Government agencies are integral to the enforcement of federal labor and employment laws and will be dramatically impacted by a government shutdown. Below is a synopsis of the impact on the main government agencies responsible for enforcing federal labor and employment laws—the U.S. Equal Employment Opportunity Commission (EEOC); the Department of Labor (DOL); and the National Labor Relations Board (NLRB).

Impact of a shutdown on the EEOC

If the government shuts down, the EEOC will furlough 95% of its employees. There will be no staff available to investigate EEOC charges; mediations will be cancelled; and FOIA requests will not be processed.

According to the EEOC’s contingency plan, however, the EEOC will continue to litigate cases where an extension has not been granted (at least until the federal courts run out of funds and cases are suspended). In addition, the EEOC’s public portal will remain open for the filing of charges and field office staff will monitor entries to see if any are nearing the end of the charge filing period or if injunctive relief is required.

Once the government re-opens, the EEOC will be required to process a backlog of charges that accrued as a result of the shutdown. As a result, a notice of right to sue may be the first notice of a charge that an employer receives.

Note, while the EEOC will be impacted by the federal government shutdown, state and local fair employment practices agencies will remain fully operable.

Impact of a shutdown on the DOL

The DOL will furlough over 11,000 employees if the government is shutdown. The Wage and Hour Division will retain only 7 of its 1,538 staff members. The Division will continue to monitor incoming complaints, but all regulatory work will cease as will all enforcement activities not related to the safety of human life or protection of property.

The Occupational Safety and Health Administration (OSHA) will retain 1,180 of its regular staff of 2,106. As a result, all worker protection agency investigations will cease unless they involve responding to or preventing fatalities, catastrophes, or imminent danger. OSHA will not carry out programmed inspections and will largely suspend activities related to whistleblower protections.

In addition, the DOL’s adjudicatory functions will also cease with the Office of Administrative Law Judges (OALJ) not retaining any full time staff members during a shutdown. Similarly, the Office of Federal Contract Compliance Programs (OFCCP) will cease operations completely.

While the DOL has previously stated its much anticipated final rule on independent contractors would be released in October, that is unlikely to occur if there is a government shutdown.

Impact of a shutdown on the NLRB

During the shutdown, the NLRB will retain only 15 of its 1,200 employees. All case handling activities will be discontinued with an immediate impact on unfair labor practice (ULP) charges, representation petitions and elections, issuance of Administrative Law Judge (ALJ) and Board decisions, enforcement of remedial actions, and the resolution of collective bargaining disputes. The NLRB will continue to respond to ULP incidents that might result in irreparable harm to the private sector economy. Retained staff will largely be located at headquarters and not in field offices.

Takeaway

The impact of a government shutdown on the EEOC, DOL, NLRB will be far-reaching. Employers can expect that in the event of a shutdown, the agencies will largely cease their regular operations. Once the shutdown ends, the agencies will face the daunting task of resuming enforcement activities and delays are likely.

The California Legislature had until September 14, 2023, to pass bills in the current Legislative Session before these bills are sent to Governor Newsom to either sign, approve without signing, or veto each bill by October 14, 2023. Several key bills relate specifically to employment law, including expansion of paid sick leave, CalWARN notice requirements, remote workers’ rights, and wage theft.

Our team has compiled a comprehensive list of the major new laws and obligations that employers in the Golden State should know. Unless otherwise noted, bills that become law will presumably take effect January 1, 2024.

For more information on these issues, please reach out to the authors, or the Reed Smith lawyer with whom you normally work.

On September 11, 2023, labor unions and the California restaurant industry reached an agreement that promises to significantly impact the fast-food chains throughout California. This deal involves, among other things, raising the minimum wage for fast food workers to $20 an hour and eliminating an industry-supported referendum scheduled for the 2024 ballot. The deal also removes language that would have held franchisors jointly liable for labor violations of franchisees. Thus, while this deal is seen as a win for workers, it also includes welcome news for fast-food restaurant chains and their franchisees.

Minimum wage and increased labor costs

One of the most immediate effects of this decision is the increase in labor costs for fast-food franchisees. The current state minimum wage is set to increase to $16 an hour in 2024. Under the recent deal, the minimum wage for fast-food workers across California will be $20 an hour by April 2024 at fast-food restaurant chains with more than 60 locations in the United States. This 25 percent wage increase in just a few years could pose challenges for franchisees already operating on tight profit margins. To remain competitive, franchisees may need to find ways to absorb these increased labor costs, such as raising menu prices or exploring more cost-effective operational strategies.

