An Introduction to Global Reductions in Force - Reed Smith To Present Teleseminar on January 29

Reductions in force – also known as collective redundancies – can be daunting for employers, both in dealing with employee issues and protecting the company from liability. On Thursday, 29 January 2015, my partners and I will present a primer on what employers need to know about redundancies in four key jurisdictions: the UK, France, Germany, and the United States. We’ll address:

  • What qualifies as a redundancy/RIF in each jurisdiction?
  • When is an employer required to consult with employees before a dismissal?
  • What happens if an employer wants to dismiss only some employees in a group?
  • Are employers required to consider alternatives to dismissal?
  • What payments are dismissed employees entitled to?
  • What liabilities could an employer face it if doesn’t comply with its obligations?

Joining me will be Reed Smith Labor & Employment partners Severine Martel in Paris, David McAllister in Pittsburgh, and Jan Weissgerber in Munich.

The teleseminar will be presented at two times to accommodate schedules: 9:00 a.m. ET / 2:00 p.m. GMT and 12:00 p.m. ET / 5:00 p.m. GMT. Employers are invited to register here for the time that best suits your schedule.

NY Governor Again Seeks to Raise Minimum Wage

In early 2013, New York Governor Andrew Cuomo signed a bill that incrementally increased the state’s minimum wage from $7.25 per hour to $9 between December 31, 2013, and December 31, 2015. Less than two years later, the governor has unveiled a new proposal to further increase the state’s minimum wage. Indeed, just weeks after New York's minimum wage rose to $8.75 per hour – $1.50 more than the federal rate – Governor Cuomo announced a plan to increase the minimum wage to $11.50 per hour in New York City by the end of 2016, and $10.50 throughout the rest of the empire state. The proposal is greatly at odds with the Governor’s comments made last spring that raising the City’s minimum wage above the rest of the state would cause a “chaotic situation.”

We anticipate that Democratic lawmakers will introduce legislation in the coming months to effectuate the Governor's proposal. Stay tuned for future updates as we learn more.

NJ Supreme Court Sets Tougher Test for Independent Contractor Classification

On January 14, 2015, the New Jersey Supreme Court (the Court) ruled that when determining whether an individual is an employee or independent contractor under the New Jersey wage laws—specifically, the NJ Wage Payment Law (WPL) and NJ Wage and Hour Law (WHL)—the broad “ABC” test used for making that determination under the NJ unemployment compensation statute shall govern. (The case is titled Hargrove v. Sleepy’s, LLC (Hargrove); a copy of the ruling is available here.)

This ruling represents a significant change for New Jersey employers and will likely have major impact. The ABC test imposes considerably stricter standards on employers than the tests used for assessing proper independent contractor classification under other employment laws. The Court’s adoption of the ABC test for NJ WPL and WHL claims also means that the same individual could lawfully be classified as an independent contractor under federal wage law (the Fair Labor Standards Act (FLSA)), but unlawfully be classified as an independent contractor under New Jersey state wage law. All employers with workers in New Jersey should be aware of this new Court ruling and factor it in when deciding how their workers should be classified.

The Court’s Decision

The Hargrove case involved Sleepy’s mattress deliverers whom Sleepy’s had classified as independent contractors—a relationship it memorialized formally in Independent Driver Agreements. Notwithstanding these agreements, plaintiffs filed suit against Sleepy’s alleging that it had misclassified them as independent contractors. Plaintiffs sought the benefits to which they would have been entitled under the New Jersey WPL and WHL had Sleepy’s classified them as employees.

Upon initial review of their claims in federal court, plaintiffs lost. The United States District Court for the District of New Jersey granted Summary Judgment to Sleepy’s, concluding that plaintiffs were properly classified as independent contractors pursuant to the test used for that determination under the Employee Retirement Income Security Act (ERISA). Plaintiffs appealed to the federal Third Circuit Court of Appeals, which then certified the following question of law to the NJ High Court: what test applies in determining employment status for purposes of New Jersey’s [WPL] and [WHL]?

Despite the lawsuit’s attracting significant interest from various private sector groups—with many filing “friend-of-the-court,” or “amici,” briefs to advocate for adoption of a variety of different, more employer-friendly tests that would have resulted in a narrower range of workers being deemed “employees” under the WPL and WHL—the NJ Court rejected all those proposed tests. Instead, the Court sided with the NJ Department of Labor (DOL) and its proposed test (the ABC test). The Court afforded weight to the DOL’s view that: (1) the WPL and WHL “work in tandem to provide a panoply of wage protections for employees,” (2) traditionally, the DOL had “interpreted and implemented both statutes using the ‘ABC’ test set forth N.J.A.C. 12:56-16.1,” and (3) the DOL had interpreted the WHL and WPL in the same manner since 1995, with its interpretations never before being challenged. Noting the similarity between the various statutes, the Court found it significant that the DOL’s implementing regulations to the WHL had specifically adopted the ABC test from unemployment compensation law.

The ABC Test

Under the ABC test, an individual is presumed to be an employee unless the entity engaging the individual can show all three of the following: (A) that the individual is free from the entity’s control or direction over the performance of the service, both by contract and in fact; (B) that the service provided is outside the usual course of business for which such service is performed, or that such service is performed outside of all the places of business of the entity; and (C) that the individual is customarily engaged in an independently established trade, occupation, profession or business.

Should the alleged “employer” entity fail to establish any of these requirements, the individual will be classified as an employee for purposes of the NJ wage laws.

