Category: Labor & Employment

Women in Whistleblowing: The Intersection Between Women’s Rights and Federal Employee Whistleblower Protections

Introduction

Pew Research Center data found that 42% of women in the United States have suffered discrimination in the workplace on the basis of their gender. Although there are statutory frameworks in place prohibiting such discrimination, the threat of retaliation can make it exceedingly difficult for employees who are already experiencing discrimination and harassment to come forward as whistleblowers under these provisions. On top of the personal and professional risks inherent in whistleblowing, federal employee whistleblowers have been saddled with added burdens by the statutory framework: in addition to proving her substantive claims, a federal whistleblower of sex discrimination is required to demonstrate that she has exhausted certain administrative remedies before she can be heard by a jury of her peers.  Because workplace discrimination disproportionally affects women, ensuring expansive and effective whistleblower protections and remedies, particularly for women in federal employment, is undoubtedly a women’s rights issue. To celebrate Women’s History Month, this article highlights just a few of the remarkable women who have come forward as whistleblowers within this framework to make enormous strides in preserving, enforcing, and expanding crucial protections for future generations of women in the federal workplace.

Statutory Framework

Title VII of the Civil Rights Act of 1964 (“CRA”) prohibits discrimination by private employers based on race, color, religion, sex, or national origin, and further prohibits retaliation by forbidding discrimination against an employee who has “made a charge, testified, assisted, or participated in” a Title VII proceeding or investigation. In 1972, the Equal Opportunity Act (“EOA”) expanded Title VII’s coverage to include certain categories of federal employees, providing that all personnel actions taken in regard to these employees “shall be made free from any discrimination based on race, color, religion, sex, or national origin.” Many courts have interpreted the EOA to extend both the anti-discrimination and anti-retaliation provisions of the CRA to federal employees. However, in a report on whistleblowing conducted by Senator Patrick Leahy in 1978, it was noted that although some interpretations of the existing statutory framework had been generous to whistleblowers, many courts were still “reluctant to play a role in the whistleblower problem”

Thus, the Civil Service Reform Act (“CSRA”) was passed in an attempt to cement protections for federal whistleblowers, creating an office within the Merit Protections Board (“MSPB”) to bring retaliation claims on behalf of whistleblowers. However, by 1989 not a single corrective action had been brought on behalf of whistleblowers to the MSPB, which was seen as largely ineffectual. In 1989, the Whistleblower Protection Act was passed, which for the first time created an individual right of action for federal employee whistleblowers. As the law currently stands, a federal employee whistleblower may bring a discrimination claim that would have been appealable to the MSPB as a civil action in federal court after the relevant administrative agency has failed to take action for a certain amount of time.

While this statutory framework provides critical tools for female whistleblowers to come forward and expose sex discrimination in the workplace, the accessibility of these tools remains particularly limited for federal employees who are required to go through the MSPB’s arduous administrative procedures before being heard in federal court, all the while often suffering continued discrimination and harassment at work. Thus, the real thrust of the work to protect female whistleblowers has been accomplished not by the provisions of the law but by those individual women brave enough to come forward and fight extensive legal battles to enforce, cement, and expand those provisions.

The Right to a Jury Trial for Federal Whistleblowers

Among the shortcomings of the statutory framework seeking to protect whistleblowers of sex discrimination in the federal workplace is an ambiguity in the scope of the individual right of action. The text of the statute explicitly gives the district court jurisdiction over discrimination claims arising under, inter alia, the Civil Rights Act. Therefore, it remains unclear whether a “mixed case”– which includes both discrimination claims and related non-discrimination retaliation claims – must remain within agency jurisdiction, or whether the entire mixed case, including the whistleblower retaliation claims, can be heard by a federal jury. This crucial gap in the legislation has been directly remedied by individual female whistleblowers.

In 1999, Dr. Duane Bonds was serving as Deputy Chief of the Sickle Cell Disease Branch of the Division of Blood Diseases and Resources within the NIH, where she was a highly prominent medical researcher. Throughout her employment, Dr. Bonds experienced repeated sexual harassment at the hands of her male supervisor. In retaliation for reporting the harassment to the EEOC, Dr. Bonds was removed from her position and demoted. In her new position, Dr. Bonds discovered that human DNA had been improperly used in NIH projects. She escalated these concerns over the objections of her supervisor, who retaliated by submitting negative performance reviews which caused her removal from the project. Dr. Bonds again filed a complaint with the EEOC in 2005, alleging that the removal constituted unlawful discrimination and retaliation. Throughout the complaint and investigation process, Dr. Bonds experienced continued sex discrimination and harassment in her workplace and was ultimately terminated in 2006. Dr. Bonds initiated a final EEOC complaint in 2007, detailing the extensive discrimination and whistleblower retaliation she had experienced. With no administrative action taken within the statutorily determined time frame, Bonds filed her case with the District Court.