The agreement also establishes a council with the authority to further raise the minimum wage for fast-food workers by up to 3.5 percent annually. This provision introduces uncertainty for franchisees, as they must now consider the potential for ongoing wage hikes. These incremental increases could compound labor costs over time, impacting franchisee profitability and business sustainability.

While the new legislation seeks to create uniformity by preventing local governments from setting higher minimum wages for the fast-food industry, it allows local governments to raise the minimum wage for all workers. This means that franchisees operating in areas with a high cost of living may face additional pressure as they compete for talent in a market with higher minimum wages for all employees.

Liability relief for franchisors

One notable change in the agreement is the removal of language that would have held fast-food chains liable for labor violations at franchisee-operated restaurants. Critics argued this provision would have had far-reaching consequences for the entire industry. By removing this language, the agreement seeks to protect the franchise business model, providing reassurance to franchisors who may have been concerned about the potential of joint liability.

Closing thoughts

The decision to raise the minimum wage for fast food workers in California and eliminate the 2024 referendum has far-reaching implications for franchisees in the state. While it presents opportunities for workers to earn higher wages and potentially improve their working conditions, franchisees will need to navigate higher labor costs, potential annual increases, and a changing regulatory landscape. The removal of joint liability language also helps assuage some of the concerns the restaurant industry expressed in light of the original proposed language. As this agreement progresses through the California legislature, fast-food chains and franchisees will be closely watching and adapting to ensure their businesses remain viable in the face of these changes.

As we previously reported here and here, effective September 17, 2023, New York State employers with four or more employees will be required to include the minimum and maximum pay range that they reasonably or in “good faith” expect to pay in any advertisement for a job, promotion, or transfer opportunity.

This disclosure obligation applies to internal and external job postings, as well as to jobs that either (i) will physically be performed, at least in part, in New York or (ii) will physically be performed outside of New York, but report to a supervisor, office, or other work site in New York. Employers are also required to provide a written description of the role in the job posting, to the extent one exists.

New York State employers should review and revise their job postings as needed to comply with this law in advance of September 17, 2023. While there is no private right of action under the law, the New York State Department of Labor is authorized to investigate complaints of non-compliance and levy civil penalties against violating employers.

Employers will be liable for the discriminatory acts of their employees in the course of employment unless they have taken ‘all reasonable steps’ to prevent the wrongdoing.

Whether all reasonable steps have been taken will be fact-specific and the hurdle is a high one; the Equality and Human Rights Commission (EHRC) stated in its Statutory Code of Practice that “an employer would be considered to have taken all reasonable steps if there were no further steps that they could have been expected to take…”

The scope of the defence was recently considered by the employment tribunal (ET) in Fischer v London United Busways Ltd, a gender reassignment discrimination case. Although the claimant failed to establish that the alleged discrimination occurred, the ET nevertheless considered the employer’s assertion that they could have relied on the ‘all reasonable steps defence’ because they had appropriate policies in place which were communicated to staff, a zero tolerance attitude to enforcement of those policies, a supportive ‘speak-up’ culture for reporting concerns, and concerns raised by the claimant had been investigated. This type of approach is common amongst employers, so the ET’s finding that the respondent in this case had not taken ‘all reasonable steps’ acts as an important reminder to employers that making use of the reasonable steps defence is often not as simple as that and employers may not be being as ‘reasonable’ as they think they are.

The ET provided valuable guidance for employers as to the steps that ought to be taken to have good prospects of being able to make use of the defence. The guidance is summarised below:

