Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

Unpaid internships are a mutually beneficial staple of the American business landscape. They provide raw workers, generally students, with a glimpse into a particular industry at no cost to the company. Especially in these uncertain economic times, internships provide unemployed students with crucial real-world experience. But no good deed goes unpunished. In the past few years, several high-profile companies have fallen victim to lawsuits brought by former interns for alleged wage and hour violations. Recently, however, this wave of class action litigation hit a major roadblock. 

To view the entire post on Forbes.com, click here.

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May 28^th marks the anniversary of the effective date for the Lilly Ledbetter Fair Pay Act, the first bill signed into law by President Obama.  The Act sparked renewed focus on improving wage-equality for the American workforce and continues to be an important  goal for administrative agencies such as the Equal Employment Opportunity Commission.  Employers are encouraged to review their wage/hour policies to ensure they are up-to-date and compliant with federal and state laws.

To read the entire post on Forbes.com, click here.

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On Tuesday, another appeals court struck down an NLRB rule that would have required millions of businesses to display posters informing workers of their right to form a union and engage in other concerted activity.  The U.S. Court of Appeals for the District of Columbia Circuit held that the NLRB rule violated employers’ free speech rights by forcing them to display the posters or face charges of committing an unfair labor practice.

To read the entire post on Forbes.com, click here.

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Q:        What is easiest way to get rid of a wage and hour class action?  

A:        Making an offer of judgment to moot the named plaintiff’s claim by proposing to pay him or her an amount that will fully satisfy his or her entire individual claim.

This is exactly the strategy that the employer utilized and which, at first blush, the U.S. Supreme Court approved in Genesis Healthcare Corp v. Symczyk. But don’t get too excited, a quick review of Genesis establishes that its utility will likely be limited. 

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Reed Smith’s Labor & Employment group writes The Employment Beat, a new blog on Forbes.com. The Reed Smith Employment Beat alerts employers and management-leaning readers on breaking news they need NOW to react to the ever-challenging legal and practical demands of today’s workplace.

During the week of April 15, 2013, two events occurred that may have a significant impact for companies’ immigration-related employment practices: the Boston marathon attack and the introduction of the Border Security, Economic Opportunity and Modernization Act of 2013. This article will address an employer’s responsibilities in light of both of these events, and as immigration reform moves from mere discussion to reality.

To read the entire post on Forbes.com, click here.

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As of July 1, 2013, Virginia employers will not be required to release to third parties certain personal information relating to their current or former employees unless the release or disclosure is related to a judicial proceeding.  On March 18, 2013, the General Assembly approved an amendment to the Code of Virginia to add a new section (§ 40.1-28.7:4) which restricts third parties from compelling the disclosure and/or release of employee “personal identifying information.”  Personal identifying information means:  home telephone number; mobile telephone number; email address; shift times and/or work schedule.  According to the new law, such personal identifying information may only be disclosed about a current or former employee to a third party pursuant to a court order; a warrant issued by a judicial officer; a subpoena issued in a pending civil or criminal case; or by discovery in a civil case.

As a practical matter, we suggest that all employers – including those outside Virginia – implement and follow a neutral reference policy in which the employer will disclose to a former employee’s prospective employer only the employee’s employment dates and job title.

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Our Financial Industry Group colleague John W. Chapas wrote a Client Alert discussing the risks associated with Bring Your Own Device (BYOD) -- an escalating trend by which employees are using their own portable computing devices, including tablets and smart phones, to access their employer’s system and data. Employers are faced with the challenging question of whether they should permit BYOD or only permit employees to access their system and data through company devices.

To read the Client Alert, please click here.

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Dwight A. Howes contributed to the content of this post.

Plaintiffs’ counsel have recently been challenging whether the pay practices of oilfield service contractors comply with the overtime provisions of the Federal Fair Labor Standards Act (“FLSA”) or analogous state laws. These lawsuits challenge the use of “day rate” compensation for employees of oilfield service contractors, arguing that use of a day rate violates the FLSA or analogous state statues which require that any work over 40 hours per week by non-exempt employees must be paid at an overtime rate of time-and-a-half. When a non-exempt employee works more than three 12-hour shifts per week under such a “day rate” system, Plaintiffs argue that they are entitled to overtime compensation. 

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We've opened our new Houston office with an excellent pair of Labor & Employment attorneys, Wanda Holloway and Fazila Issa, as well several other top-notch lawyers.

Click here to learn more.

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Our Energy & Natural Resources Industry Group colleague Edward V. Walsh, III wrote a client alert regarding employers rights during an OSHA inspection, including the right to say “no” to an OSHA compliance officer (inspector) when he or she seeks to inspect a work place.

To read the entire Client Alert, please click here.

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A federal judge in Pittsburgh dismissed the Equal Employment Opportunity Commission’s challenge to U.S. Steel Corp.’s policy of randomly testing new employees for drugs and alcohol. In EEOC v. U.S. Steel Corp., the Judge rejected the EEOC’s position that random testing of new employees -- which the Company implemented after agreement with the employees’ union -- constituted an illegal medical exam under the Americans with Disabilities Act. Attached here is copy of the Court’s opinion.

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In a recent article appearing in Illinois Banker magazine, “Beyond Social Media Policies: Have Other Common Employer Policies and Practices Been Struck Down by the National Labor Relations Board,” Reed Smith Chicago partner Jim Burns discusses some of the more aggressive positions that the National Labor Relations Board (NLRB) has taken against certain common workplace policies used by financial institutions with non-union employees. Based on the National Labor Relations Act’s recognition that all employees have the right to “engage in . . . concerted activities for the purpose of . . . mutual aid and protection,” the NLRB has long prohibited policies or work rules that “would reasonably tend to chill employees” in exercising those rights. As Jim explains in this article, the NLRB has now used that language to launch attacks on some of the more common policies that banks put in place in order to avoid legal concerns and minimize risk, creating new and unexpected risks.

To read a copy of Jim’s article, click here.

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The Pennsylvania Supreme Court recently overturned 10 years of precedent and awarded unemployment compensation benefits to employees who accepted an early retirement incentive package. In Diehl v. Unemployment Compensation Board of Review, attached here,the Supreme Court analogized early retirees with employees who accepted voluntary layoffs, a category expressly eligible for benefits under the state statute.

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On August 31, 2012, in Prairie View A&M University v. Chatha, the Texas Supreme Court held that the federal Lilly Ledbetter Fair Pay Act (“Ledbetter Act”) -- that amended Title VII of the Civil Rights Act of 1964 to provide a pay-discrimination claim for each paycheck -- does not apply to a Texas state law pay-discrimination claim. Refusing to “make law” in the absence of determinative legislative intent on this issue, the Chatha court urged the Texas Legislature to amend the Texas Labor Code to adopt provisions from the Ledbetter Act.  

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This post was written by Paul D. Fogel and Marytza J. Reyes.

On February 7, 2013 the California Supreme Court issued its much-awaited opinion in Harris v. City of Santa Monica, announcing whether and to what extent a “mixed motive” defense is available to an employer under the Fair Employment Housing Act (“FEHA”). Although a mixed bag, the holding favors employers where damages and reinstatement are concerned. As the Court put it:

In sum, we construe section 12940(a) as follows: When a plaintiff has shown by a preponderance of the evidence that discrimination was a substantial factor motivating his or her termination, the employer is entitled to demonstrate that legitimate, nondiscriminatory reasons would have led it to make the same decision at the time. If the employer proves by a preponderance of the evidence that it would have made the same decision for lawful reasons, then the plaintiff cannot be awarded damages, backpay, or an order of reinstatement. However, where appropriate, the plaintiff may be entitled to declaratory or injunctive relief. The plaintiff also may be eligible for an award of reasonable attorney’s fees and costs under section 12965, subdivision (b).

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In what appears to be something of a trend, the Pennsylvania State Legislature is considering a bill entitled “The Pennsylvania Fair Employment Opportunity Act,” attached here, which would prohibit employers from discriminating against job applicants who are unemployed at the time of applying for an open position with an employer.   

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In a decision handed down today, the U.S. Court of Appeals for the D.C. Circuit ruled that President Obama lacked the authority to install three recess appointments to the National Labor Relations Board early last year. In its opinion for Noel Canning vs. NLRB, attached here, the Court concluded that the President ignored the Senate’s “advise and consent” role by appointing three Members to the Board while the Senate remained in session.

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In a recent case involving Quicken Loans, Inc., Case No. 28-CA-75857, JD(NY)-03-13 (January 8, 2013), attached here, an NLRB Administrative Law Judge (“ALJ”) found that employers’ commonly adopted practice of including non-disclosure and non-disparagement provisions in employment agreements violated the NLRA. The ALJ concluded that these contract provisions created a chilling effect on the employees’ right to discuss their working conditions with coworkers and others. 

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This year marks the twentieth anniversary of the Family and Medical Leave Act (FMLA), which entitles eligible parents to take up to 12 workweeks of unpaid job-protected leave within a 12-month period to care for a “son or daughter” with a serious health condition. Until recently, however, whether the FMLA’s definition of “son or daughter” included adult children has been unresolved.

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This post was written by William Bevan, III and Valerie M. Eifert.

On the heels of its December 12 decision overturning 50-year-old Board precedent in WKYC-TV, the NLRB reversed a 36-year-old Board ruling which protected confidential witness statements during workplace investigations from disclosure to the labor organization representing the employee or employees involved in the investigation. Prior to the Board’s December 14 decision in Am. Baptist Homes of W. d/b/a/ Piedmont Gardens , it was well-settled under Anheuser-Busch Inc., 237 N.L.R.B. 982 (1978), that the law exempted witness statements made to employers by employees with assurances of confidentiality from the requirement to provide the union involved with copies of the statements, even though such statements were arguably relevant to the Union’s representation of bargaining unit employees.

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This post was written by Matthew R. Sheldon and Julia Y. Trankiem.

Have you ever thought that being an in-house attorney will insulate you from being deposed as a witness??  Not so fast!  The role of in-house counsel in the employment context has expanded, the legal landscape is changing, and, now more than ever, in-house attorneys are being deposed as fact witnesses.  The increase in deposing in-house counsel stems, in part, from a failure to take the proper precautions to avoid being deposed.  In-house counsel's participation in internal investigations, layoffs, and discipline and termination decisions increases the risk of being deposed.  But there are ways to minimize that risk, particularly by recognizing the different roles of in-house counsel and how acting in a business capacity can jeopardize claims of privilege protection.  This is the second in a series of employment law blogs wherein Reed Smith will offer practical tips on how in-house counsel can avoid being deposed.  To see Practical Tip No. 1, click here.

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As previously reported, the Fifth Circuit recently enforced a private settlement of certain FLSA claims. More recently, however, Judge Christopher Conner of the U.S. District Court for the Middle District of Pennsylvania reached the opposite conclusion and agreed with the majority view of courts that unsupervised FLSA settlements are not enforceable.

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The National Labor Relations Board issued a ruling to preserve the flow of union dues income to unions during protracted labor negotiations. The ruling is that an employer must continue to deduct union dues from employee paychecks despite the expiration of a collective bargaining agreement that required the payments. 

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As we prepare to ring in the New Year, employers should be aware that their obligations under the Fair Credit Reporting Act (“FCRA”), federal legislation regulating the collection, dissemination, and use of consumer information from consumer reporting agencies, including certain employee background checks, will change effective January 1, 2013.  Notably, the Consumer Financial Protection Bureau (“CFPB”), which began administering the FCRA earlier this year, will require that employers and credit reporting agencies use the revised versions of three (3) of the forms distributed during the background check process covered by the FCRA (these forms can be found at Appendices K, M and N to 12 C.F.R. part 1022).  While two of these forms (“Notice to Users of Consumer Reports: Obligations of Users Under the FCRA” and “Notice to Furnishers of Information: Obligations of Furnishers”) are distributed by credit reporting agencies, the third form “A Summary of Your Rights Under the FCRA”, must be provided by employers both to employee applicants and existing employees when conducting investigative consumer reports or sending pre-adverse action notices.

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Our Executive Compensation & Employee Benefits colleagues John D. Martini, Kerry Halpern, Jeffrey G. Aromatorio and Cory A. Thomas wrote a client alert regarding three important proposed regulations under the Patient Protection and Affordable Care Act.  These proposed regulations govern wellness programs, implement rules promoting nondiscrimination in health coverage and insurance rate transparency, and provide guidance regarding essential health benefits. 

To read the entire Client Alert, please click here.

Reed Smith’s Labor & Employment Group will be conducting a series of CLE Programs entitled “Employment Law 2013 - Reed Smith Boot Camp” in locations across the country. Kicking off “Boot Camp” will be an event in our Philadelphia Office on January 31, 2013. If you would like to attend, click here and indicate your location.

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The re-election of President Obama and insignificant changes made to the political make-up of the House and the Senate have dashed the hopes of many employers that the Patient Protection and Affordable Care Act (the “ACA”) would be significantly modified or repealed. Employers, especially those that pushed compliance efforts to the back burner during the election, will now need to turn their attention to ACA compliance. With numerous compliance deadlines having taken effect in the latter half of 2012, new requirements taking effect in 2013, as well as an already noticeable up-tick in regulatory guidance, employers that do not start to take action could be left scrambling when the majority of the remaining ACA provisions become effective in 2014.

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This post was written by Matthew R. Sheldon and Julia Y. Trankiem.

Have you ever thought that being an in-house attorney will insulate you from being deposed as a witness?? Not so fast! The role of in-house counsel in the employment context has expanded, the legal landscape is changing, and, now more than ever, in-house attorneys are being deposed as fact witnesses. The increase in deposing in-house counsel stems, in part, from a failure to take the proper precautions to avoid being deposed. In-house counsel's participation in internal investigations, layoffs, and discipline and termination decisions increases the risk of being deposed. But there are ways to minimize that risk, particularly by recognizing the different roles of in-house counsel and how acting in a business capacity can jeopardize claims of privilege protection. In the next few issues of this employment law blog, Reed Smith will offer practical tips on how in-house counsel can avoid being deposed.

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Our Executive Compensation & Employee Benefits colleagues John D. Martini, Dennis R. Bonessa, Dodi Walker Gross and Allison Sizemore wrote a client alert regarding Internal Revenue Service (the “IRS”) Announcement 2012-44, released on November 16, 2012, which relaxes certain procedural requirements for plan loans and hardship withdrawals to participants affected by Hurricane Sandy.  The U.S. Department of Labor (the “DOL”) followed suit on November 20, 2012 with related relief, plus additional relief for those affected by the disaster. 

To read the entire Client Alert, please click here.

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Following the recent Fourth Circuit opinion in WEC Carolina Energy Solutions LLC v. Miller, 687 F.3d 199 (4th Cir. 2012), the issue of whether the Computer Fraud and Abuse Act (CFAA) applies to the actions of employees (as opposed to hackers) may end up at the Supreme Court. The Act provides both civil and criminal liability for a person who “exceeds authorized access” to obtain information. This is a significant issue because the possible criminal sanctions available under the CFAA could be a powerful option available to employers seeking to protect their confidential information from being stolen by disloyal employees and used by competitors.

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NLRB: Employers cannot forbid employees from disparaging their employers and companies.

An NLRB Administrative Law Judge, following the lead of the NLRB from its recent decision in Costco Wholesale Inc., invalidated social media and other employment policies of DISH Network, Inc. Linked here is that decision. The invalidated policies (1) prohibited employees from disparaging the company on social media sites; (2) required preapproval from management before speaking about the company to the media or at public meetings; and (3) limited employee communication with government agencies.

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The NLRB added to its step-by-step expansion of union rights at the expense of employers, this time by requiring employers to “promptly respond” to even irrelevant information requests from unions. This “irrelevant” ruling is an extension of well-established NLRB case law that an employer’s duty to bargain in good faith includes the obligation to provide requested information relevant and necessary to the union’s role as bargaining representative.

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Employers must remain watchful for increased union organizing at their workplaces. Those that dismiss the possibility that their employees would consider unionizing are often left disappointed and unionized when last minute anti-union campaigns in response to “surprise” representation petitions are “too little, too late.” Recent actions by the National Labor Relations Board—examples are below-- highlight the need to prepare now, well before a union targets an employer.

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Answering a certified question from the United States Court of Appeals for the Fourth Circuit, the Virginia Supreme Court held last week that “Virginia recognizes a common law tort claim of wrongful discharge in violation of established public policy against an individual who was not the plaintiff’s actual employer but who was the actor in violation of public policy and who participated in the wrongful firing of the plaintiff, such as a supervisor or manager.” VanBuren v. Grubb, No. 120348, slip op. at 11-12 (Va. Nov. 1, 2012). That decision, in line with similar decisions in the District of Columbia, Arizona, Iowa, New Jersey, Pennsylvania and West Virginia, is in conflict with the Fourth Circuit’s longstanding position that individual supervisors cannot be held personally liable for unlawful discharges under Title VII. See Lissau v. Southern Food Serv., Inc., 159 F.3d 177, 181 (4th Cir. 1998).

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In an apparent victory for employers, the NLRB’s General Counsel (“GC”) issued a pair of Advice Memoranda upholding handbook employment-at-will disclaimers comparable to provisions found unlawful several months ago by the same GC. In the Memos, found here and here, the GC concludes that the following disclaimers did not explicitly restrict employees’ protected activities and were not in response to union or other NLRA-protected activity:

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Jonathan Nadler and Joel Barras published a series of three related articles in Forbes magazine last week, in which the Labor & Employment duo presents their thoughts on what employers should expect if Obama wins the election, and if Romney wins the election.

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Our Executive Compensation & Employee Benefits colleagues John D. Martini, Jeffrey G. Aromatorio, Jenny C. Baker and Allison Sizemore wrote a client alert regarding the December 31, 2012 deadline for correcting certain errors in the written provisions of nonqualified deferred compensation arrangements that provide payments that are contingent on the recipient’s execution of a release of claims, or a restrictive covenant agreement or similar document.

To read the entire Client Alert, please click here.

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This post was written by Hannah L. Kaplan and Betty S.W. Graumlich.

Recently, the Fifth Circuit created a crack in a thirty-year old doctrine, based on the Eleventh Circuit’s Lynn’s Food Stores, Inc. v. United States decision and followed by nearly all federal courts, that wage and hour claims brought by individuals under the Fair Labor Standards Act (“FLSA”) can be settled only with the signoff of the Department of Labor (“DOL”) or a supervising court.

In Martin v. Spring Break ‘83 Productions, LLC, certain union-represented employees working on a movie set grieved that they had not been paid for work performed. Following his own investigation, a union representative found it impossible to determine whether the grievants had actually worked the claimed hours. The union and the employer then entered into a settlement agreement to resolve the matter.

Before the union signed the settlement agreement, some of the affected employees sued the employer to recover the claimed wages. Enforcing the union settlement agreement, the district court issued a 20-page reasoned opinion granting summary judgment for the employer. The employees then appealed to the Fifth Circuit, arguing, among other things, that Lynn’s Food Stores made the settlement agreement unenforceable because it lacked involvement and approval from a court or the DOL.

On appeal, in a lengthy footnote, the Fifth Circuit expressly rejected the Eleventh Circuit’s longstanding holding in Lynn’s Food Stores that wage and hour claim settlements must always be supervised by the DOL or a court. Instead it adopted the opinion and supporting logic of a 2005 Texas federal district court case that found that “a private compromise of claims under the FLSA is permissible where there exists a bona fide dispute as to liability.”

While this ruling has only been adopted by a footnote in a Fifth Circuit panel decision, it may provide a path for employers to settle FLSA disputes confidentially and avoid costly litigation, where there is a bona fide dispute over whether the disputed wages are owed. Employers should, however, enter into any such settlement with the understanding that this “settlement crack” is still in gestation and therefore uncertain, especially in circuits other than the Fifth.

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Following the lead of Maryland and Illinois, California is the latest state to stop employers from requesting social media log-in information, such as user names and passwords for Facebook, Twitter, or e-mail, from employees and job applicants. The new law also includes protections from employer retaliation against employees who refuse to provide this personal access information.

Bill AB-1844 broadly defines “social media” to include “an electronic service or account, or electronic content, including, but not limited to, videos, still photographs, blogs, video blogs, podcasts, instant and text messages, email, online services or accounts, or Internet Web site profiles or locations.” The law specifically forbids employers from forcing employees to (1) disclose their username or password for the purpose of accessing personal social media; or (2) access personal social media in the presence of the employer.

The new legislation is not without pro-employer aspects. It does not limit an employer’s ability to discipline an employee or take other action in response to the employee posting defamatory or other untrue comments about the employer. As an exception to the general prohibitions quoted above in the new law, California employers retain their right to demand that an employee divulge her/his personal social media content “reasonably believed to be relevant to an investigation of allegations of employee misconduct or employee violation of applicable laws and regulations.”

But California employers and employers outside California with California-based workers need to tread carefully before requiring an employee to provide access to her/his social media. While the California law may permit the intrusion in limited circumstances, an employer needs to make sure the law permits the “intrusion” in question. In addition, the employer must learn whether the intended search and any resulting discipline is beyond the reach of the National Labor Relations Act as recently “clarified” and arguably expanded the NLRB’s Acting General Counsel. See our earlier alerts on this here and here. Finally, the search may implicate still other federal, state and local laws such as state laws that protect employees from adverse employment actions for engaging in activities that are “not unlawful.” 

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Once again, highlighting the potential risk to employers of using employee selection tests to filter applicants, the Third Circuit recently enforced an Equal Employment Opportunity Commission (“EEOC”) subpoena directed to test-maker Kronos, Inc., in a disability discrimination case. EEOC v. Kronos Incorporated, Civ. Act. No. 11-2834 (September 14, 2012, Third Circuit). The involved employer acknowledged that the Customer Service Assessment test created and administered by Kronos had factored into the decision to deny employment to the applicant.

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Once again attacking personnel policies largely designed to comply with other laws, the National Labor Relations Board invalidated certain personnel policies protecting the dissemination of employee health information and personal identifiers. View the full decision by clicking on Costco Wholesale Inc.

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This post was written by Hannah L. Kaplan and Betty S.W. Graumlich.

Late last week, following a recent trend, the Seventh Circuit overturned its own long-standing precedent to now hold that the Americans with Disabilities Act’s (ADA) "reasonable accommodation" provision requires employers to place disabled employees who cannot perform the essential functions of their job even with reasonable accommodation in vacant positions for which they are qualified. EEOC v. United Airlines, Inc.

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This post was written by Valerie M. Eifert and Michael D. Jones.

A federal court in Pennsylvania ruled that the fluctuating workweek method of calculating overtime, while compliant with the Fair Labor Standards Act, violates Pennsylvania's Minimum Wage Act ("PMWA"). The fluctuating workweek method of calculating overtime permits an employer to pay a non-exempt employee a fixed, weekly salary, regardless of the number of hours that employee works. Overtime is then paid at 50% of the regular rate of pay, rather than 150% of the regular rate of pay. The regular rate of pay is calculated by dividing the fixed salary by the total number of hours worked in the applicable week. Using this method benefits employers whose employees typically work in excess of 40 hours per week.

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On Monday, August 20, a federal judge in Philadelphia upheld the Department of Labor ("DOL") rule setting minimum wage requirements for foreign workers holding H-2B visas. The proposed rule has drawn much attention, and criticism, because it potentially will cost $874,000,000 or more per year in increased labor costs for employers with H-2B visa holders.

For over fifty years, employers have relied on non-immigrant workers with H-2B visas to fill temporary positions in non-agricultural industries that qualified U.S. workers declined to accept. Although the Department of Homeland Security ("DHS") has final authority to determine whether to issue a H-2B visa, it defers to the DOL for advice on the validity of the employer’s need to hire such non-immigrant workers. Critics argue that availability of H-2B visas is a millstone on U.S. workers because it permits employers to hire non-immigrant workers at depressed rates.

In January 2011, the DOL issued proposed rules that, among other things, would require H-2B visa holders to be paid wages equal to or exceeding the highest of the prevailing wage among the applicable federal, state and local minimum wages. The DOL estimated its new rule would increase hourly wages for such positions by $4.83 per hour. Not surprisingly, the DOL received over 300 comments to its proposed rule. After a series of DOL postponements, the rule is now to go into effect on October 1, 2012.

The proposed rule also sparked lawsuits by industry groups that argued that the DOL lacks congressional authority to promulgate rules on the H-2B program because (i) final decision making authority lies with the DHS, and (ii) the DHS’ rulemaking authority is non-delegable and/or DHS never delegated it to the DOL. In response to these legal challenges, the DOL postponed implementation of the proposed rule three times. Monday’s decision in The Louisiana Forestry Assn v. Solis may be a significant first-step towards final adoption of the proposed rule. Rejecting the procedural challenges described above, the court found that the DOL had followed proper guidelines and procedural requirements in formulating and announcing the proposed rule. More importantly, the court also determined that the DOL had acted properly when promulgating guidelines for a program technically administered by another agency. According to the court, while the DHS has the ultimate power to grant H-2B visas, it may rely upon recommendations from the DOL in determining whether to grant a particular H-2B visa application. Accordingly, to the extent the DHS has sought the DOL’s advice, the agency has the authority to establish its own set of requirements or guidelines that employers seeking its blessing must satisfy.

Interestingly, before the court entered Monday’s ruling, other industry groups filed a lawsuit in the United States District Court for the Northern District of Florida that raised the same procedural challenges. In that case, Bayou Lawn & Landscaping Service v. Solis, the court entered a temporary injunction barring the DOL, on a nationwide basis, from implementing its proposed rule. Appealing to the United States Court of Appeals for the Eleventh Circuit, the DOL, among other arguments, asserts that the lower court abused its discretion in entering a nationwide injunction. Undoubtedly, the DOL will raise The Louisiana Forestry Association, Inc. to support the legality of its rulemaking authority and as evidence of a "split" among the federal courts over this issue that requires review by the United States Supreme Court.

These conflicting decisions muddy whether the DOL’s proposed rule will actually be implemented on October 12. The DOL also recognizes the immediate limbo and, in its appellate submission, suggests a interim hiatus of the H-2B visa program. That "solution", however, is likely as unpalatable for most affected employers because of the "Can we or can’t we?" increased costs they face if the proposed rule is ultimately adopted. Reed Smith will continue to monitor and provide guidance regarding the status of DOL’s proposed rule and its impact for employers.

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The National Labor Relations Board (“NLRB”) is expected to issue a ruling shortly on whether employers can lawfully prohibit their employees and unions from using employer-owned e-mail and intranet systems to distribute union campaign materials. An NLRB decision favoring employee and union use of these internal communication avenues for union organizing and other NLRA-protected activities would effectively extend and be the NLRB’s “blessing” of its Acting General Counsel’s social media “rules” and guidelines discussed here and here.

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NLRB holds that employer’s practice of requesting employees to keep internal investigations confidential violates the NLRA.

The National Labor Relations Board ("NLRB" or "Board") is at it again, this time finding that an employer's policy prohibiting employees from discussing ongoing investigations of employee misconduct infringes upon employees’ Section 7 rights in violation of Section 8(a)(1) of the National Labor Relations Act ("Act" or "NLRA"). Banner Health Sys. d/b/a Banner Estrella Med. Ctr., 358 NLRB No. 93 (July 30, 2012).

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In a decision that may extend to other state and federal courts, the National Labor Relations Board, and to labor arbitrations, Alaska’s Supreme Court became the first state or federal court to recognize an implied statutory privilege for union-employee communications during a disciplinary or grievance proceeding to block questioning about them. Comparable to confidential attorney-client communications, the privilege extends to confidential communications between an employee or the employee’s attorney and union representatives acting in their official capacity.  The communications must also relate to anticipated or ongoing disciplinary or grievance proceedings.

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Inserting itself once again in the relationship between employers and their non-union employees, the National Labor Relations Board ("NLRB") recently settled a case in which the General Counsel alleged that certain common "at-will" disclaimers in employee handbooks and manuals violated the National Labor Relations Act ("NLRA"). Raised but unresolved is the impact of this settlement on "at will" disclaimers in general. 

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This post was written by David L. Weissman, Cindy Schmitt Minniti, and Daniel Schleifstein.

The New York State Legislature recently passed amendments to New York Labor Law §193, to permit employers to make additional payroll deductions authorized in writing by employees. Governor Cuomo is expected to sign this bill into law very shortly.