What This Means For Employers

The ABC Test adopted by the Sleepy’s Court is far broader than those used to determine the propriety of independent contractor classification for purposes of several federal laws, including the FLSA. As noted, this means that individuals may be independent contractors under federal law, but employees under New Jersey law. Employers with independent contractors in New Jersey should reassess these relationships to make sure they meet the ABC test and, if in doubt, take steps to mitigate the risks associated with misclassification determination.

This article can also be viewed on Forbes.com.

Report: U.S. Department of Labor Proposal to Almost Double Minimum Salary for Exempt Employees

In March 2014, President Obama directed the U.S. Department of Labor (DOL) to update existing overtime regulations for so-called “white collar” employees under the federal Fair Labor Standards Act (FLSA). In response to the president’s mandate, the DOL is preparing a proposed regulation entitled “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees.” The proposal is expected to narrow the “white collar” exemptions and make more workers eligible for overtime pay under federal law.

Just as significantly, the proposed regulation will also increase the minimum weekly salary an employee must earn to qualify as exempt from the FLSA’s minimum wage and overtime requirements. Although it is unlikely that the DOL will unveil the formal proposal for at least a few weeks, there are credible reports that the DOL’s regulation will practically double the minimum salary for exempt employees: from slightly under $24,000 per year ($455 per week to be precise) to $42,000. Although several states’ laws already require higher weekly salaries than the FLSA’s current threshold, few jurisdictions have minimum salaries as high as the DOL’s anticipated proposal. In New York, for instance, exempt employees must earn $656.75 per week, or just over $34,000 per year.

Before it becomes final, the DOL's proposed regulation will be subject to a public comment period and finalization. Stay tuned for future updates as we learn more.

Post-termination restrictions in a nutshell - to what extent will they protect your global business?

This post was written by Michael SmithAmy FerringtonSéverine MartelMarie BrunotJan Weißgerber, Desmond Liaw, and Anita Wan.

United Kingdom

In the UK, a contractual term restricting an employee's activities after termination of employment will be void for being in restraint of trade and contrary to public policy, unless the employer can show that:

  • It has a legitimate proprietary interest that the term protects
  • The scope and duration of the protection sought goes no further than is reasonable, having regard to the interests of the parties and the public interest

Post-termination restrictions in employment contracts will be subject to greater scrutiny by the courts, when assessing enforceability, than covenants in commercial contracts or other scenarios where the parties are deemed to be of more equal bargaining power (for instance, in the context of a share sale or in partnership agreements).

The current list of potential legitimate interests includes protecting trade connections with customers, trade secrets, and other confidential information; the stability of the workforce; and the goodwill in a business. Avoiding competition per se is not a legitimate interest. Enforceability is determined on a case-by-case basis, and what is enforceable will vary between employees, depending on their roles and seniority. Where a court deems that a restriction is too wide, it will likely declare it void in its entirety, unless a minor amendment (known as “blue pencilling”) would render it reasonable.

France

In France, post-termination restrictions are quite common in the employment contracts of employees who have valuable business connections, or access to confidential information, or who hold senior responsibilities or sensitive positions.

Under French law, employees are not bound by a post-termination non-competition obligation and can work for a competitor provided that they don’t act unfairly in doing so.

Therefore, to prevent an employee from working for a competitor, a post-contractual non-competition covenant has to be inserted in the employee’s employment contract.

In France, the validity of non-competition clauses is subject to the following requirements:

  • That they are designed to protect the legitimate interest of the employer
  • That they are limited in time and space
  • That they do not prevent the employee from holding a position for which he is qualified
  • That they provide for financial compensation in consideration for the performance of the non-competition obligation. The amount of the financial compensation is usually fixed by the applicable collective bargaining agreement or, if not, must be fixed in the employment contract. It usually ranges between 25% and 100% of the employee’s gross monthly salary to be paid during the application of the clause.

Non-solicitation and non-poaching clauses have to be limited in time (usually no more than two years), but there is no legal obligation to provide financial compensation for these clauses to be valid, except when their scope is very broad and they could be considered as non-competition clauses.

An employee can also be bound by a confidentiality obligation under which he undertakes to keep in the strictest confidence all information, knowledge and data concerning the company and its activities. This clause has also to be limited in time, at least up until the information concerned becomes public.

Germany

From a German employment law perspective, ‘post-termination restrictions’ basically refer to non-competition and confidentiality obligations.

German statutory law does not provide for a general post-termination non-compete obligation and thus employees, as a rule, are free to compete with former employers. German statutory law only stipulates a non-compete obligation during the term of the employment and a limited confidentiality obligation.

In order to prevent employees from joining a competitor, the employer has to agree on a post-contractual non-compete covenant with the employee. Unlike in other European countries, post-contractual non-compete covenants in Germany are subject to a number of mandatory requirements. It is important for employers to comply with these requirements as the non-compete otherwise may not be valid and in the end may be unenforceable.

German statutory law, among others, requires any post-contractual non-compete covenant to be in writing bearing original signatures. Furthermore, German law contains limits on the territorial application and covered area of business. It also stipulates that non-compete covenants may not exceed a period of two years. Additionally, a non-compete covenant is only valid if it provides for a compensation of at least 50% of the employee's most recent remuneration. This compensation has to be paid to the employee for every month of the agreed term of non-competition.

Contrary to a general post-contractual non-compete covenant, a mere post-contractual non-disclosure agreement and non-solicitation agreement is valid without compensation. However, the line between a non-disclosure, non-solicitation and non-competition covenant is a fine one.

Hong Kong

In Hong Kong, there is no legislation governing the enforceability of post-termination restrictive covenants. As such, their enforceability will be determined by the Hong Kong courts in accordance with the principles that are well-established in common law.

