employee Archives - The National Law Forum

Clueless in the Cubicle

The Journal’s recent piece about managing employees with misperceptions about their employment self-worth reminds us once again why honest and timely performance feedback makes good business sense. I have written before about the benefit of candid performance reviews, even at the risk of hurt feelings. I have also defended performance evaluations as an important tool to mitigate potential liability for employment claims. The Journal’s piece states that nearly four in 10 employees who received the lowest grades from their managers last year rated themselves as highly valued by the organization based on almost two million assessments. If true, that represents an astounding disconnect between performance-related perception and reality.

Theory is one thing. Managers who are adept at giving feedback is another. While businesses are rightly focused on running the organization’s business, training managers how to deliver quality feedback is often assigned a low priority. Adding to that deficiency is the often unmet need for managers with the right EQ to deliver feedback. But despite those challenges, which exist even for employees who relish feedback, there are some important guidelines for managing employees with an inflated sense of employment worth. Here are a few suggestions for delivering feedback for performance-deniers, who clearly require a more exacting approach.

First, performance discussions (especially about the areas in which the employee is falling short) must be done regularly and ongoing, and especially promptly after an error or mistake is committed. Performance deniers will use a one-time annual review (even if negative) to point out the obvious: if they are falling so short, the manager would not have waited so long to deliver that message (and which, in their view, adds to the review’s inherent unreliability).

Second, managers should not shy away from a denier’s tendency to fight the feedback (they disagree with it, it is wrong, it is fake). Rather, managers should use the denier’s dispute to double down on feedback: the employee’s inability to accept criticism, consider it, and even hear it, are all key parts of an employee’s commitment to the organization to grow and do better. Growth requires introspection. The refusal to engage in that process is itself a performance deficiency.

Third, managers should not permit performance conversations to become a discussion about victimization, unfair treatment or perceived persecution (all of which may end up becoming a legal claim). Performance deniers are adept at deflecting: one key deflection is to blame others and make the discussion about things entirely outside performance parameters. Managers need to be empowered to insist on returning the feedback conversation back to the key and only focus: what is the employee doing well and how can (and must) the employee improve?

Finally, organizations need to assess the impact performance deniers have on employee morale. While not all employees will share the same perception, most people are aware when others aren’t pulling their weight – especially when they are tasked to pick up the pieces. Those on the downhill slope of these assignments – often the best performers because of the natural inclination to step up – may not stick around. The slippery slope here is clear and cluelessness at work is not a great look for the business or the employee.

New Department of Labor Rule Restores Multifactor Analysis for Classifying Workers as Employees or Independent Contractors

Effective March 11, 2024, a new administrative rule will modify how the Department of Labor (DOL or Department) classifies workers as either employees or independent contractors under the Fair Labor Standards Act (FLSA). The 2024 rule will rescind the 2021 rule currently in place, which focused the Department’s classification analysis on two “core factors,” and restores the multifactor analysis that previously had been in use by courts for decades.

Given the procedural uncertainty surrounding the 2021 rule, its impact on FLSA jurisprudence has been minimal-to-nonexistent. In this sense, the 2024 rule merely codifies an analysis that federal courts never really stopped using, in the first place. But it also sends an important signal to employers operating in the modern economy: even if workers have significant autonomy over their day-to-day work lives, they should be classified as employees if, as a matter of economic reality, they are dependent on their employer’s business for work.

Background on the FLSA and Pre-2021 Classification Analysis

Under the FLSA, employers generally must pay employees at least the federal minimum wage for all hours worked and at least one and one-half times the employee’s regular rate of pay for every hour worked over 40 in a single workweek. The FLSA does not, however, extend these and other workplace protections to workers who are classified as independent contractors. Employees who are misclassified as independent contractors therefore may incur substantial losses in unpaid overtime and other lost wages as a result of their status.

Prior to 2021, federal courts applied flexible, multifactor tests rooted in Supreme Court precedent to determine whether workers should be classified as employees, and thus covered by the FLSA, or independent contractors, and thus excluded from FLSA coverage. The “ultimate inquiry” was whether, as a matter of economic reality, the worker was economically dependent on the business entity for work (employee) or was in business for herself (independent contractor).

Though the specific factors varied somewhat by circuit, the tests generally took into consideration (1) workers’ opportunity for profit or loss; (2) the amount of investment in the business by the worker; (3) the permanency of the working relationship; (4) the business’s control over the worker; (5) whether the work constituted an “integral part” of the business; and (6) the skill and initiative required to do the worker’s job. Courts tended not to assign predetermined weight to any factor or factors and engaged in a “totality-of-the-circumstances” analysis.

Prior to 2021, DOL had issued only informal guidance on classifying workers as employees or independent contractors and other than some industry-specific guidance—for example, for sharecroppers and tenant farmers and certain workers in the forestry and logging industries—had not engaged in formal rulemaking on this topic. Rather, the Department allowed federal courts to develop and hone their own classification analyses on a case-by-case basis.