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On June 30, 2012, the Pennsylvania Legislature passed into law Senate Bill 637 which will require public works contractors and subcontractors subject to the Pennsylvania Prevailing Wage Act (essentially, construction projects where the estimated cost is at least $25,000)  to use  E-Verify to confirm that their employees are legally permitted to work in the United States.  Violators of the new law are subject to progressive penalties including fines and debarment from working on public projects for up to three  years.  The law also protects employees who participate in an investigation, report, or complain about possible violations of the statute.  The law is awaiting signature from Governor Corbett and, if signed, will take effect January 1, 2013. 

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Our Executive Compensation & Employee Benefits colleagues John D. Martini, Rachel Cutler Shim, Dennis R. Bonessa, and Kaitlin A. McKenzie-Fiumara recently wrote a client alert regarding the U.S. Supreme Court's decision in National Federation of Independent Business v. Sebelius, upholding the constitutionality of the Patient Protection and Affordable Care Act of 2010 (the “ACA”).  The Supreme Court, by a vote of 5 to 4, with Justice Roberts siding with the more liberal justices, upheld the constitutionality of the ACA, including the controversial individual mandate. However, in what was an unexpected turn of events, the Supreme Court did not find the individual mandate constitutional as an exercise of the Commerce Clause, instead finding the individual mandate permissible as a valid tax, with Justice Roberts writing in the majority opinion, "Such legislation is within Congress's power to tax."

To read the entire Client Alert, please click here.

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On June 26 and 27, 2012, the Pennsylvania legislature passed an amendment to the Pennsylvania Minimum Wage Act to allow medical facilities to pay overtime to its employees for time worked over 8 hours per day or 80 hours in a 14-day period. The employer must provide advance notice to its employees before taking advantage of this overtime payment schedule and must first negotiate any change to overtime calculations with the unions of any of their represented employees. Previously, hospitals and other medical facilities were required to pay overtime for time worked in excess of 40 hours per week. This amendment brings the state’s minimum wage law in line with the Fair Labor Standards Act and will eliminate the confusions and litigation that resulted from the previous discrepancy between the state and federal law. It is anticipated that Governor Tom Corbett will sign the act into law.

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The United States Supreme Court ruled today in Knox v. SEIU that a union violates the First Amendment by imposing or increasing the dues or fees of union-represented public (meaning government-employed) employees if those increases stem from the costs of political activities by the union and the public employees are part of the unionized bargaining unit but not union members.  Instead, unions must inform their non-union members of the new or increased fees and allow them to choose whether to pay them.

Left unchanged is the Court’s longstanding precedent in Abood v. Detroit Bd. of Ed., 431 U. S. 209 (1977) that unions may require union-represented public employees who are not union members to pay fees to cover the unions’ costs associated with collective bargaining and grievance administration.  But forcing such employees to pay fees for political activities, would be a “compulsory subsidy for private speech” prohibited by the First Amendment unless there is prior notice and consent.  

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On June 18, 2012, the U.S. Supreme Court resolved a split among the U.S. Circuit Courts of Appeals, holding that pharmaceutical sales representatives are exempt outside sales employees under the Fair Labor Standards Act (“FLSA”). Thus, such employees are not entitled to overtime protection.

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This post was written by Kyle Bahr and Efrem Grail.

A recent Third Circuit opinion undercuts the attorney-client privilege, especially in federal Grand Jury investigations of companies and individuals. Under the new precedent, there is no way to immediately challenge a court order invading the protections of the attorney-client privilege without first suffering a judicial contempt citation, thereby risking monetary fines and imprisonment. In this article, Reed Smith attorneys Kyle Bahr and Efrem Grail highlight the difficult choices faced by clients in protecting their privileged materials from discovery by the Government in federal criminal investigations.

Read the full article here.

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The National Labor Relations Board’s (NLRB’s) Acting General Counsel Lafe Solomon issued his third report on social media cases handled by the NLRB. Copies of all three memos are available here, here and here, in the order issued. Our previous blog post discussing the second memo can be found here.

The most recent, third report reviews 7 social media policies, finding 6, at least in part, violative of the National Labor Relations Act. Solomon found  the seventh policy compliant with the Act and attached that full policy to his memo.

Extracted from the six “violation” cases are the following examples of impermissible elements of social media policies.

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The United States District Court for the District of Columbia voided the NLRB’s so-called “quickie election” rules because the NLRB lacked the quorum necessary when it adopted its Amended Election Rules to expedite the current union election process. See Chamber of Commerce, et al v. NLRB. Our more in-depth analysis of those amended rules is in our earlier post at here. As noted there, the United States Chamber of Commerce and several trade organizations sought to invalidate the rules on several legal grounds, including lack of quorum.

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On the heels of its long-awaited decision in Brinker v. Superior Court (Hohnbaum), No. S166350, the California Supreme Court this week issued another important wage and hour decision that favors employers. In Kirby v. Immoos Fire Protection, Inc. (Liu), No. S185827, the court ruled that neither employees nor employers can recover attorney's fees as prevailing parties on claims for meal and rest period violations. This is a key victory for California employers that routinely are subject to “one-way” statutes requiring them to pay attorneys’ fees to prevailing plaintiffs, but rarely, if ever, permitting employers to obtain such fees when they prevail. 

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The General Counsel for the National Labor Relations Board ("Board") issued a complaint yesterday alleging that 24 Hour Fitness USA, Inc., violated the National Labor Relations Act ("NLRA") by insisting that all employment-related disputes be resolved through individual arbitration. The employer, which operates fitness centers nationwide, requires its non-union workforce, as a precondition of hire, to sign written waivers surrendering any right to pursue collective or class action lawsuits or arbitrations against the Company. Employees may later opt-out of this waiver, but only by submitting a Company-created form within 30 days of their signing the original release.

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This post was written by Rania Afram and Eugene K. Connors.

In an April 20, 2012 decision, the Equal Employment Opportunity Commission (“EEOC”) solidified its intended protection of transgender employees under Title VII of the Civil Rights Act of 1964. The EEOC made it clear that an employer that discriminates against an employee or applicant on the basis of that person’s gender identity violates Title VII’s sex discrimination prohibitions. Because transgender people lack protection from adverse employment decisions in 34 states, this EEOC decision is a watershed moment for the transgender community. It also highlights the broad range of protected categories that could subject employers to more liability for discrimination.

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The "new" guidance -- accessible at http://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm -- reinforces longstanding EEOC policy prohibiting employers from using arrest and conviction records to exclude individuals from employment. More recently, the EEOC has expanded enforcement efforts to include prohibitions on employer policies that exclude candidates from employment because of criminal history, arrests, and convictions. That is because such policies adversely affect or have a "disparate impact" on minority populations that have statistically higher arrest and conviction rates. The disparate impact analysis has long been used to combat race discrimination in the workplace. The "takeaway" messages for employers are in the EEOC's specific recommendations and stated limitations on how and when criminal background information can be used. Starters are that it must be a conviction, not an arrest, and the conviction must be for an offense related to the job in question, often a tough analysis for employers. The conviction must be relatively recent in time and be of a sufficient gravity to create legitimate concern by the employer.

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This post was written by Lisa M. Carvalho and Seth C. Carmack .

On April 12, 2012, the California Supreme  Court issued its long-awaited decision in Brinker Restaurant Corporation v. Superior Ct. (Hohnbaum), No. S166350. The decision clarified several important issues regarding California employers’ obligations in connection with meal and rest breaks for non-exempt employees. It also offered guidance regarding the certification of meal and rest period wage and hour class actions.

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California's new Wage Theft Protection Act of 2011 (Labor Code Section 2810.5, effective January 1, 2012), requires employers to provide most new non-overtime-exempt employees with a written notice that contains specified information regarding, among others, wage rate, payday, employer name and address, workers' compensation insurance carrier information, and other information added by the Labor Commissioner as it may deem necessary

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This post was written by Valerie M. Eifert and William Bevan, III.

The District of Columbia Circuit Court of Appeals granted a motion for an injunction pending appeal filed by national trade associations challenging the NLRB Posting Rule that requires all employers covered by the National Labor Relations Act to post a notice informing employees of their rights under the Act.  In granting the motion to enjoin the implementation of the rule pending appeal, the Circuit Court noted that the Board earlier agreed to postpone operation of the rule during the district court proceedings.  The Circuit Court also found that the district court's decision to uphold the posting rule while depriving the Board of its primary enforcement mechanism against noncompliance creates uncertainty regarding the application of the rule and counsels in favor of granting the request for an injunction.  The Circuit Court has expedited the appeal, requiring all briefing to be concluded by June 29, 2012 and oral argument to be held in September, 2012.   

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Employers are becoming more aware of the impact of Facebook and the type of information it can reveal. Some employers use Facebook to find background or character information about their employees or job applicants. Other employers use Facebook to find out whether employees have disclosed information about the employer’s business. Some employers are taking it a step further by requesting that job applicants and/or current employees disclose their Facebook user name and password. Other employers are asking applicants and/or employees to "friend" its human resource manager or log into a company computer during interviews to view their Facebook content.

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This post was written by William Bevan, III and Joel S. Barras.

As we have discussed in earlier posts found here and here, several national trade associations challenged the NLRB’s Rule that requires all employers covered by the National Labor Relations Act to post a notice notifying employees of their rights under the Act. In response to those filings, a federal district court upheld the posting requirement, but struck down the Rule’s enforcement provisions that considered an employer’s failure to comply with the posting requirement an unfair labor practice. The court similarly struck down a provision within the Rule that extended the time an employee could file an unfair labor practice against an employer that failed to comply with the posting requirement.

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This post was written by Joel S. Barras and Valerie M. Eifert.

At a time when public employers across Pennsylvania are seeking to reduce or at least contain the skyrocketing costs of post-retirement health care benefits, the Commonwealth Court has virtually handcuffed municipalities from achieving any genuine relief for decades. The Commonwealth Court ruled in FOP, Flood City Lodge No. 86 v. City of Johnstown, No. 1873 C.D. 2010 (February 22, 2012), that the elimination of post-retirement health benefits for active police officers and firefighters by an Act 111 interest arbitration panel constitute an unlawful diminishment of contractually guaranteed benefits under the Home Rule Charter Law. This decision will likely have broad implications, as it signals how the Commonwealth Court will interpret a similar provision in the Pennsylvania Constitution that applies to all municipalities.

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This post was written by Joel S. Barras and Samantha M. Clancy.

The National Labor Relations Board’s (NLRB’s) Acting General Counsel Lafe Solomon recently issued a report on social media cases handled by the NLRB. This second report—he issued his first in August 2011— provides guidance to employers in developing and enforcing social media policies to comply with the National Labor Relations Act (NLRA). Copies of his two memos are available here and here.

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This post was written by John D. Martini, Dodi Walker Gross, Dennis R. Bonessa and Lori M. Atkin.

Increasing scrutiny by the federal government could leave employers at risk for adverse consequences if they fail to make timely deposits of employee deferrals/contributions and loan repayments to retirement plans. The following brief alert outlines some frequently asked questions relating to timely deposits and employee plans.

Read the full client alert at reedsmith.com.

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Most employers assume that if they successfully defeat a plaintiff’s motion for class certification in a wage and hour class action, the same class claims cannot be raised again in another case. On January 18, 2012, however, the California court of appeal in Bridgeford v. Pacific Health Corp, 2012 WL 130615, dashed that commonly held assumption.

In Bridgeford, the court held that “under California law, … the denial of class certification cannot establish collateral estoppel [i.e., issue preclusion] against unnamed putative class members on any issue because unnamed putative class members were neither parties to the prior proceeding nor represented by a party to the prior proceeding so as to be considered in privity with such a party for purposes of collateral estoppel.” The plaintiffs in Bridgeford were unnamed putative class members in prior litigation brought by a different plaintiff against the same employer defendants in both the prior litigation and in Bridgeford. The defendants in the prior litigation had defeated class certification of the wage and hour claims asserted against them. Undeterred by the lack of success of the other plaintiff in the prior litigation, the Bridgeford plaintiffs brought their own action against the same employer defendants seeking class certification of the same wage and hour claims which were not previously certified.

Concluding that the class claims were not barred as a matter of law, the Bridgeford court relied substantially on the United States Supreme Court decision in Smith v. Bayer Corp, 131 S. Ct. 2368 (June 16, 2011). That decision held that, under federal law, “unnamed putative class members cannot be bound by issue preclusion if the class was never certified in the prior proceeding.”

The Bridgeford court disagreed with a few other California courts of appeal, including the one that decided Alvarez v. May Department Stores Co. (2006) 143 Cal. App. 4th 1223. In Alvarez, the court determined that, under appropriate circumstances, the doctrine of collateral estoppel “does not lead to an unfair result” and, therefore, can bind in subsequent litigation the unnamed putative class members from the prior litigation. The Bridgeford court made clear that it was reaching a conclusion “contrary” to the one reached in Alvarez.

The conflict which now exists between the decisions of different courts of appeal on the application of collateral estoppel to denials of class certification motions may spur the California Supreme Court to resolve the conflict, and it may happen if a petition for review is filed in Bridgeford.

Even without a petition for review, or if one is filed and denied, employers still may be able to defeat repetitive class action litigation based on perhaps the only helpful portion of the United States Supreme Court’s decision in Bayer. In particular, the Court states that, even if a collateral estoppel is inappropriate in a denial of class certification, courts should still “apply principles of comity to each other’s class certification decisions when addressing a common dispute” so as “to mitigate the sometimes substantial costs of similar litigation brought by different plaintiffs.” In other words, while collateral estoppel may not stop the revolving door of class action litigation, a court’s discretion to respect another court’s prior decision on class certification might.

 Keep informed on this changing area of the law.

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In accordance with New York's Wage Theft Prevention Act (WTPA), which took effect on April 9, 2011, employers are required to give written notice of wage rates to New York employees:

• upon hire to new employees, and
• by February 1st of each year to all employees

The notice must include:

• Rate or rates of pay, including overtime rate of pay (if it applies)
• How the employee is paid: by the hour, shift, day, week, commission, etc.
• Regular payday
• Official name of the employer and any other names used for business (DBA)
• Address and phone number of the employer's main office or principal location
• Allowances taken as part of the minimum wage (tips, meal and lodging deductions)

The notice must be given both in English and in the employee's primary language (if the Labor Department offers a translation). The Department currently offers translations in the following languages: Spanish, Chinese, Haitian Creole, Korean, Polish and Russian.

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Attached is a decision from the NLRB in D. R. Horton, Inc. (decided the last day of Member Becker's term). In a 2-0 decision with Member Hayes recusing himself, the Board finds that an employer violates Section 8(a)(1) of the Act when it requires its employees who are covered by the Act, as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours and working conditions against their employer in any forum, arbitral or judicial. The Board finds such waivers to unlawfully restrict the Section 7 rights of employees to engage in concerted activity for their mutual aid and protection, notwithstanding the provisions of the Federal Arbitration Act.

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This afternoon, the White House announced President Obama's intention to recess appoint three members of the National Labor Relations Board, including Sharon Block, Deputy Assistant Secretary for Congressional Affairs at the U.S. Department of Labor, Terence F. Flynn, Chief Counsel to Member Brian Hayes, and Richard Griffin, General Counsel for International Union of Operating Engineers. A link to the NLRB press release which contains the prospective members' biographies is found here. For now, these appointments render the Board's recent procedural actions taken in anticipation of its loss of a quorum moot. We anticipate that industry groups will challenge the President's authority to make recess appointments while Republican Senators hold pro forma congressional sessions. We will continue to follow this closely and update you on any future developments.

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California's new Wage Theft Protection Act of 2011 (Labor Code Section 2810.5, effective January 1, 2012), requires employers to provide most new non-overtime-exempt employees with a written notice that contains specified information regarding, among others, wage rate, payday, employer name and address, workers' compensation insurance carrier information, and other information added by the Labor Commissioner as it may deem necessary. The new law requires that the Labor Commissioner create a notice template for employer use, which employers eagerly have been awaiting since the new requirements were signed into law in October 2011. Now the wait is over -- employers can access the Labor Commissioner's template for compliance with the new law at: http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html.

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U.S. employers with French operations must focus carefully on their investment or divestment operations. Through the " joint employer theory " employees of a French company can now pierce its corporate veil to hold the ultimate parent, even one based in the United States, liable for restructuring costs, including severance packages and damages for unfair dismissal.

Nicolas Sauvage's following presentation gives you the crucial aspects on this French distinctive feature:  "A New Challenge for International Groups Established in France"

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This post was written by John DiNome, Joel Barras and Valerie Eifert.

Effective January 1, 2012, a signature amendment to the Pennsylvania Unemployment Compensation Law will require that severance pay in excess of 40% of the average annual wage in Pennsylvania offset unemployment compensation benefits otherwise payable to separated employees.

Prior to Act 6 of 2011, the amount of unemployment compensation a qualified claimant would receive would be offset only by: (1) compensation received for employment services performed during the week in which the individual claimed benefits; and (2) vacation pay in excess of partial benefit credit, which did not apply to employees who had been permanently or indefinitely separated from employment. The most recent “poster child” benefiting from these limited offsets is the former Superintendent of the Philadelphia School District, who received $905,000.00 as part of a severance package and still qualified for unemployment compensation benefits.

The amendment adds a third offset to the weekly unemployment benefit to help avoid a Philadelphia School District anomaly by offsetting the benefit with any severance pay received. Severance pay is “one or more payments made by an employer to an employee on account of separation from the service of the employer, regardless of whether the employer is legally bound by contract, statute or otherwise to make such payments.” 43 P.S. § 804(d)(1).

Severance pay, however, is deductible from unemployment compensation benefits only to the extent it exceeds 40% of the average annual wage in Pennsylvania. That 40% threshold is currently $17,853.00. Only the excess over 40% will be an offset. 

Any severance pay offset is applied “to the day, days, week or weeks immediately following the employee’s separation” until used up. The severance pay offset applied to each day or week is equivalent to the regular full-time daily or weekly wage of the claimant. As an example, an individual who is entitled to receive $500 per week in unemployment benefits but is also entitled to $19,853 in severance pay ($2,000 more than the 40% average) would collect no unemployment benefits for the first four ($500 times four is $2000) weeks following her separation from employment and would begin to collect her $500 weekly benefit for and after the fifth week. 

If the amendment had been in effect at the time the former Philadelphia School District Superintendent received her severance package, the size of her severance payment would have offset her unemployment benefit for her entire 26 weeks of benefits eligibility. 

These changes apply to severance compensation payable by agreement or policy on and after the January 1, 2012 effective date of the amendment. 

Contact your Reed Smith attorney or an experience employment lawyer for added guidance.

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For decades, U.S. employment lawyers have stressed the need for employers to inject into employee handbooks and elsewhere that “your employment is at-will, terminable at any time, with or without notice.” This magic language, coupled with the legal presumption that an employment relationship is at-will unless otherwise stated, has generally been sufficient to overcome any argument from a terminated employee that s/he was anything more than at-will. 

According to a recent Illinois appellate case, even the most ironclad at-will proclamations may be insufficient when an employer makes a promise to an employee outside the scope of the actual employment agreement. Take a deep breath, and then read on.

The facts of Janda v. U.S. Cellular Corp. are not unusual. A new boss came into town, shook things up, and his subordinates were none too pleased. To boost morale, the employer held a focus group meeting for the plaintiff and other employees. The employer encouraged employees to be candid, promised to keep their comments confidential, and assured them of no retaliation for anything said at the meeting. Candid they were. Out came brutal honesty, largely centered on bashing the new boss.

The boss later confronted the plaintiff about the “nasty things” said about him at the meeting, apparently leaked to him by another focus group participant. The boss then fired the plaintiff and the other focus group participants, except the alleged informant.

The discharged plaintiff filed suit for breach of contract and promissory estoppel, seeking to hold his employer to its promises and assurances that his comments would be kept in confidence and without repercussions. For promissory estoppel, a plaintiff must prove (1) the defendant made an unambiguous promise to the plaintiff; (2) the plaintiff relied upon the promise; (3) the reliance was expected and foreseeable by the defendant; and (4) the plaintiff relied on the promise to his or her detriment. 

The trial court rejected both claims.  On appeal, the state appellate court affirmed the trial court’s denial of the breach of contract claim, based on existing at-will language in the governing employment documents, but reversed dismissal of the promissory estoppel claim. According to the appellate court, the basis for the promissory estoppel claim were the employer’s promises of confidentiality and no retaliation to encourage openness and honesty at the focus group meeting. Because the plaintiff had relied on those promises and “spilled his guts” to his detriment, his claim for promissory estoppel had validity. In the court’s judgment, a promissory estoppel claim was completely separate from and unaffected by the “at will” pronouncements.

The lesson to be learned? Be sure before you assure, because a court and jury are likely to make you live up to your promises.

The abundant benefits of focus groups obviously can be and often are crucial to an employer’s success and even survival, especially when competing globally. But it comes with a price. To encourage openness and honesty, any employer must make a Las Vegas like promise: “What happens here stays here.” And then, of course, make sure to keep it.

Speak with your Reed Smith employment attorney—or another experienced employment lawyer—about best practices and how to protect your company from irreparable loss of credibility, unnecessary court costs and liability while maintaining and improving a workplace that will encourage and motivate your employees to invest in, and feel invested in by, your company.

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This post was written by William Bevan, III, John A. DiNome and Joel S. Barras.

On November 30, 2011, the National Labor Relations Board (“Board”) voted 2-1 to advance certain proposed rules to expedite the current union election process and significantly limit employer participation in that process. The proposed rules will be drafted in final form for eventual publication in the Federal Register and re-voted by the Board. Uncertainty lingers, however, because the final vote must occur before expiration of Member Craig Becker’s recess appointment when Congress adjourns for the year. While the proposed rules are not as onerous as originally proposed by the Board, (1) they would effectively minimize an employer’s time to express its views about bargaining with its employees and (2) will eliminate any legal pre-election challenge to contested issues such as the scope of the bargaining unit and voter eligibility.

The New Rules

The Board is responsible for administering representation elections under the National Labor Relations Act (“NLRA”). Historically, the Board adheres to an internal policy designed to schedule elections within approximately six weeks after the filing of a representation petition. As indicated by the Board’s annual statistics, the actual elections in the overwhelming majority of cases fell within this six-week benchmark, because most are usually conducted pursuant to election agreements.

The Board’s proposed rules would significantly reduce the time between the filing of a representation petition and the election. This cut from filing to election leaves employers with significantly less time to present their views on unionization and bargaining to their employees and to attempt to convince employees that the union’s side of the story is not the only side.

Specifically, the proposed changes that the Board acted on include:

1. Authorizing hearing officers to limit any pre-election hearing issues only to whether an election should be held. Previously, employers could challenge election unit scope, and voter inclusion/exclusion eligibility issues, such as supervisory, casual, or confidential employee status. These issues will now be raised only after the election.
2. Authorizing the hearing officer to decide whether to permit the parties to file post-hearing briefs. Previously either party had the right to file post-hearing briefs.
3. Eliminating all pre-election review and consolidating pre- and post-election issues in a single, post-election request for review.
4. Eliminating the Board’s discretionary option to postpone elections to resolve a pre-election request for review.
5. Eliminating the practice of special appeals at the hearing stage of the proceeding.
6. Giving the Board discretion on whether to hear and decide appeals, thus eliminating what had been either party’s guaranteed right to appeal on election issues.

The Board has yet to act on a number of additional proposed changes which still require further deliberation.

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Last month, California Governor Jerry Brown approved a variety of state legislation affecting employers doing business in California. Discussed here is SB 459, which imposes strict penalties for employers found willfully (intentionally and voluntarily) to have misclassified workers as independent contractors. Known to some as the "Job Killer Act," SB 459 provides for stiff fines, joint and several liability for third parties advising as to intentional misclassification, and a "scarlet letter" provision requiring employers who are found willfully to have misclassified their workers to post public notice of the violation for a year. The Act adds new Labor Code sections 226.8 and 2753, effective January 1, 2012.

Inadvertently included in our summary last month of the Act's provisions was a burdensome recordkeeping and notice requirement that appeared in pre-signed versions of the Act. We are pleased to report, however, that this burdensome requirement did not survive and is not part of the new Act. Following are notable provisions of the signed Act, with the stricken provision deleted:

1. Fines of $5,000 - $10,000 for the first violation, and up to $25,000 for repeat violations;
2. Prohibition on charging workers a fee or deducting anything from workers' payments had the fee or deduction been prohibited to be taken from an employee's pay (such as for goods, materials, space rental, services, licenses, repairs and maintenance);
3. Notice and recordkeeping, using a state-created form, requiring the principal to factually justify independent contractor classification for each worker so classified, and advising the worker of the tax ramifications of the classification and of his/her rights to challenge the classification;
4. Joint and several liability for any person who knowingly advises an employer to misclassify a worker as an independent contractor (employer's agents and legal counsel are exempt); and
5. A "scarlet letter" provision requiring employers who are found willfully to have misclassified their workers to post public notice of the violation.

Because the new law provides no guidance on how to review worker classification to ensure compliance, employers will be required to apply the fact-intensive tests in California case law and announced by the Employment Development Department. Adding to the challenge, federal and California classification standards vary to some degree.

The new law continues the push begun by the federal Internal Revenue Service, the California Employment Development Department, and other states' taxing authorities to microscope worker classification and impose significant penalties for companies guilty of misclassifying at the federal and state level. Particularly in this era of cash-strapped governments seeking added revenue, companies using independent contractors in California need to make certain they pass all legal tests.

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This post was written by Joseph C. Rudolf, John A. DiNome and Valerie M. Eifert.

The General Assembly has passed three bills amending the civil service provisions of the First Class Township Code, Borough Code and Third Class City Code. Gov. Tom Corbett has signed into law the amendments to the First Class Township and Third Class City Codes, and is expected to sign the amendment to the Borough Code. Generally, these amendments mandate that municipalities conduct background investigations, which can be conducted after the list of applicants is certified. In addition, the amendments make the agility test, the psychological examination and the medical examination optional for promotions.

Amendments to the First Class Township Code & Borough Code

The changes to the Civil Service requirements within the First Class Township Code and Borough Code are identical. Both Acts require the municipal Civil Service Commission to conduct a background investigation on applicants for an appointment to an original position. The commission can limit the background investigations to the candidates placed on the eligibility list or to the candidates on the certified list. With the background investigation requirement, applicants for an original civil service position are now subject to each of the following:

• A physical fitness or agility examination that is job-related and consistent with business necessity
• A physical and psychological medical examination after a conditional offer of employment is made
• A background investigation (restricted to candidates included on the eligibility list or to those to be certified to borough council for appointment)

The amendments to the First Class Township Code and the Borough Code also amend the requirements for applicants seeking a promotion. Civil Service Commissions are no longer statutorily mandated to require applicants for promotion to undergo a physical fitness or agility examination when applying for a promotion. However, first class townships and boroughs may conduct physical fitness or agility examinations that are job-related and consistent with business necessity, and may also conduct physical and psychological medical examinations, but are not required to do so for promotions. 

Amendments to the Third Class City Code

The amendments to the Third Class City Code deal exclusively with civil service promotions. The amendments clarify that the mayor or another appointed city official has the authority to promote a civil service candidate, where such authority has been granted to the mayor or other appointed official pursuant to one of the following:

• A charter adopted under the Option Third Class City Law
• An optional plan of government pursuant to 53 Pa. Code § 3001, et seq. or 53 Pa. Code § 3101 et seq.
• Any other law authorizing or permitting the mayor or other elected or appointed official to promote a candidate

The language validates the promotion of a candidate by a mayor or other elected or appointed official despite the language of Act 77, which authorized city council to promote if an examination was conducted. The legislation is retroactive to October 19, 2010, which is the date of enactment of Act 77 of 2010. Act 77 brought the civil service procedures into compliance with the federal Americans with Disabilities Act of 1990 by amending provisions to expressly authorize the establishment of an eligibility list comprised of the top three scoring candidates of a promotional examination. For a more detailed analysis of the impact of Act 77 of 2010, you can refer to a previous Reed Smith Employment Law Watch post here: Pennsylvania Governor Signs Amendments to the Civil Service Laws. 

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This post was written by Don A. Innamorato and Sherri A. Affrunti.

