Recently, Democratic federal legislators proposed a bill to bar companies from requiring employees to sign mandatory arbitration agreements and also from preventing employees from bringing class actions.

Proposed Bill

The proposed bill, the Forced Arbitration Injustice Repeal Act (“FAIR Act”), sponsored by Connecticut Senator Richard Blumenthal and New York Congressman Jerrold Nadler, would ban mandatory arbitration in employment agreements, prohibiting employees from taking their claims to court.  It would also bar agreements that prevent workers from bringing class action claims against their employers.

Reactions to the Epic Systems v. Lewis Decision

This past summer, the United States Supreme Court ruled in an appropriately named case, Epic Systems v. Lewis, that mandatory arbitrations provisions, as well as waiver of class action claims in employment agreements, were enforceable.  Proponents for employees regard the Epic case as a blow to employees’ rights by preventing them from going public with claims, having their day in court and obtaining potentially larger jury awards, among other reasons.  In the midst of the recent #MeToo movement and pressure by employees to end mandatory arbitration at high profile companies such as Google and Vox Media, there is a concern that allowing employers to keep claims private and separate will in turn sweep legitimate claims under the rug.  Those who favor the Epic decision believe that arbitration provides a more civilized way of dealing with employment disputes because arbitration tends to be faster, cheaper, less obtrusive and private.  The FAIR Act would reverse the Supreme Court’s ruling in Epic.

Future Path of the FAIR Act

While similar bills have been proposed in recent years without moving forward, the FAIR Act has more support in the House of Representatives than in it has had in the past.  However, it will face more opposition in the Republican-controlled Senate and it is probably unlikely that President Trump would sign a bill reversing a decision written by his first Supreme Court appointee.

Stay tuned as we keep you updated with the issues that affect you!

Recently, we reported that the Department of Labor (“DOL”) would likely release a new rule addressing the “white collar” overtime exemptions for executive, administrative, and professional workers soon.  The DOL released this much anticipated proposed rule on March 7, 2019.

Proposed Changes

Under the proposed rule, the salary level threshold would increase from $455 per week (or $23,660 annually) to $679 per week (or $35,508 annually.) The DOL’s proposed increase falls almost squarely at the midway point between the proposed Obama-era increase ($913 per week) and the current salary threshold ($455 per week.) The DOL estimates that more than one million more American workers would be eligible for overtime as a result of this increase.

Other proposed changes would include:

  • Increasing the salary threshold for so-called “highly compensated employees” from $100,000 to $147,414,
  • A commitment to periodically review the salary threshold, which would require the DOL to use the notice-and-commenting rule making process, and
  • Allowing employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.

The proposed rule does not include:

  • Changes to the overtime protections for police officers, fire fighters, paramedics, nurses, laborers, and non-management employees,
  • Changes to the job duties test, and
  • Inclusion of automatic adjustments to the salary threshold.

At this point, this rule is just a proposal and will be open for public comment for 60 days after it is published to the federal register. The DOL will then finalize the rule after a careful review of the comments. Based on previous responses to changes to the overtime rule, it is expected that groups that are not satisfied with the final rule will take legal action to prevent its implementation.

In February, the New York City Commission on Human Rights, released guidance that defines race discrimination to include discrimination based on natural hair and hairstyles.  Under this guidance, the New York City Human Rights Law now protects the rights of New York City (“NYC”) employees to maintain natural hair or hairstyles that are closely associated with their racial, ethnic, or cultural identities.  This includes, but is not limited to, the right to maintain hairstyles such as “locs, cornrows, twists, braids, Bantu knots, fades, Afros, and/or the right to keep hair in an uncut or untrimmed state.”

Examples of policies that violate the NYC law are:

  • A grooming policy prohibiting twists, locs, braids, cornrows, Afros, Bantu knots, or fades which are commonly associated with African American people;
  • A grooming policy requiring employees to alter the state of their hair to conform to the company’s appearance standards, including having to straighten or relax hair (i.e., use chemicals or heat); and
  • A grooming policy banning hair that extends a certain number of inches from the scalp, thereby limiting Afros.

