In Late 2011 and Early 2012, the National Labor Relations Board Began to Significantly

CAUTION—CONSTRUCTION AHEAD: RECENT DEVELOPMENTS IN LABOR AND EMPLOYMENT LAW

I. INTRODUCTION...... 1

II. TITLE VII AND EEOC...... 1

A. Sex and Pregnancy Discrimination...... 1

B. EEOC Ramps Up Pay Equity Enforcement...... 9

C. LGBT Discrimination...... 10

D. EEOC Implements Digital Charge Process...... 13

E. Courts Can Review EEOC Conciliation Process...... 13

F. Straight From The Source: EEOC’s 10 Hottest Litigation Trends...... 16

G. First Genetic Information Nondiscrimination Act Suit Results In $2.3 Million Verdict...... 18

H. Joint Employer Theory Applied to Title VII Cases...... 19

III. AGE DISCRIMINATION IN EMPLOYMENT ACT...... 20

A. ADEA Disparate Impact Claims By Applicants...... 20

B. Fired Sports Writer Wins $7.1 Million in Age Bias Case...... 21

IV. AMERICANS WITH DISABILITIES ACT...... 22

A. Increased Focus on Job Qualification Standards and Essential Job Functions ...... 22

B. EEOC Issues Proposed Regulation on Wellness Programs...... 26

V. FAIR LABOR STANDARDS ACT...... 37

A. FLSA Cases Continue To Flood Federal Courts...... 37

B. Proposed Overtime Rule Would More Than Double Salary Threshold For Exempt Employees, With Automatic Annual Increases...... 37

C. Department of Labor Cracks Down on Independent Contractors...... 39

D. Student Interns May Be Employees Under FLSA...... 42 i

3822795v.1 E. Home Health Care Workers Employed by Third Parties Have a Right to Minimum Wage and Overtime...... 43

F. Paying Wages With Debit Cards May Violate FLSA...... 46

G. Department of Labor Issues Joint Employer Guidance...... 47

H. Supreme Court Rule Limits Ability to Squelch Class Action Lawsuits...... 48

VI. NATIONAL LABOR RELATIONS ACT AND NLRB...... 48

A. NLRB Changes Joint Employment Standard, With Far-Reaching Implications For Employers...... 48

B. Department of Labor To Issue New “Persuader” Regulation...... 50

C. NLRB Attacks on Employer Policies for Union and Non-Union Employers.52

D. Social Media Policies...... 57

E. NLRB Accepts Electronic Signatures...... 61

F. NLRB Quickie Election Rule Results In Quicker Elections and More Union Victories...... 63

G. NLRB Rules That Dues Checkoff Continues After Termination of Collective Bargaining Contract, Absent Express Provision...... 63

H. War Continues Over Class Action Waivers in Arbitration Agreements...... 64

I. NLRB Dismisses Northwestern University Football Players’ Petition For Union Election...... 65

VII. FAMILY AND MEDICAL LEAVE ACT...... 66

A. FMLA Protects Job Applicants From Retaliation...... 66

B. Employee Can Sue for FMLA Interference Even if Leave Ultimately Granted ...... 67

C. Does an Employee Get to Choose Whether to Use FMLA Leave?...... 68

VIII. OSHA...... 70

A. OSHA Rule Requiring Employers To Post Injury And Illness Info Online May Be Coming Soon...... 70

B. 2015 Budget Agreement Permits 82 Percent Increase In OSHA Penalties....72

3822795v.1 C. OSHA Issues Guidance on Transgender Employee Restroom Access...... 73

IX. GOVERNMENT CONTRACTING / OFCCP...... 75

A. OFCCEP Issues Regulations on “Pay Transparency”...... 75

X. EMPLOYEE BENEFITS LAW...... 78

A. Affordable Care Act Developments...... 78

B. Supreme Court Limits Ability of Health Plans to Seek Reimbursement...... 80

XI. WHISTLEBLOWER CLAIMS...... 80

A. Directors May Be Personally Liable Under SOX and Dodd-Frank...... 80

B. Dodd-Frank May Protect Internal Whistleblowers...... 81

XII. ON THE HORIZON...... 81

3822795v.1 CAUTION—CONSTRUCTION AHEAD: RECENT DEVELOPMENTS IN LABOR AND EMPLOYMENT LAW

“If you’re interested in the living heart of what you do, focus on building things rather than talking about them.” — Ryan Freitas, About.me Co-Founder

I. INTRODUCTION

In building or maintaining a solid human resources function, it is critical that employers keep up with new developments in labor and employment law. New employment statutes, regulations, guidelines, and court decisions are handed down on virtually a daily basis.

Employers are required to digest and learn to cope with these developing legal rules, for failure to do so can potentially be disastrous. For this reason, each year we devote much attention to providing seminar participants with a brief review of some of the most significant legislative, regulatory, and case law developments in the area of labor and employment law during the past twelve or so months.

II. TITLE VII AND EEOC

A. Sex and Pregnancy Discrimination

In March, 2015, the U.S. Supreme Court decided in Young v. United Parcel Service that employers covered by the Pregnancy Discrimination Act (part of Title VII) may be required to make reasonable accommodations for work restrictions caused by pregnancy and related conditions.

The majority opinion in Young v. United Parcel Service says that failure to make pregnancy accommodations may be a form of unlawful sex discrimination. However, the Court failed to articulate a clear standard of when accommodation is required.

3822795v.1 1. Facts of the Case

Peggy Young was an air package delivery driver for UPS, working out of Alexandria,

Virginia. Her job required her to regularly lift packages weighing as much as 70 pounds, and to move packages weighing up to 150 pounds with assistance. After suffering several miscarriages,

Ms. Young became pregnant, and she was placed on a 20-pound lifting restriction, which was later changed to a 10-pound restriction. UPS did not terminate her employment, but it did require her to go on an unpaid medical leave of absence and did not offer accommodations that would have allowed her to continue working.

Ms. Young and her co-workers were subject to a collective bargaining agreement, which provided for reasonable accommodations for (1) disabilities within the meaning of the

Americans with Disabilities Act, (2) on-the-job injuries, and (3) employees who were unable to drive because they had lost their certifications under U.S. Department of Transportation regulations. Ms. Young sued in federal court, alleging pregnancy discrimination among other claims. The pregnancy issue was the only one reviewed by the Supreme Court.

The Pregnancy Discrimination Act, which took effect in 1979, amended Title VII’s sex discrimination provisions to include pregnancy, childbirth, and related conditions. It states as follows:

[W]omen affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability or inability to work . . ..

In 1979, the Americans with Disabilities Act, with its requirement that employers make reasonable accommodations for disabilities, was still in the future (the ADA was enacted in 1990 and did not first take effect until 1992), so at the time that the PDA was enacted, Congress was

3822795v.1 presumably focused on preventing differential treatment of pregnant women – including refusals to hire or promote, or forcing women to resign when they became pregnant or gave birth.

Over the years, most courts have interpreted the PDA to require that pregnant employees be treated the same as any other employee with a temporary, non-work-related disability. If an employer made “accommodations” for such conditions, then it would have been required to do the same for a pregnant employee who needed accommodation. But employers were generally not required to treat pregnancy the same way they treated ADA disabilities, or work-related injuries or illnesses. More recently, there had been growing support for requiring employers to make reasonable accommodations for pregnancy-related conditions, just as they would for employees with disabilities. A number of state and local governments have enacted “pregnancy accommodation” laws, but the U.S. Congress has not.

A federal court in Virginia granted summary judgment to UPS, and the U.S. Court of

Appeals for the Fourth Circuit – which hears appeals from federal courts in Maryland, North

Carolina, South Carolina, Virginia, and West Virginia – affirmed. According to the Fourth

Circuit, neither employees with ADA disabilities, nor employees with work-related injuries, nor employees with DOT restrictions were similarly situated to employees who had pregnancy- related work restrictions. Thus, the Fourth Circuit held UPS did not “discriminate” against Ms.

Young by requiring her to go out on unpaid leave. Ms. Young sought review by the Supreme

Court, who agreed to hear the case, and oral argument was held in December 2014.

2. The Supreme Court Decision

The Supreme Court vacated the Fourth Circuit decision and sent the case back for resolution in accordance with the Supreme Court decision. The majority opinion was written by

Justice Stephen Breyer, joined by Chief Justice John Roberts, and Justices Ruth Bader Ginsburg,

3822795v.1 Elena Kagan, and Sonya Sotomayor. Justice Samuel Alito wrote a separate opinion concurring in the judgment. Justice Antonin Scalia, joined by Justices Anthony Kennedy and Clarence

Thomas, dissented. Justice Kennedy also wrote a separate dissent, for the most part stressing that he did not philosophically oppose the idea of workplace accommodation of pregnancy. Ms.

Young had argued that, if an employer accommodated any subset of workers, then it should be required to accommodate pregnant workers with similar limitations. The majority rejected this argument, saying that it granted pregnant women “most-favored nation status,” which was not authorized under the PDA.

The majority also declined to apply the EEOC’s new Enforcement Guidance on

Pregnancy Discrimination and Related Issues, which among other things takes the position that an employer must accommodate pregnancy if it accommodates employees with disabilities and must provide light duty for pregnant employees if it does so for employees with workplace injuries and illnesses. However, it was not clear that the majority actually disagreed with the

EEOC’s position. Instead, the majority seemed to primarily object to the fact that the EEOC’s

Enforcement Guidance represented a dramatic change in the agency’s prior position on pregnancy discrimination and that there was no explanation for the change. (The majority also did not seem to care for the fact that the EEOC issued the Enforcement Guidance after the

Supreme Court had already agreed to hear the Young case.)

On the other hand, the majority rejected as too narrow UPS’s argument that the PDA did nothing more than add “pregnancy, childbirth, and related conditions” to the definition of “sex discrimination” prohibited by Title VII. The Court majority said that a woman claiming discrimination based on failure to accommodate pregnancy would be required to establish the following:

3822795v.1  that she was a member of the “protected class” (that is, pregnant, or having a pregnancy-

related condition);

 that she sought a reasonable accommodation;

 that the employer did not accommodate her; and

 that the employer did accommodate others “similar in their ability or inability to work.”

As an example, presumably an employee with a 20-pound lifting restriction because of degenerative disc disease (arguably a “disability” within the meaning of the ADA) would be

“similar in his ability or inability to work” to a pregnant employee with a 20-pound lifting restriction. If the employee could make out this prima facie case, the employer could articulate a legitimate, non-discriminatory reason for treating the pregnant employee differently. The majority gave virtually no guidance here, but again, using the example of the co-worker with degenerative disc disease, perhaps the employer could argue that the employees were treated differently because the ADA mandated accommodation in the case of the employee with a chronic back condition. The employer might also be able to argue that the conditions were different because the back condition would last indefinitely and might even worsen over time, while the pregnancy-related condition would presumably be resolved in a few months. The Court majority did say that the expense or inconvenience of accommodating pregnant employees was not a legitimate, non-discriminatory reason for a distinction.

Finally, the majority said that if the employer met its burden, the employee could nonetheless prevail by showing that the employer’s explanation was a “pretext” for discrimination. This is where the Court’s decision became particularly maddening for its lack of concrete guidance and somewhat circular reasoning: according to the Court, pretext can be shown if (1) the policy imposes a significant burden on pregnant workers, and (2) the employer’s

3822795v.1 legitimate, non-discriminatory reasons are not strong enough to justify the burden. Among other things, the Court majority said an employee could show pretext by presenting evidence that the employer accommodated a large percentage of non-pregnant workers while accommodating a relatively small percentage of pregnant workers. Or an employee could show that the employer has multiple policies about accommodations for non-pregnant workers while having no pregnancy accommodation policies. The Court sent the case back to the Fourth Circuit for a determination as to whether UPS’s policy was a pretext for pregnancy discrimination.

Justice Alito, in his separate concurrence, indicated that an employer might be able to make distinctions among employees based on the “reason” for the restriction. He gave the example of an employer who might make accommodations for employees who had become restricted based on heroic conduct, such as military service. He also indicated that employers should be allowed to treat employees with ADA disabilities or on-the-job injuries or illnesses differently from pregnant employees. (The EEOC took exactly the opposite approach in its

Enforcement Guidance, calling these types of distinctions unlawful “source discrimination.”)

However, Justice Alito agreed with the majority that there was no meaningful distinction between UPS’s “DOT-restricted” employees and pregnant employees.

3. What Does It All Mean? Most employers probably would have preferred either the old rule that pregnancy should be treated the same as any other temporary, non-work-related disability, or a rule that required employers to make reasonable accommodations for pregnancy-related restrictions, period, which at least would have the benefit of clarity. Instead, the majority’s vague standard will probably not be clarified for years, until post-Young pregnancy cases begin working their way through the lower courts.

3822795v.1 It is also questionable whether the Court’s decision will deter the EEOC from continuing to take its current aggressive, pro-accommodation stance: the agency may remedy the deficiencies noted in its Enforcement Guidance by simply adding a paragraph explaining the reason for its change in position on pregnancy accommodation and acknowledging the Young decision, saying that Young supports the EEOC’s new stance. That having been said, a few principles may be gleaned from the decision:

Employers in states or localities that already have pregnancy-accommodation laws should comply with their state or local laws. More protections may be available to employees under state or local laws than under federal law. If so, compliance with state or local law should also result in compliance with federal law.

Employers who are not governed by state or local pregnancy-accommodation laws:

 may be able to continue treating employees with ADA-covered disabilities and work-

related conditions more favorably than they do pregnant employees, based on Justice

Alito’s concurring opinion. However, they should be aware that the EEOC has taken the

opposite position, and it is not clear that the rest of the majority agreed with Justice Alito

on this point, either. Therefore, this approach involves some legal risk.

 should accommodate pregnancy or related conditions if the employers make

accommodations for any class of employees other than ADA-disabled employees or

employees with work-related conditions.

 should consider taking a low-risk course and complying with the EEOC’s Enforcement

Guidance, on the chance that the EEOC will simply “re-adopt” its position with minor

updates.

3822795v.1 Employers should review their accommodation policies and practices in light of the Young decision and adapt as necessary.

In a case decided shortly after the Supreme Court decision in Young v. United Parcel

Service, Inc., a federal judge applied the Supreme Court’s reasoning. In LaSalle v. City of New

York (2015), the court ruled that a female van driver for the New York City morgue who alleged she was denied accommodation for a lifting restriction while pregnant adequately stated discrimination claims under the federal Pregnancy Discrimination Act and New York state and

City laws. Partly denying the City's motion to dismiss, the court said that the U. S. Supreme

Court decision in Young v. United Parcel Service Inc ., “dispelled any doubt” an employee may bring a PDA claim based on her employer's alleged failure to accommodate pregnancy-related work restrictions.

In the LaSalle case, the plaintiff alleged that after she became pregnant in November

2011, she asked not to be assigned to drive the morgue van because doctors had recommended she lift no more than 45 pounds. She alleged that her supervisors continued to order her to drive the van, and in January 2012, she was injured while transporting a cadaver. When LaSalle sought to return to work in April 2012, she presented a doctor's note recommending a 25-pound lifting restriction, but her supervisors said no “light duty” was available. The court reasoned that

LaSalle sufficiently stated a pregnancy bias claim under the PDA and disability bias claims under the New York State Human Rights Law and New York City Human Rights Law.