The NJ DOL has published the new mandatory notice that, by December 7, 2011, must be posted in a conspicuous location and distributed to all existing employees who work in New Jersey. In addition, ALL new employees hired in New Jersey on November 7, 2011 or after must be immediately provided with a copy of this notice. Accordingly, it is recommended to include this notice immediately in all new hire packets, and to post it immediately on all bulletin boards or other locations where you, as an employer, post similar notices. If you have an internet or intranet site for exclusive use by employees and to which all employees have access, electronic posting of the notice on the site will satisfy the conspicuous posting requirement. Similarly, you may provide the notice to employees by email to satisfy the requirement to provide each employee with a copy of the notice. You may access a copy of the notice by clicking here.

The notice summarizes the record-keeping requirements under the following New Jersey statutes: the Wage Payment Law, the Wage and Hour Law, the Unemployment Compensation Law, the Temporary Disability Benefits and Family Leave Insurance Law, the Workers' Compensation law, the Prevailing Wage Act, and the Gross Income Tax Act. It also includes contact information for New Jersey State representatives who are available to provide employees with information or to facilitate their filing of complaints regarding an employer's alleged failure to meet the requirements of these statutes.

Employers risk fines up to $1,000 for failing to comply with the notice and posting requirements, in addition to potential criminal penalties.

This notice follows on the heels of last year's new legislation imposing stricter penalties - including the loss of operating licenses - for New Jersey employers who repeatedly fail to comply with the State's wage, benefit and tax laws. This new law was summarized in an Alert published in June 2010 and can be accessed by clicking here.

If you have any questions concerning the attached posting, the corresponding law, how it will impact your business, or the risks of non-compliance, please contact the authors of this Alert or the Reed Smith attorney with whom you regularly work.

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Effective January 1, 2012, private California employers of non-exempt employees not subject to certain collective bargaining agreements will face new reporting and recordkeeping requirements and penalties for violations of California's aggressively-titled "Wage Theft Prevention Act" signed into law in October 2011. Similar to New York's law of the same name enacted last year, the Act includes:

• New Labor Code Section 2810.5 requires private employers of newly-hired, non-overtime-exempt employees to provide each new hire with:

(a) The job rate or rates of pay and whether it pays by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime.
(b) Any allowances claimed as part of the minimum wage, such as for uniforms, meals, and lodging.
(c) The employer's regular payday, subject to the Labor Code.
(d) The employer's name, including any “doing business as” names used.
(e) The address of the employer's main office or principal place of business, and its mailing address, if different.
(f) The employer's telephone number.
(g) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.
(h) Other information added by the Labor Commissioner as material and necessary.

Exempted from the Act and these requirements are public employees, employees exempt from California wage/hour laws requiring overtime pay and, under circumstances detailed in the Act, employees covered by collective bargaining agreements.

• Employers must also notify employees of any changes in this information within seven days of the change.
• Increases in civil and criminal penalties for wage-related violations, as well as an increase from 1 to 3 years for the Department of Labor Standards Enforcement to seek wage-violation-related penalties, but no change in the 1-year limit for seeking penalties in private enforcement actions.

In addition to increasing employers' administrative reporting and recordkeeping requirements and penalty risks, the Act adds pressure on employers to properly classify their employees as overtime exempt versus non-exempt. That is because employers who misclassify employees as exempt risk violating the Act and incurring incurring its increased penalties.

California employers need to work on prompt compliance strategies. Consider, for instance, periodic, attorney-led, privileged reviews of wage/hour practices to ensure compliance.

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The UK Court of Appeal has ruled, in the case of NHS Manchester v Fecitt & Others, that an employer cannot be vicariously liable for acts of victimisation by its employees against whistleblowers. The Court also clarified the correct test for determining whether a worker has suffered a detriment on the ground of making a protected disclosure (ie. whistleblowing). The Court decided that to avoid liability under the whistleblowing legislation, the employer must show that the employee’s protected disclosure did not materially influence (i.e. more than trivially influence) the employer’s treatment of that employee.

The whistleblowing legislation provides protection in two ways. First, dismissal of an employee is automatically unfair if the principal reason for dismissal is that they have made a protected disclosure. Second, workers have a right not to be subjected to a detriment by their employer on the ground that they have made a protected disclosure. This case concerned the second of these protections. 

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The U.S. House of Representatives Committee on Education and the Workforce has approved the Workforce Democracy and Fairness Act (“Bill”), which is part of the House Republican jobs agenda aimed at removing regulatory hurdles to creation of jobs. The Bill is a legislative challenge to a recent NLRB Rule. That Rule provides for conducting union representation elections within 10 days of the filing of a representation petition with the NLRB— a move favored by unions to expedite elections and, unintentionally of course, to drastically limit an employer’s time to provide employees with a fuller understanding of the facts prior to a vote. In contrast to the NLRB Rule, the Bill would mandate a waiting period of at least 35 days before an election.

The Bill also addresses the NLRB’s recent decision in Specialty Healthcare and Rehabilitation Center of Mobile, 357 NLRB No. 83 (2011). That decision adopted a new approach for determining an appropriate bargaining unit. Specialty Healthcare “opens the door” to smaller, more narrowly defined bargaining units that, being smaller, take fewer votes to become unionized. Under the Specialty Healthcare standard, an employer that argues that a proposed unit inappropriately excludes certain employees must prove that the excluded employees share “an overwhelming community of interests” with employees in the proposed unit. The proposed House legislation would reinstate the more than 50 year old NLRB standard for determining employee-voter inclusions and exclusions in the proposed bargaining unit. That traditional standard includes in the proposed voting unit all employees who share a sufficient—rather than “overwhelming”-- community of interests.

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In a related matter involving a different NLRB Rule, several national trade associations have filed federal lawsuits to prevent the NLRB from enforcing another Rule that would require employers to post a notice notifying employees of their rights under the National Labor Relations Act. The multiple judicial challenges-- now consolidated in the District of Columbia in federal court—are before the court on motions for summary judgment to declare the Rule unlawful and block the Board from implementing and enforcing it.

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This post was written by William Bevan, III and Joel S. Barras.

As we noted in our August 26 posting, the National Labor Relations Board (“Board”) has adopted a Rule that requires all employers covered by the National Labor Relations Act (“Act” or “NLRA”) to post a notice notifying employees of their rights under the Act. This requirement will apply to some 6 million private-sector employers, but not agricultural, railroad, airline or very small employers. The Rule is to inform employees – both unionized and non-unionized – of their rights under the Act, similar to posting requirements under the FLSA, FMLA and a recent Department of Labor rule requiring posting of NLRA rights by federal contractors.

Originally, the Rule was effective November 14, 2011. However, the NLRB has recently extended that deadline to January 31, 2012. The NLRB explained its reasoning for the extension as follows: “The decision to extend the rollout period followed queries from businesses and trade organizations indicating uncertainty about which businesses fall under the Board’s jurisdiction, and was made in the interest of ensuring broad voluntary compliance.” The Board also noted that the Rule was not otherwise amended and that no future changes are contemplated.

Therefore, unless one of the legal challenges filed by several national trade associations is successful in enjoining the Board from enforcing this Rule, employers will be required to post the 11-by-17-inch poster in a conspicuous location seen by all employees in the workplace by the new January 31, 2012, deadline.

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Last week, the IRS announced the Voluntary Classification Settlement Program (the “VCSP”), allowing eligible employers to voluntarily resolve U.S. past worker classification issues and reclassify workers as employees for federal employment tax purposes. Reclassifying workers as employees, however, raises many issues other than employment tax issues including, for example: retirement benefit plan issues; health and welfare benefit plan issues; and state tax classification, unemployment tax, and workers’ compensation issues. To learn more about the VCSP, please click here.

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

Recently and just prior to the expiration of National Labor Relations Board Chairman Wilma Liebman’s term, the Board issued two decisions that reverse the rights of employees to challenge the majority status of their unions following a voluntary recognition of the union by the employer or a sale or merger involving their employer. These decisions represent yet another example of the Board’s ideological shift towards creating a more union-friendly legal environment under President Obama’s administration. 

In Lamons Gasket Co., 357 NLRB No. 72 (August 26, 2011) the Board reversed its 2007 decision in Dana Corp.  Under Dana Corp., 351 NLRB 434 (2007), the Board required employers who voluntarily recognized unions to post a notice to their employees for 45 days informing them of the voluntary recognition. The notice had to contain employee rights and options regarding that voluntary recognition such as challenging that recognition. During that 45-day period, for instance, employees could file a decertification petition to reverse the employer’s voluntary recognition and vote to expressly reject union representation. Alternatively, another union could file a petition seeking to represent the same employees.

As a result of the Board’s decision in Lamons Gasket, however, neither the employees nor a rival union may challenge the recognized union’s status until a “reasonable period of time” after the voluntary recognition. This reasonable period of time ranges from six months to a year, depending on the circumstances.

In UGL-UNICCO Service Company, 357 NLRB No. 76 (August 26, 2011), the Board overruled another of its prior decisions, MV Transportation, 337 NLRB 770 (2002). Under MV Transportation, after a sale or merger of a unionized company, the bargaining unit employees or a rival union had the option to immediately challenge the union’s representative status in a Board-conducted secret ballot election. As a result of UGL-UNICCO, however, the incumbent union’s status as the employees’ bargaining representative is only subject to challenge after a “reasonable period of time” following the sale or merger. If the employer agrees to follow the existing collective bargaining agreement, this period is six months. If. Instead, the employer exercises its right to set new initial terms and conditions of employment, the bar to challenging the union’s status can be extended to a year.

Employers need to consider the impact of these cases when contemplating mergers or acquisitions and in deciding whether to adopt an existing collective bargaining agreement or unilaterally set initial terms and conditions of employment. 

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This post was written by Eugene K. Connors, William Bevan III, and Joel S. Barras.

The National Labor Relations Board has adopted a Rule that, effective November 14, 2011, requires all employers covered by the National Labor Relations Act (“Act”) to post a notice notifying employees of their rights under the Act. This requirement will apply to some six million private-sector employers, but not agricultural, railroad, airline and very small employers. The Rule is to inform employees -- both unionized and non-unionized -- of their rights under the Act, similar to posting requirements under the FLSA, FMLA, and a recent Department of Labor rule requiring posting of NLRA rights by federal contractors. 

The Notice states that employees have the right to act together to improve wages and working conditions, to form, join and assist a union, to bargain collectively with their employer, and to refrain from any of these activities. It also provides examples of unlawful employer and union conduct and instructs employees on how to contact the NLRB with questions or complaints.

The Rule requires employers to post an 11-by-17-inch poster in a conspicuous location seen by all employees in the workplace, such as where notices concerning personnel rules or policies are customarily posted. Employers will be able to download the notice from the Board’s website (www.nlrb.gov) and print it out in color or black-and-white on one 11-by-17-inch paper or two 8-by-11-inch papers taped together.

Beyond physical posting, the Rule requires every covered employer to post the Notice on an Internet or Intranet site, to the extent that personnel and policies are customarily posted electronically. There is no requirement, however, to distribute the posting by email or other electronic means, as originally proposed by the NLRB. Further, if at least 20 percent of an employer’s workforce is not proficient in English, the Notice must be posted in English and the other language(s) spoken by the employees.

Finally, the Rule goes beyond a simple notice-posting requirement to specify penalties for noncompliance. Included among the penalties are:  (1) a finding of an unfair labor practice, accompanied by a cease and desist order; (2) tolling of the six-month statute of limitations under the Act for filing unfair labor practice charges, unless the employee filing the charge has “actual or constructive notice that the conduct in question is unlawful;” and (3) treating a willful refusal to post the notice as evidence of an unlawful motive in other unfair labor practice cases where motive is an issue. 

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This post was written by David L. Weissman, Cindy Schmitt Minniti and Daniel A. Schleifstein.

Connecticut recently became the first state to mandate that employers provide paid sick leave for service workers (the “Act”), effective January 1, 2012. 

The Act may indicate an emerging trend of which employers should be aware. Cities, including San Francisco, Washington, D.C., and Milwaukee, have already passed mandatory paid sick leave legislation in recent years, and legislation is currently pending in Philadelphia and Denver. Massachusetts and California (the latter of which enacted its own Paid Family Leave legislation back in 2002) are also moving to pass similar legislation.

Which companies are covered?

The Act applies to companies with 50 or more employees in Connecticut not already offering at least five paid days off for full-time workers.

Which employees are covered?

Covered by the Act are "service workers." They are hourly paid, overtime-eligible workers employed in dozens of specific occupations listed in the federal Bureau of Labor Statistics Standard Occupational Classification system. Included are waiters, cashiers, cooks, hair stylists, security guards, nursing aides, administrative personnel, and employees without discretionary and independent authority. 

The Act excludes manufacturing workers, salaried employees, day or temporary workers, workers at nationally chartered nonprofit organizations, managers with authority to hire and fire staff, professionals such as lawyers and physicians, outside salespeople, and certain computer professionals.

What is required?

Hours: Service workers accrue one hour of sick leave for every 40 hours of work but no more than 40 hours in a calendar year. They can carry over as many as 40 hours into the next calendar year, but cannot use more than 40 hours of leave in any year. Service workers employed prior to January 1, 2012 can begin accruing sick leave as of January 1, 2012. Service workers hired on or after January 1, 2012 can begin accruing sick leave on their hire date. Service workers cannot use accrued sick leave until they have worked at least 680 hours after the benefit starts accruing, and they must have worked an average of 10 hours a week for the employer during the most recently completed calendar quarter.

Pay: Service workers' paid sick leave must be the greater of: (1) the worker's normal hourly wage, or (2) the statutory minimum wage required while the worker is on leave. If the service worker's hourly wage varies, the “normal hourly wage” is the average hourly wage paid to him or her in the pay period prior to the leave. An employer does not have to pay a service worker for unused sick leave upon termination, unless otherwise provided by an employer policy or a collective bargaining agreement.

Notice: Covered employers must inform each service worker at hiring that: (1) s/he is eligible to accrue paid sick leave, in what amount, and how it can be used; (2) retaliation for requesting or using sick leave is illegal; and (3) s/he can file a complaint with the labor commissioner for any violation. 

Displaying a poster with this information, in English and Spanish, in a conspicuous place, accessible to employees, at the employer's place of business, satisfies this notice requirement.

What qualifies as "sick leave"?

An employer must allow a service worker to use paid sick leave for the worker’s, or his or her spouse's or child's: (1) illness, injury, or health condition; (2) medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition; or (3) preventive medical care.

If the service worker is a victim of family violence or sexual assault, paid sick leave is also available for: (1) medical care or psychological or other counseling for physical injury or disability; (2) services from a victim services organization; (3) relocating; or (4) participation in any civil or criminal legal proceedings.

What about service workers subject to a labor agreement?

The Act does not preempt or override the terms of any collective bargaining agreement effective prior to January 1, 2012.

Do employees need to provide advance notice prior to taking sick leave and may employers require verification?

Employers may require service workers to provide notice: (1) up to seven days before taking any leave that is foreseeable, or (2) as soon as practicable for any leave that is not foreseeable.

If the leave is for three or more consecutive days, the employer can require reasonable documentation verifying the leave's purpose. 

What are the penalties for failing to comply?

Prohibited is retaliating against any employee by terminating, suspending, constructively discharging, demoting, unfavorably assigning, refusing to promote, disciplining, or taking any other adverse employment action against an employee because the employee: (1) requested or used paid sick leave under the Act or an employer's own paid sick leave policy, or (2) filed a complaint with the labor commissioner alleging an employer violated the Act’s provisions, regardless of whether the employee is a service worker or would otherwise be excluded from sick leave pay.

The Act permits the filing of administrative complaints but not court actions.

Civil penalties include $500 fines for each instance of retaliation and "all [other] appropriate relief." This may include payment for used paid sick leave, reinstatement to the employee's previous job, back wages, and employee benefits for which the worker would have been eligible if the retaliation or discrimination had not occurred. 

The Act provides for penalties of up to $100 for any other violation.

What do we recommend?

Connecticut employers should take the following steps to ensure compliance:

• Review paid and unpaid personal leave policies in your employee handbook.
• Determine whether and which employees are covered by the Act.
• Obtain posters and/or add to interviewing/hiring documents to explain the Act and its benefits.
• Train and sensitize supervisors and managers on Act documentation and record-keeping, and the illegality of retaliation.
• Consult an experienced, knowledgeable labor & employment attorney to ensure full compliance.

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In a unanimous opinion, the California Supreme Court has ruled that California's overtime laws apply to workers from out of state who perform work in California for a California-based employer. Sullivan v. Oracle Corp., No. 06-56649 (9th Cir. June 30, 2011). Answering certified questions from the U.S. Court of Appeals for the Ninth Circuit, the court ruled that California laws on overtime pay applied to software trainers employed by California-based Oracle Corporation with respect to work they performed in California, even though the employees resided in Colorado and Arizona. The court noted that "California's overtime laws apply by their terms to all employment in the state, without reference to the employee's place of residence. . . . To exclude nonresidents from the overtime laws' protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states." The court rejected Oracle's argument that interstate comity required that the employee's resident state's wage law traveled with the employee, as well as Oracle's complaints about the practical burdens on employers that might result from requiring them to apply California law to such employees.

Answering two other certified questions, the court also held that California's Business & Professions Code section 17200 applies to the overtime work issue (providing a four-year limitations period for such claims), but that time-barred FLSA wage claims that had accrued as to work performed in other states could not be resurrected in California under that longer limitations period.

While Sullivan specifically addresses a California-based employer's obligation to follow California's wage and hour laws for its out-of-state-resident employees who perform work in California, the case has implications for all employers with employees working in California who do not reside there. All employers with employees working in California, even on a transient basis, should be prepared to observe the state's wage and hour rules for work performed in the state.

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This post was written by Bailey E. Axe, Joel S. Barras and Joseph C. Rudolf.

Pennsylvania Gov. Tom Corbett signed House Bill No. 797 into law Thursday, July 7, amending the Workers' Compensation Act (“WCA”) to include coverage to firefighters suffering from a cancer caused by exposure to certain known carcinogens. Notably, these new provisions allow firefighters who have retired in the past 300 weeks (approximately 5.7 years) to apply for compensation benefits and receive a presumption of work relatedness for these types of cancers.

This legislation, effective immediately, provides a “work-related” presumption for cancers caused by the Group 1 carcinogens. Compensation available under this new provision is available to those firefighters (1) who have served four or more years in continuous firefighting duties, (2) who can establish direct exposure to a Group 1 carcinogen, and (3) who passed a physical exam prior to asserting a claim, or prior to engaging in firefighting, and the exam failed to reveal any evidence of cancer. Those claims brought by volunteers must be based on evidence of direct exposure to a Group 1 carcinogen as documented by reports filed pursuant to the PennFIRS Reporting System.

Significantly, the employer may rebut the “work-related” presumption with “substantial competent evidence” that shows the firefighter’s cancer was not caused by the occupation of firefighting.

House Bill No. 797 also provides for a lengthy accrual period for potential claims The legislation allows a claim on the basis of cancer as defined to be made within 600 weeks after the last date of employment to which a claimant was exposed to the hazards of the disease (compared with the 300-week limitation for other “occupational diseases” defined in the WCA). However, the “work-related” presumption only applies to claims made within the first 300 weeks.

The full text of the legislation may be found here.

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In one of the largest class actions in history, involving more than 1.5 million current and former Wal-Mart employees, the U.S. Supreme Court held that the case could not proceed as a class action because, in part, the plaintiffs had failed to show that there were issues of law or fact common to the class, as there was no evidence that Wal-Mart operated under a general policy of discrimination. Wal-Mart, Inc. v. Dukes, No. 10-277 (June 20, 2011).

Justice Scalia's majority opinion noted that the plaintiffs "wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored." The Court noted that "[t]he only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s 'policy' of allowing discretion by local supervisors over employment matters. On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices. It is also a very common and presumptively reasonable way of doing business—one that we have said 'should itself raise no inference of discriminatory conduct.'" In sum, the Court agreed with Chief Judge Kozinski's dissent in the Ninth Circuit that the class members “held a multitude of different jobs, at different levels of Wal-Mart’s hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed. . . . Some thrived while others did poorly. They have little in common but their sex and this lawsuit.”

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This post was written by  Roy D. Prather, III, Joel S. Barras and Eugene K. Connors.

In yet another instance illustrating the National Labor Relations Board’s (“NLRB’s”) intent to prosecute violations of the National Labor Relations Act (“NLRA”) related to employee activity on social media sites, the NLRB’s Buffalo, NY regional office has issued a complaint against Hispanics United of Buffalo Inc. (HUB), a New York nonprofit agency. The complaint alleges that the employer fired five employees because they complained about working conditions on Facebook in violation of NLRA sections 8(a)(3) and 8(a)(1). Those provisions prohibit employers from taking or threatening adverse action against employees for engaging in so-called “concerted” activities protected by the NLRA. Firing or threatening employees with adverse action for voicing complaints or concerns over working conditions has been illegal for decades. But the NLRB has logically extended its reach to include email exchanges and, more recently, discussions and comments made using social media such as Facebook and Twitter.

According to the complaint, a HUB employee on Facebook named a co-worker who claimed that HUB employees failed to adequately assist its clients. This prompted Facebook rejoinders from other HUB employees who, in defending their job performances, criticized HUB’s working conditions, including workloads and staffing issues. HUB discharged five employee participants in this online forum on the basis that their comments illegally harassed the co-worker who made the “inadequacy” claim.

As noted, the NLRB asserts that the Facebook discussions were concerted activities under NLRA section 7 because they involved terms and conditions of employment such as job performances, workloads, and staffing levels. 

A hearing before an NLRB Administrative Law Judge is set for June 22, 2011, in Buffalo. We will track and report on this case as it progresses.

This matter is on the heels of two recent attempts by the NLRB to regulate employers’ reactions to employee use of social media to discuss workplace issues. The first concerned an NLRB complaint against American Medical Response, Inc., a Connecticut ambulance provider, for discharging an employee over her criticism of her supervisor on Facebook. In the second, the NLRB threatened a complaint against Thomson Reuters Corp. for its restrictive social media policy and for disciplining a reporter for a message she posted on Twitter. Both cases settled.

The lessons to be learned from the NLRB’s new and increased attention to social media activities are simple but crucially important. First, be ever-vigilant on what the NLRA permits and what it condemns. Second, “where” discussions and other protected actions occur makes no difference. Protected activities are protected if they are face-to-face, over the telephone, in a letter, in a fax, on TV, on the radio, in a news story, and “spoken” electronically, in emails or on social media sites. Put simply, the NLRA applies fully to the “cloud.” For this reason, take a thorough look at every policy to make sure that it recognizes and complies with the NLRA by balancing employer needs against the NLRA’s protections.

Feel free to discuss any concern with one of the authors or with another Reed Smith attorney of your choosing.

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This post was written by Meghan Offer, Gene Connors and Don Innamorato.

To prevent job applicants with criminal records from automatic hiring rejection, cities and states are considering and already adopting so-called “Ban the Box” laws and ordinances. Among the states that have adopted such a law are Connecticut, Hawaii, Massachusetts, Minnesota, and New Mexico, and the cities of Atlanta, Baltimore, Chicago and Philadelphia. Among the states mulling such legislation are Rhode Island and Nebraska, and the city of Pittsburgh.

This Alert lauds the policy considerations behind “Ban the Box” type of legislation but points out how it can unintentionally create impossible-hiring decisions and pose huge legal risks for employers.

“Ban the Box” legislation, as discussed in the “Philadelphia Joins the Movement To Ban Inquiries into Arrests and Convictions on Employment Applications,” restricts and, in Philadelphia and other locales, limits covered employers from asking about an applicant’s criminal record during the hiring process. The laws in Connecticut, Hawaii, Minnesota, New Mexico, and Massachusetts, and the bill proposed in Rhode Island, forbid covered employers from asking an applicant about a conviction until after assessment of his or her qualifications for the job. Though the laws in Connecticut, Minnesota and New Mexico apply only to public (meaning government) employers, there is mounting support to amend them to cover private employers, as in Hawaii, Massachusetts, and Philadelphia.

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In AT&T Mobility v. Concepcion, U.S., No. 09-893, 4/27/11, an ideologically divided U.S. Supreme Court held that the Federal Arbitration Act (FAA) trumped California law to uphold class action waivers in arbitration. 

According to the majority opinion authored by Justice Antonin Scalia, a blanket prohibition on arbitration provisions requiring individual arbitration in favor of class-wide procedures would undermine the FAA's "liberal federal policy in favor of arbitration."  In so holding, the Court rejected the California Supreme Court rule in Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005) that voided as unconscionable an arbitration clause containing a class action waiver. The Ninth Circuit Court of Appeals had upheld the Discover Bank rule. The U.S. Supreme Court, however, disagreed with both courts and held that the Discover Bank rule impermissibly "interferes with arbitration" under the FAA.

AT&T Mobility v. Concepcion, involving a consumer arbitration provision, has important implications for employers. Employers with mandatory pre-dispute arbitration agreements for employees should consider amending them to make collective class action relief impermissible. 

Stay tuned for further insight into arbitration and class action issues, including the eagerly awaited U.S. Supreme Court decision in WalMart over whether the court-certified class size is too broad. But, in pre-dispute arbitration, AT&T offers potential insulation from class action claims to at least employers and commercial service providers.

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This post was written by Don A. Innamorato and Meghan O. Offer.

On April 13, 2011, Philadelphia Mayor Michael Nutter signed a new city ordinance that bans Philadelphia employers from asking applicants about their convictions during the initial phases of the hiring process and precludes them from ever asking about arrests which failed to result in a conviction. Due to become effective on July 12, 2011, the Fair Criminal Record Screenings Standards Ordinance (“the Ordinance”) applies to all City agencies (other than the courts and law enforcement agencies) and private employers with ten (10) or more employees working within the City of Philadelphia. Similar to the “Ban the Box” legislation passed by several states and other cities such as Atlanta, Baltimore and Chicago, and pending in Pennsylvania cities such as Pittsburgh, the Ordinance aims to prevent applicants with criminal records from being summarily excluded from the hiring process. 

The Ordinance completely bars employers from ever asking about or basing hiring decisions on an applicant’s history of arrests that failed to result in a conviction. The Ordinance broadly defines forbidden inquiries as any direct or indirect method of gathering information through any mode of communication. Forbidden methods would include job applications and a recruiter’s written or oral requests for information. Although not specifically addressed in the Ordinance, this broad language will also likely preclude any “Google” or other electronic background checks to investigate an applicant’s arrest history.  The Ordinance also prohibits employers from asking about or otherwise investigating an applicant’s conviction history until completion of a “first interview” in person or by phone. Without an interview, the employer would have no right to gather any information regarding the applicant’s record of conviction. During the initial interview, the employer cannot ask about or discuss the applicant’s conviction history unless the applicant volunteers this information. After an initial direct interview, however, an employer is free to investigate the applicant’s conviction history. 

The Ordinance specifies that it does not alter the Pennsylvania Criminal History Record Information Act, 18 Pa.C.S. § 9125, that bars employers from denying employment based on a criminal conviction unless:

1. the conviction was for a felony or misdemeanor;
2. the crime has a sufficient connection to the applicant’s suitability for the position, and
3. the applicant is given written notice of the decision not to hire based on the conviction. 

Finally, although a Philadelphia employer may seek information about an applicant’s convictions after a first interview, how it obtains that information and any notice to the applicant remain governed by the Federal Fair Credit Reporting Act, 15 USC § 1681, et. seq.

Penalties:

Each violation of the Ordinance is a “Class III” offense under the Philadelphia Code that involves a possible $2,000-per-violation fine.

What Covered Employers Should Do Before July 12, 2011:

Covered Philadelphia employers need to take several steps prior to the July 12, 2011 effective date of this Ordinance:

1. Review and remove from current job applications, including any online applications, any questions or inquiries regarding an applicant’s arrest or conviction record;
2. Delay any manual or “automatic” criminal background system or procedure (including through third-party vendors) until after a first interview;
3. Warn, in writing, every recruiter, employee, or employer agent involved in the hiring process not to ask questions or otherwise seek information (as in emails) about an applicant’s past convictions until after the first interview and provide these individuals with social media training to avoid inadvertent violations of this Ordinance;
4. Avoid any inquiry into arrests that failed to result in conviction.