The 2021 Rule

On January 7, 2021, DOL promulgated a first-of-its-kind rule identifying a total of five factors, but prioritizing only two “core factors,” for federal courts to consider in conducting the classification analysis. DOL articulated the two “core factors” as (1) the nature and degree of the worker’s control over the work and (2) the worker’s opportunity for profit or loss based on initiative, investment, or both. It articulated the three remaining factors as (3) the amount of skill required for the work; (4) the degree of permanence of the working relationship between the individual and the business; and (5) whether the work is part of an “integrated unit of production.” If the two “core factors” weighed in favor of the same classification, it likely was the correct classification, and the Department deemed it “highly unlikely” the three non-core factors could outweigh the combined probative value of the other two.

By elevating the two “core factors” above the other factors traditionally considered by federal courts, the 2021 rule focused almost exclusively on workers’ control over when and on what projects they worked and their ability to earn more money based on how efficiently or for how long they worked. This approach ignored the reality that for many workers, their work is completely dependent on their employer’s business—and vice versa—even though they may have significant autonomy over their day-to-day work lives.

The Department’s articulation of some of the non-core factors also departed from longstanding court precedent and rendered them less, not more, compatible with the modern economy. For example, the 2021 rule considered only whether a worker’s job was part of an “integrated unit of production,” akin to a job on an assembly line, rather than its importance or centrality to the business, overall. This change risked misclassifying employees who performed work that was essential to but “segregable from” an employer’s process of production or provision of services, even though modern industry is much more sprawling than the traditional assembly line. The 2021 rule also combined the distinct “investment in the business” factor with consideration of a worker’s potential for profit and loss, which improperly shifted the focus of that factor from worker inputs to worker outcomes. This change likewise risked misclassifying employees who earned more profits because of greater “investment” in their employers’ businesses, even though the costs they bore might have been non-capital in nature, e.g., an existing personal vehicle, or imposed unilaterally by the employers.

Shortly after the change in administration that took place on January 20, 2021, the Department took steps to delay and ultimately withdraw the 2021 rule based on these and other concerns about its potential to misclassify employees as independent contractors. But legal challenges to the administrative process led a Texas district court to vacate the Department’s delay and withdrawal actions, ostensibly leaving the 2021 rule in effect. Though the Department appealed the district court’s order, the Fifth Circuit stayed the action pending promulgation of the new rule. In the interim, the uncertain legal status of the 2021 rule and impending new rule meant that few courts, if any, incorporated the “core factor” analysis into their jurisprudence.[1]

The 2024 Rule

After unsuccessful efforts to delay and withdraw the 2021 rule, the Department opted to rescind and replace it altogether with the new final rule it announced on January 10, 2024. The 2024 rule, effective March 11, 2024, identifies six equally-weighted factors for courts to consider in classifying workers as independent contractors or employees: (1) opportunity for profit or loss depending on managerial skill; (2) investments by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) nature and degree of control; (5) extent to which the work performed is an integral part of the potential employer’s business; and (6) skill and initiative. Each single factor should be considered “in view of the economic reality of the whole activity” and additional factors “may be relevant” to the analysis.

Notably, the 2024 rule reverts to the “integral to the business” formulation of that factor; treats “investment in the business” as a distinct factor; differentiates between capital and non-capital investments by workers; and takes into consideration whether a particular cost was incurred based on entrepreneurial initiative or was imposed unilaterally by the employer. In these ways, the 2024 rule is much more compatible with the growing and increasingly diffuse economy than was the 2021 rule.

Ongoing and prospective legal challenges to the 2024 rule, plus the looming possibility that the Supreme Court will overturn or modify Chevron v. Natural Resources Defense Council—the 1984 decision applying deference to a federal agency’s interpretation of the statutes it administers—mean the 2024 rule may have a limited impact on FLSA jurisprudence. But it nevertheless conveys the Department’s position that employers should err on the side of classifying workers as employees, not independent contractors, and therefore subject to FLSA protections.

Given this changing landscape, employers may struggle to classify workers who were considered independent contractors under the 2021 rule but will be considered employees under the 2024 rule. If your employer has misclassified you as an independent contractor instead of an employee, you may be entitled to benefits and protections under the FLSA or state equivalents, like time-and-a-half pay for overtime work, that you are not currently receiving. If you believe you have been misclassified, consider contacting an attorney to discuss your legal options.

[1] The Fifth Circuit remanded the Texas case to the district court in light of the 2024 rule on February 19, 2024. Coal. for Workforce Innovation v. Walsh, No. 22-40316 (5th Cir. Feb. 19, 2024).

2024 New Years’ Resolutions for Retirement Plans

Over the past few years, numerous pieces of legislation affecting retirement plans have been signed into law, including the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Bipartisan American Miners Act, and the SECURE 2.0 Act (the “Acts”). While some of the changes, including both mandatory and optional provisions under the Acts previously became effective, other provisions under the SECURE Act and SECURE 2.0 Act had a delayed effective date. As we enter into 2024, many of the remaining mandatory and optional provisions established under these Acts are now going into effect. As a refresher, we have compiled a brief list of some of the important changes that will affect retirement
plans in 2024:

Long-Term Part-Time (“LTPT”) Employee Rule –
We resolve to permit more part-time employees to defer to our plans.