Because it included both discrimination and claims of retaliation for protected whistleblowing activity, Bonds’ case was considered a “mixed case,” and the district court struggled with the question of jurisdiction under the CSRA, ultimately dismissing the claims citing failure to exhaust administrative remedies. In her appeal to the 4th Circuit, Dr. Bonds argued that mixed cases like hers must be treated as a single unit and heard in combination in either an administrative proceeding or in federal court. The 4th Circuit agreed, granting Bonds and other whistleblowers in her situation the right to a federal jury trial, on both her CSRA discrimination and WPA retaliation claims.

In determining this jurisdictional question, the 4th Circuit cited to a D.C. Circuit case which held in favor of another female whistleblower bringing both discrimination and retaliation claims. In this case, Kiki Ikossi – an electrical engineer at the Navy Research Lab – suffered continuous discrimination by her employer on the basis of age, gender, and national origin, stunting her career progression. Dr. Ikossi fought the misconduct in federal court, where the D.C. Circuit found that interpreting the law to require a whistleblower’s retaliation claims to be held up in administrative proceedings would be adverse to Congress’ intent to have discrimination and retaliation claims settled “expeditiously.” The Court noted that the regulatory structure surrounding mixed cases had become “extremely complicated,” and that access to a judicial forum for complainants of sexual discrimination in the federal workplace was critical to the legislative purpose, otherwise such claims would “languish undecided in the administrative machinery.”

The decisions on mixed case jurisdiction secured by Dr. Ikossi and Dr. Bonds have been cited by numerous other circuit courts, further expanding protections for federal employee whistleblowers facing sex discrimination in the workplace. On the basis of this precedent, Bunny Greenhouse – a high ranking official at the Army Corps of Engineers who discovered and exposed egregious contracting fraud by the Department of Defense – was able to take her case of whistleblower retaliation to federal court in the District of Columbia. Under pressure of a federal trial, the Army agreed to settle the case for nearly $1 million in restitution. After the settlement, Ms. Greenhouse made an impassioned statement: “I hope that the plight I suffered prompts the Administration and Congress to move dedicated civil servants from second-class citizenry and to finally give federal employees the legal rights that they need to protect the public trust.”

Among many other female whistleblowers who have helped to shape the law as it stands today, Dr. Ikossi, Dr. Bonds, and Ms. Greenhouse’s lengthy legal battles paved the way for future whistleblowers of gender discrimination to have their claims heard by a federal jury of peers rather than a politically appointed federal agency. The whistleblowing community is indebted to these women who were willing to take significant personal, professional, and financial risks to expose sex discrimination in the workplace, and to ensure future whistleblowers remain protected.

Copyright Kohn, Kohn & Colapinto, LLP 2023. All Rights Reserved.
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Michigan House Moves Quickly to Repeal Michigan Right to Work Act

The Michigan House of Representatives moved quickly yesterday to advance legislation repealing Michigan’s Right to Work law, which has been in effect for the last decade. Right to Work prohibits the inclusion of a clause in a union labor contract that conditions access to employment (and continued employment) on becoming and remaining a Union member in good standing. Before enactment of Michigan’s Right to Work law, Unions could legally negotiate a union security clause into a labor contract. In a nutshell, union security means that employees performing work covered by a labor contract must join the union and remain in good standing with the union or be terminated. On March 8, the House passed both House Bill 4005 (private sector unions) and House Bill 4004 (public sector unions). The bills will now be taken up by the Michigan State Senate.

What Does Repeal of Right to Work Mean for Michigan Companies?

If Right to Work is repealed, employers with Union labor contracts can expect requests to meet and bargain regarding union security clauses. If repealed, existing labor contracts will not be presumed to include such clauses. Rather, union security clauses and the terms and scope of such provisions are a subject of negotiation. Existing labor contracts should be reviewed with labor counsel to determine the employer’s obligations to engage in mid-contract bargaining on this important topic. Labor contracts on this issue vary. For example, labor contracts may contain:

  • A union security clause that becomes effective upon a change in the law;
  • An obligation to meet and negotiate with the Company upon a change in the law; or,
  • The labor contract may be silent on the issue.

