Labor & Employment Archives - Page 76 of 146

What Does Subway’s “Voluntary Agreement” with the US Department of Labor Mean for Joint Employer Status?

This past week, Doctor’s Associates Inc., which is the owner and franchisor for the Subway sandwich restaurant chain entered into aVoluntary Agreement (the “Agreement”) with the US Department of Labor’s (DOL) Wage and Hour Division “as part of [Subway’s] broader efforts to make its franchised restaurants and overall business operationssocially responsible,” and as part of Subway’s “effort to promote and achieve compliance with labor standards to protect and enhance the welfare” of Subway’s own workforce and that of its franchisees.

While the Agreement appears intended to help reduce the number of wage and hour law claims arising at both Subway’s company owned stores and those operated by its franchisee across the country, the Agreement appears to add further support to efforts by unions, plaintiffs’ lawyers and other federal and state agencies such as the National Labor Relations Board (NLRB or Board), DOL’s own Occupational Safety and Health Administration (OSHA) and the EEOC to treat franchisors as joint employers with their franchisees.

What Is in the Agreement?

While on its face this may sound like a good idea and one that should not be controversial, in reality by entering into this Agreement, which among other things commits Subway to working with both the DOL and Subway’s franchisees, to develop and disseminate wage and hour compliance assistance materials and to work directly with the DOL to “explore ways to use technology to support franchisee compliance, such as building alerts into a payroll and scheduling platform that SUBWAY offers as a service to its franchisees,” and although the Agreement is notable for its silence on the question of whether the DOL considers Subway to be a joint employer with its franchisees, the Agreement is likely to be cited, by unions, plaintiffs’ lawyers and other government agencies such as the NLRB as evidence of the fact that Subway as franchisor possesses the ability, whether exercised or not, to directly or indirectly affect the terms and conditions of employment of its franchisees’ employees, and as such should be found to be a joint employer with them.

Notably, while the Agreement does not specifically address the exercise of any such authority on a day to day basis, it does suggest an ongoing monitoring, investigation and compliance role in franchisee operations and employment practices by Subway and a commitment by Subway as franchisor to take action and provide data to the DOL concerning Fair Labor Standards Act compliance. In the past, courts have in reliance on similar factors held that a franchisor could be liable with its franchisees for overtime, minimum wage and similar wage and hour violations.

Of particular interest to many will be the final section of the Agreement, titled “Emphasizing consequences for FLSA noncompliance.” This section not only notes that “SUBWAY requires franchisees to comply with all applicable laws, including the FLSA, as part of its franchise agreement,” but also what action it may take where it finds a franchisee has a “history of FLSA violations”:

SUBWAY may exercise its business judgment to terminate an existing franchise, deny a franchisee the opportunity to purchase additional franchises, or otherwise discipline a franchisee based on a franchisee’s history of FLSA violations.

Will Subway’s “Voluntary Agreement” with the DOL Have Any Impact Beyond Wage and Hour Matters?

As we approach the one year anniversary of the NLRB’s decision in Browning Ferris Industries, it is abundantly clear that not only the Board itself but unions and others seeking to represent and act on behalf of employees are continuing to push the boundaries and expand the application of Browning Ferris. In fact the Board has been asked to find that policies and standards such as those evidencing a business’s commitment to “socially responsible” employment practices, the very phrase used in the Subway-DOL Agreement, should be evidence of indirect control sufficient to support a finding of a joint employer relationship between a business and its suppliers.

Moreover, the NLRB and unions such as UNITE HERE and the Service Employees International Union continue to aggressively pursue their argument that the terms of a franchise agreement and a franchisor’s efforts to ensure that its franchisees, who conduct business under its brand, can also be sufficient to support a finding of joint employer status. No doubt they will also point to the Subway Agreement with the DOL as also being evidence of such direct or indirect control affecting franchisees’ employees’ terms and conditions.

What Should Employers Do Now?

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical employers should carefully evaluate their relationships with suppliers, licensees, and others they do business with to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.

ARTICLE BY Steven M. Swirsky of Epstein Becker & Green, P.C.

Chicago Joins Growing Trend in Requiring Paid Sick Leave

The City of Chicago joined an emerging national trend when it unanimously passed an ordinance that requires employers to provide workers with paid sick days.

