Lack of Cell Phone Reimbursement Creates Class Action Liability for CA Employers

Remy Kessler and Ian A. Wright have posted a new article on Forbes.com.

On August 12, 2014, the California court of appeal issued a sweeping decision that may spark a new wave of class action lawsuits against California employers.  In Cochran v. Schwan’s Home Service, Inc., the appellate court determined that employers must reimburse employees for work-related phone calls made on personal cell phones or face liability—potentially on a class-wide basis.  Under California Labor Code section 2802, employers must reimburse employees for necessary expenditures incurred in performing their duties.  Now, at least a portion of an employee’s personal cell phone bill may constitute an expenditure covered by section 2802.

To read the full article, please visit Forbes.com.

The Prevailing Wage Law: Finally Coming to NYC?

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

Possibly the last hurdle to effectuating New York City’s long-stalled prevailing wage law has been surmounted.  On August 8, 2014, a New York court effectively dismissed a challenge to the law’s validity – paving the way for its immediate implementation.

By way of background, the NYC Council passed a bill in March 2012 (the Bill) requiring that a prevailing wage, rather than the New York state minimum wage (currently $8 per hour), be paid to all building service workers, including janitors and security guards.  “Prevailing wage,” as defined in the Bill, is “the rate of wage and supplemental benefits paid in the locality to workers in the same trade or occupation,” and is to be calculated annually by the city comptroller.  With limited exception, the Bill covers three classes of employers: (1) recipients of $1 million or more in economic development aid from the city; (2) contractors and subcontractors of such entities; and (3) entities that enter into a lease with a “contracting agency.”  A copy of the Bill can be found here.

Although Mayor Michael Bloomberg vetoed the Bill in April 2012 – citing concerns that it would drive business from NYC – the City Council overrode his rebuttal.  Bloomberg then sued to block implementation, arguing that the Bill was preempted by state and federal law.  Ultimately, in August 2013, State Court Judge Geoffrey Wright sided with Bloomberg, ruling that the New York State Minimum Wage Law preempted the Bill.

Bloomberg’s victory, however, was short-lived.  Fulfilling a campaign promise, incoming Mayor Bill de Blasio – who disagreed with Bloomberg’s concerns – took legal action, in early June 2014, to overturn Judge Wright’s ruling.  With the support of the City Council and two senior labor union officials, de Blasio asked the court to vacate its earlier ruling.  On August 5, 2014, Judge Frank Nervo obliged, vacating Judge Wright’s ruling and effectively dismissing the legal challenge to the Bill.  Now, without any major courtroom obstacles, de Blasio and the City Council will be free to implement the Bill.

How Does This Affect My Company?

Entities that receive significant city aid and that employ building service workers, as well as companies that contract with such entities, should work with counsel now to prepare for imminent implementation of the Bill and enactment of a prevailing wage law in NYC.

More broadly, this is yet another example of the philosophical differences between the Bloomberg and de Blasio administrations.  NYC employers can and should expect continued efforts from Mayor de Blasio to increase wages and other protections for lower-wage workers in the coming years.

New Jersey Becomes Latest to 'Ban the Box,' Prohibiting Employers from Inquiring About Applicants' Criminal Record During Initial Application Process.

John McDonald and Joel S. Barras have posted a new article on Forbes.com.

On August 11, 2014, New Jersey Gov. Chris Christie signed the “Opportunity to Compete Act,” Bill 1999 (hereafter the “Act”), into law.  The Act limits the ability of covered New Jersey employers to inquire into a job applicant’s criminal record.  The law becomes effective March 1, 2015.

To read the full article, please visit Forbes.com.

Are obese workers protected from discrimination?

Summary

An opinion on whether an obese worker is protected under discrimination law has been issued by Advocate General Jääskinen. It was found that while obese workers are not automatically covered, where a worker is "severely, extremely or morbidly obese", the worker may be considered to be disabled and therefore protected under discrimination law.

We discuss this in more detail below.

Background

The case of Kaltoft v Municipality of Billund (C354-13) involved Mr Kaltoft, who was a childminder for the Municipality of Billund and was dismissed purportedly for redundancy after 15 years with his employer. Mr Kaltoft had been obese throughout his employment, and at one time had a BMI of 54. It was alleged that there had been "discussions" about Mr Kaltoft's obesity during the dismissal process and Mr Kaltoft sought to bring a claim that he had been dismissed because of his obesity, which amounted to discrimination on the grounds of obesity.

The Danish District Court sought clarification on whether this was a valid claim from the European Court of Justice.

Questions

The two questions that were referred were:

  • Whether there was a self-standing ground of discrimination which applied to obese workers
  • Whether obesity was always or is in some cases included in the scope of disability under the Equal Treatment Directive

Standalone principle of obesity discrimination?

The Advocate General dismissed the idea that there was a standalone principle of EU law that applied to obese workers. The argument raised was that there was a general principle prohibiting discrimination in the labour market. It was clearly stated that discrimination was not prohibited in a generalised way, but rather on specified grounds, e.g., age, disability, etc.

Could obesity amount to a disability?

When looking at whether obesity could amount to a disability under the Equal Treatment Framework Directive (which the Equality Act 2010 implements in Great Britain), the Advocate General confirmed that an obese person may meet the definition of disability under the Directive. It would be a question of degree and would depend on the effects of the obesity, i.e., whether there were long-term physical or mental impairments which hindered the effective participation of the person in professional life on an equal basis with others (a test similar to the one in the Equality Act 2010).