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EEOC Publishes Long-Awaited Regulations Under the ADA Amendments Act

More than two years after the Americans with Disabilities Amendments Act (“ADAAA”) became effective, the EEOC has issued Final Rules and Regulations (“Regulations”) that were published in the March 25, 2011 Federal Register. The Regulations, which become effective May 24, 2011, further demonstrate the ADAAA’s objective of broadening employee coverage to the maximum extent permitted. They also continue to shift focus from whether an employee is “disabled” to whether an employer has satisfied its legislative obligations to accommodate without discriminating. 

Although the definition of “disability” remains whether a physical or mental impairment exists that substantially limits one or more major life activities; a record of such an impairment; or being regarded as having such an impairment; how “disability” should be interpreted by employers has changed.  

Coverage under the ADAAA continues to require proof of a substantial limitation, but the Regulations specify that this is not intended to be a demanding standard. The EEOC seeks to implement Congressional intent to establish consistent and workable standards by establishing “rules of construction,” including the requirements that:

• A lower degree of functional limitation be applied
• “Substantially limits” be read broadly in favor of expansive coverage
• Determining whether an impairment substantially limits a major life activity be made without regard to the ameliorative effects of mitigating measures (except for “ordinary eyeglasses or contact lenses”)
• Episodic impairments or impairments in remission still qualify as disabilities if they would when active

The Regulations also expand the definition of "major life activities" through two non-exhaustive lists. The first list focuses on activities, some of which the EEOC has already recognized, such as walking. But some are new and include sleeping, concentrating, thinking and reading. The second list focuses on major bodily functions, such as the immune system, normal cell growth, and digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine and reproductive functions. 

In another broadening of coverage, the Regulations make no mention of any six-month durational requirement for establishing a disability, and instead specify that an impairment for any duration may be a covered disability.   

The Regulations also elaborate on the ADAAA’s coverage of individuals with episodic conditions or conditions in remission. They offer a non-exhaustive list of covered conditions, including cancer, post-traumatic stress disorder, major depressive disorder and multiple sclerosis.

Despite acknowledging that the determination of a disability requires an "individualized assessment," the EEOC lists conditions that will "virtually always" constitute a disability. These include cancer, cerebral palsy, diabetes, epilepsy, multiple sclerosis, major depressive disorder, bipolar disorder, obsessive compulsive disorder and autism. 

“Regarded as” claims also gain support under the Regulations. Such claims may be based upon an alleged perception of impairment, irrespective of whether that impairment is perceived as an actual disability. Though employers need not reasonably accommodate an employee with a “regarded as” disability, they must accommodate employees with a “record of disability,” unless they establish that it would be an undue burden.

Employers consequently should interpret “disability” broadly and focus on properly and fully participating in the interactive process. Employers should use the time before the Regulations become effective to review and sharpen their reasonable accommodation policies and procedures, and to provide training to management, human resources and legal staff on the ADAAA and these EEOC Regulations. 

Feel free to direct any questions or concerns about the ADAAA and the Regulations to the authors of this Alert, or the Reed Smith attorney with whom you work regularly.

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The United States Supreme Court has held that under the Fair Labor Standards Act (“FLSA”), the federal law that requires proper payment of wages and overtime pay, an employer cannot retaliate against an employee who complains about a possible violation of that law, even where the complaint is oral rather than in writing. Kasten v. Saint-Gobain Performance Plastics Corp., No. 09-834 (Mar. 22, 2011).

The FLSA provides that employers cannot “discharge or otherwise discriminate against an employee because such employee has filed any complaint or otherwise instituted any proceeding under or related to the [FLSA].” [emphasis added] The employer in Kasten argued, and the U.S. Court of Appeals for the Seventh Circuit had found, that by using the phrase “filed any complaint,” Congress meant to protect only those employees who put their complaints in writing. The Supreme Court disagreed, finding that interpretation would deter employees, particularly those who are uneducated or illiterate, from coming forward with good-faith concerns about possible violations of the law. At the same time, however, the Court recognized that the reference to filing a complaint “contemplates some degree of formality,” and that for a complaint to be protected, it “must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute.”

The employer also argued that employees should be protected only if they complain to government agencies, not to their employer. Although the Court declined to address that issue, its opinion in this case, and in others where the Court has broadly interpreted anti-retaliation provisions, leaves little doubt that employees who complain about possible FLSA violations – internally or externally, orally or in writing – are protected from retaliation.

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This post was written by Lisa M. Carvalho, Lucas Liben and George M. Linge.

This may be one of the abiding truths of the 21^st Century: the pervasiveness of modern communication technology has revolutionized how business is conducted, law is practiced, and life is lived. Nevertheless, courts remain protective of communications between an attorney and his or her client almost without regard to the form that communication takes.

Since the middle of the past decade, courts have faced the question of whether the attorney-client privilege can be abrogated when an employee uses employer-provided communication technology to email the employee’s personal attorney. Courts examine a variety of factors to answer this question, including:

• Whether the employee was operating an employer-owned computer or his or her own
• Where the computer was located
• Whether the email was transmitted through a company account or a personal account such as Gmail, Yahoo or Hotmail
• Whether the employee’s personal email account was password-protected. Perhaps most importantly, courts look to the language of the employer’s policy on email usage, particularly the policy’s stance on personal use, monitoring of email accounts and web activity, and retrieval of information.

Employers must decide whether the advantage of possibly accessing communications between a former employee and his or her counsel outweighs the disadvantages associated with the kind of communications policy necessary to abrogate attorney-client privilege. On the one hand, an employer's interests in information security and full control of its systems mitigates in favor of its having fully transparent access to its employees' electronic communications on the employer's systems, and would have the incidental benefit of possible access to employee communications that are against the employer's interest. On the other hand, an employer may wish, in some limited fashion, to be sensitive to its employees' privacy rights in the context of today's mobile workforce, and may choose not to exert an aggressive information security policy that would go so far as to permit the invasion of the attorney-client privilege.

To read more about the recent rulings and the two-part rule that seems to be emerging, please click here.

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This post was written by Stephanie Wilson, Amy Greer, Carl Krasik, and E. David Krulewicz.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was enacted July 21, 2010. Among other things, it added new Section 21F to the Securities Exchange Act of 1934 (“Exchange Act”). This Section establishes a whistleblower program that directs the SEC (the “Agency”) to pay monetary awards, or what has been viewed as “bounties,” to whistleblowers who voluntarily provide the SEC with original information about violations of the securities laws. If the original information results in the SEC obtaining monetary sanctions exceeding $1 million, the whistleblower can recover between 10 percent and 30 percent of the monetary penalties. The Section also sets forth a robust anti-retaliation framework for whistleblowers. For a detailed discussion of Dodd-Frank’s anti-retaliation provisions, please click here to see our earlier Alert, “Financial Regulators Set Out to Get Their Man: Federally Mandated Bounties and Anti-Retaliation Provisions Designed to Regulate the Financial Services Industry.”

The SEC's proposed regulations recognize that tension exists between an employee's use of his/her company's internal corporate compliance procedures and the lure of a potential bounty by proceeding directly to the SEC. The proposed regulations seek public comment about this particular issue, among others. Regardless of whether this tension is resolved adequately from the employer's perspective, employers can strengthen their position by carefully evaluating their internal compliance process to ensure its effectiveness.

To read the full Alert, please click here.

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This post was written by Samantha M. Clancy and Kimberly A. Craver.

The United States Supreme Court has unanimously held that an employee may bring Title VII retaliation claims where he or she is subject to an adverse employment action, because someone else “closely related” to the employee engaged in protected activity, such as filing a charge of discrimination or opposing discrimination.

In Thompson v. North American Stainless, LP (No. 09-291, Jan. 24, 2011), Eric Thompson and his fiancée, Miriam Regalado, were both employed by North American Stainless. Three weeks after receiving notice that Regalado had filed a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”), the company fired Thompson for alleged performance-based problems. Thompson filed his own EEOC charge and later sued the company, claiming that he had been fired in retaliation for his fiancée’s EEOC charge. The district court granted the employer’s motion for summary judgment. A panel of judges from the Sixth Circuit initially reversed, but after a rehearing en banc, the full circuit affirmed, holding that Thompson was not protected by the anti-retaliation provisions of Title VII because he did not personally engage in protected activity on his own behalf or on behalf of his fiancée.

The Supreme Court reversed the Sixth Circuit’s decision. Finding that the anti-retaliation provisions of Title VII must be construed broadly to encompass any employer action that might dissuade a reasonable worker from making or supporting a charge of discrimination, the Court said it was “obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.”

Although the Court refused to identify a fixed class of relationships for which third-party reprisals are unlawful, it noted that firing a close family member will almost always rise to that level, “while a milder reprisal on a mere acquaintance will almost never do so.”

The Court also rejected the employer’s argument that Thompson was not, in the words of Title VII, a “person aggrieved” under that law. The Court applied the “zone of interests” test, which allows suit by any plaintiff “with an interest ‘arguably [sought] to be protected by the statutes.’” The Court concluded that Thompson fell within the zone of interest protected by Title VII because that statute is intended to protect employees, such as Thompson, from unlawful acts by their employers.

Though this ruling does not establish a bright-line test for third-party retaliation claims, employers must take notice. When deciding to take an adverse action against an employee, an employer must take care not only when the employee has engaged in protected activity himself or herself, but also where he or she is closely associated with someone else who has. 

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This post was written by David Weissman, Cindy Minniti and Daniel Schleifstein.

On December 13, 2010, New York Governor David A. Paterson signed the Wage Theft Prevention Act (“Act”). The New York Labor Law currently requires employers to notify employees in writing, at the time of hiring, of their rate of pay, pay date, and overtime rate (if applicable). The Act amends the law to significantly increase the penalties for wage payment violations, particularly for repeat offenders, and now requires employers to provide additional information regarding the payment of wages to employees. All New York employers must revise their pay practices by the Act’s effective date, April 12, 2011.

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This post was written by Joel S. Barras and Michael D. Jones.

On March 15, 2011, the U.S. Department of Justice’s amended Final Rule substantially revising and expanding the regulations implementing the Americans with Disabilities Act will become effective. Compliance, however, is not mandated until March 15, 2012. Among other substantive changes, the amended regulations adopt the 2010 ADA Standards for Accessible Design, which implement new accessibility guidelines for government facilities and commercial places of public accommodation. In addition, the amended regulations address numerous accessibility issues, including selling and issuing tickets to individuals with disabilities; accommodating service animals, wheelchairs and other power-driven mobility devices; providing auxiliary communication aids; and making reservations in places of lodging.

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This post was written by John T. McDonald and Don A. Innamorato.

The United States Bankruptcy Code prohibits an employer from taking adverse action against an existing employee because of a bankruptcy filing.

In December, the United States Court of Appeals for the Third Circuit refused to extend that same protection to applicants for employment. In Rea v. Federated Investors, the court ruled that the phrase "discrimination with respect to employment" in section 525(b) of the Bankruptcy Code was not broad enough to encompass discrimination in the denial of employment, and concluded that an employer may refuse to hire a job applicant based on a prior bankruptcy filing. Thus, the court upheld the dismissal of the plaintiff's case on a motion to dismiss for failure to state a claim. 

Despite this ruling, employers should be wary of using prior bankruptcy filings, and more generally credit reports, when making employment decisions, as several U.S. states have laws strictly limiting the use of such information. Also, the EEOC recently filed a nationwide hiring discrimination lawsuit asserting that an employer's use of job applicants' credit histories discriminated against applicants on the basis of race under the disparate impact theory of employment discrimination under Title VII. EEOC v. Kaplan Higher Education, Inc., No. 1:10-cv-02882 (N.D. Ohio), filed December 21, 2010. In the past, the EEOC expressed its position that unless a credit history is strongly related to the position at issue (e.g., a position in which the employee is charged with handling cash), use of credit histories may be discriminatory, resulting in liability, even if the discrimination was unintentional. 

Thus, employers should review their hiring policies to the extent they use credit checks, and should consult with employment counsel as necessary.

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This post was written by Cindy S. Minniti and Daniel A. Schleifstein.

In light of recent high-profile lawsuits in New York involving defendants such as Starbucks and Del Posto, employers must be aware of important new changes to New York labor laws that can significantly affect their business and profits. 

Minimum Wage Increase for Tipped Employees

Minimum wages for tipped workers in the hospitality industry, such as restaurant and hotel workers, will increase as follows effective January 1, 2011:

• Tipped non-food service employees in the hospitality industry must now receive at least $5.65/hour (up from $4.90/hour)
• Tipped food service employees in the hospitality industry must now receive at least $5.00/hour (up from $4.65/hour)
• Service workers for resort hotels must now receive at least $4.95/hour (up from $4.35/hour)

Employers have until February 28, 2011 to make any necessary changes to their payroll systems, but must pay employees the new wage rates retroactive to January 1, 2011.

Employers May Mandate Tip Pooling

Under the new law, restaurants also may now mandate tip pooling, the distribution of tipped food service workers' gratuities among tipped and nontipped workers. Restaurants using tip pooling must maintain a daily log of tips collected and handed out for at least six years. Tip sharing, when food service workers give a cut of their tips to nontipped employees, is also allowed. However, unlike the practice of tip pooling, employees conduct these transactions themselves.

Tips for Employers

• Maintain accurate payroll records
• Maintain accurate tip pooling records (if applicable)
• Know your employees' current tipping practices and remediate as necessary

Reed Smith is ready to assist employers in complying with all New York and federal labor laws and regulations while minimizing the adverse impact and cost to the employer. Please feel free, at any time, to contact Cindy Minniti, Daniel Schleifstein or any Reed Smith lawyer you work with to discuss these important new changes.

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On January 10, 2011, employers will become subject to new regulations issued by the U.S. Equal Employment Opportunity Commission (“EEOC”) that interpret the Genetic Information Nondiscrimination Act of 2008 (“GINA”). Employers must now comply with GINA’s tough restrictions on the acquisition, use, and disclosure of genetic information about applicants, employees, former employees, and all such individuals’ family members. In particular, employers must take affirmative steps to avoid receiving genetic information about applicants, employees, or any of their family members.

The following addresses some key questions about how the new EEOC regulations will affect employers.

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The National Labor Relations Board (“NLRB” or “Board”) recently issued a complaint against a Connecticut ambulance service accusing it of illegally discharging an employee for posting negative comments about her supervisor on her Facebook page. The NLRB also challenged the employer’s blogging and Internet policy, asserting that it chills employee rights under the National Labor Relations Act (the “Act”). The Act protects the right of all workers, both union and non-union, to communicate with one another about wages, hours, and other terms and conditions of employment, and prohibits employers from taking action against employees for having engaged in such “protected concerted activity.”

According to the NLRB’s complaint, Dawnmarie Souza was asked to prepare an incident report after the company received a customer complaint about her. A supervisor denied Ms. Souza’s request for assistance from her union, Teamsters Local 443, in completing the report. The Board also alleges that the supervisor threatened Ms. Souza with discipline because of her request for union representation.

Later that day, on her own time and using her own computer, Ms. Souza posted negative comments about the supervisor on her Facebook page. In support of Ms. Souza, her coworkers also posted negative comments about the supervisor on the same page. The company discharged Ms. Souza just three weeks later, and the NLRB claims it did so because she violated the company’s Internet policy. The employer, however, contends that it discharged Ms. Souza based on several serious complaints about her behavior. 

Following an investigation, the NLRB’s Hartford office determined that the Facebook postings were “protected concerted activity.” In addition, the Board viewed the company’s Internet and blogging policy, which barred employees from making disparaging remarks when discussing the company or a supervisor and which prohibited employees from depicting the company online without company approval, as a violation of the Act. An NLRB administrative law judge is set to hear the case in January.

Until a decision is rendered, all facts relating to this case, including the company’s Internet and blogging policy, will not be publicly available. The Board’s position, however, is that the policy chilled employees’ rights under the Act by barring employees from making any disparaging remarks or depicting the company in any way on the Internet without prior permission. Such policies are bound to be viewed as overly restrictive by the Board, especially because employees would generally be protected if they engaged in the same sort of behavior on their own time in any public forum.

This is not the first time that the Board has closely examined whether a social media policy infringes upon employee rights. On December 4, 2009, the NLRB’s Office of General Counsel issued an Advice Memorandum analyzing a social media policy adopted by Sears Holdings, which prohibited employees from using social media to disparage “a company’s or competitor’s products, services, executive leadership, employees, strategy and business prospects,” to discuss confidential and proprietary information, or to make explicit sexual references. The Office of General Counsel found this policy was permissible because a reasonable employee, viewing the policy as a whole, would not believe it limited conduct protected by the Act. 

Every employer, whether it has a union or not, is now on notice that the NLRB will focus on examining employers’ efforts to limit employees’ use of social media, challenging those it views as likely to chill employee rights to act together to complain about or address work issues. Employers should thus analyze their social media policies to ensure that employee restrictions are not so broad as to interfere with or chill such employee rights. While an employer can restrict disclosure of confidential and proprietary information and require compliance with its harassment policy, it cannot prohibit employees from discussing the employer with other employees on social media sites, at least not where such discussion could be “concerted activity” protected by the Act.

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This post was written by Scott E. Blissman and Joel S. Barras.

Over the past few weeks, Pennsylvania Gov. Edward Rendell signed a series of bills into law (Acts 76, 77, 78, 91 and 92) that amended the civil service provisions of the First Class Township Code, Borough Code and Third Class City Code (as well as the civil service provisions applicable to towns). All of these amendments are effective immediately and require municipal civil service commissions to revise their civil service rules to ensure compliance before a new hiring or promotional testing cycle has been initiated for police officers and paid firefighters.

Each of these new civil service amendments specifies that appointments and promotions made prior to the effective date of each act are unaffected by the new legislation. However, the viability of any current eligibility list for future hirings and promotions, as well as the propriety of completing hiring or promotional screening that has already commenced rather than starting over after adoption of the amendments, should be reviewed on a case-by-case basis. The critical question is whether the existing civil service rules used in creating the current eligibility list or used for initiating the new hiring or promotional process incorporate the new mandatory provisions. Specifically, do the municipality’s current civil service rules require a physical agility test as well as a medical and psychological examination after issuance of a conditional offer of employment? If the answer is yes, then the municipality may well be able to continue with its current process and make selections from an existing eligibility list. If the answer is no, then the municipality will need to incorporate the amendments into its civil service rules and restart the process under the newly adopted rules.

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The California Supreme Court's recent decision in Reid v. Google, Inc. underscores an employer's need to take reasonable steps to eliminate all inappropriate comments from the workplace at every level of the organization. Under Reid, even casual comments made by non-decisionmakers may be used to support claims of discrimination. It is recommended that employers train – and retrain – employees at all levels on proper workplace conduct.

Please click here to read the full alert.

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This post was written by David Krulewicz and Stephanie Wilson.

As stated in our previous blog posting, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”) into law on July 21, 2010, with the objective of ushering in a new era of financial regulation and transparency. The Act’s range encompasses not only the usual group of financial services employers, but it extends to mortgage brokers and insurance adjusters as well. Portions of the Act, including those discussed below, went into effect immediately. However, portions of the Act have left more questions than answers as to what long-term impacts the legislation will have on the financial industry. 

A few of the Act’s highlights include bounty provisions, additional changes to the Securities Exchange Act of 1934 and changes to amend SOX’s anti-retaliation provisions in a number of ways. A brief list of actions that employers can take is also noted.

To read the full alert, please click here. 

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This post was written by Daniel J. Moore and Stephanie Wilson.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, created some of the most sweeping changes to the financial industry since the Great Depression. Section 342 of the Dodd-Frank Act requires federal financial agencies to create an Office of Minority and Women Inclusion (“OMWI”), which is responsible for “all matters of the agency relating to diversity in management, employment, and business activities.” This provision could significantly impact the diversity practices of federal financial agencies, agency contractors, and other entities that do business with these agencies.

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This post was written by Daniel J. Moore and Eugene K. Connors.

A little-noticed provision of the 2010 health care reform legislation requires employers to provide nursing mothers with "reasonable break time" to express breast milk for one year after a child's birth.  Section 4207 of the Patient Protection and Affordable Care Act (P.L. 111-148), 29 U.S.C. § 207(r)(1) ("PPACA"), which became effective March 23, 2010, amends the Fair Labor Standards Act ("FLSA") to require employers to provide a break each time an employee needs to express milk, in a location other than a bathroom that is "shielded from view and free from intrusion by coworkers and the public."

The Department of Labor ("DOL") has yet to issue regulations defining a "reasonable" break or what sort of location may be used for lactation.  In July 2010, the DOL did release a "Fact Sheet" that says employers should provide break time to express milk "as frequently as needed by the nursing mother," and that the frequency and duration of the breaks will "likely vary" among mothers.  The Fact Sheet also says that the location provided must be a "functional space" for expressing milk, but need not be dedicated solely for a nursing mother's use, as long as it is available whenever needed.  The Fact Sheet, however, is only intended for general information and is not an official statement of the law, like federal regulations.

Although the new law applies to employers of any size, those with fewer than 50 employees need not provide such breaks if doing so "would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business."

Under the new law, these breaks may be unpaid.  That is an exception to the FLSA's rule that breaks of fewer than 20 minutes be paid as compensable time.  But employers should look out for more "generous" state or local laws that "trump" that unpaid exception.  This law does not preempt state laws that offer greater protection for nursing mothers who work, and 24 states and the District of Columbia have laws that apply to such employees.

The law itself contains no penalties for violations.  Both penalties and remedies available to aggrieved employees are likely to be in forthcoming DOL regulations.

Feel free to contact a Reed Smith attorney with any questions or concerns about break times for nursing mothers.  Additional information and the full Fact Sheet are accessible through the DOL Wage and Hour Division website.

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A new law will make it much more costly for Illinois employers that fail to pay employees their earned wages, including final compensation such as accrued but unused vacation pay.  The Illinois Wage Theft Enforcement Act, S.B. 3568 (the "Act"), signed into law July 30, 2010, increases both civil and criminal penalties for violating the state's wage payment law, imposes new risks for employers who ignore or unsuccessfully challenge employees' wage claims, and creates a new cause of action for employees who face retaliation for having complained about unpaid wages.  The Act will take effect January 1, 2011.

Illinois Wage Payment and Collection Act

The Illinois Wage Payment and Collection Act (the "Wage Payment Act") requires employers to pay employees their earned wages no later than a specified period following the date on which the wages are earned, and to pay employees who resign or are terminated all wages they earned through their last day of employment, no later than the first regular payroll date thereafter.  The law applies to every employee in Illinois, exempt or non-exempt, regardless of the employer's size or location.  "Earned wages" includes not only an employee's salary or hourly pay, but also any earned bonuses or vacation pay.  With some limited exceptions such as tax withholdings and authorized deductions for benefits, the Wage Payment Act also prohibits employers from deducting anything from an employee's wages, unless the employee signs an authorization at the time of the deduction.  The law also allows employees to recover damages from any corporate officer or agent of an employer who knowingly permits the employer to violate the Wage Payment Act.

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Tracking the trend of increased federal and state focus on the misclassification of workers, the U.S. Court of Appeals for the Ninth Circuit recently applied California law to hold that plaintiffs were entitled to a trial on the merits against their former employer for improperly classifying its California drivers as independent contractors, notwithstanding that the drivers had all signed independent contractor agreements that provided that Texas law controlled.  Narayan v. EGL, Inc., Case No. 07-16487 (9th Cir. July 13, 2010).

EGL - an international transportation, supply chain management, and information services company headquartered in Texas - retained drivers to pick up and deliver freight in California, classifying them as independent contractors rather than as employees.  EGL required each driver to sign a "Leased Equipment and Independent Contractor Services" agreement that, among other things, referred to the driver as a "Contractor," provided that the parties intended to "create a vendor/vendee relationship," and in which each driver acknowledged that neither the "Contractor nor any of its employees or agents shall be considered to be employees of" EGL.  The agreements also contained a provision requiring that they be interpreted under Texas law.

Several California drivers sued EGL, claiming that they had been misclassified as independent contractors, and demanding damages for unpaid overtime wages, business expenses, missed meal breaks, unlawful deductions from wages, and other relief under the California Labor Code.  Applying Texas law per the agreement, the district court found that the drivers were independent contractors and granted summary judgment in favor of EGL.

The Ninth Circuit reversed.  As a starting point, the court refused to apply Texas law to the dispute.  Noting that the drivers sought entitlement to employment benefits under California's Labor Code and that state's statutory and regulatory scheme, the court held that it was not required to interpret the agreements to decide the case.  The court instead found that California law should apply to determine whether EGL could be liable for violating the California Labor Code.

Turning to the merits of the case, the Ninth Circuit again disagreed with the district court, finding that the drivers had established a prima facie case that they were employees rather than independent contractors.  The appellate court applied California's multifactor test in analyzing whether the drivers worked as employees or independent contractors, citing, among others, the following facts as supporting the drivers' claim that they were employees:

• The delivery services provided by the drivers were integral to the regular business operations of EGL
• EGL's Safety and Compliance Manual and Driver's Handbook instructed the drivers on how to conduct themselves
• The drivers were ordered to report to the EGL station at a set time each morning
• EGL controlled other aspects of the details of the drivers' performance, such as requiring that they wear EGL-branded shirts, safety boots, and EGL identification cards
• EGL supplied branded equipment, such as boxes and packing tape
• The agreement provided for automatic renewal clauses and could be terminated on 30 days' notice, which was a substantial indicator of an at-will employment relationship
• The drivers' occupation did not require a high level of skill
• The indefinite and lengthy duration of the drivers' relationship with EGL (some of whom had worked for EGL for several years)

The court noted that in light of these facts, the drivers' acknowledgment that they were independent contractors was not significant under California law.

In reaching its conclusion, the Ninth Circuit found that once a plaintiff presents evidence that he provided services for the "employer," the plaintiff is presumed to be an employee unless the employer can prove that the individual was in fact an independent contractor.

In light of this case, and the continuing scrutiny by federal and state agencies on the misclassification of workers as independent contractors, companies should audit and analyze their independent contractor agreements with vendors, owner-operators, or contractors, as well as the practices of its contractors, to determine whether the relationship is truly one of independence.  Where there are any questions or concerns about possible misclassification,  experienced employment counsel should be consulted to determine how best to address the situation before any company is forced to defend time-consuming and expensive litigation.

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This post was written by Daniel J. Moore and James A. Burns, Jr.

 On June 17, 2010, the U.S. Supreme Court held that the National Labor Relations Board (“NLRB” or “Board”) lacked the authority to issue any decisions during a 27-month period when it had only two members. New Process Steel, L.P. v. NLRB, No. 08-1457. The Court’s ruling effectively invalidates nearly 600 decisions issued by the two-member Board, leaving unclear how those cases will be resolved by a Board that is now back to a full five members, three of whom are generally expected to favor unions. A full copy of the Court’s decision is available here.

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This post was written by Kimberly A. Craver, with contributions from Joel S. Barras, Scott E. Blissman and Eugene K. Connors.

The U.S. Supreme Court held that a public employer’s review of transcripts of an employee’s text messages on an employer-issued pager constituted a reasonable search under the Fourth Amendment of the United States Constitution. City of Ontario, Calif. v. Quon, No. 08-1332 (June 17, 2010). Although the case involved a public employer, it has some important lessons for private sector employers as well.

Factual Background

Quon worked for the City of Ontario, California, as a police sergeant and as a member of its SWAT team. In 2001, the police department issued pagers to its SWAT team members to help them mobilize and respond to emergency situations. The City’s contract with its wireless service provider had a monthly character limit for each pager, and the City required officers to reimburse it for the additional fees incurred for monthly usage over that limit. When the reimbursement process became burdensome, the City reviewed the communications to determine if the existing character limit was too low for work-related purposes or if the overages were for personal messages.

An initial review showed that several officers had used their pagers for extensive personal text messaging. For instance, many messages sent and received on Quon’s pager were personal in nature, and several were sexually explicit. This prompted the Police Department’s Internal Affairs Division to investigate whether Quon had violated department rules by pursuing personal matters while on duty. The investigation concluded that he had done so, noting for instance that of the 28 messages Quon averaged per shift, only three were work-related.

