Sexual Revolution: Seventh Circuit Holds Title VII Protects Sexual Orientation

On April 4, 2017, the U.S. Court of Appeals for the Seventh Circuit broke new legal ground by ruling that Title VII of the Civil Rights Act of 1964, which prohibits sex discrimination in employment, also forbids sexual orientation discrimination.  Hively v. Ivy Tech Community College, No. 15-1720 (7th Cir. 2017) (en banc).  The ruling means that employers in Illinois, Indiana, and Wisconsin must ensure that their policies and practices avoid sexual orientation discrimination, regardless of what state law says.

Until yesterday, every federal appeals court to consider the issue—including the Seventh Circuit itself—had held that Title VII did not prohibit sexual orientation discrimination.  More than 25 years ago, however, the Supreme Court, in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), held that Title VII prohibits discrimination based on sex stereotypes, leading several appellate courts to hold that an employee who is harassed or disciplined for not conforming to traditional gender norms (such as a woman perceived to be acting “mannish” or refusing to wear makeup) may have a sex discrimination claim under Title VII.  In some cases, gay and lesbian plaintiffs succeeded on such claims.

This case represents a major shift in employment law.  The plaintiff, Hively, a college instructor, claimed that she was denied promotions and ultimately terminated because she is a lesbian.  The majority ruled that because “discrimination on the basis of sexual orientation is a form of sex discrimination,” her case could proceed.  Indeed, the court described as “paradigmatic sex discrimination” Hively’s claim that “if she had been a man married to a woman … and everything else had stayed the same, Ivy Tech would not have refused to promote her and would not have fired her.”  Echoing the Supreme Court in Price Waterhouse, the majority wrote that because sexual orientation discrimination “is based on … assumptions about the proper behavior for someone of a given sex,” it necessarily takes “the victim’s biological sex … into account.”

Judge Richard Posner joined the majority opinion but wrote a separate concurrence arguing that the court should have candidly acknowledged that it was updating Title VII.  Just as it has taken courts and society “a considerable while” to realize that sexual harassment and gender stereotyping are forms of sex discrimination, Posner wrote, “the compelling social interest in protecting homosexuals … from discrimination justifies an admittedly loose ‘interpretation’ of the word ‘sex’ in Title VII to embrace homosexuality.”  Three dissenting judges argued the majority was legislating from the bench, thwarting clear congressional intent that “sex” referred only to gender and not to sexual orientation.

Hively will not be the last word on this subject.  For example, as the majority noted, the employer here did not invoke Title VII’s exemption for religious institutions.  More generally, given the circuit split created by the decision, the Supreme Court is likely to address the issue.  Until then, however, employers in Illinois, Indiana, and Wisconsin should update their non-discrimination policies and ensure that their supervisors and human resources departments understand the increased risk.  Because Illinois and Wisconsin already prohibit sexual orientation discrimination in employment, the greatest effect of the Seventh Circuit’s decision will be felt in Indiana.  But in all three states, and perhaps across the nation, the spotlight placed on the issue will likely lead to an increase in discrimination claims.

The ‘Gig’ Economy Under the Spotlight

New research published by the CIPD suggests that around 1.3 million people are engaged in the UK ‘gig’ economy – the term used to describe flexible, short-term working arrangements, typically managed through digital platforms.

The ‘gig’ sector has attracted a great deal of press attention in recent months as a string of high profile cases have gone before the Tribunals, testing existing assumptions about the employment status of individuals working for major players in the industry.

Recent protests over pay and other terms have been viewed by many as symptomatic of a wide-spread disgruntlement amongst gig-economy workers over their employment status and legal rights. However, the CIPD’s research reveals a more complex picture, with a significant proportion of gig-economy workers reporting that they are happy with their working circumstances and enjoy the flexibility offered by gig-work, often using it to supplement an alternative primary income.  Nevertheless, the current law on employment status undoubtedly leaves companies and individuals operating in the gig-sector in a position of uncertainty regarding their legal rights and obligations and it’s of no surprise that there have been growing calls for the government to reform the law in this area to reflect modern working practices.

Employment status

The law currently recognises three main categories of employment status. At one end are employees – those working under a contract of employment and whose working arrangements are, to a large extent, controlled by their employer.  The quid pro quo of this ‘master-servant’ relationship is the enjoyment of the full extent of legal rights and protections afforded by UK employment laws.  At the other end of the spectrum are self-employed contractors – those running a business on their own account – who are largely unprotected by employment laws.