Beginning January 1, 2024, 401(k) plans are required to allow eligible employees who have at least 500 hours of service over 3 consecutive, 12-month periods beginning on or after January 1, 2021 to participate for purposes of making elective deferrals only, even where the 401(k) plan provides for a longer service requirement for deferral eligibility. See our prior SECURE Act and SECURE 2.0 Act newsletters, linked below, for more details on the LTPT employee rule; however, note that the IRS recently published proposed regulations on the LTPT employee rule, which are not addressed in these newsletters.

Effective January 1, 2025, the SECURE 2.0 Act changed the rule to require only 2 consecutive 12-month periods of service with at least 500 hours of service, and to apply the LTPT employee rule to 403(b) plans.

RMD Age and Roth Accounts –
We resolve to permit our elders to stay in our plans longer (again).

The age at which required minimum distributions (“RMDs”) must commence was increased again by SECURE 2.0, this time to age 73 for individuals who turn age 72 on or after January 1, 2023. Additionally, pre-death RMDs are no longer required for Roth accounts in retirement plans, generally effective for taxable years after December 31, 2023.

New Emergency Withdrawals –
We resolve to permit more access to retirement plan savings.

Beginning January 1, 2024, plan sponsors may add a number of new optional features addressing emergency situations, including:

Emergency Expense Distributions – Plans may permit participants to receive one emergency distribution of up to $1,000 per calendar year to cover unforeseeable or immediate financial needs relating to personal or family emergency expenses.
Distributions for Victims of Domestic Violence – Plans may permit a participant who is a domestic abuse victim to take a distribution up to the lesser of $10,000 (indexed) or 50% of the participants vested account balance during the 1-year period beginning on the date on which the individual is a victim of domestic abuse by a spouse or domestic partner.
Emergency Savings Accounts – Plan sponsors may offer an emergency savings account linked to their defined contribution retirement plan. Participants who are not highly compensated employees may contribute (on a post-tax, Roth basis) a maximum of $2,500 (indexed), or such lower amount that may be set by the plan sponsor. The account must allow for withdrawal by the participant at least once per calendar month, and the first 4 distributions per year from the account cannot be subject to fees or charges.

Mandatory Distribution Threshold –
We resolve to increase our automatic IRA rollover threshold.

The limit on involuntary distributions (i.e., the automatic IRA rollover limit) is increased from $5,000 to $7,000 for distributions occurring on or after January 1, 2024. However, this increase is optional – therefore, the limit under a plan will stay at $5,000 unless the plan administrator takes action to increase it to $7,000.

Roth Employer Contributions –
We resolve to treat employer contributions more like Roth.

Plans may permit employees to designate employer matching contributions or nonelective contributions as Roth contributions if such contributions are 100% vested when made.

Matching Contributions on Student Loan Payments –
We resolve to treat student loan payments like employee deferrals.

Plan sponsors may treat certain “qualified student loan payments” as elective deferrals for purposes of matching contributions.

2024 Resolutions Saved for Another Year

Roth Catch-Up Contribution Requirement is Pushed Back.

SECURE 2.0 required that all catch-up contributions made to a retirement plan by employees paid more than $145,000 (indexed) in FICA wages in the prior year be made on a Roth basis. The original effective date of this requirement was generally January 1, 2024 – however, in September, the IRS provided for a 2-year administrative transition period, which essentially moved the effective date for this requirement from January 1, 2024 to January 1, 2026. This extension provides plan sponsors with additional time to prepare for this new requirement.

Amendment Deadline to Reflect the Acts

IRS Notice 2024-02, released in the last week of December 2023, further extended the amendment deadline for changes made by the Acts. In general, the deadline to adopt an amendment to a qualified plan for required and discretionary changes made by the Acts is now December 31, 2026.

For more in-depth analysis of the new provisions briefly described above, please refer to our prior newsletters linked below:

The Secure Act Becomes Law!

SECURE 2.0 Passes

IRS Relief for Roth Roth Catch-up Requirement

Your Employee As Your Arbitrator? Maybe!

The Hon’ble Supreme Court of India (“Court”) has, by its order dated August 24, 2009, in the matter of Indian Oil Corporation Ltd. & Ors. (“Appellants”) Vs. M/s. Raja Transport (P) Ltd. (“Respondent”)¹, once again upheld that the Court must give full effect and meaning to the appointment procedure set by the parties in the arbitration agreement before appointing arbitrator of their choice.

BRIEF FACTS OF THE CASE:

The Appellant and Respondent entered into an agreement dated February 28, 2005 (“Agreement”), where under, the Respondent was appointed as the dealer of the Appellant for the retail sale of petroleum products. Clause 69² of the Agreement provided for settlement of disputes by arbitration where the Director, Marketing of the Appellant, or a person appointed by him, was to act as the sole arbitrator.