The City argued LaSalle's disability discrimination claims should fail because her requested accommodations—that she not be required to drive the van or to lift more than 25 pounds—would have prevented her performance of the job's essential functions. But LaSalle received similar accommodations during a 2008 pregnancy, and in June 2012, the City granted

3822795v.1 her “virtually identical accommodations” when it ultimately allowed her return to work, the court said. The City offers “no explanation as to why [LaSalle's] requested accommodations were reasonable in 2008 and in June 2012, but were not reasonable when [LaSalle] requested them in

December 2011 and April 2012,” the court said.

B. EEOC Ramps Up Pay Equity Enforcement

On Friday, January 29, 2016, the Equal Employment Opportunity Commission released a proposed rule that will require employers with more than 100 employees to include pay data by race, ethnicity, and sex in their annual EEO-1 reports. The EEOC will use this data to identify employers with pay disparities that might be a result of discrimination.

The proposed rule would take effect beginning with the EEO-1 reports that come due on

September 30, 2017. (There will be no change for September 30, 2016.) Under the proposal, employers would be required to include W-2 earnings information for a single pay period between July 1 and September 30, the same reporting "window" that applies now to other EEO-1 information. The EEOC says that it settled on W-2 earnings because they are more complete than the alternatives, and include overtime, severance, bonuses, taxable fringe benefits, and the like.

The proposal would categorize employees into 12 pay bands across the EEO-1 categories. According to the EEOC, use of pay bands will be less burdensome for employers and will also provide more meaningful pay data to the EEOC. In addition to number of employees

(by race, ethnicity, and sex) in each pay band, the employers will be required to state the number of hours worked. The agency has requested input from employers on how to state or calculate number of hours worked for "salaried" employees and suggests that employers assume they work

40 hours a week. (Presumably, the problem is really with "exempt" rather than "salaried"

3822795v.1 employees; salaried employees can be nonexempt and, if so, the employer already has to track their hours.) The EEOC also proposes to require that all EEO-1s be filed electronically starting in 2017.

As federal contractors know, the Office of Federal Contract Compliance Programs issued a proposed rule in 2014 that would have required disclosure of pay data on EEO-1 reports by federal contractors with 100 employees or more. The EEOC rule, if adopted, would replace the

OFCCP proposal.

Comments on the EEOC's proposed rule will be accepted through April 1, 2016.

Getting ready

It's not too early for employers to begin auditing their pay practices with the help of employment counsel. At a minimum, these audits should include identifying any disparities that appear to be based on race, sex, or ethnicity. Look at employees in the same job, but because the trend seems to be "comparable worth" rather than "equal pay for equal work," it's a good idea to also compare employees who perform arguably "similar" work. Where an apparent disparity has a valid explanation, make sure you have gathered the documentation necessary to explain it to the EEOC or other government agency – or a plaintiff's lawyer. Where an apparent disparity does not have a valid explanation, work on correcting the disparity and determine how to explain the correction to the affected employee.

C. LGBT Discrimination

Last year, we reported on a lawsuit filed by the EEOC against Lakeland Eye Clinic of

Florida alleging that the termination of a transgender employee violated Title VII. In April,

2015, the lawsuit against Lakeland Eye Clinic of Florida was settled. The Clinic agreed to make two payments of $75,000 to Brandi Branson, who had been the Clinic’s Director of

3822795v.1 Hearing Services. Ms. Branson was hired as a male and began transitioning to female after about six months on the job. The lawsuit claimed that doctors all but stopped referring patients to her and that her position was eventually eliminated in a bogus reduction in force (a replacement was reportedly hired into the “eliminated” position only two months later). The EEOC alleged that the Clinic violated Title VII by discriminating against Ms. Branson because of her sex (failure to conform to gender stereotypes). In addition to the payments, the Clinic agreed to adopt a policy against discrimination because of gender identity or gender stereotyping, and to conduct training for management and employees on the subject.

In other federal government efforts to deal with LGBT discrimination, the Office of

Federal Contract Compliance Programs now requires federal contractors to include sexual orientation and gender identity as protected classes in EEO statements, purchase orders, and other required documentation, and to provide training. Also, EEOC charges alleging LGBT discrimination are increasing.

However, the law remains unsettled whether Title VII’s ban on “sex discrimination” applies to LGBT discrimination. There is no federal statute explicitly barring LGBT discrimination. A number of courts have found that Title VII’s ban on sex discrimination does apply to discrimination based on failure to conform to gender stereotypes and norms — precisely the issue involved in the EEOC lawsuit against Lakeland Eye Clinic. But it is far less clear that

Title VII applies to garden-variety “sexual orientation discrimination” where no “gender stereotyping” is involved. However, the EEOC seems determined to expand the law in that direction.

In July, 2015, the EEOC issued a ruling in Complainant v. Fox (2015) that Title VII’s ban on gender discrimination prohibits bias based on sexual orientation. The EEOC decision

3822795v.1 reasoned that sexual orientation discrimination is a form of sex discrimination under Title VII independent from the sex stereotyping theory which has been utilized by the EEOC and federal courts when finding that LGBT discrimination is a form of sex discrimination.

In January, 2016, the EEOC filed an amicus brief with the Eleventh Circuit Court of

Appeals in Burrows v. College of Central Florida. In that amicus brief, the EEOC argued that employment bias based on an individual’s sexual orientation is sex discrimination under Title

VII. The Burrows case is on appeal from a ruling of a federal district court in Florida that dismissed the plaintiff’s claim that she was treated differently because of her sexual orientation and same-sex marriage. In that case, the lower court ruled that sexual orientation discrimination is not covered by Title VII.

On January 14, 2016, the Eleventh Circuit Court of Appeals essentially held that transgender discrimination is a form of sex discrimination under Title VII when it reversed a summary judgment dismissing an employee’s claim that she had been terminated because of her transgender status. In Chavez v. Credit Nation Auto Sales, LLC (2016), the Eleventh Circuit ruled that the plaintiff presented sufficient evidence of pretext to warrant a trial based on comments by her supervisor about being nervous about the effect on the business of her transition to a different gender and her excellent pre-transition performance reviews. In the

Chavez case, the plaintiff was told that she could no longer use a unisex restroom that other female employees were permitted to use; she was asked not to wear a dress or anything

“outlandish;” and asked to tone down her workplace conversations about her upcoming surgeries. The Eleventh Circuit ruled that this represented sufficient evidence of pretext to justify sending the case back to the district court for a trial. The Court of Appeals implicitly

3822795v.1 ruled that transgender status is protected under Title VII independent of a sex stereotyping legal theory.

D. EEOC Implements Digital Charge Process

The EEOC has begun use of a new "Digital Charge" for employment discrimination charges filed against non-federal employers. Under the "Digital Charge" process, an employer will no longer receive the usual forms informing it that a charge of discrimination has been filed against it. Instead, an employer will receive just a one-page letter titled "Notice of Charge of

Discrimination" that will include a link to view the entire charge online via a secure portal. This portal, which is shared between the employer and the EEOC, is to be used by the employer not only to view the full charge of discrimination, but also to submit electronically any documents to the EEOC, including notices of appearance, requests for extension of time, supporting documentation, and the employer's position statement.

E. Courts Can Review EEOC Conciliation Process

In May, 2015, the U.S. Supreme Court rejected the EEOC’s longstanding position that pre-suit conciliation efforts are shielded from judicial review of any kind. Holding that “a court may review whether the EEOC satisfied its statutory obligation to attempt conciliation before filing [an employment discrimination] suit,” the unanimous opinion of Mach Mining, LLC v.

EEOC makes clear that judicial review is the only way to ensure EEOC compliance with pre-suit obligations. The opinion, written by Justice Elena Kagan, also establishes the general scope of any such review – and even suggests ways for the EEOC to prove compliance and for the employer to rebut. Even so, Mach Mining leaves many issues related to the EEOCs pre-suit obligations unresolved.

3822795v.1 1. Fact of the Case

A female applied for a job as a coal miner with Mach Mining and was not hired. She filed a sex discrimination charge with the Equal Employment Opportunity Commission. The EEOC issued a “reasonable cause” determination on behalf of the woman who filed the original charge as well as a class of women who applied for mining jobs. After sending two letters, one advising the company of the EEOC’s reasonable cause determination and another declaring conciliation efforts unsuccessful, the EEOC filed suit in a federal court in Illinois.

The EEOC alleged in its complaint that it tried to conciliate before filing suit, but Mach

Mining denied that the agency “conciliated in good faith.” The EEOC sought summary judgment on the issue, claiming that courts should not be allowed to review the agency’s conciliation efforts. The district court disagreed, and found that it was entitled to determine whether the

EEOC made “a sincere and reasonable effort to negotiate.” The EEOC appealed to the U.S.

Court of Appeals for the Seventh Circuit, which hears appeals from federal courts in Illinois,

Indiana, and Wisconsin. The Seventh Circuit reversed, and found that there was no right of judicial review of the EEOC’s conciliation efforts. (The U.S. Courts of Appeals for the Fourth,

Sixth, and Tenth circuits found in previous decisions that a very limited degree of judicial review was appropriate, while the Second, Fifth and Eleventh circuits permitted a more in-depth review.)

2. The Supreme Court Decision

Mach Mining petitioned for the Seventh Circuit decision to be reviewed by the U.S.

Supreme Court, and the Supreme Court unanimously reversed the Seventh Circuit decision.

However, the Court found that the appropriate remedy when the EEOC failed to conciliate was

3822795v.1 not dismissal of the lawsuit but an order requiring the EEOC to conciliate before moving forward.

The Supreme Court first discussed the “strong presumption” in favor of judicial review of administrative actions that may be rebutted only if the agency demonstrates Congress’ intent for an agency to “police its own conduct.” The Court ruled that the EEOC failed to demonstrate a

Congressional intent exempting its conciliation efforts from all judicial review. The Court said that the EEOC must disclose to the employer the alleged unlawful employment practice at issue and provide the employer with an opportunity to discuss it, all in an effort to achieve voluntary compliance with the law. Without the option of judicial review, the Court notes, violations of these requirements by the EEOC would have no consequence.

That said, the Court clarified that judicial review of the EEOC’s conciliation efforts should be narrow in scope. The conciliation process must “afford the employer a chance to discuss and rectify a specified discriminatory practice – but goes no further.” The court should

“respect the expansive discretion that Title VII gives to the EEOC over the conciliation process, while still ensuring that the [EEOC] follows the law.” The purpose of judicial review is to

“determine that the EEOC actually, and not just purportedly, tried to conciliate a discrimination charge.” In short, the Court makes clear that the EEOC need only “endeavor” to conciliate a claim, without a set amount of time or resources, without requiring specific steps or measures, and with the discretion to sue whenever “unable to secure” terms “acceptable” to the EEOC.

3. Going Forward

The Court’s decision suggests what the EEOC should and should not do in proving that it complied with its duty to conciliate. According to the Court, the EEOC may prove compliance by submitting an affidavit saying that it met its obligations by attempting in good faith to

3822795v.1 conciliate but that conciliation efforts failed. If the EEOC’s affidavit is rebutted with “credible evidence” from the employer, the trial court must then “conduct the factfinding necessary to decide that limited dispute.” What these phrases mean will no doubt result in another split among the circuits.

The opinion does, however, resolve the split in the circuits with regard to the appropriate remedy if the EEOC fails to satisfy its conciliation obligation. Previously, some courts were

“staying” (suspending) the case while the EEOC fulfilled its obligations. Other courts dismissed the lawsuit altogether. As already noted above, the Supreme Court ruled that “the appropriate remedy is to order the EEOC to undertake the mandated efforts to obtain voluntary compliance” rather than dismissal.

The Mach Mining opinion leaves many issues unresolved. For example, the opinion does not address the EEOC’s statutory and separate pre-suit obligation to investigate the merits of a charge or the appropriate remedy if the EEOC fails to do so. Likewise, the Court does not address whether the EEOC’s obligations are different depending upon whether it seeks prospective relief (to prevent future discrimination) or retrospective relief (like monetary damages for back pay) on behalf of claimants. Finally, the Court does not discuss what discovery is permitted of the EEOC’s conciliation (or investigative) efforts, an issue on which the circuits do not agree.

Those questions aside, the Supreme Court Mach Mining decision is an important victory for employers.

F. Straight From The Source: EEOC’s 10 Hottest Litigation Trends

In October, 2015, David Lopez, General Counsel of the Equal Employment Opportunity

Commission, spoke at an employment law conference in which he outlined the EEOC’s litigation

3822795v.1 priorities in enforcing Title VII. Mr. Lopez presented his top 10 issues in reverse order, from least to most significant.

10. Racial harassment. Mr. Lopez noted that the EEOC had scored some big wins in this area, generally when the racially offensive behavior was blatant. “Juries don’t like this kind of behavior,” he said. On the other hand, he said, there was much less consensus about “subtler” forms of harassment and discrimination.

9. Use of background screens in hiring. Mr. Lopez acknowledged that many of the cases hadn’t gone the EEOC’s way, but said the agency had “started a conversation” about the use of this information, noting the growing number of states that have adopted “ban-the-box” legislation.

8. Sex discrimination in hiring. Mr. Lopez said that the agency is aggressively going after claims of discrimination in the hiring process because most plaintiffs’ attorneys lack the time and resources to get proof of systemic discrimination and individual cases are not lucrative. He also mentioned litigation in heavy manufacturing environments, where women were rejected for positions based on the belief that they could not handle the physical requirements of the job.

7. Preservation of access to the legal system, aka retaliation. Retaliation has always been a very high priority issue for the EEOC. In the agency’s view, it can’t do its job if people are deterred from making complaints about discrimination in the workplace or coming to the EEOC. Mr. Lopez said that the EEOC was winning about 70 percent of its jury trials on retaliation claims.

6. Immigrant/migrant/“vulnerable” workers. Mr. Lopez spoke of the EEOC’s desire to protect workers “living in the shadows,” and noted that some employers believe they can evade the law because of linguistic and cultural barriers. He cited an EEOC victory from 2013 against Moreno Farms in Florida, in which a jury awarded five women who were allegedly sexually harassed and raped a total of $17 million. (The farm went under immediately afterward, so it’s not clear that the women got any relief.)

5. Americans with Disabilities Act/reasonable accommodation. Mr. Lopez spent most of this topic talking about the EEOC v. Ford Motor Company telecommuting case involving an employee with severe irritable bowel syndrome. Summary judgment was granted to Ford by the district court, and a three-judge panel of the Sixth Circuit reversed. But Ford asked to have the case heard by all of the judges on the Sixth Circuit, and the majority agreed with the district court. Mr. Lopez expressed frustration that the full appeals court would not take judicial notice (in other words, they wouldn’t rule on the issue without evidence) of the fact that technology had changed to such a degree that telecommuting is a better reasonable accommodation than it used to be. He also disagreed with the court’s finding that a company shouldn’t be penalized because it allows telecommuting in some cases but not others.

4. LGBT rights. Mr. Lopez said that the EEOC’s position is that sexual orientation discrimination always violates Title VII. Interestingly, Mr. Lopez claimed support for the 17

3822795v.1 agency’s position from — Antonin Scalia! In the Supreme Court decision of Oncale v. Sundowner Offshore Services (1998), the Court decided that a plaintiff could sue for sex harassment under Title VII when he was harassed by his male co-workers for being too “effeminate.” (The plaintiff was not gay, so sexual orientation was not at issue. Gender stereotyping was.)