The change will go into effect on July 1, 2017, and expands benefits already provided under the Family Medical Leave Act (FMLA). The FMLA grants covered employees up to 12 weeks of unpaid time off to attend to the serious health condition of the employee or a covered family member. In contrast, the Chicago ordinance requires businesses to provide eligible employees one hour of paid sick leave for every 40 hours worked, up to 40 hours of total paid sick leave in each 12-month period.

The ordinance, which is technically an amendment to Chicago’s minimum wage law, covers all employees who perform at least two hours of work within the City in any two-week period and who work at least 80 hours during any 120-day period. The ordinance applies to all employers, regardless of the number of employees, that maintain a business facility within the geographic boundaries of the City or who are subject to one of the City’s licensing requirements. The law permits employees to carry up to 2.5 paid sick days over to the following year, but does not require employers to pay employees for unused sick days.

New employees will be eligible to use paid sick days after an initial six-month probationary period. Employers who already offer paid time off that satisfies the requirements of
the ordinance will not be required to provide additional benefits.

Under the ordinance, employees will be able to use paid sick leave for their own illnesses, injuries, medical care or preventative care, or for the illnesses, injuries, medical care or preventative care of covered family members. Pursuant to the law, “family members” is construed broadly to include a child, legal guardian, spouse, domestic partner, parent, the parent of a spouse or domestic partner, sibling, grandparent, grandchild or any other individual related by blood whose close association with the employee is the equivalent of a family relationship. Employees also can use paid sick leave if they or their family members are victims of domestic violence or if their place of business or child care facility has been closed due to a public health emergency.

In passing the amendment, Chicago has added another potential landmine in the already tough- to-navigate employer/employee relationship. The ordinance allows employers to require that employees who use paid sick leave for more than three consecutive days provide certification that the leave was for a qualifying purpose. However, the ordinance prohibits employers from inquiring as to the specific nature of the medical issue. As such, employers should tread carefully when addressing employees’ health issues and corresponding requests for time off.

Currently, four states have laws requiring employers to issue paid sick leave benefits. Connecticut passed the first such law in 2011, followed by Massachusetts and California in 2014 and Oregon in 2015. Likewise, roughly 20 cities across the country have enacted similar regulations, including San Francisco, Washington D.C., Seattle and Philadelphia.

ARTICLE BY David M. Holmes, Alexander L. Reich & Angela M. Sekerka of Wilson Elser Moskowitz Edelman & Dicker LLP

Two Timing Employee Caught in the Act – Uber Unfortunate!

An employee of West Australian Newspapers Limited (WAN) who moonlighted for Uber was caught in the act when, one Saturday night, he picked up a WAN manager.

Despite being well and truly busted, the employee (who worked night shifts as WAN’s newspaper machinist) denied having any affiliation with Uber, saying that his wife had the Uber business and he just occasionally drove her car to the petrol station or car wash. He also initially denied picking up the WAN manager, but in a classic case of #absolutelysprung, quickly reneged from this position when shown the receipt identifying him by name and picture as the Uber driver.

It was clear from the employee’s employment contract that he was required to seek WAN’s permission before working a second job. It was also clear from WAN’s codes and procedures, as well as discussion at toolbox meetings (which the employee attended), that WAN had a duty of care to manage the safety risk of fatigue arising from night shift work.

When WAN investigated the matter, the employee refused to answer its questions or produce documents and conducted himself in an obstructive manner causing the employment relationship to become untenable. The employee was subsequently dismissed and claimed unfair dismissal on the basis he was confused as to the meaning of having a ‘second job’ (#goodtry)

Amid the cobweb of lies (including that his wife must have completed his Uber registration without his knowledge), it was revealed that the employee had driven as an Uber driver on at least 15 occasions. The Fair Work Commission upheld the dismissal stating that the employee deliberately provided misleading information to WAN and ultimately, was the “architect of his own demise” (#nowafulltimeUberdriver)

ARTICLE BY Emily J. Tan of Squire Patton Boggs (US) LLP

Rights of HIV-Positive Job Applicants and Employees

HIV infection is a disability under the Americans with Disabilites Act. What rights and responsibilities does an employer have in relation to HIV-positive applicants and employees? The EEOC recently clarified its position concerning HIV-positive individuals in the workplace in a press release, as well as documents addressing the rights of HIV-positive workers, including the right to be free from discrimination and harassment, and guidance to physicians in facilitating accommodations for those individuals.more

An HIV-positive applicant/employee can generally keep his or her condition private, unless he or she is requesting a reasonable accommodation, or if there is objective evidence (not based on “myths or stereotypes”) that he or she may be unable to do the job or poses a safety risk. Employers do not have to retain employees who are unable to perform, or who pose a “direct threat” to safety, defined by the EEOC as a significant risk of substantial harm even with a reasonable accommodation.