  1. Policies: employers should have appropriate policies in place showing their commitment to equal opportunities and anti-bullying and harassment (no surprise there). However, the mere existence of a policy is not enough in itself – policies must be regularly reviewed and updated, refer to current legislation and be consistent with current guidance and best practice. In this case, the policy failed to reference the Equality Act 2010, and had seemingly not been updated since 2007.
  2. Awareness: individuals need to know that the policy applies to them – both in terms of whether they are protected by the content, and whether they are expected to comply with it. In this case, the respondent engaged a high volume of agency workers (including the claimant), but the policy did not make it clear that it applied to them. While many policies will clearly be stated to apply to employees, consideration should be given to whether it is clear when they apply to other groups, including agency staff, and job applicants.
  3. Inclusion: inclusion is just as important as equality, and policies should reflect that. The claimant in this case, a transgender woman, stated that she did not feel a sense of belonging at work, and the ET considered that her employer’s policy could have done more to set expectations around inclusion of people with diverse characteristics. The ET opined that the tone of a policy was important, and that it should make clear that the skills, experiences, characteristics and perspectives of all employees will be celebrated.
  4. Communication and Training: it is not enough that an employer’s policies are on display and theoretically accessible, they also have to be prominent or regularly communicated to the workforce. In this case, it was found that while the respondent’s Equal Opportunities and Harassment policies were on display on noticeboards in the depot, this was in an area where the workforce spent only small portions of their working day. In that context, the ET held that where the policy is not prominent, it is necessary for the employer to provide regular and refreshed training and communications, emphasising the importance of equality, diversity and inclusion. The ET gave the following examples of effective initiatives: attachments accompanying digital payslips, or printed leaflets or other forms of communication being left in areas that the workforce spent a notable amount of their time. Training is a vitally important means of raising awareness and inclusivity. Training should include education on the correct language and terms used in regard to relevant minority groups. For instance, in this case training was found to be required in respect of terms such as “cis” and “trans”.
  5. Employee representative groups: it is important employees comprising minority groups are encouraged (or at least enabled) to establish representative groups, such as an LGBTQ+ representative group, or a minority ethnic representative group. As well as providing a safe space for minority groups, support from an employer for such initiatives would be a meaningful step towards making all employees feel welcome and would help facilitate the development of ideas for how employers can improve enrich the experience and integration of minority groups.

While the above guidance is from an ET decision, and is therefore not binding, it is nonetheless a helpful guide for employers navigating not only transgender issues in the workplace, but issues relating to any minority group. It is also an invaluable reminder that employers should not be complacent about their important role in preventing discrimination (of any kind) in the workplace, with there being a clear expectation that they should be proactive around policies, training and awareness initiatives.

Over the past decade-plus, New York lawmakers have passed several laws intended to combat perceived wage theft across the Empire State. On September 6, 2023, lawmakers in Albany continued this trend by passing a bill that codifies wage theft as criminal larceny.

Specifically, the bill adds a new subsection to the New York Penal Law’s larceny statute to include wage theft, which it describes as when a person is hired “to perform services and the person performs such services and the [employer] does not pay wages, at the minimum wage rate and overtime . . . to said person for work performed.” In such a case, the prosecution is permitted to aggregate multiple non-payments or underpayments from an individual or workforce, even if such incidents occurred in multiple counties.

Simply put, New York State employers who fail to timely and fully pay all wages due to their employees could potentially now be subject to criminal penalties (in addition to the preexisting civil damages and penalties). In light of this new law, employers should review their policies and records to ensure immediate compliance.

On August 30, 2023, the U.S. Department of Labor (DOL) proposed a regulatory rule that would raise the minimum salary threshold for employees who are classified as “exempt” under the white collar exemptions to the Fair Labor Standards Act (FLSA) by nearly 55 percent. The proposed rule would also create a new mechanism for subsequent, automatic increases every three years.

Under the proposed rule, the DOL seeks to:

  • Increase the minimum salary threshold for employees classified as exempt under either the executive, administrative, or professional exemptions by changing the test so that the threshold increases from $684 per week ($35,568 annually) to $1,059 per week ($55,068 annually).
  • Increase the minimum salary threshold for highly compensated employees by changing the test so that the threshold increases from $107,432 per year to $143,988 per year.
  • Apply the increased salary threshold requirements to Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands (the U.S. territories subject to federal minimum wage).
  • Increase the special salary levels for American Samoa to 84 percent of the standard salary level (which under that test increase the threshold from $380 per week to $890 per week).
  • Increase the base rate for exempt employees in the motion picture industry from $1,043 per week to $1,617 per week.
  • Establish a new mechanism to automatically increase the minimum salary threshold every 3 years (i) for white collar exemptions to the current 35th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, and (ii) for highly compensated employees to the current annualized weekly earnings of the 85th percentile of full-time salaried workers nationally. These automatic increases could be temporarily delayed by the DOL when unforeseen economic or other conditions warrant.

The DOL has published FAQs about the proposed rule. Under the FLSA, employees must be paid at least the minimum salary threshold and the employee’s job position must also meet certain tests regarding their job duties for an employee to be properly classified as “exempt”. The DOL indicates that under the proposed rule, the agency expects many currently salaried employees to no longer be eligible to be classified as “exempt” and therefore eligible for overtime wages. The DOL has also clarified that the proposed rule does not seek to change the duties tests for these exemptions.

