances which complement or mirror anti-discrimination statutes under state and federal law. In May 2014, the Houston city council passed an ordinance that would have banned discrimination based on characteristics already protected by federal law (such as age, sex and race), as well as sexual orientation and gender identity, which are not characteristics protected by federal law. In last week’s election, Houston voters rejected the ordinance. Opponents of the ordinance had labelled it the “bathroom ordinance” and claimed that its provisions concerning transgender people would enable men who wear women’s clothes – and sexual predators – to access public women’s restrooms.

Minimum Wage Measures in Portland, Maine and Tacoma, Washington

Voters in Tacoma, Washington supported a phased-in increase to the city’s minimum wage to $12 by 2018, but rejected a more ambitious increase that would have immediately raised it to $15. Similarly, voters in Portland, Maine rejected a measure that would have increased the city’s minimum wage from $7.50 to $15 in just four years, instead sticking with a hike recently enacted by the city council that would raise it to $10.10 in 2016, $10.68 in 2017, and tie increases from 2018 forward to the Consumer Price Index.

Marijuana Initiatives in Ohio, Colorado and Michigan

The increasing trend toward marijuana decriminalization (and outright legalization) presents multiple issues for employers, including reconciling their drug-free workplace policies with medical marijuana patients’ rights, and whether or not they can punish employees for engaging in what is now deemed to be a legal activity. In Ohio, voters rejected a marijuana legalization measure that would have ended marijuana prohibition in the state. Nonetheless, most analysts believe that the rejection is not reflective of voters’ opposition to marijuana legalization per se, but rather opposition to the specifics of the ballot initiative, which would have granted an effective oligopoly on marijuana production within the state to a small handful of the initiative’s wealthy backers. In Colorado, voters approved a ballot measure that gives state lawmakers permission to spend (rather than return to state residents, marijuana growers, and recreational users) $66.1 million in taxes collected from the sale of recreational marijuana, further legitimizing the state’s prior legalization of recreational use. And voters in the Michigan municipalities of Keego Harbor and Portage approved initiatives that effectively repealed the city’s prohibition on the possession, use and transfer of up to an ounce of recreational marijuana.

Employers can expect employment-related ballot initiatives similar to those listed above in upcoming elections. For example, building upon the passing of minimum wage increases in San Francisco and Los Angeles, it is likely that in 2016 California voters will consider a measure to increase the minimum wage to $15 statewide by 2021. Multi-jurisdictional employers should keep in mind that their policies may need to be re-evaluated, sometimes on a city-by-city basis, to ensure compliance with voter or legislatively enacted local ordinances and statutes.

Obama Board Reaffirms Successor’s Right to Set Initial Terms of Employment when Taking Over Unionized Operation

Last week, the National Labor Relations Board issued a refreshingly employer-friendly decision which allowed a successor company to implement new pay terms without having to first bargain with the labor union. In Paragon Systems, Inc., 362 NLRB No. 182 (2015), a divided three-member Board panel held that the new guard service, Paragon Systems, Inc. (Paragon), had given sufficient notice to employees of a change in pay and therefore could assert its right to unilaterally set the initial terms and conditions of employment when it assumed a federal contract from the predecessor employer, MVM, whose work force was represented by The Federal Contract Guards of America International Union.

A Successor Can Make Unilateral Changes

In 2011, the Board reinstated the “successor bar” doctrine, where a union is presumed to retain its majority status when the employees it represents are hired to work for a successor employer. UGL UNICCO Service Co., 357 NLRB 76 (2011). This decision overturned MV Transportation, 337 NLRB 770 (2002) in which the Bush Board had refused to impose a successor bar in favor of the employees’ right to free choice of a union representative.