Of course, the applicant or employee is free to choose to reveal his or her status in response to an employer affirmative action program, and the employer may ask medical questions after a job offer has been made, but before employment begins, if everyone entering the same job category is asked the same questions. An employee may also have to discuss his or her HIV status with an employer in order to establish eligibility under other laws, such as the FMLA.

Physicians are reminded that nothing in the ADA alters legal and ethical privacy obligations to patients, and that they should disclose medical information to an employer only if and as authorized by the patient in a signed release. For example, a patient may request that his or her healthcare provider not disclose a specific diagnosis, in which case the physician may state, generally, that the patient has an “immune disorder,” rather than stating that he or she is HIV-positive. Providers may need to discuss an alternative accommodation with the employer, if an initially proposed accommodation would be too difficult or costly.

During FY2014, the EEOC resolved almost 200 charges of discrimination based on applicant/employee HIV status, obtaining more than $825,000.00 for those individuals.

ARTICLE BY Jami K. Suver of Steptoe & Johnson PLLC

Five Lessons from FOX News and Trump on Sexual Harassment

The recent accusations of sexual harassment against Roger Ailes at Fox News, and the response of a high-profile candidate for public office about how women should respond to sexual harassment have crystallized into an opportunity to learn from the mistakes of others.

Since the mid-1980s, we’ve all read about sexual harassment and been trained on it. For the last 25 years, I’ve studied it, investigated it, seen it, taught about it, warned about it, developed policies to guard against it, and defended companies accused of it. Here are a few lessons from these recent events:

A Quick Review

If you’ve avoided (whether by choice or by luck) these last few news cycles, former Fox News anchor Gretchen Carlson accused former Fox News Chairman and CEO Roger Ailes of sexual harassment. After an outside investigation and multiple women providing more examples of his alleged slimy behavior, Ailes is now gone. It happened quickly.

Then, in responding to questions about sexual harassment, a high-profile office-seeker went on record saying he hopes his daughter would quit if she were sexually harassed—and seek another career—which is, by all accounts, an impossibly unrealistic option for most women. Another family member, jumping on the grenade, made it worse when he tried to explain that what his dad actually meant was that a “strong” woman would not allow such sexual harassment to continue – implying (whether intentionally or not) either that strong women could control it, or would have the power to find other work.

Enough already. Sexual harassment is personal; it’s sensitive, and it’s complicated.

Five Quick Lessons

Lesson 1: Sexual harassment comes in many forms.

In 1986, 30 years ago, the U.S. Supreme Court determined that sexual harassment is a form of sex discrimination. Today, the law recognizes harassment that includes female-on-male, male-on-male, female-on-female, but most often we see the male-on-female harassment. Still.

Lesson 2: Most women don’t want to complain about it. Period.

Since the 90s, the research has repeatedly shown that complaining is the leastlikely response from women who were harassed. The more likely responses include (1) avoiding the harasser; (2) downplaying the gravity of it; (3) ignoring it; and (4) taking it head-on.

The EEOC’s recently released Select Task Force Report on the Study of Harassment in the Workplace explains in more detail that most women who are victims of harassment don’t ever complain about it. They just want to fly under the radar. There are a lot of reasons, but that’s for a much longer article in a different format. In sum, usually, it takes courage to complain.

Lesson 3: Know when to bring in outsiders.

Fox News did the right thing by bringing in an outside investigator—reportedly an outside law firm—to investigate the Carlson allegations. When the accused is in a position of power (like Ailes), such that other employees might be afraid to tell what they’ve actually experienced or seen, an internal investigator is usually not enough. An outside neutral has no attachment to the accused or accuser, and the results—whatever they are—in most cases, are more likely to be more thorough, more revealing, and more trusted.

Importantly, with an outside law firm as an investigator, you also have more opportunities to protect communications, advice, and other developments under the attorney-client privilege. That process must be carefully handled.

Lesson 4: Confidentiality is critical.

When employees report harassment, the law compels employers to investigate. We know investigations can be messy and trigger unexpected consequences. Practically, it makes sense to protect those who complain and those about whom complaints are made. Some sexual harassment (like the allegations against Ailes) is severe, while other accusations are more tame. In some cases, there really is no evidence of a hostile work environment and no evidence of harassment. Everyone needs to be protected.