On August 06, 2005, the Appellant terminated the dealership. The Respondent filed suit in the Civil Court, Dehradun, seeking (1) a declaration that the order of termination of dealership was illegal and void and (2) for a permanent injunction restraining the Appellant from stopping the supply of petroleum products to the retail outlet of the Appellant. In this same suit, the Appellant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (“the Act”), praying that the suit be rejected and the matter be referred to arbitration in terms of Section 69 of the Agreement. The Ld. Judge allowed the Appellant’s application and directed the parties to refer the matter to arbitration within two months and also directed the Appellant not to stop supplies to the Respondent for a period of two months.

Both parties challenged the said order before the District Court, Dehradun. The Respondent also filed an application under Section 9 of the Act seeking an interim injunction against the Appellant. Both appeals and the Section 9 application were disposed off by a common order dated January 20, 2006, whereby, both appeals were dismissed and the Section 9 application was allowed, retraining the Appellant from interrupting the supply of petroleum products to the Respondent for two months as well as directing the parties to refer the matter to arbitration as per the agreement, within the said period of two months.

While the appeals were pending, the Respondent issued letter dated January 04, 2006, through their counsel, wherein, the Respondent, referring to the Appellant’s insistence that only its Director, Marketing could be appointed as the Arbitrator, inter alia alleged that it (the Respondent) did not expect fair treatment or justice if the Director, Marketing or any other employee of the Appellant was appointed as the Arbitrator and called upon the Respondent to have a joint meeting so as to enable the parties to mutually agree on an independent arbitrator. This request was not accepted by the Appellant.

Thereafter, the Respondent filed an application before the Chief Justice of the Uttaranchal High Court under Section 11(6) of the Act for appointment of an independent arbitrator to decide the dispute. This application⁷ was allowed and a retired High Court Judge was appointed as the Sole Arbitrator to decide the dispute. The Ld. Chief Justice inter alia assigned the following two reasons to appoint a retired Judge as an Arbitrator instead of the persons as named in the arbitration agreement.

The Director (Marketing) of the Appellant, being its employee, should be presumed not to act independently or impartially.
1. The Respondent had taken steps in accordance with the agreed appointment procedure contained in the arbitration agreement and directions of the civil court by issuing notice dated January 04, 2006, calling upon the Appellant to appoint an arbitrator. After receipt of the said notice, the Appellant had to refer the matter to its Director, Marketing, which it did not do, nor did it take any steps for the appointment of an Arbitrator. The Appellant had, thus, failed to act as required under the agreed procedure.
Aggrieved by the said order, the Appellant preferred an appeal before the Court.

JUDGMENT:

The facts and circumstances of this case raised three issues for the Court to consider:
1. Whether the Ld. Chief Justice of the Uttaranchal High Court was justified in assuming that when an employee of one of the parties to the dispute is appointed as an arbitrator, he will not act independently or impartially.
On this issue, the Court inter alia noted as under:
- Arbitration is a binding and voluntary dispute resolution process by a private forum so chosen by the parties.
- Where a party, with open eyes and full knowledge and comprehension of the said provision enters into a contract with a government/statutory corporation/public sector enterprise, where such arbitration agreements providing for settlement of disputes where the arbitrator will be one of its senior officers, were common, such party cannot subsequently turn around and contend otherwise unless performance of that part of the arbitration agreement is impossible, or is void being contrary to the provisions of the Act.
- It was settled law that arbitration agreements in government contracts providing that an employee of the department (usually a high official unconnected with the work or the contract) will be the arbitrator are neither void, nor unenforceable.
- Whilst the provisions relating to independence, impartiality and freedom from bias are implicit under the Arbitration Act, 1940, the same are made explicit in the Act.
- This position may differ where the person named as the arbitrator is an employee of a company/body/individual other than the state and its instrumentalities e.g. a Director of a private company who is party to the arbitration agreement. In such cases, there may be a valid and reasonable apprehension of bias in view of his position and interest. In such cases, the court has the discretion not to appoint such a person.
1. In what circumstances the Chief Justice or his designate can ignore the appointment procedure or the named arbitrator in the arbitration agreement to appoint an arbitrator of his choice.
On this issue, the Court inter alia noted as under:
- The court must first ensure that the terms of the agreement are adhered to or given effect to, as far as possible and those remedies, as provided for, are exhausted.
- It is not mandatory to appoint the named arbitrator but at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. Referring the disputes to the named arbitrator shall be the rule. Ignoring the named arbitrator and nominating an independent arbitrator shall be the exception to the rule, which is to be resorted to for valid reasons.
Interestingly, the Court also proceeded to expound on the scope of Section 11 of the Act, which contains the scheme of appointment of arbitrators.
1. Whether the Respondent had taken the necessary steps for the appointment of an arbitrator in terms of the agreement, and the Appellant had failed to act in terms of the agreed procedure, by not referring the dispute to its Director, Marketing for arbitration.
On this issue, the Court inter alia noted as under:
- In view of the order dated January 20, 2006, the Respondent ought to have referred the dispute to the Director (Marketing) of the Appellant within two months from January 2006. The Respondent had not done so and in light thereof, it was the Respondent that had failed to act in terms of the agreed procedure and not the Appellant.
- As the Arbitrator was already identified, there was no need for the Respondent to ask the Appellant to act in accordance with the agreed procedure.
The Court proceeded to hold that the Chief Justice had erred in having proceeded on the basis that the Respondent had performed its duty under the agreement and that there was justification for appointment of an independent arbitrator.

