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On May 21, 2018, the United States Supreme Court held in Epic Systems Corp. v. Lewis, and two related cases, that class action waiver provisions contained in arbitration agreements do not violate the National Labor Relations Act. This decision is a significant favorable development for employers. Justice Gorsuch, writing in a 5 to 4 decision, held that although the public policy is debatable, the Federal Arbitration Act allows arbitration agreements with such waiver provisions to be enforced despite claims that “concerted activity” under the National Labor Relations Act includes the right to file class actions. In a strongly worded dissent, Justice Ginsburg called the decision “egregiously wrong.”

What Does This Mean?

 As we alerted you previously, this is a hot button issue that provides key insight into the current Supreme Court’s view on arbitration and the National Labor Relations Act. The decision continues a long line of cases favoring arbitration. Stated simply, it means that employers may require employees to sign valid arbitration agreements prohibiting class actions as a condition of employment.

Under these waiver provisions, it will be more difficult for employees to challenge employment practice violations through the usually more expensive and burdensome class action litigation process. (The cases before the Court were alleged wage-hour violations under the FLSA.) Instead, such challenges will be decided individually on the merits through what is generally regarded as a more expedient and efficient arbitration process. Critics of the Court’s decision argue that this will discourage claims, lead to inconsistent decisions and result in less protection of employee rights. Proponents argue otherwise: the more efficient arbitration process could result in more claims being filed. Proponents also note that the costly and burdensome class action process was being misused to leverage large settlements from employers.

In addition to the major impact this decision could have on the employment law landscape, the decision also is significant because it foreshadows the current Court’s more limited view on deference to administrative agencies, such as the NLRB, under the so-called “Chevron deference” doctrine.

What Should Employers Do?

Employers should revisit the pros and cons of requiring their employees to arbitrate employment claims. The Court’s decision in Epic Systems is a major factor, among others, in favor of binding arbitration.  However, other countervailing factors should be considered, such as reduced chances of prevailing on dispositive motions and limited appellate review. Yet there is no question that most large employers could benefit from limiting their exposure to class actions, particularly given the recent surge in class or collective wage-hour litigation. As a caveat, employers should recognize that there are essential components that must be included to establish a legally enforceable, mandatory arbitration procedure.

Given the controversy surrounding the Court’s decision and the policy questions it raises, state legislatures might seek to minimize or undermine the Court’s decision. We will continue to monitor this area and update you as the law develops. At the same time, we continue to work with clients as they modify policies in response to this important development.

The Connecticut General Assembly ended its legislative session quietly for the second year in a row. There were significant employment proposals on pay equity, paid FMLA, sexual harassment and discrimination, paid sick leave, and an increase in the minimum wage, but the General Assembly only passed the pay equity bill.

Pay Equity

The General Assembly passed “An Act Concerning Pay Equity.” Under this law, employers will be prohibited from inquiring or directing a third party to inquire about a prospective employee’s wage and salary, unless the prospective employee has voluntarily disclosed such information.

This law does not apply to employers or third parties who are required to inquire about wage or salary history by federal or state law. The law also does not prohibit employers from inquiring about other elements of a prospective employee’s compensation structure (e.g., whether the employee received stock options.) However, the employer may not inquire about the value of other elements of the prospective employee’s compensation structure (e.g., the value of the stock options.)

The Governor has indicated that he will sign this bill into law and if signed, it will take effect on January 1, 2019.

No Changes to Sexual Harassment Laws

One of the most surprising developments was the failure of the General Assembly to pass reforms to the state’s sexual harassment laws. Proposed bills would have, among other things, increased the number of employers required to provide sexual harassment training and would have required training for non-supervisory employees. One proposal also would have eliminated an important affirmative defense for employers and would have significantly increased the statute of limitations for bringing such claims.

These proposals were made in the wake of the #MeToo movement and had overwhelming support among legislators. It appears that the bill failed to pass due to concerns about a provision extending the statute of limitations for certain sex crimes. It remains to be seen whether the momentum for strengthening the state’s laws on sexual harassment will carry through to the next legislative session.