For those of you chiding me for the NLRB’s sweeping decisions against blanket confidentiality rules, I know, I know. But, after being on the front lines of these investigations, confidentiality is critical to protecting everyone in an investigation, and to prevent retaliation.

Notably, even the EEOC’s Select Task Force acknowledges the need for the EEOC and NLRB to “jointly clarify and harmonize the interplay of the National Labor Relations Act and federal EEO statutes with regard to the permissible confidentiality of workplace investigations, and the permissible scope of policies regulating workplace social media usage.”

Lesson 5: Update your policies.

Good employers have good policies that encourage people to come forward. The EEOC’s Select Task Force Report emphasized that a modern, updated policy will include the following elements:

Clear explanation of prohibited conduct, including examples

Promises to protect against retaliation

Complaint process that provides multiple, accessible avenues of complaint

Promises to protect the confidentiality of harassment complaints to the extent possible

Processes for a prompt, thorough, and impartial investigation

Promises to take immediate, proportionate corrective action when harassment has occurred

Promises to respond appropriately to behavior that might not be legally actionable “harassment,” but that which—left unchecked—might lead to harassment

The Select Task Force Report also lists a host of other recommendations, including updating training. Practically, even the best of policies may not have prevented the conduct that Ailes is accused of committing, but let’s take this opportunity to try.

ARTICLE BY Jeanine M. Gozdecki of Barnes & Thornburg LLP

Profits Interest as Equity-Based Incentive: Keeping Your Team Motivated

Say you own one-half of an LLC that is taxed as a partnership. You and your partner invested the initial capital that was necessary to get the business up and running, and you both built the business with the help of a few key employees. With the business still in the growth phase, you want to make sure that you motivate and retain these key employees who are helping you grow your company. What should you do? You and your partner might want to consider causing the LLC to issue the key employees a profits interest in the LLC.

What is a Profits Interest?

From a tax-standpoint, an LLC can issue two basic types of membership interests: capital interests and profits interests. A capital interest is an interest in a partnership or LLC taxed as a partnership that entitles the recipient to share immediately in the proceeds of liquidation. A capital interest normally results from a capital investment and provides recipients with participation in current and future equity value, a share of income, and distributions. When someone receives a capital interest in an LLC in exchange for a corresponding capital contribution, this is typically a tax-free event. When someone receives a capital interest in exchange for services, this is taxable compensation to the service provider.

Profits interests are distinct from capital interests, providing no current right to share in the proceeds of liquidation as of the date of grant. Instead, they typically only provide a holder with the right to share in those profits of the business that arise after the recipient acquires the interest. The primary goal of issuing profits interests is typically to give a service provider the ability to participate in the growth of the enterprise without incurring tax on the receipt of the interest, and to enjoy at least some long-term capital gain treatment (instead of ordinary income treatment) on proceeds they receive on a sale of the LLC or similar liquidity event.

Structuring a Profits Interests

Usually, as long as the profits interest is structured properly and capital accounts are booked up on entrance of the profits interest member, the IRS should not treat the grant of a vested or unvested profits interest as a taxable event. Most practitioners design profits interests so that they meet IRS safe harbor standards for ensuring profits interest treatment. These standards include:

The profits interest must not relate to a substantially certain and predictable stream of income from the entity’s assets, such as income from high quality debt securities or a net lease,
The recipient of the profits interest must not dispose of it within two years of receipt, and
The profits interest may not be a limited partnership interest in a publically traded partnership.

The issuing entity’s partnership or operating agreement should be closely examined upon the issuance of a profits interest. Things to consider with respect to newly issued profits interests include whether such recipients should have voting rights similar to that of members who contributed capital to the enterprise. Additionally, the agreement should be updated to clearly define how the profits interests will be valued relative to capital interests under current buy-out or redemption provisions. Oftentimes, practitioners ensure that a profits interest has no right to share in liquidation proceeds on the grant date by valuing the company as of that date, and providing that a profits interest holder will not share in distributions except to the extent a threshold established based on the value is exceeded. Also, booking up capital accounts is generally critical to ensuring that the profits interest does not entitle the recipient to any proceeds of liquidation if the entity was liquidated on the grant date.