The Court then proceeded to allow the appeal, set aside the impugned order and appointed the Director (Marketing) of the Appellant as the sole arbitrator to decide the disputes between the parties.

ANALYSIS:

By this decision, the Court has once again upheld that when a person enter into a contract with a government/statutory corporation/public sector enterprise having an arbitration agreement providing for settlement of disputes where the arbitrator will be one of its senior officers, such person cannot subsequently turn around and contend otherwise unless performance of that part of the arbitration agreement is impossible, or is void being contrary to the provisions of the Act. However, this position may differ where the person named as the arbitrator is an employee of a company/body/individual other than the state and its instrumentalities e.g. a Director of a private company who is party to the arbitration agreement.

Referring to its decision taken earlier in the matter of Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Ltd. (please refer to our earlier hotline dated August 26, 2008) Court reiterated that it is important to first ensure that the terms of the arbitration agreement are adhered to or given effect to, as far as possible and those remedies, as provided for, are exhausted, before they intervene in any manner.

However, If circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else.

FOOTNOTES

¹ Civil Appeal No. 5760 of 2009 arising out of SLP (C) No. 26906 of 2008.

² “69. Any dispute or a difference of any nature whatsoever or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this Agreement shall be referred to the sole arbitration of the Director, Marketing of the Corporation or of some officer of the Corporation who may be nominated by the Director Marketing. The dealer will not be entitled to raise any objection to any such arbitrator on the ground that the arbitrator is an officer of the contract related or that in the course of his duties or differences. ………………..It shall also be a term of this contract that no other person other than the Director, Marketing or a person nominated by such Director, marketing of the Corporation as aforesaid shall act as arbitrator hereunder…………………….”
Nishith Desai Associates 2022. All rights reserved.

Article By Sahil Kanuga and Vyapak Desai with Nishith Desai Associates.

For more articles on international law updates, visit the NLR Global section.

Six Things to Know About New York’s New Employer Notification Requirements for Electronic Monitoring of Employees

Under an amendment to the New York Civil Rights Law that will take effect on May 7, 2022, private-sector employers that monitor their employees’ use of telephones, emails, and the internet must provide notice of such monitoring. The following provides highlights of the new law.

Question 1. Which employers and electronic monitoring activities are covered?

Answer 1. The law applies to any private individual or entity with a place of business in New York, and it broadly covers “telephone conversations or transmissions, electronic mail or transmissions, or internet access or usage by an employee by any electronic device or system, including but not limited to the use of a computer, telephone, wire, radio, or electromagnetic, photoelectronic or photo-optical systems [that] may be subject to monitoring.”

Q2. Are any electronic monitoring activities exempted from coverage?

A2. The law does not cover processes “designed to manage the type or volume of incoming or outgoing electronic mail or telephone, voice mail or internet usage,” and it also does not apply to processes “that are not targeted to monitor or intercept the electronic mail or telephone voice mail or internet usage of a particular individual.” The law also exempts processes that are “performed solely for the purpose of computer system maintenance and/or protection.”

Q3. What are some of the law’s compliance obligations?

A3. Private-sector employers that “monitor[] or otherwise intercept[] [employee] telephone conversations or transmissions, electronic mail or transmissions, or internet access or usage” must post a notice of electronic monitoring in a “conspicuous place which is readily available for viewing” by affected employees. Employers also must furnish new employees with written notice when they are hired. The law requires that newly hired employees acknowledge receipt of the notice, “either in writing or electronically.”

Q4. What information must be included in the notices?

A4. Under the law, employers are required to notify employees that “any and all telephone conversations or transmissions, electronic mail or transmissions, or internet access or usage by an employee by any electronic device or system” may be subject to monitoring “at any and all times and by any lawful means.” The law requires that the written notice advise employees that the electronic devices or systems that may be subject to monitoring include, but are not limited to, “computer, telephone, wire, radio or electromagnetic, photoelectronic or photo-optical systems.”

Q5. What are the penalties for violations of the law?

A5. The law provides for the imposition of civil penalties for violations of its requirements. Employers found to be in violation of the law are subject to civil penalties of $500 for a first offense, $1,000 for a second offense, and $3,000 for a third offense and for each subsequent offense. The Office of the New York State Attorney General will enforce the law.

Q6. Are there similar requirements in other jurisdictions?