Article By Maureen Rouse-Ayoub and Ashleigh E. Draft of Varnum LLP

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© 2023 Varnum LLP

Time Is Money: A Quick Wage-Hour Tip on … the Tip Credit

Gratuities are often helpful for both employees and their employers: tips supplement a worker’s income, and federal law and the laws of most states allow employers to credit a portion of a worker’s tips toward the company’s minimum wage obligations. But what exactly is a tip and how do employers take this so-called “tip credit?”

What is a tip or gratuity?

The Fair Labor Standards Act (“FLSA”) defines a tip as “a sum presented by a customer as a gift or gratuity in recognition of service performed[.]” 29 C.F.R. § 531.52. Tips are separate from the payment due for the service, and whether to tip and in what amount is in the sole decision of the customer. If a customer provides a tip, it is generally the property of the tipped employee. Employers, including supervisors, may not take any portion of employee tips, except employers may offset reasonable processing fees from a tip provided by credit card so long the deduction does not reduce the employee’s hourly wage below the minimum wage. 29 U.S.C. § 203(m)(2)(B); 29 C.F.R. §§ 531.52, 531.53.  However, note that some states (e.g., California) prohibit employers from deducting credit card processing fees from employee tips.

Tips a should not be confused with mandatory service or administrative charges (“service charges”) that an establishment imposes on customers, and which are increasingly common in the restaurant industry. Service charges are not tips because they do not involve customer discretion. Further, service charges are the employer’s property and part of its taxable gross receipts.

If the employer distributes all or some portion of the charges to its employees, the amount distributed is treated as employee wages and not gratuities. Although service charges distributed to employees can help satisfy an employer’s minimum wage requirements under the FLSA, service charges cannot count as tips for the purposes of satisfying the tip credit. See 29 C.F.R. § 531.55.

What is a tip credit?

The FLSA allows employers to pay “tipped employees” a reduced hourly wage (currently $2.13 per hour) so long as the cash wage plus tips received by an employee satisfy the federal minimum wage (currently $7.25 per hour). The “tip credit” is the portion of an employee’s tips the employer can apply toward its minimum wage obligations. 29 U.S.C. § 203(m); 29 C.F.R. § 531.59(b).

What is a tipped employee?

Employers may take a tip credit for employees who work in an occupation in which they customarily and regularly receive more than $30 per month in tips. 29 U.S.C.A. § 203(t). These “tipped employees” can be full-time, part-time, permanent, or temporary employees. and usually include wait staff, bartenders, and hairdressers, but not dishwashers, cooks, or janitors. 29 C.F.R. §§ 531.56(a), 531.57.

The “customarily and regularly” standard provides some flexibility for employers to account for slow months. Tipped employees can sometimes receive less than $30 in tips in a particular month but still meet the standard, so long as they receive the required amount in tips more than occasionally. See 29 C.F.R. § 531.57.

What if the tipped employee performs multiple roles?

Tipped employees are considered to have “dual jobs” if they are employed in two occupations for the same employer (e.g., a janitor who is also a bartender). If an employee has dual jobs, the FLSA’s regulations permit employers to take a tip credit for only those hours the employee spends working in their tipped occupation (e.g., the time spent working as a bartender). 29 C.F.R. § 531.56(e).

However, work that is part of an employee’s tipped occupation is not strictly limited to tip-producing work such as making and serving a drink. In December 2021, the Department of Labor promulgated a rule clarifying that employers may take a tip credit for tip-producing work and directly supporting work (e.g., restocking the bar or rolling silverware), provided the employee does not perform the directly supporting work for a substantial amount of time. The rule defines “substantial” as either more than 20% of the employee’s workweek or a continuous period of more than 30 minutes. In other words, according to this regulation, employers cannot take a tip credit for any directly supporting work that exceeds the 20% threshold or exceeds 30 continuous minutes.  This regulation is currently facing a challenge in the courts, with restaurant associations contending that the rule is contrary to the FLSA.

What are the employer’s notice and recordkeeping obligations?

Before taking a tip credit, the FLSA’s regulations require employers to notify all tipped employees of the following:

  • the amount of cash wage the employer is paying the tipped employee;
  • the additional amount claimed by the employer as the tip credit;
  • the tip credit claimed by the employer cannot exceed the amount of tips actually received by the employee;
  • that all tips received by the tipped employee are to be retained by them except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
  • that the tip credit will not apply unless the employee has been informed of these provisions.

