NY Makes Significant Changes to Employers’ Use of Direct Deposit and Payroll Cards

The New York State Department of Labor (NYSDOL) recently finalized a new rule that significantly changes how employers pay their employees through direct deposit and payroll debit cards. Even though the new regulation does not go into effect until March 7, 2017, Empire State employers should begin preparing for the effective date now, especially for employees paid by direct deposit. Continue Reading

Employers Act Even Before Additional Protections for Victims of Domestic Violence Are Law

California Gov. Jerry Brown recently signed AB 2337, strengthening the job protections for victims of domestic violence, and ensuring those who work for employers with 25 or more employees are notified of protected time-off rights for domestic violence, sexual assault, or stalking, without threat of termination or retaliation. The Bill’s author, Assemblymember Autumn Burke (representing the 62nd California Assembly District, including the cities of Inglewood and El Segundo, as well as coastal Los Angeles and L.A. County), proclaimed that “victims of domestic violence shouldn’t have to choose between their job and their safety.” Continue Reading

CVs: the whole truth?

At the start of July, in just one of the ever stranger twists and turns taken by the UK’s main political parties this summer, Andrea Leadsom was caught in a storm of questions about the true nature of her 25-year track record in the City of London. The pressure eventually led her campaign team to publish her CV – but rather than lay the issue to bed, it prompted even more queries around the exact roles she had played at various organisations: was she a director or a deputy director; a managing director or a marketing director?

She is not the first to be accused of finessing her previous track record to benefit an application for a new role. We hear about misdemeanors that range from relatively benign claims around personal interests: expressing a passion for fitness and an addiction to triathlons which turns out to be less than completely accurate, through to lies about professional or academic qualifications (whether they were achieved at all, or the grades attained), or employment track record.

Degree fraud is more prevalent than many people realise. The Higher Education Degree Datacheck (“Hedd”) (a service employers can use to verify UK degree qualifications held by candidates) has surveyed students and graduates with results consistently showing that about a third of people exaggerate their academic credentials when they apply for jobs. Of these 11% falsely claimed to hold a degree and 40% inflated their grade.

Some high profile figures appear to have got away with a significant level of deceit: take David Geffen, Hollywood media tycoon, who famously landed a job at talent agency William Morris after lying about his qualifications. He then came in early every day for 6 months to intercept the letter that would reveal he had not, as he claimed, graduated from UCLA. He successfully blocked the letter and went on to become one of the most powerful people in Hollywood.

This is of course not the norm, and clearly it is not acceptable for employers to take on new recruits under false circumstances. But what is the legal position for employers and what can they do if a discovery of CV fraud is made?

Pre-Employment

If during the recruitment process an employer discovers that an applicant lied on their CV the employer may wish to withdraw the offer of employment. However, in such circumstances there is a risk that a disgruntled applicant may make a claim that the reason for withdrawal was unlawful e.g. the reason was discriminatory. In order to mitigate this risk, employers should keep a clear record of the reason for withdrawal and communicate that reason to the employee, so that there is evidence of the decision making process. Employers will only be able to retract an offer of employment if it is withdrawn before acceptance of the offer by the employee.

During employment

If CV fraud is uncovered during the employment relationship (or after an offer of employment has already been accepted) whether an employer can dismiss without notice will depend on whether the dishonesty is sufficiently serious to amount to gross misconduct. The severity of the dishonesty should be judged by the employer on a case by case basis.

If the employee does not have 2 years continuous service they would not be able to bring an unfair dismissal claim unless they could allege an automatically unfair reason for dismissal (for example, their employment was terminated for making a protected disclosure). Further, the employee could claim that the reason for dismissal was discriminatory (as there is no length of service requirement).

If the employee is eligible to bring an unfair dismissal claim, employers should be aware that any decision to dismiss must fall within the reasonable range of responses. This may be more difficult to show if the employee has been working competently for a long period of time and the lie has had no impact on their ability to perform their role. Reasoning should therefore be carefully considered and recorded. A fair procedure will also need to be followed.

Other Consequences

Although one of the consequences for falsely claiming a qualification or inflating grades is that the employee loses their job, there are other more serious consequences, as stated by Hedd:

“There are a number of sections of the Fraud Act 2006 relevant to degree fraud. Under the terms of Section 2 it is an offence to make a false representation with the intention of making a personal gain, causing a loss to someone else or exposing someone else to the risk of a loss. A representation is false if it the person making it knows that it is, or might be untrue or misleading. When someone lies on an application form or CV, presents a fake certificate or transcript or alters a genuine university document and presents the information as real they have committed fraud and can be prosecuted. It could result in prison sentences of up to ten years.”

What can employers do?