The Advocate General referred to the World Health Organisation's classification of obesity as being ranked into three classes according to BMI, with Class III or morbid obesity being where an individual has a BMI of higher than 40. In his view, the Advocate General stated that only Class III obesity would likely amount to a disability.

He also stated that the notion of disability was considered to be "objective", and the fact that it was self-inflicted should not preclude the condition from being protected. The Advocate General likened this to precluding disabilities which arose from risk-taking in traffic or in sports. (Note, however, that conditions such as alcoholism are excluded from the Equality Act 2010, but a disability arising from an excluded condition, say liver disease from alcoholism, could be covered.)

Previous case law in GB

This finding is consistent with the recent EAT decision of Walker v Sita Information Networking Computing Limited [2013] UKEAT 0097_12_0802 which came out last year. It was found that a Tribunal must simply consider the definition of disability, starting with whether the individual has a physical or mental impairment. In that case, the Claimant, who was 21.5 stone, suffered from "functional overlay compounded by obesity" which had a number of symptoms (including asthma, diabetes, high blood pressure, and bowel and stomach problems). He was found to be disabled.

What does this mean for GB employers?

While this opinion was given at EU level, it is applicable to decisions made in GB courts. The ECJ needs to make a formal finding, but it commonly follows the Advocate General's opinion.

Therefore, obese workers may be considered to be disabled, depending on the extent of the obesity and the impact on the particular individual. A good rule of thumb is to consider that individuals with BMI of around 40 or higher, or who appear to be morbidly obese, could well be covered.

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 they require 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.

Administrative Agency's Final Rules Clarify Employers' Duties Under NYC Paid Sick Leave Law

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

At long last, the New York City Department of Consumer Affairs (DCA) – the agency tasked with administering the New York City Earned Sick Time Act (ESTA) – has issued Final Rules (Rules) addressing ambiguities in ESTA’s statutory text, responding to questions left unanswered by the law itself, and otherwise providing guidance for employers on a number of ESTA’s particular requirements.  The DCA introduced a preliminary version of the Rules March 28, and a public hearing was held April 29.  A copy of the Final Rules – as published in the City Record July 30 – can be found here.

What Does ESTA Require?

As we previously detailed here and here, as of April 1, 2014 (ESTA’s effective date), employers with five or more employees are required to provide employees with up to 40 hours of paid sick leave per calendar year.  Sick leave must accrue at a rate of at least one hour of leave for every 30 hours worked.  Leave may be earned by any employee who performs more than 80 hours of work in NYC in a calendar year.  Up to 40 hours of unused sick leave may carry over to the following calendar year, although employers are only required to allow use of up to 40 hours of sick leave per year.

Employers with fewer than five employees must provide comparable unpaid sick leave benefits.  With limited exception, ESTA covers all employees, including those classified as exempt, non-exempt, full-time, part-time, and temporary.

Employers also must disseminate a Notice of Employee Rights to all new hires upon commencement of employment.  Notices must be provided in both English and – if made available by the DCA – the employee’s primary language.  Copies of the Notice in a multitude of dialects can be found here.

On July 30, 2014, employees employed as of April 1, 2014 were entitled to begin using accrued sick leave (whether paid or unpaid).  All other employees may begin using accrued sick leave 120 calendar days after the start of their employment.

How Do the Final Rules Affect My Obligations Under ESTA?

Following is a detailed overview of the particular ESTA requirements clarified by the Rules.

Scope of Employee Coverage:  Of critical importance during ESTA’s infancy, the Rules clarify the scope of the term “employee.”  ESTA defines “employee” as any individual “employed for hire within the city of New York for more than eighty hours in a calendar year.”  The Rules make clear that “[a]n employee is entitled to the protections of [ESTA] regardless of immigration status.”  The Rules go on to specify that only work performed while physically located in NYC, including via telecommuting, counts toward the 80-hour threshold, irrespective of where the employer is located.  Particularly impacted by this provision in the Rules are employees with multiple work locations, who telecommute, or who perform transient services in NYC.

Employee Notification of the Need to Use Sick Time:  One question frequently asked by NYC employers is whether employees must provide prior notice of the need to use accrued sick time.  The answer, in most instances, is YES.  Under ESTA, an employer may require up to seven days’ advance notice, in writing if it elects, where the need to use sick time is foreseeable.  And where such need is not foreseeable, employees must notify their employer “as soon as practicable.”

The Rules build on these requirements, noting that the determination of whether providing notice “is practicable in a given situation” requires an assessment of the specific “facts and circumstances.”  The Rules further provide that an employer requiring notice of the need to use sick time – where such need is not foreseeable – must implement “a written policy that contains procedures for the employee to provide notice as soon as practicable.”  A written policy also must be adopted if the employer requires advance notice for foreseeable use of sick time.

Employer Demands for Medical Notes:  For businesses concerned with potential abuses of sick leave, ESTA provides little recourse.  Employers may seek documentation (such as from a licensed health care provider) confirming ESTA-authorized use of sick leave only where an employee is absent for more than three consecutive work days.  For shorter absences, employers may only request “written confirmation” – a term left undefined by both ESTA and the Rules – from the employee that ESTA-compliant sick leave was used.

