Employment Law Changes Taking Effect 1 October 2014

As is generally the case each year, 1 October brings a number of changes to employment law.

The key changes taking effect 1 October 2014 are as follows:

National Minimum Wage Increase

The annual increase to national minimum wage rates for all workers will take effect, such that from 1 October:

  • Workers aged 21 and over will be entitled to £6.50 per hour
  • 18-20 year olds will be entitled to £5.13 per hour
  • 16-17 year olds will be entitled to £3.79 per hour
  • Apprentices will be entitled to £2.73 per hour

Power to order Equal Pay Audits

From 1 October, Tribunals will have the power to order employers found to be in breach of equal pay law under the Equality Act 2010 (i.e. those who have lost an equal pay claim brought on or after 1 October 2014) to carry out equal pay audits.

The audit will have to identify any differences in pay between men and women and the reasons for these, as well as the reasons for any equal pay breach and how the employer plans to avoid further breaches in the future.

The employer will be required to publish the relevant gender pay information and make it available on its website for at least three years – therefore making it available to competitors, customers and potential job applicants.

Time off for ante-natal appointments

An expectant father or the partner of a pregnant woman will be entitled to take unpaid time off work to accompany the woman to up to two of her ante-natal appointments. “Partner” includes the spouse or civil partner of the pregnant woman and a person (of either sex) in a long-term relationship with her. The right to time off is capped at 6.5 hours for each appointment.

An employer is not entitled to ask for any evidence of the ante-natal appointments, such as an appointment card, as this is the property of the expectant mother attending the appointment.

However, an employer is entitled to ask the employee for a declaration stating the date and time of the appointment; that the employee qualifies for the unpaid time off through his or her relationship with the mother or child; and that the time off is for the purpose of attending an ante-natal appointment with the expectant mother that has been made on the advice of a registered medical practitioner, nurse or midwife.

Reserve Forces Reform

The statutory two-year service requirement for bringing an unfair dismissal claim will no longer apply in cases where the dismissal is connected with the employee’s membership of the Reserve Forces. The order also makes provision for the secretary of state to make payments to small and medium-sized employers of reservists who are called out for service.

It's Not a 'Game': The Need for Employers to Clearly Address Ownership of Social Media Brand Pages

This post was written by Sherri A. Affrunti and Matthew Y. Kane.

A recent district court case should remind companies of the importance of setting forth clear social media guidelines with their employees, which, among other things, make clear that webpages – such as Facebook brand pages – are owned by the company. In the case, the plaintiff, Stacey Mattocks, ran an un-official Facebook Fan Page (the “Page”) focused on a television show called the “Game.” After the Black Entertainment Television network (“BET”) acquired syndication rights to televise several seasons of the show, it hired Mattocks on a part-time basis after learning about her Page. Her employment duties included managing the Page, although other BET employees were granted permission to post to the Page. BET displayed its trademarks and logos on the Page, encouraged its viewers to “like” the Page, and provided Mattocks with exclusive content – including video links and photographs to post on the Page. Mattocks and BET eventually entered into a Letter Agreement that granted BET full access to the Page, including the right to update content at any time. In the same Agreement, BET agreed that it would not change Mattocks’ administrative rights.

During Mattocks’ employment, the number of Page “likes” grew from 2 million to 6 million. After a dispute arose between the two parties during negotiations for BET to employ Mattocks full-time, Mattocks demoted BET’s ability to access and post to the Page without her approval. Following its demotion, BET contacted Facebook and had Facebook “migrate” the likes from Mattocks’ Page to an official BET Fan Page for the “Game.” BET’s request was granted, as was a similar request it made to Twitter. Mattocks then filed suit, claiming breach of the Letter Agreement and asserting, among other claims, that BET tortiously interfered with her contractual relationships with Facebook and Twitter by having her accounts shut down.

Although the U.S. District Court for the Southern District of Florida granted summary judgment to BET – holding that Mattocks materially breached the Letter Agreement, finding that BET’s migration request was neither unauthorized nor wrongful, and rejecting Mattocks’ tortious interference claims – the case highlights the need for companies to plan ahead to protect their intellectual property assets.

Social media platforms do offer companies built-in protections. For example, Twitter provides “verified accounts” to establish the authenticity of certain brands and has a “trademark policy” that prevents users from deceiving others as to brand and business affiliations. Instagram’s Terms of Use prohibits users from violating, misappropriating, or infringing on the rights of any third party. And Facebook provides verified profiles/ Pages and prohibits users from misleading others into thinking their Page is an official Page of a brand. Despite these built-in protections, however, prudent employers should take certain proactive measures to assure their ownership rights:

  • Establish a social media policy that addresses the ownership of and use of social media accounts, provides notice to employees that such accounts are the property of the company, and complies with any applicable social media password protection laws
  • Provide proper risk management by specifically addressing in the social media policy the protection of trade secrets, intellectual property and other confidential information
  • Educate employees on the company’s social media guidelines and obtain express notice and consent for the policy, including through an initial acknowledgment of the policy, as well as periodic reminders
  • Assure that company-sponsored sites are established initially by the company within the course and scope of an individual’s employment, rather than permitting the use of a personal page initially created by an employee or other third party on personal time in the absence of a subsequent written agreement conferring ownership to the company
  • Set ground rules for the administration of official company-sponsored social media sites, making clear that their authority to administer such sites is only granted during employment and is revocable by the company at-will
  • Consider providing administrative rights to social media accounts to more than one employee
  • Avoid using employees’ names or personal information in company account names
  • Update employment agreements, confidentiality agreements and restrictive covenant agreements to address ownership of social media accounts, and otherwise reflect digital risks and realities

Taking the time to address social media ownership concerns ahead of time when an account is first created will avoid headaches later, in the event that an employment relationship is severed in an other than amicable fashion.