Mr. Lopez also spoke on the issue of bathrooms and transgender individuals. The EEOC’s position is that transgender individuals have the right to use the restroom of their choice, no matter where they are in the transition process. (In other words, they don’t have to have had surgery yet to be entitled to use a different restroom.)

3. Pregnancy. This is obviously a very hot area after the Young v. UPS case. Mr. Lopez said that many employers (smaller ones) still don’t know that “Yes, pregnancy discrimination is against the law.” Young was a “game-changer,” Mr. Lopez said, because it gave new life to the second part of the Pregnancy Discrimination Act, which requires treatment of pregnant women that is the same as the employer’s treatment of non-pregnant employees who are “similar in their ability or inability to work.”

2. Conciliation requirement. Mr. Lopez said that the victory for employers was that the SCOTUS said the courts do have authority to review the EEOC’s conciliation efforts. The victory for the EEOC, though, was that if the EEOC doesn’t fulfill its obligations, the court just tells the EEOC to go back and conciliate rather than dismissing the lawsuit.

1. Religious accommodation. “This is number one in my heart,” Mr. Lopez said. He was talking about Samantha Elauf, in the EEOC’s case against Abercrombie & Fitch, which we discussed in our 2015 Employment Law Workshop.

G. First Genetic Information Nondiscrimination Act Suit Results In $2.3 Million Verdict

In what is believed to be the first jury verdict in a lawsuit filed under the Genetic

Information Nondiscrimination Act (GINA), a federal court jury in the Northern District of

Georgia awarded $2.3 million to two employees who were ordered to provide saliva samples as part of an internal investigation. In Lowe v. Atlas Logistics Group Retail Services (2015), the company was conducting an internal investigation to determine who was defecating on the floor of its warehouse, which resulted in the destruction of grocery products. The company suspected that the two plaintiffs may have been involved in the misconduct. It ordered the two plaintiffs to

3822795v.1 submit to the collection of saliva samples without informing of their rights under GINA. The two men were subsequently determined not to be involved.

The federal district court ruled against the company on summary judgment, and rejected the company’s argument that the tests used on the plaintiffs’ saliva samples did not detect medical information; or uncover the propensity of the plaintiffs to develop a disease; or discover whether the plaintiffs’ offspring would have a genetic mutation. After the granting of summary judgment in favor of the plaintiffs, the trial was conducted solely on damages. At the end of that trial, the jury awarded each plaintiff $250,000 for damages for emotional pain and suffering and awarded a total of $1.75 million in punitive damages.

H. Joint Employer Theory Applied to Title VII Cases

The National Labor Relations Board has received much publicity about its effort to expand the joint employer test to hold employers legally responsible for violations of law by contractors and franchisees. Less noted is the fact that the Department of Labor has applied a joint employer rationale to hold employers responsible for violations of the Fair Labor Standards

Act by contractors; and federal courts have held employers liable under Title VII for actions by their contractors on a joint employer theory.

In November, 2015, the joint employer theory was used by a federal judge in Tampa to hold that Sarasota Doctors’ Hospital was liable for the Title VII violations of one of its contractors in Scott v. Sarasota Doctors’ Hospital (2015). In that case, the federal district judge denied summary judgment to Sarasota Doctors’ Hospital in a suit filed by an employee of one of the hospital’s third-party contractors. The court ruled that a reasonable jury could find that the hospital exercised sufficient control over the plaintiff’s employment and the decision to terminate her employment to be deemed a joint employer under Title VII.

3822795v.1 In Scott, the Plaintiff was a physician who was placed at Sarasota Doctors’ Hospital by

Emcare, Inc. as a contract physician. After a short period of time, the Emcare on-site manager received complaints from the hospital that Scott was too curt with patients and nurses, and hospital officials expressed concern about her “fit” at the hospital. After Scott filed a discrimination charge claiming that a male doctor was treated differently, the hospital directed

Emcare to terminate her assignment at the hospital. In denying summary judgment, the court relied on the fact that the hospital controlled her employment by directing Emcare to terminate her employment at the hospital.

III. AGE DISCRIMINATION IN EMPLOYMENT ACT

A. ADEA Disparate Impact Claims By Applicants

On November 30, 2015, the U.S. Court of Appeals for the Eleventh Circuit, which hears appeals from cases in Florida, Georgia and Alabama, held that job applicants may bring disparate impact claims against employers under the Age Discrimination in Employment Act in Billarreal v. R.J. Reynolds Tobacco Company (2015). In Billarreal, the plaintiff had applied for a job as a sales territory manager. He was 49 years old at the time he applied. He subsequently discovered that R.J. Reynolds had encouraged hiring managers, in filling territory managers sales positions, to target younger applicants and to stay away from applicants with eight to ten years of sales experience. As a result, he filed an EEOC charge based on age and subsequently filed suit against R.J. Reynolds alleging both disparate treatment and disparate impact claims on behalf of himself and other similarly situated older applicants. The federal district court dismissed

Billarreal’s disparate impact claim, holding that the ADEA does not recognize disparate impact claims by job applicants although it does recognize disparate impact claims by current employees. Billarreal appealed to the Eleventh Circuit Court of Appeals, and the Eleventh

3822795v.1 Circuit reversed the federal district court’s dismissal of his ADEA disparate impact claim. The

Eleventh Circuit reasoned that although the language of the statute is not clear on whether job applicants may pursue disparate impact claims, it was deferring to the EEOC’s interpretation of the Age Discrimination in Employment Act that authorizes disparate impact claims by job applicants.

The Eleventh Circuit reasoned that Section 4(a)(2) of the ADEA prohibits an employer from limiting, segregating or classifying employees in a way that would deprive “any individual of employment opportunities,” or “otherwise adversely affect” the employee’s status as an employee, because of age. In deferring to the EEOC’s regulation interpreting the ADEA, the court noted that the EEOC regulation does not distinguish between current and potential employees, but rather extends the ability to bring disparate impact claims based on age to all individuals within the protected age group.

As a result of Billarreal, employers in the Eleventh Circuit should be aware that they need to avoid hiring policies and practices that either expressly or implicitly encourage hiring younger candidates over older candidates, as well as hiring policies and practices that result in significant statistical disparities between the number of new hires who are below the age of 40 and above the age of 40.

B. Fired Sports Writer Wins $7.1 Million in Age Bias Case

In November, 2015, the trial of fired Los Angeles Times sports columnist T.J. Simers’ age discrimination claims against the Los Angeles Times garnered a great deal of publicity.

After a six week trial, the jury returned a verdict in favor of Simers, finding that the Los Angeles

Times had discriminated against him because of age. The jury awarded $7.1 million in past

3822795v.1 economic damages, future economic damages, past non-economic damages and future non- economic damages.

According to an interview of the jury foreman after the trial, the evidence that weighed most heavily in favor of a verdict in favor of the plaintiff included (1) the fact that the newspaper had issued the plaintiff a final written warning over alleged misconduct before ever issuing a first warning for the same conduct; and (2) that the plaintiff’s performance reviews were consistently positive. The jury foreman offered the opinion that the way that the plaintiff was treated by the

Los Angeles Times was “just not right.”

Although this case does not tread new ground or develop new legal theories under the

Age Discrimination in Employment Act, it illustrates the risks of terminating older employees without taking the time to deal with performance issues through progressive discipline and making sure that the process is “done right.”

IV. AMERICANS WITH DISABILITIES ACT

A. Increased Focus on Job Qualification Standards and Essential Job Functions

In recent months, the Equal Employment Opportunity Commission (EEOC) has been focusing on job qualification standards that have a disparate impact on individuals with disabilities. In doing so, the EEOC is distinguishing between job qualification standards, which may have to be modified as part of the reasonable accommodation process for a job applicant, and essential job functions, which do not have to be modified in the reasonable accommodation process.

Historically, an employee or applicant has been deemed to be qualified for a position if he or she meets basic skills, training, education and job-related requirements; and if he or she is able to perform the essential functions of the position with or without reasonable

3822795v.1 accommodation. The EEOC has begun to focus recently on the distinction between qualifications and essential functions, reasoning that essential job functions are what an employee does on the job; while qualification standards are requirements and predicting whether the individual can perform the essential functions. Examples of qualification standards include passing a drug test, an educational requirement, a driver’s license, or a good credit history.

The distinction between job qualification standards and essential job functions has sometimes been recognized by federal courts in ADA suits, but in other times the terms have been intermingled and intertwined. For example, in EEOC v. Ford Motor Company (2015), a case that we have discussed in prior Employment Law Workshops, the Sixth Circuit Court of

Appeals ruled in 2015 that regular and predictable on-site attendance was an essential job function for a buyer who suffered from irritable bowel syndrome. In Ford Motor Company, the

Sixth Circuit appeared to intermingle on-site attendance as both an essential job function and a job qualification standard, stating that: “regular, in-person attendance is an essential function— and a prerequisite to essential functions—of most jobs.” In that case, the EEOC took the opposite position, arguing in filing suit against Ford Motor Company that being present on the job was not an essential job function, but rather a job qualification standard that Ford Motor

Company was required to accommodate. In ruling against the EEOC, the Sixth Circuit pointed out the difficulty in sometimes distinguishing between the job qualification standards and essential job functions.

The distinction is important for employers in dealing with applicants or employees who request accommodations. The law is clear that an employer is not required to eliminate an essential job function and therefore may deny an accommodation request that involves eliminating an essential job function. However, if an employer denies an accommodation

3822795v.1 request involving relaxing or eliminating a job qualification standard, the employer must prove that eliminating or modifying that standard would create an undue hardship on the business of the organization. This can be a heavy burden of proof.

Distinguishing between the essential functions and job qualification standards is also the subject of two other cases decided in 2015. In Roberts v. Bayhealth Medical Center, Inc. (2015), a former part-time nurse who was normally scheduled for twelve-hour shifts requested an eight- hour shift schedule, three times a week, because of a brain tumor. When her request for an accommodation was denied, she filed suit. The defendant hospital filed a motion for summary judgment in federal district court, arguing that the hospital’s twelve-hour shift requirement was an essential job function for the nurse’s position; that the plaintiff was not a qualified individual with a disability because she could not perform that essential job function of working twelve- hour shifts, and therefore was not protected by the ADA.

The federal district court in Delaware denied the hospital’s motion for summary judgment. The court refused to rule that as a matter of law, a twelve-hour shift is really an essential job function; rather, finding that there were triable disputes of fact as to whether a twelve-hour shift really was an essential function.

In a case in California which also appeared to have difficulty reconciling essential functions with job qualification standards, the U.S. Court of Appeals for the Ninth Circuit decided in Mayo v. PCC Structurals, Inc. (2015), that a welder who was fired for repeatedly threatening to kill supervisors and managers was not a qualified individual with a disability and therefore was unprotected by the ADA.

In Mayo, the plaintiff had been treated for several years for the threats that led to his termination. During a meeting in which the plaintiff claimed to have been bullied by a

3822795v.1 supervisor, the plaintiff became upset and made threats against the supervisor. He repeated those threats shortly after the meeting, and when questioned by a human resources manager, he stated that he could not guarantee that he wouldn’t carry out his threats. As a result, the company suspended and then ultimately terminated the plaintiff because of his repeated threats against managers and supervisors.

Mayo filed suit and the federal district court granted summary judgment in favor of the company, ruling that Mayo’s violence and threats showed that he was not qualified to work for the employer even though the threats may have been caused by his disability. In affirming the granting of summary judgment in favor of the employer, the Ninth Circuit Court of Appeals reasoned: “An essential function of almost every job is the ability to handle stress and interact with others … an employee whose stress leads to violent threats is not a ‘qualified individual.’”

In attempting to deal with the distinction between job qualification standards with respect to which a reasonable accommodation is required, and essential job functions that require no reasonable accommodation, employers who disqualify job applicants or employees who apply for other jobs based on qualification standards might consider the following frame work for analyzing the reason for disqualification:

Define what standard screened out the applicant or employee.

Ask whether the standard screened out the individual on the basis of disability.

If so, decide whether the standard is job related and consistent with business necessity.

If it is job-related and consistent with business necessity, determine whether the individual can meet the standard or perform the job’s essential functions with reasonable accommodation.

3822795v.1 If so, decide whether the employer can demonstrate that providing the accommodation would be an undue hardship or otherwise show that the accommodation would not be effective in performing the essential job functions.

C. EEOC Issues Proposed Regulation on Wellness Programs

On April 20, 2015, the U.S. Equal Employment Opportunity Commission (EEOC) published a proposed regulation that describes how Title I of the Americans with Disabilities Act

(ADA) applies to employee wellness programs that are part of group health plans and that include questions about employees' health (such as questions on health risk assessments) or medical examinations (such as screening for high cholesterol, high blood pressure, or blood glucose levels). The comment period on the proposed regulation ended on June 19, 2015. The proposed regulation is available at https://www.federalregister.gov/articles/2015/04/20/2015-

08827/regulations-under-the-americans-with-disabilities-act-amendments. The following is a summary of the key provisions of the proposed regulation.

Wellness programs must be reasonably designed to promote health or prevent disease.

 They must have a reasonable chance of improving health or preventing disease in participating employees, must not be unduly burdensome to employees, and must not violate the ADA.

 A program that collects information on a health risk assessment to provide feedback to employees about their health risks, or that uses aggregate information from health risk assessments to design programs aimed at particular medical conditions is reasonably designed. A program that collects information without providing feedback to employees or without using the information to design specific health programs is not.

Wellness programs must be voluntary.

 Employees may not be required to participate in a wellness program, may not be denied health insurance or given reduced health benefits if they do not participate, and may not be disciplined for not participating.

3822795v.1  Employers also may not interfere with the ADA rights of employees who do not want to participate in wellness programs, and may not coerce, intimidate, or threaten employees to get them to participate or achieve certain health outcomes.

 Employers must provide employees with a notice that describes what medical information will be collected as part of the wellness program, who will receive it, how the information will be used, and how it will be kept confidential.

Employers may offer limited incentives for employees to participate in wellness programs or to achieve certain health outcomes.

 The amount of the incentive that may be offered for an employee to participate or to achieve health outcomes may not exceed 30 percent of the total cost of employee- only coverage.

 For example, if the total cost of coverage paid by both the employer and employee for self-only coverage is $5,000, the maximum incentive for an employee under that plan is $1,500.

Medical information obtained as part of a wellness program must be kept confidential.

 Generally, employers may only receive medical information in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of specific employees.

 Wellness programs that are part of a group health plan may generally comply with their obligation to keep medical information confidential by complying with the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule.

 Employers that are not HIPAA covered entities may generally comply with the ADA by signing a certification, as provided for by HIPAA regulations, that they will not use or disclose individually identifiable medical information for employment purposes and abiding by that certification.

 Practices such as training individuals in the handling of confidential medical information, encryption of information in electronic form, and prompt reporting of breaches in confidentiality can help assure employees that their medical information is being handled properly.

Employers must provide reasonable accommodations that enable employees with disabilities to participate and to earn whatever incentives the employer offers.

 For example, an employer that offers an incentive for employees to attend a nutrition class must, absent undue hardship, provide a sign language interpreter for a deaf employee who needs one to participate in the class.

