Laborsphere

New York City Expected to Pass Expansive Paid Sick Leave Law

The New York City Council has reached a compromise that will enable it to pass a paid sick leave law. Although Mayor Michael Bloomberg objects to the legislation, news outlets are virtually unanimous in predicting that the City Council has enough votes to override his veto. While federal law does not require employers to provide paid sick leave, Connecticut and some cities (including San Francisco, Seattle and Portland) have adopted paid sick leave laws. Other cities (including Philadelphia) are considering doing so. In New York City, even employers that already provide paid sick leave will have to take a close look at the new legislation and reconcile their current sick leave policies with the city’s mandates. For example, New York City’s proposed law includes anti-retaliation provisions that would prohibit employers from firing employees for using their paid sick leave.

What employers are covered by the proposed law and when would it go into effect?

Under the proposed New York City law, as of April 1, 2014, companies with 20 or more employees would have to provide at least five paid sick days a year. The law would be extended to apply to companies with 15 or more employees as of October 1, 2015. Earlier versions of the legislation had required nine paid sick days, so five days was part of the compromise lawmakers reached in response to small business owners’ very vocal objections. The New York City law is not as expansive as some other city laws. For example, paid leave obligations in San Francisco, Seattle and Portland apply to companies with as few as five employees.

Notably, the New York City law will also require companies of any size to provide five days of sick leave as of April 1, 2014, but the time off may be unpaid.

What employees would be eligible?

To be eligible for paid leave, employees working within the borders of New York City would have to be employed for at least 4 months. The law applies to full-time and part-time workers, although seasonal workers and student interns would not be eligible.

Other details include that the New York City Department of Consumer Affairs would have enforcement authority and there is a safety net provision that would delay implementation of the law if New York City’s economy slows down.

Advocates of the legislation claim that the law will provide paid sick leave for one million workers. It is clear that this law will have a significant impact on small businesses. The Society for Human Resource Management reports that only 32% of small businesses (50 or less employees) currently offer paid sick leave, and an advocacy group, A Better Balance, reports that over 80% of restaurant workers and 60% of retail workers in New York City do not receive pay when they miss work due to sickness. As noted above, this law will also impact larger employers to the extent that they do not already provide five days of paid sick leave or only offer benefits to full-time employees or employees employed for longer than four months. And, as with any new law, it is important to track implementation to comply with notice requirements, both in terms of posting and adoption of compliant company policies prior to the April 2014 and October 2015 effective dates.

Editor’s Note:

On May 8, 2013, the New York City Council passed the Earned Sick Time Act by a 45-3 vote. New York City Mayor Michael Bloomberg had vetoed the bill on June 7, 2013, but the New York City Council overrode the veto on June 27. New York City now joins San Francisco, Washington, D.C., Seattle, Portland, and the State of Connecticut to pass mandatory sick leave laws.

EEOC Warns Employers Against Domestic Violence Discrimination

In its recent guidance titled “Questions and Answers: The Application of Title VII and the ADA to Applicants or Employees Who Experience Domestic or Dating Violence, Sexual Assault, or Stalking,” the EEOC cautions employers against unwittingly violating Title VII and the ADA in addressing employment-related issues involving victims of domestic violence.

The EEOC reminds employers that while Federal law does not expressly protect domestic violence victims from employment discrimination, such victims may still be entitled to protection under federal employment discrimination laws.

In its guidance, the EEOC provides examples of situations where employers may violate Title VII by engaging in disparate treatment, or applying sex-based stereotypes to victims of domestic violence. For example, an employer that terminates an employee victimized by domestic violence due to fear of the potential “drama battered women bring to the workplace” may engage in discrimination based on sex in violation of federal law.

The EEOC further warns employers to exercise caution before transferring or discharging domestic violence victims based on general concerns that they may pose greater workplace safety risks. Instead, employers should seek alternate resolutions before taking adverse action, such as paying for workplace security or getting a temporary restraining order. Even if such options are not effective, an employer should take adverse action against an employee only based on specific and concrete facts showing that the employee poses a threat to other employees.