The guidance further provides that facially neutral grooming policies may violate the NYC law if an employer enforces the policy only against a protected class.

The NYC law prohibits employers from harassing, imposing unfair conditions, or otherwise discriminating against employees based on aspects of their appearance associated with their race.  Examples of discrimination include:

  • Requiring African American people to obtain supervisory approval prior to changing hairstyles, but not imposing the same requirement on other races;
  • Requiring only African American employees to alter or cut their hair or risk losing their jobs;
  • Telling an African American employee with locs that they cannot be in a customer-facing role unless they change their hairstyle;
  • Refusing to hire an African American candidate with cornrows because her hairstyle does not fit the “image” the employer is trying to promote for sales representatives; and
  • Mandating that African American employees hide their hair or hairstyle with a hat or visor.

This law is an interesting development in light of a 2016 federal appellate court decision that held that an employer’s ban of dreadlocks was not per se race discrimination.  In that case, the Equal Employment Opportunity Commission took the position that it was.  The Supreme Court declined to hear the case and federal courts remain split on whether natural hair discrimination is race discrimination.  We will update you as this area of the law develops.

An updated rule for the Fair Labor Standard’s Acts “white collar” overtime exemptions for executive, administrative, and professional workers is likely coming soon.  In mid-January, the United States Department of Labor (“DOL”) submitted its proposed final rule governing these exemptions to the White House Office of Management and Budget for final approval.  As we reported previously, the drastic Obama-era updates to the overtime exemptions, which nearly doubled the salary threshold, were struck down by a federal court.

What can we expect in a new rule?

You can certainly expect an increase in the salary threshold.  Current DOL Secretary Alexander Acosta testified in his confirmation hearings that the salary threshold should increase but he thought that the Obama-era increase was done in a way that “created a shock to the system.”  It is likely that the salary threshold will fall somewhere in the middle of the current threshold, which is $23,600 and the proposed Obama-era threshold, which was $47,476.

When can we expect a new rule?

No release date has been provided.  However, the DOL is likely to publish a new rule this year.  An appeal of the court’s decision to strike down the Obama-era rule is pending before a federal appellate court.  The federal appellate court can overturn the lower court’s decision and reinstate the Obama-era proposed rule if the DOL does not finalize its new rule.

The General Assembly began its 2019 Legislative Session on January 9th.  Many bills affecting the workplace have already been introduced.  They include the following:

Leave of Absence

  • HB5003 and SB1 would create a paid Family and Medical Leave funded by employee contributions, similar to a workers’ compensation program. The bills would also broaden the existing Connecticut FMLA, making it applicable to all employers, and offering up to twelve weeks of paid leave during any twelve-month period.
  • SB358 would provide time off to employees in order to vote.

Wage and Hour

  • HB5004 would raise the minimum wage in the state from $10.01 to $15 over multiple years.
  • SB764 would prohibit on-call shift scheduling.
  • HB6111 would permit employers to require employees to participate in direct deposit for paychecks.
  • HB5053 would create a task force to increase employment opportunities for people recovering from substance abuse.
  • HB5045 would create a task force to increase employment opportunities for people with disabilities.

Non-Compete Agreements

  • HB6913 would prohibit employers from requiring certain employees from signing unfair non-compete agreements. The terms “certain” and “unfair” are currently undefined.
  • HB6914 would prohibit non-compete agreements for employees below a certain salary.
  • HB377 would prohibit non-compete clauses in a physician employment contract.