Employers should not take the Connecticut legislature’s failure to pass a bill as a sign that the #MeToo movement is waning. In fact, New York state, and New York City, recently passed laws requiring sexual harassment training for all employees. Other neighboring states also are considering new sexual harassment laws. Connecticut employers should continue to review their policies and procedures on preventing and properly responding to harassment in the workplace. Covered employers must continue to train their supervisors and, although not legally required to do so, an increasing number of employers also are training non-supervisory employees.

Please contact us if you are considering training your non-supervisory employees as we have developed a program for this audience.

Employers should be aware of two developments in federal wage and hour law.  The U.S. Supreme Court has issued an employer-friendly decision regarding the interpretation of the FLSA exemptions and the U.S. Department of Labor has launched a new program that will allow employers to self-audit and avoid fines for accidental violations of the federal wage and hour laws on overtime and minimum wages.

Supreme Court Decision Signals Broader View of FLSA Exemptions

On April 2, 2018, the U.S. Supreme Court issued an important decision which signals that it will take a broader view of FLSA exemptions.  In Encino Motorcars LLC, v. Navarro, the Court held that auto service advisors, who advise customers about repair work, are exempt under the FLSA exemption that excludes salesmen, partsmen, or mechanics “primarily engaged in selling or servicing automobiles.”

Although this case only involved auto service advisors, the decision is important because the Court abandoned the long-held principle that FLSA exemptions are to be “narrowly construed” against employers seeking to assert them.  In the past, if there was any “gray area” or uncertainty, the court would resolve that ambiguity in favor of employees and hold that they were not exempt.

Now, the Court will apply a “fair reading” of FLSA exemptions, meaning it will take a more holistic, rather than a narrow approach, when determining whether employees are exempt.  This new standard includes a critical examination of the statutory language, consideration of relevant industry practices, and the intent of the exemption.  In the Encino Motorcars, LLC case, the Court looked at the phrases “salesman, partsman, or mechanic” and “selling or servicing automobiles” and determined that the language could be combined such that a “salesman” who is primarily engaged in “servicing” vehicles falls within the exemption.  The Court held that service advisors were “obviously” a form of “salesmen of services” and, therefore, were exempt.

The decision may make it easier for employers to establish that employees are exempt under the FLSA.  But employers should be aware that this decision does not affect state laws and state laws on exemptions still apply.

DOL Announces Pilot Program to Self-Audit

Recently the U.S. Department of Labor announced the “Payroll Audit Independent Determination,” or PAID, program, which will allow employers to self-audit and to pay back wages for accidental overtime and minimum wage violations.  This program requires employers to carefully audit their pay practices and correct any violations going forward.

There are numerous unanswered questions, most notably the effect of voluntary compliance with the federal FLSA under the PAID program would have on potential state violations for the same issues. The program is currently in a six month “pilot” period and will be evaluated at the end of the period.

Before participating in what could be a beneficial and efficient way to resolve possible wage and hour violations, employers are advised to consult counsel to understand the full ramifications of the PAID program.

Employers should take note of the following developments in labor law.  The National Labor Relations Board vacated a key joint-employer decision and the United States Supreme Court is considering two cases which will impact labor law and union organizing.

Oops! Board Member’s Private Practice History Leads to Return of Obama-Era Joint-Employer Standard

In a previous post, we reported that the Board overturned the Obama-era Browning-Ferris decision and restored the employer-friendly “direct and immediate” control test for establishing joint-employer status when it issued the ­Hy-Brand decision.  On February 26, 2018, however, the Board vacated that decision.

The Board vacated it because current Board Member William Emmanuel’s former law firm represented the employer in Browning-Ferris when the case was before the Board and before his appointment.  Critics of the Hy-Brand decision argued it was improper because Emmanuel’s former firm participated in a decision he voted to overturn once he was appointed.  The NLRB’s Inspector General sent the Board Members a memorandum which concluded that Emanuel should not have participated in the Hy-Brand decision and recommended that the Board consult with agency ethics officials to determine whether it should vacate the decision.  The Board decided to vacate it.