A6. Connecticut and Delaware also require employers to provide notification of electronic monitoring. As the requirements of these laws vary slightly from New York’s law, employers doing business in either or both of these states and in New York may wish to consider whether to adopt a single approach, or adopt approaches tailored to each jurisdiction’s requirements.

Key Takeaways

New York employers that have not already taken action to comply with this new law may wish to consider whether to post physical notices in the workplace or utilize electronic postings that are visible upon logging in to the employer’s computer, or both.

Employers may also wish to determine how to incorporate the required notice to new employees in their new-hire and onboarding systems. Employers that address electronic monitoring in existing policies may also wish to review the existing policies to ensure that the information in those policies is consistent with the nature of the notification required by the new law, and update existing policies if warranted.

Employers may also wish to consider whether to obtain written or electronic acknowledgments of electronic monitoring from current employees. In addition, employers may wish to evaluate the potential for challenges to the use of information obtained through electronic monitoring absent compliance with the notice requirements.

Article By Simone R.D. Francis with Ogletree, Deakins, Nash, Smoak & Stewart P.C.

For more articles about labor laws, visit the NLR Labor & Employment section.

New Jersey Employers Now Required to Provide Written Notice Before Using Tracking Devices in Employee Vehicles

On January 18, 2022, New Jersey Governor Phil Murphy signed into law Assembly Bill No. 3950. Under the law, private employers in New Jersey must provide employees with written notice before using tracking devices on vehicles operated by employees. The law takes effect on April 18, 2022.

The law defines “tracking device” as “an electronic or mechanical device which is designed or intended to be used for the sole purpose of tracking the movement of a vehicle, person, or device.” Devices “used for the purpose of documenting employee expense reimbursement” are excluded from the definition of “tracking device.” Notably, the law applies regardless of whether the employee uses a company-owned vehicle or the employee’s personal vehicle.

The New Jersey law expressly states that it does not “supersede regulations governing interstate commerce, including but not limited to, the usage of electronic communications devices as mandated by the Federal Motor Carrier Safety Administration.”

An employer that knowingly uses a tracking device on an employee-operated vehicle without providing written notice to the employee will be subject to a civil penalty in an amount not to exceed $1,000 for the first violation and not to exceed $2,500 for each subsequent violation.

This article was written by Robin Koshy and Steven Luckner of Ogletree Deakins law firm.

Employees Miffed by Your Monitoring of Company Devices? Give Notice Now to Hopefully Avoid Annoyance Later

We’ve talked about social media policies several times over the years, but it’s been a while since we’ve discussed monitoring your employees’ work phones, emails, and internet usage. As you most likely know, you can and probably should monitor employees’ work phones, emails, and internet usage. You never know when someone outside the business will require you to produce emails (hello, subpoenas or litigation). But, how do you protect your business upfront from employees who are miffed by your monitoring? One of the best ways is to provide notice to your employees that you are watching.

In fact, effective May 7, 2022, the state of New York will require all employers to provide notice to employees that their work phones, email, and internet use is monitored. The new law requires the following for new hires:

Written notice (hard copy or electronic) to all who are subject to electronic monitoring
Written acknowledgment (hard copy or electronic) of the notice

As for current employees, no written acknowledgement is required but employers must post notice about electronic monitoring. Failure to meet these requirements could result in civil penalties up to $500 for the first offense, $1,000 for the second, and $3,000 for any subsequent offense.

Even if you are not operating in New York or another state that requires notice, we suggest you take the time now to review your onboarding materials and policies and, if you don’t already have one, implement a policy related to monitoring work phones, emails, and internet usage. Providing your employees with your expectations about their electronic usage and notice that you are monitoring their use of company devices could save you from headaches in the future. Here are a few tips:

Review and revise any existing policies related to work phones, emails, and internet usage to include your expectations and let them know you are monitoring and will discipline employees for misuse
Identify what devices may be monitored (tip: it’s best to limit monitoring to company devices but we understand gray areas may arise and advise you to speak with counsel about those issues)
Include the policy and acknowledgement of receipt in the onboarding materials (which will keep you compliant in New York)
If you have annual training for employees, consider including a brief section that covers and reminds employees about the policy
Also, if you discuss prohibitions in your policy, remember to make clear that there is no prohibition on employees’ rights to engage in discussion of terms and conditions of employment (as that could be protected, concerted activity under the National Labor Relations Act)

This article was written by Cortlin Bond and Anne R. Yeungert of Bradley Arant Boult Cummings law firm. For more articles about employee monitoring, please see here.

Stopping Harassment Before it Starts Includes Dealing with Bullying

Toxic workplaces have been making plenty of headlines lately. Recent stories about toxic workplaces – and some of the fallout – have spanned all sorts of industries, from the government to video gaming to professional sports.