The Rules clarify that the term “work days” refers to the “days or parts of days” on which an employee would have worked had (s)he not used sick time.  Moreover, for absences of more than three consecutive days, the Rules specify that, upon return to work, an employee must be afforded at least seven days to procure verifying documentation from a licensed health care provider.  The “employee is responsible for the cost of any documentation not covered by” a benefit plan.  Employers who desire a second opinion are out of luck: employers may not require an employee who has provided written documentation from a licensed health care provider to obtain documentation from a second provider.

Rate of Pay:  One of the more pressing uncertainties surrounding ESTA is the rate at which sick time must be compensated.  The Rules resolve this uncertainty.  The Rules mandate that, generally, paid sick leave must be compensated at the employee’s regular hourly rate of pay even if it is used during hours that would otherwise have been designated as overtime.

Of particular interest to hospitality industry employers, tipped employees are not entitled to lost gratuities while using sick leave, but they still must receive at the least the minimum wage – currently $8 per hour – while absent.  And employees paid on a commission basis must receive either their base wage or the applicable minimum wage, whichever is greater.

Payment for Used Sick Time:  The DCA has also legislated the timing of such payments via the Rules, providing that “[s]ick time must be paid no later than the payday for the next regular payroll period beginning after the sick time was used.”  A carve-out exists, however, for employers that request written documentation confirming the use of sick leave.  In such circumstances, used sick time need not be compensated until appropriate documentation has been submitted.

Joint Employer Liability:  Like the New York Labor Law, the Rules permit the DCA to hold “joint employers” individually and collectively accountable for ESTA violations.  Just as critically, the Rules provide that, “[i]f an employee is employed jointly by two or more joint employers, all of the employee’s work for each of the joint employers will be considered as a single employment for purposes of accrual and use of sick time under [ESTA].”  As a slight consolation to the business community, the Rules allow joint employers to allocate ESTA responsibilities among themselves.  Nevertheless, expect this provision to be the subject of future litigation.

Minimum Hourly Increments for the Use of Sick Leave:  The Rules reiterate that, although employees may determine how much sick time they need to use, employers may set a minimum increment for use not to exceed four hours.  If, however, under the particular circumstances a four-hour increment would be unreasonable – e.g., the employee has not accrued four hours of sick leave – then a lower threshold must be adopted.

Transfer of Sick Time Upon the Sale of a Business:  The Rules also add a wrinkle to local business sales.  Specifically, the DCA makes clear in the Rules that, “[i]f an employer sells its business . . . an employee will retain and may use all accrued sick time if the employee continues to perform work within the City of New York for the successor employer.”  Thus, unless a purchase agreement specifies otherwise, successor employers may be on the hook for sick leave accrued prior to consummation of the sale.

Distribution/Posting of Sick Leave Policies:  Finally, the Rules reaffirm that employers must distribute or post their written sick time policies.  This requirement can be satisfied by, among other things, personal distribution, inclusion in an employee handbook, posting on the company intranet, or displaying in a “conspicuous location” where notices and posters are customarily posted.  Failure to properly distribute or post written policies can result in civil penalties.

How Does This Affect My Company?

As supplemented by the Rules, ESTA contains many potential pitfalls for employers.  And given the zeal with which Mayor Bill de Blasio pushed through an amendment to ESTA earlier this year, employers should expect aggressive enforcement by the DCA.  Employers of all sizes should consult with counsel immediately about implementing and adhering to the law’s provisions.  Whether you have one employee working in NYC or 1,000, compliance with each of the reticulated ESTA requirements, as supplemented by the Final Rules, is an absolute must.

Planning for an independent Scotland - Employment & Pensions Issues

This post was written by Thomas McLaughlin and William Sutton.

It is less than two months now until the referendum on Scottish independence.

So far as lawyers are concerned, Scotland is already a separate legal jurisdiction.  However, subject to some very minor differences, Scotland’s employment law is sufficiently similar to the law in England & Wales that the majority of employers are able to operate both north and south of the border with little regard for the border itself.

Plainly, all of that will change in the event that Scotland becomes an independent country.

From an employer’s point of view, planning for this eventuality is not entirely straightforward.  The Westminster Government has said that it is not willing to “pre-negotiate” the terms of Scotland’s independence; so even if there is a “yes” vote on 18 September, we do not know any of the details of how an independent Scotland would function.  However, it seems certain that employers will have to confront at least some of the following issues:

  1. Taxation:  As an independent country, Scotland will have its own exchequer.  Employers would therefore need to run a separate payroll for operations where employees will be taxed in Scotland.  Where employees undertake only some of their duties in an independent Scotland, it will be necessary to decide where their employment taxes should be paid.
  2. Currency issues: The Scottish Government envisages that an independent Scotland would continue to use sterling in a formal currency union with the rest of the UK; a position not supported by the UK Treasury.  If an independent Scotland were to adopt a different currency, then employers with Scottish operations would be exposed to exchange rate risk in respect of those operations including in respect of salaries and other labour costs. 
  3. Pensions: There have been vast quantities of material produced analysing the issues that independence would present for both state pension and private pension provision, and it is fair to say that there are significant challenges and unknowns in both areas.  Focusing on private sector occupational pension schemes, the key uncertainty is in relation to what tax treatment Scotland will provide in relation to such schemes.  Other key issues affect defined benefit pension schemes and could have unappealing consequences.  It is not, for example, clear what type of pension protection regime would be put in place by Scotland to deal with underfunded pension schemes of insolvent employers (as these would presumably no longer be covered by the UK Pension Protection Fund).  Defined benefit pension schemes also risk becoming ‘cross border’ schemes overnight which would trigger various consequences including, most significantly, a requirement to fully fund the pension scheme from day one of independence.
  4. Conflict of laws: Immediately after becoming an independent country, Scotland would carry over its existing employment law unchanged.  However, from that point onwards Scottish employment law would diverge from the rest of the UK.  The Scottish Government has already indicated that it would make certain changes to employment law, such as abolishing “employee shareholder” status and reinstating the 90 day consultation period for redundancies affecting 100 or more employees.  Where employees undertake some duties in independent Scotland but are not based there exclusively, it will be necessary to decide which legal system governs the employment relationship.  This is much easier said than done and, in the event of a dispute, the rules concerning the territorial reach of UK employment law are complex and depend very much on facts pertaining to each employee.
  5. Immigration:  This may be a particular issue if an independent Scotland is not initially successful in joining the European Union.  The White Paper produced by the Scottish Government sets out an intention for an independent Scotland to have a points-based immigration system, but beyond this we know little of how easy it would be for employees to live and work in an independent Scotland.