29 C.F.R. § 531.59(b). Employers may provide the tip credit notice orally or in writing but should require employees to sign an acknowledgement that they received and understood the notice and maintain copies of the signed acknowledgment in employee personnel or payroll files to document compliance. Generally, employers should provide the tip credit notice to new employees upon hire and to existing employees whenever there are changes to the minimum wage, cash wage, tip credit, or mandatory tip pool requirements (if appliable). Employers who take a tip credit without providing the proper advanced notice may be required to pay tipped employees the difference between the cash wage and the minimum wage for all hours worked before the employer provided the notice.

In addition to providing advanced notice, employers who take a tip credit must maintain and preserve payroll records that contain all the information required for non-exempt employees under 29 C.F.R. § 516.2(a), and:

  • a symbol, letter, or other notation in their pay records that identities each employee receiving a wage determined in part by tips;
  • the weekly or monthly amount of tips reported by each employee to the employer;
  • the amount of any tip credit taken, up to the maximum permitted by the FLSA (note: employers must notify employees in writing each time the tip credit amount changes);
  • the number of hours worked each workday in which the employee does not receive tips (i.e., worked in any non-tipped occupation) and the total daily or weekly straight-time pay for such hours; and
  • the hours worked each workday in any tipped occupation and the total daily or weekly straight-time earnings for such hours.

29 C.F.R. § 516.28(a).

States Laws on Tip Credit

State and local laws may have different rules when it comes to tip credits. For example, some states allow employers to take a tip credit, but require them to pay a higher cash minimum wage to employees. Other states may provide different definitions for a tipped employee or permit tip credits under different circumstances than the FLSA.

Currently, seven states prohibit employers from taking a tip credit: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. Further, in November 2022, District of Columbia voters approved Initiative 82, which will phase out the tipped minimum wage by July 2027. Although the D.C. Council recently postponed the initial increase to the minimum regular cash wage (and decrease to the maximum tip credit) from January 1, 2023, until May 1, 2023, the rest of the schedule remains unchanged.

©2023 Epstein Becker & Green, P.C. All rights reserved.
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NLRB Determines Confidentiality and Non-Disparagement Provisions to be Unlawful in Severance Agreements

The National Labor Relations Board (the NLRB or the Board) issued a decision earlier this week that purports to ban confidentiality and non-disparagement provisions from most employee severance agreements.

In McLaren Macomb, the Board scrutinized severance agreements an employer gave to 11 employees who had recently been laid off. The confidentiality provision stated that the terms of the severance agreement were confidential and must not be disclosed to anyone with few exceptions (e.g., the employees’ spouses). The non-disparagement provision barred the employees from making statements to anyone that could disparage or harm the image of the employer or its officers, directors, employees, etc. These provisions are obviously common in severance agreements.

Among other things, the Board determined that both provisions unlawfully prevented the former employees from speaking out about working conditions and compensation (including the severance) offered by the employer and assisting with NLRB and other government investigations. Historically, the NLRB has gone back and forth on whether such provisions are lawful. However, the position taken this week is the NLRB’s most aggressive position to date. Specifically, the Board determined that the mere inclusion of such provisions in a severance agreement is unlawful because they have a deterrent and chilling effect on worker’s rights, even if the employee does not sign the agreement or the employer does not enforce the provisions against an employee who breaches confidentiality or disparages the company after signing.

It is important to note that this decision has some limitations:

  • First, it does not apply to “supervisors” (as defined by the NLRA) or to independent contractors. Who is a “supervisor” under the NLRA involves several factors, including whether the employee has the authority to hire, fire, discipline, or direct the work of another employee. Therefore, it is clear that executives and upper-level management are not covered by this ruling, and, depending on the circumstances, middle and even lower level managers may not be covered either.
  • Second, some have questioned whether a smartly worded disclaimer may permit employers to include limited confidentiality and limited non-disparagement provisions in severance agreements given to rank-and-file employees. For instance, in the past, employers often included a broad statement that the severance agreement is not intended to and in fact does not infringe upon any rights the employee may have under the NLRA. Unfortunately, the Board did not specifically address this issue, but, given the aggressive position taken in the Board’s decision this week, there is definitely some risk of liability even with such disclaimers. That determination should be made based on the employer’s risk-tolerance, along with the circumstances of the individual severance agreement, and is best determined by speaking with legal counsel.

The NLRB General Counsel is expected to release additional guidance on this issue in the coming months. Until that happens, employers should seriously consider this decision when drafting severance agreements.

