Hiring Practices Archives - Page 2 of 2

Massachusetts Joins California and New York with Aggressive Equal Pay Law

On August 1, Massachusetts added significant teeth to the state’s current equal pay law. The new law, “An Act to Establish Pay Equity,” not only targets compensation decisions, it also affects hiring practices. As of July 1, 2018, when the new law takes effect, employers cannot ask an applicant to provide his or her prior salary history until after the candidate has successfully negotiated a job offer and compensation package. This measure is intended to stop the perpetuation of gender pay disparities from one employer to the next. In addition, employers cannot use an employee’s prior salary history as a legitimate basis to pay a man more than a woman for comparable work.

The definition of comparable work is broad: “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions: provided, however, that a job title or job description alone shall not determine comparability.”

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Just Don’t Ask: With The Fair Chance Ordinance, San Francisco Joins A Growing Number Of Jurisdictions That Restrict Employers’ Pre-Hire Inquiries About Applicants’ Criminal Histories

In February 2014, San Francisco joined the growing number of jurisdictions that have enacted so-called “ban the box” laws. Like many of its counterparts, San Francisco’s Fair Chance Ordinance, which will become effective in August 2014, significantly limits employers’ abilities to inquire about and/or consider applicants’ and employees’ criminal records when making employment decisions.

Pursuant to the Ordinance, San Francisco employers are prohibited from asking about applicants’ criminal histories until either (a) after the applicants’ first live interview, or (b) after a conditional offer of employment has been extended. However, the Ordinance places considerable limits on obtaining and using any information obtained. Specifically, employers are prohibited from inquiring about or taking any adverse action against applicants or current employees based on: (a) any arrests not leading to a conviction, except for some unresolved (i.e., pending) arrests; (b) participation in or completion of a diversion or deferral of judgment program; (c) convictions that have been judicially dismissed, expunged, voided, invalidated or otherwise rendered inoperative; (d) convictions or other determinations of the juvenile justice system; (e) convictions older than seven years; and/or (f) information pertaining to any offense other than a felony or misdemeanor (e.g., infractions). Before making any inquiry about an applicant’s conviction history, the Ordinance requires that the employer provide the applicant in question with a notice promulgated by the San Francisco Office of Labor Standards Enforcement (“OLSE”).

The Ordinance also requires that employers engage in an individualized assessment and consider only directly-related convictions when making decisions about applicants. Employers also must consider the amount of time that has elapsed since the applicants’ convictions and any evidence of rehabilitation, inaccuracy of the applicants’ records, and/or other mitigating factors. Before making any adverse decision, employers are required to provide the employee with a written notice of their intention to make such a decision, detailing the reasons for the decision. In addition, if any background report was considered by the employer, the employer must also provide that to the applicant. Any affected candidate has seven days following receipt of the employer’s notice to submit evidence regarding: (i) the inaccuracy of the criminal history information; or (ii) rehabilitation or mitigating factors. If the employer receives such information from an applicant, it must delay its intended action and consider the additional information.

In addition to the above restrictions, the Ordinance contains strict anti-retaliation/interference provisions. The Ordinance also requires that employers post a notice of applicants’ and employees’ rights in a conspicuous place at every workplace, job site, or other location in San Francisco that is under the employer’s control and that is frequently visited by employees or applicants. In addition, any job postings must contain a notice that the employer will comply with the Ordinance’s requirements.

Though San Francisco’s ordinance is particularly stringent, the City is by no means alone in banning employers from inquiries about applicants’ criminal pasts: dozens of cities and several other states – including Hawaii, Massachusetts, Minnesota, and Rhode Island – have enacted similar “ban the box” legislation. Moreover, there are a growing number of organizations pushing for the enactment of similar laws and ordinances across the country.

Employers in jurisdictions that have already enacted “ban the box” laws should ensure that they avoid any impermissible inquiries. Employers in locations that have not yet been affected should closely monitor developments in their jurisdictions to avoid any exposure.