The difficulty with all of these issues is that there is a limit to the amount of planning which an employer can undertake at this stage.  The full details of the functioning of an independent Scotland will only become known in the event of a “Yes” vote.  However, the Scottish government envisages that the country would become independent on 26 March 2016 – i.e. only 18 months after the referendum, which does not leave very much time for employers to make the necessary preparations.

Illinois Joins 'Ban The Box' Bandwagon by Limiting When Employers Can Ask For or Use Criminal History

James A. Burns, Jr. has posted a new article on Forbes.com

Illinois has joined the quickly growing number of states and cities (including Massachusetts, Minnesota, Rhode Island, Hawaii, Philadelphia, San Francisco, Seattle, Baltimore, Newark and Buffalo) that have passed “ban the box” legislation—so named based on the box found on most employment applications asking whether an applicant has ever been convicted of a crime.

To read the full article, please visit Forbes.com.

New York State Becomes The Fourth Jurisdiction To Protect Unpaid Interns From Employment Discrimination

Cindy Schmitt Minniti and Mark S. Goldstein have posted a new article on Forbes.com, detailing a recently-enacted New York State law making it unlawful for employers to discriminate, harass, retaliate, or otherwise engage in unlawful employment practices against unpaid interns and applicants for internships. This makes the State just the fourth jurisdiction – joining Oregon, Washington, D.C., and New York City – to enact workplace protections for interns. Governor Andrew Cuomo signed the bill last Tuesday.

To read the full article, please visit Forbes.com.

How much should employers be paying employees on holiday?

This post was written by Amy Ferrington and David Ashmore.

With school holidays under way, thoughts of UK employees are now turning to their summer holidays. Given the far-reaching implications of the recent case of Lock v British Gas, employers with employees on commission arrangements need to take special care when paying employees during annual leave.     

Summary

The recent European Court of Justice decision in the case of Lock v British Gas has established that, in some circumstances, a worker’s holiday pay should be calculated based on salary and commission payments, not just basic pay, where commission payments are “intrinsically linked” to the performance of tasks required to be carried out by a worker.

Facts

Mr Lock is a sales consultant with British Gas. Mr Lock’s wage is made up of two elements: (i) a basic monthly salary and (ii) commission payments calculated in accordance with the level of sales achieved (which make up approximately 60% of his monthly wage). Commission is paid subject to customers completing contracts, and therefore commission earned in one month will be paid in subsequent months. When on annual leave, Mr Lock receives commission payments relating to sales achieved in previous months, and also holiday pay equal to the basic salary he would have received if he was working.

In December 2011, Mr Lock took a period of annual leave. Consequently, Mr Lock incurred a reduced income in the following months because he had not generated any sales during this period of holiday. Mr Lock made a claim to the Employment Tribunal for outstanding holiday pay on the basis that this drop in commission income in future months, as a result of taking holiday, was unlawful. Mr Lock claimed that his holiday pay should include an additional element to compensate him for the loss of opportunity to earn commission during his period of annual leave.

Mr Lock’s claim was unusual because he did not suffer any drop in income at the time he took his annual leave. Rather, his complaint was that, as a result of taking annual leave, his commission “pipeline” was disrupted and therefore he suffered a delayed (or deferred) financial disadvantage. Mr Lock argued he should receive additional holiday pay to compensate for this delayed financial disadvantage.

The Employment Tribunal referred this case to the European Court of Justice (“ECJ”) to ascertain whether the Working Time Directive (the “Directive”) requires loss of the opportunity to earn commission during a period of annual leave to be factored into the holiday pay calculation.

ECJ Decision

The ECJ decided that:

  • Mr Lock was entitled to additional holiday pay to compensate him for not being able to earn commission when taking annual leave
  • It was for the UK courts to decide how that payment would be calculated
  • It was a fundamental principle that during periods of statutory annual leave, workers should be put in a comparable position to periods when they are working.  To deviate from this would be contrary to the motivation of the Directive, which is to ensure that there are no deterrents from taking annual leave.
  • It was not relevant that the commission scheme targets had been adjusted to take into account annual leave (i.e. it was irrelevant that Mr Lock’s commission targets were based on 48 weeks’ work as opposed to 52)


In short, the ECJ held that the amount an employee receives as holiday pay should correspond to an employee’s “normal” pay. Where the employee’s remuneration has variable elements (which might include overtime, commission or allowances), these will form part of the employee’s normal pay where they are “linked intrinsically” to the performance of their duties.