3822795v.1  An employer also may need to provide materials related to a wellness program in alternate format, such as large print or Braille, for someone with vision impairment.

 An employee may need to provide an alternative to a blood test if an employee's disability would make drawing blood dangerous.

Is the proposed rule good for employers, or bad?

Pretty good overall. The EEOC has, for the most part, proposed that providing

“incentives” for employees to participate in wellness programs (both rewards and penalties, which we’ll call “carrots” and “sticks”) will be all right as long as the employer complies with the limits in the HIPAA/Affordable Care Act. In other words, incentives to that extent would, for the most part, not make the wellness program “involuntary” for ADA purposes. Which means that medical inquiries made in connection with such a wellness program will generally not violate the ADA.

One catch: The wellness program would have to be associated with a group health plan

(either insured or self-insured).

Another catch: The EEOC proposals don’t exactly match the HIPAA/Affordable Care

Act (ACA) rules, but they are reasonably close.

What are the HIPAA/ACA requirements?

Under the HIPAA/ACA scheme, there are two types of wellness programs. A

“participatory” program is one that rewards employees just participating. Hence the name. (An example would be an employer who reimburses employees for fitness club memberships.) Under the HIPAA/ACA, participatory programs can be offered without limitation, as long as they are available to all similarly situated individuals.

3822795v.1 The other type of program is a “health-contingent” program. There are two types of

“health-contingent” programs: (1) activity-only programs, in which the employee is rewarded for completing an activity but doesn’t have to achieve or maintain an outcome (for example, “we’ll pay you $100 if you walk a mile three days a week for a year”); and (2) outcome-based programs, in which employees are rewarded for achieving or maintaining results (for example,

“we’ll pay you $100 if you keep your BMI at or below 25 for a year, or if you quit smoking”). If the program is health-contingent, employers are allowed to offer incentives (carrots or sticks) if

1. Employees are allowed to try to qualify at least once a year; 2. The total reward offered doesn’t exceed 30 percent of the total cost of employee-only coverage under the plan (total means the employee’s and the employer’s share), and the percentage is 50 percent for tobacco prevention or reduction; 3. The program is reasonably designed to promote health or prevent disease; 4. The full reward must be available for all similarly situated individuals, and reasonable alternatives must be offered to those who can’t qualify; and 5. The availability of reasonable alternatives must be disclosed in plan materials and in any disclosure telling an individual that he or she did not meet an initial outcome-based standard. Under the HIPAA/ACA, the 30 percent/50 percent incentive applies only to “health- contingent” programs. HIPAA and the ACA have no limit on rewards that apply to “participatory” programs (if the programs are available to all similarly situated individuals).

The EEOC’s proposed rule is slightly different.

What does the EEOC say?

The EEOC would allow employers to offer incentives (carrots or sticks) for employee participation in wellness programs associated with group health plans if the total reward does not exceed 30 percent of the total cost of employee-only coverage under the plan for both participatory and health-contingent plans, AND if the wellness program is voluntary. The EEOC would define “voluntary” as follows: 29

3822795v.1 1. Employees aren’t forced to participate in the wellness program,

2. Health insurance coverage is not denied or made more difficult to get if the employee chooses not to participate (with the exception of the permitted “incentives”), and

3. The employer does not take adverse action against an employee for refusing to participate.

The employer would also be required to provide a notice “that clearly explains what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on its disclosure, and the methods the covered entity will employ to prevent improper disclosure of the medical information.”

The EEOC recommended “best practices”

Make sure that employees who handle medical information know their obligations under the laws. Adopt privacy policies for collection and handling of employee medical information. If medical information is stored electronically, it should be encrypted. Employees who handle medical information should not be “making decisions related to employment, such as hiring, termination, or discipline.” If this isn’t possible (for example, with a small company that has to do it all), then the employer should ensure that there is no discrimination based on an employee’s disability. Breaches of confidentiality should be promptly and effectively addressed, and the affected employees should be informed immediately. Employers should take appropriate action against an employee who breaches confidentiality, and should “consider discontinuing” their relationships with vendors who breach confidentiality. The EEOC’s proposed regulation is inconsistent with a wellness/ADA decision from the

U.S. Court of Appeals for the 11th Circuit, Seff v. Broward County in 2012. Employers in the

11th Circuit states of Alabama, Florida, Georgia, can follow Seff, but employers who have operations in other states are probably better off trying to follow the EEOC once its proposal becomes final. (The conflict between the EEOC and the Eleventh Circuit will eventually be resolved in the courts.)

3822795v.1 As if employers had not seen enough new regulations on wellness programs, on October

30, 2015, the Equal Employment Opportunity Commission issued a proposed rule on employer wellness programs and the Genetic Information Nondiscrimination Act (GINA). The GINA proposal accompanies the proposed rule on employer wellness programs and the Americans with

Disabilities Act, which the EEOC issued in April, 2015.

When viewed from an EEO standpoint, the proposed rule is pretty good news for employers. Many employers were concerned that the GINA rule might entirely prohibit employers from offering "inducements," or incentives, to employees’ family members who provided genetic information in connection with wellness programs. The proposed rule does allow inducements for certain health information from employees' spouses (although not their children).

On the other hand, the news is not quite so wonderful from the standpoint of the Health

Insurance Portability and Accountability Act or the Affordable Care Act. The proposed GINA rule is more complicated and restrictive than the HIPAA rule and ACA requirements. The GINA proposal focuses primarily on health information gathered from spouses of employees who participate in an employer's group health plan. (The employees' own rights are primarily governed by the ADA.)

Why didn't the EEOC just issue this latest proposal as part of the ADA proposal it issued in the spring?

The GINA is more restrictive than the ADA on the right of an employer to acquire certain medical information. In addition to placing more stringent restrictions on employers, the GINA protects not only employees but also their spouses and other family members in connection with wellness programs, while the ADA generally applies to employees only. The EEOC said that when it issued proposed GINA regulations (adopted in 2010), no one commented or asked about 31

3822795v.1 the impact on spouses participating in employer wellness programs, but it says it has "received numerous inquiries" since that time.

What does the GINA proposal say?

The proposal would amend the 2010 GINA regulations by making six additions:

1) It's ok for an employer to "request, require, or purchase genetic information" in connection with employer-provided health or genetic services only if the services "are reasonably designed to promote health or prevent disease."

The proposal tells us what would not be considered "reasonably designed": *It must not be overly burdensome for the employees or family members participating, *It must not be a sneaky way of (also known as "subterfuge for") violating the GINA or other anti-discrimination laws, and *It must not be "highly suspect in the method chosen to promote health or prevent disease." The EEOC provides a few examples: *Collecting information but failing to provide any follow-up or feedback to the individual who provided the information. *Requiring a burdensome amount of time from the individual, or being intrusive, or imposing excessive costs on the individual. *Existing for the sole purpose of shifting costs from the covered entity to "targeted employees based on their health."

2) It is ok for an employer to provide "inducements" (either rewards or avoidance of penalties) to encourage an employee's spouse to provide information about his or her current or past health status, if

*The spouse is enrolled in the employer's group health insurance, and *The information is provided as part of a health risk assessment associated with the group health insurance, and *The spouse provides prior knowing, voluntary, and written authorization.

3822795v.1 On the other hand, the employer cannot offer inducements to obtain the spouse's "genetic information," or any information about the employee’s children. (And "children" includes not only biological children, but also adopted and stepchildren.)

One point of clarification: The GINA statute and the 2010 regulations have a broad definition of "genetic information" that includes, not only "true" genetic information like genotypes and DNA tests, but also medical history or examinations of the employee's family members. For example, it is normally a violation of the GINA for an employer to ask an employee whether anyone in his family has ever had cancer. Under the GINA, this is a request for "genetic information."

It appears that the EEOC is now distinguishing "true" genetic information (for example, genotypes and DNA tests) from medical history and medical examinations. Very strict rules apply to the former, but the rules relating to the latter are not as strict. For clarity, in this article, we will call "true" genetic information exactly that, and will refer to medical history or examinations using the EEOC’s term "current or past health status."

The spouse must also provide prior knowing, voluntary, and written authorization before disclosing past or current medical status in connection with a wellness program, and the authorization form has to "describe the confidentiality protections and restrictions on the disclosure of ["true"] genetic information or disclosure of current or past health status [for which inducements are allowed]." The employer may use the same form for both types of information or examinations. But remember that if the employer or wellness provider is collecting "true" genetic information from a spouse, it must do so without providing any inducements to the employee or spouse.

3822795v.1 As with inducements to the employee, there are limits on the amount of "inducement" that an employer can provide based on disclosure of past or current medical history of the spouse. The total inducement can’t exceed 30 percent of the cost of providing group health insurance coverage to the employee and spouse. Here's the EEOC’s example:

If the cost of providing group health coverage to employee and spouse (or family coverage) is $14,000, then the employer cannot offer an inducement in excess of $4,200 (30 percent of $14,000).

The EEOC's proposed 30 percent limitation is generally consistent with regulations under

Health Insurance Portability and Accountability Act issued in June 2013, which took effect in

Under the HIPAA regulations, there is a higher inducement cap for tobacco cessation programs (50 percent), the inducement may be increased if the wellness program includes dependents, and the cap applies only to inducements offered in the context of "health-contingent" programs. The EEOC has declined to incorporate these provisions in its ADA and GINA wellness regulations. In addition, the "30 percent" is a more complicated calculation under the proposed GINA rule than under the HIPAA regulations.

3) The "30-percent limit" described above must also be apportioned between the spouses, in cases where the inducement is designed to encourage the spouse to provide information (as opposed to the employee).

The employee's share of the inducement cannot exceed 30 percent of the employer's cost of providing individual coverage. And then the spouse’s share can’t exceed the difference between the employee's share of the inducement and the total allowable inducement for spousal/family coverage. Thankfully, the EEOC provides another example:

Using the same example as above, the cost of providing family coverage was $14,000, with a total “inducement allowance” of $4,200 to employee and spouse. 34

3822795v.1 The EEOC assumes (for purposes of the example) that the cost of individual coverage to the employer was $6,000. If so, the employee’s inducement cannot exceed 30 percent of $6,000, or $1,800. Then the spouse’s inducement would be a maximum of $2,400 ($4,200 minus $1,800).

While the EEOC tried to close the loop regarding inducements for spouses, the inducement allowance continues to stray from that permitted under the HIPAA rule, which has no "allocation" requirement for spouses. In order to be comfortable with compliance, wellness programs will need to follow the strictest allowance, which now seems to be the proposed allowance under the GINA.

The last three changes are a little simpler than the first three:

4) An employer is not allowed to require an employee, spouse, or other covered dependent to sell genetic information as a condition of participating in the wellness program or receiving an inducement. The employer also can't ask the individual to waive his or her rights under the GINA.

5) That said, the employer may obtain information about a spouse's past or current health status if the spouse is (a) covered under the employer's group health plan and (b) completing a health risk assessment on a voluntary basis (in other words, as long as the authorization and inducement requirements/limits already described are complied with).

6) "Inducements" include not only cash payments, but also "in-kind" items, "such as time-off awards, prizes, or other items of value, in the form of either rewards or penalties."

The comment period on the proposed rule ended on December 29, 2015.

Although the GINA proposal does not dovetail with the HIPAA/ACA requirements, it does appear that the EEOC is trying to harmonize its mission to protect employees’ privacy rights with respect to health-related information with the strong federal policy – especially now,

3822795v.1 in light of the Affordable Care Act - favoring wellness programs. The following chart attempts to illustrate the differences between the various laws and regulations.

3822795v.1 37

3822795v.1 V. FAIR LABOR STANDARDS ACT

A. FLSA Cases Continue To Flood Federal Courts

According to reports from the Bureau of National Affairs and Employment Law 360, the number of lawsuits alleging minimum wage and overtime violations under the Fair Labor

Standards Act (FLSA) continues to increase, with a five percent increase in suits filed between

2012 and 2015. In 2014, 7964 suits were filed in federal courts nationwide, with New York

State and Florida leading the nation in the number of federal court suits filed under the FLSA.

D. Proposed Overtime Rule Would More Than Double Salary Threshold For Exempt Employees, With Automatic Annual Increases

On June 30, 2015, the Wage and Hour Division of the U.S. Department of Labor released its long-awaited Notice of Proposed Rulemaking, proposing changes to the executive, administrative, professional, and highly-compensated employee exemptions from the overtime requirements of the Fair Labor Standards Act. In addition to the Notice, the Department has also issued a Fact Sheet and list of Frequently Asked Questions. Final regulations are expected sometime in mid-2016. The following are key highlights of the proposed regulations.

The Salary Test

Although the proposed rule is 295 pages long, the only substantive changes are in the weekly salary that must be paid in order for an employee to qualify for the executive, administrative, and professional exemptions to the FLSA overtime requirements, and in the annual compensation that must be paid for an employee to qualify for the “highly compensated employee” exemption. The current salary threshold for the executive, administrative, and professional exemptions is $455 a week ($23,660 a year). This figure was last updated in 2004.

In the proposed rule, the Department of Labor proposes to set the minimum weekly salary at the 40th percentile of weekly earnings for all full-time salaried employees. Assuming

3822795v.1 that a Final Rule is issued in 2016, the minimum weekly salary for the white collar exemptions would be $970 a week ($50,440 a year), more than double the current threshold. The effect of this change, of course, would be to dramatically increase the number of employees who are entitled to overtime pay. According to some estimates, approximately 5 million more employees nationwide would qualify for overtime if the proposed rule is adopted.

While the increase in the minimum weekly salary was expected, what was more of a surprise is the Department’s proposal, for the first time since the Fair Labor Standards Act was passed in 1938, to automatically increase the minimum weekly salary requirement each year based on data from the Bureau of Labor Statistics. The Department, however, has not chosen between the two different indexing methods that it has studied and has solicited comments on the indexing process. The Department also proposes to increase the minimum annual compensation for the highly-compensated employee exemption. The current minimum is $100,000. The

Department proposes to increase that figure to $122,148 a year for 2016, and that this figure be increased annually based on the same index that would apply to the weekly salary requirement.

No Change to Duties Test

Many commentators had also predicted that the Department would propose changes to the so-called “duties test” for the executive, administrative, and professional exemptions, including the adoption of a California-style requirement that 50 percent of an exempt employee’s time each week be devoted to performing exempt tasks. In an interesting turn of events, the

Department has solicited comments regarding the respective duties tests but has not proposed any specific regulatory changes at this time. It remains to be seen what the Department will do as to the duties tests. By choosing not to include any proposed amendments regarding the duties tests in the Notice, the Department may have foreclosed its ability to make regulatory changes

3822795v.1 without further notice and comment. On the other hand, the solicitation for comments may indicate that the Department is considering issuing a second round of proposed amendments, and opening up a second comment period, at a more opportune time in the future.

What Happens Next?

For now, these are just proposed changes to the regulations. The DOL is expected to issue final regulations in mid-2016. The regulations have not changed, and employers are not required to take any action at this time. However, it is not too early for employers to begin their planning on how to comply with this new rule with respect to exempt employees whose salary currently is less than the expected new salary threshold.

