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

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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