The starting position is that all post-termination restrictive covenants are unenforceable as a matter of public policy. The courts will be prepared to enforce such covenants to the extent that (i) they are necessary to protect the legitimate interests of the employer, and (ii) they are reasonable in all the circumstances.

In assessing whether or not an employer has a legitimate interest to protect, the courts will consider the nature of the interest it is aiming to protect. For example, legitimate interests worthy of protection may include goodwill (e.g., customer connections), trade secrets, confidential information and workforce stability. Once a legitimate interest has been established, the employer must prove that the post-termination restrictive covenant only goes as far as reasonably necessary to protect that legitimate interest. Reasonableness is ordinarily considered by the courts in terms of (i) the scope of the activities restricted, (ii) the length of time of the restriction, and (iii) the geographical coverage of the restriction.

Evidently, there are no fixed guidelines to adhere to when drafting post-termination restrictive covenants. Their enforceability depends on, inter alia, the employee’s role and seniority, and whether the position requires that degree of restriction. The takeaway point is that extra care must be taken when drafting them, and they should always be tailored to the individual employee – after all, there is no “one size fits all” employment contract.

Reminder for N.J. Employers: Minimum Wage Hike Takes Effect January 1, 2015

As we start the New Year, New Jersey state employers should make sure they are prepared to pay more to minimum wage workers. Based upon the voter-approved amendment to New Jersey’s Constitution, which provides an annual cost of living increase to the state’s minimum wage – effective January 1, 2015, the statewide hourly minimum wage for employees will rise from $8.25 per hour to $8.38 per hour. Employers must ensure that all work performed by employees on and after January 1, 2015, is compensated at this increased rate.

California Employers Face Increased Liability When Using Staffing Agencies

This post was written by Julia Y. Trankiem and Barbra W. Diallo.

A California state law that became effective January 1, 2015, substantially undermines the business decision to utilize temporary workers. A significant number of California employers who use temporary workers must now share responsibility and liability with the staffing agencies that provided these workers when claims arise under any of the following:

  • The payment of wages
  • Failure to secure valid workers’ compensation coverage, or
  • Failure to comply with occupational safety and health requirements

Employers with fewer than 25 workers (including independent contractors) and nonprofit organizations, labor organizations, apprenticeship programs, motion picture payroll services companies, and hiring halls operated pursuant to a collective bargaining agreement are exempt from the law. All remaining private employers are susceptible to the law’s new dictates and cannot shift their legal liabilities to the staffing agency or waive them by contract.

The new law does not prohibit employers and staffing agencies from contracting and enforcing any “otherwise lawful remedies” for liability created by the other party. In addition, the law provides that it should not be interpreted to impose liability on an employer for the use of an independent contractor, or to change the definition of independent contractor.

Employee Notification Requirements
Prior to raising a claim under this new law, an individual must give at least 30 days' prior notice. As this requirement is vaguely worded, employers are advised to include notification procedures in their policies that identify designated supervisors or HR personnel eligible to receive such notice.

Anti-Retaliation Provision
Not surprisingly, the statute provides that neither the employer nor the staffing agency may take any adverse action against any individual who gives notification of violations or files a claim or civil action.

Agency/Department Inspections
Employers and staffing agencies can also expect and must promptly respond to requests by state enforcement agencies or departments seeking to inspect records to verify compliance.

With the potential for increased liability, employers should carefully review their policies and determine whether using staffing agencies is still a viable business model. Employers are also encouraged to seek legal counsel to discuss any questions regarding the new law.

New Year, New Rules, New Union-Avoidance Strategies

This post was written by Joel S. Barras and John A. DiNome.

The National Labor Relations Board topped off 2014 with several jabs to employers, including its recent decision in Purple Communications, where the Board held that employees have a presumptive right to use email for non-work-related messages. The Board’s final blow to employers came December 15, with the issuance of new Quickie Election Rules for union representation cases. The new Rules, discussed in detail here, (1) dramatically shrink the period of time between the filing of a representation and the union election date, (2) require employers to give petitioners more information about their employees, and (3) severely limit the legal issues management can raise before an election.

In the wake of the new Rules, employers should re-think their union-avoidance strategies in 2015. Because union elections will occur quickly, gone are the days of relying on post-petition, anti-union campaigns. With the expedited election process, it is imperative that employers develop and maintain “perpetual” anti-union campaigns.

First, develop and maintain ongoing positive relationships between employees and management. Communication is key. Employees must feel as if they are in the loop and that their concerns are respected by the company. For example:

  • Create and publicize an open-door policy that promotes employee-management communication. Train management to: (1) listen to employee concerns, (2) communicate that they will follow up on those concerns, (3) actually take steps to resolve the concerns, and (4) communicate the steps taken to the employee.
  • Remind employees about the “hidden” benefits they receive from the company, including insurance costs, payroll taxes and other employer-provided benefits. Employees often do not understand that the “cost of an employee” to an employer is much higher than the employees’ wages.
  • Meet harsh decisions head-on. If you are forced to make seemingly harsh corporate decisions, communicate the reasons for the decisions and how they will ultimately help the company thrive and grow.

Second, prepare now to combat a union campaign tomorrow. Train supervisors and managers on the do’s and don’ts of union avoidance. Continually monitor employee morale and search for the early signs of a union organizing attempt. This way, you will be well positioned to respond to any organizing efforts that arise.

John DiNome and Joel Barras will present a one-hour teleseminar on February 17 at 12 p.m. ET on union-avoidance strategies in the wake of the new Rules. Interested participants can register here.

This article can also be viewed on Forbes.com.

New year - New social media policy?