Somewhere in between these two categories sit ‘workers’, a statutory creature, who are subject to a greater degree of control than contractors, but whose working arrangements do not reach the high ‘pass mark’ required for full employment status. ‘Workers’ benefit from a limited, albeit important, set of employment rights, including holiday and sick pay, national minimum wage and protection from discrimination.  A key element of ‘worker’ status is the existence of an obligation on the worker to perform work personally.  Recent case law has confirmed that an unrestricted ability to appoint a substitute to carry out a particular job on the worker’s behalf will usually present a bar to the individual establishing worker status (providing that the right can be freely exercised in practice).

Gig “workers”

In a widely-reported decision, an Employment Tribunal recently determined that Uber drivers were ‘workers’ for the purposes of certain employment legislation and therefore qualified for ‘worker’ rights such as those mentioned above. A similar decision has since been reached in a case concerning a cycle courier for Citysprint. Whilst these cases were first instance decisions and not therefore binding, businesses operating under ‘gig’ models may be concerned that the direction of travel in recent case law appears to be towards an increased recognition of worker status in the ‘gig’ sector. However, businesses should keep in mind that question of employment status is extremely fact-sensitive and it is often difficult to draw any concrete conclusions from previous cases given the complexity of the factual analysis underpinning any particular decision.  The boundaries of the current legal tests will continue to be tested as more cases go through the Courts and Tribunals this year, and businesses operating ‘gig’ models will want to maintain a watchful eye on any developments that might impact them in the coming months, seeking specialist advice where needed.

Legislative reform on the horizon?

It remains to be seen whether the government will seek to simplify the current rules on employment status through legislative change, as has been widely suggested. Earlier this month, Matthew Taylor, who is leading an independent review of modern employment practices, reported that Theresa May is supportive of proposals to overhaul of workers’ rights to reflect 21-century working practices.  We will have to wait until June this year when the Taylor Review is due to be published to see what recommendations are put forward.  In the meantime, we expect the gig-economy to remain a hot topic as further decisions emerge from the Courts and Tribunals and the wider political implications of the gig economy continue to be debated.

For more information on developments in this area, please get in touch Ed Hunter at or your usual contact in the team.

SMCR Conduct Rules go live!

Reed Smith will be hosting a breakfast seminar on the SMCR 28 March 2017. Visit for more information.

On 7 March 2017, the Conduct Rules in FCA Handbook and PRA Rulebook were extended to cover thousands more employees at UK Banks And Building Societies (including UK branches of overseas banks).

As part of the SMCR, the Conduct Rules now apply to all employees other than those with purely administrative functions, exposing many employees to individual ‎regulatory accountability for the first time.

The SMCR give firms a responsibility to report all breaches of conduct rules to the regulator, including the personal details of those individuals responsible, the basis for the breach, and details of any individual sanctions (including malus or clawback). These changes have potential to place enormous strain on the employment relationship, and implementing the right processes, employment contract changes, workplace policies and breach reporting systems has been essential to successfully implementing the SMCR.

If you’d like to hear more about the employment impact of the Conduct Rules and the SMCR, we’d be delighted for you to attend our SMCR breakfast seminar 28 March 2017.

Visit for full details of the event. R.S.V.P. to if you would like to attend.

Gender Pay Gap Reporting – Do we need more?

Today is International Women’s Day. What originally started life in 1909 as a single protest organised by the Socialist Party of America in New York, is now a global event with the backing of the United Nations and some of the world’s largest corporations.

The theme of this year’s campaign is #BeBoldForChange. The UK Government’s own flagship equality measure, while a welcome step forward, is, it might be said, neither particularly bold, nor likely to inspire much change.

In just under a month, from 6 April, new regulations on the publication of gender pay gap information will come into force.

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New York Wage Payment Regulations Are Revoked at the Eleventh Hour

Recently, New York’s Industrial Board of Appeals (IBA) revoked regulations issued by the State’s Department of Labor (NYSDOL) governing employee wage payments via direct deposit and payroll debit cards, which were scheduled to go into effect March 7, 2017. The IBA, an independent agency with certain oversight authority over the NYSDOL, held that the proposed regulations exceeded the NYSDOL’s regulatory powers.