To the extent the profits interest issued is unvested at the time of issuance, most practitioners opt to make an 83(b) election to ensure tax-free treatment upon receipt. When a profits interest is issued, it has no value. If the profits interest is vested, there is no question that it is taxed at the time of receipt, at $0. Unvested property is taxed at the time of vesting, on the property’s value at the time of vesting. Hence, if the profits interest has appreciated in value since the time of grant, then there would be ordinary income at the time of vesting. To avoid this treatment, recipients of profits interests can make an 83(b) election, which is an election to treat the profits interest as vested for tax purposes at the time of grant and to be taxed on the value of the profits interest at the time of grant. There is some IRS guidance that states that an 83(b) election is not necessary. However, that issue is beyond the scope of this article and a so-called “protective 83(b) election” is usually still made to assist in easing the minds of profits interest holders who want to ensure that the interest is not taxable when it vests.

Tax Consequences of a Profits Interest

The recipient of a properly structured profits interest is not taxed on receipt because the IRS views the profits interest’s value as $0. Because the profits interest is treated as having no value, there is no deduction that corresponds to the issuance of the profits interest for the entity. The profits interest will be treated as having a $0 basis, and no capital account. Going forward, the recipient should be treated as an equity owner under the terms of the governing partnership or operating agreement for the entity starting on the date on which the profits interest was granted. The recipient should receive a K-1 and pay taxes on income that is passed through from the entity. Capital accounts should be adjusted accordingly, just as is the case for any other member.

The Future of Profits Interests

The history of how profits interests are taxed is riddled with controversy. In addition, politicians continue to discuss the desirability of profits interests (also sometimes called “carried interests”), in the context of private equity and hedge funds. However, the foregoing analysis reflects the IRS’ stated position on profits interests based on several Revenue Procedures that were issued to address the topic pending additional guidance. Until the IRS or Department of Treasury issues additional guidance, the current rules will generally remain applicable to small businesses and startups who are issuing profits interests.

Overall, profits interests are a unique and creative way to give people who are rendering services to the LLC or partnership a stake in the enterprise. They can generally be viewed as similar to options, except that they also provide the holder with a stake in the losses of the entity. With the increasing use of LLCs for startup operations, the use of profits interests as an incentive compensation mechanism has grown in the past years.

ARTICLE BY Katie K. Wilbur of Varnum LLP

Is H-1B Reform On Its Way?

Two bipartisan bills to reform professional-level visa classifications were introduced into Congress this past July. Given the charged nature of the national discourse on immigration issues this election year, it seems unlikely either bill will be enacted before the presidential election. The bipartisan nature of both bills, however, suggests Congress may be able to coalesce, in the near future, around new H-1B legislation. If these or similar reforms are enacted under a new administration, the information technology (IT) sector, specifically, and all employers who rely on outsourced labor or who contract with H-1B dependent employers may face significant changes to their operations.

Overview of the H-1B program

Through the H-1B program, U.S. employers can sponsor up to 85,000 new foreign workers each fiscal year for employment in “specialty occupations.”¹ Generally speaking, a “specialty occupation” is a professional-level position that requires a bachelor’s level education (or higher) in a specific field of study. Common specialty occupations include white-collar professions such as accountants, teachers, doctors, engineers and numerous IT positions including software developers, computer programmers and systems analysts. With the exception of H-1B workers whose employers are sponsoring them for legal permanent residence (green cards), H-1B workers are allowed to remain in the U.S. for up to six years of employment.

The H-1B program has been heavily oversubscribed the last few years. In fact, in each of the last two years, employers filed approximately 230,000 petitions against the 85,000 H-1B visas available. Because extension petitions for employees who have already been granted H-1B status are not counted against the numerical cap, the total number of H-1B workers in the U.S. at any given time is estimated to be around 600,000.²

IT workers constitute the bulk of H-1B employees in the U.S. For fiscal years 2013 and 2014, for example, U.S. Citizenship & Immigration Services (USCIS) reports that close to two-thirds of workers in each fiscal year were employed in computer-related occupations.³ The significance of the H-1B program to the IT sector and entrepreneurship is such that over the years many leading entrepreneurs and IT innovators, including Michael Bloomberg, Mark Zuckerberg and Bill Gates have vocally called for increases in the number of annual H-1Bs available, among other reforms.⁴

The H-1B program is regulated by both the U.S. Citizenship & Immigration Services (USCIS) and the Department of Labor (DOL). The program requires, among other elements, that the employer make a binding promise to pay the sponsored H-1B worker the higher of the actual wage the employer pays to similarly-situated workers or the prevailing wage for the occupation in the area of intended employment.