Ten Considerations in Drafting Executive Employment Agreements

Perhaps your company has just acquired a new business and wants to put that entity’s employees under a more structured employment arrangement. Or maybe you are just looking to roll out new executive-level agreements within your own company. Whatever the motivation and circumstances, here are ten things to think about in drafting employment agreements that often go overlooked:

Severance – The most common question is the easiest: Are you going to provide severance and, if so, how much? Other details merit consideration though. For example, is death or disability a severance trigger? As part of the package, do you want to provide things like medical benefit continuation, prorated bonus, equity vesting acceleration, extension of the option exercise period, or other benefits? Whatever you do, the employer will want to make sure that the executive has to execute a release to receive the severance benefits, other than vested benefits and accrued compensation.
Fixed Term (or Not) – Traditionally, a term contract was like a baseball contract – the executive had a term and, except where the employer had good cause for an early termination, it had to pay the executive out through the end of the term no matter what. That concept seems to have largely disappeared, in that (a) employers don’t want to be saddled with paying out the full term if they elect to make a change earlier and (b) executives want severance even when the agreement expires naturally and is not renewed by the company. As a result, except where the employer can secure a true no obligation walk away at the end of the term, or at least establish some difference between an in-term and end-term separation, an employer would be wise to go with an at-will arrangement with no set term.
Restrictive Covenants (or Not) – Restrictive covenants, including covenants not to compete, require clearer, more definitive consideration than most contract terms. And aside from new employment, there is no better consideration than new or enhanced compensation and benefits memorialized in a formal employment agreement. So, if you think non-competition, customer non-solicitation, or other restrictive covenants are worthwhile (and you usually should at the executive level), the employment agreement (or a separate, contemporaneously-executed and cross-referenced restrictive covenant agreement) is the place to do it.
Cause – “Cause” means different things to different people. From an executive’s point of view, Cause is often engaging in particularly serious conduct that is not rectified after notice and an opportunity to cure. Employers, however, should seek to include things like the executive’s failure to perform his or her duties; violation of material company policies (such as anti-discrimination and harassment policies); commission of a felony or other serious crime; breach of his or her restrictive covenants, fiduciary duty, or other misconduct; and material misrepresentation of experience or education, among other things.
Good Reason Provision (or Not) – A “Good Reason” separation provision allows an executive to resign for certain preapproved reasons – typically the employer’s material breach of the employment agreement, a required relocation, or a material diminution of the executive’s duties, often after the employer has failed to cure – and collect severance as if he or she was fired without Cause. Most savvy executives have come to expect such a provision, and providing it to the executive can be a relatively easy give if the Good Reason provision is drafted correctly.
Award Equity (or Not) – Many executives, particularly when accepting a role in a new or newly-acquired company, understand that the cash compensation may be limited initially. What they really want is equity or options so that, if they succeed in developing the company, they can share in that success. Employers and equity firms often find this arrangement beneficial too in that it limits cash outlays and aligns incentives.
State Law and Venue Selection – Almost all employment agreements include a choice of law provision, and many, if not most, employers instinctively select the state in which the company operates and the executive will work. But that may not be the best law for the employer and other options may be available. For example, most courts will apply another state’s law if there is a nexus to that state, such as it being the employer’s state of incorporation. Venue is equally important, as requiring an employee to litigate in a certain forum can give the employer litigation location certainly and potentially avoid the executive running to another state where the law (for example, concerning non-competes) is more favorable.
Assignment – Often forgotten, the assignment provision is critical in that, without it, many states’ laws will not permit assignment, even upon a sale of the employer’s assets. To avoid this, the employment agreement should state that, although the executive may not assign the agreement, the employer may do so, at least to an affiliate or as part of a transaction.
409A – When possible, severance, other payments and the agreement generally should be structured so as not to trigger coverage under Section 409A of the Internal Revenue Code. If the agreement is subject to Section 409A, it should be written to comply with it. Failure to do so can expose the executive, among other things, to a 20 percent additional tax and the employer to an angry executive.
Miscellaneous – There are of course numerous other things of value that an employer can do. For example:

● The salary section can allow for the reduction of the executive’s salary when executive salaries are being cut across the board.