Implications of the Decision

This decision will have a significant impact on UK employers and workers. 

UK Employers

Employers face the difficult task of trying to devise a Lock-compliant commission scheme. The argument of British Gas that their commission targets and payments were based on 48 weeks’ work (and not 52) was rejected by the ECJ.

The Advocate General proposed compensating employees for holiday periods with an average level of commission calculated by reference to commission earned over the previous 12 months (see the Advocate General’s opinion here). However, it will be up to the UK courts to decide whether UK law can be interpreted “purposively” to comply with the Lock decision and, if so, what calculation method is appropriate.

The extent to which this decision could have a broader impact is difficult to predict. It is unclear whether this principle will only apply to workers such as Mr Lock, whose pay was predominantly commission-based, or whether it could apply where commission is a smaller element of pay. The ECJ itself did not elaborate. All workers who are rewarded based on performance suffer some kind of hypothetical loss of earning capacity (whether through commission/bonus schemes or other performance incentives) during periods of annual leave and, accordingly, the impact of this decision on employers has the potential to be far-reaching.

UK Workers

The decision opens the door to UK workers who regularly earn commission as a substantial proportion of their overall remuneration claiming back pay, in respect of holiday pay which was calculated by reference to basic salary only.

There is no basis to assume from the judgment that these principles will also apply to annual leave in excess of the four-week entitlement derived from the EU Working Time Directive. However, we anticipate that this point will be explored in future litigation. 

Part-Time Workers: New Nuisance for Employers?

This post was written by Sara A. Begley, Amanda D. Haverstick, and Joel S. Barras.

A movement to give part-time employees more predictable schedules and related perks recently made front-page news.  See Steven Greenhouse, “A Push to Give Steadier Shifts to Part-Timers,” The New York Times (July 15, 2014).  The number of jurisdictions with laws providing for such a right remains small but is likely growing, and the media attention itself may fuel increased part-timer scheduling requests.  Employers should prepare accordingly.

The Current Legal Landscape

In the private sector, the only large jurisdictions that impose legal duties on employers in this area thus far are Vermont and San Francisco.

  • In Vermont, employers’ obligations stem from a broader “Equal Pay Act” amendment to the state’s employment discrimination statute.  See 21 V.S.A. § 309, available here.  Signed into law May 14, 2014, the amendment provides, among other things, that employers must discuss in “good faith” with an employee, and “consider” any request for, a “flexible working arrangement”—defined to include “intermediate or long-term changes in the employee’s regular working arrangements, including changes in the number of days or hours worked, changes in the time the employee arrives at or departs from work, work from home, or job-sharing.”  In addition, an employer must make a determination on whether it can grant such a request, or if doing so would be “inconsistent with its business … legal or contractual obligations,” and then must notify the employee of its decision. 
  • San Francisco’s Ordinance is more limited in some respects and broader in others.  See “San Francisco Family Friendly Workplace Ordinance,” San Francisco Administrative Code Chapter 12Z (Oct. 8, 2013), available here.  On one hand, the ordinance only covers scheduling requests that are linked to an employee’s “care” of:  a child under the age of 18; a family member with “a serious health condition”; or a parent age 65 or older.  On the other hand, the duties of an employer that receives such a request are more onerous than in Vermont:  the employer must meet with the employee within 21 days of the request, respond to the request within 21 days of the meeting, and set forth any denial of a request in writing, providing for a “bona fide business reason” and giving the employee notice of the right to request reconsideration (which the employer may refuse only for “legitimate business reasons”).  

Both laws also prohibit employers from retaliating against an employee who makes a scheduling request or engages in other forms of newly protected conduct. 

Additional “Right to Request” Entitlements Expected

State and Local:  Labor unions, women’s rights advocates, and other groups are reportedly fueling a national, “Fair Workweek Initiative” pushing for “right to request” legislation similar to those above in cities across the nation—including in New York, Milwaukee and Santa Clara, California.

  • A key driver for unions is that more “right to request” legislation could lead to more “regular” part-time employees, as defined by the National Labor Relations Act (NLRA), and, as a result, an increase in union ranks.  Whereas “regular” part-time employees are typically considered part of a union-represented bargaining unit, “casual” employees are not.

In a related vein, state and local “right to request” laws that are too aggressive, in terms of requiring employers to negotiate with employees over scheduling requests, run the risk of NLRA preemption.  (Although yet untested, the narrow scope and specific clauses of the Vermont and San Francisco laws may save them from such preemption.)

Federal:  In addition to the expected new local legislation fueled by the Fair Workweek Initiative, employers should be aware that U.S. Congressional Representative George Miller (D.-Calif.) has announced plans to introduce federal “right to request” legislation this summer.  His proposal would include a requirement that employers pay an extra hour to an employee who receives less than 24 hours’ notice of a required shift, as well as guarantee that workers receive four hours’ pay if they are sent home mid-shift because of low customer volume. Although Congress is unlikely to pass Rep. Miller’s bill, a more targeted Executive Order is more probable.