In order to assist employers, Hedd has produced a tool kit (available here), endorsed by the government Department for Business Innovation and Skills, which sets out a range of advice for employers on how to spot fraudulent claims, specifically in relation to degree qualifications.

Some of the methods that can be adopted by employers are as follows:

  • Carry out comprehensive background checks on candidates’ employment history, as a matter of routine. Employers should note that problematic CVs often contain discrepancies with employment dates (potentially altered to cover gaps) and job titles or salary.
  • All job offers and contracts should clearly state that the offer is contingent on the verification of information given in application documents.
  • Contracts of employment and the employee handbook should make clear that serious lies in the application process can be deemed ‘gross misconduct’ which can result in dismissal.

If you have any questions on the above, or would like to discuss an issue of CV fraud, please contact one of the employment team at Reed Smith LLP who would be happy to discuss this further.

Ninth Circuit Holds Class Action Waivers Are Unenforceable

In a strong blow to employers, the Ninth Circuit Court of Appeals recently released its opinion in Stephen Morris, et al. v. Ernst & Young, et al., No. 13-16599, D.C. No. 5:12-cv-04964-RMW (August 22, 2016), holding that agreements precluding employees from bringing “concerted actions” such as class and/or collective actions relating to their wages, hours, and terms and conditions of employment are unenforceable under the National Labor Relations Act (NLRA).

In Morris, the appellate court examined whether an employer can force its employees to sign an agreement that: (1) waives their ability to join a class action lawsuit against the employer; and (2) requires that all legal claims against the employer be brought only through arbitration on an individual basis and in separate proceedings.

In the underlying case, two former Ernest & Young (E&Y) employees filed a class and collective action lawsuit claiming that the accounting firm misclassified their jobs as exempt from the overtime pay provisions of the Fair Labor Standards Act (FLSA) to avoid overtime liability. Both employees signed an arbitration agreement when they were hired saying they would not bring future claims against the firm on behalf of a class. Instead, they agreed to pursue such claims on an individual basis in what the agreement called “separate proceedings.” The term “separate proceedings” was not defined in the agreement. Nevertheless, the employees subsequently filed their wage-hour case as a proposed class action. After E&Y informed the district court of the waivers the employees had signed, the case was ordered to be submitted to arbitration on an individual basis. The plaintiffs subsequently appealed to the Ninth Circuit.

The Ninth Circuit examined the class action waiver and determined that interference with an employee’s right to pursue work-related legal claims together, whether in arbitration or other legal proceeding, violates Section 7 and 8 of the NLRA. These provisions seek to protect employees’ rights to engage in concerted activity for the betterment of the terms and conditions of their employment. In its reasoning, the Ninth Circuit considered the “separate proceedings” language in the arbitration agreement to be “illegal,” rendering it unenforceable.

The finding of illegality was surprising to many since the Federal Arbitration Act specifically allows employees and employers to define the terms of their arbitration agreements so long as the employee is not required to waive a substantive federal right. In reaching its conclusion, the Ninth Circuit determined that the ability to bring a class or collective action is a substantive federal right.

The Ninth Circuit joins the Seventh Circuit in holding that class action waivers are unenforceable, while the Second, Fifth, and Eight Circuits still enforce such waivers. As a result, the issue is ripe for consideration by the Supreme Court.

In light of this Ninth Circuit ruling, employers will likely see additional challenges to their arbitration agreements and should take a careful look at them. Employers looking to maximize the effectiveness of their agreements should consider including savings clauses to prevent complete unenforceability of the agreements. As the focus on potential wage-hour violations continues to increase in workforce popularity, now is also a good time for employers to review their wage and hour practices to minimize potential exposure to employment class actions in this area.

Employers in Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington are immediately impacted by the Ninth Circuit’s decision as it nullifies the ability of an employer to prevent employees from bringing class and/or collective actions by agreement.

Emerging Labor & Employment Law Trends (Part 2)

With summer 2016 almost behind us, employers should begin to plan for the major labor and employment law trends expected to emerge in the last quarter of the year and into 2017. In the first part of this two-part series, we looked at some of the principal trends likely to be shaped by federal regulators.  In this second and final piece in the series, we will look at some other trends, with a particular emphasis on emerging state and local movements.

  • Equal Pay on Everyone’s Radar. Last fall, California and New York enacted legislation strengthening existing equal pay laws by making it more difficult to discriminate against workers based on sex. Other states, like Massachusetts, have followed suit in the ensuing months. And beyond the state level, the U.S. Equal Employment Opportunity Commission (EEOC) is finalizing an equal pay data rule that will likely require employers with more than 100 workers to provide pay data across up to 12 pay bands, broken down by sex, race, and ethnicity.

