Chicago-Area Employers: Paid Sick Leave Begins July 1

A reminder to all employers with any employees who work in Chicago or elsewhere in Cook County, Illinois: ordinances mandating that you provide paid sick leave to employees who work in Chicago or Cook County take effect July 1, 2017.

As we previously reported here, under the Chicago Paid Sick Leave Ordinance (and the almost identical Cook County Earned Sick Leave Ordinance), employers must begin awarding every employee who works in Chicago or Cook County one hour of paid sick leave for every 40 hours worked, up to at least 40 hours of paid sick leave per year (plus up to at least 20 unused rollover hours from the previous year). Nearly any employee who works at least 80 hours within any 120-day period in either jurisdiction qualifies, but employers may require the employee to wait up to 180 days after starting employment before they may use accrued paid sick leave.  Employers can avoid the carryover and accrual requirements by “frontloading” their employees with equal or greater leave at the start of each calendar or benefit year.

Recently released interpretative rules from the City and County have added the following clarifications:

  • According to the City’s rules, “[i]n the case of a conflict between the [City’s] Ordinance and the Cook County Earned Sick Leave Ordinance, the [City’s] Ordinance shall prevail within the City.”
  • After the first year of employment, an employee may use a maximum of 60 hours of paid sick leave (unless the employer has a more generous policy)
  • An employee may use paid sick leave in one-hour increments, unless the employer establishes and disseminates a written minimum-use policy
  • An employer is not required to allow paid sick leave use while the employee is on disciplinary leave
  • Paid sick leave must be paid no later than the next regular payroll period beginning after the leave was used
  • The following employees are not covered under either ordinance:
    • Employees working in construction covered by a collective bargaining agreement (“CBA”)
    • Employees covered by a CBA entered into before July 1, 2017
    • Employees covered by a CBA entered into on or after July 1, 2017, and that explicitly waives their rights under the ordinance(s)
  • Immigration status does not affect an employee’s rights under either ordinance
  • A private right of action is possible under both ordinances

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Can contracts for those working in the gig economy move with the legal tide?

The status of those working in the ‘gig economy’, whether they are genuinely self-employed or, in reality, workers or employees with greater employment law rights, has become a highly charged issue – and one increasingly the subject of legal challenge, notably involving Uber, Citysprint and Pimlico Plumbers in recent years. The ongoing review into modern employment practices commissioned by the UK Government, and being led by Matthew Taylor, has also kept the issue in the headlines, with the final report due later this year.

At the heart of the issue is whether the true nature of the relationship between companies and the individuals who provide a service for them is consistent with the self-employed label often used in the relevant contracts. Those in the gig economy may work as couriers, drivers or tradespeople, may wear uniforms, and in many cases are the company’s main interface with its customers. However, they also often work flexible hours and are free to decide when to clock on and off. Continue Reading

New California Workplace Harassment Guide Is Useful Tool for Preventing and Addressing Harassment, Discrimination, and Retaliation

On May 2, 2017, the California Department of Fair Employment and Housing (DFEH) issued a Workplace Harassment Guide, which offers recommendations for employers on how to prevent and address harassment in the workplace. While the Guide focuses on workplace harassment, it also is a useful tool for how to handle other workplace issues, including discrimination and retaliation.

Preventing Harassment

The Guide provides a list of suggestions to create an effective anti-harassment program, including, but not limited to:

  • A written policy, which includes the required components of an anti-harassment policy as set forth in 2 CCR § 11023. The policy should be easy to understand, and should be distributed to employees and discussed at meetings regularly (e.g., every six months)
  • Management who sets good examples by knowing and following the policies
  • Training for supervisors and managers, as required under AB 1825 and AB 2053
  • Specialized training for individuals handling the complaints
  • Policies and procedures for investigating and responding to complaints
  • Conducting prompt, detailed, and fair investigations
  • Taking prompt and fair remedial action

Investigating and Addressing Complaints of Harassment

The Guide goes into detail for what is required to conduct a fair investigation, including, but not limited to, interviewing the complainant and the accused party, as well as any pertinent witnesses, and reviewing any relevant documents or other evidence necessary to obtain all of the facts. The Guide provides the following recommendations for conducting workplace investigations:

  • Impartiality
  • Internal or qualified external investigator who is knowledgeable in anti-harassment policies and investigation techniques
  • Training programs for investigators

Even more useful is the Guide’s instruction on confidentiality, which states that employers “can only promise limited confidentiality,” and that the information may be limited to individuals on a “need to know” basis. Additionally, the Guide reminds employers that while managers can be told to keep an investigation confidential, generally, an employer cannot require employees to keep an investigation confidential because that may interfere with the employees’ right to talk about their work conditions under the National Labor Relations Act.