Indeed, President Obama recently provided for similar employee scheduling rights in the federal sector.  A June 23, 2014 White House memorandum to all executive department and agency heads directs that, within 120 days, procedures must be in place to provide employees with an ability to request “work schedule flexibilities,” including telework, part-time employment, or job sharing.  See “Presidential Memorandum—Enhancing Workplace Flexibilities and Work-Life Program,” available here.  In addition, executive branch employers that receive such a request must:  “meet or confer with the requesting employee as appropriate to understand fully the nature and need for the requested flexibility”; “consider the request and supporting information carefully and respond within 20 business days of the initial request”; and ensure that such workplace flexibilities are available “to the maximum extent practicable … consistent with mission needs.”

It would not be a tremendous leap for the President Obama to extend the rights set forth in his memorandum by requiring federal contractors and subcontractors to grant the same type of scheduling rights to their employees.

What All This Means for Employers

Historically, employers have deemed part-time workers as low-risk and high-reward:  they rarely qualify for overtime pay or as employees under the Affordable Care Act, and they generally do not receive benefits.  They also offer employers scheduling flexibility—particularly important in the retail and restaurant sectors where staffing needs can ebb and flow unpredictably based on the season and even daily weather conditions.  But as laws providing more rights to part-timers gain momentum, employers will need to weigh these benefits against new legal duties.

Employers that engage in the types of work-schedule discussions with their employees, as described in the San Francisco and Vermont laws, also should make sure they do not run afoul of NLRA prohibitions on “direct dealing.”  Even in jurisdictions without specific laws like those Vermont and San Francisco, employers should review their scheduling procedures to ensure they are applied consistently and do not have a disparate impact on any legally protected group—such as female workers, who statistically make up the greatest share of part-timers.  Employers also should ensure that their scheduling practices take into account the laws in many jurisdictions that protect employees of both genders from discrimination based on familial status and child-care characteristics, which can often form the basis of schedule-related requests.

Stay tuned here for updates on this newest rapidly developing area of law requiring employer monitoring.

Restrictive Covenants - Little way out for employers when the drafting goes wrong

In the recent case of Prophet  Plc - v- Huggett, the Court of Appeal reminded employers how vitally important it is to ensure that the drafting of restrictive covenants is accurate and well thought through.  Overturning an earlier High Court judgment, the Court of Appeal refused to re-write an unambiguous, but commercially meaningless, restrictive covenant to make it commercially effective. 

Prophet developed, sold and updated computer software for the fresh produce industry.  In early 2012, it recruited Mr Huggett as its UK Sales Manager.  Mr Huggett entered into an employment contract with Prophet which included a 12-month non-compete covenant.  The covenant limited its scope as follows:

‘……this restriction shall only operate to prevent the Employee from being so engaged, employed, concerned or interested in any area and in connection with any products in, or on, which he/she was involved whilst employed hereunder.’

In December 2013, Mr Huggett handed in his notice.  He told his employer that he was joining a company called K3 which was a software supplier operating in part of the fresh produce industry.  Prophet believed that Mr Huggett would be breaching the terms of his restrictive covenant to do so and sought an injunction to prevent him taking up employment with K3. 

Prophet brought proceedings in the High Court and an injunction was granted.  In the High Court, the judge accepted that the wording of the restrictive covenant was clear but it was commercially meaningless and offered Prophet no protection.  This was because the covenant sought to prevent Mr Huggett being involved with products in which he was involved while employed by Prophet.  Mr Huggett had only been involved with a very discrete product line while employed with Prophet, and this product was not provided by any other company.  There was, therefore, nothing to prevent him from joining a competitor as no competitor provided the same product.  

The judge’s view was that, although the meaning of the restrictive covenant was clear, something had gone wrong in the drafting and the covenant did not give effect to the parties’ intentions.  The judge was therefore prepared to add the words “or similar thereto” to the end of the restrictive covenant above to give it, what he believed, was the parties’ intended meaning.  With the additional wording, the judge believed that Mr Huggett would be in breach of the restrictive covenant by joining K3 and granted an injunction.  Mr Huggett appealed to the Court of Appeal.

The Court of Appeal overturned the injunction.  The Court found that the wording of the restrictive covenant was plain in that it prevented Mr Huggett from joining another company where he would be involved in the same products as he had been with Prophet.  However, there were no such other companies.  Although this rendered the covenant commercially meaningless, the Court of Appeal did not believe that anything had gone wrong with the drafting.  Rather, the drafting was clear, but the person who had drafted the restrictive covenant had not thought through its effect.  In that case, it was not for the courts to rewrite the restrictive covenant.  It was only if the covenant was ambiguous, with one interpretation leading to a meaningless outcome and the other giving rise to a commercially sensible outcome, that the court would likely favour the latter.  However, this was not the case here; the meaning was clear. 

The Court accepted that it could, if necessary, “blue pencil” a restrictive covenant to delete words which rendered an otherwise enforceable covenant unenforceable but would not re-write a clear restrictive covenant as here.  In the words of Lord Justice Rymer, “it was not for the judge, nor is it for this court to remake the parties….. bargain.  Prophet made its…. bed and it must lie upon it.”

Implication for Employers

When the High Court decision in this case was published, it came as a great relief to many employers.  The courts are notoriously reluctant to enforce post-termination restrictive covenants and traditionally had been unwilling to do anything to render a meaningless or unenforceable restrictive covenant enforceable, other than using the “blue pencil” test.  However, the High Court’s decision in this case appeared to give some hope that the courts would look to re-write meaningless or unenforceable restrictive covenants to reflect what they believed to be the intentions of the parties.  However, the Court of Appeal’s decision in this case firmly rejects this approach and reasserts the previously understood method of dealing with restrictive covenants.  It is therefore vital for employers to ensure that restrictive covenants are enforceable and commercially workable when they are entered into.  It is clear that if the wording goes wrong, the courts will not be prepared to correct it, other than to utilise the “blue pencil” test.

