National Labor Relations Board proposes regulation to establish new joint employer rule

Yesterday, the National Labor Relations Board (NLRB or Board) announced a much-anticipated proposed regulation to establish a rule-driven standard for determining joint-employer status under the National Labor Relations Act (NLRA).

The Board’s proposed rule represents a return to a more common-law-centered understanding of joint-employer relationships, establishing joint employer status based on the exercise of substantial direct and immediate control. The Board’s announcement explained that its proposed rule, which is subject to revision after public comment, best serves the NLRA’s purposes by imposing bargaining obligations only on those employers that actually play an active role in establishing essential terms and conditions of employment. In other words, a related business partner not actively participating in employment decisions (such as setting employee wages, benefits, and other essential terms and conditions of employment) ought not be drawn into the collective bargaining process. The Board stated:

An employer . . . may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.

New Jersey Federal Judge Finds Medical Marijuana User Cannot Compel Employer to Waive Employment Drug Testing Requirements

By Sherri A. Affrunti and Melissa M. Ferrara on 22 August 2018 Posted in Employment, Employment & Labor (U.S.), Medical Marijuana, US Alert, Workplace Laws and Regulations

The United States District Court of New Jersey recently dismissed an employee’s disability discrimination, failure to accommodate and retaliation claims, holding that neither the New Jersey Law Against Discrimination (LAD) nor the New Jersey Compassionate Use Medical Marijuana Act (CUMMA) required the employer to waive its drug testing requirements.

In Cotto v. Ardagh Glass Packing, Inc., No. 18-1037, employee-plaintiff Daniel Cotto Jr. sustained an injury at work while operating a fork lift. Consistent with its practices, the employer, Ardagh, required that he pass a breathalyzer and urine test before he could return to work. Cotto explained that he was taking prescription medications, which he was told would not be a problem. However, in subsequent discussions, the company relayed concerns about Cotto’s use of medical marijuana and placed him on indefinite suspension until he could pass the drug test. Cotto objected, presenting his medical marijuana card and prescription, but Ardagh refused to relax the drug testing requirement. Cotto then filed suit, claiming the company’s refusal to waive the drug test constituted disability discrimination, a failure to accommodate his disability, and retaliation. Ardagh moved to dismiss Cotto’s Complaint, arguing that applicable New Jersey law, and CUMMA specifically, does not mandate an employer’s acceptance of medical marijuana use or require it to waive drug testing for substances that are illegal under federal law.

In considering Cotto’s discrimination claim, the Court noted that while no court had addressed CUMMA’s effect on the LAD, other non-New Jersey courts have concluded that the decriminalization of medical marijuana does not shield employees from adverse employment action except where expressly provided by statute. The Court then found that while CUMMA decriminalizes medical marijuana usage and removes the threat of civil sanctions, it specifically states that it should not be construed to require employers to permit the use of medical marijuana in the workplace, which neither invalidated nor supported Cotto’s claims. The Court thereafter held the employee’s disability discrimination claim failed for the “obvious” reason that “the LAD does not require an employer to accommodate an employee’s use of medical marijuana with a drug test waiver” – citing New Jersey courts’ determinations that drug testing is generally acceptable in private employment. Thus, Cotto could not prove that he could perform the essential functions of his job. Similarly, the Court held that Cotto could not prove a failure to accommodate claim because neither CUMMA nor the LAD requires an employer to waive its drug testing requirement. Finally, because refusing a drug test is not a protected activity, the Court dismissed the employee’s retaliation claim.

The Cotto decision is unpublished and therefore not controlling precedent under New Jersey federal or state law. However, the decision is persuasive authority for New Jersey private employers to refuse to waive drug tests for medical marijuana in similar situations while the substance remains federally-prohibited. Notably, though, New Jersey’s Governor and legislature have discussed their intention to expand marijuana use protections, making it especially important for employers to stay tuned for changes in the law which may ultimately enact workplace protections for medical marijuana users. Moreover, multistate employers must be aware of the specific laws in all of the states in which they operate – and if those laws provide for workplace protections for marijuana users – before taking adverse employment actions or refusing to accommodate such use.

Are confidentiality clauses about to become a relic in sexual harassment cases?