Discrimination

  • HB5271 would revive last year’s Time’s Up Act. It would require employers with 3 or more employees to provide sexual harassment prevention training to all employees of Connecticut employers.  Currently, employers with 50 or more employees are required to provide two hours of training for supervisors
  • SB697 would restrict workplace nondisclosure agreements “to prohibit the silencing of victims in the workplace and to prevent sexual harassment by repeat offenders.” This goes beyond the federal Tax Cut and Jobs Act of 2017, which limited tax deductions for confidential sexual harassment settlements.
  • HB6113 would prohibit employers from asking about an applicant’s date of birth or date of graduation on an employment application to prevent age discrimination.
  • SB765 would ensure all employees “receive fair and equal pay for equal work.”

Stay tuned as we continue to monitor these bills and update you over the course of the legislative session.

There are 3 significant developments at the National Labor Relations Board (“NLRB”).

NLRB Revises Independent Contractor Test

In late January, the Board overturned the Obama-era test for establishing whether an individual is an employee or independent contractor under the National Labor Relations Act.  Under the Obama-era test, the Board ignored whether an individual had entrepreneurial opportunities in performing the services.  Under the current test, the Board has restored the previously longstanding common law agency test and will again consider whether the individual had entrepreneurial opportunities.

This decision will make the analysis of independent contractor status more employer-friendly and balanced, particularly in the context franchisors and franchisees and a company’s service providers.  For more information on the decision, see the NLRB’s press release.

Still No New Joint-Employer Rule

After two 30-day extensions, the period for submitting comments to the NLRB’s proposed rule for replacing the Obama-era Joint-employer test closed on January 22, 2019.  Nevertheless, until the proposed rule is finalized the Obama-era test remains in effect.  For more information on the propose rule, see notice of proposed rule.

Board Member Mark Gaston Pearce Will Not Seek Re-Appointment

On Tuesday February 5, 2019, former NLRB Chairman Mark Gaston Pearce announced that he will not seek re-appointment to the Board.  President Trump re-nominated Pearce to the Board immediately after his term expired, but, his re-appointment was met with criticism by business groups and Congress did not act on his nomination.  Pearce’s announcement ensures that a new Board Member will be appointed.

The long held tradition is that the President appoints the majority of the board (i.e., 3 members) from his own party and a minority (i.e., 2 members) from the other party.  Based on the Board’s composition, it is likely that the President will appoint a member of the Democratic party.

As a reminder, Connecticut Public Act No. 18-8 titled “An Act Concerning Pay Equity” became effective January 1, 2019. Under this law, all employers are prohibited from asking or directing a third party to ask about a job applicant’s wage and salary, unless the job applicant has voluntarily disclosed this information.
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Exceptions
There are two exceptions to the new law. It does not apply to employers or third parties who are required to ask about wage or salary history by federal or state law. The law does not prohibit employers from asking about other elements of an applicant’s compensation structure (e.g., whether the applicant received stock options.) However, an employer may not ask about the value of the other elements of the applicant’s compensation structure (e.g., the value of the stock options.)
Takeaways
Employers should immediately:
  • advise their Human Resources Department and other employers with interview responsibilities not to ask applicants about their wage and salary history, and
  • review their employment application(s) and remove any questions about past wages or salary.

Massachusetts

Major Changes to Non-Competes

Massachusetts passed a new law that will limit the enforceability of non-compete agreements entered into on or after October 1, 2018. Some highlights of the new law include: (1) the law applies to employees who live or work in Massachusetts, and to independent contractors; (2) non-competes are prohibited for employees classified as non-exempt under the Fair Labor Standards Act; (3) non-competes are not enforceable against employees who are terminated without cause or laid off; (4) employers must pay employees during the non-compete period either 50% of their salary (referred to as “garden leave” pay) or “other mutually agreed upon consideration”, which is not defined; (5) the non-compete cannot be for a period of longer than one year, with limited exceptions; and (6) non-competes signed after employment has commenced must be supported by “fair and reasonable consideration”, which is not defined. There are numerous other requirements. Please contact us should you require additional information.