The City had a “Computer Usage, Internet and E-mail Policy” that permitted incidental, personal use of City-owned computers and equipment. The policy warned employees that personal communications could be monitored, and that employees had no expectation of privacy in such communications. Although the policy did not mention text messages, the City made clear to employees that such messages would be treated like e-mails. The police lieutenant responsible for the City’s wireless contract, however, told Quon that “it was not his intent to audit [an] employee’s text messages to see if the overage [was] due to work related transmissions.” Quon interpreted that comment to mean that the City would not examine the content of his text messages.

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Reed Smith is proud to have been named one of the top employment and labor firms in the United States by Legal 500, a leading legal industry publication. The firm was highly ranked for both Labor and Employment Litigation and Labor Management Relations. Legal 500 cited in particular Reed Smith’s national reputation for experience in the areas of wage and hour and employee benefits class action defense, as well as our strong reputation for advising employers on traditional labor-law matters in diverse industries on a multi-state, regional and national basis.

Chambers USA also ranked the firm’s labor and employment practice in Pennsylvania and California as being industry leaders. In addition, seven of our U.S. attorneys were highly ranked by Chambers USA for their practices.

To learn more about the firm’s Legal 500 rankings, please click here.

To learn more about the firm’s rankings, Chambers USA, rankings or the methodology behind the rankings, please click here.

For more information about Reed Smith's Labor and Employment practice, please contact Karl Fritton, Casey Ryan, Linda Husar, Jim Burns, or the Reed Smith attorney with whom you regularly work.

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This post was written by Daniel J. Moore, James A. Burns, Jr. and Joel S. Barras.

Just 10 days after taking office, President Obama signed Executive Order 13496, requiring all federal contractors and subcontractors to notify employees of their rights under the National Labor Relations Act (NLRA), including their right to join and support unions, and to include in every contract, subcontract, and purchase order, a pledge to honor the employee notice requirements. The U.S. Department of Labor (DOL) has now issued its final rule implementing the Executive Order, specifying how contractors and subcontractors must comply with those requirements, including a poster describing employees’ rights and how they can file claims with the National Labor Relations Board (NLRB), and the penalties employers will face if they fail to comply. The rule will take effect June 21, 2010.

Who Is Affected by Executive Order 13496?

Executive Order 13496 (“the Order”) affects contractors and subcontractors who contract or subcontract with a federal government agency and are covered under the NLRA. The Order does not apply to the federal government, state or local governments, labor unions, or employers who are covered by the Railway Labor Act. The Order also does not apply to prime contracts under the simplified acquisition threshold, currently set at $100,000, or subcontracts of $10,000 or less.

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This post was written by Samantha M. Clancy, E. David Krulewicz and Robert M. Jaworski.

The United States Department of Labor (“DOL”), Wage and Hour Division, recently published an Administrator’s Interpretation that takes the position that mortgage loan officers with certain “typical” job duties are not subject to the administrative employee exemption of the Fair Labor Standards Act. The DOL reasoned that mortgage loan officers’ primary duties are to make sales, and these are not administrative functions as defined by federal regulations. As a result, mortgage loan officers are not exempt from the FLSA’s minimum wage and overtime compensation rules under the administrative employee exemption. The DOL based its new interpretation on the statutory and regulatory framework, as well as on a thorough review and analysis of recent case law. With this determination, the DOL reverses its previously held position and explicitly withdraws Opinion Letters from February 2001 and September 2006, which stated that mortgage loan officers could be considered exempt administrative employees. 

The administrative exemption applies to employees whose job duties and qualifications meet all of the following tests: (1) the employee is compensated on a salary or fee basis as defined in the regulations at a rate of not less than $455 per week; (2) the employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 

The DOL’s interpretation focuses on the second test. The DOL noted that a mortgage loan officer’s typical duties include contacting and gathering financial information from customers, entering data into computer programs to determine which loan products may be offered to a customer, assessing the loan products identified, and trying to match the customer’s needs with one of the company’s products. Those duties, combined with other factors, led the DOL to conclude that mortgage loan officers’ primary duty is to make sales, rather than administrative functions.     

In reaching its conclusion, the DOL also relied on the following factors:

• In lawsuits brought by mortgage loan officers, mortgage companies have typically conceded that the officers’ primary duty is sales.
• Mortgage loan officers are usually paid commissions based on sales, and their performance is evaluated based on sales volume.
• The DOL could not find any reported case holding that a mortgage loan officer, whether working inside or outside, had a primary duty other than sales.
• A primary duty to make sales is not directly related to the management or general business operations of an employer or an employer’s customers, a necessary part of meeting the administrative exemption. 

Although Wage and Hour Administrator Interpretations do not have the force of law, they are given considerable weight by the courts.  This new interpretation, therefore, will significantly affect financial institutions and other related organizations that currently consider their mortgage loan officers to be exempt from overtime pay. Such employers should take immediate steps to address this new interpretation, such as by engaging outside counsel to audit current practices and to otherwise ensure full compliance with all parts of the FLSA. And given that the DOL’s new approach does not limit application of other FLSA exemptions to mortgage loan officers, employers should also consider whether other exemptions may apply. For example, mortgage loan officers may qualify as exempt employees pursuant to the FLSA’s exemption for outside sales staff, i.e., employees who are primarily responsible for sales or for obtaining contracts for services, and who are customarily and regularly engaged away from their employer’s place of business in performing such duties. Counsel familiar with FLSA issues can provide valuable assistance in this process. It may also be necessary to reorganize compensation plans or reclassify employees to ensure compliance.

Whatever approach is chosen, in light of the real potential for class action lawsuits seeking double damages and attorneys’ fees on behalf of all mortgage loan officers who an employer has employed going back as far as three years, this Administrator’s Interpretation cannot be safely ignored.

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This post was written by Laurence G. Rees, Sara A. Begley, Eugene K. Connors, Casey S. Ryan, Carl De Cicco, Amber M. Spataro.

In our everyday lives, we've all noticed or become a part of the phenomenon of social media Facebook, Twitter, YouTube, Flickr, MySpace and more. The options offered and growth of the media have been staggering. With that growth has come new legal risks, including employment issues, quite unlike anything we've seen before. And with things happening at lightning speed, it's hard to keep up, much less react when something goes awry.

In October 2009, we published a White Paper on social media and United States law entitled Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media Phenomenon. The response was unlike quite anything we'd ever seen before as clients, friends, and colleagues from around the globe asked for copies and praised the work.

This month, we've published the second edition which includes a chapter on Employment Practices that addresses employment issues arising from the use of social media in both the U.S. and Europe.

Click here for the new edition and bookmark the entry to be sure to get ongoing revisions.  You can also read the employment chapter by clicking here on our sister technology blog, Legal Bytes.

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Lessons for Employers in a Social Media World

This post was written by Don Innamorato and E. David Krulewicz.

Recently, in Stengart v. Loving Care Agency, the New Jersey Supreme Court held that an employee had a reasonable expectation of privacy in her Internet-based emails to her lawyer, despite the fact that she sent such emails from a company-owned laptop and was on notice of the employer’s written policy that emails may not be considered “private or personal.” The opinion is significant not only in recognizing a privacy interest for employees’ communications to their attorneys using company-owned-and-monitored networks, but also in providing important guidelines for employers drafting or updating their policies on use of email and the Internet. In addition, Stengart issues a warning to both in-house and outside counsel involved in the forensic review of employees’ computer-based data and communications.

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On April 7, 2010, the Internal Revenue Service (“IRS”) issued the form employee affidavit that employers can use to claim a payroll tax credit for newly hired employees, made available under the Hiring Incentives to Restore Employment (“HIRE”) Act that was recently signed into law.

As noted in our earlier client alert on the HIRE Act, the law contains two key tax breaks that are available to most employers, including businesses, agricultural employers, tax-exempt organizations, tribal governments, and public colleges and universities. First, it exempts an employer from paying its share of Social Security payroll taxes (normally 6.2 percent) in 2010 for any unrelated employee, hired after February 3, 2010 and before January 1, 2011, who (1) swears under oath that he or she did not work more than 40 hours during the past 60 days, and (2) was not hired to replace another employee, except one who voluntarily resigned or was terminated for cause. To demonstrate that an employee’s hiring meets the first of those tests, employers can have qualified employees sign the form affidavit, also known as a Form W-11.

Second, the Act offers a tax credit to businesses that keep a newly hired qualified employee for at least 52 consecutive weeks, so long as the employee’s wages during the last 26 weeks of that period are at least 80 percent of his or her wages during the first 26 weeks of the period. The credit is equal to the lesser of $1,000 or 6.2 percent of the employee’s wages during the 52-week period.

Additional information about these tax credits available to employers, including a useful set of FAQs, is available at the IRS website.

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A little-noticed provision of the new health care reform law requires employers to provide new mothers with “reasonable break time” to express breast milk for nursing children who are up to 12 months old. Section 4207 of the Patient Protection and Affordable Care Act (P.L. 111-148), 29 U.S.C. § 207(r)(1), amends the Fair Labor Standards Act (“FLSA”) to require employers to allow a break each time that such an employee needs to express milk, and a place to do so, other than a bathroom, that is “shielded from view and free from intrusion by coworkers and the public.” Because Congress did not specify an effective date for this requirement, it went into effect March 23, 2010, when the president signed the bill.

Although the new law applies to employers of any size, those with fewer than 50 employees need not provide such breaks if they can demonstrate that doing so “would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer’s business.”

The law provides that employers need not compensate employees for any work time that they spend taking such breaks, an exception to the FLSA’s usual rule that breaks of less than 20 minutes must be treated as compensable time. Employers should keep in mind, however, that more generous state laws may trump that exception.

Because the law does not preempt state laws that offer greater protection for nursing mothers who work, and 24 states and the District of Columbia have passed laws that apply to such employees, employers should be sure to check local law before deciding how to proceed.

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This post was written by Bill Bevan, John DiNome and Joel Barras.

This past weekend, with the Easter Congressional recess just under way, President Barack Obama wasted no time in announcing the recess appointments of his two proposed Democratic nominees to serve as members on the National Labor Relations Board (NLRB). One appointment was Buffalo union-side attorney Mark Pearce; the other was the highly controversial Craig Becker from Washington, D.C., who is counsel to the AFL-CIO and the Service Employees International Union. President Obama decided not to install his Republican nominee, Brian Hayes, as a recess appointment to the NLRB. As a result of these recess appointments, Democrats now occupy three of the four filled seats on the NLRB, with Mr. Hayes awaiting Senate confirmation to occupy the remaining seat. Mr. Becker’s and Mr. Pearce’s appointments will last until the end of the next Congressional session, which coincides with the end of 2011. Notably, the terms of Republican Board Member Peter Schaumber and Republican NLRB General Counsel Ronald Meisburg expire in August 2010. The president, of course, could simply take his time filling Mr. Schaumber’s seat, leaving the Board at three Democratic Members, and let the general counsel’s side of the Agency be run by a career acting general counsel until his administration sees what the makeup of Congress looks like after the 2010 elections. Given Mr. Becker’s published works, which are explicitly pro-union, and his stated belief that the Act can be structurally reformed by Board decision-making and rule-making, it is expected that employers’ rights, particularly during union organizing campaigns, will be greatly diminished through future NLRB decisions. Indeed, Mr. Becker’s stated views in the past are that employers should essentially have no involvement in union organizing elections. As always, we will continue to monitor the NLRB docket and decisions to update you on any legal developments.

Also included in the president's announcement were two appointments to the Equal Employment Opportunity Commission (EEOC), Georgetown Law Professor Chai Feldblum and the former Assistant Secretary of Labor for Employment Standards under President George W. Bush, Victoria Lipnic.

To learn more about the appointments, please read the White House's press release.

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This week, President Obama signed into law a $17.6 billion jobs creation package passed by Congress, H.R. 2847, the Hiring Incentives to Restore Employment Act (“HIRE Act”). This legislation includes tax incentives for businesses to hire and retain the unemployed; extension of infrastructure programs affecting surface transportation, energy, and school construction projects; and continuation of depreciation programs in effect for small businesses.

For more information about the HIRE Act, please read our client alert written by Christopher L. Rissetto, James A. Burns, Jr. and Robert Helland.

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Tucked away in Act 44 of 2009, landmark legislation intended to relieve the significant financial strain on municipalities throughout Pennsylvania, in particular Philadelphia and Pittsburgh, the General Assembly imposed a set of best-practices standards on every municipal pension plan in the Commonwealth. Act 44 contains sweeping changes for the use of professionals by municipal pension systems by imposing substantial selection procedures and disclosure requirements.  Chapter 7-A of Act 44 mandates an open competitive selection process for any and all professional services contracts when the municipal pension system is a party. Basically, any entity receiving money from a municipal pension fund, such as actuaries, fund custodians, fund managers, plan advisors and other professional consultants, going forward, may be retained only after being selected through a competitive process. Furthermore, under Act 44, the “most qualified” bidder must be selected. Finally, Act 44 contains conflict-of-interest standards, restrictions on political contributions, and annual disclosure requirements.

This article explains the mandates of the new Act and provides a checklist of tasks necessary for compliance by a municipality.

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Recent opinions by the California Courts of Appeal should encourage employers to review and assess the enforceability of their arbitration and related employment agreements.

Court Refuses to Enforce Agreement to Shorten Limitations Period on Wage and Hour Claims

In Pellegrino v. Robert Half International, the Court of Appeal found that an agreement to shorten or waive the applicable statute of limitations on wage and hour claims was unenforceable. Plaintiffs, all of whom were classified as exempt administrative employees, worked as account executives for temporary staffing firm Robert Half International (“RHI”). Each employee signed an agreement barring claims made more than six months after termination of employment, and waiving any statute of limitations to the contrary.[1]

More than six months after leaving RHI, the plaintiffs filed suit, alleging that RHI had improperly classified them as exempt employees and seeking damages for California Labor Code violations related to overtime, meal and rest breaks, untimely payment of wages, and itemized wage statements. RHI argued that the plaintiffs’ wage claims were barred by the six-month limitations period in the agreements they had signed. It also asserted that the employees were covered by the administrative exemption.

The court found RHI’s arguments unpersuasive. It held that the agreement shortening the applicable wage and hour statute of limitations unlawfully restricted the plaintiffs’ ability to vindicate their claims. It noted the state’s strong public policy in ensuring that non-exempt employees receive overtime compensation and commissions, meal and rest breaks, itemized wage statements, and timely payment of wages. On public policy grounds, plaintiffs’ statutory rights could not be waived through private agreements. The court also relied on Labor Code section 219, which provides that the type of wage claims at issue in Pellegrino could not “in any way be contravened or set aside by a private agreement, whether written, oral, or implied.” The court thus concluded that enforcing the shorter limitations period found in RHI’s agreements would “result in barring legitimate, unwaivable statutory wage and hour claims asserted by misclassified employees who were unable to discover their employer’s classification error and assert appropriate claims.”

The court also rejected RHI’s position that it had properly classified the plaintiffs as exempt administrative employees. The court focused on evidence that the plaintiffs had presented a showing that their duties as account executives did not directly relate to RHI’s management policies or general business operations. Rather, the plaintiffs placed candidates with clients, pitched RHI’s services, and engaged in other sales activities, and did not supervise other employees. Based on these facts, the court found that RHI had misclassified plaintiffs as exempt from overtime.

Arbitration Agreements Providing for Minimally Sufficient Discovery Are Enforceable

In Dotson v. Amgen, Inc., the Court of Appeal upheld the enforceability of an arbitration agreement that limited each party to one non-expert deposition, unless the party could demonstrate a need for additional depositions. 

After Amgen terminated Dotson, an in-house attorney, after four years of employment, he filed suit in the Superior Court for the County of Ventura, alleging wrongful termination. Amgen moved to compel arbitration, but Dotson opposed the motion on the grounds that the arbitration agreement was unconscionable because, among other things, it allowed him to take only one non-expert deposition. 

The court rejected Dotson’s position, finding that the limit on depositions was not substantively unconscionable. The court reasoned that arbitration is principally designed to streamline litigation, and that discovery limitations, such as restricting the number of depositions, represent one way to further that goal. Although Amgen’s agreement purported to restrict discovery, it did so in a way that ensured each party could conduct adequate discovery to prove its claims or defenses. The arbitrator, after all, retained “broad discretion … to order the discovery needed to sufficiently litigate the parties’ claims.” Because Amgen’s agreement differed from agreements to arbitrate that granted additional discovery only on a demonstration of a “substantial” or “compelling” need, it was not unconscionable.

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Reed Smith is proud to have been named one of the top six employment defense firms in the United States in 2009 by Law360, a premier national legal publication. Law360 cited in particular Reed Smith’s success as co-counsel for a major employer in persuading the U.S. Court of Appeals to reverse the certification of the largest class of employees ever recognized under the Americans with Disabilities Act, estimated at more than 36,000 persons. Reed Smith is delighted to be ranked among the top employment defense firms in the country.

To read Law360’s article, click on the following: “Employment Defense Firms of the Year”.

For more information, please contact Karl A. Fritton, Casey S. Ryan, or Linda S. Husar.

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This post was written by Sara A. Begley and Miriam S. Edelstein.

The Pennsylvania Human Relations Commission (“PHRC”) has extended the comment period to March 2, 2010 for its proposed “Policy Guidance” that would create the presumption of disparate impact discrimination when an employer uses criminal history information of African-American or Hispanic applicants/employees as the basis for any adverse employment-related decision. Employers in highly regulated industries may want to submit comments either individually or through an advocacy group within their industry. 

The extension of the deadline appears to have come in response to urging by those in highly regulated industries for additional time to inform the Commission of the numerous laws, regulations and other authority requiring that such employers exclude from certain occupations individuals convicted of specific criminal offenses. In addition to the information in our first Alert regarding this Policy Guidance and the potential areas for comment, please read on for suggestions to employers when submitting comments. A copy of the proposed Policy Guidance can be found on the PHRC’s website, and includes instructions for submitting comments. (Note: At the time of this posting, the proposed Policy Guidance submission information had not been updated to reflect the extended deadline for comments).

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This post was written by Sara A. Begley and Miriam S. Edelstein.

The Pennsylvania Human Relations Commission (“PHRC”) has proposed “Policy Guidance” stating that it intends to treat an employer's rejection of an African-American or Hispanic applicant because of his or her criminal record as presumptive evidence that the employer is discriminating against the applicant in violation of the Pennsylvania Human Relations Act (“PHRA”).

The proposed Policy Guidance potentially presents significant new hurdles for Pennsylvania employers as they attempt to strike the correct balance between instituting security-minded and non-discriminatory hiring practices. This is particularly critical in fields that are highly regulated by federal, state and administrative bodies. Employers in regulated industries are already bound by a myriad of statutory, regulatory and court authority that includes prohibitions against employing individuals convicted of specific offenses in certain occupations. 

The PHRC is seeking public comments regarding the proposed Policy Guidance by January 26, 2010, so that it can consider them before deciding whether to adopt the final Policy Guidance on February 22, 2010. A copy of the proposed Policy Guidance can be found on the PHRC’s website,  and includes instructions for submitting comments. Please read on for further information regarding the potential issues the proposed Policy Guidance raises for Pennsylvania employers, and suggestions of points to include if you choose to submit comments to the PHRC.

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The U.S. Department of Labor (“DOL”) recently released its 2010 regulatory plan, which envisions a major change in how DOL interprets the Labor-Management Reporting and Disclosure Act of 1959 (“LMRDA”) as to when an employer must disclose its use of attorneys or consultants to help persuade employees not to unionize. In particular, DOL will be seeking to narrow a longstanding exemption that allows employers not to report having received “advice” from lawyers and consultants on union organizing.

LMRDA requires employers to file annual reports with DOL identifying every “agreement or arrangement with a labor relations consultant or other independent contractor or organization” pursuant to which such a third party: (1) engages in “activities where an object thereof, directly or indirectly, is to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising,” their right to unionize; or (2) supplies the employer with “information concerning the activities of employees or a labor organization in connection with a labor dispute involving such employer, except information for use solely in conjunction with an administrative or arbitral proceeding or a criminal or civil judicial proceeding.” 29 U.S.C. § 433(a). Employers must also report any payment made pursuant to such an arrangement. Id.   LMRDA imposes a similar reporting requirement on those who provide such services. 29 U.S.C. § 433(b). Willful violations of the law, as well as knowing material misstatements or omissions, are a crime. 29 U.S.C. § 439.

In a key exception, LMRDA does not require employers to report “services of [a] person by reason of his giving or agreeing to give advice to [an] employer” in the covered areas. 29 U.S.C. § 433(c). In the union organizing context, DOL has traditionally distinguished between “direct persuaders,” who communicate directly with employees on behalf of employers and are covered by the reporting requirements, and “advisors,” who have no direct contact with employees and are not covered. Until now, DOL has construed “advice” to include a consultant's review of and comments on persuasive materials prepared by the employer, as well as the consultant's preparation of materials for the employer to use that the employer is free to reject.

Moreover, under current regulations, reports need not be filed as to services that consist of “representing or agreeing to represent an employer before any court, administrative agency, or tribunal of arbitration,” or “engaging or agreeing to engage in collective bargaining on behalf of an employer … or the negotiation of an agreement or any question arising thereunder.” 29 C.F.R. § 406.5(b). Reports filed by attorneys need not include “information which was lawfully communicated to such attorney by any of his clients in the course of a legitimate attorney-client relationship.” 29 U.S.C. § 434 (emphasis added); see also 29 C.F.R. § 406.5(d). Neither the law nor the regulations mention communications by an attorney to a client, presumably because that falls within the more general “advice” exception.

In announcing DOL’s regulatory agenda for 2010, Labor Secretary Hilda Solis said that the agency will seek to expand the LMRDA reporting requirements by narrowing what DOL treats as exempt “advice.” Although DOL has not yet signaled what specific changes it may implement, one model may be regulations that the Clinton administration implemented in its final days. Under those rules, employers would have been required to disclose all persuasive scripts, letters, videotapes, or other materials that were prepared by attorneys or consultants if one goal of the materials was to persuade employees regarding their union rights – even if the attorney or consultant who prepared the materials had no direct contact with employees. The Bush administration quickly rescinded those rules, but Secretary Solis’s 2010 agenda suggests that DOL may be looking to adopt a similar approach.

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President Obama has signed the Department of Defense Appropriations Act for Fiscal Year 2010 (H.R. 3326). Section 8116 of that Act significantly restricts the ability of defense contractors and subcontractors to enter into or enforce agreements that require employees or independent contractors to arbitrate certain claims.

In particular, section 8116 provides that no funds appropriated under the Act may be spent on any federal contract in excess of $1 million that is awarded 60 or more days after the effective date of the Act, unless the contractor agrees not to:

(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or

(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.

Section 8116 also provides that no funds appropriated by the Act may be spent on any federal contract in excess of $1 million that is awarded 180 or more days after the effective date of the Act, unless the contractor certifies that each of its subcontractors that has a subcontract worth more than $1 million has agreed not to enter into or seek to enforce any provision of any agreement described above with respect to any employee or independent contractor who is or will be performing work related to the subcontract.

The Secretary of Defense may waive the application of these provisions to a particular contractor or subcontractor for the purposes of a particular contract or subcontract if the Secretary or the Deputy Secretary personally determines, with a specific explanation, that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is not longer than necessary to avoid such harm.

Congress is considering more sweeping restrictions on arbitration that would apply to every employer. The Arbitration Fairness Act (H.R. 1020, S. 931), which now has 106 cosponsors in the House and 11 cosponsors in the Senate, would prohibit the enforcement of all pre-dispute agreements to arbitrate employment disputes (other than in collective bargaining agreements), civil rights disputes, consumer disputes, or franchise disputes, and would require courts, rather than arbitrators, to decide the validity or enforceability of any such agreement.

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Introduction

On October 9, 2009, Gov. Rendell signed into law Act 51 of 2009 (“Act 51”), which removed the 100 percent Killed-in-Service benefit from Act 600 and created a similar but not identical benefit under the Emergency and Law Enforcement Personnel Death Benefits Act (“Death Benefits Act”), 53 P.S. § 891 et seq. While the Death Benefits Act creates a 100 percent survivor benefit for firefighters, ambulance service or rescue squad members, and police officers who die in the line of duty, only borough and township police officers, under Act 600, previously had a Killed-in-Service benefit guaranteed by state pension law. This article is limited to the interplay between Act 600 and Act 51. While a cursory reading of the new law suggests a limited change to the existing benefit, Act 51 significantly impacts the current benefit available to surviving spouses and creates challenges for municipal employers in eliminating the now-illegal benefit from an Act 600 Pension Plan. This brief analysis reviews the Act 600 survivor benefits available prior to the passage of Act 51, the new benefit created by Act 51, and identifies the issues that must be addressed in order to transition safely to the new Act 51 benefit.

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As employers seek to avoid substantial exposure for alleged violations of wage and hour laws, including the continuing flood of class actions, many are asking outside counsel to review or audit their pay practices so that any problems can be fixed to minimize such risks. In a welcome development, the California Supreme Court recently rejected an effort to force an employer to disclose the results of such a review to managers who had sued, affirming that such advice is protected by the attorney-client privilege.

For more information on this recent ruling, please see the following client alert.

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This post was written by John A. DiNome, Remy Kessler, Joel S. Barras and Marytza J. Reyes.

A series of wage and hour collective actions initially filed in New York and Pennsylvania have begun to swell across the country. Plaintiffs’ attorneys are targeting health care facilities over their alleged failure to comply with meal break rules. Specifically, such suits claim that employers have automatically deducted 30 to 60 minutes of time for employees’ meal periods, even if employees never took the breaks. The plaintiffs allege that by failing to provide unpaid meal periods free of interruptions from work, or by failing to fully compensate the employees for the time they were not relieved of duty, health care facilities have violated the Fair Labor Standards Act (“FLSA”) and other laws. Because employees can recover for violations that took place as many as three years before suit is filed, damages in these cases can be substantial. Employers may be liable for double the employees’ overtime rate of pay for the unpaid meal breaks that were improperly deducted. In addition, plaintiffs are entitled to recover their attorneys’ fees and costs, which often exceed the actual damages. 

Not surprisingly, the Internet has become an effective tool for plaintiffs’ lawyers seeking to identify deep-pocket defendants. Some attorneys have even gone so far as to set up websites to provide information to employees about their investigations of health care employers. (See, e.g., www.hospitalovertime.com or www.overtimecases.com.) Such websites have become an easy way for a plaintiffs’ counsel to gather information about a particular health care employer’s practices, reach employees throughout the country, and publicize large settlements in wage and hour lawsuits.

Health care facilities throughout California have experienced a recent wave of wage and hour lawsuits. In 2008, at a time when registered nurses were in high demand and hospitals across the country were struggling financially, California completed implementation of landmark legislation passed almost a decade before, mandating minimum nurse-to-patient ratios. Not surprisingly, the shortage of nurses and other medical professionals has made it increasingly difficult for employers to comply with California laws requiring them to provide employees who work more than six hours with an uninterrupted 30-minute meal period. While many nurses acknowledge that the demands of their positions do not always permit an uninterrupted meal period, they uniformly object to not being compensated when they are unable to take the breaks to which they are legally entitled. 

In addition to requiring payment of overtime when an employee works more than 40 hours per week, California law requires overtime pay when an employee works more than eight hours per day. Depending on the length of the shift, California employees who are denied meal periods may be entitled not only to overtime, but also to an additional hour of a “premium wage” for each missed meal period. California law permits employees to seek damages for meal period violations going back three years before suit is filed; but if the same allegations are brought under California’s Unfair Competition Law (Business & Professions Code Section 17200), the statute of limitations is four years.

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U.S. employers with 15 or more employees must post workplace notices to inform applicants and employees about their rights under federal anti-discrimination laws. The Equal Employment Opportunity Commission (EEOC) has recently published an updated version of its required “Equal Employment Opportunity is The Law” poster, updated to refer to the employment provisions of the Genetic Information Nondiscrimination Act (GINA) that will go into effect November 21, 2009, as well as changes resulting from the ADA Amendments Act of 2008 that took effect in January.

All employers should replace their existing federal EEO poster with the new version, or add a new supplementary poster, also available from the EEOC. Links to the new poster and the supplement, as well as instructions on how to order multiple printed copies from an EEOC clearinghouse, can be found at the EEOC's website. The EEOC says that Spanish, Chinese, and Arabic versions of the posters will become available before GINA takes effect.