Further, the EEOC guidance highlights situations in which an employer may violate the Americans with Disabilities Act (“ADA”) in treating employees and applicants adversely based on actual or perceived impairments resulting from domestic or dating violence. An example of this includes refusing to hire a domestic violence victim “based on a concern that she may require future time off for continuing symptoms or further treatment of depression.” The ADA may also require an employer to provide employees reasonable accommodations; such as where a victim of sexual assault requests unpaid leave to get treatment for depression and anxiety, but has no accrued sick leave and is not covered by the Family and Medical Leave Act. In certain situations the employer may have to modify its leave and attendance policies to accommodate the leave request, or risk violating the employee’s rights under the ADA.

Many of the scenarios discussed in the EEOC’s Q&A’s are straightforward and may surprise few employers. Yet the guidance highlights the agency’s interest in protecting victims of domestic violence, and signals to employers that the EEOC will be paying close attention to these issues. Finally, while Federal law offers limited protection to domestic violence victims, a handful of States have specific laws either directly protecting victims of domestic violence from employment discrimination, or requiring employers to give employees time off to attend court proceedings, obtain protective orders and/or seek services for the effects of domestic violence. Employers are well advised to consult the laws of their individual States and otherwise tread lightly when dealing with victims of domestic violence.

The DOL’s Made Some Changes to the FMLA; Is Your Policy in Compliance?

Effective March 8, 2013, the Department of Labor (“DOL”) began enforcing a new Final Rule for interpreting the Family and Medical Leave Act of 1993 (“FMLA”). The DOL’s new Final Rule (published February 6, 2013) makes effective expanded military caregiver and qualifying exigency leave rights created by the National Defense Authorization Act of 2010. The Final Rule also incorporates an hours of service eligibility requirement created by the Airline Flight Crew Technical Corrections Act of 2009, a federal law which modified FMLA eligibility requirements for airline flight attendants and flight crew members, who largely had been excluded from protected leave due to their unconventional work schedules,

The bulk of the DOL’s Final Rule clarifies military qualifying exigency and service member caregiver leave. Significant changes to the FMLA regulations resulting from the Final Rule include the following:

Extension of Military Caregiver Rights to Veterans: The Final Rule implements statutory amendments to the FMLA that extend military caregiver rights to family members of veterans with serious injuries or illnesses. Specifically, the regulations define a covered veteran as a member of the Armed Forces who has been discharged or released under conditions other than dishonorable within five years prior to the date the employee’s leave. The Final Rule adopts a flexible definition of a serious “injury or illness” for purposes of veteran military caregiver leave coverage. Additionally, the Final Rule expands the definition of serious injury or illness for current service members to include preexisting conditions aggravated by service in the line of active duty.

Expansion of Qualifying Exigency Leave: The DOL’s Final Rule extends qualifying exigency leave to eligible employees who are family members of military personnel of the Regular Armed Forces that are deployed to a foreign country. The DOL Final Rule also expands qualifying exigency leave to add a “parental care” category. Under this new category, an eligible employee may take qualifying exigency leave to care for a service member’s parent, who is incapable of self-care, in order for the eligible employee to:

arrange for alternative care;
provide care on an urgent, immediate need basis (but not on a routine, regular or everyday basis);
admit or transfer the parent to a care facility; or
attend meetings with staff at a care facility (but not for routine or regular meetings).

The need to provide parental care must arise directly out of the military member’s active duty status. Additionally, under the DOL’s new regulations, eligible employees now may take up to fifteen (15) days, instead of five (5), for qualifying exigency leave related to their rest and recuperation.

Clarification of Leave Certification Process: Prior FMLA regulations allowed certification of a service member’s serious injury or illness to be obtained only from representatives of the Departments of Defense or Veterans Affairs. Other health care providers were excluded from certifying a service member’s serious injury or illness. Under new FMLA regulations, any health care provider, even those unaffiliated with the Department of Defense, Department of Veterans Affairs or TRICARE, may provide required certification for an eligible employee to take military caregiver leave.

New FMLA Poster and Certification Forms: The Final Rule approves a revised FMLA Employer Rights and Responsibilities poster and new certification forms for FMLA leave, including a new form for military caregiver leave to care for veterans. The FMLA poster and certification forms, which are available on the DOL’s website, have been revised and updated to incorporate the new language of the FMLA regulations.

In light of these significant changes to FMLA regulations, employers need to revise their current FMLA policies and replace outdated posters and certification forms to bring them into compliance. Employers can also expect an uptick in the number of employees requesting military–related FMLA leave, as the DOL’s new regulations have expanded existing leave rights to cover a greater number of eligible employees.