Game Retail Limited v Mr C Laws

In what is thought to be the first such case involving Twitter, the Employment Appeal Tribunal has overturned an Employment Judge’s decision that an employee was unfairly dismissed after posting offensive tweets.

Although the EAT declined to give general guidance about the manner in which misconduct involving social media should be dealt with, the issues in the case give rise to some important practical points for employers.

Background

The claimant, Mr Laws, worked for Game Retail as a risk and loss prevention investigator with responsibility for investigating losses, theft, etc., for around 100 stores in the north of England.

As with many businesses, Game used Twitter and other social media for marketing purposes. Each of Game’s stores had its own Twitter account which was administered by the store manager. Mr Laws opened his own Twitter account to monitor the stores for which he was responsible to see if anything happened with their communications that was unacceptable. Of the 100 stores which Mr Laws followed, 65 followed him in return. This was because the manager in the Preston store had posted a tweet encouraging other Game stores to follow Mr Laws.

Over time, Mr Laws started to use Twitter as a way to vent his frustrations at various non-work related issues, using highly offensive language. (See paragraph 13 of the judgment for some examples.)

One of the store managers who followed Mr Laws brought these offensive tweets to Game’s attention. Following an investigation and then a disciplinary hearing, Mr Laws was dismissed for gross misconduct on the basis that he had posted “offensive, threatening and obscene tweets” which were available in the public domain.

Employment Tribunal’s Decision

The Employment Tribunal decided that the decision to dismiss Mr Laws did not fall within the so-called “band of reasonable responses” for these reasons:

  • Mr Laws had not registered on Twitter as part of his job but principally to communicate with friends outside of work using his own mobile phone, and concerning matters which were nothing to do with work
  • There was no evidence that any customer or member of staff was offended by the tweets
  • Mr Laws had not posted anything derogatory about Game or anything which would reveal he was its employee
  • He only engaged in tweeting offensive material in his own time and not on work time
  • Mr Laws did have explanations for some of the offensive tweets

The Employment Judge therefore found that the dismissal was unfair, but reduced Mr Laws’ compensation by 40% to reflect his own contributory fault.

Appeal to the EAT

The EAT allowed Game’s appeal on the finding of unfair dismissal and sent the case back to a different Employment Tribunal to reconsider whether the decision to dismiss Mr Laws fell within the band of reasonable responses open to Game.

The EAT essentially decided that, in respect of various aspects of his reasoning, the Employment Judge had either impermissibly substituted his own view for that of the dismissing employer, or had reached a decision which was perverse on the evidence. For example, the EAT was dissatisfied with the Employment Judge’s reasoning that Mr Laws was only using Twitter for “private” purposes in circumstances where he was followed by 65 of Game’s stores and had not set his account to “private”.

When considering unfair dismissal claims, an Employment Tribunal must decide whether the decision to dismiss falls within the band of reasonable responses. It is not allowed to substitute its own view for that of the employer, which the EAT considered it had likely done in this case.

Practical Tips for Employers

  • Ensure that your reasoning in disciplinary outcome letters is clearly set out. Game’s appeal to the EAT and the subsequent rehearing of the case will no doubt be expensive. By setting out its reasoning in the outcome letter in a clear and detailed way, an employer can help the Employment Tribunal avoid falling into the trap of substituting its own view for that of the employer’s, and possibly avoid having to appeal the Employment Tribunal’s decision.
  • Adopt a social media policy. Ensure that the policy is reviewed regularly, as the nature of social media platforms and the use your business makes of social media evolves. Ensure that updates to the policy are brought to employees’ attention.
  • Ensure your policy deals with the “blurring” between personal and professional use of social media. This is particularly important if your business makes active use of social media for its own marketing communications. In this case, although Mr Laws did not post tweets about Game’s business, the endorsement from the Preston store manager and the large number of stores that subsequently followed Mr Laws created an association between Game and Mr Laws’ account which we suspect both parties now regret.

Reminder - New Pregnancy Discrimination Obligations and Poster for Illinois Employers

This post was written by James A. Burns, Jr. and Kimberly M. Mitchell.

As we previously reported, as of January 1, 2015, all Illinois employers are subject to new amendments to the Illinois Human Rights Act that require employers to reasonably accommodate employees affected by pregnancy, childbirth, or related conditions, and to post a new notice published by the Illinois Department of Human Rights. All employers must post the English version of the notice in a conspicuous location on the premises where notices are customarily posted, and may also post the Spanish version next to the English version. Both versions may be downloaded here.

N.Y. (Finally) Eliminates Annual Wage Notice Requirement, Effective Immediately

This post was written by Cindy S. Minniti and Mark S. Goldstein.

In June, we reported on a bill passed by the New York State Legislature that proposed significant changes to the state’s labor laws. Among other things, the bill eliminated the requirement that employers furnish annual wage notices to employees between January 1 and February 1.

Finally, on December 29 – in a move sure to please employers statewide – the governor signed Assembly Bill 8106-C and, in an accompanying memorandum, clarified that no annual wage notice is required in 2015, effectively eliminating the bill’s 60-day waiting period for implementation. In light of the governor’s action, the New York State Department of Labor has included the following statement on its website:

“On December 29, 2014, Governor Andrew M. Cuomo signed a bill eliminating the requirement that before February 1 of each year, employers notify and receive written acknowledgement from every worker about their rate of pay, allowances, pay day, etc. According to the signing statement, legislative leaders and the Governor have agreed to a chapter amendment to make this change effective immediately. Accordingly, given the pending enactment of this chapter amendment, the Department will not require annual statements in 2015.”