This means that the Browning-Ferris “indirect control” standard has been resurrected, at least for now.  The Board must now consider the joint employer standard in a new case where there are no conflicts of interest.

We also reported that the “Save Local Business Act” is pending before Congress.  This Act would establish the “direct control” standard for the National Labor Relations Act and Fair Labor Standards Act.  The Board’s decision to vacate the Hy-Brand decision may lead to action on this bill.  We will keep you updated on any developments.

U.S. Supreme Court Considers Mandatory Arbitration and Agency Fees

The Supreme Court is currently considering two cases that will have a large impact on labor arbitrations and union organizing.

The first is titled National Labor Relations Board v. Murphy Oil.  This is a trio of cases which consider whether class and collective action waiver provisions are lawful in arbitration agreements.  The Board’s position is that requiring employees to give up their right to arbitrate class or collective action claims is a violation of the employees’ rights to engage in concerted activity.  The Supreme Court heard argument on this case on October 2, 2017, and a decision will likely be released soon.

This decision will provide insight on the current Supreme Court’s views on arbitration, employees and the National Labor Relations Act.

The second is Janus v. American Federation of State, County and Municipal Employees.  In this case, the Supreme Court is considering whether the requirement that public-sector employees be required to pay union dues as a condition of employment regardless of union membership is constitutional.  Currently, public-sector employees are required to pay union dues and these funds are used for, among other things, union organizing and campaigning.  The Supreme Court will be deciding whether this requirement violates the public-sector employees’ First Amendment rights because many of the employees are not union members or union supporters but are required to contribute to union funding.

This case will provide insight to the current Court’s views on unions and union organizing.  The case was heard on February 27, 2018.  We will keep you updated on the result.

Legislators in the Connecticut State House and Senate have proposed legislation that would significantly impact sexual harassment cases and sexual harassment training requirements.  Although the proposals differ slightly, it is clear that legislators are seeking to expand sexual harassment training, including requiring employers to train non-supervisory employees.  One proposal also seeks to extend the limitation and deadline periods for accusers to bring complaints before state courts and the CHRO.

The proposal pending in the Senate is titled “The Time’s Up Act.”  The proposal, which is a clear response to the #MeToo and Time’s Up movements, purports to be the “Largest Overhaul in Connecticut History of Sexual Harassment Laws.”  The Time’s Up Act proposes the following changes:

  • Requires employers to email their sexual harassment policy and the remedies available under the law to employees at least once a year, in addition to posting them in the workplace. A significant increase in the fine for failing to comply with this requirement (the current fine is $250.)
  • Requires employers with 3 or more employees (rather than the current 50 or more threshold) to provide sexual harassment training to both supervisors and non-supervisory employees (rather than just supervisors.)
  • Extends the statute of limitations to file a harassment complaint with the CHRO from 180 days (or 6 months) to 2 years after the alleged harassment or discrimination.
  • Extends the deadline to file a lawsuit with the court after the CHRO issues a release of jurisdiction from 90 days to 2 years.
  • Allows the CHRO to provide injunctive relief to employees who work for employers with 3 or more employees (rather than the current 50 or more threshold.)
  • Authorizes the CHRO and private parties to petition for or request punitive damages in sexual harassment or other employment discrimination cases.
  • Prohibits nondisclosure provisions in settlement agreements and other contracts.

The proposal pending in the House (HB 5043) is titled, “An Act Promoting A Fair, Civil and Harassment-Free Workplace.”  Under the proposed bill:

  • Employers with 15 or more employees will be required to provide training to both supervisors and non-supervisory employees (rather than current 50 or more threshold or the 3 or more threshold under The Times Up Act.)
  • Training would consist of two cumulative hours of what legislators have called “awareness and anti-harassment compliance training and education” within 6 months of promotion of supervisors and 6 months of hire for employees. This requirement would take effect on October 1, 2019.  Employers who provide this training between October 1, 2017 and October 1, 2019 would not be required to provide it for a second time.
  • Training would include, but not be limited to, examples of the types of conduct that constitute and do not constitute harassment and strategies to prevent harassment, bystander intervention training, a discussion of workplace civility that includes what is acceptable and expected behavior in the workplace, and training on the employer’s policy against harassment.
  • Employers with 3 or more employees must post information on all types of harassment and the remedies available to the targets of such harassment on an annual basis. This information must be directly communicated to employees.  Unlike The Time’s Up Act, HB 5043 does not specify how it must be communicated to employees.