© 2007-2023 Hill Ward Henderson, All Rights Reserved
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The NLRB Curtails the Scope of Nondisparagement and Confidentiality Provisions in Severance Agreements

On Tuesday, February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) issued McLaren Macomb, a decision that curtails the permissible scope of confidentiality agreements and non-disclosure provisions in severance agreements. See McLaren Macomb, 372 NLRB No. 58 (2023). Analyzing the broad provisions in the agreements at issue in this case, the Board held that simply offering employees severance agreements that require employees to broadly waive their rights under Section 7 of the National Labor Relations Act (“NLRA” or “the Act”) was unlawful. The Board held:

Where an agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the Act, because it has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain. Whether the employee accepts the agreement is immaterial.

The Board’s decision is part of a broader trend by courts and administrative agencies applying heightened scrutiny to contractual provisions that limit employees’ rights. The decision also provides a crucial reminder to union and nonunion workers alike of the relevance of federal labor law in providing legal protections for most private-sector workers.

Case Background

The case arose when Michigan hospital operator McLaren Macomb permanently furloughed eleven employees, all bargaining unit members of Local 40 RN Staff Council, Office of Professional Employees International Union (OPEIU), AFL-CIO, because it had terminated outpatient services during the COVID-19 pandemic in June 2020. After McLaren Macomb furloughed these employees, it presented them with a “Severance Agreement, Waiver and Release” that offered severance amounts to the employees if they signed the agreement. All eleven employees signed.

The agreements provided broad language regarding confidentiality and nondisparagement. The confidentiality provision stated, “The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.” (emphasis added). The non-disclosure provision provided, in relevant part, “At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer…” The employees faced substantial financial penalties if they violated the provisions. The Employer conditioned the payment of severance on Employees’ entering into this agreement.

The NLRB’s Decision

In McLaren Macomb, the Board held that simply offering employees severance agreements that contain these broad confidentiality and nondisparagement provisions violates the NLRA.

The NLRA provides broad protections of employees’ rights to engage in collective action. Section 7 of the NLRA vests employees with a number of rights, including the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 8(a)(1) of the Act makes it an unfair labor practice (ULP) for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.” As the Supreme Court, federal courts, and the NLRB have repeatedly held and reaffirmed, Section 7 provides broad rights for employees and former employees—union and nonunion alike—to engage in collective action, including discussing terms and conditions of employment and workplace issues with coworkers, a union, and the Board. As the Supreme Court has stated in elaborating on the broad construction of Section 7, “labor’s cause often is advanced on fronts other than collective bargaining and grievance settlement within the immediate employment context.” Eastex, Inc. v. N.L.R.B., 437 U.S. 556, 565 (1978).

Applying these foundational principles to the severance agreements at hand, the Board reversed Trump-era NLRB precedent and concluded that the employer’s proffer of these broad nondisparagement and confidentiality provisions contravened the employees’ exercise of Section 7 rights, which is an unfair labor practice under Section 8(a)(1). Notably, the Board held that an employer’s merely offering such broad provisions violates the Act—it does not matter whether the employee signs the agreement or not.

The Board determined that the nondisparagement provision substantially interfered with employees’ Section 7 rights on its face. That provision prohibits the furloughed employee from making any “statements to [the] Employer’s employees or the general public which could disparage or harm the image of [the] Employer.” Analyzing this language, the Board reasoned that the provision would encompass employee conduct or critiques of the employer regarding any labor issue, dispute, or term and condition of employment. Accordingly, this proscription sweeps far too broadly—it prohibits employees from exercising their right to publicize labor disputes, a right which is protected by the Act. Moreover, the nondisparagement provision chills employees from exercising Section 7 rights, including efforts to assist fellow employees, cooperate with the Board’s investigation and litigation of unfair labor practices, and raise or assist in making workplace complaints to coworkers, their union, the Board, the media, or “almost anyone else.” As the Board underscored, “Public statements by employees about the workplace are central to the exercise of employee rights under the Act.”

The Board then concluded that the confidentiality provision also interfered with employees’ Section 7 rights in at least two ways. First, the Board explained that because the confidentiality provision prohibits the employee from disclosing the terms of the agreement “to any third person,” the agreement would reasonably tend to coerce the employee not to file a ULP charge with the Board or assist in a Board investigation. (emphasis added). Second, the same language would also prohibit the furloughed employee from discussing the terms of the agreement with former coworkers in similar situations, which would frustrate the mutual support between employees at the heart of the Act. As the Board summarized, “A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.”