By Mark S. Goldstein and Kelley C. Miller on 20 August 2018 Posted in Employment & Labor (U.S.), New York Employment Beat, Sexual Harassment, US Alert, Workplace Laws and Regulations

With a few minor tweaks here and there, your company has probably relied on the same severance and employment-related settlement agreements for years. Sure, you touch base with your friendly neighborhood employment lawyer from time to time to ensure there haven’t been any significant legal developments that necessitate revisions. But aside from peripheral alterations, these agreements have, by and large, retained their same basic form and content.

Among the most important terms of your company’s “form” severance and settlement agreements is the confidentiality clause. This provision protects your business from the public disclosure of potentially damaging allegations of workplace wrongdoing. This is particularly important when the asserted allegations exaggerate or skew the facts or are flat out spurious. Or when the alleged misconduct was perpetrated by a rogue manager, unbeknownst to management. Regardless of the reason, the confidentiality clause is of paramount importance. In fact, outside of the employee’s release of claims, your company – like so many others – considers this clause to be the seminal term of the agreement. Without it, your company might be far more hesitant, if not outright unwilling, to enter into potentially costly severance and settlement arrangements with current and former employees.

Two recently enacted laws – one at the federal level and one spurred by New York legislators – threaten to topple the long-standing use of confidentiality clauses in severance and settlement agreements, at least in cases involving sexual harassment. Below, we discuss each of these laws, as well as how you and your company can navigate the proverbial minefield of recent nondisclosure-related legislation.

Reminder for NY employers: NYC’s Temporary Schedule Change Law is in effect

By Cindy Schmitt Minniti, Mark S. Goldstein and Laura Bedson on 27 July 2018 Posted in Employment, Employment & Labor (U.S.), New York Employment Beat, Wage and Hour, Workplace Laws and Regulations

On July 18, 2018, New York City’s temporary scheduling provisions of the New York City Fair Workweek Law went into effect. As a reminder, this law requires covered employers to grant employees a maximum of two temporary work schedule changes per calendar year for qualifying personal events. Also, the law prohibits employers from retaliating against employees who exercise these rights and does not permit employees to waive these rights. To assist employers and workers in understanding the new law and its requirements, the New York City Department of Consumer Affairs (DCA) Office of Labor Policy & Standards released a mandatory posting, Frequently Asked Questions, and an overview as guidance on the temporary schedule change provisions of the law.

Pursuant to the mandatory posting requirement, covered employers must post the “You Have a Right to Temporary Changes to Your Work Schedule” notice where employees can easily see it at each NYC workplace. This poster should be printed on and scaled to fit 11 inch by 17 inch paper and must be printed in English as well as any language that is the primary language of at least 5 percent of the workers at the workplace. Covered employers must also retain records documenting compliance with the requirements of the Temporary Schedule Change Law for a period of three years, unless another law requires the records be maintained for a longer period.

Employers should certainly take the time to review the posting requirements, FAQs and the additional guidance from the DCA to ensure compliance with this law. Reed Smith’s experienced Labor & Employment Group is ready to address any of your questions or concerns. For more information regarding this law and the accompanying guidance, please contact your Reed Smith attorney.

California Supreme Court finds mere minutes matter…sometimes

By Christina Tellado and Deisy Castro on 26 July 2018 Posted in California, California Employment Beat, Employment, Employment & Labor (U.S.), US Alert, Wage and Hour, Workplace Laws and Regulations

Today, the California Supreme Court issued its much-anticipated opinion in Troester v. Starbucks Corp., No. S234969 (Cal. July 26, 2018), regarding whether the long-standing de minimis doctrine adopted under the federal Fair Labor Standards Act (FLSA) applies to claims for unpaid wages for minute increments of time under the California Labor Code.

The majority opinion held that the de minimis doctrine did not apply under the particular facts of the putative class action in which a Starbucks employee performed “store closing tasks” each closing shift that required him to work “four to 10 additional minutes each day.” Ultimately, the Court left undecided the possibility of applying the de minimis rule under different factual circumstances because it expressly refused to “decide whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded.”