Our firm has been proactive in crafting sexual harassment training that is responsive to the current climate and consistent with emerging views on harassment.   In addition to our recent seminar, Rethinking Sexual Harassment Prevention, we regularly provide sexual harassment training to supervisors and have developed a new program directed at non-supervisory employees.  In the event that either of these legislative proposals passes this term, we are prepared to provide the newly required training.

You can find HB 5043 here, and The Time’s Up Act here.

Lawyers and employers must examine what the #MeToo uprising and the ongoing media coverage of high profile sexual harassment claims mean for the workplace. Learn about individual and board liability; how to assess workplace culture, including how human resource departments are perceived by employees; about workplace investigations with an emphasis on how to address rumors and/or complaints made against high level executives and star employees; and how juries may react to sexual harassment claims. The speakers will address sexual harassment prevention training and anti-discrimination and harassment policies, along with proposed changes to the federal and/or state sexual harassment laws.

Partners, Vincent Farisello and Sarah Healey will present this CLE for the Connecticut Bar Association on Monday, April 30th. Associate, Alan Bowie, Jr. organized this event in his role as Co-Chair of the Young Lawyers’ Section, Labor and Employment Committee.

For more information, please click here.

Last week, the NLRB held its promise and issued a series of decisions just before Chairman Philip Miscimarra’s term ended on Saturday, December 16.  As expected, the Republican-led NLRB overturned four decisions of the Obama-era.  However, the Board issued an employee-friendly decision, holding an employer violated the NLRA by firing two employees for soliciting union support.

Down Goes the Joint-Employer Standard

In a case titled Hy-Brand Contractors Ltd., the Republican-majority NLRB overturned the Obama-era joint employer standard that was enunciated in Browning-Ferris. In Browning-Ferris the NLRB held that companies were joint-employers even when one company only exercised “indirect control” or had the ability to exert such control over the terms and conditions of employment.  Current NLRB Chairman Philip Miscimarra strongly dissented from this decision.

In Hy-Brand, the Republican-majority NLRB, led by Chairman Miscimarra, returned to the previous standard which requires that companies exercise “direct and immediate control” over the terms and conditions of employment.  In its decision, the majority described the new standard as “understandable and rooted in the real world” and as recognizing joint-employer status in “circumstances that make sense and would foster stable bargaining relationships.”

NLRB Loosens Employee Handbook Standards

The NLRB also overturned the standard for determining whether employee handbook policies violated the National Labor Relations Act (“NLRA”).  The previous standard was that a policy violated the NLRA if employees could “reasonably construe” it to bar them from exercising their rights under the Act.  The Obama-era NLRB used this standard in recent years to invalidate numerous employer policies, including policies prohibiting employees from criticizing employers on social media or recording workplace conversations.

The current NLRB will now consider the nature and extent of a policy’s impact on an employee’s rights under the NLRA and the employer’s legitimate justifications for the policy.  This test balances the employee’s rights with the employer’s legitimate justifications, rather than relying on the employee’s subjective understanding.

The NLRB also announced that it will classify policies in the following categories:

  1. Policies that are legal in all cases because they cannot be reasonably interpreted to interfere with employee’s rights or because any interference is outweighed by business interests; and
  2. Policies that are legal in some cases depending on their application; and
  3. Policies that are always illegal because they interfere with employee’s rights in a way that cannot be outweighed by business interests.