In addition, an employer who relies significantly on H-1B workers, called an “H-1B dependent” employer,⁵ must attest to having tried to recruit a U.S. worker for the position and must promise that the intended H-1B employment will not displace a U.S. worker within 90 days before and 90 days after the employer files the H-1B petition in support of the H-1B worker.⁶An H-1B dependent employer, however, can exempt itself from the U.S. recruitment and non-displacement limitations for petitions in which the company pays the H-1B worker at least $60,000 or for petitions in which the employer files on behalf of an H-1B worker with at least a master’s degree in the specialty occupation.

The potential displacement of U.S. workers by H-1Bs has been a periodic concern since the beginning of the modern H-1B program. Displacement has recently been brought back into the spotlight by allegations some U.S. employers replaced several hundred U.S. IT workers with foreign nationals.⁷ The U.S. workers are also alleged to have been forced to train their foreign-worker replacements as a precondition to receiving a severance package.⁸ A subsequent investigation by the DOL into allegations of H-1B program violations related to at least one of those U.S. employers, Southern California Edison, appears to have been resolved in favor of the company and its IT consulting vendor.⁹

H.R. 5801: Limiting U.S. worker displacement by H-1B dependent employers

On July 14, 2016, Representative Darrell Issa (R-CA) introduced H.R. 5801, the “Protect and Grow American Jobs Act,” which has been referred to the House Judiciary Committee. The bill proposes to reduce H-1B dependent employers’ ability to avoid U.S. worker recruitment and non-displacement provisions. Under this bill, H-1B dependent employers would be bound by the provisions unless they promised H-1B workers a salary of at least $100,000 (increased from the current $60,000). The bill would also eliminate the Master’s degree exemption. The bill has bipartisan support and is co-sponsored by Rep. Peters (D-CA), Rep. Polis (D-CO), Rep. Vargas (D-CA), Rep. Farenthold (R-TX), Rep. Smith (R-TX), Rep. Hunter (R-CA) and Rep. Davis (D-CA).

H.R. 5657: Limiting U.S. worker displacement by any H-1B employer

On July 7, 2016, Representative Bill Pascrell, Jr. (D-NJ) introduced H.R. 5657, the “H-1B & L-1 Visa Reform Act of 2016,” which has been referred to both the House Judiciary and House Education and the Workforce committees. This bill proposes largescale changes to the H-1B program, including eliminating H-1B dependent employers as a separate classification. This change would subject all H-1B employers to the U.S. worker recruitment and non-displacement provisions that currently apply only to H-1B dependent employers.¹⁰ The bill would also double the non-displacement window from the 90 days before and after filing the petition to 180 days on each side of the filing.

In addition, under this proposal an H-1B worker would be authorized to perform services only at his or her employer’s work location unless the employer first obtained a waiver from the DOL.¹¹ This provision would directly, and adversely, impact the business model of modern consulting companies and their clients; moreover, the new waiver requirement would seemingly prevent most staffing companies from accessing the H-1B program.¹²

The bill is co-sponsored by Rep. Rohrabacher (R-CA).

What would these proposals mean?

For IT consulting companies and their corporate clients, these proposed changes could force significant changes. At a minimum, the cost to hire an H-1B worker would increase. And, if consultant-vendors are limited in placing H-1B workers at a client site, the end-client may need to scramble to fill positions that can no longer be filed by their consultant-vendor.

ARTICLE BY Monica Santa Maria of Godfrey & Kahn S.C.

_{1 Universities and certain nonprofit research facilities are exempt from the 85,000 numerical limitation.

2 See, e.g., Immigration Reforms to Protect Skilled American Workers: Hearing Before the S. Judiciary Comm., 114th Cong. (2015) (testimony of Professor Ron Hira).

3 U.S. Citizenship and Immigration Servs., Characteristics of H-1B Specialty Occupation Workers: Fiscal Year 2014 Annual Report to Congress 12, Table 8A (2015).

4 Matthew DeLuca, Tech Demands More H1-B Visas as Critics Cry Foul (Apr. 10, 2014).

5 For an employer with at least 51 workers, if 15% or more are H-1B workers, the employer is classified as H-1B dependent. 8 U.S.C. §1182(n)(3)(A)(iii). There are separate calculations for smaller employers. Id. §§1182(n)(3)(A)(i) and (ii).

6 8 USC §§1182(n)(1)(E) and (G).

7 See Matthew Thibodeau, Southern California Edison IT Workers ‘Beyond Furious’ Over H1-B Replacements, Computerworld (Feb. 4, 2015); Sara Ashley O’Brien, Disney Sued for Replacing American Workers with Foreigners, CNN Money (Jan. 26, 2016).