Takeaways for Employment Lawyers and Plaintiffs

First, while one might assume that labor law is exclusively the province of unions, their members, and their lawyers, McLaren Macomb demonstrates the relevance of the NLRA for employees regardless of union status. Although the workers in this case were unionized, the Section 7 rights at the heart of the NLRA apply to most private-sector employees, including nonunion employees. Indeed, because nonunion workers often have fewer workplace protections than their unionized counterparts, Section 7’s protections are critically important for nonunion employees. Employees who are asked to sign confidentiality and nondisparagement provisions and their attorneys should be aware that broad restrictions on employees’ concerted activity may be illegal.

Second, this decision is part of a broader effort to protect workers from being muzzled by their employers. For instance, the recent federal Speak Out Act establishes that predispute nondisclosure clauses and nondisparagement clauses—often included in employment contracts—are unenforceable in disputes involving sexual assault or sexual harassment. These recent developments in the law should be on the radar of workers and their attorneys who are navigating employer’s contracts, policies, handbooks, and proposed severance agreements.

Article By Kyle Bigley of Katz Banks Kumin LLP

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DOL Issues Guidance on Handling Telework Under FLSA, FMLA

The U.S. Department of Labor (DOL) has issued guidance on the application of the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) to employees who telework from home or from another location away from the employer’s facility.

The Field Assistance Bulletin (FAB) 2023-1, released on February 9, 2023, is directed to agency officials responsible for enforcement and provides employers a glimpse into how the DOL applies existing law and regulations to common remote-work scenarios. FAB 2023-1 addresses FLSA regulations governing “hours worked,” rules related to break time and privacy for nursing employees, and FMLA eligibility factors.

Hours Worked

In the FAB, the DOL reviews the rules governing compensability of work time, explaining that, regardless of work location, short breaks (typically, 20 minutes or less) generally are counted as compensable hours worked, whereas, longer breaks “during which an employee is completely relieved from duty, and which are long enough to enable [the employee] to use the time effectively for [their] own purposes[,] are not hours worked.” Examples of short breaks, whether at home or in the office, include when an employee takes a bathroom or coffee break or gets up to stretch their legs.

Longer rest breaks and periods of time, when employees are completely relieved from duty and able to use the time for their own purposes, are not considered work time. Just as would be the case when an employee is working in the office, if during remote work an employee’s 30-minute lunch break is interrupted by several work-related phone calls, that 30-minute period would be counted as hours worked. Conversely, if an employee working from home takes a three-hour break to pick up their child or to perform household chores, that time does not count as work time under the FLSA. In short, the FAB reiterates the telework guidance set forth by the DOL in a Q&A series published during the height of the COVID-19 pandemic.

The FAB emphasizes that, regardless of whether an employee performs duties at home, at the worksite, or at some other location, if the employer knows or has reason to believe that work is being performed, the time must be counted as hours worked. Importantly, the FAB notes that an employer may satisfy its obligation to exercise reasonable diligence to acquire knowledge regarding employees’ unscheduled hours of work by providing a reasonable reporting procedure for employees to use when they work non-scheduled time and paying employees for all hours worked. This guidance was addressed in greater detail in FAB 2020-5.

Guidelines for Nursing Employees

The FAB further clarifies that, under the FLSA, an employer’s obligation to provide employees “reasonable break time,” as well as an appropriate place to express breast milk, extends to employees who are teleworking or working at an off-site location. Just as an employer has an obligation to provide an “appropriate place” for an employee to express milk while working at a client site, the employer should ensure a teleworking employee has privacy from a “computer camera, security camera, or web conferencing platform” to express milk.

Employers are not required to pay employees for otherwise unpaid breaks simply because the employee is expressing breast milk during the break, but if an employee is working while pumping (or if the pumping occurs during an otherwise paid break), they must be paid for that time. For example, in most cases, if a remote employee attends a call or videoconference off camera while pumping, that employee would be considered on duty and must be paid for that time.

The recently enacted PUMP Act expanded existing employer obligations under the FLSA to cover exempt employees, as well as non-exempt employees. The DOL has published more guidance on breast milk pumping during work.

Eligibility Under FMLA

The DOL also addresses FMLA eligibility requirements for remote employees both in terms of hours worked (employee must work 1,250 hours in the previously 12 months) and the small worksite exception (employee must work at a worksite with at least 50 employees in a 75-mile radius).

As with the FLSA, it is important for employers to have a system to track their remote workers’ hours. With respect to hours worked, the FAB reiterates that the 1,250 hours determination for remote worker is based on compensable hours of work under FLSA principles.

With respect to the worksite size determination, the FMLA regulations explain that an employee’s personal residence is not a worksite. Instead, whether a remote employee is FMLA-eligible is based on the size of the worksite from which “they report to” or “their assignments are made.” If a remote employee reports into or receives assignments from a site with 50 or more employees working at that site (or reporting to or receiving assignments from that site) or within 75 miles, then that employee would meet that eligibility factor.