Paragon was deemed a successor because the majority of its work force was made up of former MVM guards. Paragon conceded that it was a successor and in fact, agreed to recognize and bargain with the union. However, without first consulting with the union, Paragon implemented employee pay terms that were different from what its predecessor had in place. Specifically, Paragon reduced the amount of paid “guard mount” time – time spent getting and returning weapons and ammunition – from 30 minutes to 10 minutes per day and discontinued paying for “guard mount” time on weekends.

The union filed an unfair labor practice charge against Paragon which was dismissed by the Administrative Law Judge.

On appeal, the union and the NLRB’s general counsel argued that Paragon as a successor violated Section 8(a)(5) and (1) when it unilaterally made changes to the pay terms. In analyzing the case, the Board stated that “a ‘successor’ employer under NLRB v. Burns International Security Services, 406 U.S. 272 (1972), and Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27 (1987), is free to set initial employment terms without first bargaining with an incumbent union, unless ‘it is perfectly clear that the new employer plans to retain all of the employees in the unit,’ in which case ‘it will be appropriate to have him initially consult with the employees’ bargaining representative before he fixes terms.’” Paragon Systems, Inc., 362 NLRB. No. 182, slip op. at p. 2 (quoting Burns at 294-295). The Board went on to state that “[o]nce a Burns successor has set initial terms and conditions of employment, however, a bargaining obligation attaches with respect to any subsequent changes to terms and conditions of employment.” Id. In other words, once the successor has established the initial terms, it cannot make any unilateral changes to employment terms without first bargaining with the union.

The Board held that it was undisputed that Paragon was a Burns successor and had properly implemented the initial terms and conditions of employment when it started operations. Accordingly, the Board held that Paragon did not violate the Act when it made unilateral changes to the pay terms that had been in place under the prior employer’s agreement.

Effective Notice to Employees Is Critical

The key issue in this decision was not whether the successor had the right to implement its initial terms and conditions upon becoming the new employer, but the sufficiency of the notice given to employees regarding the change in pay terms. The majority found that Paragon provided adequate notice to employees that there may be a change in such terms. Specifically, prior to taking over the contract, Paragon announced that it had the right to establish compensation, benefits and working conditions; its job applications specifically advised applicants that employees would have to conform to all Paragon policies and reiterated Paragon’s right to set compensation, benefits and other terms and conditions of employment; and Paragon specifically informed applicants that shift schedules would be set in accordance with the operational needs of the contract being serviced by Paragon.

Taken together, these statements were found by the Board to have made clear to employees that Paragon was not adopting MVM’s practice regarding paid guard mount time. Additionally, the implementation of these pay changes occurred on the first day that Paragon assumed operations. The Board majority concluded that the change in pay was within Paragon’s right to set initial terms and conditions of employment.

The sole dissenting Board member argued not that the successor was prohibited from setting the initial terms and conditions of employment, but that the implementation of this change was unlawful because Paragon had not provided specific notice of the specific change. The dissent noted that none of Paragon’s prior statements and communications to employees specifically addressed paid guard mount time.

Moreover, noted the dissent, even if Paragon’s general statements regarding its right to establish compensation, benefits and other working conditions were broad enough to cover the guard mount pay, the fact that Paragon provided detailed information in the contingent offer letter regarding many of the changes in wages and benefits, but was silent regarding guard mount time, reasonably conveyed to employees that no change would be made to such pay.

Practical Takeaways

This decision is good news for potential buyers of businesses, and other employers who are deemed to be successor employers of unionized operations having union contracts, because it reaffirms a successor’s right to make unilateral changes to the initial terms and conditions of employment upon commencement of operations (so long it is not “perfectly clear” that the successor intends to follow the existing agreement – a doctrine beyond the scope of this alert, as the “perfectly clear” doctrine is anything but perfectly clear).

In order to make such changes lawfully, however, the successor must make certain to provide adequate notice about the changes to employees. Notice will be deemed adequate if the successor communicates that it has the right to establish wages, benefits, and working conditions and provides enough general detail about the terms that may be subject to change. A cautious employer should be as specific as it can be when setting initial terms and conditions.