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This post was written by Irene M. Recio and Lorraine M. Campos.

The Federal Acquisition Regulation (“FAR”) provision requiring Federal contractors to use the E-Verify System became effective on September 8, 2009, following nearly a year of litigation. The E-Verify System is a free internet-based program operated by the U.S. Department of Homeland Security, U.S. Citizenship and Immigration Service (“CIS”) that allows employers to verify the employment eligibility of new hires. All federal contracts awarded and solicitations must now include a clause mandating the use of E-Verify for all new employees, as well as all employees who perform work on the contract during the contract period except those who perform support work such as indirect or overhead functions. Institutions of higher education, state and local governments, and governments of federally recognized Native American tribes need verify only those employees who are assigned to a covered Federal contract, rather than all newly hired employees.

The Final Rule exempts contracts that are for less than $100,000 or fewer than 120 days in duration. The Rule also exempts contracts where all work is performed outside the United States or those for commercially available off-the-shelf items (“COTS”), including nearly all food and agricultural items. Subcontractors to federal contractors are also required to use E-verify, as the Rule extends the E-Verify requirement to subcontracts for services or construction with a value of more than $3,000. It will also apply to existing indefinite-delivery/indefinite-quantity contracts if the remaining period of performance extends at least six months after the Rule’s effective date of September 8, 2009.

For employers not covered under the new Rule, E-Verify continues to be a voluntary program.

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As we predicted in our September 14 piece on the Employee Free Choice Act (EFCA), organized labor’s increased pressure on Congress to pass such legislation is starting to bear fruit.  At this week’s AFL-CIO convention, Sen. Arlen Specter (D-Pa.), a leader in the Democrats’ effort to forge a bill that can withstand a Republican filibuster, announced the outlines of a compromise that he has been discussing with a small group of senators, which he predicted would become law before year-end.  Specter’s prediction echoes comments by Sen. Tom Harkin (D-Iowa), who said last week that there had been 60 votes to pass some compromise form of EFCA in July, and that the Senate could act on the bill later this year.

Sen. Specter said that he and his colleagues had reached a “consensus” on three “core principles:”

• No card check, but speedier elections and union access.  Any revised version of EFCA would not include the widely attacked “card check” provision found in the current version of EFCA, under which employees could find themselves represented by a union without any vote.  Saying that no bill that did away with secret ballot elections could be passed, Specter described the proposed compromise as requiring such elections to take place promptly after a petition for certification was filed with the National Labor Relations Board (rather than the current approach, which allows elections to take place as late as six weeks later), and giving unions a right to enter the workplace to campaign.  Specter did not specify how long the shortened election period would be, or give any details about how and when unions could visit employees at work.
• Mandatory “baseball style” arbitration.  The bill would retain the binding interest arbitration found in the current version of EFCA, so that if an employer and union failed to reach agreement on a first contract within so many days following the election, federal arbitrators could step in and impose an agreement on the parties dictating employees’ wages, benefits, hours, layoff procedures, and so on.  To address concerns that this approach would give parties an incentive to make unreasonable proposals, Sen. Specter said the bill would require the arbitrators to adopt the last best offer of one party or the other, so-called “baseball style” arbitration.  He said no decision had yet been reached on how long the parties would have to sign a contract before they would be forced into arbitration.  The current version of EFCA allows 120 days.
• Treble back pay.  The bill would include significantly increased penalties like those found in the current version of EFCA, under which employers who discharge employees because they join or support a union would face treble back pay.

Shortly after Sen. Specter announced this framework, however, labor officials said they had not agreed to it.  Incoming AFL-CIO president Richard Trumka said “card check” remained in play, and the AFL-CIO’s director of governmental affairs said the labor federation had not agreed to any compromise.  Business leaders were equally dismissive, describing Specter’s approach as permitting “ambush elections,” contracts imposed by a “government-appointed bureaucrat,” and acting as a smokescreen for a last-minute return of card check.

All sides agree that any revision of EFCA cannot and will not move forward until the Democrats have 60 votes, which will depend on when Massachusetts selects a replacement for the late Sen. Ted Kennedy.  Although the special election to replace Kennedy will not take place until January, the Massachusetts legislature is considering a bill that would give the Democratic governor authority to name an interim replacement, meaning that a new Democrat could join the Senate within the next few weeks.

We will continue to keep a close eye on EFCA so that our clients can be fully prepared for whatever bill may emerge.

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While many suspected that the Employee Free Choice Act (“EFCA”) might become law within the first 100 days of the new Administration, that has not come to pass. Indeed, with the focus in Congress on the recession and the Administration’s push for healthcare reform, EFCA seems to have been all but forgotten. Like the disappearing canine in the old childhood song that we all remember, “Oh Where, Oh Where Has My Little Dog Gone,” EFCA seems to be lost in the Congressional agenda. 

But has it been forgotten? As we headed into Labor Day, EFCA emerged in the news. Although Senate Majority Leader Harry Reid (D-Nev.) announced last week that EFCA was unlikely to be considered until some time next year because Congress had “too many other things on [its] plate,”¹ staunch supporters of the bill within organized labor beg to differ. Indeed, Andy Stern, president of the Service Employees International Union, was quoted in The New York Times as saying that he not only expected to see EFCA pass, but that it would still include “card-check” — the provision, widely attacked by Republicans and the business community — that would mandate union representation on employees without any secret ballot election in which employees could vote.² While EFCA may be on the back burner, for now it is unlikely that labor will let it remain there for long. 

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This post was written by David Weissman, Cindy Schmitt Minniti, and Daniel Schleifstein.

The New York Legislature recently passed a new law that requires greater communication and transparency from employers in the hiring and firing process. Employers who fail to comply risk incurring penalties and unwanted scrutiny of labor and employment policies and practices. The Labor & Employment team at Reed Smith is here to help employers comply with this new statute and avoid undesirable consequences.

Pursuant to McKinney’s Labor Law § 195, New York employers must now provide any new employee hired on or after October 26, 2009, with information on the following subjects:

• Rate of Pay: Employers must provide the employee with the employee’s regular hourly rate of pay, overtime rate of pay (if applicable), and regular payday at the time the employee is hired.
• Written Acknowledgement: Employers must obtain written acknowledgment of the rates of pay and the regular payday from each employee at the time the employee is hired. The form and content will be provided by the Commissioner of Labor at a later date.
• Payday Changes: Employers must notify employees of any change in paydays before the change.
• Wage Statement: Employers must provide each employee with every payment of wages, listing gross wages, deductions and net wages, and must, at the employee’s request, explain how the wages were computed.
• Recordkeeping Requirements: Employers must establish, maintain and preserve records showing the hours worked, gross wages, deductions, and net wages for each employee, for not less than three years.
• Time-Off Policies: Employers must notify employees in writing or by publicly posting the employer’s policy on sick leave, vacation, personal leave, holidays and hours.
• Termination: Employers must notify any employee terminated from employment – in writing – of the exact date of termination, as well as the exact date of cancellation of employee benefits connected with the termination. Notice must be provided within five working days of the actual date of termination. Failure to notify an employee of cancellation of accident or health insurance subjects an employer to penalties, including a fine of up to $5,000 paid to the Commissioner of the New York State Department of Labor, as well as potential liability in a civil action brought by the employee in which damages may include reimbursement for medical expenses that were not covered by the insurer because of the termination of the employee without notice.

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This post was written by Scott E. Blissman and Joel S. Barras.

The Supreme Court has recently declined to review the Commonwealth Court’s 2008 holding that a municipality properly included officers that had entered into a deferred retirement plan in the municipality’s calculation for state pension aid. In a time when municipal pension funds have been devastated by market conditions, this ruling will increase the amount of state aid many municipalities will receive to help satisfy increasing minimum municipal obligations.

Background

City of Erie v. Department of the Auditor General involved the City’s establishment of a Partial Lump Sum Distribution Option (“PLSDO”). The PLSDO allowed City employees who had reached certain age and length-of-service requirements to select a “pension look-back date” that preceded their actual termination date by 12, 24 or 36 months. For purposes of pension calculations, the pension look-back date would be used as the effective date for the employee’s retirement benefits. The employee would continue to work for the City, but would no longer accrue seniority or service credit; however, the employee was required to continue contributing to his or her pension plans between the pension look-back date and the date of employment termination. Following the employee’s separation of employment, he or she would receive his or her normal retirement benefits determined as of the pension look-back date, as well as a lump sum cash distribution equal to the participant’s monthly retirement benefit, multiplied by the number of months elected in the PLSDO. In most respects, the PLSDO is analogous to Deferred Retirement Option Plans or In-Service Retirement Option Plans.

During an audit by the Department of the Auditor General (“AG”), the AG determined that the City included PLSDO participants in the City’s preparation of its PF-385 form used to receive state pension aid. The AG believed that PLSDO participants should not be included as employees eligible for Act 205 monies, because they were, in effect, retired. Conversely, the City believed that the PLSDO participants should be counted in the calculations, because they were still actively working between their elected pension look-back date and their actual termination date. The AG’s audit recommended that the City reimburse the commonwealth for the excess state aid received in error. The City challenged the recommendations in the audit report concerning the excess state aid through the AG’s administrative process, and the AG’s hearing officer sustained the audit report findings. The City appealed that decision to the Commonwealth Court.

The Commonwealth Court’s Decision

The Commonwealth Court appropriately focused its analysis on the applicable statutory language that authorizes state pension aid; i.e., Section 402 of the Municipal Pension Plan Funding Standard and Recovery Act (commonly referred to as “Act 205”). Act 205 established a General Municipal Pension System State Aid Program that provides funds that municipalities may use to supplement their pension plans. The court noted that the amount of money a municipality may receive is based on “each active employee who was employed on a full-time basis for a minimum of six consecutive months prior to December 31 preceding the date of certification and who was participating in a pension plan maintained by that municipality…” (emphasis added).

The court then concluded that the PLSDO’s pension look-back date is merely used for pension calculation purposes, and not as the date that the employee stopped working. Rather, an employee who participated in the PLSDO continued to work on a full-time basis and contribute to the pension plan beyond the look-back date. Finally, the court noted that the definition of “active employee” indicates that the PLSDO participants are engaged in an activity; i.e., their continued employment. There were no limitations or restrictions placed on their jobs once the employees elected the PLSDO. Therefore, the court held that the City was not required to refund the state aid received for participants of the PLSDO.

Practical Effects for Pennsylvania Public Employers

• Employers should include active employees who are participating in deferred retirement option plans on their roster of employees for purposes of calculating state pension aid.
• Employers should expect unions to emphasize this decision in pushing to obtain such deferred retirement option plans, or to obtain enhancements of the benefits available under these plans.
• While there are many similarities between the PLSDO and a traditional DROP or IROP, the courts may rely upon a few differences in distinguishing this case from one involving a traditional DROP or IROP. Specifically, the court noted in City of Erie that the employees continued to contribute toward their pensions, which does not occur in traditional DROP or IROP settings.

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Just 10 days after taking office, President Obama signed Executive Order 13496, requiring all federal contractors and subcontractors to notify employees of their rights under the National Labor Relations Act (NLRA), including their right to join and support unions. On Aug. 3, 2009, the U.S. Department of Labor (DOL) issued a proposed regulation specifying how contractors and subcontractors must comply with that Order, including a poster describing employees’ rights, and how they can file claims with the National Labor Relations Board (Board). Parties wishing to comment on the proposed rule must do so by Sept. 2.

Executive Order 13496

Citing the government’s need to deal with “contractors whose work will not be interrupted by labor unrest,” and a belief that industrial peace is best achieved when employees are “well informed of their rights,” Executive Order 13496 requires most federal departments and agencies to include in virtually all government contracts, provisions that require the contractor to post a notice for employees describing their rights under the NLRA, to follow all DOL rules relating to the Order, and to be subject to penalties for noncompliance that can include debarment from future contracts. The Order exempts two types of contracts: collective bargaining agreements, and contracts for purchases under the “simplified acquisition threshold” of $100,000. The Order also requires contractors to include such provisions in every subcontract they enter into in connection with the government contract. The Order directs the DOL to issue regulations implementing its requirements, and they will take effect when those regulations become final.

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This post was written by Scott E. Blissman and Joel S. Barras.

The Supreme Court has declined to review the Commonwealth Court’s 2008 holding that a Borough was statutorily required to promote the top-scoring candidate on its eligibility list. Accordingly, the Court found that the Borough erred when it promoted a lower-scoring candidate, who was in the top three on the eligibility list, to fill a position for the Captain of its Fire Department.

Background

Borough of Wilkinsburg v. Colella involved a civil service firefighter who had served as the Borough’s Fire Department Chief Engineer for almost eight years. When the Captain position became vacant, the Borough held an examination to establish the eligibility list for the position pursuant to its civil service rules and regulations. Each candidate who took the exam received a score based on his or her performance on the written and oral portions of the examination. The candidates were then ranked by final score and placed on the eligibility list for promotion. Colella received the highest score. However, the Borough promoted another employee, who was serving as the acting Captain, even though that employee received a lower score on the exam, but was still in the top three. The Borough did so on the basis that it could select any of the top three candidates on the list for promotion.

The Chief Engineer filed a statutory appeal of the decision to the Court of Common Pleas, which sustained the Engineer’s objections and directed the Borough to promote him to the position of Captain. The Court of Common Pleas reasoned that the Borough Code required promotions to be based solely on the outcome of the examination. Thus, the Borough did not have any discretion to choose from the three highest scorers on the eligibility list when filling the vacant Captain’s position by promotion, as opposed to when it hired a new firefighter. The Borough then appealed to the Commonwealth Court.

The Commonwealth Court’s Decision

The Commonwealth Court affirmed the ruling of the lower court. The court drew a clear distinction between original appointments and subsequent promotions. Under the Borough Code, the ability to select from a list of the highest-scoring applicants applied only to original positions. Such discretion did not apply to promotions. Specifically, the language allowing for discretion in the selection process for original appointments did not appear in the provision relating to promotions. The Borough’s interpretation of the Borough Code ignored this distinction and would have rendered the provision pertaining to promotions meaningless. Earlier cases to the contrary were distinguishable, because they were decided before the Pennsylvania General Assembly amended the Borough Code to limit the ability to select from a list of the highest-scoring applicants to original positions. Since virtually identical language appears in the First Class Township Code and the Third Class City Code, promotions in those communities must also comply with this ruling. With the Supreme Court declining to review this decision, this decision is now established law.

Practical Effects for Pennsylvania Public Employers

• All Boroughs, First Class Townships, and Third Class Cities should amend their civil service rules to provide that promotions must be awarded to the highest-ranking individual on the civil service list.
• The only way to avoid promoting the highest ranked individual is to decline to fill the position. Promotions are discretionary; a municipality is not required to fill a position simply because there is an opening. See Trosky v. Civil Service Commission, City of Pittsburgh, 539 Pa. 356, 652 A.2d 813 (1995).
• Note that veteran’s preference does not apply when promoting current civil service employees.
• Joseph C. Rudolf and Ryan J. Cassidy are currently preparing a Fifth Edition of their publication, Model Hiring Manual for Pennsylvania Municipalities, which is distributed by the Pennsylvania Department of Community and Economic Development. We will be sending out an Alert when this publication is finished. If you would like a copy of the Fourth Edition, please respond to this e-mail.

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In one of its most significant employment discrimination decisions in years, the U.S. Supreme Court held this week that if an employer discovers that a test it has given to employees would screen out a statistically significant number of women or minorities, the employer cannot scrap the test based on a fear that it will be sued for discrimination by those who did not pass the test, unless it can show a “strong basis in evidence” that it would actually lose such a suit. Throwing out the test results without such a showing, the Court held, would unlawfully discriminate against those who did well on the test based on their race or sex. Ricci v. DeStefano, Nos. 07-1428 and 08-328 (June 29, 2009).

Facts

The City of New Haven, Connecticut (the “City”), used a written test to help decide which firefighters would be eligible for certain promotions. The results showed that the test had a statistically significant adverse effect on African-Americans. Not only was the passing rate for black firefighters only about half of what it was for whites, but also none of the employees with top scores – the only ones eligible for promotion under City rules – was black. Concerned that using the test would lead black employees to file, and probably win, a suit alleging that the test had a discriminatory “disparate impact” based on race, the City decided not to use the test. In what likely appeared to the City as a case of “damned if you do, damned if you don’t,” it was then sued by 18 firefighters (17 whites and one Hispanic) who had passed the test, alleging that the City had discriminated against them, based on race, by refusing to use the test and thus denying them a chance at promotions.

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On June 18, 2009, the United States Supreme Court issued its opinion in Gross v. FBL Financial Serv., Inc., No. 08-441, giving a significant victory to employers facing claims under the Age Discrimination in Employment Act (“ADEA”).

Jack Gross, an employee of FBL Financial Services, Inc. (“FBL”), claimed that he was demoted because of his age, in violation of the ADEA. The jury ruled in Gross’s favor after being instructed by the judge that FBL was liable if age was “a motivating factor” in its demotion decision. In other words, the jury was told that if age played any part in that decision, FBL had violated the ADEA.

In an opinion by Justice Clarence Thomas, the Supreme Court held that the trial judge had misstated the standard for liability under the ADEA. Specifically, the Court held that the plaintiff in an ADEA suit must prove that age was the determinative, or “but-for,” cause of the adverse employment decision, not merely that it was “a motivating factor.” In other words, a plaintiff must demonstrate that, if it were not for his or her age, the adverse employment decision would not have been made.

Gross means that a plaintiff’s burden of proof under the ADEA is now higher than it is under Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment on the basis of race, sex, color, religion or national origin. In Title VII cases, a plaintiff must prove only that a protected characteristic was “a motivating factor” for the adverse employment decision, not that is was determinative.

While Gross provides a substantial win for employers, the victory may be short-lived. In the past, Congress has shown little hesitation in amending employment laws that it believes have been misinterpreted by the Supreme Court. Examples include the Civil Rights Act of 1991, which overruled a Supreme Court decision by amending Title VII to, among other things, substantially increase the difficulty of proving the employer’s affirmative defenses; and the Lilly Ledbetter Fair Pay Act of 2009, which overruled a Supreme Court opinion by amending several laws to provide greater protection for employees complaining of pay disparities. Given the current political composition of Congress, there is a substantial possibility that the House and Senate will overrule Gross by amending the ADEA to conform it to Title VII, so that it requires plaintiffs to prove only that age was a motivating factor in an employer’s decision. Until that happens, however, Gross will make it easier for employers to defend age discrimination claims.

A copy of the Gross opinion can be found on Cornell University Law School’s Legal Information Institute website.

For more information, please contact the author of this Client Alert, or the Reed Smith attorney with whom you regularly work.

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This post was written by Scott E. Blissman and Joel S. Barras.

In a recent decision by the Pennsylvania Labor Relations Board (“Board”), the Board found that a public employer committed an unfair labor practice by prohibiting its unionized employees from smoking in outdoor work spaces. This case represents the Board’s attempt to balance its longstanding case law requiring employers to negotiate prohibitions on employee smoking with the recently passed Pennsylvania Clean Indoor Air Act. Specifically, the Board concluded that the Clean Indoor Air Act permits public employers to unilaterally ban smoking by employees in all indoor work areas without first negotiating with the employees’ union, but the statute does not apply to outdoor spaces. The case may proceed on appeal to the Commonwealth Court, and we will update you if and when the case progresses.

Background

In Association of Pennsylvania State College and University Facilities v. Pennsylvania State System of Higher Education, prior to September 2008, faculty and coaches were allowed to smoke indoors and outdoors, subject to previously negotiated local restrictions at the various state college and university campuses. In September 2008, the State System of Higher Education (“SSHE”) informed the faculty’s union that the Pennsylvania Clean Indoor Air Act prohibited smoking in the workplace, and as such, any past practice or provision in the operative collective bargaining agreement that permitted such activity was null and void. As the new law did not provide an exception for existing labor agreements, the SSHE did not negotiate or discuss this new prohibition prior to its implementation.

In response, the union filed a charge of unfair labor practices with the Board, alleging that the state unilaterally changed a term of employment that is a mandatory subject of bargaining. Initially, the Board Hearing Examiner dismissed the charges, citing the overriding authority of the Clean Indoor Air Act. The union filed Exceptions to the Board, which reversed the Examiner’s Proposed Decision and found the SSHE violated Act 195 by failing to bargain with the union regarding the outdoor smoking ban.

The Pennsylvania Labor Relations Board’s Decision

In its decision, the Board first noted that the General Assembly can pass legislation that requires public employers to unilaterally change a mandatory subject of bargaining, regardless of its bargaining obligations to its employees’ unions. As such, to the extent that the Clean Indoor Air Act applies to public employers’ facilities and their employees, the Act would supersede existing provisions in any labor agreement. In reviewing that law, the Board agreed with the Hearing Examiner that public employers were statutorily required to prohibit smoking in their indoor facilities by members of the public and public employees. However, after analyzing the Act’s provisions, including its name – the Clean Indoor Air Act – and the General Assembly’s public deliberations, the Board held that it did not apply to outdoor areas. Accordingly, the Board concluded that its established case law that required bargaining over smoking prohibitions still applied to those spaces. Therefore, the SSHE committed an unfair labor practice by unilaterally banning smoking by unionized employees in outdoor work spaces.

Practical Effects for Pennsylvania Public Employers

Public employers are permitted, and in fact required, to prohibit smoking by their employees in all of their indoor facilities and vehicles. However, with regard to their public parks and other outdoor spaces, current contract provisions and established past practices control. Before a public employer can modify its outdoor smoking policy for unionized employees or institute a new policy, it must first gain the assent of the union representing any impacted employee.

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This post was written by Joel S. Barras, Scott E. Blissman, and Daniel J. Moore.

The Third Circuit Court of Appeals has ruled that the Philadelphia Police Department did not violate Title VII of the 1964 Civil Rights Act when it denied an officer’s request to wear a headscarf, a head covering traditionally worn by Muslim women, while in uniform and on duty. According to the court’s ruling, the Department successfully demonstrated that allowing the officer to wear a headscarf on duty would impose an undue hardship on the Department.

Background

The dispute began in 2003 when the officer requested permission from her commanding officer to wear a headscarf while on duty. The officer’s request was denied pursuant to the Department’s strictly-enforced internal uniform policy. The officer subsequently filed a complaint of religious discrimination with the Equal Employment Opportunity Commission (“EEOC”) and the Pennsylvania Human Relations Commission (“PHRC”). While these administrative agencies investigated her complaints, the officer continued to report to work wearing a headscarf, eventually resulting in a temporary 13-day suspension, without pay, for insubordination.

In 2005, the officer brought suit against the city of Philadelphia in federal district court, alleging religious discrimination. The district court granted summary judgment in favor of the city, holding that the officer could not be reasonably accommodated without imposing an undue burden on the city.

The Third Circuit’s Decision

The Third Circuit affirmed the district court’s ruling. The court explained that an employer is not required to accommodate a religious belief if it can show that the requested accommodation would cause an undue burden on the employer and its business. In this context, an accommodation constitutes an “undue hardship” if it would impose more than a de minimis cost on the employer. Here, the city presented testimony that strict enforcement of the Department’s uniform policy was
“critically important to promote the image of a disciplined, identifiable and impartial police force by maintaining the Philadelphia Police Department uniform as a symbol of neutral government authority, free from expressions of personal religion, bent or bias.” Such uniformity encouraged officers to subordinate their personal preferences in favor of the overall policing mission, and conveyed a sense of authority and competency both inside the Department and to the general public. Accordingly, the court found that the city had shown that wearing a religious headscarf would impose an undue burden on the Department, and that the district court’s grant of summary judgment was proper.

Practical Effects for Pennsylvania Public Employers

The Third Circuit’s decision is consistent with a number of federal courts holding that police departments are not required to accommodate an officer’s request to wear religious garb while on duty. For example, a court in another jurisdiction has held that a police department was not required to accommodate an officer’s request to wear a gold cross pin on his uniform in contravention with the department’s no-pins policy. It is important that police departments have a detailed, written uniform and appearance policy. Such policies can and should address tattoos and piercings that would be visible on an officer while in his or her uniform. Additionally, it is important that police departments apply any such policy consistently, without exceptions. A court would likely rule differently had the department provided medical exemptions for a particular aspect of the uniform policy or grooming standards (e.g., a “no-beard” policy), while refusing religious exemptions. As a practical matter, this uniform and appearance policy should be included with your job application materials to avoid situations where a newly appointed officer claims that he or she was unaware of work rules on appearance. If your police department does not have such a policy, contact one of the attorneys at Reed Smith to obtain a model policy.

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This post was written by David L. Weissman and Joel S. Barras.

New York Governor David Paterson issued an order on April 24, 2009, making it easier for labor unions to organize employees for agencies and public authorities that provide financial aid to projects that will entail the construction of a hotel or convention center. The directive requires the operators of new construction projects that receive state aid, including loans, tax incentives or long-term leases from state agencies or public authorities, to obtain Labor Peace Agreement (“LPA”) with unions seeking to organize their workers. These LPA must also be included in any contract between the project operators and any subcontractors that work on the project. 

Under these mandated agreements, employees would be prohibited from striking, boycotting or engaging in other actions that would disrupt business or deprive the state of revenues. While the directive’s language appears to favor employers, unions will enjoy unprecedented leverage to gain concessions from companies in exchange for entering into LPA. For example, unions will likely demand right-to-organize agreements, including “card-check” rights that allow a union to be recognized as soon as a majority of workers sign authorization cards.

For purposes of the governor’s directive, covered hotel and convention center projects include those in which New York state, or an agency with at least one member appointed by the governor, owns title to part of the facility or has entered into a 40-year or longer lease to occupy a portion of the new facility. The directive also applies to construction projects that receive financing from the state or state agency, including direct financial subsidies, loans or loan guarantees, credit enhancements, or other similar aid. 

The directive includes two limited exceptions. First, a state agency may decide not to include the LPA if the agency determines that such a requirement will not further the state’s proprietary interest prior to the issuance of the initial request for proposal. Second, the agreement would not be required if the financial assistance at issue is provided pursuant to a specific statute or regulation that prevents the conditioning of such assistance on an LPA. Any company preparing to undertake a construction project in New York should be aware of this pending order, and make sure to consider a union workforce when budgeting for the project.

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The Illinois Supreme Court has held that under that state’s Human Rights Act (the “Act”), an employer is strictly liable for sexual harassment by any of its supervisors, even if the harasser does not supervise the victim. Sangamon County Sheriff’s Department v. Illinois Human Rights Commission, Nos. 105517 and 105518 consolid. (Apr. 16, 2009). In other words, an employer is automatically responsible if any of its supervisors sexually harasses any of its employees, regardless of whether the supervisor has any direct or indirect authority over the employee.

Facts

A sheriff’s department records clerk complained that a supervisor named Yanor, who did not supervise her, pressed himself on her and kissed her, and asked her a month later if she would go with him to a motel for the night. Two months after that, the clerk received a letter on official stationery of the state public health department which said that she might have been recently exposed to a communicable or sexually transmitted disease according to a confidential source who tested positive. Frantic, the clerk reported the letter to a friend in management at the sheriff’s department. The department investigated and determined that Yanor had written and sent the fraudulent letter. After Yanor explained that he had meant the letter as a joke, the employer suspended him for four days without pay and urged the clerk not to take the matter any further.

Despite that request, the clerk filed a complaint with the Illinois Human Rights Commission, alleging in part that the sheriff’s department had sexually harassed her in violation of the Act. The Commission agreed, finding that Yanor had engaged in a series of acts “that cumulatively constituted a hostile work environment,” and because he was a supervisor, the department was liable for his conduct.

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The Supreme Court has ruled that employees represented by a union cannot sue for age discrimination when their union and employer have agreed that any such claims should go to arbitration rather than court. In a 5-4 split, the Court held that so long as the collective bargaining agreement (“CBA”) between an employer and a union “clearly and unmistakably” includes discrimination claims among those disputes that must be arbitrated, union members subject to the CBA must pursue such claims before an arbitrator rather than a judge or jury. 14 Penn Plaza LLC v. Pyett, No. 07-581 (Apr. 1, 2009).