The DOL provided two examples of this rule:

  • When both a store employee and their supervisor are working from their homes temporarily due to a weather emergency, for FMLA eligibility purposes, the store remains their worksite.

  • When remote employees are working in various cities more than 75 miles away from the company headquarters but receiving assignments from a manager working at the headquarters, for FMLA-eligibility determination, the company’s headquarters would be considered the workplace for the remote employees.

Employers are reminded to review state and local wage and hour laws, paid and unpaid leave laws, and lactation accommodation laws.

Article By Jenifer M. Bologna, Justin R. Barnes, and Jeffrey W. Brecher of Jackson Lewis P.C.

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Jackson Lewis P.C. © 2023

Non-Negotiable Arbitration Agreements May Be Required as a Condition of Employment

On February 15, 2023, the Ninth Circuit struck down AB 51, a California statute that imposed criminal and civil penalties against employers who required employees to enter into an arbitration agreement as a condition of employment, finding the statute to be an “unacceptable obstacle to the accomplishment and execution of the full purposes and objectives” of the Federal Arbitration Act (“FAA”).  Chamber of Commerce of the United States of America, et al. v. Bonta, et al., No. 20-15291 (9th Cir. 2023).

As discussed in our prior post and articles (link here), in August 2022 the Ninth Circuit withdrew its prior decision, which had upheld portions of AB 51, following the United States Supreme Court’s June 2022 decision in Viking River Cruises v. Moriana.

AB 51, embodied in California Labor Code §432.6 effective January 1, 2020, prohibited an employer from entering into a non-negotiable agreement that required the employee to waive “any right, forum, or procedure” for a violation of the Fair Employment and Housing Act or the California Labor Code, including “the right to file and pursue a civil action.”  Further, AB 51 imposed harsh penalties for employers who violated the statute, including a fine of up to $1,000 and up to six months’ imprisonment, as well as the potential for civil litigation by the State of California or by private individuals.  In an effort to avoid Supreme Court decisions striking down state laws that improperly targeted arbitration agreements, the California legislature also created the confusing outcome that potentially criminalized the formation of non-negotiable arbitration agreements, but permitted their enforcement once executed.

Noting that arbitration agreements by their very nature require parties to waive their rights to bring disputes in court, and crediting the plaintiffs’ evidence that the possible imposition of civil and criminal penalties deterred employers from attempting to enter into non-negotiable agreements with employees, the court affirmed the district court’s preliminary injunction in favor of several trade associations and business groups who sought to block the implementation of the statute.  Relying on principles of preemption and judicial precedent striking down similar state laws or judge-made rules that singled out executed arbitration agreements, the Court found AB 51 improperly “burden[s]” the formation of arbitration agreements in violation of the FAA.

Having written the previous 2-1 decision upholding AB 51, Judge Lucero now found himself dissenting.  Arguing that the majority “misconstrue[d] the jurisprudence” of the Supreme Court, the dissent claimed that arbitration was permissible only if consensual and that AB 51 only applied to conduct occurring prior to the formation of the contract and thus was not an obstacle to the objectives of the FAA.

Employers may require their California employees to sign non-negotiable arbitration agreements to obtain or maintain their employment.  Arbitration agreements may still be unenforceable however if they are procedurally and substantively unconscionable, if the agreement lacks mutual consent because a party was forced to sign by threats or physical coercion or “upon such grounds as exist at law or in equity for the revocation of any contract.”  Thus, employers should review their agreements to ensure they are in compliance with other California requirements, that the terms are not unfair or one-sided, and, the agreement presented is not unfair, surprising or oppressive.

Article By Sheryl L. Skibbe of Vedder Price

For more arbitration legal news, click here to visit the National Law Review.

© 2023 Vedder Price

Biden Administration Sets New Course on ESG Investing in Retirement Plans

In late 2022, the Department of Labor finalized a new rule titled “Prudence in Selecting Plan Investments and Exercising Shareholder Rights,” largely reversing Trump-era guidance that had strictly limited the ability of plan fiduciaries to consider “environmental, social, and governance” (ESG) factors in selecting retirement plan investments and generally discouraged the exercise of proxy voting. In short, the new rule allows a fiduciary to consider ESG factors in selecting investment options, provided that the selection serves the financial interests of the plan and its participants over an appropriate time horizon, and encourages fiduciaries to engage in proxy voting.