The federal de minimis doctrine, as explained by the California Supreme Court, applies “in some circumstances to excuse the payment of wages for small amounts of otherwise compensable time upon showing that the bits of time are administratively difficult to record.” The question of whether the de minimis doctrine applies to California wage claims was submitted to the Court by the Ninth Circuit.

In its 35-page decision, the Court addressed the question of the applicability of the de minimis doctrine in two parts. First, it addressed whether California’s wage and hour statutes or regulations adopted the FLSA’s de minimis doctrine. The Court confirmed that it “liberally construe[s] the Labor Code and wage orders to favor the protection of employees,” which it describes as the purpose of the legislature and Industrial Welfare Commission (IWC). It explained that the language of the California Labor Code and IWC Wage Orders require that employees be paid for all work performed. As such, the “federal rule permitting employers under some circumstances to require employees to work as much as 10 minutes a day without compensation is less protective than a rule that an employee must be paid for ‘all hours worked.’” The Court concluded that neither the text nor the history of the California Labor Code or the IWC Wage Orders indicated any adoption of the de minimis doctrine. Interestingly, the Court recognized that the California Division of Labor Standards Enforcement adopted the de minimis doctrine in its Enforcement Policies and Interpretation Manual and opinion letters, but ignored the administrative guidance as non-binding.

Second, the Court addressed whether the de minimis principle itself, which has operated in California in other contexts, applies to state wage and hour claims. Once again, the Court responded in the negative. The Court declined “to decide whether a de minimis principle may ever apply to wage and hour claims given the wide range of scenarios in which this issue arises” and instead decided “only whether the de minimis rule is applicable to the facts of this case” (emphasis added). Under the factual record before it, the Court concluded that the de minimis doctrine did not apply “[i]n light of the Wage Order’s remedial purpose requiring a liberal construction, its directive to compensate employees for all time worked, the evident priority it accorded that mandate notwithstanding customary employment arrangements, and its concern with small amounts of time.” According to the Court, an “employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine,” and the Court further highlighted how “a few extra minutes of work each day can add up.” The Court acknowledged the issue of “the practical administrative difficulty of recording small amounts of time,” but stated that “employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time.”

The lack of clarity in the Court’s decision perpetuates the abyss in which California employers lack clarity on the scope of their obligation to capture infinitesimal and infrequent work performed by employees. In that regard, the Court’s decision gives rise to concerns among employers about the practical implications of paying for “all hours worked” without any consideration of the administrative difficulties of capturing such time. This question was raised by the concurring opinions from Justice Cuéllar and Justice Kruger, who discussed the “rule of reason” in light of the open question that remains following the majority opinion – “whether, in circumstances different from those presented in this case, the de minimis principle may apply to California wage and hour claims.” Therefore, this issue is far from decided and the applicability of the de minimis rule will continue to be a fact-intensive analysis.

For more information on developments in this area, please contact Christina Tellado at ctellado@reedsmith.com or Deisy Castro at dcastro@reedsmith.com

Reminder for NY employers: key pieces of sexual harassment legislation just took effect

By Cindy Schmitt Minniti, Mark S. Goldstein and Laura Bedson on 16 July 2018 Posted in Employment, Employment & Labor (U.S.), New York Employment Beat, Sexual Harassment, Workplace Laws and Regulations

Earlier this year, New York Governor Andrew Cuomo signed into law the State’s Budget Bill for fiscal year 2018-19. Astute employers may recall that the Budget Bill has in the past been the Governor’s preferred mechanism for enacting sweeping employment law reforms. For example, the 2016-17 Budget Bill included provisions that will ultimately increase the statewide minimum wage to $15/hour by 2021. The 2016-17 Bill also laid the groundwork for the State’s paid family leave law, which took effect on January 1 of this year.

In this year’s Budget Bill, the Governor pivoted his attention to the recent groundswell of high-profile sexual harassment allegations. Indeed, as we previously reported, the Budget Bill imposes a myriad of new obligations and restrictions intended to remedy sexual harassment in the workplace. Two of the more prominent portions of the Budget Bill, discussed below, took effect on July 11, 2018.