NLRB Restores the “Sufficiently Distinct” Micro-Unit Standard

In a case titled PCC Structurals, Inc., the NLRB overturned the Obama-era decision which allowed so-called “micro-units”, or small bargaining units.  The Obama-era NLRB issued the Specialty Healthcare decision which established the “overwhelming community of interest” standard.  Under this decision, the NLRB presumed a union’s petitioned-for bargaining unit was appropriate as long as it consisted of a clearly identifiable group of employees.  Employers that believed additional employees should be included in the unit were required to show there was an “overwhelming community of interest” between the additional employees and those in the bargained-for unit.  This allowed unions to seek small units as a strategy to increase their success in organizational campaigns.

The NLRB returned to its traditional approach and will consider whether the employees in the proposed bargaining unit share a community of interest that is “sufficiently distinct” enough from the proposed additional employees to warrant a separate unit.

A Win for Employers Looking to Make Unilateral Changes

The NLRB also overturned the controversial Obama-era E.I. du Pont de Nemours decision.  In the du Pont decision, the Obama-era NLRB held that the changes the employer made to the employee benefit plan after the expiration of the collective bargaining agreement were unlawful unilateral changes.  This decision was a departure from the 50-year-old precedent that allowed employers to make changes to work rules without bargaining after a collective bargaining agreement expired if the employer had a history of making those changes.  The current decision restores this precedent, and employers will have the ability to make changes to work rules as long as they have a consistent practice of doing so.

NLRB Issues An Employee-Friendly Decision

In a case involving parties from Connecticut, the NLRB issued a decision in favor of employees’ rights to organize.  The NLRB held that Waterbury-based Bozzuto’s Inc. violated the NLRA by disciplining and terminating two employees who encouraged others to support a union campaign.  In addition, the NLRB determined that an executive level employee unlawfully interrogated an employee by asking what was going on with the union.  The NLRB ordered Bozzuto’s to reinstate the employee to his former position and pay back wages.

Takeaways

Based on these decisions, the NLRB seems poised to reverse Obama-era decisions that were seen by many employers as too harsh or impractical.  This certainly is welcome news for employers.  These decisions likely will be challenged in the courts, but should help employers faced with NLRB charges at the local level.

Holiday parties are a time-honored tradition in most workplaces.  While holiday parties can boost workplace morale and culture, poor management and planning can lead to unfortunate incidents and even worse, lawsuits.  In light of recent headlines on sexual harassment and other employment issues, it is especially important to consider various steps that you can take to minimize personnel issues and potential liability.

Monitor Alcohol Consumption and Provide Transportation

Alcohol is commonly served at holiday parties.  If not properly monitored, alcohol consumption can cause employees to engage in inappropriate, unwelcome or injurious conduct.  Successfully monitoring employee alcohol consumption can greatly reduce the risk of these kinds of incidents.

Consider limiting alcohol consumption by providing “drink tickets” or setting a drink maximum.  If your event is catered and not at a restaurant, you should hire a professional bartender to serve alcohol.  Professional bartenders are trained to monitor excessive drinking and cut off patrons who have had “too much.”  Also, consider providing transportation to and from the party.  This will reduce the risk of drunk driving and an employee hurting himself or others, and/or getting arrested.  Lastly, you should consider cutting off alcohol at least an hour before the party ends.

Set an Appropriate Time

Timing can be everything.  Holiday parties traditionally are evening affairs.  Consider departing from the evening tradition and hosting a party during the day.  If you plan to stick to the evening tradition, strongly consider starting and ending earlier in the evening.  Regardless of the time of day, make sure there is a strict end time and employees do not hang around after the party.  You should not sponsor or organize “after-party” events.  To this end, supervisors and managers should not attend the “after-party.”

Remind Employees of Personnel Policies and Expectations

Remind your employees that workplace rules will apply and clearly communicate your expectations in advance.  Consider reminding employees of the relevant personnel policies in advance of the event (e.g. anti-harassment, drugs and alcohol, dress code, and the code of conduct).  Before doing this, you should make sure that personnel policies and mandatory trainings are up-to-date.

Managers and/or supervisors should be reminded of their obligations to report certain behavior and should be encouraged to intervene where appropriate.  Managers and supervisors should help set the tone for holiday party behavior and hold employees accountable.  It is important that you clearly communicate your expectations and that employees understand that inappropriate behavior can lead to discipline.