8 Id.

9 Press Release, Infosys, U.S. Dep’t of Labor Concludes Investigation, No Violations by Infosys Found.

10 H.R. 5657, sec. 101(d)(1).

11 Id. sec. 101(e).

12 See, id. sec. 113(a) (making the waiver dependent, in part, on a DOL finding that the “placement of the H-1B [worker] is not essentially an arrangement to provide labor for hire for the [third-party] employer with which the H-1B [worker] will be placed.”)}

Seventh Circuit: Title VII Offers No Protection Against Sexual Orientation Discrimination

In the midst of a legal, political and cultural landscape expanding the rights of LGBT individuals, the Seventh Circuit U.S. Court of Appeals has held to prior precedent in reaffirming that Title VII does not prohibit sexual orientation discrimination. Kimberly Hively v. Ivy Tech Community College, __ S.Ct. __, No. 15-720 (July 28, 2016). According to the court, though “the writing is on the wall” that sexual orientation discrimination should not be tolerated, because the writing is not in a Supreme Court opinion or Title VII, the court’s hands are tied.

In two 2000 opinions, Hamner v. St. Vincent Hosp. & Health Care Ctr., Inc.and Spearman v. Ford Motor Co., the Seventh Circuit had previously held that Title VII offers no protection from sexual orientation discrimination. The court revisited the issue now in order to provide a more detailed analysis in light of recent trends and decisions advancing LGBT rights.

The court recognized the merits of many of Ms. Hively’s arguments, and acknowledged that in light of the recognition of other rights of LGBT individuals the current legal landscape does not make sense. In recent years, the U.S. Supreme Court struck down the Defense of Marriage Act as unlawful (U.S. v. Windsor) and legalized gay marriage (Obergefell v. Hodges). In 2015, the EEOC held that sexual orientation discrimination is a form of sex discrimination under Title VII. Baldwin v. Foxx (July 16, 2015). Many judicial decisions at the district court level have repeatedly recognized that sexual orientation discrimination cannot be tolerated. Yet, Congress has repeatedly rejected new legislation that would extend Title VII to cover sexual orientation discrimination, and it has not amended the language of Title VII to include sexual orientation.

This creates “a paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act.” The court observed, “From an employee’s perspective, the right to marriage might not feel like a real right if she can be fired for exercising it.”

Nonetheless, the court stated that Congress’ failure to amend Title VII to include sexual orientation cannot be due to its unawareness of the issue. Thus, Congress must have intended a very narrow reading of the term “sex” when it passed Title VII.

In excluding sexual orientation discrimination from the coverage of Title VII, the Seventh Circuit conveyed its apparent reluctance in doing so:

“Perhaps the writing is on the wall. It seems unlikely that our society can continue to condone a legal structure in which employees can be fired, harassed, demeaned, singled out for undesirable tasks, paid lower wages, demoted, passed over for promotions, and otherwise discriminated against solely based on who they date, love, or marry. The agency tasked with enforcing Title VII does not condone it, … many of the federal courts to consider the matter have stated that they do not condone it …; and this court undoubtedly does not condone it… . But writing on the wall is not enough. Until the writing comes in the form of a Supreme Court opinion or new legislation, we must adhere to the writing of our prior precedent[.]”

The Seventh Circuit went on to offer its further observations:

“Many citizens would be surprised to learn that under federal law any private employer can summon an employee into his office and state, “You are a hard‐working employee and have added much value to my company, but I am firing you because you are gay.” And the employee would have no recourse whatsoever—unless she happens to live in a state or locality with an anti‐discrimination statute that includes sexual orientation.”

Those states are currently California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington and Wisconsin. Other states apply the prohibition to public employment only: Alaska, Arizona, Indiana, Kentucky, Louisiana, Michigan, Montana, North Carolina, Ohio; Pennsylvania, and Virginia. Some local city and county ordinances contain similar anti-discrimination provisions.

The bottom line for both employers and LGBT individuals, in the Seventh Circuit and elsewhere, is that the employment protections afforded to individuals based on sexual orientation remains determined, for now, at the state and local level.

ARTICLE BY Julie Furer Stahr of Schiff Hardin LLP

Civil Penalties Nearly Double for Form I-9 Violations

Significantly Increase for Other Immigration-Related Violations

Due to the implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Sec. 701 of Public Law 114-74) (“Inflation Adjustment Act”), higher fines and civil penalties have now gone into effect for assessments that occur on or after August 1, 2016. These higher penalties can be applied to violations that occurred after November 2, 2015, the day the President signed the Act into law.