Further blow for self-employed status: Tribunal finds that Hermes couriers are “workers”

By Carlene Nicol on 12 July 2018 Posted in Employment (UK), Gig Economy, Uncategorized

Employment status in the UK

The UK recognises three categories of employment status: employees, workers and self-employed contractors, each with varying levels of protection under employment law. Employees are entitled to the full suite of employment rights, while self-employed contractors have very little protection under employment law. Workers who are not employees sit somewhere in the middle and are entitled to core rights such as sick pay and breaks, national minimum wage, statutory holidays and holiday pay. Hermes claimed that their delivery couriers were self-employed and, as such, were not entitled to these core workers’ rights.

The employment tribunal decision

In reaching the decision that the couriers were workers, the tribunal held that:

The couriers were controlled by Hermes and had an obligation to perform services personally. They were not performing a professional service nor operating a business undertaking for their clients or customers i.e. there was a “dependent working relationship” such that they were not truly self-employed.
While the couriers had a right to substitute others to perform services for Hermes on their behalf, Hermes retained control over who that substitute was and could veto the courier’s choice of substitute. The couriers also had to ensure that the substitute performed the deliveries to the standard required by Hermes.
Hermes’ own evidence on the documentation and, in particular, regarding pay negotiations between it and the couriers, was “wholly unpersuasive” and, at times, implausible. The tribunal found that, to the extent any existed, pay negotiation was – in reality – limited and exceptional.

What does it mean for businesses?

This finding is another judgment in a long run of gig economy cases, in which individuals who are ostensibly self-employed have succeeding in their claims that they are, in fact, workers. The reason that Hermes and other companies in the gig economy (Pimlico Plumbers, City Sprint, Addison Lee etc.) are fighting these status cases so hard is that misclassification is expensive, for both future payments and in respect of past omissions, including for non-payment of holiday pay following the recent ECJ’s decision in the case of King v The Sash Window Workshop Ltd. In that case, the ECJ decided that the right to paid annual leave under the Working Time Directive carries over indefinitely where the employer refuses paid leave, including in the scenario where an individual is incorrectly classified as self-employed.

Hermes has stated in the press that it will appeal the decision, amidst intensified calls from unions and others for changes to the law on employment status. In the meantime, businesses are well-advised to take the opportunity to review the proper status of their arm’s length engagements and to rectify any anomalies, in a bid to stave off future claims.

Supreme Court Holds Public Unions May Not Charge Non-Members Fees.

By Betty S.W. Graumlich and Adam Weiner on 27 June 2018 Posted in Employment & Labor (U.S.), Labor (U.S.), Labor Relations, US Alert

The United States Supreme Court’s decision in Janus v. American Federation of State, County and Municipal Employees (AFSCME) makes clear that agency fee agreements in the public sector are unconstitutional under the First Amendment. Although Janus dealt with government employees, the potential impact on private sector employers also demands careful consideration.

The Decision

In Janus, the plaintiff, an Illinois state employee, challenged the requirement that he pay “agency fees” to a union of which he was not a member. The theory for the agency fee charges was that although the plaintiff was not a member, he benefited from the union’s collective bargaining activities on employees’ behalves. The plaintiff argued that having to pay the fees violates the First Amendment. The Court agreed with the plaintiff.

Today’s decision directly overrules the Court’s 1977 holding in Abood v. Detroit Board of Education, which upheld public sector agency fees. There, the Court pointed to the state’s interest in “labor peace” and in avoiding the problem of “free riders” – people who reap the benefits of union representation without paying for them.

While the Court has previously held that agency fees cannot be used to fund unions’ political activities, plaintiff successfully argued that union activities are inherently political. Consequently, compelling non-union members to subsidize political speech with which they disagree amounts to compelled speech in violation of the First Amendment.

In so ruling, the Court invalidated agency fee laws in 22 states. Now, bargaining fees in the public sector need only be paid on a voluntary basis; employees must “opt-in” before wages can be deducted.

Private Sector Impact

While the Supreme Court’s decision was technically limited to public sector unions, ripples may be felt throughout all unionized (and would-be unionized) workplaces. Likely implications include:

Spread of “Right to Work” movement: More states may move to ban the negotiation of contracts requiring all members who benefit from the union contract to contribute to the costs of union representation. 28 states already have such laws.
Union destabilization: The Janus decision is a significant blow to unions. If the elimination of mandatory agency fees spreads further within the private sector, union funding and membership may further deteriorate. Unions will lose revenue previously collected from non-union members, and existing union members may consider resignation to avoid agency fee withdrawal. Relatedly, unions may see a decrease in political influence and bargaining power.
Revitalized and refocused union activism: Nevertheless, the Janus decision’s threat to public sector unions may light a fire under all union activists, and may encourage organizing efforts outside the public sector.