Paid Family and Medical Leave

Starting January 1, 2021, eligible employees will be entitled to take up to 20 weeks of paid medical leave to attend to their own serious medical needs, up to 12 weeks of paid leave to care for a sick family member or a newborn, and up to 26 weeks of paid leave to care for a covered service member. The paid leave program will be administered by the state of Massachusetts and funded through a 0.63% payroll tax, which the employer and employee will split. Employees will be required to cover 100% of the contributions for family leave, and 40% of the contributions for personal medical leave. However, employers with over 25 employees must pay 60% of the contributions for personal medical leave. Employer and employee contributions will begin on July 1, 2019.

Before receiving payment during leave, the employee will have to take seven days of unpaid leave.  Thereafter, the employee will be eligible for a weekly paid leave equal to 80% of the employee’s wages (capped at 50% of the state average weekly wage) plus 50% of their wages beyond that amount (capped at $850 per week), which is adjusted annually to remain at 64% of the state average weekly wage.

There are a number of other administrative and notice requirements. Please contact us should you require additional information regarding these requirements.

Increased Minimum Wage

Beginning January 1, 2019 and gradually increasing over the following five years, the hourly minimum wage in Massachusetts will increase from $11.00 to $15.00 and the tipped hourly minimum wage will increase from $3.75 to $6.75.

 

New York

Sweeping Sexual Harassment Laws

The New York state budget that was enacted on April 12, 2018 includes numerous requirements concerning sexual harassment. The new requirements: (1) extend protection against sexual harassment to non-employees, including contractors, subcontractors, vendors and consultants; (2) prohibit employers from requiring employees to arbitrate sexual harassment claims; (3) prohibit employers from including non-disclosure provisions in settlement agreements for sexual harassment claims unless the employee prefers otherwise and certain other requirements are met; and (4) mandate all employers, effective October 9, 2018, to adopt a sexual harassment policy containing certain specific provisions, and to conduct annual interactive sexual harassment training for all employees covering certain specific topics.

On June 27, 2018, the United States Supreme Court issued a pivotal decision in Janus v. American Federation of State, County and Municipal Employees, which overturned more than 40 years of precedent. The Janus case involved “agency fees” that unions typically require non-union employees to pay. That is, employees who are covered under a union’s collective bargaining agreement, but choose not to join the union, do not have to pay full union dues. Instead, they pay agency fees to cover the basic costs that the union incurs in representing them. In Janus, the Court held that public employee unions cannot force non-union employees to pay agency fees because this requirement violates the First Amendment.

The Janus case overturned the Court’s prior decision in Abood v. Detroit Bd. of Educ. where the Court held that agency fees were constitutional so long as the union used the fees for non-political purposes, such as collective bargaining, contract administration, grievance adjustment purposes, and other activities “germane to the union’s duties as collective bargaining representative.” The Court reasoned that there was a compelling state interest in promoting “labor peace” and avoiding the issue of “free riders”—i.e., employees reaping the benefits of union representation without paying dues.

In Janus, the plaintiff was a non-union public employee who was required to pay an agency fee that was 78.06% of total dues, or $535 annually. The plaintiff challenged the agency fee claiming that it violated the First Amendment because it was “coerced political speech.”

The Court held in favor of the plaintiff describing the Abood decision as “poorly reasoned.”  It also pointed out that the decision has led to “practical problems and abuse.”  The Court explicitly rejected the “labor peace” and “free rider” justifications underlying the Abood decision, concluding that these justifications did not outweigh First Amendment protections.  With respect to “labor peace,” the Court noted that there are millions of public employees in states that do not allow agency-fee arrangements and unions continue to represent them.  On the issue of “free riders,” the Court concluded that the issue simply does not provide a compelling interest to override the First Amendment protections at issue.  As a result, the Court concluded that mandatory agency-fees are unconstitutional and that public employees must affirmatively agree to pay union dues.

The Janus decision will have a significant impact on public unions particularly in states like Connecticut, which allow agency fees.  We are monitoring developments following this decision and will update you as more details unfold.  Please do not hesitate to ask us any questions you might have regarding this decision and its affects.

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.