E. Department of Labor Cracks Down on Independent Contractors

On July 15, 2015, Wage Hour Administrator David Weil issued Interpretive Guidance on the misclassification of employees as independent contractors. As employers probably expected, the U.S. Department of Labor takes the position that most workers are “employees” and not

“independent contractors.” The DOL has stated in support of its policy that “when employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. . . . [S]ome employees may be intentionally misclassified as a means to cut costs and avoid compliance with labor laws.”

According to the DOL, the key question is whether “the worker is economically dependent on the employer” – in which case the worker is an employee – “or in business for him or herself” – in which case the worker may be a true independent contractor.

3822795v.1 Here are four key points for employers to keep in mind:

1. It doesn’t matter if you call the worker an “independent contractor.” You can call

the worker anything you want, but the courts and the DOL will look at the

“realities” of the situation rather than labels.

2. It doesn’t matter that you’re paying the worker with a 1099. Well, actually, it

does, because you’re going to owe a lot of money to the Internal Revenue Service

and the Social Security Administration if it turns out that your “contractor” was

really an employee.

3. It doesn’t matter if the “independent contractor” is highly skilled. Even a highly

skilled person will usually be an employee.

4. “ Independent contractors” are people “with economic independence who are

operating a business on their own.”

Here are some questions to ask yourself about your “independent contractors”:

Does the “contractor” perform work that is integral to your business? Using one of the examples from the DOL interpretation, if your business sells cakes that are custom-decorated and your “contractors” are cake decorators, you’d better reclassify, and fast. On the other hand, if you’re a construction company who hired somebody to decorate a cake for the owner’s birthday, the decorator is probably an independent contractor because cake decorating is not an integral part of a construction company’s business.

Can the “contractor” make more (or less) money depending on his or her managerial skills? What the DOL is talking about is “decisions to hire others, purchase materials and equipment, advertise, rent space, and manage time tables.” In other words, the kind of

“management” that an owner of a business would engage in. If you’re a lousy entrepreneur, you

3822795v.1 may go bust. If you’re a good one, you may get rich. Employees, even those in “management” positions, don’t face this type of risk, even though their success in the company may depend on how well they perform certain “managerial” tasks. The DOL also makes clear that the ability to work more hours doesn’t count toward finding an “independent contractor” relationship.

What is the worker’s investment compared with the employer’s? An employee may have to purchase tools and equipment to do the job. But generally an employee does not have to make a significant investment to do the job – the employer usually takes care of most of it. The DOL says that even if a worker does have to make a significant investment (for example, buying or equipping a truck), that investment has to be compared with the level of investment by the company. If the employer’s investment is significant relative to the investment by the individual, then the DOL is likely to find an “employment” relationship.

Does the work performed require special skill and initiative? Here, the DOL is not looking at technical skills, or skills “used to perform the work,” but “business skills, judgment, and initiative.” As an example, they cite a “highly skilled carpenter” who makes custom cabinetry for a variety of companies, “markets his services, determines when to order materials

[and how much], and determines which orders to fill.”

Is the relationship permanent or indefinite? If so, the individual is probably an employee.

A contract for a definite term may mean the individual is an independent contractor, but not necessarily. (Many “employees” have employment contracts for defined periods of time.) The

DOL would consider “whether the lack of permanence or indefiniteness is due to ‘operational characteristics intrinsic to the industry’ . . . or the worker’s ‘own business initiative.'” Only in the latter case might the person be considered an independent contractor.

3822795v.1 How much control does the employer have? According to the DOL, an “independent contractor” must have control over “meaningful aspects of the work performed” and “must actually exercise it.” The fact that workers may telecommute, have flexible schedules, or work from the road – depriving the employer of the ability to closely supervise – does not mean that the worker is an “independent contractor” now that these practices have become so common among employees. Also, if you have to impose stringent requirements on your “contractors” to comply with the law or to ensure customer satisfaction, watch out – when you do that, you may be transforming your contractors into employees. (Of course, you may not have a choice.)

The answer to any one of the above questions is not dispositive. That would be way too easy! You have to consider what courts like to call “the totality of the circumstances.” In other words, all of these factors have to be considered before a determination is made. Your safest bet is to err on the side of finding that the worker is an “employee.”

F. Student Interns May Be Employees Under FLSA

We have reported in prior years that the issue whether student interns are employees covered by the minimum wage and overtime provisions of the Fair Labor Standards Act has heated up in recent years and is the source of a good deal of litigation. In September, 2015, the

Eleventh Circuit Court of Appeals, which hears appeals from federal courts in Florida, Georgia and Alabama, issued a decision reversing a summary judgment in favor of an employer in

Schumann v. Collier Anesthesia, P.A. (2015). In doing so, the Eleventh Circuit modified the traditional “primary beneficiary” test announced by the U.S. Supreme Court in Walling v.

Portland Terminal Co. (1947). The Eleventh Circuit reasoned that the employer, an anesthesiology practice, could not be expected to incur the costs of training anesthesiologists without receiving some type of benefit from the arrangement. The court recognized, however,

3822795v.1 that the mere fact that the employer obtained some benefit from the arrangement was not sufficient to make the students employees. The court reasoned that where both the intern and the employer may obtain benefits from the relationship, the appropriate focus is on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive towards the student. The

Eleventh Circuit cited a decision of the Second Circuit Court of Appeals in Glatt v. Fox

Searchlight Pictures, Inc. (2015) as the appropriate balancing of the primary beneficiary test in today’s society. The court remanded the case to the federal district court to analyze the plaintiff’s claims under this modified primary beneficiary test.

G. Home Health Care Workers Employed by Third Parties Have a Right to Minimum Wage and Overtime

Domestic service workers providing either companionship service or live-in care for elderly, ill or disabled persons and who are employed by a staffing agency or other third-party employer are entitled to minimum wage and overtime for their services, according to the U.S.

Court of Appeals for the District of Columbia Circuit in Home Care Association v. Weil

(2015). The ruling, issued in August, 2015, overturned a lower court decision that had found new regulations issued by the U.S. Department of Labor invalid and unenforceable. The Court of

Appeals ruling means that the case will be remanded to the lower court for the grant of summary judgment to the DOL, thus reinstating the DOL’s regulations affecting more than 2 million home care workers.

At issue in the case was a Final Rule issued by the DOL in 2013 which was set to take effect on January 1, 2015. The Final Rule made some significant changes to the regulations covering companionship workers. Companionship workers have historically been exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act. Under the Final

3822795v.1 Rule, employees of third-party home health-care agencies (as opposed to employees who were employed directly by the individuals needing care or their family members) were excluded from the exemptions. In addition the definition of “companionship services” was narrowed considerably.

The Home Care Association of America and other trade associations that represent third- party employers of home-health care workers sued to stop the DOL from putting the Final Rule into effect, and in late December 2014, the federal district court ruled in its favor, vacating the part of the Final Rule that excluded employees of third-party providers from the minimum wage and overtime exemptions. The district court found that the DOL’s interpretation conflicted with the intent of Congress. Three weeks later, the district court also vacated the DOL’s narrow definition of “companionship services,” finding that the DOL had overstepped its bounds by trying to administratively change longstanding interpretations.

The DOL appealed both decisions, and a panel of the D.C. Circuit unanimously reversed the lower court’s ruling regarding third-party employers. The panel concluded that the case was governed by the Supreme Court decision in Long Island Care at Home Ltd. v. Coke (2007), which had concluded that the language of the FLSA gave the DOL discretion to apply (or not to apply) the companionship services and live-in exemptions to employees of third-party agencies.

According to the D.C. Circuit panel, the DOL’s decision to exclude all third-party employers from the exemption, “was entirely reasonable....The DOL’s understanding is consistent with

Congress’s evident intention to ‘include within the coverage of the Act all employees whose vocation is domestic service.’”

The Home Care Association also argued that since 2007 Congress had considered, but failed to enact, legislation excluding agency employers from the exemption and that this conduct

3822795v.1 showed Congress did not intend to exclude agency employers from the exemption’s coverage.

The panel disagreed: “Failed legislative proposals are a particularly dangerous ground on which to rest an interpretation of a prior statute.”

The Court of Appeals also rejected “public policy” arguments from the Home Care

Association that the DOL was inappropriately changing 40 years of interpretations and making home health care less affordable for individuals, which could result in increased institutionalization and a decline in quality of care. Regarding the change in longstanding interpretation, the panel said that the Final Rule was based on the “dramatic transformation of the home care industry since the third party employer regulation was first promulgated in 1975....

Due to significant changes in the home care industry over the last 25 years, workers who today provide in-home care to individuals needing assistance with activities of daily living are performing types of duties and working in situations that were not envisioned when the companionship-services regulations were promulgated.” The “affordability” argument was also unpersuasive, the panel said. Fifteen states already provide wage protections for home care workers employed by third parties, but there was no data indicating that these protections actually resulted in increased institutionalization or a decline in the quality of care. Thus, “[t]he

Department instead reasonably credited comments suggesting that the new rule would improve the quality of home care services.”

Finally, with respect to the DOL’s change to the definition of “companionship services,” the Court of Appeals found that it had no jurisdiction to rule on this matter. The Court of

Appeals reasoned that because it had upheld the Final Rule to the extent that it excluded all third- party employers from the exemption, these agencies could not show that they were injured by a narrower definition of “companionship services.”

3822795v.1 Subsequent to the Court of Appeals decision, the Home Care Association sought a stay of the Final Rule from the U.S. Supreme Court, but the Supreme Court denied the stay, meaning that the Department of Labor was free to implement the Final Rule. The Department of Labor began enforcing the Final Rule as of November 12, 2015.

H. Paying Wages With Debit Cards May Violate FLSA

Paying hourly employees with debit cards has become a common practice in recent years, particularly in industries where employees may not have bank accounts for direct deposits. The use of payroll debit cards can be cost effective and convenient and save employers from the administrative burdens of issuing paper paychecks. However, the use of pay cards is not without some risk under the Fair Labor Standards Act and state minimum wage laws.

For example, in Czopek v. TBC Retail Group, Inc. (2015), a federal district court in

Florida certified class claims under the Fair Labor Standards Act in a case where hourly employees claimed that the use of pay cards violated the minimum wage provisions of the statute.

Under the Fair Labor Standards Act, hourly employees must be paid at least the minimum wage for all hours worked and appropriate overtime pay and must receive this payment of wages “free and clear” except for legally required withholding and voluntary deductions. The risk for employers using payroll debit cards is that the use of such cards violate the Fair Labor Standards Act to the extent that there are fees associated with the cards that are charged to employees when using the cards to access their funds. If an employee has to pay fees in order to access his pay, then he is not receiving his pay “free and clear” as required by the Fair

Labor Standards Act. Most reputable payroll debit cards permit employees to access all of their wages at least one time without paying a fee. However, in Czopek v. TBC Retail Group, the

3822795v.1 plaintiffs alleged that Tire Kingdom issued wages on payroll debit cards that were subject to excessive transaction fees, causing the plaintiffs not to be paid their wages free and clear as required by 29 C.F.R. § 531.35. The plaintiffs alleged that by issuing payroll debit cards that were not redeemable for cash and were subject to substantial transaction fees, Tire Kingdom failed to comply with 29 C.F.R. § 531.27(a), which requires that wage payments be made in cash or negotiable instruments. The plaintiffs in that case further claimed that Tire Kingdom failed to disclose the fees associated with the payroll debit cards; failed to offer employees the option of obtaining a paper check or cash in lieu of the debit cards; and failed to provide names and addresses of businesses at which employees could receive cash in exchange for the payroll debit cards.

The certification of the class by the federal district court judge is not a finding of a violation, but is an indication that we may see more litigation regarding the issue of paying wages to non-exempt employees through payroll debit cards.

I. Department of Labor Issues Joint Employer Guidance

On January 20, 2016, the U.S. Department of Labor issued formal guidance that is intended to advise employers on the types of business relationships that could lead to joint employer liability under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural

Worker Protection Act. The guidelines provide guidance relating to several different organizational and staffing models. They point out that in some cases, employees are shared, or a company contracts with another company such as a third-party management company or a staffing agency. The guidelines are also aimed at companies that use subcontractors, and point out that a contracting company may not escape liability by using a subcontractor who violates the minimum wage or overtime requirements or other provisions of the Fair Labor Standards Act

3822795v.1 or the Migrant and Seasonal Agricultural Worker Protection Act. The guidelines focus on both horizontal joint employment which is defined in the guidelines as when an employee is employed by two more technically separate but related employers; and also focuses on vertical joint employment, defined in the guidelines as existing when there is a typical subcontracting relationship.

J. Supreme Court Rule Limits Ability to Squelch Class Action Lawsuits

On January 20, 2016, the U.S. Supreme Court decided in Campbell-Ewald Company v.

Gomez (2016), that companies cannot automatically defeat class action lawsuits by making an offer of full relief to individual plaintiffs who reject that offer of full relief. While the Campbell-

Ewald case was brought under the Telephone Consumer Protection Act rather than an employment statute, the principles announced in the Supreme Court decision apply equally to wage and hour collective actions and other employment class actions. In Campbell-Ewald, the defendant made an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure, offering full relief to the named plaintiff in the class action suit. The offer of judgment was rejected, but the defendant argued that because it had offered full relief, the case was mooted.

The Supreme Court rejected that argument but left open the possibility that an offer of settlement that is accepted by a named plaintiff would moot a class action. However, the Court’s decision explicitly declines to decide whether defendants could defeat a class action by paying out the full amount of the individual plaintiff’s claim.

VI. NATIONAL LABOR RELATIONS ACT AND NLRB

A. NLRB Changes Joint Employment Standard, With Far-Reaching Implications For Employers

On August 27, 2015, the National Labor Relations Board issued its long-awaited ruling in Browning-Ferris Industries (BFI) and, as expected, changed the standard for determining

3822795v.1 joint-employer status. If the decision withstands appeal, it will dramatically change the dynamics of organizing campaigns and elections before the Board, expand the range of "target" employers vulnerable to potential unfair labor practice charges, and remove important flexibility in establishing and ending business relationships between contractors, subcontractors and suppliers.

In its decision, the NLRB's three-member Democratic majority concluded that BFI was a joint employer of workers provided by Leadpoint Business Services, Inc., a contract staffing agency, at a recycling facility in California that was controlled by BFI. The Board majority contended that the Board's prior joint-employer standard, which generally required direct, immediate, and actual exercise of control over the workers, was outdated in light of the increased use of contingent workers in American workplaces.

Under the new standard, two or more entities can be considered "joint employers" if the entities are "employers" under common law, and if they share responsibility for or co-determine the essential terms and conditions of the workers' employment. The Board ruled that an entity can be a "joint employer" if it has the authority to control terms and conditions of employment, even if it does not actually exercise that authority. Reserved control (authority that is not exercised) and indirect control may be enough to establish joint-employer status.

In August 2013, in connection with a representation election at the BFI facility, a Board

Regional Director issued a recommended decision that Leadpoint was the sole employer of the contract workers. The Teamsters local involved in the election asked for the full Board to review the Regional Director’s recommendation, and the ballots from the election were impounded.

Presumably, the ballots will now be counted in light of the NLRB's refusal to adopt the Regional

Director's recommendation. If the vote is in favor of the union, BFI or Leadpoint (or both) will

3822795v.1 probably seek review of the NLRB's decision by a U.S. Court of Appeals in a "technical refusal to bargain" unfair labor practice case.