Additionally, the Guide discusses how to make credibility determinations, and provides a list of nine factors. It states that the investigator should make findings based on a “preponderance of the evidence” standard – the same standard used in a civil case of discrimination or harassment. Additionally, the Guide recommends that the investigator only make factual conclusions rather than legal conclusions – e.g., finding a violation of workplace policy, not a violation of the law. The Guide also reminds employers to carefully document the investigation, including interviews, signed witness statements, the findings made, and steps taken during the investigation. This is an incredibly important part of the procedure and something we recommend to our clients, as it becomes very useful in minimizing risk in the event a lawsuit arises.

The Guide provides helpful suggestions on how to handle anonymous complaints – act the same as if the complaint was not anonymous – and requests by the complainant that the employer do nothing (hint: the employer should never “do nothing”). Employers are reminded that they should always tell employees involved in an investigation that the employer has an anti-retaliation policy, and should ensure that the policy is well enforced.

Lastly, the Guide states that employers are required to take prompt remedial action whenever there is proof of any misconduct – not necessarily a violation of company policy or the law. According to the Guide, remedial action includes:

  • Training
  • Verbal counseling, one-on-one counseling
  • “Last chance” agreements
  • Demotions
  • Salary reductions
  • Rescinding a bonus
  • Termination
  • Anything else that will stop or prevent the wrongful conduct

The full text of the Workplace Harassment Guide for California Employers can be found here. If you are an employer and have questions on preventing or handling workplace harassment, discrimination, or retaliation issues, contact Julia Y. Trankiem at jtrankiem@reedsmith.com or Sonya D. Goodwin at sgoodwin@reedsmith.com.

Reminder for NYC Employers: Independent Contractor Law Takes Effect May 15

On May 15, a new law takes effect in New York City that will require written agreements between many, if not most, independent contractors and the entities that engage them.  As we previously reported, the “Freelance Isn’t Free” Act (the Act) requires that virtually all entities that engage a “freelance worker” for $800 or more in services, execute a written agreement with the contractor before the work begins.  “Freelance worker” means “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation.”

The written agreement must include, at a minimum:

  • The name and mailing address of both the hiring party and the freelance worker
  • An itemization of all services to be provided by the contractor
  • The value of the services
  • The rate and method of the contractor’s compensation
  • The date on which the contractor must be paid, or the mechanism by which such date will be determined
  • Any other terms that NYC’s newly created Office of Labor Standards designates by rule

Beyond the requirement of a written independent contractor agreement, the Act also bars wage theft and retaliation against contractors, and imposes substantial penalties on businesses that fail to comply with these and other requirements surrounding the independent contractor relationship.

A flyer created by the Office of Labor Standards concerning the Act can be found here.

Practical Considerations

The “Freelance Isn’t Free” Act represents a major sea change with respect to independent contractors.  As a result, all NYC businesses that use independent contractors should immediately review and update their independent contractor agreements as appropriate, or speak with counsel about preparing such an agreement, and align their payment practices with the Act.  Given the steep penalties for violating the law, the time to act is now.

NYC to Employers: “No Salary for You!”

On April 5, New York City became the latest jurisdiction to enact legislation barring employers from inquiring into a job applicant’s salary history.  Originally introduced last summer at the behest of NYC Public Advocate Letitia James, the bill specifically prohibits businesses from (1) inquiring about the salary history of a job applicant or (2) relying on the salary history of an applicant in determining salary, benefits, or other compensation for such applicant during the hiring process, including the negotiation of a contract.  These prohibitions extend to inquiries made to the applicant him/herself and to his/her current or former employer, as well as searches of public records.  The term “salary history,” as it is used in the law, includes an applicant’s current or prior wage, benefits, or other compensation, but does not include any objective measure of an applicant’s productivity (e.g., revenue, sales, or other production reports).

Despite the broad scope of the law, employers may still, without inquiring about salary history, discuss with applicants their expectations for salary, benefits, and other compensation.  This discussion may touch upon, among other things, any unvested equity or deferred compensation that the applicant would forfeit or have cancelled by virtue of his/her resignation from employment with his/her current employer.  In addition, where an applicant voluntarily and without prompting discloses his/her salary history to an employer, such employer may consider the salary history in determining salary, benefits, and other compensation for the applicant, and may verify the applicant’s salary history.

Notably, the new law does not apply to actions taken by an employer pursuant to any federal, state, or local law that specifically authorizes the disclosure or verification of salary history for employment purposes, or specifically requires knowledge of salary history to determine an employee’s compensation.  It similarly does not apply to applicants for internal transfer or promotion within an organization, or to attempts by an employer to verify an applicant’s disclosure of non-salary-related information, or to conduct a background check as permitted by law.  However, if any such verification or background check does disclose the applicant’s salary history, this disclosure may not be relied upon for purposes of determining the applicant’s salary, benefits, or other compensation.

The law will take effect 180 days after it is signed into law by Mayor Bill de Blasio (meaning it will likely become effective next fall).  In the interim, employers should remove questions about salary history from their job applications, and train interviewers and other individuals involved in the hiring process about the restrictions imposed by the new law.

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 ehunter@reedsmith.com 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 reedsmith.com 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 reedsmith.com for full details of the event. R.S.V.P. to events@reedsmith.com 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

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