● The employer may want to make any bonuses contingent on the executive working through the end of the year.

● In most states, an employer can provide that accrued, unused vacation and PTO will not be paid out upon termination of employment.

● Arbitration, subject to a carve out for injunction actions, has its positives and negatives and should be considered.

● Address what is to happen upon a sale of the employer or other change of control.

● New executives should represent and warrant that they are not bound by any restrictive covenants that would limit their ability to work for the employer and that they will not use any confidential information from their former employer.

● Although largely standard now, employers should take care to ensure that the agreement provides that it can be revised only by written document.

● Make sure the agreement works with other documents and that the integration clause doesn’t unintentionally overwrite other agreements.

There are always more issues of course, particularly those specific to the particular company and the executive. But the ten-plus areas above arise frequently and thus typically merit consideration.

New FCRA Background Check Forms Required January 1, 2013

Effective January 1, 2013, employers must revise Summary of Rights forms they provide to prospective and current employees as required under the Fair Credit Reporting Act (“FCRA”).

The FCRA is a federal law which applies whenever a covered employer seeks information from a “consumer reporting agency” regarding an individual’s credit, character, general reputation, personal characteristics, or mode of living. A “consumer reporting agency” is defined quite broadly under the FCRA, resulting in an employer being subject to the FCRA simply by using a third-party vendor to conduct background checks on any of its applicants/employees.

Pursuant to the FCRA, an employer is required to provide a disclosure and obtain written authorization from any applicant/employee prior to conducting a background check. Should the employer seek to take an “adverse action” against the applicant/employee based on the background check — which, for purposes of the FCRA is defined as a denial of employment or any other decision that adversely impacts the applicant/employee (i.e., failure to hire, transfer, termination) — the employer must first provide the applicant/employee a copy of the background check and a Summary of Your Rights under the FCRA (“Summary of Rights”) form under the FCRA. It is this Summary of Rights form that employers must revise prior to January 1, 2013.

With President Obama’s signing of the Consumer Protection Act of 2010 (signed into law on July 21, 2010) enforcement powers over the FCRA were transferred from the Federal Trade Commission (FTC) to a newly created Consumer Financial Protection Bureau (CFPB). The CFPB has since issued regulations requiring employers to revise their Summary of Rights forms effective January 1. 2013 to reflect that information about consumers rights under the FCRA can now be obtained from the CFPB instead of the FTC.

Other notice provisions under the FCRA remain the same. After taking adverse action against an applicant/employee based on a background check, the employer must provide the applicant/employee with notice of the adverse action, as well as the name, address and toll-free telephone number of the third-party vendor that conducted the background check, and a written statement that the third-party vendor did not make the decision to take the adverse action and is unable to provide the applicant/employee with specific reasons as to why the adverse action was taken. The employer must also provide the applicant/employee with notice of his/her rights to obtain a free copy of the consumer report within sixty days and to dispute the accuracy or completeness of any information contained in the report.

Further, while the FTC no longer will have primary statutory authority to issue interpretive guidance under the FCRA, the agency on July 20, 2011 issued a Staff Report entitled “Forty Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report and Summary of Interpretations” which compiles and updates the agency’s prior guidance under the FCRA and provides a section-by-section summary of the agency’s interpretations of the Act. The FTC also has withdrawn its 1990 Commentary on the FCRA, which the agency admits had become obsolete as a result of statutory amendments expanding the FCRA in the intervening years. A copy of the FTC’s new Staff Report can be found on the FTC’s website at http://www.ftc.gov/os/2011/07/110720fcrareport.pdf. The copy of the new Summary of Rights form which employers are required to use effective January 1, 2013 can be downloaded from the CFPB’s website at http://ecfr.gpoaccess.gov/graphics/pdfs/er21dell.019.pdf.