Republican Board Members Philip A. Miscimarra and Harry I. Johnson, III (whose term ended in August, 2015), dissented vigorously, saying that the decision was "the most sweeping of recent major decisions" rewriting the longstanding test for determining joint employer status.

According to the dissenting members, "This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts and picketing."

The importance of the Board's decision, assuming it ultimately stands, probably cannot be overstated. For example, a "user" employer of contract employees would no longer be able to readily extricate itself from labor problems of a supplier/contractor employer by simply terminating the contract with the supplier/contractor. We expect the Board to use the BFI standard as a basis for finding franchisors and franchisees to be joint employers, which will obviously have far-reaching implications for the restaurant and hospitality industries, among others. The Board can also be expected to approve multiemployer bargaining units consisting of a combination of workers who are employed by two or more "joint" employers and workers who are employed by a single employer.

K. Department of Labor To Issue New “Persuader” Regulation

The U.S. Department of Labor has long wanted to revise the "persuader" reporting rules under the Labor Management Reporting and Disclosure Act. The DOL announced in a regulatory agenda issued toward the end of 2015 that it expects to issue the persuader rule in

3822795v.1 March, 2016. Current regulations require employers and their labor consultants who engage in

"persuader activity" to file extensive reports about their use of consultants and lawyers.

However, the current regulations contain an "advice exemption" for attorneys and consultants who assist employers in labor relations activities so long as the activities are "advisory" to the employer (that is, the attorneys and consultants communicate to the employer and do not directly communicate with employees).

The proposed regulations are expected to narrow that exemption, essentially to limit exempt "advice" to providing representation in legal and administrative labor-related proceedings. Such a narrowing will largely swallow the advice exemption and mean that many more entities – employers, attorneys, and consultants – will have an obligation to report extensive and detailed financial information on labor relations activity, expansively defined, on mandatory DOL forms. The reporting obligations are huge, costly to those subject, and come with potential criminal sanctions for failure to comply.

Since at least 2011, the DOL has held back on issuing its new final persuader regulations, presumably because of the political and legal firestorm that is expected. Opponents of the new regulations point out that the new interpretation of the advice exemption will encroach on the attorney-client privilege and deter smaller employers from seeking legal advice in labor matters, which is expected to hinder employer effectiveness in union campaigns while also increasing the risk that employers will commit unfair labor practices because they don't have the benefit of legal advice. The regulations have now been submitted to the Office of Management and Budget, a near-final step in the process. Court challenges are likely, but employers, their counsel, and their consultants should begin to prepare if they have not done so already.

3822795v.1 L. NLRB Attacks on Employer Policies for Union and Non-Union Employers

The National Labor Relations Board in recent years has put employee handbooks and policy manuals under a magnifying glass, searching for any provision that might, in its view, violate the National Labor Relations Act. In March, 2015, NLRB General Counsel Richard F.

Griffin, Jr., issued a report attempting to explain several years of Board decisions and positions taken by his office. His stated goal was “to offer guidance on . . . this evolving area of labor law, with hope that it will help employers to review their handbooks and other rules, and conform them, if necessary, to ensure that they are lawful.”

Unfortunately, because the decisions and positions have often been inconsistent, the guidance provides few bright lines for employers to follow to ensure that their rules are lawful.

But, perhaps worst of all, the General Counsel’s guidance follows the current Board majority view and, at least implicitly, largely rejects a balanced interpretation of the NLRA that gives sufficient weight to employers’ interests in managing their workplaces, protecting employees, and protecting confidential information and intellectual property.

All employers, especially non-union employers not used to dealing day-to-day with the

NLRA, should take note and get their employee handbook rules and policies in line with the

GC’s expressed views. Employers found to be in violation can be ordered to rescind any unlawful rules, and rescind and remedy any disciplinary action based on the rules. An unlawful rule can also be ground for the Board to set aside an NLRB election vote against union representation and direct a re-run election, thus giving the union another chance to win.

1. Categories of Rules Addressed in the Report

The General Counsel’s report addresses the following types of workplace rules:

 confidentiality

3822795v.1  conduct toward the employer and management

 conduct toward co-workers

 communications and interaction with outside parties and the media

 use of logos, copyrights or trademarks

 photography and recording in the workplace

 leaving work or premises, or walking off the job

 conflicts of interest

2. Overview of the General Counsel’s Position

The General Counsel expansively interprets what constitutes unlawful "interference" with the Section 7 right to engage in protected concerted activity. He generally views employer rules as unlawful when, in his view, an employee “would reasonably” construe a rule as prohibiting any form of protected concerted activity. It is not relevant that there may be no evidence that the policy language in fact restricted any employee's actions, and there is no room for an employer to demonstrate that the GC’s view of how an employee “would reasonably” construe language is incorrect. A rule might be viewed as having a “chilling effect” even if the prohibited behavior is harmful to the employer, co-workers, third parties, or the public, and even if there are less- harmful ways for employees to dispute and communicate.

Given the GC’s perspective, an employee handbook rule generally is unlawful if any employee might interpret it as restricting any form of Section 7 activity, subject to some relatively limited exceptions. Exceptions may exist when the Board or GC views the rule as fostering some employer business interest that the Board or the GC deems “legitimate” and sufficiently weighty to justify some restriction of employee activity that otherwise would be protected.

3822795v.1 Employers should also be aware that the GC views Section 7 activity as encompassing the nearly unfettered right of employees to strike, walk out, dispute, criticize, complain, and communicate, by nearly any means or method, and with nearly any content, to co-workers, management, third parties, the media, government officials, and the public, about nearly anything having to do with wages, hours, and other terms and conditions of employment. And even “wages, hours, and other terms and conditions of employment” is a term of art viewed expansively by the GC (for example, in the stated view of the GC, it includes certain political activity).

3. A few “safe harbors” for employers

On a more positive note, the GC does provide a few examples of rules that he does not consider unlawful (the Board may or may not agree):

 Rules prohibiting “unlawful” acts  Rules prohibiting “malicious” defamation

 Rules prohibiting “disparagement” of the “employer’s product” (although “disparage” and “employer’s product” are interpreted narrowly)

 Rules prohibiting “knowingly” false statements

 Rules requiring “respect for” copyright, trademark, and similar laws

 Rules prohibiting disclosure of “trade secrets”

 Rules prohibiting employees from making photographs or recordings during “working time” or of work areas (exceptions apply when the photography/recording is of activity protected by the NLRA, such as documenting health or safety issues or a strike or work- related protest)

 Rules prohibiting “financial” conflicts of interest

 Rules requiring employees to work during “working time” (CAUTION: “working time” should not be confused with “on-duty time,” “company time,” “shift time,” or “time on the clock”; “working time” is the time that an employee is engaged or should be engaged in performing his or her work tasks for the employer)

 Rules prohibiting distribution of literature in “working areas” (CAUTION: “working areas” does not include areas that are used both for working and breaks) 55

3822795v.1  Rules prohibiting distribution and solicitation during “working time” as defined above

 Rules prohibiting employees from coming into the interior of the workplace for “any reason” during non-working time The above list is illustrative and should not be used as a substitute for legal advice on the subject.

And just as the Board or the GC sometimes considers the surrounding context of an employee handbook rule’s language to determine its lawfulness (for example, placement of the rule language in a sexual harassment policy), employers are cautioned that an otherwise lawful rule might be found to be unlawful if the context gives it a potentially different meaning.

4. What wasn’t in the report?

The General Counsel’s report did not claim to be an exhaustive review, and notably absent is any discussion of union-free statements, employment-at-will statements, binding dispute resolution and arbitration polices, and the newest type of handbook rule in the

“interference” mix, an English-only rule, which recently was a matter of first impression before an administrative law judge of the Board. Unfortunately, the GC also does not meaningfully address the effect (if any) of so-called “savings language” in an employee handbook, such as,

“Nothing in this handbook should be construed to prohibit any form of Section 7 activity under the National Labor Relations Act and nothing herein is intended to prevent, deter, or interfere with employees in the exercise of any employee rights under the National Labor Relations Act.”

These subjects may get attention from the GC or the federal courts in the future.

The General Counsel’s Report will certainly help employers understand the GC’s position, but employers may not like what they hear. Many employers are confused by what they see as a one-sided interpretation of the law and arguably strained, and often wholly out-of- context, "non-real-world" interpretation of employee handbook rules and other policies.

Employers almost universally publish and enforce rules to advance legitimate business goals

3822795v.1 such as maintaining civil employee relations; providing useful information to employees to avoid lack of “fair notice”; fostering productive, profitable, and safe workplaces; and protecting

Company investments in employee training and education, and intellectual property. Private sector employers are now on notice that the GC, when given the opportunity, will scrutinize employee handbook rules for a possible “chilling effect” on employees' exercise of the right to engage in protected concerted activity.

To be in the best possible position to avoid unfair labor practice charges regarding employee handbook rules and other policies, employers should take the following steps, with the assistance of experienced labor counsel:

 Review handbooks, policy manuals, social media policies, work rules, plant rules, and

individual employee agreements – including confidentiality and non-disclosure

agreements – to determine whether the language “could be” interpreted as interfering

with Section 7 activity, and revise as needed.

 Revisions to policies and rules should be made before the employer has knowledge of

any union organizing activity. (Changes to policies should be made only after

consultation with labor counsel, and this is especially true if the employer is aware of

organizing activity.)

 Consider using specific examples of prohibited behavior, and consider a disclaimer or

multiple disclaimers (including the “savings language” described above).

 Although this approach has costs, consider dispensing with some general rules that

attempt to encompass broad classes of bad behavior. If the behavior is egregious enough,

you may be able to deal with it even if you don’t have a written policy.

3822795v.1  In connection with rule-based discipline or discharge of an employee, carefully review

the rule before taking the action and consider the potential for an "interference" or

“discrimination” claim based on the rule itself or disparate enforcement of the rule even if

it is otherwise lawful.

M. Social Media Policies

In late 2011 and early 2012, the National Labor Relations Board began to significantly weigh in on the propriety of employer policies that addressed employees' use of social media to convey their thoughts on workplace issues. The underpinning for the Board to review employer social media policies is found in Section 7 of the National Labor Relations Act, which states in relevant part:

Employees shall have the right . . . to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.

Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer to

"interfere with, restrain or coerce employees in the exercise of rights guaranteed in Section 7 of this Act."

It is important to point out that these parts of the NLRA apply to non-union as well as unionized facilities. Some of the early unfair labor practice charges that were filed challenging social media policies were filed by unions on behalf of their members, alleging that the employer either failed to bargain about the policy (a violation of § 8(a)(5)) or that the policy on its face violated Section 7 rights (a violation of § 8(a)(1)). When these earlier charges were filed it was difficult to get guidance from the Regional office of the NLRB where the charge was filed as to what would constitute a compliant social media policy. Then, in the spring of 2012, in a case challenging Wal-Mart's Social Media Policy, Wal-Mart modified its policy to be compliant with

3822795v.1 the NLRA as interpreted by the Board. That policy provided at least some guidance as to what would be acceptable to the Board. Nevertheless, Wal-Mart's policy did not necessarily fit the needs of other companies and was never intended to be a “one size fits all” policy.

After approval of the Wal-Mart policy, many cases have been decided by the NLRB regarding the legality of social media policies. The legality of any social media policy is determined on a case-by-case basis. What follows is a summary of recent NLRB social media policy decisions:

In Pier Sixty, LLC (2015), the NLRB held that an employee’s profanity-laced Facebook post complaining about criticism from his supervisor was protected concerted activity under the

National Labor Relations Act. Although the Board majority found the employee’s comment distasteful, it still ruled that it was activity protected by the Act.

In Botch Imports, Inc. (2015), the NLRB ruled that an employer’s social media policy requiring that employees identify themselves when discussing the company’s business on social media was a violation of the National Labor Relations Act.

In Tinley Park Hotel and Convention Center, LLC (2015), an NLRB administrative law judge ruled that the employer violated the National Labor Relations Act by disciplining an employee for social media comments that violated the employer’s policy prohibiting disloyalty, including disparaging and denigrating the company by making false and malicious statements.

Durham School Services, L.P . (2014) involved a school bus operator's social networking policy, which threatened employees with discipline for a variety of infractions including publicly sharing information “related to the company or any of its employees or customers.” The NLRB concluded that the policy was unreasonably broad and vague under the NLRA and that

3822795v.1 employees could interpret the policy as restraining their right to communicate with each other regarding work issues and “for their mutual aid and protection.”

Lily Transportation Corporation (2014) involved an information posting rule contained in an employee handbook. The posting rule was designed to protect the company's public image.

An Administrative Law Judge concluded that the rule did not distinguish information about customers and company business, on the one hand, from information that employees should have been free to share, on the other. The policy was not restricted to confidential or sensitive company information. The ALJ concluded that the restrictions of the policy were not drafted clearly enough for employees to understand what was prohibited and what was allowed, even though the company’s handbook included a longer, more detailed confidentiality policy.

In Hoot Winc, LLC (2014), a company that provided restaurant management services was found to have violated the NLRA when it terminated a server for posting disparaging remarks about coworkers and managers on social media in violation of a handbook rule prohibiting insubordination. The ALJ concluded that because the rule did not define terms like

“insubordination,” “lack of respect,” or “cooperation,” it was too subjective and left employees without guidance as to what was acceptable and what was not. Moreover, the ALJ concluded that if those terms were construed or interpreted in their broadest sense, there could be a chilling effect on employees engaged in the exercise of their Section 7 rights under the NLRA.

In Professional Electric Contractors of Connecticut, Inc. (2014), an ALJ invalidated a handbook rule prohibiting initiation or participation in the distribution of chain letters, or sending communications or posting information, on or off duty, or using personal computers in any manner that adversely affected company business interests or reputation. Again, the ALJ found that the rule was overly broad and not carefully drafted to remove unlawful restrictions.

3822795v.1 A more complex case involved a Facebook discussion between two employees. In Triple

Play Sports Bar and Grille (2014), employees were critical of the employer's failure to withhold the proper amount of state income tax from their paychecks. Both employees were terminated by the company. The NLRB rejected the company argument that the employees used profane language criticizing one of the owners. The Board concluded that the remarks were not maliciously untrue and that what the employees were really doing was seeking mutual aid and protection in voicing concerns about terms and conditions of employment in the hope that they would be addressed by the company. The Board found the comments were not designed to disparage company product or services, or to undermine the company's reputation. The Board also considered the company's “Internet/Blogging” policy, which discouraged online communications involving confidential or proprietary information. It also discouraged inappropriate discussions about the company, management, or co-workers. The policy did contain some limiting language that it was not intended to override applicable state or federal law. However, the Board found that language to be ineffective in light of the broad language of the policy, which employees could reasonably understand as prohibiting discussions about their terms and conditions of employment.

From these cases we have learned steps that employers can take to draft social media policies that are acceptable to the NLRB, including the following:

 Be specific. Ensure that your policy specifically delineates which posts are prohibited.

The Board will probably accept limitations or prohibitions on communications that could

violate the law, such as securities or financial disclosure laws; maliciously false

statements about the company; or communications that violate laws against harassment,

3822795v.1 bullying, discrimination, or retaliation. Vague or overly broad statements are likely to be

struck down.

 Require employees to identify themselves as such when creating a link relevant to the

company, and prohibit employees from representing themselves as company

spokespersons.