The Inflation Adjustment Act will be implemented by multiple federal agencies that have authority to assess civil penalties. The following is a summary, by federal agency, of the penalties covering violations for the unlawful employment of immigrant workers; violations related to Forms I-9; immigration-related discriminatory employment practices; and violations of the H-1B, H-2A and H-2B temporary visa for foreign worker programs. The increases in many categories are substantial. The penalties for Form I-9 paperwork violations are increased by an eye-catching 96 percent.

Department of Homeland Security fines:

Department of Homeland Security Fines i-9 violations

Department of Justice fines:

Department of Justice Fines

Department of Labor fines:

Department of Labor Fines

The consequence of the above is that employers should continue to aggressively monitor their immigration programs for compliance or suffer the harsher sting of these increased fines. Given that the penalties for I-9 errors are practically doubled, it is more important than ever to ensure I-9s are completed timely, correctly and are periodically audited. Moreover, most I-9 violations are considered continuing violations until they are corrected.

ARTICLE BY Gregory A. Wald of Squire Patton Boggs (US) LLP

Quota Reserved for Most Desired Immigrant Applicants Retrogresses for Natives of India and China!

The Department of State published its August 2016 Visa Bulletin and it has a few impactful surprises. This is not good news for companies and foreign nationals. Indian and Chinese foreign nationals, as usual, are the hardest hit. Specifically, the historically open First Preference Employment Based Category (EB-1) retrogressed to January 1, 2010 for Indian and Chinese nationals. We can’t recall the last time the EB-1 category was not current.

This is astonishing when you consider that the EB-1 group represents some of the most talented foreign nationals that are immigrating to the US. Specifically, the EB-1 category includes:

Individuals of Extraordinary Ability – to qualify the individual must be able to demonstrate extraordinary ability in the sciences, arts, education, business, or athletics through sustained national or international acclaim.
Outstanding Researchers – to qualify the individual must demonstrate international recognition for his/her outstanding achievements in a particular academic field. The individual must have at least 3 years’ experience in teaching or research in that academic area and must be in the United States in order to pursue research in the field.
Multinational Managers/Executives – to qualify the individual must have been employed as a manager or executive outside the United States in the 3 years preceding the petition for at least 1 year by a parent, affiliate or subsidiary of a U.S. company where they will serve in the U.S. in a managerial or executive capacity.

There are additional delays for other nationalities and categories as well see: https://travel.state.gov/content/visas/en/law-and-policy/bulletin/2016/visa-bulletin-for-august-2016.html. The most common employment based visa categories, beyond EB-1, are Second (EB-2) and Third (EB-3) preference. EB-2 is applicable for jobs that require an advanced degree or equivalent as a minimum, exceptional ability in the arts, sciences or business, and National Interest Waivers for individuals whose work is in the national interest. The EB-3 classification is for skilled workers, professionals and unskilled workers.

Chinese nationals are being treated the same this August, whether first, second or third preference. All three categories have a January 1, 2010 priority date. For Indian nationals, EB-1 is still the best category, but with the January 1, 2010 priority date – the news is not good! The EB-2 and EB-3 categories have a priority date of November 2004. Can you imagine waiting more than twelve years to complete a process once started?

Notably, the EB-2 “all other” category retrogressed to February 1, 2014 which is worse than the third preference category at March 15, 2016. So, EB-3 all other is better than EB-2! We haven’t see this type of movement in the “all other” category for a significant period of time.

What this Visa Bulletin represents is a “shutting off” of the flow of immigrant visas being issued for what is expected to be the remainder of the fiscal year. Fiscal Year 2017 starts on October 1, 2016 and new visa numbers will be available. In the August Visa Bulletin, the Department of State indicates that the EB-1 category will be opening back up in October. Assuming the State Departments calculations are generally on target, we should see movement in October or later in the fall that will resemble the dates where we left off in July 2016.

The Visa Bulletin and lack of visa numbers for skilled workers continues to be a daunting problem for employers and foreign nationals alike. The system for foreign nationals who want to “follow the rules” has broken down. Further, there is no relief, or comprehensive immigration reform, in sight. Expect more whiplash inducing movement in the future.

ARTICLE BY Valarie H McPherson of Proskauer Rose LLP

Category: Labor & Employment

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