It is therefore important for all employers, even those in jurisdictions without newly-updated equal pay laws, to review compensation data to ensure that employees within a given region, even if there are multiple offices, are being fairly and consistently paid without regard to sex, race, or some other protected characteristic.

  • Expansion of LGBT Rights in the Workplace. In recent years, the EEOC has taken the position that federal law bars discrimination based on sexual orientation and gender identity. This position is just beginning to be litigated in the federal court system and may ultimately work its way to the Supreme Court. In the meantime, numerous states and cities have passed laws barring discrimination based on sexual orientation, transgender status, and gender dysphoria. Expect to therefore see an increase in EEOC charges and litigation involving claims of discrimination against LGBT workers.
  • Increased Limitations on the Hiring Process. Perhaps the area of greatest legislative activity at the state and local level over the past few years has been the restriction of the pre-employment process, specifically laws barring employers from inquiring into an applicant’s credit and/or criminal history during the hiring process, as well as laws barring employers from inquiring about a candidate’s salary history. For employers with operations in multiple jurisdictions, these new laws likely require a complete overhaul of the hiring process. The laws also come at the same time that class actions under the Fair Credit Reporting Act, a federal law governing employer’s use of background checks, have reached an all-time high.
  • Medical Marijuana Legislation. The enactment in several states of legislation permitting the use of medical marijuana has required the business community to re-consider longstanding policies and procedures regarding substance abuse. Employment-specific issues include whether accommodations are required for medical marijuana users and the right to terminate employees who test positive for marijuana. Although lawsuits by medical marijuana users questioning their employers’ practices have been limited thus far, that is sure to change over the next few years.
  • Efforts to Preserve Family and Caregiving Obligations. Another trend gradually gaining traction is legislation designed to protect employees’ family and caregiving obligations. New York, for instance, recently passed laws barring familial status discrimination and, effective in 2018, providing employees with up to 12 weeks of paid family leave. And New York City, for its own part, recently adopted legislation barring “caregiver” discrimination. As other jurisdictions mull similar protections, expect to see an increase in litigation by employees who claim to have been discriminated against based upon their family and caregiving obligations.
  • Validity of Class Action Waivers. There is currently a split among the federal Circuit Courts of Appeals as to whether class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act. Expect the Supreme Court to weigh in on this question in the near future. In the meantime, the National Labor Relations Board will likely continue to conclude that such waivers violate federal law.

As we head into last quarter of 2016, the U.S. employment law landscape is as dynamic as ever. Employers therefore can, and indeed should, expect significant changes to their employment relationships in the coming months and year.  It is more crucial than ever that employers stay in regular contact with their experienced employment law counsel to prepare.

 

Emerging Labor & Employment Law Trends (Part 1)

With summer 2016 almost behind us, employers should begin to plan for the major labor and employment law trends expected to emerge in the final quarter of the year and into 2017. In the first part of this two-part series, we will take a look at some of the principal trends likely to be shaped by federal regulators.

  • Wage & Hour Class Actions Will Remain Hot. On December 1, 2016, the U.S. Department of Labor’s (DOL) changes to the salary threshold for exempt employees will increase the number of workers eligible for minimum wage and overtime payments. Specifically, the salary threshold for exempt executive, administrative, and professional employees will increase to $47,476 per year (or $913/week), meaning that salaried employees earning less than this amount, regardless of job duties, must be compensated for overtime work. This will undoubtedly result in an increase in wage and hour class actions in the coming years.

In addition, the DOL and other administrative agencies, as well as the plaintiffs’ bar, remain intently focused on independent contractor misclassification, especially following the DOL’s July 2015 guidance proclaiming that most U.S. workers should be classified as employees. Bring-your-own-device policies will also continue to lead to claims of unpaid overtime work.

Continue Reading

Five Tips for Handling Pokémon Go in the Workplace

In the past several weeks, Pokémon Go has taken the world, and many workplaces, by storm. If you’re concerned about reducing the negative impact that this game may be having on your employees’ productivity – and, more importantly, their safety – here are five steps you can take:

1. Make sure that your corporate policies for use of email, internet, and electronic devices are up to date. The policies should state the parameters and limitations regarding the use of these tools for personal matters. If your company allows for reasonable use of internet and personal email, the policy should state that an employee’s personal activity should not interfere with his or her job responsibilities. Ideally, a policy will also include a non-exhaustive list of sites, apps, games, and other programs that employees should not access at work. Examples, such as Pokémon Go, can also be listed. A specific social media policy that limits personal use of sites such as Facebook and Instagram should be included, as well. The policy should also limit personal use of mobile phones during work hours. In drafting or revising any policies, be sure that you take into account the recent decisions of the National Labor Relations Board (NLRB). These decisions strike down common personnel policies on the grounds that they could lead reasonable employees to believe they may face discipline for engaging in protected activity with or on behalf of one or more co-workers relating to employees’ wages, hours, or other terms or conditions of employment.