California Court of Appeal Finds Employment Arbitration Agreement Barring Class Claims Unconscionable

In Compton v. Superior Court of Los Angeles County, No. B236669 (2d Dist. Mar. 19, 2013), a divided panel of the Second District Court of Appeal reversed the Los Angeles Superior Court’s order compelling arbitration of her wage-and-hour class action complaint.

The Compton majority found the arbitration provision was substantively unconscionable because it was “unfairly one-sided” for four reasons. First, the agreement exempted the employer from arbitration for injunctive relief on claims related to confidential information and trade secrets. The majority did not find the carve-out of plaintiff’s claims for workers compensation, unemployment and disability claims sufficient to create parity. Second, the majority found the imposition of a one-year time limit to arbitrate employee claims impermissibly shortened the applicable statutes of limitations; for a separate, but related reason, the court found this limitation was unfairly one-sided when compared with the three- and four-year statutes of limitation applicable to the unfair competition and trade secret claims preserved by the employer. Finally, the majority found that the attorneys’ fees language undermined the employee-favorable statutory fee provisions. Of some concern, the court declined to sever the offensive terms, finding the agreement to be “permeated by unconscionability.”

In an apparent effort to distance its opinion from AT&T Mobility, LLC v. Concepcion (2011) 131 S.Ct. 1740 and its progeny, the Compton majority emphasized that the Concepcion opinion arose out of a consumer arbitration agreement. The court specifically found that Concepcion “did not abrogate the Armendariz one-sidedness rule,” i.e., “the doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself.” Armendariz v. Foundation Health Psychcare Servs. (2000) 24 Cal.4th 83, 118.

The Compton court found that the agreement was also procedurally unconscionable because, regardless of “how conspicuous the arbitration agreement’s terms and advisements,” the employer’s reported conduct (hurried presentation and signature requested) “rendered them nearly meaningless” and demonstrated oppression. The court also found that the information provided was one-sided because it did not sufficiently set forth the rights that were being waived, and because the rules of the applicable arbitration bodies were not provided to the employees in toto.

As a procedural side note, the panel was divided even on the basis for consideration of the appeal. The dissent found that the appeal was appropriate pursuant to the “death knell” doctrine, and the majority side-stepped the issue by addressing the issue as a petition for writ of mandate.

The dissent raises a host of issues and highlights the unsettled conflicts between the Concepcion line of cases and California’s unconscionability principles, which have arisen primarily in the context of employee and consumer lawsuits.

Given the strong language in Compton and the court’s refusal to strike out the offensive terms, California employers may wish to engage in a review of their arbitration agreements in light of the Compton majority’s opinion.

Editor’s Update:

On June 12, 2013, the Supreme Court granted defendant’s petition for review, but deferred all briefing and further action in the matter pending its disposition of Sanchez v. Valencia Holding Co., S199119, the leading case on the related issue of whether the Federal Arbitration Act, as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___, 131 S.Ct. 1740, preempt state laws invalidating mandatory arbitration provisions in a consumer contract on grounds of procedural and substantive unconscionability.

NLRB Acting General Counsel Gets One Right

The NLRB’s Acting General Counsel has finally recognized that employees do not read every employer policy through a Section 7 lens. In a Memorandum from the General Counsel’s Division of Advice dated February 28, 2013, the Acting GC found that Boeing Company did not interfere with or restrain Section 7 activity by maintaining an ethics policy Code of Conduct which prohibits employees from questioning the company’s honesty, morality or reputation. Instead, the Memorandum concludes that reasonable employees would understand that the company’s Ethical Guidelines are aimed at matters of business ethics, not protected concerted activity.

While recent Board decisions give lip service to the requirements that phrases not be read in isolation, and that policies are unlawful only if employees “would reasonably construe” them as prohibiting Section 7 activity, all too often the opinions read as if the analysis was simply an academic exercise for labor lawyers to decide if the language could be construed as interfering with protected rights irrespective of the context in which they are found. Refreshingly, that is not the case in the Boeing Company Memorandum.