Reminder for NYC Employers: Workers Can Start Using Accrued Paid Sick Leave July 30

As we have previously discussed here and here, the New York City Earned Sick Time Act took effect April 1, 2014, 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. Now, almost four months after the law took effect, employers are reminded that all workers who were employed as of April 1 may begin using accrued sick leave, whether paid or unpaid, on July 30, 2014. Employees hired after April 1 may begin using accrued sick leave 120 calendar days after the start of employment.

Employers are also again reminded that they must distribute the requisite Notice of Employee Rights to all new hires upon commencement of employment. Notices must be provided in both English and, if made available by the Department of Consumer Affairs, the employee’s primary language. More information about the Act’s requirements, and copies of the Notice in a multitude of dialects, can be found here.

Flexible Working For All

This post was written by Joanna Powis.

From 30 June 2014, the statutory right to request flexible working was extended to all employees with 26 weeks’ continuous service. The right was previously limited to employees with caring responsibilities.

It is important to remember that the rules are limited to a right to make a flexible working request. Prior to 30 June 2014, employers had a broad discretion to reject a request for legitimate business reasons. We examine below whether this is still the case. We also look at how the flexible working request procedure has changed and some tricky issues that may arise as a result of employers receiving more flexible working requests.

Simplified procedure

The good news for employers is that the procedure that needs to be followed when dealing with a flexible working request is far less prescriptive under the new legislation. The complex statutory procedure has been abolished and instead, employers are required to comply with the ACAS Code of Practice – Handling in a Reasonable Manner Requests to Work Flexibly. ACAS has also produced guidance which supplements the Code.

In summary, the Code provides that once the employee has made a written request, the employer has three months to consider it, discuss it with the employee and notify them of the decision and, if the request is rejected, give the employee the right to appeal. Employees should be allowed to be accompanied to any meetings.

There is no longer a requirement on the employer to explain the reasoning behind its decision, but it is still advisable to do so, not least because it may avoid an appeal and/or a subsequent claim. Remember that in order to avoid a discrimination claim, the reasoning should be unrelated to protected characteristics (e.g. age, disability, sex).

Refusing a request

The position remains that an employer can only refuse a request to work flexibly on one or more of the eight specific (but relatively broad) grounds set out below:

  • The burden of additional costs
  • Detrimental effect on ability to meet customer demand
  • Inability to reorganise work among existing staff
  • Inability to recruit additional staff
  • Detrimental impact on quality
  • Detrimental impact on performance
  • Insufficiency of work during the periods the employee proposes to work, or
  • Planned structural changes

Under the legislation (which remains the same), the test of whether or not one of the specific grounds applies is a subjective one. If the employer considers that one of the grounds applies, then the test is satisfied. However, the new Code confuses matters. The Code imposes an obligation on employers to act reasonably in making a decision whether to accept a flexible working request. This obligation appears to apply to the decision itself, as well as to the procedure followed in coming to the decision – meaning that employees could argue that the Code introduces an element of objectivity to the test.

For example, the Code provides that requests should be considered carefully by weighing up the benefits of the requested changes against any adverse business impact. Employers who are unable to demonstrate they have gone through this thought process leave themselves open to claims that they have not dealt with the request reasonably. In the future, we are likely to see more claims challenging the basis of the decision itself.

Prioritising requests

It remains to be seen whether employers will be flooded with flexible working requests as a result of the recent changes. Many employers have considered flexible working requests outside of the statutory scheme for some time. However, it can probably be assumed that, at least as a result of the publicity generated by the changes, there will be some increase for employers. A tricky question is how employers should deal with multiple requests. For example, can an employer give priority to requests it considers are made for more ‘worthwhile’ reasons (e.g. how do you prioritise a request for a later start time to accommodate childcare arrangements over the same request to accommodate reduced commuting costs)? What can an employer do if it grants a request then a couple of months later receives another request which it considers ‘more deserving’?

The ACAS guidance explains that employers faced with multiple requests are not required to make value judgments about the most deserving, but there is nothing preventing an employer from doing so (provided it does not act in a discriminatory way). Indeed, in order to properly consider the benefits of the requested change to each employee (as expressly required by the Code), employers will arguably have to apply some form of value judgment. There are some circumstances in which it might be legitimate to apply value judgments to prioritise one request over another (e.g. prioritising a request made by a disabled employee, the refusal of which could amount to a failure to make reasonable adjustments), but it should be avoided where possible.

The Guidance says that requests should be considered in the order in which they are received. This isn’t much help to the employer who receives a request it can no longer accommodate because it previously granted a ‘less deserving’ request. In this situation, the best option would be to speak to affected employees about the issue and see if a compromise can be reached. Failing that, the Code is clear that the correct approach is “first come, first served”.

Take aways

  • Check whether your flexible working policy needs updating - it probably does. References to the old prescriptive procedural requirements should be removed. Consider whether to set out how multiple requests will be dealt with.
  • Make sure you follow the Code and Guidance when dealing with new flexible working requests. Remember that the old procedural rules still apply to flexible working requests made prior to 30 June 2014.
  • If you are not sure whether a request can be accommodated, consider trialling the request, or a variation of the request, over a certain period. Make sure details of the trial period, and how it will end, are properly documented.
  • Remember that the main risk of refusing a request is not usually the maximum compensation payable for failure to comply with the flexible working regime (eight weeks’ pay currently capped at £464 per week), but a claim for discrimination with potentially unlimited compensation.
  • Take a consistent approach to dealing with requests to reduce the risk of discrimination claims.