CA Paid Sick Leave: DLSE Opinion Letter Not a Cure-all

Last week, on August 7, 2015, the DLSE issued its first opinion letter interpreting the Healthy Workplaces, Healthy Families Act of 2014 (“Paid Sick Leave Law”), which is codified at California Labor Code section 245 et. seq. and which was recently amended by AB 304, effective July 13, 2015.

As most California employers should now be aware, the Paid Sick Leave Law generally requires employers to provide three days or 24 hours of paid sick leave to an employee who works at least 30 days within a year in California, including part-time, per diem, and temporary employees. Employers may either grant the paid leave up front or, alternatively, allow employees to accrue the paid time off. The question presented to DLSE was how to address the sick leave requirement for an employee who regularly works a ten-hour shift where the employer has opted to follow the front-loading method. Does the employer have to front load thirty hours (the equivalent of that employee’s three days)? Or, rather, does the employer have to front load 24 hours (as referenced in the statute, and because a “day” is typically eight hours)?

The DLSE responded in a three page letter, in which it opined that the Paid Sick Leave Law requires an employer to front load thirty hours in this ten-hour a day scenario. The DLSE reasoned that the Paid Sick Leave Law establishes minimum standards for paid sick leave, and defines “paid sick days” as “time that is compensated at the same wage as the employee normally earns during regular work hours.” (emphasis in original). In order to give effect to this minimum labor standard for all employees, including those that may work more or less than eight hours per day, the language necessarily must be interpreted to require 24 hours or three days, “whichever is more for an employee.” (emphasis in original).

So, with respect to an employee who regularly works a ten hour day, a paid sick day would be the normal full day and the employer with a ten hour per day employee must therefore front load thirty hours in the beginning of the 12 month period. However, an employee who regularly works a six hour day would also be entitled to the minimum amount of leave required under the Paid Sick Leave Law, which for him or her would be 24 hours (e.g., the greater of 24 hours or three days).

The DLSE also clarified that the same analysis would apply when the employer elects to proceed under an accrual system. Under the Paid Sick Leave Law, an employer must allow the employee to accrue up to six days or 48 hours, though the employer may limit the time off to three days or 24 hours. However, in the case of an employee who regularly works a ten hour day, if an employee has accrued 30 hours in his or her sick leave bank, then the employee must be able to use and be paid for the full three days at 10 hours per day. Similarly, the employee who works six hours per day must be permitted to take a minimum of 24 hours of paid sick leave, not only three part-time days.

So far so good, but what happens when the employee normally earns daily or weekly overtime? For example, employers who have not adopted an alternative work week schedule may normally pay overtime to employees who work over eight hours in a day. Some employers may regularly schedule employees for six-day work weeks and pay overtime on the sixth day. If the employee is to be paid “at the same wage as the employee normally earns during regular work hours,” does that include overtime wages? What happens when some employers adjust the shift schedules of employees during their busy season (assume 3 months out of the year) from a regular 8 hour day to a 9 or 10 hour day? How much paid sick leave should the employer provide to such employees if, for instance, the employer has implemented the front load method? We expect more DLSE answers in the weeks and months to come as DLSE is revising their FAQ section of their website. Please check with us for further updates.

New Guidance Regarding Employee Handbooks Part Six: Ensuring Conflict of Interest Rules Don’t Inhibit Protected Concerted Activity

This post is the sixth in a series providing guidance on federal rules regarding permissible and impermissible employer handbook policies and rules. See Guidance Regarding Confidentiality Rules Here, Employee Conduct Rules, Rules Related to Company Logos, Copyright, and Trademark, Rules Restricting Photography and Recording and Rules Restricting Employees From Leaving Work. While the recent guidance was issued by the National Labor Relations Board (NLRB), (found here) this guidance is applicable to both unionized and non-unionized employers. The National Labor Relations Act (NLRA) restricts all employers from issuing policies or rules – even if well-intentioned – that inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.