In light of Janus, employers should evaluate the state of their relationships with any current unions, analyze potential stimulants of unions, and prepare for a potentially volatile uptick in union activity.

Reed Smith Summer Associate Coco Arima also contributed to this post.

How should organisations present gender pay gap information?

By Joanna Powis on 26 June 2018 Posted in Employment (UK), Equal Pay

The Government Equalities Office has published new research giving helpful guidance on clearer ways for employers to present pay gap data. The research is the result of a trial by the Behavioural Insights Team focusing on how the public interprets gender pay gap figures. Taking as its starting point the idea that gender pay gap data should be a way for people to hold companies to account, the trial sought to find the most transparent way for figures to be presented. The question they were aiming to answer was “How should gender pay gap information be presented to drive change effectively?”.

Researchers tested four different ways of presenting gender pay gap data, with variations based on whether the figures were contextualised against a benchmark for their sector, and whether the data was expressed in percentage terms or in terms of pounds and pence. The findings indicate that people respond better to visual representations of the figures, described as money rather than percentages: i.e. illustrating that women at x organisation earn 90p for every £1 that men earn. Researchers also concluded that benchmarking of gender pay gap statistics (i.e. comparing companies against each other) better enabled people to make assessments as to which companies were performing well as against their competitors.

When reporting their figures for the first time, many organisations chose to go further than they were required to do, by adding information that interpreted reasons for the pay gap, and explaining actions being taken to tackle it. Some companies also provided more detailed statistics. But, for the most part, figures were presented as percentages (in line with Government guidance) with the adoption of visual aids being varied. With the first round of reporting now complete, this new research gives helpful guidance on clearer ways to present pay gap data. Companies keen to use pay gap reporting as a positive tool for both internal communications and messaging to the wider market would be well advised to take this into account when preparing their statements for the second year of reporting.

For more information on gender pay gap reporting please see our blogs:

Gender pay gap reporting: do we need more?

Gender pay gap reporting: why it matters now

Supreme Court decision announced in Pimlico Plumbers case

By Joanna Powis on 14 June 2018 Posted in Employment (UK), Gig Economy

The Supreme Court has delivered its ruling on the landmark Pimlico Plumbers case, upholding previous decisions that an ostensibly ‘self employed’ plumber was in fact properly classified as a ‘worker’ with valuable employment rights under UK law (including discrimination protection and holiday pay). The case has been closely monitored because of its impact on organisations engaging large numbers of individuals on a self-employed basis, including those operating in the ‘gig economy’.

The case centred on the employment status of Gary Smith, a plumber who worked on a self employed basis with Pimlico for approximately six years over 2005-2011. Both the Employment Appeal Tribunal and the Court of Appeal supported Mr Smith’s position that he was a ‘worker’ with limited (but often valuable) employment rights, including holiday pay. Pimlico Plumbers appealed the case to the Supreme Court. Pimlico Plumbers has lost that appeal, with the Supreme Court supporting previous rulings that key aspects of Smith’s working conditions meant he cannot be classed as an independent self-employed contractor for employment law purposes.

In the Supreme Court’s view, the fact that Pimlico exercised tight administrative control over Smith, imposed conditions around how much it paid him and on his clothing and appearance for work, and restricted his ability to carry out similar work for competitors if he moved on from the company, all supported the conclusion that he was a ‘worker’ and not genuinely self employed. It also noted that the dominant feature of his relationship with the company was that he would do the work personally, rather than pass it on to a substitute contractor, even though he did have the option to pass work to another Pimlico operative.

Decisions on employment status are always fact sensitive and therefore the precedent impact of this case for employers in the long run is not clear cut. However, the publicity surrounding the decision is likely to lead to future challenges by ostensibly self employed individuals looking to unpick those arrangements in the event of a dispute.