 Give examples. Describe which communications are allowed, and make clear that the

policy is not intended to interfere with employee rights recognized under the law.

N. NLRB Accepts Electronic Signatures

On September 1, 2015, the National Labor Relations Board General Counsel Richard

Griffin, Jr. issued Memorandum GC 15-08, “Guidance Memorandum on Electronic Signatures to

Support a Showing of Interest." In the memorandum, the General Counsel directs Regional

Offices of the Board to begin accepting electronic signatures for the required "showings of interest" in support of election petitions. Unions can be expected to respond in short order by using emailed electronic authorization cards and social media "sign ups" in the initial stages of organizing campaigns.

According to the General Counsel, the Board charged him with determining "whether, when, and how" electronic signatures would be practicable for employees to indicate their showing of interest for or against representation to support election petitions to the Board and "to issue guidance on the matter." The Board requires at least a 30 percent showing of interest for a representation or decertification petition and concluded in its December 15, 2014 rulemaking that its current election regulations permit the use of electronic signatures. As a general rule, the

Board presumes that signatures in support of a showing of interest are authentic and valid unless there is objective evidence otherwise. The Board views the showing of interest as purely an

3822795v.1 administrative matter within the sole discretion of the Board and largely outside of legal challenge by interested parties.

General Counsel Griffin has now answered the Board's charge to him with guidance that the Board will accept electronic signatures effective immediately, provided certain requirements are satisfied when electronic signatures are submitted. To be accepted by the Board, the electronic signatures must be accompanied by the signer's name, email address or other known contact information (e.g., social media account address), telephone number, authorization language agreed upon by the signer, the date of signature, and name of the employer. In addition, the submitted information cannot contain the signer's birth date or social security number. A union submitting electronic signatures must submit a declaration identifying the technology used and how its controls ensure the identity of the signing person and what the person signing agreed to.

How application of this guidance works out in "real world" practice remains to be seen.

For example, what happens if the employer is listed incorrectly or an email address is wrong?

But, bottom line, what is not actually a "signature" is going to be treated by the Board Regional

Offices as a signature. A mere check in a box or an email from an unknown source will likely suffice for a signature. Does the guidance provide any "real world" checks on signature or identity fraud by anyone determined to falsify a signature? Probably not. But that is the case with handwritten signatures too. E-signatures simply make the showing of interest process (whether bona fide or fraudulent) easier and faster, much like the NLRB's "quickie" election rules that went into effect on April 14, 2015. Add a few apps to automate the process and the union's organizing effort is fast, cheap, potentially more secretive, and not readily subject to any

3822795v.1 challenges, even valid ones intended simply to ensure some minimum level of integrity in the process.

O. NLRB Quickie Election Rule Results In Quicker Elections and More Union Victories

The NLRB “quickie election” rule became effective in April, 2015. While the new rule has not generated a huge increase in union organizing as anticipated, it has resulted in quicker elections and an increase in union victories. Prior to April, 2015, the NLRB had a target of conducting a union election within 42 days after the filing of a petition for an election, and according to NLRB statistics, a median number of days between the petition and election was 37 days. As of the end of 2015, it appears that the median time between petition and union election is approximately 23 days, or about a 40% decrease in the amount of time that employers have to communicate with their employers after a union petition has been filed.

Prior to the implementation of the quickie election rule, it was feared that we would see a huge increase in union victories because of the shortened period of time to communicate with employees. So far, while there has been an increase in the election win rate for unions, it has been lower than expected. While it is still early, the takeaway from these initial statistics is that it is still possible for employers to win union elections even under the pro-union quickie election rules. Sound preventive practices and preparation are key to the type of employee engagement that will prevent a union petition from ever being filed.

P. NLRB Rules That Dues Checkoff Continues After Termination of Collective Bargaining Contract, Absent Express Provision

The National Labor Relations Board has ruled in Lincoln Lutheran of Racine (2015) that an employer’s obligation to withhold union dues under a checkoff provision continues after

3822795v.1 expiration of the collective bargaining agreement, unless there is an express provision that checkoff ends when the contract expires. Otherwise, the Board panel decided, the checkoff provision continues as part of the post-contract status quo.

If the collective bargaining agreement does not specifically provide that dues checkoff ends upon contract expiration, the employer can lawfully stop checkoff only if the employee revokes the dues authorization, or if there are no wages to which checkoff can apply. For this reason, unionized employers may want to negotiate a checkoff termination clause in their next collective bargaining contract. Expressly and clearly addressing whether a provision or practice continues or is stopped at expiration of the contract may help the employer avoid uncertainty and achieve more leverage in negotiating a new contract.

Q. War Continues Over Class Action Waivers in Arbitration Agreements

One of the most effective tools that employers have in warding off huge liability in overtime and minimum wage collective actions and class actions is an arbitration agreement in which employees waive the right to file class or collective arbitrations over any employment dispute. Federal courts have routinely held that such arbitration agreements are enforceable.

However, a single agency, the National Labor Relations Board, has ruled that such arbitration agreements waiving class or collective arbitrations constitute a violation of the National Labor

Relations Act because they interfere with an employee’s right to engage in concerted protected activity. The NLRB first issued this ruling in D.R. Horton (2012), and the Board has continued to adhere to this position even though its decision in D.R. Horton was overturned by the Fifth

Circuit Court of Appeals in 2013.

Undeterred by the Fifth Circuit’s decision, the NLRB ruled that a class waiver in an arbitration agreement violated the National Labor Relations Act in its decision in Murphy Oil

3822795v.1 (2013). In October, 2015, the Fifth Circuit Court of Appeals again reversed the NLRB in

Murphy Oil, holding: “Murphy Oil committed no unfair labor practice by requiring employees to relinquish the right to pursue class or collective claims in all forms by signing the arbitration agreements at issue here.” However, making it clear that it has no intention of bowing to the decision of the Fifth Circuit Court of Appeals, the NLRB ruled in August, 2015 that Neiman

Marcus Group, Inc. had violated the National Labor Relations Act by requiring its employees to sign arbitration agreements that waive the right to bring class or collective arbitration actions. In

The Neiman Marcus Group, Inc. (2015), the Board ordered Neiman Marcus to cease and desist from maintaining the mandatory arbitration agreement that employees reasonably would believe restricts their right to file unfair labor practice charges with the National Labor Relations Board.

It appears that this important issue for employers is not going to be resolved until it reaches the U.S. Supreme Court. In the meantime, arbitration agreements containing waivers of class and collective actions continue to be an important employer tool to limit class action liability.

R. NLRB Dismisses Northwestern University Football Players’ Petition For Union Election

On August 17, 2015, the National Labor Relations Board dismissed the representation petition filed by the College Athletes Players Association, which sought collective bargaining representation for scholarship football players at Northwestern. In March 2014, the Chicago

Regional Director had decided that the players were “employees” under the NLRA. The full

Board didn’t rule either way on this finding but instead unanimously decided that it didn’t want to exercise jurisdiction in the case. According to the Board, it would be difficult for the union to bargain about standards set, not by Northwestern, but by athletic conferences and organizations.

The Board commented that in other contexts its exercise of jurisdiction helps promote uniformity

3822795v.1 and stability in labor relations, but not in this case. Is this the final word on student athletes as

employees? Probably not: other players have lawsuits pending in which they claim to be

“employees.”

VII. FAMILY AND MEDICAL LEAVE ACT

A. FMLA Protects Job Applicants From Retaliation

In Martin v. Okaloosa County Board of County Commissioners (2015), a job applicant

who alleged she wasn't hired for a communications technician position with a Florida county

because she had a pending Family and Medical Leave Act lawsuit against her former employer

was found by a federal judge to have a triable FMLA discrimination and retaliation claim.

According to the court, Martin was the top-rated candidate for the communications

position. However, when hiring officials began checking her references, they discovered that her

most recent employer, the city of DeFuniak Springs Police Department, had terminated her for

insubordination. They also learned that Martin had a pending FMLA lawsuit against the city. In

addition, the officials obtained Martin's performance evaluations that also revealed issues

concerning insubordination. The county ultimately didn't select Martin for the position. Several

months later, Martin called Daniel Dunlap, chief of the county's 911 Communications Division

and one of the decision makers on the selection team. She claimed that Dunlap told her she had

not been hired because officials had “information on the FMLA lawsuit” against DeFuniak

Springs and that the litigation “was too big of a liability.” Dunlap denied making such a

statement. Martin filed suit under the FMLA, among other claims, and the county moved for

summary judgment. In denying the motion for summary judgment, the court found a material

factual dispute as to whether a decision maker told Martin that she wasn't hired because of her

3822795v.1 FMLA suit. If a fact-finder credits Martin's testimony, the court said, the decision maker's statement would constitute direct evidence of FMLA discrimination or retaliation.

The court also ruled that the FMLA prohibits employers from interfering with, denying or retaliating against job applicants based on their exercise of their statutory leave rights, citing the

FMLA regulation at 29 C.F.R. § 825.220(a)(2) which provides that interference and retaliation

“include acts of discrimination against any [prospective] employee for exercising FMLA rights or opposing practices that are unlawful under the FMLA.”

S. Employee Can Sue for FMLA Interference Even if Leave Ultimately Granted

In what appears to be a significant expansion of employee rights under the Family and

Medical Leave Act, the U.S. Court of Appeals for the District of Columbia Circuit ruled in

Gordon v. U.S. Police (2015) that an employee can bring an FMLA interference claim based on her employer’s discouragement of her requesting or taking FMLA leave even if she did not suffer any actual deprivation of FMLA leave.

Under the Family and Medical Leave Act, there are two potential claims: one for retaliation for having taken FMLA leave, and a second for interference with rights under the

FMLA, which includes interfering with the right to take leave and/or failing to return an employee to the same or an equivalent position.

In May, 2011, Gordon applied for FMLA leave, indicating she was experiencing intermittent episodes of severe and incapacitating depression. Her employer approved intermittent FMLA leave to be taken as needed. However, Gordon’s immediate supervisors were apparently unhappy with her request and the prospect of her taking leave. Her immediate supervisor ordered Gordon to take a fitness-for-duty examination and told her that the fact that she requested FMLA leave was the basis for the fitness-for-duty exam. While waiting to

3822795v.1 schedule the exam, Gordon’s police powers were revoked, requiring her to turn in her service weapon, and she was assigned to administrative duty. That resulted in her loss of scheduled overtime work. Gordon filed suit, alleging that by discouraging her from taking FMLA leave, her employer had interfered with her rights under the Family and Medical Leave Act.

The Court of Appeals agreed, reasoning that the FMLA’s interference clause at 29 U.S.C.

§ 2615(a)(1) largely mimics Section 8(a)(1) of the National Labor Relations Act. That statute makes it an unfair labor practice for an employer to interfere with, restrain or coerce employees in the exercise of rights under the National Labor Relations Act. The Court of Appeals reasoned that courts have interpreted the National Labor Relations Act to hold employers liable if they attempt to interfere with employees’ rights under that statute even though their interference attempts are ineffective. The Court of Appeals applied the same standard to FMLA interference claims, stating that even an ineffective interference with FMLA rights can constitute a violation of the Family and Medical Leave Act. The court specifically held that there does not need to be an actual denial of FMLA leave in order for an employee to bring a claim for interference with

FMLA rights.

T. Does an Employee Get to Choose Whether to Use FMLA Leave?

A federal district court in Ohio answered that question in the affirmative in Amstutz v.

Liberty Center Board of Education (2015), in direct conflict with several provisions of the

Department of Labor FMLA regulations.

In Amstutz, the plaintiff had worked for the Board of Education for several years as a bus driver and cafeteria worker. She had numerous warnings and suspensions for various performance and conduct issues. In February, 2013, the plaintiff requested sick leave for the week of February 25 for her grandson’s birth. The leave was approved but she was advised that

3822795v.1 she could only take one day as paid sick leave and the rest of the week without pay. Not terribly surprisingly, on February 25, she called in sick claiming to have bronchitis the entire week. She returned to work the following week with a doctor’s note that excused her for an unspecified illness. She filled out a sick leave form which contained a section in which she could have requested FMLA leave. However, she did not request FMLA leave which would have been unpaid, but rather requested paid sick leave for the entire week.

The coincidence in timing between her requested week of leave for her grandson’s birth and her paid sick leave caused the school district to do some investigation. In doing so, they found a school security video of the plaintiff picking up her grand-daughter at school during the week that she was allegedly off sick, and concluded that she had falsified the reason for her sick leave. As a result, she was suspended for 3 days without pay, and shortly thereafter was fired for performance issues.

She filed suit, claiming that the school district had violated the FMLA by suspending her and eventually terminating her in retaliation for using FMLA leave. The court ruled in favor of the employer because the plaintiff had specifically declined to use FMLA leave when requesting the leave. In doing so, the court ruled that an employee can decline to use FMLA leave even where the reason for the absence would have triggered FMLA protection. In doing so, the court relied on a Ninth Circuit Court of Appeals case, Escriba v. Foster Poultry Farms, Inc. (2014).

The Amstutz and Escriba decisions are both clearly inconsistent with the Department of

Labor Regulations under the Family and Medical Leave Act requiring an employer to designate whether an employee is eligible for FMLA leave based on information provided by the employee about his or her serious medical condition. There is no basis in the statute or regulations for an employee to decline FMLA leave when qualifying for it, and certainly no basis for an employee

3822795v.1 to decline FMLA leave and then later attempt to benefit from the protection of the Family and

Medical Leave Act after being terminated.

VIII. OSHA

A. OSHA Rule Requiring Employers To Post Injury And Illness Info Online May Be Coming Soon

In November, 2015, a draft final rule on electronic tracking of employers’ injury and

illness records was sent to the White House’s Office of Information and Regulatory Affairs by

the Occupational Safety and Health Administration. This is the last stage of review and approval

process before the final rule is issued and takes effect. As initially proposed in November 2013,

the new rule would require larger establishments to submit their OSHA 300 Logs, 301 Incident

Reports, and 300A Annual Summaries to OSHA through a website that would allow for public

access to that information. Only names and addresses of employees and treating physicians

would be withheld. As proposed, the rule would apply to establishments that are required to keep

an OSHA Log and that had at least 250 employees at any time during the previous calendar year.

Currently, OSHA sees this information only during the course of an on-site inspection.

The proposal would also require that these larger establishments, and all other

establishments in certain industries that had at least 20 employees at any time during the

previous calendar year, submit the information from their 300A Annual Summary to the new

OSHA injury and illness website on or before March 2 of each year. The designated industries

include manufacturing and other industries with relatively high rates of injury and illness. The

proposed electronic tracking rule would put a much greater volume of establishment-specific

injury and illness information in the hands of OSHA, which has acknowledged that it would use 71

3822795v.1 the additional information to conduct targeted inspections similar to the agency’s recently discontinued Site-Specific Targeting Program.

But perhaps a greater concern for employers is that the information would also be accessible by the public – and unions, public interest groups, and the media – via a searchable website database. For example, a union could use the information as an organizing tool, a reporter could publish the information, or a disgruntled former employee could base a complaint to OSHA on it. Employees could also easily access the information to confirm that their employer has recorded the injuries and illnesses that occur, and complain to OSHA if they are not satisfied that a case was recorded or recorded properly. In addition, although OSHA says that the names and addresses submitted with the information will be secured from public access, there is always some risk that the website could be hacked and the personal information disclosed to the public.