The legislation does not eliminate the requirement that employers furnish a wage notice upon commencement of employment of new employees. Likewise, employers outside the hospitality industry must provide a new wage notice for any reduction in an employee’s rate of pay. For hospitality industry employers, a new notice is needed for every pay rate change, whether up or down.

Although the annual wage notice requirement is eliminated, the governor’s memorandum notes that the remainder of the bill “contains some technical and substantive problems which the Legislature has agreed to address in additional legislation.” Stay tuned for further updates concerning any such “additional legislation.”

New York's 5 Gifts for Employers in 2015: What State and City Employers Need To Know Heading into the New Year

This post was written by Cindy S. Minniti and Mark S. Goldstein.

2014 was a hectic year for New York labor and employment practitioners, yielding mixed results for employers and, in many instances, creating more questions than answers. Among the highlights, an expanded paid sick leave law, amended on the eve of implementation by Mayor Bill de Blasio, took effect in New York City. And in Albany, state legislators, following the lead of their NYC counterparts, enacted workplace protections against discrimination and harassment for unpaid interns.

Now, however, with 2014 almost fully behind us, it is time for New York state and city employers to look toward 2015. Here are some of the most pressing employment law issues on next year’s horizon:

Minimum Wage Moving On Up, Up, Up‼

Perhaps most key is that, on December 31, 2014, the statewide minimum wage for non-exempt (i.e., overtime-eligible) employees goes from $8.00 to $8.75/hour (and then to $9.00/hour December 31, 2015). Just as significantly, the minimum weekly salary for overtime-exempt executive and administrative employees will also increase December 31, 2014: from $600.00 to $656.25/week (and then to $675.00/week December 31, 2015).

Wages for tipped employees in the hospitality industry are also impacted come December 31, 2014. For food service workers, the “tip credit” – which permits employers to pay tipped employees less than the minimum wage so long as the employees earn enough gratuities to make up the difference – will increase from $3.00 to $3.75/hour (and to $4.00/hour December 31, 2015). This means that the “tipped minimum wage” for such workers will remain at $5.00/hour, provided that tips plus wages equal or exceed the applicable minimum wage (i.e., $8.75/hour as of December 31, 2014). Critically, the minimum overtime rate for these workers will increase to $9.375/hour. For non-food service workers (other than those at resort hotels), the tip credit will rise from $2.35 to $3.10/hour, although the tipped minimum wage for such workers will stay steady at $5.65/hour.

Certain meal and lodging credits, as well as uniform maintenance pay for employers that do not maintain required uniforms, are also scheduled to increase. In addition, the minimum wage spike will mean a spike in the “spread of hours” pay rate owed to employees when they work either (1) more than 10 hours in a given day, or (2) on a split shift, where the number of hours between the start and end of their workday exceeds 10.

Finally, employers should monitor the New York Department of Labor’s website for an updated minimum wage poster that must be displayed in the workplace.

Beware Enforcement of Newly Implemented NYC Laws

Two of the major 2014 storylines for the NYC business community were implementation of the city’s paid sick leave law and amendment of the NYC Human Rights Law (NYCHRL) to require accommodations for pregnant employees. In 2015, NYC employers should expect these two laws to emerge from their infancy and get some teeth.

The Earned Sick Time Act: On April 1, 2014, the NYC Earned Sick Time Act (ESTA) took effect, requiring employers with five or more workers to provide paid sick leave to all employees who perform more than 80 hours of work in NYC in a calendar year. Employers with fewer than five workers are required to provide comparable unpaid sick leave benefits. Recently, the NYC Department of Consumer Affairs (DCA), the agency that enforces ESTA, issued instructive ESTA FAQs and outlined the requirements for ESTA-compliant written sick leave policies.

In late October, DCA Commissioner Julie Menin testified before the NYC Council that, in the months since ESTA implementation, the agency has received more than 350 ESTA complaints. According to the DCA, professional service firms have been the subject of the most complaints (35 percent of the total), with retail industry employers the subject of 18 percent of the total. Most complaints have stemmed from an employer’s alleged failure to provide proper notice of ESTA to new and existing employees. Although the DCA had not levied a single fine against an employer as of late October 2014, it has issued warnings of “imminent fines” to at least five companies, and NYC businesses should expect the complaints to continue, and actual fines to be issued, in the coming year.

The Pregnancy Accommodation Amendment: Several months before ESTA’s January 2014 implementation, an amendment to the already-expansive NYCHRL took effect. It requires that NYC employers provide reasonable accommodations for an employee’s pregnancy, childbirth, or related medical condition. Such accommodations may include, among other things, bathroom breaks, leaves of absence for childbirth-related disabilities, breaks to facilitate increased water intake, periodic rest for those who stand for long periods, and assistance with manual labor. NYC employers also must distribute, to all new hires upon commencement of employment, written notice of the right to be free from discrimination on the basis of pregnancy, childbirth, or a related medical condition.

The advent of pregnancy accommodation requirements in NYC appears to be part of a larger, national movement to expand the rights of pregnant workers. In July 2014, for example, the Equal Employment Opportunity Commission issued guidance suggesting that the federal Pregnancy Discrimination Act requires accommodations for pregnant employees in certain circumstances. And the U.S. Supreme Court recently heard oral argument in a case presenting a similar issue. Given the high-profile support for pregnant workers’ rights on the national stage, NYC officials can be expected to vigorously enforce the NYCHRL pregnancy accommodation amendment in the coming months.