The final rule moves away from 2020 Trump-era rulemaking by allowing more leeway for fiduciaries to consider ESG factors in selecting investment options. Specifically, the rule states that a “fiduciary’s duty of prudence must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis and that such factors may include the economic effects of climate change and other ESG considerations on the particular investment or investment course of action.” The rule makes clear, however, that there is no requirement to affirmatively consider ESG factors, effectively limiting its scope and effect and putting the onus on fiduciaries to determine whether they want to incorporate ESG factors into their assessments of competing investments.

Overview

  • Similar to the Trump-era guidance, there is no definition of “ESG” or an “ESG”-style fund. Debate continues over what kinds of funds can be considered ESG investments, especially in light of the fact that some companies in industries traditionally thought to be inconsistent with ESG conscious investing are now trying to attract ESG investors (e.g. industrials, energy).
  • Fiduciaries are not required to consider ESG factors in selecting investment options. However, the consideration of such factors is not a presumed violation of a fiduciary’s duty of loyalty or prudence. Unlike the prior rule, which suggested that consideration of ESG factors could only be considered if all other pecuniary factors between competing investments were equal (the “tiebreaker” approach), the new rule allows a fiduciary to consider potential financial benefits of ESG investing in all circumstances.
  • Plan fiduciaries may take into account participant preferences in constructing a fund lineup. Therefore, if participants express a desire for ESG investment options, then it may be reasonable for plan fiduciaries to add ESG funds or to consider ESG factors in crafting the fund lineup.
  • ESG-centric funds may be used as qualified default investments (QDIAs) within retirement plans, reversing the prior outright prohibition on use of such funds as QDIAs.
  • In some situations, fiduciaries may be required to exercise shareholder rights when required to protect participant interests. It is unclear whether the exercise of such rights is only limited to situations that have an economic impact on the plan, or applies to additional situations. The clarification suggests that the exercise of proxy voting is not disfavored as an inefficient use of fiduciaries’ time and resources, as the prior iteration of the rule suggested.

Effective Date and Challenges to the Regulation

The new rule became effective in January 2023, except for delayed applicability of proxy voting provisions. However, twenty five state attorneys general have joined a lawsuit in federal court in Texas that seeks to overturn the regulation. The court is in the Fifth Circuit, which historically has been hostile to past Department of Labor regulations (including Obama-era fiduciary rules overturned in 2018, though the ESG rule is less far-reaching than the fiduciary rule and may survive a challenge even in the Fifth Circuit). Congressional Republicans have also introduced a Congressional Review Act (CRA) review proposal to repeal the regulation that has gained the support of Joe Manchin (D-WV). Although CRA actions are not subject to Senate filibuster rules, they are subject to presidential veto, which President Biden is sure to do if the repeal reaches his desk.

Action Steps

Employers should assume that the ESG rules will remain in effect and engage with plan fiduciaries, advisors, and employees and determine the extent to which ESG considerations should (or should not) enter into fiduciary deliberations when considering plan investment alternatives. Some investment advisors have already begun to include separate ESG scorecards for mutual funds and other investments in their regular plan investment reviews. Fiduciaries should also consider whether and how the approach that is ultimately taken should be reflected in the plan’s investment policy statement. Plans that delegate full control over investments to an independent fiduciary (an ERISA 3(38) advisor) should engage with their advisor to determine whether and the extent to which ESG considerations will be part of that fiduciary’s process, and whether that is consistent with the desires of the plan fiduciaries and participants.

Article By Alex H. Glaser and Timothy Brechtel of Jones Walker LLP

For more labor and employment legal news, click here to visit the National Law Review.

© 2023 Jones Walker LLP

Passport Entry Date Stamps to Be Eliminated

U.S. Customs and Border Protection (CBP) plans to eliminate passport entry date stamps in the passports of foreign nationals arriving in the U.S. The new policy measures are already in effect in some ports of entry and CBP will continue to expand the policy at additional ports.

The Form I-94 record of admission will continue to be used as a proof of a foreign national’s travel history and immigration status, which are accessible online. Foreign nationals are strongly encouraged to access and review their I-94 online as soon as they are inspected and admitted. Checking for errors in their I-94 online admission status before they leave the inspection area can help to avoid mistakes that may not be easily fixed after entry.

Since the I-94 governs the foreign national’s immigration status and work authorization for I-9 purposes, employers should also carefully monitor their foreign national employees’ status for Form I-9 employment verification.

© 2023 BARNES & THORNBURG LLP
For more Immigration Law News, click here to visit the National Law Review.