The DOL’s proposed increase comes after the Trump-era DOL raised the salary threshold in 2019 from the long-standing $455 per week to $684 per week (and also raised the highly compensated employee threshold to $107,432 up from $100,000). That action came after the Obama-era DOL attempted to raise the minimum salary threshold to $913 per week, but that increase was challenged by employer groups, stayed by a federal court, and ultimately withdrawn. The current proposed regulations appear susceptible to the same challenges raised by employer groups to the Obama-era regulations that were withdrawn.

Employers or other interested stakeholders will have 60 days from publication of the proposed regulations in the Federal Register to submit public comment to the DOL. Employers should monitor these developments and evaluate how the proposed rule will impact their workforce and current wage and hour practices. If you have any questions on these proposed requirements, need assistance developing wage and hour policies and procedures, or have other questions related to wage and hour compliance, please contact Betty Graumlich at bgraumlich@reedsmith.com, Christopher Bouriat at cbouriat@reedsmith.com, Noah Oberlander at noberlander@reedsmith.com, or the Reed Smith lawyer with whom you normally work.

The National Labor Relations Board (“NLRB”) issued a decision in Cemex Construction Materials Pacific, LLC announcing a new framework for determining when employers are required to bargain with unions without a representation election. In the decision, the NLRB overruled the long-standing standard in Linden Lumber because, in the Cemex majority’s view, it was inadequate to safeguard the fundamental right to organize and bargain collectively.

In Cemex, the NLRB found that the employer engaged in over twenty instances of unlawful conduct after filing a petition for election was filed but before the election was held. In applying the new Cemex framework retroactively, the NLRB dismissed the petition and ordered the employer to recognize and bargain with the union.

The new Cemex framework creates a fundamental change of dynamics relating to the representation process. Under Cemex, when a union requests recognition based on a majority support of the employees to be in the bargaining unit, an employer must either: (1) recognize and bargain with the union; or (2) promptly file a RM petition to challenge the union’s claim of majority support by seeking an election, pursuant to Section 9(c)(1)(B) of the NLRA, unless the union has already filed a petition for a representation election pursuant to Section 9(c)(1)(A) of the Act.

The Board has also significantly shifted the remedy scheme for addressing cases in which an employer, after filing a RM petition but before the election, commits an unfair labor practice that causes the election to be set aside. Under long-standing precedent, typical remedies included conducting another election or, in cases of egregious violations, a Gissel order requiring the employer to bargain. According to the Cemex majority, however, that remedy scheme was inefficient and ineffective towards preserving a free and fair election. Now, under Cemex, the default remedy stands to be dismissal of the employer’s RM petition and an order for the employer to recognize and bargain with the union.

Cemex represents a significant pivot by the Board away from long-standing precedent and represents a return significantly closer to the long-idle Joy Silk doctrine. The Board, however, stopped short of entirely reviving Joy Silk insofar as it made clear that the new framework does not require an employer’s “good-faith doubt” of a union’s majority status to file a RM petition. Rather, under Cemex, the employer’s subjective view of the union’s majority status is immaterial.

The impact of Cemex is expected to be profound. Unionization efforts are reported to be at peak levels compared to recent decades. Employers should fully expect that trend to continue following Cemex and should be fully prepared in terms of responding to a union’s request for recognition based on majority support, and in terms of mitigating the risk of unfair labor practices during the critical period between the filing of an RM petition and the representation election. Missteps could lead to a requirement to recognize and bargain with the Union under Cemex.

The United Kingdom has published plans on proposed changes to paternity leave. These extend the period over which leave can be taken and streamline the administration process.

The UK’s statutory paternity leave regime currently allows eligible employees to take two weeks of leave (at the statutory rate at the time, currently £172.48 per week) in the first 56 days after birth or adoption. The proposals, announced in the UK Government’s Good Work Plan, provide employees more flexibility about how and when they take their paternity leave. Should the plans come into force, eligible employees will be able to take paternity leave in two separate blocks of one week at any point in the first year, spreading out the period over which leave can be taken.

There will also be changes to simplify the administration process. At the moment, employees must inform their employer of their intended leave dates 15 weeks before the expected week of childbirth. To reduce this burden, the UK Government’s proposals reduce the period of notice required from employees to 28 days before the intended start date(s) of paternity leave.

No changes are proposed to statutory paternity pay or the eligibility requirements for paternity leave.

The Good Work Plan appears to acknowledge that the proposals will enable more employees to take paternity leave whilst remaining affordable. There is a long way to go before these proposals become law; the legislative process has not yet started, and these things can take time if it is not a priority area.