Get To Know the “New” NYC Commission on Human Rights

As we head into 2015, NYC employers can also expect increased visibility and enforcement initiatives from the recently overhauled NYC Commission on Human Rights (NYCCHR or the Agency) – the administrative agency tasked with enforcing the NYCHRL. Responding to pressure from Public Advocate Letitia James, Mayor de Blasio, on November 21, 2014, appointed an employee-plaintiffs’ side attorney, Carmelyn Malalis, as the Agency’s new chair. Ms. Malalis replaces Patricia Gatling, a holdover from the Bloomberg administration. De Blasio also appointed eight new NYCCHR commissioners, commenting that he expects the revamped Agency to “be a robust enforcer of our fundamental civil rights.”

One initiative that NYC employers can expect from the newly populated NYCCHR is an aggressive, continued push to combat discriminatory job postings on Craigslist and other websites. Even before the addition of de Blasio’s newest pro-employee appointees, the Agency had already, in recent months, been ramping up scrutiny of online job postings that arguably express a preference for applicants with particular demographic characteristics – such as females for a food server job (by posting an opening for a “waitress” rather than “waiter/waitress” or “food server”).

Upon discovering a potentially biased job posting, the NYCCHR will reportedly then try to build a case against the posting employer by sending “tester” resumes by email. Next, using tracking software, the Agency can determine which “tester” applicant emails the employer opens. In the case of a “waitress” job posting, for instance, if the employer opens the email from a “tester” applicant who is female, but not from one who is male (traits the Agency would make obvious through the email addresses it uses), the Agency may use this fact as evidence that the posting employer was indeed motivated by gender bias in hiring for the food server position. Despite modest pushback – one state senator recently criticized the NYCCHR for these surreptitious procedures – the Agency’s practice persists.

NYC employers should keep an eye out for these and other NYCCHR tactics to strengthen its enforcement of the NYCHRL – already one of the nation’s most expansive anti-discrimination laws – in 2015 and beyond.

A Decision in 2015 on Whether Employers Must Pay “Unpaid” Interns

Finally in 2015 – after what has felt like an endless wait – the federal Court of Appeals for the Second Circuit in Manhattan is expected to weigh in on the great intern debate: are company-sponsored unpaid internship programs lawful, or must interns be paid just like regular employees? The court has scheduled oral argument in tandem appeals for January 15, 2015, and should issue a ruling before year’s end.

As we have previously reported on this site, unpaid internship programs were once considered a long-standing, stable facet of the U.S. business landscape, as well as a valuable option for students seeking to gain real-world experience and to open doors in their sought-after career field. But in recent years, these programs have come under intense scrutiny and fierce legal attack. A veritable flood of class and collective action lawsuits have been filed against employers across a broad swath of industries. Propelled by an ever-enterprising employee-plaintiffs’ bar, and facilitated by the soft job market following the 2008 recession, these suits have attempted to hold companies liable under the federal Fair Labor Standards Act (FLSA) and parallel state laws, under the theory that companies unlawfully withheld minimum wages and overtime pay, while reaping the benefits of interns’ “free” labor. The suits seek not only back pay with interest, but also hefty attorneys’ fees, and have become so costly for employers to defend that several high-profile companies have elected to discontinue their internship programs altogether.

In its highly anticipated decision, the Second Circuit is expected to set the contours for when (if ever) a company must pay student (and other) interns. The court also will likely clarify whether, and if so, how much, deference federal courts should afford to policy positions of the United States Department of Labor (USDOL) on this issue. The USDOL contends that an intern must be classified as an employee under the FLSA (i.e., must be paid) unless all of the following six criteria are satisfied: (1) the internship is similar to training given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern does not displace regular employees; (4) the employer derives no immediate advantage from the intern’s activities; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages. The New York State Department of Labor, for its own part, has articulated 11 criteria (several of which are duplicative of the USDOL’s six) that must be met for a valid internship program.

The Second Circuit’s ruling will likely be based as much on politics and policy as on any technical FLSA statutory analysis. The USDOL has filed an amicus brief in the two intern cases pending before the court, urging that it “defer to the [the agency’s] longstanding six-part trainee test.” Other interested organizations, such as the United States Chamber of Commerce and the National Employment Law Project, have also vocalized their contrary positions, urging the court to rule in favor of the companies in the pending cases.

Many deem the Second Circuit’s decision to be the most important wage-and-hour decision expected in 2015, and it is anticipated to have significant impact on the future structure and use of internship programs not only in New York, but nationwide as well.

Keep Your Eye on Proposed Legislation

New York employers in 2015 must stay abreast not only of recently-enacted laws, but also of a host of statutes and regulations that are pending – and which, if enacted, could have such a significant impact on “business-as-usual” so as to warrant advanced operational preparation.

Gov. Andrew Cuomo’s proposed agenda in Albany is particularly noteworthy. One of the agenda items, the Women’s Equality Act, is a multifaceted plan that would, among other things:

  • Limit the current justifications in state law for paying men and women differently
  • Prohibit employers from terminating or retaliating against employees who share wage information
  • Increase liquidated damages to 300 percent where an employer willfully fails to pay required wages
  • Prohibit workplace discrimination based upon family status
  • Extend the prohibition on sexual harassment in the workplace to workplaces with fewer than four employees
  • Require employers to provide accommodations for pregnant employees, unless the requested accommodation imposes an undue hardship on the employer
  • Permit the recovery of attorneys’ fees by successful litigants in sex discrimination cases

Expect Gov. Cuomo also to seriously mull legislation to further increase the state’s minimum wage and/or to permit localities to set their own wage standards (initiatives for which NYC Mayor Bill de Blasio has been a strong advocate). Gov. Cuomo has also discussed eliminating the tip credit, a move that would most directly affect hospitality industry employers. A governor-convened wage board is expected to report in early 2015 on any recommended changes to the current tip credit structure.