Reminder for N.Y. Employers: Minimum Wage Hike Takes Effect December 31

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

As we head into the final quarter of 2014, New York State employers should begin preparing for the minimum wage hike. On December 31, 2014, the statewide hourly minimum wage for non-exempt (i.e., hourly) employees will rise from $8.00 to $8.75 (and then to $9.00 on December 31, 2015). Just as significantly, the minimum weekly salary for certain exempt employees – executives and administrators – will also increase on December 31: from $600.00 to $656.25 (and then to $675.00 on December 31, 2015).

Wages for tipped employees in the hospitality industry are also impacted. For food service workers, the tip credit will increase from $3.00 to $3.75 per hour (and to $4.00 on December 31, 2015). This means that the “tipped minimum wage” for such workers will remain at $5.00 per hour, provided that tips plus wages equal or exceed the applicable minimum wage (i.e., $8.75 per hour as of December 31, 2014). But the minimum overtime rate for these workers will increase to $9.375 per hour. For non-food service workers (other than those at resort hotels), the tip credit will rise from $2.35 to $3.10 per hour, although the tipped minimum wage for such workers will stay steady at $5.65 per 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.

Finally, the minimum wage spike also means a spike in the “spread of hours” pay rate owed to employees when they work (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.

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

What Does This Mean for My Company?

2015 promises to bring a bevy of wage and hour changes for New York employers. Employers should consult with experienced counsel to discuss these issues and prepare a cogent plan of action to face them, head-on.

NY Department of Labor Mandates New Paperwork for Child Performers

As we detailed in a blog post last October, New York amended the state’s labor law to extend certain workplace protections to child models – specifically, to protect runway and print models under the age of 18 in the same way that other young performers, including actors, dancers, musicians, singers, and voice-over artists, were already protected. The state’s child performer regulations protect any performer “under the age of 18 who renders creative or artistic services in New York State as a performer or[] any New York resident under the age of 18 who renders creative or artistic services anywhere outside New York State.”

In the wake of the amendment, the New York Department of Labor has now released updated forms that employers must use when engaging child performers, including models. The new forms include: (1) a child performer permit application, (2) a school form, (3) a health form, (4) a trust account form, (5) an emergency contact form, and (6) a 15-day permit online application. More information about the state’s child performer regulations and copies of the updated forms can be found on the Department’s website.

New York State of Mind ... in Texas

Mark D. Temple and Peter J. Stuhldreher have posted a new article on Forbes.com.

Multinational companies with operations in New York have been looking for opportunities to relocate operations to business-friendly Texas. The Texas Supreme Court, in Exxon Mobil Corp. v. Drennen, recently gave those companies another reason to do so. In an anticipated decision, the court allowed Exxon, which has operations in New York, to apply New York law to a stock forfeiture agreement with one of its Texas-based employees.

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

Can NY Employers Shorten the Statute of Limitations for Workplace Claims?

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

As we previously detailed here, a New Jersey appellate court recently held that parties may contractually agree to shorten the applicable statute of limitations for state law wrongful termination claims.  New York employers, however, need not fret:  an appellate court decision from early 2013 reached the same conclusion.

The New York decision – captioned Hunt v. Raymour & Flanigan – involved the same employer and employment application as the New Jersey proceeding (Rodriguez v. Raymours Furniture Co., Inc.).  As in Rodriguez, plaintiff Thomas Hunt signed an employment application providing that “any claim or lawsuit relating to [his] service with Raymour & Flanigan must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit.”  The application further provided that Hunt waived “any statute of limitations to the contrary.”

Hunt was eventually discharged in February 2011.  More than six months after his termination, Hunt sued for unlawful discrimination and retaliation under both the New York State and City Human Rights Laws.  Raymour & Flanigan moved to dismiss, as it did in Rodriguez, on the grounds that the claims were time-barred by the contractually-shortened statute of limitations recited in the employment application.

Reversing the trial court’s decision, the Appellate Division (Second Department) agreed with Raymour & Flanigan and dismissed the action, specifically holding that “[t]he parties to a contract may agree to limit the period of time within which an action must be commenced to a period shorter than that provided by the applicable statute of limitations.  Absent proof that the contract is one of adhesion or the product of overreaching, or that [the] altered period is unreasonably short, the abbreviated period of limitation will be enforced.”  Unlike Rodriguez, however, the Appellate Division did not address the effect of the abbreviated limitations period on employment claims asserted under federal law (because Hunt did not assert such claims).

How Does This Affect My Company?

Unless and until the State’s highest court, the Court of Appeals, takes up the issue, Hunt remains good law in New York (at least in the Second Department (i.e., Richmond, Kings, Queens, Nassau, Suffolk, Westchester, Dutchess, Orange, Rockland, and Putnam counties)).  Given the increased volume of employment litigation, employers should continue to evaluate contractual provisions that may assist in controlling the costs associated with defending such claims.  Like arbitration provisions and jury waivers, reducing certain limitations periods is a tool that employers should consider.

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.