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Changes to tax treatment of termination payments

The UK Government has announced changes to the tax treatment of termination payments following the conclusion of its recent consultation. Draft legislation has now been published which will come into force in April 2018.

The main changes are as follows:

  • All payments in lieu of notice (“PILONs”) will be fully taxable regardless of whether there is a PILON provision in the employment contract or not.
  • Employer National Insurance contributions will be payable on the balance of any termination payment above £30,000. Termination payments will remain free of employee National Insurance contributions.
  • Payments in respect of injury to feelings will be taxable. This resolves a current divergence of judicial opinion on the matter. Tax free payments in respect of injury or disability may only be made in respect of any injury of a physical or psychological nature which means that the employee is not able to perform their job properly.  The UK Government has also confirmed that the £30,000 tax free exemption for termination payments will remain in place. Proposals had been made during the consultation to reduce the tax free amount or link it to length of service but these proposals have now been dropped.

The UK Government has also confirmed that the £30,000 tax free exemption for termination payments will remain in place. Proposals had been made during the consultation to reduce the tax free amount or link it to length of service but these proposals have now been dropped.

Massachusetts Equal Pay Law

Effective January 1, 2018, Massachusetts’ equal pay law will impose new and broad sweeping requirements on employers. At its core, the law prohibits gender-based pay disparities. It also takes steps to encourage transparency regarding compensation among employees, and to reduce the emphasis on compensation inquiries during the hiring process. The recently enacted amendments are designed to further ensure that salaries for men and women are equal for equal work.

The law previously prohibited the payment of differential wage payment “as between the sexes” for “work of like or comparable character.” The new law amends this language and includes additional provisions to reinforce the prohibition of discrimination “on the basis of gender in the payment of wages” for “comparable work.”  “Comparable work” is defined as “work that is substantially similar in content and requiring substantially similar skill, effort and responsibility and performed under similar working conditions.”  The law also contains new exceptions for pay variations based on:

  • Seniority
  • A bona fide merit system
  • A bona fide system that measures earnings by quantity or quality of production or sales
  • Geographic location, or
  • Education, training, or experience, to the extent such factors are reasonably related to the particular job in question and consistent with business necessity

A violation occurs when a discriminatory compensation decision or practice is adopted, when an employee becomes subject to a discriminatory compensation decision or practice, or when an employee is affected by application of a discriminatory compensation decision or practice. Each discriminatory paycheck shall be deemed a violation. Additionally, the law prohibits employers from reducing the pay of any employee to resolve a gender-based pay disparity.

The amended law further prohibits employers from:

  • Banning employees from talking about their own salaries or the salaries of others
  • Screening job applicants based on their wages or salary histories, which includes requiring or requesting that applicants disclose wage or salary history to be considered for a position
  • Seeking the salary history of a prospective employee from a current or former employer, except after a formal offer of employment and with written consent of the prospective employee, or
  • Retaliating against an employee for disclosing, discussing, or inquiring about compensation, or opposing or complaining about unlawful wage differentials[1]

The law encourages employers to take steps to remedy gender-based pay disparities. Specifically, it creates an affirmative defense for any employer who, within the preceding three years, has completed a good-faith self-evaluation of its pay practices, and can demonstrate reasonable progress has been made to eliminate gender-based pay differentials, if any, for comparable work. An employer may design its own review, provided that it is reasonable, or may conform to templates, forms, and guidance that the Massachusetts attorney general will provide.

The law requires employers to post a notice in their workplaces that notifies employees of their rights to equal pay for comparable work. As part of the legislations, a special committee will assemble to investigate, analyze, and study the factors, causes, and impact of pay disparity based on gender.

The statute of limitations for violations is three years. Damages for violating the law shall be the amount of unpaid wages plus an equal amount in liquidated damages, as well as attorney’s fees.


 

[1] An employer may prohibit human resources employees, or others whose job responsibilities require access to other employees’ compensation information, from disclosing compensation information without prior written consent from the employee whose information is sought.

New OSHA Rule May Require Employers to Update Drug-Testing Policies

The Occupational Safety and Health Administration’s (OSHA) new reporting rule goes into effect August 10, 2016. Although it does not expressly address post-accident drug testing, OSHA’s commentary related to the new rule makes clear that such testing will now be squarely in the agency’s crosshairs. Accordingly, many employers may want to consider updating their drug-testing policies to ensure OSHA compliance. Continue Reading

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