New York employers were already prohibited from paying their employees through direct deposit without first obtaining the employees’ advance written consent. The invalidated regulations, published by the NYSDOL September 7, 2016, attempted to impose additional requirements on employers before they could pay employees via direct deposit or payroll debit cards.  A full discussion of those now defunct obligations is available here. Continue Reading

What does the future hold for Employment Tribunal reform?

The Ministry of Justice has recently published its review of the introduction of Employment Tribunal (‘ET’) fees. The fees were first introduced 2013 and many groups have raised concerns that they are a potentially serious barrier to bringing claims in the ET, particularly for less well off workers and those who have just lost their jobs.

The review concludes that fees are not proving a barrier to access to justice. On the issue of fees it states, “While there is clear evidence that ET fees have discouraged people from bringing claims, there is no conclusive evidence that they have been prevented from doing so.”  It also asserts that the introduction of mandatory conciliation through ACAS in May 2014 has been effective in helping claimants resolve disputes, reducing the number of tribunal claims.

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Philadelphia Employers Barred from Asking about Wage History

On January 23, 2017, Philadelphia Mayor Jim Kenney signed the Philadelphia Wage Equity Ordinance into law. The bill amends the Philadelphia Fair Practices Ordinance to prohibit employers from asking about an applicant’s wage history at any point during the hiring process. Philadelphia City Council unanimously voted in favor of the legislation in December 2016.

Introduced by Councilman-at-large William Greenlee, the Wage Equity Law is intended to reduce wage inequality, particularly among minorities and women. Companies often use a new hire’s prior salary as a baseline for setting the employee’s new compensation. By prohibiting companies from asking prospective employees how much they earned at their last jobs, the bill seeks to prevent unequal wages and salaries from following employees through their entire careers.

In addition to prohibiting employers from asking job applicants about their wage history, the ordinance prohibits employers from: Continue Reading

NY Dept of Labor Finalizes Major Changes to Wage Regulations

In New York, a large number of wage and hour requirements are statutorily codified in the Labor Law. Many others requirements, however, are set forth in regulations known as wage orders, which are issued and updated from time-to-time by the New York State Department of Labor (NYSDOL).  The NYSDOL publishes wage orders covering the hospitality, building service, nonprofit, agricultural, and miscellaneous (i.e., all other) industries.  Adherence to the statutory Labor Law, but not to the wage orders, can have disastrous consequences.

To that end, on the morning of December 28, 2016, the NYSDOL finalized amendments to each of the wage orders that will have a tremendous impact on how New York employers pay their workers. The finalized wage orders, which are unchanged from the proposed orders published by the NYSDOL in mid-October, take effect in just three days, on December 31. Continue Reading

Modern Slavery Business Reporting: Beyond Compliance

A year after the introduction of the business reporting obligation in the Modern Slavery Act 2015 we take a look at the approach taken to statements to date and possible future developments in this area.


Modern slavery and human trafficking are two of the biggest human rights challenges of our time. The Modern Slavery Act 2015 seeks to tackle these issues in a number of ways, including imposing a requirement on organisations carrying out a business (or part of a business) in the UK, and with a turnover of £36 million or more, to publish an annual modern slavery statement.

The statement must detail the steps the organisation is taking to ensure that modern slavery and human trafficking are not present in its business or global supply chains. The statement must be signed by a director and a link to the statement must be included in a prominent place on the organisation’s website homepage. Companies with a year end of 31 March should already have published their statement, whereas those with a 31 December year end are due to publish in the first half of 2017, giving the latter the advantage of being able to review and benchmark their statements against those already published.

For background on the reporting requirement in the Act, please see our blog post of October 2015.

One year on, the question is what approach are companies taking to their Modern Slavery Act statements, how much interest have the press and consumer groups shown on this topic and what does this say about the initial success of the reporting obligation?

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What Employers May Expect with Trump in Office

This installment of our ongoing series prognosticating about the new Presidential administration focuses on the regulatory environment employers may face. President-elect Trump has promised to revoke a number of the more employee-friendly measures that the Obama Administration has passed over the previous eight years.  Additionally, Ivanka Trump, who was influential throughout her father’s campaign, has reiterated her intention to fight for equal pay for women and family leave policies.  Continue Reading