It is likely that the draft final rule submitted to OIRA may contain at least one additional provision that was not in the proposed rule, but was the subject of a later request by OSHA for public comment: the need to prevent employers from discouraging their employees from reporting injuries or illnesses. Workers’ groups have argued to OSHA that the rule needs to include a restriction against employer policies or practices that have such an effect, and that penalties should be imposed if that restriction is violated. These groups have pointed out that this is necessary to counter the temptation felt by some employers to under-record injuries and illnesses that would have to be submitted to OSHA and made public under the new rule. While the content of the draft final rule has not been released to the public, it may well include a provision prohibiting employers from having policies or practices that discourage employees from reporting their injuries and illnesses.

3822795v.1 OIRA guidelines say that the review of the rule should be completed within four months, although that review period has often been extended for more complicated or controversial rules.

Despite this possible delay, OSHA’s submission of the electronic tracking recordkeeping rule to

OIRA signals the Agency’s intent to issue a final rule at least before the end of the Obama

Administration.

U. 2015 Budget Agreement Permits 82 Percent Increase In OSHA Penalties

Buried in the fine print of the recent budget agreement between Congress and the White

House, and seemingly slipped in at the last minute with no one claiming responsibility for the change, the Occupational Safety and Health Administration now has authority to raise penalties by about 82 percent. The Federal Civil Penalties Inflation Adjustment Act amends a 1990 law to provide a “catch-up” adjustment that allows OSHA to raise penalties by the amount of inflation that has occurred since 1990. OSHA had previously been exempted from the inflation adjustment provision of the 1990 law, but can now raise the maximum penalty amounts for “Other than

Serious,” “Serious,” “Repeat,” and “Willful” violations. For example, although the OSH Act provides for a maximum penalty of $7,000 for “Other than Serious” or “Serious” violations, under the new law, maximum penalties for these types of violations could be increased to about

$12,744. For “Repeat” and “Willful” violations, the current maximum penalty of $70,000 could be increased to $125,438.

The new law does not require OSHA to increase the maximum penalty amounts by the authorized 82 percent, but simply allows OSHA to increase penalties by that amount. The law requires that these penalty changes be announced by the publication of an interim final rule by

July 1, 2016, with the adjusted penalties going into effect by August 1, 2016. These changes will be made through new regulations, with opportunity for public comment. After the one-time

3822795v.1 “catch-up” to capture the amount of inflation that has occurred since 1990, OSHA can annually increase the maximum penalties for each type of violation consistent with the inflation rate for the prior fiscal year, as determined by the federal government’s Consumer Price Index.

Interested stakeholders in the safety community have uniformly acknowledged that

OSHA penalties will be increasing as a result of the new law, with Congress explicitly directing

OSHA to raise the penalties. Unless Congress repeals the law through legislation and the repeal survives a veto, higher OSHA penalties will shortly be a way of life.

With this year’s new requirement to report to OSHA all admissions to a hospital, amputations, and loss of an eye within 24 hours, and with 37 percent of those reports resulting in on-site inspections, the stakes have clearly been raised. Although OSHA’s announced goal is to ensure that employers provide a safe workplace, citations are typically issued as a result of failing to comply with the provisions of OSHA Standards. Having a safe workplace does not necessarily mean that you have complied with all of the OSHA Standards that are applicable in your workplace. Enhanced enforcement as a result of the last seven years of the present OSHA

Administration has become the norm, including “regulation by shaming” through press releases issued when high-penalty cases occur, and now the increased penalties about to go into effect. In this climate, it is important for employers to make sure that their safety programs and physical site conditions are fully compliant.

V. OSHA Issues Guidance on Transgender Employee Restroom Access

On June 1, 2015, the Occupational Safety and Health Administration published a Guide to Restroom Access for Transgender Workers. The publication provides guidance to employers on best practices regarding restroom access for transgender workers. The guide was developed at the request of the National Center for Transgender Equality, an OSHA Alliance partner that

3822795v.1 works collaboratively with the agency to develop products and materials to protect the safety and health of transgender workers.

OSHA's sanitation standard requires that all employers under its jurisdiction provide employees with sanitary and available toilet facilities, so that employees will not suffer the adverse health effects that can result if toilets are not available when employees need them. In applying the sanitation standard to restroom access for transgender employees, OSHA’s guidance is based on the core belief that all employees should be permitted to use the facilities that correspond to their gender identify. For example, a person who identifies as a man should be permitted to use men's restrooms, and a person who identifies as a woman should be permitted to use women's restrooms.

The publication includes a description of best practices and also makes employers aware of federal, state and local laws that reaffirm the core principle of providing employees with access to restroom facilities based on gender identification. The Guidance suggests that the employee should determine the most appropriate and safest option for himself or herself, and states that a best practice is that “employees are not asked to provide any medical or legal documentation of their gender identity in order to have access to gender-appropriate facilities.”

As a matter of best practice, OSHA recommends that employers implement written policies ensuring that all employees have prompt access to appropriate sanitary facilities.

Further, OSHA encourages employers to also provide employees with additional options— including single-occupancy gender-neutral facilities and the use of multiple occupant, gender- neutral restroom facilities with lockable single occupant stalls—which employees may choose, but are not required, to use.

3822795v.1 IX. GOVERNMENT CONTRACTING / OFCCP

A. OFCCEP Issues Regulations on “Pay Transparency”

U.S. Office of Federal Contract Compliance Programs (OFCCP) has issued its Final Rule implementing Executive Order 13665, which prohibits federal contractors from discriminating against employees and applicants who ask about or discuss compensation. The regulations became effective on January 11, 2016. The pay transparency requirements will apply to all contractors and subcontractors covered by the non-discrimination and affirmative action provisions of Executive Order 11246, including contractors who are not required to develop written Affirmative Action Plans. Thus, an organization that meets the criteria will be covered if it:

• Has a single federal contract, subcontract, or federally assisted construction contract worth more than $10,000, or

• Has federal contracts or subcontracts that, combined, are worth more than $10,000 in any 12- month period, or

• Has government bills of lading, or

• Serves as a depository of federal funds, or

• Is an issuing and paying agency for U.S. savings bonds and notes in any amount.

The Final Rule will apply to contracts entered into or modified on or after January 11,

2016. Contracts are considered “modified” if there is any alteration in their terms and conditions, including supplemental agreements and extensions.

3822795v.1 Employees cannot be disciplined for asking about or discussing their own or other employees’ pay and benefits, and applicants cannot be discriminated against for asking about or discussing employees’ compensation. Specifically, the Equal Opportunity Clause is revised to include the following language:

The contractor will not discharge or in any manner discriminate against any employee or applicant for employment because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. . . .

This non-discrimination provision does not apply if the employee has access to the employer’s compensation information as part of his or her job responsibilities. The following language is also included in the revised Equal Opportunity Clause:

This provision shall not apply to instances in which an employee who has access to the compensation information of other employees or applicants as part of such employee’s essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor’s legal duty to furnish information.

The Final Rule defines a job function as essential if

(i) the access to compensation information is necessary in order to perform that function or another routinely assigned business task; or

(ii) the function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.

Thankfully, the OFCCP recognized that the main issue is whether an employee has authorized access to compensation information, rather than the importance of that access in performing the job.

3822795v.1 Compensation is defined as “any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment, including but not limited to salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing and retirement.” Compensation information is defined as “the amount and type of compensation provided to employees or offered to applicants, including, but not limited to, the desire of the contractor to attract and retain a particular employee for the value the employee is perceived to add to the contractor’s profit or productivity, the availability of employees with like skills in the marketplace; market research about the worth of similar jobs in the relevant marketplace; job analysis, descriptions, and evaluations; salary and pay structures; salary surveys; labor union agreements; and contractor decisions, statements and policies related to setting or altering employee compensation.”

Contractors have defenses to claims alleging retaliation for discussing compensation, as long as the defense is not based on a policy that prohibits, or tends to prohibit, employee or applicants from discussing compensation. A contractor can take advantage of this defense by showing that it has consistently and uniformly disciplined similarly situated employees. In addition, the “essential job functions defense” – which the OFCCP describes as a “complete defense” – provides protection to contractors who take adverse action against an employee who has access to compensation information and discloses the information to individuals who do not otherwise have access to it. However, the employee’s disclosure would still be protected if it was “in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the contractor, or is consistent with the contractor’s legal duty to furnish information.”

3822795v.1 Contractors are required to provide notice of their rights under the new regulation to applicants and employees, using language prescribed by the OFCCP. This mandatory language must be included in existing employee handbooks or other manuals, and must be posted electronically or in conspicuous places. The OFCCP will also be updating the “EEO is the Law” poster to include this notice.

X. EMPLOYEE BENEFITS LAW

A. Affordable Care Act Developments

There have been a number of developments under the Affordable Care Act, continuing to modify and tweak employer obligations under that statute.

In October, 2015, the President signed the Bipartisan Budget Act of 2015. One provision of that Act amends the Public Health Service Act to identify employers with between 51 and 100 employees as large employers in health insurance markets. That change allowed small companies with 100 or fewer employees to avoid certain Affordable Care Act requirements for small employers including coverage of a “core package of health services” as essential health benefits. The Bipartisan Budget Act of 2015 also repealed Section 1511 of the Affordable Care

Act, the automatic enrollment provisions of that statute. As originally enacted in the Affordable

Care Act, employers who employ more than 200 full-time employees were required to automatically enroll new full-time employees in a health plan offered by the company.

Another development helpful to employers is that the due dates for 2015 health coverage information reporting requirements for employers and insurers relating to the employer mandate have been delayed by the Treasury Department. The February 1, 2016 due date for employers and insurers to provide employees with forms reporting on offers of health coverage has been extended to March 31. Also, the February 29 and March 31 deadlines for reporting health

3822795v.1 coverage information to the IRS has been pushed back to May 31 and June 30. The May 31 deadline applies to paper reports and the June 30 deadline applies to electronic reports.

Another deadline that has been delayed is the effective date of the Cadillac tax, originally scheduled to take effect on January 1, 2018. The Cadillac tax provisions of the Affordable Care

Act impose a 40% excise tax on employer-sponsored health coverage that exceeds certain annual dollar limits, which are indexed for inflation.

On December 18, 2015, President Obama signed into law a two-year delay of the

Cadillac tax until January 1, 2020.

On November 13, 2015, final rules implementing several provisions of the Affordable

Care Act were issued by three federal agencies. The final rule covering grandfathered health plans, pre-existing condition exclusions, lifetime and annual dollar limits, and coverage of dependent children until age 26 was issued by the Department of Health and Human Services, the Department of Labor Employee Benefit Security Administration and the Internal Revenue

Service.

On August 31, 2015, the Internal Revenue Service and Treasury Department issued a proposed regulation relating to the minimum value requirements under the Affordable Care Act.

The proposed regulation states that eligible employer-sponsored health plans will be deemed to provide minimum value coverage only if the plan’s share of total allowed costs of benefit provided to an employee is at least 60% and if the plan includes substantial coverage of in- patient hospital and physician services.

In another development under the Affordable Care Act, the U.S. Supreme Court decided on November 6, 2015 to accept for review the issue of the Obama Administration’s administrative process for employers to opt out of the Affordable Care Act’s contraceptive

3822795v.1 mandate. The Supreme Court’s decision to review this issue was based on a split among the

Circuit Courts of Appeal. Under the opt-out provisions, certain religious employers that oppose covering birth control can notify the Department of Health and Human Services and their insurance plan of their objections. In most cases, employees have access to contraceptive coverage but at no cost to the employer. The issue before the Supreme Court will be whether that opt-out procedure substantially burdens religious freedom.

W. Supreme Court Limits Ability of Health Plans to Seek Reimbursement

On January 20, 2016, the U.S. Supreme Court issued its decision in Montanile v. Board of Trustees of National Elevator Industry Health Benefits Plan (2016). In that case, the Supreme

Court held that under the provisions of ERISA, an employee benefit plan may not assert a lien on a plan participant’s settlement proceeds in a situation where the participant has already spent the money in question. In that case, the benefit plan had sought reimbursement of medical expenses for a plan participant. The plan had paid out $122,000 in medical benefits to cover medical expenses resulting from a car accident in which the plan participant was injured. The plan participant later recovered a settlement for his injuries of $500,000 but spent the money before the plan could recover the medical expenses. The Supreme Court held that when a plan participant spends the entire settlement, the benefit plan cannot bring a suit to attach the plan participant’s general assets because such a suit would not be one for appropriate equitable relief.

XI. WHISTLEBLOWER CLAIMS

A. Directors May Be Personally Liable Under SOX and Dodd-Frank

On October 23, 2015, the Federal District Court in the Northern District of California ruled in Wadler v. Bio Rad Laboratories, Inc. (2015) that the members of a company’s board of directors may be individually liable for whistleblower violations by the company under the

3822795v.1 Dodd-Frank statute and the Sarbanes-Oxley Act. The plaintiff, who was the company’s former general counsel, filed suit against the company, the president and individual board members of the company. In ruling that board members were liable in their individual capacity, the court held that although the Sarbanes-Oxley Act does not expressly include directors in the list of corporate “agents” who may be individually liable, the “context and general purpose” of

Sarbanes-Oxley “supports the conclusion that the term ‘single agent’ is intended to encompass directors.” This case is one of a number of cases in which former in-house counsel have filed whistleblower claims against their former employers and underscores the risk of individual liability for corporate officers and members of the board of directors.

X. Dodd-Frank May Protect Internal Whistleblowers

On September 20, 2015, the Second Circuit Court of Appeals in New York decided

Berman v. Neo @ Ogilby (2015). In that case, the Second Circuit ruled that the whistleblower protection provisions under the Dodd-Frank Act cover internal complaints made within a company even though no complaint is made by the whistleblower to the Securities And

Exchange Commission. This ruling is inconsistent with the ruling by the Fifth Circuit Court of

Appeals in a similar case, Asadi v. G.E. Energy (USA) LLC (2013). In the Berman case, the plaintiff claimed that he was fired in retaliation for making an internal complaint. After the lower court dismissed his claim because he did not make a report to the Securities And Exchange

Commission, the Second Circuit Court of Appeals reversed, holding that internal whistleblowers are protected by Dodd-Frank in addition to those who make complaints to the Securities And

Exchange Commission. As with the Wadler decision, this case may result in increased risk of whistleblower liability due to claims of whistleblower retaliation by in-house attorneys, officers and compliance professionals.

3822795v.1 XII. ON THE HORIZON

While little new employment legislation is expected during the final year of the Obama

Administration, the Administration continues to be aggressive in issuing new regulations

protecting employees and imposing greater burdens on employers. In the remainder of 2016, we

can expect to see final regulations limiting the ability of an employer to classify employees as

exempt under the Fair Labor Standards Act. We may also see new “persuader regulations”

limiting an employer’s ability to use attorneys and consultants to assist with union avoidance.

Additional OSHA protection and additional whistleblower protections are likely to be issued by

the Occupational Safety and Health Administration. Also, there appears to be no end in sight to

the continuing barrage of lawsuits by plaintiffs’ lawyers under the Fair Labor Standards Act

claiming minimum wage and overtime violations. In all, 2016 will be a challenging year for

employers in maintaining compliance with the multitude of employment regulations, and

maintaining their human resources programs.

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