And in NYC, the City Council is considering two bills that could uproot two mainstays of the hiring process: criminal history inquiries and credit checks. The Fair Chance Act, part of the “ban the box” trend sweeping the nation, would prohibit any inquiry or statement about a job-seeker’s criminal history – including arrest or conviction records – made before a conditional offer of employment is extended. The Stop Credit Discrimination in Employment Act, for its part, seeks to ban any employment decision based on an applicant’s “consumer credit history,” which the proposed law defines as “any information bearing on an individual’s credit worthiness, credit standing or credit capacity, including but not limited to an individual’s credit score, credit account and other consumer account balances and payment history.” Both bills are currently pending before the City Council’s Committee on Civil Rights.

Finally, New York state and city employers should brace for highly anticipated guidance from the USDOL regarding the scope of certain exemptions under the FLSA. In March 2014, President Obama directed the USDOL to update and modernize existing overtime regulations for so-called “white collar” employees. In response to the president’s mandate, the USDOL is in the midst of preparing a proposed regulation entitled, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees.” The proposal will likely be unveiled within the first few months of 2015. It is expected to narrow the scope of the “white collar” exemptions – thereby making more workers eligible for overtime pay under federal law – and may increase the minimum weekly salary under the FLSA for exempt workers. Given that New York recognizes most of the FLSA exemptions, the USDOL’s proposed regulation will be of utmost importance, and may be cause for widespread employer audits of exempt/non-exempt classification schemes.

What Does this Mean for My Company?

New York employers can, and indeed should, expect a bevy of changes during 2015. From the minimum wage increase to expanded protections for pregnant employees to the use of unpaid interns, the New York employment law landscape remains in flux and is as dynamic as ever. Employers should stay in regular contact with experienced counsel to discuss these issues and to prepare a cogent plan of action to face them head-on. Make sure this is a New Year’s resolution you actually keep!

This article can also be viewed on Forbes.com.

European Court confirms obesity can be a disability under EU law

In our previous blog, “Are obese workers protected from discrimination” , we confirmed the advocate general’s opinion in the case of Kaltoft v Municipality of Billund (case C-354/13) that while obese workers were not automatically covered by EU disability discrimination law, the worker may be considered to be disabled where he or she is “severely, extremely or morbidly obese”. 

The case has now gone before the Court of Justice of the European Union (“ECJ”), which agreed that there is no general principle of EU law that prohibits discrimination because of obesity, but that if the obesity amounts to a disability (and hinders the full participation of the individual in professional life on an equal basis with other workers), this may be protected under discrimination law. 

We discuss additional points made by the ECJ below.

Is there anything new to consider? 


As is usual, the ECJ followed the opinion of the advocate general which was delivered in July this year. It stated that there was no standalone protection for obese employees. However, the ECJ agreed that obesity may amount to a disability (and therefore be protected on that basis) where there is a: 

“limitation which results in particular from physical, mental or psychological impairments that in interaction with various barriers may hinder the full and effective participation of that person in professional life on an equal basis with other workers, and the limitation is a long-term one.”
 

The ECJ also echoed the advocate general’s point that the origin of the disability, or the contribution to it by the individual, was not relevant when determining whether a worker was protected.

What does this mean?


When considering whether an obese employee or worker is entitled to any protection under discrimination law, Employment Tribunals will need to consider whether the obesity amounts to a disability in the particular individual’s case. 

Practical points


As with many ill-health issues, the effect on each individual will be unique, and a separate assessment will be needed to determine whether an individual is disabled. However, employers would be wise to consider making reasonable adjustments where an employee is morbidly obese.
For example:

  • Providing particular equipment to work, e.g., a special desk or chair for an office worker
  • Considering whether there are duties that the employee may find particularly challenging because he or she requires a long period of time standing or walking
  • Considering requests for reduced hours or alternative working where the employee suffers from particular fatigue or other physical symptoms which make it difficult to work core hours

Mr Kaltoft raised that as an obese person, he may face barriers to the employment market on the basis of his physical appearance. While this was not directly considered by the advocate general, it is worth being aware that an applicant who is not selected on the basis of obesity may have a discrimination claim. Office “banter” relating to an obese person’s physical appearance may also lead to harassment claims. Managers should be made aware of these sensitivities in equal opportunities training.

New York's 5 Gifts for Employers in 2015: What State and City Employers Need To Know Heading into the New Year (Day 5)

This post was written by Cindy S. Minniti and Mark S. Goldstein.

Each day this week, we will “unwrap” one of five pressing employment law issues on the 2015 horizon for New York state and city employers. Previously, we covered the minimum wage hike, the anticipated enforcement of two new NYC laws, the revamped NYC Commission on Human Rights, and the unsettled status of unpaid interns. Today’s topic, the final one in this series, addresses proposed legislation.

New York employers in 2015 must stay abreast not only of laws that have actually been enacted recently, but also of a host of statutes and regulations that are pending – and which, if enacted, could have such a significant impact on “business-as-usual” so as to warrant advanced operational preparation.