Selecting a Retirement Age: Is 65 just a number?

This post was written by Eleanor J. Winslet.

Summary

The EAT has issued a decision in the well-known and long-running retirement case of Seldon v Clarkson Wright and Jakes, which dealt with the question:

Was the retirement age of 65 PROPORTIONATE to achieve the firm’s stated aims of retention of staff and workforce planning?

Following the removal of the default retirement age, employers need to justify any retirement policy in place by showing that it is a proportionate means of achieving a legitimate aim.  In Seldon, the EAT has found that it was proportionate for the firm to select a retirement age of 65, even though using a higher age could have a less discriminatory effect.  The reasoning in this case may be useful to employers setting a retirement age, or considering other policies which may be potentially age-discriminatory (e.g. benefits policies).  

We discuss this in more detail and also consider essential points when deciding on a retirement age.

Background

More than seven years ago, Mr Seldon raised a claim of age discrimination because he had to retire from the solicitors’ practice that he worked for at age 65.  The firm’s defence was that having a retirement age of 65 in place was a “proportionate means of achieving a legitimate aim” and therefore allowable under the legislation in place at that time.  Protracted litigation ensued, and the Supreme Court eventually decided that the firm had legitimate aims in place, namely:

  • Retention of Staff – i.e. ensuring that associates were given the opportunity to become partners rather than leave the firm
  • Workforce Planning – having a sense of when vacancies would become available by having a retirement age in place
  • Congeniality – avoiding the awkwardness of having to dismiss a long-standing and senior figure for performance reasons (NB: this aim was not ultimately relied on by the firm as justification for the age chosen)

Having reached a decision on one prong of the test for justification, the Employment Tribunal had to decide whether the age of 65 itself was proportionate.  The Tribunal found against Mr Seldon.  It stressed that in this case a balance needed to be achieved between the interests of the practice, the partners, and the associates who aspire to partnership.  It found that there was a narrow range of ages that would be proportionate to achieve the two aims of retention of staff and workforce planning, but that 65 was within this range.  Mr Seldon appealed again to the EAT.

The EAT found that the age of 65 was proportionate.

It noted that determining whether a particular age is proportionate is fact-sensitive to the particular business, but in this case the Tribunal had considered this appropriately. 

One of the arguments raised by Mr Seldon was that the given age of 65 could not be proportionate because it was possible for another age to have been used (e.g. 68 or 70), which would have met the legitimate aims just as well.

The EAT confirmed, however, that the fact that it would be less discriminatory for the firm to have chosen another age did not prevent the age of 65 from being appropriate in this case.  If this were the case, it would be impossible for a given age to be proportionate as there would always be a less discriminatory choice.

How does this decision help employers?

While it may be challenging to decide on a specific retirement age for a given business, it is helpful to note that the precise age is not completely critical. It was remarked throughout the case that a retirement age needs to be decided on the basis of the needs of the particular organisation.  If, for example, the firm had no trouble retaining associates regardless of partners being retired or not, this may well have undermined the legitimate aim of workforce retention. 

The EAT repeated the list of factors used by the ET when weighing up whether a retirement age of 65 was appropriate in this case, which may be useful when thinking about justifying a retirement age:

  • The partners had consented to the retirement age of 65 in the partnership deed where it was set out
  • The retirement age for partners was the same as for other staff
  • The State Pension Age
  • At the time, the default retirement age was 65
  • There had been a number of European cases where a retirement age of 65 was upheld

The Tribunal also considered that the congeniality aim, while not contested, might be a factor to consider when looking at proportionality for the other two aims.

It is possible that the ET and EAT may have reached a different decision if Mr Seldon had been retired following the removal of the default retirement age (of 65), which provided a useful benchmark.  However, this was not the only factor looked at and the case suggests that an age of 65 may well be justifiable if this appears to be appropriate for the given organisation. 

Key points when thinking about setting a retirement age

  • Think about what legitimate aims are relevant to your organisation: e.g. is there a need to incentivise junior staff to stay with the employer?
  • Give careful consideration to which age you will set by reference to the particular legitimate aim: e.g. for succession planning, the higher the retirement age the higher the detriment for junior staff, the lower the age the higher the determent for potential retirees.  The respective needs must be balanced as far as possible.
  • Document any deliberations about possible legitimate aims and the rationale for selecting a certain age, but bear in mind that these will be discloseable in the event of litigation.
  • Make sure that you act consistently whether or not you decide to put a policy in place.

Obama's NLRB Recess Appointments Deemed Unconstitutional: >100 Decisions Impacted

Amanda D. Haverstick and Joel S. Barras have posted a new article on Forbes.com.

In a ruling issued today, a unanimous U.S. Supreme Court decided that President Obama’s January 4, 2012, recess appointments of three National Labor Relations Board (NLRB or Board) members violated the Constitution.  The ruling is of great significance:  it invalidates every single decision—of which there are more than a hundred—that the Board handed down from January 2012 through summer 2013 (the period the Board included the three Presidential appointees, before he appointed replacement members that the Senate properly confirmed).

To read the full article, please visit Forbes.com.