What makes a workplace toxic? There’s probably an academic definition (or two), but what’s intended for the purposes of this article is behavior that is intimidating, demeaning or belittling, and is either severe, ongoing or both. It typically involves someone taking advantage of a power difference, real or perceived. The power difference may come from the official position or title, it may come from a long tenure with the organization, it may come from namedropping or sense of connections to power within the organization, and it may come from being a rainmaker, superstar, or someone identified as high potential. The person or group on the receiving end lacks such power and often receives a message, not always in so many words, that any complaint will not be believed or taken seriously. Critically, there are usually instances of demonstrating poor behavior in front of others, without intervention or acknowledgment, signaling the behavior is accepted.

A toxic workplace can be especially difficult to deal with because rude (or worse) behavior, unless tied to a protected characteristic, is not necessarily harassment or discrimination under the law. Even the Supreme Court says companies are not required to be manners police, and most certainly do not want to be tasked with managing the manners of our coworkers. After all, we are all capable of an off day when we are not as kind or considerate as we aspire to be. We hesitate to call out the poor behavior in someone else, either to avoid embarrassment or confrontation, because it’s not a good time and then it’s too late, or because it could be us the next time. Unfortunately, this tolerance likely contributes to a bigger problem, allowing the poor behavior to grow into illegal harassment.

The problem is not new. In 2016, the EEOC reported that training to stop or prevent harassment was largely missing the mark. Among other things, the EEOC suggested training focus more on preventing poor behavior(s) that tends to escalate into harassment, namely bullying.

With that suggestion in mind, what should be done to improve processes? What can you do?

Make sure your training programs address behaviors that are common precursors to harassment or discrimination (either as part of EEOC training or something separate).
Consider whether your complaint process would allow or even encourage complaints that do not fit the typical paradigm of unlawful discrimination or harassment. If not, consider broadening your process or developing something different that can help address concerns before they become formal complaints. (And be prepared to hear and listen more.)
Consider how to ensure appropriate confidentiality but also have a way to recognize a pattern of poor behavior attributed to an individual or group.
Don’t communicate tolerance as a bystander. If you recognize someone is uncomfortable, intervene. Intervention does not have to be an admonition or correction, it can simply be a diversion.
Foster dialogue about how to improve, starting with yourself and those comfortable with you. Are you quick to apologize if you were short with someone? If you made a remark or told a joke that someone that was too stereotypical or otherwise offensive, would someone tell you they had been uncomfortable? To be clear, you probably are not the problem. But more dialogue means more opportunity for everyone to improve and recognize what or who might be a real problem.

These are just a few suggestions and none of them are very easy to accomplish. But, they do not cost much and may save a lot of money. No one wants to deal with the publicity or litigation that often comes with making the headlines for having a toxic workplace. But, the more common costs are low productivity and high turnover. It’s worth another look.

Article By Dabney D. Ware with Foley & Lardner LLP.

For more articles about employee rights in the workplace, visit the NLR Labor & Employment section.

Mitigating Payment Fraud Risks

For businesses that thrive on person-to-person transactions, cash is quickly being replaced by cards, as well as tap-to-pay systems, mobile wallets and QR-based payment systems. These technologies will continue to dominate the market in the near future, but the long-term future of the payment card industry will likely be shaped by the impact of blockchain and artificial intelligence. These developments will eventually also impact risk management, marketing and financial planning, as they present opportunities for serious risks, including fraud. Hence, it is imperative for risk management professionals to plan for these short- and long-term changes in the industry.

Strong risk monitoring requires proactively assessing threats and planning mitigation measures to minimize risk impact on the company or organization. To help mitigate payment fraud risks, businesses can take the following steps:

Train your Employees Regularly

The more regularly you train your employees, the more likely are they to spot suspicious behavior, no matter what payment technology the business uses. Repeated and regular trainings are essential because employees tend to forget what they have learned with time. These training workshops should teach the workers to never accept damaged cards from customers, confirm customer identities, and never enter a card number manually.

Use Contactless and EMV-Enabled Terminals

As payment technology changes, businesses must evaluate what options are safest and least prone to fraud. Currently, businesses should use EMV (short for Europay, Mastercard and Visa), which involves chips embedded into payment cards—a significant step in making transactions safer. The introduction and adoption of EMV-enabled secure terminals, particularly when using PIN and EMV security together, has helped merchants and customers prevent fraudulent transactions.

Contactless smartcards such as chip and magnetic stripe cards use contactless payment, which can present another secure way to process transactions. Most EMV terminals are also enabled with contactless payment. At such terminals, a fast and secure transaction is possible using Near Field Communication (NFC) or Radio-Frequency Identification (RFID) via smartcard or smartphone. If a merchant chooses to use contactless payment without PIN, they can put a limit to the amount spent on each contactless transaction to further minimize risk.

Beware Uncommon Transactions

Transactions that involve unusually large purchases could be a sign of potential fraud. Businesses should examine such transactions closely and confirm the identity of the customer. Similarly, if several purchases are made with a card in a short timeframe, it could indicate that the card was stolen and being used by someone other than the owner.