Gov. Andrew Cuomo’s proposed agenda in Albany is particularly noteworthy. Among other agenda items is the Women’s Equality Act. It is a multifaceted plan that would, among other things:

  • Limit the current justifications in state law for paying men and women differently
  • Prohibit employers from terminating or retaliating against employees who share wage information
  • Increase liquidated damages to 300 percent where an employer willfully fails to pay required wages
  • Prohibit workplace discrimination based upon family status
  • Extend the prohibition on sexual harassment in the workplace to workplaces with fewer than four employees
  • Require employers to provide accommodations for pregnant employees, unless the requested accommodation imposes an undue hardship on the employer
  • Permit the recovery of attorneys’ fees by successful litigants in sex discrimination cases

Expect Gov. Cuomo also to seriously mull legislation to further increase the state’s minimum wage and/or to permit localities to set their own wage standards (initiatives for which NYC Mayor Bill de Blasio has been a strong advocate). Gov. Cuomo has also discussed eliminating the tip credit – which permits employers to pay tipped employees less than the minimum wage so long as the employees earn enough gratuities to make up the difference – a move that would most directly affect hospitality industry employers. A governor-convened wage board is expected to report in early 2015 on any recommended changes to the current tip credit structure.

And in NYC, the City Council is considering two bills that could uproot two mainstays of the hiring process: criminal history inquiries and credit checks. The Fair Chance Act, part of the “ban the box” trend sweeping the nation, would prohibit any inquiry or statement about a job-seeker’s criminal history — including arrest or conviction records — made before a conditional offer of employment is extended. The Stop Credit Discrimination in Employment Act, for its part, seeks to ban any employment decision based on an applicant’s “consumer credit history,” which the proposed law defines as “any information bearing on an individual’s credit worthiness, credit standing or credit capacity, including but not limited to an individual’s credit score, credit account and other consumer account balances and payment history.” Both bills are currently pending before the City Council’s Committee on Civil Rights.

Finally, New York state and city employers should brace for highly anticipated guidance from the United States Department of Labor (USDOL) regarding the scope of certain exemptions under the federal Fair Labor Standards Act (FLSA). In March 2014, President Obama directed the USDOL to update and modernize existing overtime regulations for so-called “white collar” employees. In response to the president’s mandate, the USDOL is in the midst of preparing a proposed regulation entitled, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees.” The proposal will likely be unveiled within the first few months of 2015. It is expected to narrow the scope of the “white collar” exemptions – thereby making more workers eligible for overtime pay under federal law – and may increase the minimum weekly salary under the FLSA for exempt workers. Given that New York recognizes most of the FLSA exemptions, the USDOL’s proposed regulation will be of utmost importance and may be cause for widespread employer audits of exempt/non-exempt classification schemes.

What Does This Mean for My Company?

New York employers can and indeed should expect a bevy of changes over the next year. From the minimum wage increase to expanded protections for pregnant employees to the use of unpaid labor, the New York employment law landscape remains in flux and is as dynamic as ever. Employers should therefore consult with experienced counsel immediately to discuss these issues and prepare a cogent plan of action to face them head-on.

Be sure that this is a New Year’s resolution that you actually keep!

Have Yourself a Merry Little Party: How to Minimize Office Holiday Party Liability

This post was written by Cindy S. Minniti, Mark S. Goldstein, and Kimberly M. Mitchell.

Over the next few weeks, office holiday parties will invade restaurants, bars, and conference rooms across the nation. This oft-anticipated tradition may be the only time each year that all employees nosh, sip, and dance in one place. What could possibly go wrong? Plenty! This article will discuss some of the workplace issues that can arise from a holiday party gone awry, and suggest measures for minimizing the corresponding risk.

Remind Employees of Your Policies

Most company holiday parties go off without a hitch, save a few embarrassing or awkward moments. On occasion, though, serious allegations arise in the aftermath of corporate holiday gatherings. In fact, allegations of sexually explicit conduct and religious discrimination tend to spike at this time of year.

Because of these concerns, it is important for employers to reinforce their employment policies before the festivities begin. Prior to the holiday party, send an email or post a notice reminding employees of your policies governing personal conduct, discrimination, and workplace harassment. Employers may also want to provide specific examples of unacceptable holiday party conduct, such as adult-themed gifts or mistletoe props. These reminders may discourage employees from behaving badly and can prove important in defending harassment lawsuits, should one arise.

It is also important for companies to create an inclusive environment while the festivities are underway. During the party, for instance, avoid religious-themed music, decorations, or customs. Provide food and drink options suitable for all guests, including those with religious-based dietary restrictions.

Moderate the Flow of Alcohol

In some jurisdictions, employers may be liable for injuries caused by employees who consume alcohol at company functions. Accordingly, consider moderating the flow of alcohol by providing employees with drink tickets instead of unlimited access to the bar. By doing so, employers set their expectations with respect to drinking and remind employees when they have reached their limit. Also consider designating a few members of management to identify and secure safe transportation for employees who appear overly intoxicated.

Curb Unofficial Holiday Parties

Employers may also be liable for conduct that occurs during unofficial holiday gatherings paid for with company credit cards. To curb inappropriate use of company funds and your potential exposure, remind corporate-card-carrying employees of your business-expense reimbursement policy. Consider requiring them to obtain advance approval for any holiday gatherings where employees may be in attendance, and to describe their party plans, including venue, guests, date, and time.

Promptly Respond to Complaints

In the event of post-party complaints, promptly investigate and effectively resolve the claims. If you discover evidence substantiating the complaint, take immediate action to correct the harassing behavior. These actions may absolve or at least reduce corporate liability.

In the unfortunate event that you have to discipline or terminate an employee based on conduct that occurred during a holiday party, make sure that such action is consistent with prior action taken in comparable situations. Inconsistent action, even if well-intended, may be problematic.

What Does This Mean for My Company?

Office holiday parties boost morale and camaraderie, but can also be a nightmare for your human resources department if your company is not properly prepared. Consider, therefore, implementing the steps outlined above for a fun and compliant holiday season.

This article can also be viewed on Forbes.com.