Conflict of Interest Rules: A Balancing Act

Naturally, all employers would like to prevent their employees from engaging in activities that are in conflict with the employers’ interest. However, there is a great deal of potentially conflicting employee activity that is protected by Section 7 of the NLRA, such as protesting in front of the company, organizing a boycott, or soliciting support for a union during non-work time. Accordingly, if an employer’s conflict-of-interest rules can reasonably be read to prohibit protected concerted activity, the NLRB will view them with great suspicion.

The NLRB provides a couple examples of conflict-of-interest rules that were found to be impermissibly overbroad. These include:

• Policy banning employees from engaging in “any action” that is “not in the best interest of” the employer.

• Policy providing that, “[b]ecause you are now working in one of [employer’s] restaurants, it is important to realize that you have an up close and personal look at our business every day. With this in mind, you should recognize your responsibility to avoid any conflict between your personal interests and those of the Company. A conflict of interest occurs when our personal interests interfere – or appear to interfere – with our ability to make sound business decisions on behalf of [the employer].”

Examples of Permissible Conflict of Interest Rules

The NLRB advises that employers ensure their conflict-of-interest rules do not impinge upon protected Section 7 activity by including specific examples of prohibited behavior. The NLRB explains that when a rule clarifies that it is limited to the employer’s legitimate business interests, employees will understand that it is not banning Section 7 activity.

Some examples of lawful conflict-of-interest rules include:

• A policy that provided two pages of examples of what was considered a conflict of interest, instructing employees to do such things as “avoid outside employment with a[n employer] customer, supplier, or competitor, or having a significant financial interest with one of these entities.”

• Rules prohibiting employees from giving, offering, or promising, “directly or indirectly, anything of value to any representative” of “any person, firm, corporation, or government agency that sells or provides a service to, purchases from, or competes with” the employer.

• Rules in a section of a handbook dealing entirely with business ethics banning employees from “activities, investments or associations that compete with the Company, interferes with one’s judgment concerning the Company’s best interests, or exploits one’s position with the Company for personal gains.”

In sum, employers should take great care to ensure their conflict-of-interest rules provide sufficient clarifying examples and context to indicate that such rules are intended only to protect the employer’s legitimate business interests, and not to inhibit activities protected by Section 7.

The DOL Announces Proposed Revisions to FLSA Regulations Doubling the Minimum Salary Requirement for Exempt Employees

More than 15 months after President Obama issued a Presidential Memorandum directing the Secretary of Labor “to propose revisions to modernize and streamline the existing [FLSA] overtime regulations,” the Department of Labor on June 30, 2015 finally issued a Notice of Proposed Rulemaking (NPRM) detailing its proposed revisions. These proposals include:

(1) Increasing the minimum salary requirement from $455 per week ($23,660 per year) to an expected $970 per week ($50,440 per year) in 2016;

(2) Increasing the minimum annual compensation requirement to qualify as a “highly-compensated” exempt worker from $100,000 to $122,148 annually;

(3) Creating a mechanism for automatically updating the minimum salary and compensation levels, by tying them to either (a) a fixed percentile of earnings for full-time salaried workers or (b) changes in the CPI-U (i.e., the Consumer Price Index for Urban Consumers).

Note that these are proposed revisions; they are not yet law. The NPRM will be published in the Federal Register and the public will be invited to comment on the revisions for a certain period (likely 60 days). After the comment period ends, the Department of Labor (DOL) may consider the comments; possibly make further revisions to the regulations; and publish a “Final Rule” in the Federal Register with an effective date on which it becomes law. Considering this timeline, it is likely that new regulations will not become law until mid-2016 or later. Usually, however, the “Final Rule” does not differ significantly from the NPRM, and thus employers now have a preview of the regulatory landscape they will face in 2016.