Background

The CBA in this case prohibited discrimination based on “race, creed, color, age, disability, national origin, sex, union membership, or any other characteristic protected by law,” including claims made under several federal laws listed by name, among them the Age Discrimination in Employment Act (“ADEA”). The contract said all such claims were subject to the CBA’s grievance and arbitration procedures “as the sole and exclusive remedy for violations.”

After the employer reassigned several union employees to other positions, they asked their union to file a grievance claiming that the reassignments violated that clause by discriminating against them because of their age, as well as running afoul of seniority and overtime provisions in the CBA. The union did so, but withdrew the age discrimination portion of the grievance before the arbitration was complete. The employees then filed an ADEA claim in federal court, but their employer moved to dismiss the suit based on the CBA provision requiring such claims to be arbitrated. The lower courts sided with the employees, holding that under a 1974 Supreme Court case, Alexander v. Gardner-Denver Co., a CBA could not effectively waive employees’ right to bring statutory discrimination claims in court. Although the lower courts recognized that the Supreme Court had since enforced an agreement to arbitrate ADEA claims in Gilmer v. Interstate/Johnson Lane Corp.(1991), they distinguished that case on the grounds that it had involved an individual agreement by an employee rather than a collective agreement by a union.

The Supreme Court’s Decision

The Supreme Court reversed the lower courts, holding that a CBA provision that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law. It first held that an employer and the union representing its employees are free to negotiate whatever lawful terms they believe appropriate to govern the employees’ terms and conditions of employment, and that under federal labor law such agreements should generally be upheld. The Court found that, as it had held in Gilmer, nothing in the ADEA precluded the arbitration of age discrimination claims so long as the relevant agreement clearly requires employees to arbitrate rather than litigate.

The Court rejected the employees’ argument that agreements to arbitrate statutory claims are suspect when found in CBAs instead of individual employee contracts, finding that the ADEA makes no such distinction. The Court distinguished its decision in Gardner-Denver as involving a CBA that covered only contractual disputes, not statutory claims. Here, where the CBA expressly covered statutory claims, and in light of Gilmer and other more recent cases favoring arbitration of such claims, the Court held that Gardner-Denver did not affect its conclusion.

The Court also dismissed the concern that a union and its members might have a conflict of interest over the union’s decision whether or not to pursue arbitration of a discrimination claim on behalf of certain employees. Writing for the majority, Justice Thomas said that the ADEA did not reflect any such concern, and that it was best left to Congress to decide how to resolve any such possible conflict. The Court also noted that if employees believed their union had improperly refused to pursue a discrimination claim in arbitration, they could always sue the union for breaching its duty to fairly represent all of its members or for itself having violated the ADEA. Finally, the Court held that it would not decide whether a CBA provision that allowed a union to block any arbitration of discrimination claims by refusing to act on the employees’ behalf amounted to an unenforceable waiver of the employees’ substantive rights. The Court noted that the parties disagreed over whether the union, after it stopped pursuing the age discrimination claim in arbitration, had offered to allow the employees to do so themselves, and that the parties had not briefed that issue.

Practical Effects

This decision gives employers the opportunity to avoid lawsuits and jury trials in discrimination cases by including provisions in their CBAs like that upheld by the Court, just as many employers have done through arbitration agreements with individual non-union employees since Gilmer was decided. But the decision leaves open many important questions that may limit its scope:

• Many if not most CBAs allow only the union, not individual employees, to invoke the grievance and arbitration procedure. In such cases, if a union decided not to take a discrimination claim to arbitration, it seems likely that the courts would allow the employees to pursue their claims in court lest they be left with no way to enforce their rights.

• Unions may be reluctant to add language to their CBAs like that in Pyett, fearing that if they do so, and then fail to pursue a discrimination claim through arbitration, the employee may sue the union for violating its duty of fair representation or discriminating against the employee.

• Congress may accept the Court’s invitation to address the issue. The Arbitration Fairness Act of 2009 (H.R. 1020), recently introduced in the House of Representatives, would ban all predispute agreements that require arbitrating any employment dispute, thus overturning Gilmer. Although the current version of the bill exempts CBAs from its scope, that provision will surely be revised to ensure that Pyett is reversed as well. If Congress passes such legislation, Pyett may prove to be a Pyrrhic victory for employers.

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This post was written by Scott E. Blissman and Joel S. Barras.

In light of the economic downturn, public employers have been forced to consider and, in some cases, to implement layoffs as part of a greater labor cost reduction strategy to address lost tax and other revenues. While it is always a difficult decision to furlough employees, the federal government has stepped in to provide some relief to these individuals. The recently passed federal Stimulus Plan amended benefits provided under COBRA and the health care coverage continuation provisions of the Public Health Services Act. Any employer with 20 or more employees and thereby subject to the requirements of COBRA or the PHSA with an employee who has or will have been involuntarily terminated during the period from September 1, 2008 through December 31, 2009 must take action.

The most significant changes to these benefits for former employees are as follows:

• For a period of up to nine months beginning on or after March 1, 2009, any qualified beneficiary whose employment is involuntarily terminated between September 1, 2008 and December 31, 2009 is required to pay only 35 percent of the applicable premium amount, rather than up to 100 percent of the premium.
• Employers are reimbursed for the 65 percent of the premium they pay through an offsetting payroll tax credit.
• The 65 percent premium subsidy is tax free for taxpayers with a modified gross income of up to $125,000 ($250,000 in the case of a joint return).
• Employers must provide each qualified former employee with written notice regarding the availability of subsidized COBRA and PHSA premiums, the availability of an extended election period, and the individual's rights and obligations to receive subsidized COBRA or PHSA continuation coverage.
• An additional COBRA election period allows individuals who did not elect COBRA continuation coverage as of Feb. 17, 2009, but who would otherwise be considered a qualified former employee on that date, to elect COBRA subsidized coverage. This individual will be able to elect subsidized coverage going forward, but not retroactively. Again, employers must provide a notice to these former employees regarding the extended COBRA election period and subsidy.

With regard to informing former employees of their rights to these expanded benefits, the U.S. Department of Labor released model notices to assist employers in complying with the new requirements. A brief description and a link to each model notice can be found below.

General Notice (Full version) – The General Notice is the COBRA election notice updated to include information about subsidized COBRA premiums required by the Stimulus Plan. This Notice can be used for all qualified beneficiaries who experience a qualifying event at any time from September 1, 2008 through December 31, 2009.

General Notice (Abbreviated version) – The abbreviated notice is an abbreviated version of the General Notice that does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event on or after September 1, 2008, have already elected COBRA coverage, and still have coverage.

Alternative Notice – Insurance carriers that provide group health insurance coverage in accordance with state law must send the Alternative Notice to persons eligible for continuation coverage under state law.

Notice in Connection with Extended Election Periods ("Extended Election Notice") – This Notice must be sent to any assistance-eligible individual who (i) had a qualifying event at any time from September 1, 2008 through February 16, 2009, and (ii) either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA. This notice must be provided by April 18, 2009.

Employers should immediately begin work internally and with their outside COBRA administrators to update and distribute the required notices.

For a .PDF copy of this alert, please click here. 

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This post was written by William Bevan III and James A. Burns, Jr.

Seeking to impose dramatic changes in how employers are unionized and who writes an employer’s first contract with a union, Democrats in the House and Senate yesterday re-introduced the Employee Free Choice Act (“EFCA”). The bill (H.R. 1409, S. 560) is identical to legislation that passed the House in 2007 as H.R. 800.

EFCA would make three radical changes to the National Labor Relations Act:

• First, the bill would permit unions to obtain certification through a mandatory card check reviewed by Regional Offices of the National Labor Relations Board (“NLRB” or “Board”), rather than through a secret ballot election held and closely monitored by the Board. Predictably, the proposed legislation would not allow employees seeking decertification of a union to use such card check procedures; employees who wished to oust a union would instead be required to vote in an election.
• Second, EFCA would allow an arbitration panel to write the first labor contract between an employer and a union where the parties themselves cannot do so. In particular, if the parties had not reached agreement on their own within 90 days, either side could ask the Federal Mediation and Conciliation Service to mediate the contract and, if no contract was in effect 30 days later, an arbitration panel would step in and write the contract for the parties. Any such contract would remain in effect for two years.
• Third, the bill would change the procedures and penalties for alleged violations arising out of union organizing campaigns. NLRB Regional Directors, acting at their own discretion, would be allowed to seek injunctive relief against employers for such alleged violations. The Board would be required to assess both back pay and double liquidated damages on employers who discharge employees during an organizing campaign. The Board would also have authority to assess a civil penalty of up to $20,000 per violation of Section 8(a)(1) or (3) of the Act that substantially interferes with the union organizational process during the period of organizing and, after certification or recognition of a union, until a first contract is signed.

Like its predecessor, EFCA requires that the Board certify a union once it finds that most of an employer’s employees in a unit appropriate for collective bargaining have signed valid authorization cards designating a particular union as their representative. In other words, if a union submitted cards to the Board signed by 50 percent plus one of the employees in an appropriate bargaining unit, the Board would be required to certify the union as the representative of all employees in that unit without holding any secret ballot election. The proposed legislation, like the prior bill, is silent on what sort of authorization cards would be valid, and directs the Board to develop language for such cards and procedures for determining their validity without setting any deadline for the Board to do so. The current House version of EFCA also does not indicate how traditional representation issues involving the scope and composition of bargaining units will be determined. Under current NLRB procedures, these issues are determined by means of a representation case hearing that results in a written decision by a Regional Director, which is subject to review by the NLRB.

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This post was written by Stephanie Wilson and E. David Krulewicz.

On January 1, 2009, the ADA Amendments Act of 2008 (the “ADAAA”) took effect, bringing with it what many expect to be sweeping reforms to the landscape of federal disability discrimination law. This Act, which was widely lauded by both members of the House of Representatives and the Senate, was signed into law by President Bush on September 25, 2008. Employers who are not fully familiar with the changes the ADAAA brings must quickly learn the nuances of the new law – and the impact it has on the meaning of a “disabled employee” – as it will likely open the flood gates for a new wave of employees seeking reasonable accommodations and the number of discrimination lawsuits. There is good news, however, for employers and attorneys in New Jersey, as these amendments essentially conform the ADA to the “handicap” protections mandated by New Jersey Law Against Discrimination (“LAD”) and interpretative New Jersey Supreme Court decisions.

Click here to read the full article.

This article was originally published in the February 2009 issue of New Jersey Lawyer Magazine, a publication of the New Jersey State Bar Association, and is reprinted here with permission.

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Illinois employers need not pay certain workers’ compensation benefits to employees fired for cause, according to a recent state appellate court decision. Interstate Scaffolding, Inc. v. The Workers’ Compensation Commission, et al., 385 Ill. App. 3d. 1040, 896 N.E. 2d 1132 (3d Dist. 2008).

The case involved an employee injured while working, who then returned to light duty work. The employer accommodated the employee’s work-injury-related restrictions. After returning to work, the employee admitted writing graffiti on the employer’s walls, and was fired.

The court addressed the issue of whether the employee should continue receiving temporary total disability (“TTD”) benefits after his termination for cause. The court first explained that in Illinois, an employee is temporarily totally disabled from the time the injury renders him unable to work until he is as recovered as the permanent character of his injury permits. An employee seeking TTD benefits must prove both that he did not work and that he was unable to work.

Although the court ruled that the employee still had a temporary total disability when fired from his light duty job, it decided that he forfeited his right to TTD benefits when his employer fired him for cause.

The court said that the “overriding purpose” of Illinois’ workers’ compensation laws is to “compensate an employee for lost earnings resulting from a work-related disability.” The court reasoned that because this employee’s lost earnings resulted from his own admitted misconduct unrelated to his work-related disability, he forfeited his right to any TTD benefits.

This case gives Illinois employers some additional comfort level if they have cause to fire an employee who has returned to work on light duty after filing a workers’ compensation claim. Now, employers (and their workers’ compensation insurance carriers) can discontinue TTD benefits under such circumstances.

Employers should, however, continue to exercise extreme caution before terminating employees who have filed workers’ compensation claims. The employee fired for cause in the recent appellate court case admitted writing the graffiti, giving the employer uncontested cause to fire the employee. Additionally, this recent case did not involve any retaliatory discharge claim by the employee. Illinois still makes it illegal to fire an employee in retaliation for having filed a workers’ compensation claim, subjecting the employer to possible compensatory and punitive damages. Employers who fire employees who have filed workers’ compensation claims without such clear-cut grounds for termination may have to continue paying workers’ compensation benefits and defend a retaliatory discharge claim.

The lesson for Illinois employers? If you are thinking about firing an employee who recently filed a workers’ compensation claim, then you should have rock-solid, non-retaliatory grounds for doing so. Only then can you avoid continued TTD payments, and successfully defend a retaliatory discharge claim.

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This post was written by Sherri A. Affrunti and E. David Krulewicz.

Responding in part to a 2007 study which found that New York employees were largely unfamiliar with State laws regulating an employer’s use of past convictions for employment-related decisions and in support of the State’s goal to prevent discrimination on the basis of criminal records, the New York Legislature recently amended the State’s general business and labor laws to require employers to disseminate and post notice to job applicants and employees of their rights with respect to, and an employer’s limitations on the use of, information on criminal convictions. The posting and notice requirements take effect on February 1, 2009. 

Background 

Section 296 of the New York Executive Law makes it unlawful for an employer to deny employment to an individual based upon his or her having been convicted previously of a crime, or by reason of a finding of lack of “good moral character” due to his or her prior conviction of a criminal offense, when such a denial is a violation of New York’s Correction Law Article 23-A (Licensure and Employment of Persons Previously Convicted of One or More Criminal Offenses). N.Y. Executive Law § 296. 

Under Article 23-A, employers of 10 or more employees are expressly proscribed from making adverse hiring or termination decisions based upon an individual’s conviction record unless: (1) there is a direct relationship between the prior criminal offense(s) and the specific employment position sought or held by the individual; or (2) hiring or continuing to employ the individual would involve an unreasonable risk to property or the safety or welfare of specific individuals or the general public. Before determining that an individual’s criminal conviction record bars employment or continued employment, Article 23-A requires that those employers carefully consider each of the following factors:

• New York’s public policy encouraging the employment of previous convicts;
• The specific duties and responsibilities of the employment position sought or held by the individual;
• The bearing, if any, the criminal offense(s) for which the person was previously convicted will have on that individual’s fitness or ability to perform one or more job duties or responsibilities;
• The time that has elapsed since the occurrence of the criminal offense(s);
• The age of the applicant or employee at the time of the conviction;
• The seriousness of the offense(s);
• Any information produced by the person or on his or her behalf, regarding rehabilitation and good conduct; and
• The employer’s legitimate interest in protecting its property as well as the safety and welfare of its employees and clients as well as the general public.

Notably, an employer must also give consideration to any certificate of relief from disabilities or certificate of good conduct issued to an individual, which certificate, by law, creates a rebuttable presumption of rehabilitation regarding the offenses to which it relates. 

N.Y. Correction Law § 750, et seq.

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Acting swiftly on one of his campaign promises, President Obama today signed the Lilly Ledbetter Fair Pay Act (S. 181). The new law will increase the number of pay discrimination claims, make them much more difficult to defend, and force employers to retain records relating to compensation decisions far longer than they have in the past. In addition, the Act creates a strong incentive for management to review any current disparities in pay or benefits between two employees who hold similar jobs, to be confident that such differences were and are based on legitimate factors rather than a discriminatory decision that may have occurred years ago.

Federal discrimination laws generally require employees to file charges of discrimination with the Equal Employment Opportunity Commission (“EEOC”) within 180 or 300 days after the alleged discrimination occurs. That deadline allows such claims to be resolved relatively quickly, while the evidence is fresh and witnesses are available. In Ledbetter v. Goodyear Tire & Rubber Co. (2007), the U.S. Supreme Court, emphasizing the importance of the deadline, held that the period for challenging pay discrimination starts to run when an employer first makes the allegedly discriminatory decision, not each and every time that the employee later feels the effect of such a decision by receiving a paycheck.

The Ledbetter Act overturns that approach. The period for filing a charge now starts to run not only when an allegedly discriminatory compensation decision or practice is first adopted, but also each time that an individual becomes subject to or affected by application of such a decision or practice, “including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or practice.” The new law, which takes effect today and retroactively applies to any claim filed since the Ledbetter case was decided, amends Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act of 1973, and thus applies to compensation discrimination based on sex, race, national origin, color, religion, age, and disability.

The new law creates substantial challenges for employers, in that they will now be forced to reconstruct and defend compensation decisions made years ago by persons likely to have forgotten what happened – even assuming that such witnesses are still alive and can be found. For that reason, employers now have a strong incentive to document any and all decisions that may affect compensation – such as why they paid a new employee more than an existing one, or why a supervisor gave one employee a better review than another – and to retain all such records much longer than is legally required. Finally, employers may want to evaluate any current disparities in pay and compensation between employees who hold the same job in order to be able to defend such differences as legitimate.

Congress is soon expected to place even greater emphasis on pay discrimination by passing the Paycheck Fairness Act, which was approved by the House of Representatives earlier this month but has not yet been voted on in the Senate. That law would allow plaintiffs bringing Equal Pay Act claims to recover unlimited compensatory and punitive damages, make it far easier for them to bring class actions, and prohibit employers from taking action against most employees because they have asked about, discussed, or disclosed any employee’s wages.

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In another victory for employees, the U.S. Supreme Court has ruled unanimously that employees who answer questions in an employer’s internal investigation of possible harassment or discrimination are protected from retaliation for doing so, even though they did not come forward to complain. Crawford v. Metropolitan Gov’t of Nashville and Davidson County, Tennessee, No. 06-1595 (Jan. 26, 2009).

The case involved a school system’s internal investigation of a sexual harassment complaint brought against an employee relations director, in which the employer interviewed several of the complaining employee’s co-workers. In answering the employer’s questions, one of those co-workers, Vicky Crawford, mentioned that the director had engaged in what the Court described as “gross clowning” and “sexually obnoxious” behavior toward her. The employer reprimanded the director, but later fired Crawford for alleged embezzlement. Crawford sued under that part of Title VII of the Civil Rights Act of 1964 which prohibits retaliating against employees because they have “opposed” discrimination, claiming that her termination was motivated by her statements during the investigation. The employer argued that although the law protects employees who oppose discrimination by bringing complaints, an employee who merely answers questions has not “opposed” anything. The Sixth Circuit Court of Appeals sided with the employer.

In reversing the lower court, the Supreme Court described that distinction as “freakish.” The Court rejected as speculative the employer’s argument that transforming every witness in an internal investigation into a potential retaliation plaintiff would deter employers from conducting thorough investigations. Citing its earlier cases, the Court held that employers would continue to have “a strong inducement to ferret out and put a stop to” discrimination in order to avoid liability. Allowing employees to be punished for answering questions in internal probes, the Court said, would render such investigations virtually useless by making employees afraid to participate, making it more likely that unlawful discrimination and harassment would continue.

The Court thus reemphasized that management has a powerful incentive to promptly investigate possible harassment or discrimination. In doing so, however, employers may wish to take greater care in deciding who to interview. For instance, unless it is reasonable to expect that such an employee may have relevant knowledge, an employer may want to think twice about interviewing someone whose job is in jeopardy, out of concern that if the employee is terminated soon after being interviewed, he or she will have a ready-made retaliation claim. At the same time, if an employer passes over employees who may shed light on what happened, it runs the risk that a judge or jury will find that it failed to take adequate steps in ferreting out a problem. It is thus more important than ever for employers to carefully plan their investigations, including which employees should be interviewed.

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On October 9, 2008, Governor Ed Rendell provided a victory for nurses’ unions by signing the Prohibition on Excessive Overtime in Health Care Act. The Act prohibits employers from mandating overtime for direct patient caregivers, including nurses and nurses’ assistants, in Pennsylvania’s hospitals and health care facilities. Effective July 1, 2009, hospitals and health care facilities will be prohibited from requiring nurses and nurses’ assistants to work hours beyond a predetermined, regularly scheduled daily work shift. The Act also includes an anti-retaliation provision, which prohibits employers from retaliating against workers who refuse to work extra hours.

The new law contains a relatively narrow exception, permitting employers to mandate overtime in certain unforeseen emergency circumstances. These circumstances include the following:

• A declared national, state or municipal emergency
• A highly unusual or extraordinary event that substantially affects the provision of needed health care services or increases the need for health care services
• An act of terrorism
• A natural disaster
• A widespread disease outbreak
• An unexpected absence, discovered at or before the commencement of a scheduled shift, which could not be prudently planned for by an employer, and which could significantly affect patient safety. (This cannot be used to overcome habitual short-staffing.)

If such an emergency occurs, the employer is permitted to mandate overtime as a last resort and only after: (1) exhausting reasonable efforts to obtain other staffing; and (2) providing the employee with up to one hour to arrange for the care of the employee’s minor child, or elderly or disabled family member.

While the statute does not address whether this Act supersedes any provisions in an existing collective bargaining agreement that permits an employer to mandate overtime, the legislative history and prior case law suggest that such a provision would continue “as is” until the expiration of that labor agreement.

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Just a few days after starting its new session, Congress has moved to substantially expand employees’ rights and remedies in pay discrimination cases. On Jan. 9, 2009, the U.S. House of Representatives passed the Lilly Ledbetter Fair Pay Act (H.R. 11) and the Paycheck Fairness Act (H.R. 12), largely along party lines, and then combined them into a single piece of legislation (H.R. 11). Identical bills have been introduced in the Senate, and a vote there is expected later this month. Taken together, the bills would make it easier for plaintiffs to establish pay discrimination, significantly expand the number and size of class actions in such cases, and expose employers to unlimited compensatory and punitive damages even if they never intended to discriminate. President-elect Obama supports the legislation.

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This post was written by James A. Burns, Jr. and Vanessa K. Eisenmann.

Earlier this year, we reported that Congress was considering a large number of bills that would have imposed significant new burdens on how employers deal with employees. Two such bills—one outlawing genetic discrimination in employment and the other making significant changes to the Americans with Disabilities Act—were passed and signed into law. Considering the new political landscape, it is reasonable to assume that several of the others will be reintroduced in the 111^th Congress, and that many of those bills will become law next year. The following previews major changes in employment legislation (in addition to the Employee Free Choice Act discussed in a separate Alert) that employers might expect to see in 2009.

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The much-anticipated Final Rule (“the Rule”) amending the Federal Acquisition Regulation (“FAR”) provision to require federal contractors to use the E-Verify System was published in the Federal Register on November 13, 2008. The E-Verify System is a free internet-based program operated by the U.S. Department of Homeland Security, U.S. Citizenship and Immigration Service (“CIS”) to allow employers to verify the employment eligibility of new hires. All federal contracts awarded and solicitations issued after January 15, 2009 will include a clause mandating use of E-Verify for all employees hired during the contract period, and those employees who will perform work under the contract, with a surprising exception for employees who perform support work on the contract, such as indirect or overhead functions. Institutions of higher education, state and local governments, and governments of federally recognized Native American tribes need only verify employees assigned to a covered federal contract (and not all newly hired employees, as is the case for all other federal contractors).

There are exemptions in the Final Rule for contracts that are for less than $100,000 or fewer than 120 days in duration. The Rule also exempts contracts where all work is performed outside the United States or those for commercially available off-the-shelf items (“COTS”), including nearly all food and agricultural items. The Rule extends the E-Verify requirement to subcontracts for services or construction with a value of more than $3,000. It will also apply to existing indefinite-delivery/indefinite-quantity contracts if the remaining period of performance extends at least six months after the Rule’s effective date of January 15, 2009.

Those entities subject to this amended FAR provision will be required to enroll in E-Verify within 30 days of the award of the contract, and to initiate the verification queries within 90 days of the enrollment. After the initial 90-day phase-in period, all newly hired employees will have to be processed in E-Verify within three days of their start date. Contractors may choose to verify all employees, in which case it must notify the government and begin verifying all employees within 180 days of the notification. Federal contractors who no longer wish to participate in E-Verify after a contract has ended can terminate their participation.

To date, the E-Verify program has been voluntary for all employers and, at times, controversial because some employers have found the database unreliable. There are some employer advocacy groups considering filing suit to enjoin enforcement of the Rule. Although E-Verify is operated and managed by CIS, it relies on the Social Security Adminstration’s database to verify the information provided by the employee. Other advocacy groups oppose the program as potentially violative of an employee’s privacy and due process rights. For employers not covered under the new Rule, E-Verify still remains a voluntary program, with only 11 states requiring employers and/or state contractors to use E-Verify. Those states include: Arizona, Colorado, Georgia, Minnesota, Mississippi, Missouri, North Carolina, Oklahoma, Rhode Island, South Carolina and Utah. Illinois currently has legislation forbidding the use of E-Verify, but that law is in the process of litigation.

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This post was written by Don A. Innamorato and John T. McDonald.

In a typical harassment/discrimination claim, a plaintiff alleges that inappropriate or discriminatory conduct rendered his or her work environment hostile and, in many cases, that he or she also suffered an adverse employment action (e.g., discharge) caused by the discriminatory workplace. For many years, employers were often successful in obtaining the dismissal of such claims where it could be shown that, at the time of the adverse employment action, the decision-maker had no knowledge of the plaintiff’s protected class or the hostile environment. In essence, the decision-maker could not possibly have discriminated on the basis of something of which he or she was never aware. Hostile work environment claims based solely on a single alleged comment were also prone to dismissal. In a recent case, however, the New Jersey Appellate Division drew upon new federal decisions to change the legal landscape for employers. This change is expected to make it easier for plaintiffs to avoid pretrial dismissal of their suits, and to present their discrimination and harassment claims to a jury.

In an unpublished decision, Kwiatkowski v. Merrill Lynch, the New Jersey Appellate Division adopted the “subordinate bias” theory that several federal courts have applied in Title VII cases when reviewing the dismissal of a discrimination claim. Often described as the “cat’s paw” or “rubber stamp” theory of liability, the subordinate bias theory holds that an employer may be found liable for a facially nondiscriminatory employment action if the decision-maker may have been influenced—even unknowingly—by a biased subordinate employee. In such a case, the biased subordinate provides an illegal taint to the decision-maker’s action by selectively reporting, or even fabricating, information in his communications with her. Thus, the employer can still be held liable even though the decision-maker herself was unbiased, or not even aware that the plaintiff was in a protected class, or had previously complained of discrimination or harassment. In the Kwiatkowski case, the Appellate Division reversed an award of summary judgment to the employer, based upon the federal decisions applying the “subordinate bias” theory.

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In perhaps no U.S. presidential election in recent memory has the outcome been more important to a change in our basic labor law, the National Labor Relations Act (“NLRA” or “Act”). Predictions are that if Sen. Obama is elected President and the Democrats take control of Congress, the crown jewel in labor’s legislative agenda, the Employee Free Choice Act, which passed the House last year but fell short in the Senate,¹ could become the law of the land.²

The Employee Free Choice Act (“EFCA”), as passed by the U.S. House of Representatives, has three major features that make sweeping changes in the current provisions of the NLRA. First, the Act will permit unions to obtain certification through a mandatory card check conducted by Regional Offices of the National Labor Relations Board (“NLRB” or “Board”). Second, EFCA will impose first contracts through interest arbitration where the parties are unable to agree on the terms of such agreements. Third, EFCA will amend certain provisions of the Act to permit NLRB Regional Directors, acting at their own discretion, to seek injunctive relief against employers for alleged violations arising out of union organizing campaigns. The Board will be required to assess both back pay and double liquidated damages on employers who discharge employees during an organizing campaign. In addition, the Board will have authority to assess a civil penalty of up to $20,000 per violation of Section 8(a)(1) or (3) of the Act that substantially interferes with the union organizational process during the period of organizing and, after certification or recognition of a union, until a first contract is entered into. Each of these changes and its significance is examined below.

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The U.S. Supreme Court begins its 2008-09 term with several cases related to labor and employment, raising issues that include the protection afforded employees who participate in sexual harassment investigations, management’s right to require union employees to arbitrate discrimination claims rather than raise them in court, and whether employers calculating pension benefits must credit employees for the time they missed work for pregnancy leaves taken before pregnancy discrimination was outlawed. These cases are summarized below.

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This post was written by James A. Burns, Jr. and John T. McDonald.