In the meantime, there have been developments in relation to other family friendly law reforms – over the summer, changes that have been in the pipeline for several years have now completed their passage through the process and passed as Acts, including: amendments to flexible working laws (read more on our blog); adjustments to the laws applicable to expectant and new mothers facing potential redundancy; and new statutory rights for carers and parents of neo-natal babies. These changes do not take immediate effect – we will need regulations on the detail so do not expect the changes to take effect until next year.

With a general election predicted in 2024, it remains to be seen whether the changes outlined will be given priority. We will keep you abreast of developments through our blog.

On August 18, 2023, the Fifth Circuit sitting en banc in Hamilton v. Dallas County unwound its long-held limitation that an adverse employment action must be an “ultimate employment decision” to be actionable under Title VII. The majority reasoned that this limitation was incongruent with the broad language of Section 703(a)(1), which states that “[i]t shall be an unlawful employment practice for an employer… to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileged of employment, because of such individual’s race, color, religion, sex, or national origin…”

This case presents with “unusual” facts, as characterized by Judge Edith H. Jones in her concurrence, joined by Justice Smith and Justice Oldham. Hamilton was brought by nine female correctional officers who alleged their employer, Dallas County, violated Title VII by adopting a sex-based scheduling policy in place of a seniority-based policy, which allowed only male officers full weekends off. Interestingly, the County stood behind its policy, reasoning that it would be safer for the male officers to be off on the weekends, because having none on duty during the week would be an unsafe practice. The district court granted the County’s 12(b)(6) motion to dismiss and held that changes to an employee’s work schedule, such as the denial of weekends off, was not an ultimate employment decision. The Fifth Circuit initially affirmed on the same grounds, but a rehearing en banc was granted to reexamine the “ultimate employment decision” requirement.

The Fifth Circuit has limited disparate-treatment claims under Title VII to those involving “ultimate employment decisions” for decades, holding that “only ultimate employment decisions such as hiring, granting leave, discharging, promoting, or compensating” were actionable. But in Hamilton, the Fifth Circuit then held that the “ultimate employment decision” standard, which it stood alone amongst the federal circuits in applying, was based on fatally flawed foundations.

In nullifying the “ultimate employment decision” standard, the Fifth Circuit applied Title VII as written, noting that “[n]owhere does Title VII say, explicitly or implicitly, that employment discrimination is lawful if limited to non-ultimate employment decisions.” In addition to expressly prohibiting discrimination in hiring, refusing to hire, discharging, and compensation, Section 703(a)(1) also prohibits an employer “otherwise to discriminate against” an employee “with respect to his terms, conditions, or privileges of employment.” To require an “ultimate employment decision” would render this statutory language meaningless.

Using the new interpretation of Section 703(a)(1), the Fifth Circuit held the County’s change to a sex-based scheduling policy was actionable at the pleading stage given: (1) the days and hours that an employee works are quintessential “terms and conditions” of employment; and (2) the female officers’ allegations support a plausible inference that the right to pick work shifts based on seniority under the County’s prior policy was a “privilege” of employment.

Although Hamilton expanded the reach of actionable discriminatory acts by eliminating the “ultimate employment decision” standard, the Court refused to opine on “the precise level of minimum workplace harm a plaintiff must allege on top of showing discrimination in one’s ‘terms, conditions, or privileges of employment.’” The Court punted on this issue partly because the Supreme Court is poised to address it in Muldrow v. City of St. Louis, an Eighth Circuit case for which certiorari was recently granted. The only guidance given by the Fifth Circuit on this issue is that Title VII does not permit liability for “de minimis workplace trifles.” As Judge Jones put it in her concurrence, “[t]he majority holding amounts to this: we hold that speeding is illegal, but we will not say now what speed is illegal under what circumstances.”

The majority’s incomplete ruling now leaves employers in the Fifth Circuit guessing as to where the line is drawn for actionable adverse employment actions. Until the Supreme Court clears up this issue in Muldrow, if it so choses, the murkiness of this line will force employers to examine more of their actions taken that affect employees to minimize potential liability under Title VII. Particularly, employers will need to carefully scrutinize any policies or practices in place, or set to be implemented, that may disadvantage certain employees belonging to a protected class.

Notwithstanding the murkiness that remains, the Fifth Circuit’s decision in Hamilton will certainly expand the landscape of disparate-treatment claims employees will bring.

If you have questions about this alert or any issues related to it, please contact the authors or the Reed Smith lawyer with whom you normally work.