The DOL was widely expected to raise the minimum salary requirement, which has not been updated since 2004. However, most predicted that the DOL would couple a more modest (but still significant) increase with changes to the various “duties tests.” This speculation was based upon remarks made by the president and the Secretary of Labor indicating a concern that too many employees, particularly retail managers, were exempt under the regulations even though they spent a large portion of their time performing non-exempt duties.

The DOL has not, however, proposed any specific revisions to the duties tests. Essentially, the DOL seems to believe that a dramatic increase in the minimum salary and compensation requirements will, standing alone, ameliorate concerns about potential misclassification, noting in the NPRM that “[a]djusting the salary level upward to account for the absence of a more rigorous duties test will ensure that the salary threshold serves as a more clear line of demarcation between employees who are entitled to overtime and those who are not, and will reduce the number of white collar employees who may be misclassified . . .”

Even though the DOL has proposed fewer revisions than expected, it is nonetheless “seeking comments” on other potential changes. For example, the DOL has reiterated the concern that “in some instances the current tests may allow exemption of employees who are performing such a disproportionate amount of nonexempt work that they are not [white collar] employees in any meaningful sense” and it is thus “seeking comments on whether the [duties] tests are working as intended.” Similarly, it seeks comments on whether to allow nondiscretionary bonuses and incentive payments to satisfy a portion of the salary basis test. Revisions to the regulations in these areas may possibly appear in the Final Rule.

Although a Final Rule will not take effect until 2016, employers should now start evaluating their employee classification policies to ensure compliance with, at the least, the expected increase in the minimum salary requirements. Given the magnitude of the increase, it’s likely that most employers will need to transition some employees, for whom meeting the new salary basis test is not feasible, from a salary to hourly role.

Should you have questions about this alert, please contact the authors or any other member of Drinker Biddle’s Labor and Employment Group.

EEOC’s Proposed Rule on Employee Health Wellness Programs

On June 19, 2015, public comments were submitted for the EEOC’s much anticipated proposed rule to amend the Title I of the ADA to clarify how the statute applies to certain employee health wellness programs. The EEOC’s stated goal for the rule is to harmonize wellness programs’ use of incentives to encourage participation with the ADA’s requirement that disability-related inquiries and medical exams as part of a wellness program must be voluntary and not penalizing in nature.

The Issue: Incentivizing Wellness Programs

The ADA generally prohibits employers from making disability-related inquiries or requiring medical examinations, but provides an exception for voluntary medical examinations, including voluntary medical histories, which are part of a wellness program. The wellness program is voluntary so long as an employer neither requires participation nor penalizes employees who do not participate. Prior to the EEOC’s proposed rule, neither the statute nor EEOC regulations addressed the extent to which incentives for participation might affect the voluntary nature of a wellness program, but recent lawsuits filed by the Commission caused concern among employers regarding whether incentivizing wellness programs to any extent violated the ADA.

The Solution: The Proposed Rule

The EEOC drafted the proposed rule to be in line with current ACA and HIPAA regulations regarding wellness programs generally and the use of incentives specifically. The main points of the rule are as follows:

Incentives – Employers are allowed to offer incentives up to 30 percent of the cost of employee-only coverage to employees who participate in a wellness program without violating the “voluntary” requirement of the ADA. E.g., if the total cost of coverage paid by both the employer and employee for self-only coverage is $5,000, the maximum value of incentives for an employee under that plan is $1,500.
Confidentiality – Wellness programs that are part of a group health plan may generally comply with their obligation to keep medical information confidential by complying with the HIPAA. Specifically, medical information collected as part of a wellness program may be disclosed to employers only in aggregate form that does not reveal the employee’s identity.
Reasonable Accommodations – Employer must provide reasonable accommodations that enable employees with disabilities to participate and to earn whatever incentives the employer offers. E.g., an employer would need to provide wellness program materials in large print or Braille if necessary to accommodate a participant with vision impairment.

While there is not yet an anticipated date for a final rule, the Commission encourages employers to start complying with the proposed rule now.