Yesterday, September 25, 2008, President Bush signed the ADA Amendments Act of 2008 (“ADAAA”), which will expand the protections afforded by the Americans with Disabilities Act (“ADA”). The ADAAA passed the Senate by unanimous consent on September 11 and was approved by a voice vote in the House of Representatives less than a week later. Its significant changes to the ADA will take effect January 1, 2009. 

The ADA prohibits discrimination against a qualified individual with a “disability,” defined as a physical or mental impairment that substantially limits one or more of the individual’s major life activities. The ADAAA is designed to reverse several rulings by the United States Supreme Court that the law describes as having improperly restricted ADA coverage by narrowly interpreting the term “disability.” In one such case, the Court held that when deciding whether an individual is protected by the ADA, courts need to take into account mitigating measures that might ameliorate the effects of the condition, such as medication or other treatment. In other cases, the Court strictly enforced the requirement that an impairment substantially limit a “major life activity” to be a covered disability, and narrowly construed what sort of activities would be considered “major life activities” for purposes of the ADA. 

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This post was written by Catherine S. Ryan and Andrew T. Quesnelle.

On June 13, 2008, Gov. Ed Rendell signed into law the Pennsylvania Clean Indoor Air Act (S.B. 246) (the “Clean Indoor Air Act” or the “Act”). The Clean Indoor Air Act will take effect on September 11, 2008. 

The Clean Indoor Air Act prohibits individuals from smoking in a public place. A “public place” is defined as an “enclosed area which serves as a workplace, commercial establishment or an area where the public is invited or permitted.” In addition, “workplace” is further defined as “an indoor area serving as a place of employment, occupation, business, trade, craft, professional or volunteer activity.” Several categories of business establish-ments are explicitly excluded from the Act’s coverage, including certain drinking establishments, many private clubs, certain fundraisers or charitable events, and designated areas within sports and recreational facilities. 

Any establishment where smoking is prohibited, which includes any public place for which there is no specific exception, is required to prominently post “No Smoking” signs. Likewise, any entity where smoking is permitted by the Clean Indoor Air Act is required to prominently post a “Smoking Permitted” sign at every entrance to the establishment. 

The Clean Indoor Air Act provides for a variety of penalties for entities that fail to post the required signage or that permit smoking in places where it is prohibited. The penalties increase in severity depending on the number of offenses within certain periods of time. An entity is subject to a $250 fine for a first violation, a $500 fine for a second violation within one year, and a $1,000 fine for a third violation within one year of the second violation. Violations are considered administrative if they are found by the Pennsylvania Department of Health, state licensing agency or county board of health, and criminal if they are found by a law enforcement officer; but the fines remain the same whether the offense is considered administrative or criminal. It is an affirmative defense for an entity to demonstrate, through a sworn affidavit, that it “made a good faith effort” to prohibit smoking. 

Employers should be aware that the Clean Indoor Air Act contains anti-retaliation provisions, which prohibit employers from discharging, refusing to hire or otherwise retaliating against an employee because the employee exercised his or her right to a smoke-free workplace under the Act. 

Covered entities must begin compliance with the Act’s provisions by September 11, 2008. The Pennsylvania Department of Health has printable “No Smoking” and “Smoking Permitted” signs on its website, along with other pertinent information about the Act. 

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In August 2008, Gov. David Patterson signed the New York State Worker Adjustment and Retraining Notification Act (S.8212) (the “NY WARN Act”) into law. Although the NY WARN Act, effective Feb. 1, 2009, imposes requirements on employers similar to those required by the federal Worker Adjustment and Retraining Notification Act (the “Federal Act”), 29 U.S.C. §§2101-2109, there are some important differences. 

The Federal Act generally requires employers of 100 or more full-time employees to provide at least 60 days’ advance written notice regarding plant closings or mass layoffs to the affected employees’ representative or, if none, to the affected employees themselves. The Federal Act also requires that employers notify the state dislocated worker unit and the local government. The NY WARN Act requires New York employers with 50 or more employees to provide 90 days’ advance written notice in the event of a mass layoff, relocation or employment loss¹ to the affected employees, the representatives of the affected employees, the New York State Department of Labor and the local workforce boards. 

The NY WARN Act also has lower minimum thresholds than the Federal Act for determining whether a triggering event requires mandatory notice. Specifically, the NY WARN Act expands the definition of “mass layoff” to include employment losses at a single site of employment that affect: (1) at least 25 full-time employees (as opposed to the 50 employee minimum of the Federal Act) so long as they represent at least 33 percent of the total active workforce; or (2) at least 250 full-time employees (as opposed to the 500 employee threshold of the Federal Act). 

The NY WARN Act also requires notice in the event of a plant closing resulting in an employment loss affecting 25 full-time employees (as opposed to the 50 employees required pursuant to the Federal Act) during a 30-day period.²

Affected employees and their representatives may pursue claims against employers as individuals or as members in representative actions for violations of the NY WARN Act. Such employees may be entitled to back pay and the cost of benefits for the employer’s violation, up to a maximum of 60 days or one-half the number of days the employee was employed by the employer, if fewer. Employers may also be required to pay civil penalties of not more than $500 for each day of the violation. The NY WARN Act also grants the New York State Department of Labor the authority to prescribe rules necessary to enforce the Act, and to make determinations regarding violations and liability. Any payment made pursuant to the Federal Act constitutes payment under the NY WARN Act, and penalties cannot exceed the maximum federal penalty for the same violation. 

Both the NY WARN Act and the Federal Act provide exemptions for employers from the notice requirements under certain limited circumstances, including good faith and active attempts to secure financing, strikes/lockouts, and unforeseeable business circumstances, such as natural disasters. The NY WARN Act provides additional exemptions for a “physical calamity” or “an act of terrorism or war.”

²     The NY WARN Act does not specifically include “plant closing” as an event requiring 90 days’ advanced notice, nor is the term included in the definition of “employment loss.” The NY WARN Act, however, seems to require 90 days’ notice in the event of a “plant closing” because the term “affected employees” is defined as those “who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer.”   

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This post was written by John T. McDonald and E. David Krulewicz.

Adding to a series of recent employment law cases decided by the United States Supreme Court, the Court issued three more opinions affecting employment law on June 19, 2008: two interpreting the Age Discrimination in Employment Act of 1967 (“ADEA”) and one concerning the Employee Retirement Income Security Act of 1974 (“ERISA”). 

In Kentucky Retirement Systems v. EEOC, 554 U.S. ___ (2008), a 5-4 decision, the Supreme Court held that “differential treatment based on pension status, where pension status…itself turns, in part, on age” does not violate the ADEA. Specifically, Kentucky’s state retirement plan (the “Plan”) for employees in “hazardous positions” provided that an employee could obtain “normal” retirement benefits in two ways: (1) after 20 years of service; or (2) after 5 years of service provided the employee had attained the age of 55. If an employee became disabled prior to satisfying either avenue, however, the Plan would “impute” the number of years necessary to meet either the years of service or age requirement, whichever was less. The amount of benefits a retiree received depended upon the number of years of service (either actual or imputed). 

The EEOC challenged the Plan on behalf of an employee who retired after becoming disabled at age 61. As the employee was already eligible for “normal” retirement benefits (having achieved 18 years of service and age 55), the Plan did not “impute” any additional years of service to him. The EEOC claimed that the Plan discriminated on the basis of age because had the employee become disabled before reaching age 55, he would have been credited with additional years of service and, therefore, received increased benefits. In rejecting the EEOC’s argument, the Supreme Court explained: “[w]here an employer adopts a pension plan that includes age as a factor, and that employer then treats employees differently based on pension status, a plaintiff, to state a disparate treatment claim under the ADEA, must adduce sufficient evidence to show that the differential treatment was ‘actually motivated’ by age, not pension status.” Because the EEOC had failed to produce such evidence, the Supreme Court found no violation of the ADEA. 

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In a unanimous ruling by a three-judge panel on June 18, 2008, the Ninth Circuit Court of Appeals in Quon v. Arch Wireless Operating Co., Inc. et al., 2008 U.S. App. LEXIS 12766, held: (1) that a third party vendor provided an electronic communication service to the subscriber/employer and that it violated the Stored Communications Act (SCA) when it turned over text-messaging transcripts to its subscriber, who was not an addressee or intended recipient of the messages; and (2) that an employer’s search of the text-messaging transcripts violated the Fourth Amendment because employees have a reasonable expectation of privacy in those messages. 

Facts — A police sergeant (employee) filed a lawsuit against the city, the police department (employer) and the city’s provider of wireless text messaging services for violations of the SCA and the Fourth Amendment prohibition against unreasonable search and seizure. The employer had a computer usage, internet and e-mail policy that entitled it to monitor all network activity without notice and stated that users had no expectation of privacy or confidentiality and that use of computers for personal benefit was a violation of the policy. The employee signed an acknowledgment of the policy and attended a meeting in which it was stated that the policy applied to the use of pagers. The employee was issued a pager by his employer, which was governed by the policy. He used the pager for both work and personal messages, including sexually explicit messages to his wife. He exceeded the department’s informal policy limiting use of the pagers to 25,000 characters. The “operational reality” was that the department would not audit their employees’ pagers as long as the employees agreed to pay for any overages. The employee paid the overages on the three to four occasions he exceeded the character limit. The police chief ordered that the transcripts of the employee’s text messages be obtained and reviewed to determine whether the pagers were being used for purely work purposes. The provider, Arch Wireless, produced the transcripts to its subscriber, the employer. 

The Decision — The Ninth Circuit held that the provider provided a service that enabled the employee to send or receive electronic communications under the plain meaning of the SCA and therefore violated the SCA. The court ruled against the police department, stating that its informal policy of requesting a check for any overages created an expectation of privacy in the text messages. The search of the text messages was unreasonable in scope and therefore in violation of the Fourth Amendment because there were a host of simple ways to verify the efficacy of the 25,000 limit without intruding on the employee’s constitutional rights. 

Practical Impact — This is the first time a federal appellate court has provided Fourth Amendment protection to electronic messages. The ruling gives government workers Fourth Amendment protection against searches of text and e-mail messages by their employers. Government employer subscribers will now have to obtain a warrant, court order or consent before their outside vendors will permit access to email and text messages. The SCA portion of the decision may encourage employers to maintain archived email and text messages on their own internal servers, rather than hiring third-party vendors, so they can control access to them. The decision should also remind employers that they should implement strong internet and computer usage policies. However, even if they have strong policies that allow monitoring of all network activity without notice, that expressly state that users have no expectation of privacy or confidentiality and that use of computers for personal benefit violates the policy, they need to to regularly monitor employee email and text messages. The Quon case makes it clear that an employer’s statement that it has the right to monitor is not sufficient if, in practice, employees are lead to believe they have an expectation of privacy in their personal communications. In addition, the opinion highlights the need for employers to thoroughly train supervisors who are responsible for ensuring employee compliance with computer and internet policies and to evaluate their performance of these duties on a regular basis to avoid a custom or “operational reality” which supercedes the written policies. 

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This post was written by John A. DiNome and Daniel J. Moore.

In a 7–2 decision, the U.S. Supreme Court held that California’s Assembly Bill 1889 (“AB 1889” or the “Act”) is preempted by the National Labor Relations Act (“NLRA”). Chamber of Commerce v. Brown, 554 U.S. ___ (2008). The decision represents a significant victory for employers and maintains the current federal policy favoring free debate between employers and employees on unionization. 

Background — On September 28, 2000, California enacted AB 1889, known as the union “neutrality law.” AB 1889 forbids private employers who receive either state grants or more than $10,000 in state funds during a calendar year from using such funds to “to assist, promote, or deter union organizing.” Although termed the “neutrality law,” AB 1889 benefited employees because few, if any, employers would dedicate funds to encourage its employees to unionize. AB 1889 requires employers to maintain strict accounting records demonstrating a complete separation of state funds. The penalties for violating AB 1889 are severe—employers found in violation of AB 1889 are subject to treble damages, attorneys’ fees, and costs. 

The U.S. Chamber of Commerce, along with a group of employers and business associations, filed a lawsuit challenging the Act. In 2002, a federal district court held that the Act was preempted by the NLRA and therefore unenforceable. The U.S. Court of Appeals for the Ninth Circuit struggled with the case. In two separate decisions, a three-judge panel affirmed the district court’s decision. However, in 2006, the full Ninth Circuit vacated the earlier panel decisions, and ruled that the Act was not preempted by the NLRA. Chamber of Commerce v. Lockyer, 463 F.3d 1076 (9th Cir. 2006) (en banc). 

The Decision — In reversing the Ninth Circuit, the Supreme Court relied on a doctrine known as Machinists preemption, which forbids states to regulate conduct that Congress intended to be unregulated and left to the free play of economic forces. The Court found that both the text and the history of the NLRA demonstrated a congressional policy “favoring uninhibited, robust, and wide-open debate in labor disputes.” The NLRA protects an employee’s right not only to unionize, but also to refuse to join a union, which implies an underlying right to receive information opposing unionization. Accordingly, AB 1889, which embodied California’s judgment that partisan employer speech necessarily interferes with an employee’s choice about whether to join a labor union, violated Congress’s policy in favor of free debate. 

Practical Impact — AB 1889, and similar statutes, threatened to seriously undermine the speech rights of employers related to union organizing campaigns. The potential costs of litigation, plus the threat of severe penalties gave employees tremendous leverage to halt employer campaigns in opposition to labor organizing activities. The Supreme Court’s decision preserves the federal policy in favor of free debate on unionization. It also maintains a consistent policy throughout the nation, thereby avoiding a patchwork approach to employer speech varying from state to state.

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The U.S. Supreme Court today held that 42 U.S.C. § 1981 (Section 1981), a law enacted just after the Civil War, which prohibits race discrimination in the making and enforcement of contracts, also protects persons who are subject to retaliation because they have complained about such discrimination – even though Section 1981 never mentions retaliation. The Court relied in large part on two of its earlier cases that had interpreted a similar law against discrimination to encompass retaliation claims. It also noted that its decision did not change the law, because every federal appellate court to have addressed the issue had held that Section 1981 prohibits retaliation. CBOCS West, Inc. v. Humphries, No. 06-1431 (May 27, 2008).

Section 1981, which the Court earlier held prohibits discrimination based on ethnicity as well as race, offers plaintiffs three key advantages over the more well-known federal fair employment practice law, Title VII of the Civil Rights Act of 1964. First, although Title VII precludes plaintiffs from suing until they have first filed a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) and waited for that agency to issue a right-to-sue notice, Section 1981 plaintiffs may sue without exhausting any administrative process. Second, while Title VII has a fairly short statute of limitations, requiring plaintiffs to file an EEOC charge within 180 or 300 days after an act of alleged discrimination or retaliation has occurred, Section 1981 gives plaintiffs four years after such an act has occurred in which to sue. Third, although Title VII allows employees to recover all lost wages and benefits, it limits how much a successful employee can collect for emotional distress and punitive damages, with the cap for such other damages ranging from $50,000 to $300,000, depending on the employer’s size. Section 1981, on the other hand, allows a plaintiff to recover unlimited compensatory and punitive damages.

In light of these differences, employers may expect current or former employees who believe themselves to have been subject to retaliation based on complaints about alleged race discrimination to sue under Section 1981 instead of or in addition to Title VII.

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This post was written by James A. Burns, Jr. and Rachel C. Shim.

By overwhelming margins, the House and Senate have passed legislation that will prohibit discrimination in employment and medical insurance based on genetic information and tests. The White House has made clear that President Bush will sign the bill.

The Genetic Information Nondiscrimination Act (“GINA” or the “Act”) will prohibit employers, employment agencies and labor unions from discriminating against applicants or employees based on information about genetic tests of, or the receipt of genetic counseling or other services by, an individual or his or her family members. GINA will also preclude group health plans and issuers of health insurance from discriminating against individuals based on genetic information, and will bar insurers from requiring genetic tests.

Employers, Employment Agencies and Labor Unions

GINA makes it unlawful for an employer, employment agency or labor union to discriminate against any applicant or employee based on “genetic information,” which the Act defines as information about the genetic tests of such an individual or any of his or her family members; information about the manifestation of a disease or disorder in any such family members; or information about a request for or receipt of a genetic test, genetic counseling, or genetic education by the individual or any of his or her family members. The Act also prohibits requesting, requiring or purchasing genetic information with respect to an employee or family member. Employers are nonetheless permitted to request or require that an employee provide a family medical history in compliance with the certification provisions of the Family and Medical Leave Act (“FMLA”) or comparable state laws, or where the employer’s request or requirement is “inadvertent.” Another exception permits requesting or requiring information used for legally mandated genetic monitoring of the biological effects of toxic substances in the workplace, but only if the monitoring complies with federal and state regulations, and the employee expressly consents and is given the results.

Like medical information under the Americans with Disabilities Act, genetic information must be treated as confidential, maintained on separate forms, and stored in separate medical files. If a covered entity receives a court order directing it to provide genetic information, it cannot do so unless the disclosure is specifically authorized by the order and the employee either knew about the order before it was secured, or is told about the order and any genetic information to be produced before production takes place. Employers may also disclose such information in connection with the employee’s compliance with the certification provisions of the FMLA or comparable state laws.

Other provisions of the Act, including its prohibition against retaliation and the range of available remedies, mirror those found in Title VII of the Civil Rights Act of 1964. Prevailing plaintiffs may thus recover lost wages and benefits; compensatory and punitive damages of up to $300,000, costs and attorneys’ fees; and equitable relief such as reinstatement. To allay business concerns, however, GINA does not permit employees to bring “disparate impact” claims asserting that a facially neutral policy or practice has a discriminatory adverse effect based on a protected characteristic.

Group Health Plans and Insurers

Under the Act, group health plans and insurers cannot discriminate against an individual with regard to premiums based on genetic information, nor can they require an individual to undergo a genetic test (except in certain limited circumstances for research purposes). The Act also bars group health plans and insurers from requesting, requiring or purchasing genetic information about an individual, or using for underwriting purposes any genetic information that they acquire.

GINA’s full impact on employers that provide group health plans is not yet clear, as the agencies charged with administering the new law have been given one year from the date the Act takes effect to issue regulations. Nevertheless, employers that provide fully insured group health plans will most likely be able to rely on their insurers to satisfy at least some requirements of the Act. In addition, GINA requires the Department of Health and Human Services (“HHS”) to amend regulations issued under the Health Insurance Portability and Accountability Act (“HIPAA”) to include genetic information within the definition of protected health information. This should allow insurers and group health plans to use genetic information for payment, treatment and health care operations, and thereby ensure that the Act does not bring the day-to-day administration of a group health plan to a halt.

Once GINA takes effect, however, employers will need to pay close attention to ensuring that their group health plans comply with its requirements, because penalties for a violation are steep. Under the Act, the Secretary of Labor may impose a penalty of up to $100 per day per participant or beneficiary to whom a failure relates. The Act also allows an excise tax to be imposed under Section 4980D of the Internal Revenue Code. While employers will be able to correct errors and be excused from unintentional, unknowing mistakes, employers that fail to take action to ensure compliance could be hit hard.

Effective Dates

To provide enough time for those covered by the Act to prepare for its restrictions and for the agencies charged with issuing regulations to do so, GINA will not take effect until next year. Those parts of the Act that cover group heath plans and health insurers will take effect 12 months after the bill is signed, while the employment discrimination provisions will take effect six months after that.

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As the election season continues to heat up, Congress is considering a large number of bills that would impose significant new burdens on how employers deal with employees. Even if these bills do not become law this year—either because their sponsors cannot muster the necessary number of votes, or because President Bush wields his veto pen—they provide a preview of what employers might expect to see next year, depending on the results of the 2008 election. 

Pay Discrimination

As early as this month, the Senate is expected to take up the Fair Pay Restoration Act (S. 1843), which mirrors the Lilly Ledbetter Fair Pay Act (H.R. 2831) passed by the House of Representatives last summer. Both bills would overturn the Supreme Court’s 2007 decision in the Ledbetter case, holding that an employee must challenge an alleged discriminatory pay practice within 180 or 300 days after the employer first made the pay decision at issue, rather than treating each paycheck as a new act of discrimination. An employer thus would be treated as having discriminated “each time wages, benefits, or other compensation is paid,” even if the alleged discriminatory pay practice reflected in the paycheck had occurred years earlier. The Senate bill has 42 cosponsors, including Sens. Obama (D-Ill.) and Clinton (D-N.Y.), but the Bush Administration has threatened a veto. 

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This post was written by Sherri A. Affrunti and Meghan O. Offer.

Provided that the bill is signed into law by Governor Corzine, New Jersey employees will be entitled effective July 1, 2009 to collect up to six weeks of paid family temporary disability leave benefits during any 12-month period (42 days for “intermittent leave”) when caring for children, spouses, domestic or civil union partners, or parents with serious health conditions, or to be with their newborns or newly adopted children during the first 12 months following birth or placement for adoption. As proposed, family temporary disability leave benefits will be paid at the same level as state-funded temporary disability benefits (currently two-thirds of an employee’s weekly wages, up to a maximum benefit rate of $524 for disabilities beginning on or after Jan. 1, 2008).

The bill provides that state family disability leave benefits will be funded through employee tax deductions to be implemented Jan. 1, 2009, unless an employer is covered by an approved private disability plan for benefits during periods of family temporary disability leave, or is exempt from the provisions of the law. Thus, for the 2009 calendar year, each worker covered by the state plan will be required to contribute to the Family Temporary Disability Leave Account an amount equal to 0.09 percent of wages earned (anticipated to be about $33 per year for each employee in the state), in addition to any amount contributed to the State Temporary Disability Benefits fund for their own covered non-occupational illness, accidents or disabilities.

Unless otherwise prohibited by law, the bill permits New Jersey employers to allow or require employees to use up to two weeks of paid sick leave, vacation or other paid time off before collecting family temporary disability leave benefits under the proposed bill. It also permits employers to offset the total number of days of family temporary disability leave benefits paid to an employee during a period of a family temporary disability leave, by the number of days paid by the employer at full pay, not to exceed two weeks. Further, if an employer requires an employee to take two weeks at full pay, its employees must be permitted to take that fully paid leave during the waiting period for state family temporary disability leave benefits.

While the proposed amendments to the New Jersey Temporary Disability Benefits Law provide for the payment of certain family leave benefits, they do not provide for any leave entitlement such as those mandated under the federal Family and Medical Leave Act (“FMLA”) or the New Jersey Family Leave Act (“NJFLA”). Employers should nevertheless be cognizant of the interplay of these Acts if this bill is signed into law – particularly when making decisions on whether to restore employees to their positions following periods of family temporary disability leave. Notably, while the bill states that it is not intended to “increase, reduce or otherwise modify” any right of an employee to return to work under the NJFLA or the FMLA, it provides an express safe harbor from claims—including those alleging discharge in violation of public policy—for small businesses (employing less than 50 employees) not covered by the NJFLA.

Because the bill is expected to be signed into law, employers are encouraged to consult with counsel when drafting and implementing policies; performing any necessary amendments to private temporary disability benefit plans; and responding to requests for leave or benefits; and to assure compliance with statutory amendments when distributing information to employees.

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This post was written by Sherri A. Affrunti and Meghan O. Offer.

The New Jersey Department of Labor and Workforce Development has now published the form mandated to be used by New Jersey employers to provide notice of mass layoffs or the transfer or termination of operations under the Millville Dallas Airmotive Plant Job Loss Notification Act (“Millville Dallas Act” or state “Baby WARN”). An interactive copy of the form is attached, along with the Department’s Summary of the Law.

Employers who have been in operation three years or longer and who have at least 100 or more full-time employees are required to use the form to provide a minimum of 60 days’ advance notice of plant closings or mass layoffs to: (a) all affected employees and their collective bargaining unit representatives (if any); (b) the Commissioner of Labor and Workforce Development; and (c) the chief elected official of the municipality where the business is located.

Employers must insert the following information into the form:

• The number of employees whose employment will be terminated
• The date(s) each employee termination will occur
• The reasons for the mass layoff or transfer or termination of operations
• A list of all available employment opportunities, including the pay, benefits, location, and other terms and conditions of such alternate employment
• A summary of employee rights with respect to the payment of wages, severance, pension, and other benefits in connection with the termination, including rights based on an existing collective bargaining agreement or other existing employer policy

Employers who fail to timely provide notice face substantial penalties, including mandatory severance to each affected employee equal to one full week of pay for each full year of employment, in addition to the payment of other available severance benefits.

Use the following link for an interactive copy of the Millville Dallas Form.

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The Department of Labor published proposed changes to the current FMLA regulations Feb. 11, 2008. Employers, trade associations, unions and other interested parties may submit comments on the proposals until April 11, 2008. 

Coinciding with the 15th anniversary of the FMLA’s enactment, the Department’s proposed regulations are intended to: respond to court decisions that had invalidated some of the FMLA regulations; provide additional clarity for workers and employers; and address areas where the Department had received repeated complaints about the existing regulations. The proposed changes were based in part on the Department’s own difficulties with administering the current regulations, as well as more than 15,000 comments received in response to the Department’s request for comments on the existing FMLA regulations in December 2006. 

The Department’s proposed changes address a few of employers’ concerns with existing regulations, but fall short of proposing significant change in an area of concern to employers: the use of intermittent leave. Once the comment period has closed, the Department will assess the public responses and draft final revisions to the FMLA regulations. How closely the final regulations will resemble the current proposal remains to be seen, although it should be noted that the Department made widespread changes to its proposed regulations before issuing final regulations under the Fair Labor Standards Act in 2004—the Department’s last major regulatory change. 

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This post was written by Jean F. Kuei and Hardy Ray Murphy.

In a March 3, 2008 ruling, a sharply divided California Supreme Court determined that individuals (e.g., supervisors and coworkers) cannot be held personally liable for retaliation in employment under the California Fair Employment and Housing Act (“FEHA”). Scott Jones v. The Lodge at Torrey Pines Partnership, et al.¹ This important ruling reverses the contrary conclusions of lower state courts and federal courts in California, and clarifies that only employers, not individuals, can be held liable for retaliation under California law.

The Torrey Pines decision flows from the court’s 10-year-old decision in Reno v. Baird,² which held that individuals cannot be held personally liable for discrimination under the FEHA, but can be held liable for harassment. The Supreme Court reached that holding in Reno by focusing on the legislature’s different statutory treatment of harassment and discrimination claims. The court further reasoned that harassment claims typically concern conduct that is unnecessary to a supervisor’s job performance and that is engaged in solely for personal gratification, whereas discrimination claims usually involve conduct that arises out of the supervisor’s performance of necessary personnel management duties.³

Despite its broad pronouncement in Reno, the California Supreme Court had not specifically addressed individual liability for retaliation claims under the FEHA until now. Several lower and federal courts had concluded that, because the statutory language proscribing that conduct specifically includes “persons,”⁴ as does the language prohibiting harassment, individuals could be held liable for retaliation.⁵ But the California Supreme Court has now utilized its reasoning in Reno to conclude that supervisors cannot be held liable for retaliation under the FEHA. The 21-page, 4-3 decision spawned two dissenting opinions, including a 28-page dissent by Justice Carlos Moreno, joined in by the other two dissenters.

With this clarification of California law, it is hoped that supervisors can now discharge their duties and manage their subordinates without fear of being sued as individuals for discrimination or retaliation, and with the desired impact of increasing the overall effectiveness of supervisory and collaborative decisionmaking.

²   Reno v. Baird (1998) 18 Cal.4^th 640.

⁴   Cal. Gov’t Code § 12940(h),

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The National Defense Authorization Act of 2008, a $700 billion military spending bill, was recently signed into law by President Bush. Buried within the bill were dozens of modifications to the Family and Medical Leave Act of 1993 (“FMLA”) designed to create two new forms of FMLA leave. These two new forms of leave are intended to address the need for family members to provide care for wounded service members who are injured in the line of duty, and to provide leave from work to deal with non-medical obligations created by a family member’s call to active duty status. 

• Service Member Medical Leave – A parent, spouse, child or the nearest blood relative of a soldier may take 26 weeks of leave to care for a soldier injured in the line of duty, while serving on active duty in the armed forces.
• Active Duty Exigency Leave – An employee make take 12 weeks of leave in the event that the employee’s spouse, child or parent is on active duty status or has received an order to active duty status, in support of a “contingency operation.”

Although these changes seem relatively straightforward, in practice, they are likely to prove much more complicated to administer.

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