Maintain Online Security

As merchants and consumers shift to contactless and EMV-enabled point of sale terminals, risk has shifted towards online transactions. To mitigate this risk, it is important for online businesses to use the Address Verification Service (AVS), which verifies that the billing information matches the one registered with the card issuer. Vendors should also ask for Card Verification Value 2 (CVV2) to verify that the user has the card in hand when placing the order. Another important check is to put a limit on an IP address for the number of cards it can use for online transactions.

Prevent Employee Fraud

Employee fraud is always a major concern for risk management professionals. Businesses should remember to keep an eye on credit card activity, particularly returns, as employee theft often shows up in fake discounts or returns. Companies should create alerts that set limits on returns at stores and notify management any time those limits are exceeded.

ARTICLE BY Adam Smith at Risk and Insurance Management Society, Inc. (RIMS)

For more on financial fraud, see the National Law Review Financial Institutions & Banking law section.

“Presents” of Mind for the Holidays: Six Q&As on Sensible Workplace Gift Giving

‘Tis the season of generosity, random acts of kindness, and selfless gifts. But not all gifts are well received—or positively perceived. In the employment law context, where compliance and best practice remain the watchwords, presents exchanged by colleagues, however well-intentioned, must still pass muster under law and corporate policy. Below are answers to several questions addressing the appropriateness of workplace gifts given during this time of year.

Q: Are there any employment law concerns about gifts given around the holidays—such as gifts with potentially romantic overtones, such as flowers, perfume, or perhaps an invitation to a one-on-one carriage ride—that may give rise to subsequent claims of sexual harassment? Or are such presents innocuous in the holiday season?

A: The nature of the holiday doesn’t change the nature of the gift exchanged between workers (regardless of managerial or non-managerial level). If an item is one that could lead to questions regarding the sender’s motivation (e.g., a veiled romantic overture), it should be avoided. Failing to do so could create misimpressions as to a sender’s true motive or could lead to the perception of favoritism or inappropriate sexual advances.

Q: Managers sometimes are told not to accept gifts from subordinates. Why might accepting presents from subordinates be imprudent? And how might managers tactfully turn down presents from subordinates?

A: Allowing gifts from subordinates may create the false impression that gift-givers are treated differently than non-gift-givers. It also may allow tacit competition concerning who can give the best, most expensive, or most thoughtful gift, and lead to morale problems or discomfort among employees. A considerate way to turn down a gift from a subordinate is to make it known, graciously but unequivocally, prior to the holidays, that gifts will not be accepted. If such a statement seems Scrooge-like, suggesting that an anonymous donation to a charity would be acceptable (rather than a tangible gift to the supervisor) could be an appropriate alternative.

Q: Are there are any issues with employees giving each other religious presents at this time of year? (It is, after all, a religious time of year for many.) In the workplace, might that be problematic? What limits on presents between coworkers might be warranted?

A: Religious gifts should generally be avoided, both at holidays and at other work times. Such gifts could create the impression that one particular religion is more acceptable than others to the gift-giver, and could lead to discomfort in the workplace on that issue.

Other limits on gift giving in the workplace (besides the “romantic” gifts and the religious gifts mentioned previously) could be related to gag gifts concerning protected characteristics—for instance, “over-the-hill” or other age-related gifts or cards, or items that derogate a physical or mental disability. Such gifts could lead inadvertently to claims of discrimination or inappropriate workplace actions.

Q: What about bosses giving presents or holiday cards to employees? Are there any risks with this?

A: This is simply the inverse of the question regarding managers accepting or refusing gifts, and it raises similar issues. Unless a boss is giving a neutral gift (e.g., a one-pound bag of coffee, local history book, or non-religious seasonal card) to every employee, selective gift giving may occasion claims of preferential treatment, discrimination, and/or workplace harassment.

Q: Are limits on gift giving likely to be perceived as not in the holiday spirit? How can an employer enforce these limits without seeming unfestive?

A: While limits on gift giving could be perceived as “not in the holiday spirit,” the risk avoidance element is more critical to employers. There’s often a fine line between limiting the fun associated with the holidays and creating an atmosphere that could encourage inappropriate behavior. The solution is clear, thoughtful communication. It’s OK to tell employees that there’s a limit on gift giving, and that part of the reason is so that no one feels left out or unable to keep up with the level of gifts exchanged. Setting a reasonable limit—either in value or in substance—could allow employees to understand that the employer is doing this thoughtfully, with the best interests of the employees in mind.

Q: What might be some elements of a company gift policy, both during the holidays and at other times of year?

A: A company-wide gift policy, assuming that the employer is not already limited by regulations or laws, would depend upon the nature of the company or work group, the size of the business, and the holiday being celebrated (i.e., is it a religious holiday or, say, an employee’s birthday?). Policies may also address gifts from outside sources, including contractors, customers, lobbyists, and others. Clear rules supported by language explaining the general rationale for the policy can help employees fully understand the restrictions being imposed.

ARTICLE BY Maria Greco Danaher of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

The author of this article was previously quoted on this topic on SHRM Online.

For more on company policies around the holidays, see the National Law Review Labor & Employment law page.

Tag: employee

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