Avoiding Wage and Hour Issues

Asking nonexempt employees to perform tasks at the holiday party can raise wage and hour issues.  Time spent performing duties for the benefit of the employer is considered compensable work time.  Therefore, you should establish that the party is voluntary and should not ask nonexempt employees to perform any duties or administrative tasks like setting up at the event, picking up supplies, or cleaning up.  Instead, rely on your exempt employees or consider hiring an outside company to complete these tasks.  If you choose to use nonexempt employees, make sure they are paid for all regular or overtime hours.

Holiday parties can be rife with potential liability if you are not careful.  If you follow these tips you can ensure your employees are able to celebrate the close of another business year while reducing your risk of liability.

Happy Holidays from the Carmody Labor and Employment team!

 

Notwithstanding all the news about repeal and changes to the Affordable Care Act, we are aware that the Internal Revenue Service is enforcing current provisions and assessing penalties.

Enforcement of the 2015 Employer Mandate Penalty

The IRS has announced that it will assess employer mandate penalties for the 2015 tax year.  Employers who had 100 or more full time employees (including full time equivalents) in 2014 and did not offer coverage to 70% of their full time employees in 2015 are subject to a penalty. The penalty applies if even one full time employee received a premium tax credit through the Exchange and employer coverage was not offered.  The 2015 penalty is $2080 times the total number of full time employees (minus 80).

Current Rule

Currently, the penalty applies to employers with 50 or more full time employees, including full time equivalents. If coverage is not offered to 95% of full time employees and at least one employee receives a premium tax credit through the Exchange, the penalty applies. The penalty for 2017 is $2260.

Other Penalties

Employers also can be subject to a penalty even when coverage is offered. The IRS penalizes employers for not offering affordable, minimum value coverage, if the employee received a premium tax credit through the Exchange. There are safe harbors for determining affordability.  The most commonly used one is the W-2 safe harbor, where the cost to the employee for self-only coverage is no more than 9.56% of W-2 income.  (This number is indexed for 2017.)  The penalty for this violation for 2015 is $3120 for each employee ($3390 for 2017).

How Are These Penalties Assessed?

These assessments result from IRS review of Forms 1095-C filed by employers for each full time employee against the records of employees who claimed a premium tax credit. Employers who receive what the IRS has labeled as Letter 226J must respond, typically within a 30 day period.

We can assist you in responding to the IRS.  Ignoring the letter will lead to the assessment of the tax.

Last week, both the U.S. House of Representatives and Senate took actions that may have a significant effect on labor and employment law.

Senate Confirms Peter Robb

On November 8, 2017, the Senate confirmed President Trump’s nominee for NLRB General Counsel, Peter Robb.  Robb is a longtime management-side labor and employment attorney.  He previously served as an NLRB field attorney and Chief Counsel to a former NLRB member.  Robb also litigated President Reagan’s firing of the Air Traffic Control Association members in 1981.

Robb’s confirmation is important because it confirms the change at the NLRB.  The General Counsel controls the agenda by setting NLRB policy and instructing the regional offices on the handling of cases and which issues to pursue and prioritize.  Robb’s management-side background signals a significant departure from his more pro-employee predecessor.

With the addition of Robb and the new Republican-appointed NLRB members, more employer friendly policies and decisions are expected from the NLRB.

Save Local Business Act

On November 2, 2017, the House of Representatives advanced the Save Local Business Act.  The relevant portion of this Act would amend the definition of joint employer under the National Labor Relations Act and the Fair Labor Standards Act to require that the employer exercise “direct control” over an employee to be considered a joint employer.

In 2015, the NLRB issued the Browning-Ferris decision in 2015 which expanded the Board’s definition of a joint employer to include employers who exercised indirect control over employees.  In addition, the Obama-era DOL issued guidance which significantly broadened the interpretation of a joint employer.  The current DOL rescinded this guidance in June.

This Act is Congress’s attempt to return the joint employer definition to the pre-Browning-Ferris standard.  The Senate is expected to introduce a companion bill, and the bill has a realistic chance of passing. We will keep you updated on any developments.