Boeing’s Ethical Guidelines is a forty-three page statement of the company’s business ethics, and sets forth the policies and standards by which the company and its employees are expected to conduct themselves as a government contractor. In the one-page Code of Conduct preamble, the company sets forth its own expectation for conducting business with highest standard of ethics and integrity, and mandates that employees meet that standard: “Employees will not engage in conduct or activity that may raise questions as to the company’s honesty, impartiality, reputation or otherwise cause embarrassment to the company.” The preamble Code of Conduct does not contain any limiting disclaimers or clarifying examples to explain that it is not intended to interfere with or restrict Section 7 rights. Nevertheless, the Acting GC determined that employees would understand that the Code does not interfere with their rights because the “broader framework” of the forty-three page Guidelines contains examples of the type of conduct – such as bribery or insider trading – that would undermine the company’s reputation for integrity. In other words, context matters even where the context requires reading the policy as a whole, and even where there are no clarifying examples or disclaimers connected with the prohibitions at issue. We can only hope the Acting General Counsel continues to apply the rule that policy statements should not be read in isolation, and continues to recognize that employees “would reasonably” understand the context in which prohibitions are contained.

Former Executive’s Race to California Hits a Roadblock in New York

Like many things in life, there is a perceived formula for success in non-compete cases: If you are the former employee or his or her new or would-be new employer, conventional wisdom dictates that you identify the restrictions early and consider filing a preemptive declaratory judgment action in a state that is hostile to such agreements (provided the facts permit). California is the most well-known example, but there are others. The plan works best if the former employee lives in California (or similarly hostile state) or has other significant connections by virtue of his past or intended future employment. But now, a New York appellate court has thrown conventional wisdom a curve.

Michael Cusack and Peter Arkley were former Aon executives. They left Aon on June 13, 2011 to pursue lucrative opportunities with a competitor, Alliant Insurance Services. The same day, 38 other Aon employees also left, and 22 more followed shortly thereafter. Aon’s clients came too, with over $20 million in client revenue allegedly flowing from Aon to Alliant.

Arkley and Cusak, along with Alliant, following the familiar formula, filed for a declaratory judgment to invalidate their restrictive covenant agreements in California federal court on the same day they resigned. Arkley’s chances of success in California seemed particularly good because, although his employment agreement was governed by Illinois law, he both lived and worked in California, and he planned to continue to do so with Alliant.

Aon responded by filing suits in Illinois and New York state courts, and found success in New York in particular. The New York trial judge, undeterred by the action in California and Arkley’s California connections, enjoined him soliciting business from, and entering into any business relationship with, any of Aon’s clients whom he either procured or whose accounts he worked on in the 24 months prior to his departure. She also enjoined him from soliciting any Aon employees to work for Alliant.

In January, a New York appellate court affirmed. The court rejected Arkley’s calls to defer to the first-filed California action, calling it “a preemptive measure undertaken to gain a tactical advantage so as to negate the force and effect of the restrictive covenants, which the parties had freely agreed upon.” The New York court seized upon the fact that the parties’ agreement had selected Illinois law to govern and held that Illinois law provided for enforcement.

Although the outcome was arguably an unusual one insofar as a New York court entered an injunction against someone who lived and worked in California and intended to do so in his new employment, so too were the facts involved, on many levels. First, the conduct at issue was particularly egregious in that it involved, among other things, former employees allegedly taking the equivalent of hundreds of thousands of printed pages of documents, including highly-sensitive documents; a coordinated departure strategy that included filing a declaratory judgment action in California within an hour of the key executives’ resignations; a mass exodus of both employees and clients; and alleged violations of an earlier-issued temporary restraining order. Second, the executives involved were high-level employees, who received seven-figure compensation from Aon, at least in part in consideration of the very restrictions they sought to avoid. Third, the restrictive covenants at issue were not blanket non-competes, but rather restricted the executives from disclosing confidential information, from calling on the customers that they serviced for Aon, and from soliciting other Aon employees for employment. In different circumstances, involving lower-level employees, who are alleged to have engaged in less egregious conduct and/or who are subject to broader restrictive covenants, the former employer may not fare as well.

Still, the takeaways are unmistakable. First, choice of law is critical, and an employer loses a tactical advantage when it fails to select a state law that, if not favorable to it, at least gives it a fair shot. Second, living and working in California is not the end all be all, and racing into a California court does not guarantee the former employee and his new employer freedom from the employee’s post-separation obligations. Solid facts and a solid agreement, presented in a jurisdiction that follows a more traditional approach to restrictive covenants, can still result in success for the former employer.