Category: Labor & Employment

California Law Creates New Risk Factor

Last year, California enacted AB 5 imposing the so-called A-B-C test for employee status under California’s Labor Code.  The legislation basically extended the California Supreme Court’s holding in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018) which imposed the test in the more limited context of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission.

Although aimed at the gig economy, AB 5 has impacted a wide range of traditional businesses.  For example, it was widely reported last year that Vox media had laid off hundreds of California free-lance writers in response to AB 5.  Not surprisingly, the American Society of Journalists and Authors, Inc., and National Press Photographers Association has filed a lawsuit in federal court challenging the new law (A hearing on California’s motion to dismiss is scheduled for March 23).  A ballot initiative measure is currently in circulation to change for “app-based” transportation and delivery drivers.  This month, the California Trucking Association succeeded in obtaining a federal court order enjoining enforcement of AB 5 as to any motor carrier operating in California.

I am music and I write the songs, but am I an employee?

Great uncertainty still abounds about the applicability, application and even constitutionality of AB 5.  Thus, it is not surprising to see issuers identifying AB 5 as a risk factor in their filings with the SEC.  For example, Warner Music Group Corp.  included this risk factor in its Form 10-K concerning independent songwriters and and recording artists:

“Although we believe that the recording artists and songwriters with which we partner are properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our characterization of these relationships. We are aware of a number of judicial decisions and legislative proposals that could bring about major reforms in worker classification, including the California legislature’s recent passage of California Assembly Bill 5 (“AB 5″). AB 5 purports to codify a new test for determining worker classification that is widely viewed as expanding the scope of employee relationships and narrowing the scope of independent contractor relationships. Given AB 5’s recent passage, there is no guidance from the regulatory authorities charged with its enforcement, and there is a significant degree of uncertainty regarding its application. In addition, AB 5 has been the subject of widespread national discussion and it is possible that other jurisdictions may enact similar laws. If such regulatory authorities or state, federal or foreign courts were to determine that our recording artists and songwriters are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay Social Security, Medicare and similar taxes and to pay unemployment and other related payroll taxes. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that our recording artists and songwriters are our employees could have a material adverse effect on our business, financial condition and results of operations.”

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP

For more on California’s AB5 see the National Law Review Labor & Employment Law section.

Coronavirus and the Workplace: What Employers Need To Know

News that multiple cases of the newly-identified 2019 Novel Coronavirus have reached the United States have prompted employers to think about employee safety and ways to address disease prevention in the workplace. Although, according to the Occupational Safety and Health Administration (OSHA), “most American workers are not at significant risk of infection” at this time, the situation is evolving, and it is never too early for employers to consider how they can address employee concerns, help prevent an outbreak, or address one if it occurs. Employers should also be aware of legal pitfalls that they may encounter when attempting to protect their employees from the virus.

The following addresses some of the key questions employers may have regarding the Coronavirus threat.

What is the Coronavirus and How Is It Transmitted?

At this point, relatively little is known about the 2019 Novel Coronavirus, more commonly known as the “Coronavirus.” According to the CDC, the initial reports of the illness originated in Wuhan, China, where people likely contracted the virus from animals at a seafood and animal market. Experts now believe that the virus is spreading from human-to-human when an infected person coughs or sneezes, similar to the spread of a cold or flu. However, it is still too early to know how easily the virus is transmitted between people.

What Are the Primary Symptoms of the Coronavirus?

In the confirmed cases of Coronavirus thus far, affected individuals have reported mild to severe respiratory symptoms, fever, cough, shortness of breath, and breathing difficulties. In severe cases, the virus has led to pneumonia, kidney failure, and, in at least 100 deaths (presently, all in China), as of the time of this writing.  The CDC believes at this time that symptoms may appear within two to fourteen days after exposure.  However, some infected individuals have shown little to no symptoms.

How Can Spread of the Coronavirus Be Prevented?

Because there is presently no Coronavirus vaccine available, the CDC is recommending standard precautions to avoid the spread of respiratory viruses, such as washing hands with soap and water for at least 20 seconds, or, if soap is not available, using hand sanitizer; avoiding close contact with people who are sick; staying at home when you are sick; and disinfecting frequently touched objects and surfaces.

What If My Employees Travel to China For Business?

As of January 27, 2020, the CDC has issued a level 3 health travel notice (the highest threat level) recommending that people avoid all nonessential travel to China.

Employers whose employees travel to and from China should keep in mind the following:

  • Consider whether to limit business travel to affected areas. While the current CDC travel notice does not specifically define “nonessential travel,” the General Duty Clause of the Occupational Safety and Health Act (OSHA) requires employers to furnish “employment and a place of employment which are free from recognized hazards that are causing or likely to cause the death or serious physical harm to … employees.”  Although the Occupational Safety and Health Administration (also referred to as OSHA) has not promulgated specific standards covering the Coronavirus, requiring employees to engage in nonessential business travel to China (or any other areas in which the risk of contagion is heightened) could create risk under the General Duty Clause, particularly in light of the CDC warning against nonessential travel.  For that reason, employers whose business may involve travel to China (or other areas that become subject to travel restrictions or otherwise experience an increase in the spread of the virus) should consider other available options for employees for the duration of the threat, such as videoconferencing.

By the same token, employers should also be prepared to respond to employees who may express concerns about traveling to affected areas due to the virus.  While an employer generally has broad discretion to decide the duties and requirements of a job and to discipline employees who fail to fulfill those requirements, as a practical matter employers may wish to consider offering employees reasonable alternatives to such travel.

Finally, while employers may implement restrictions on work-related travel to affected areas, employers should tread more carefully when attempting to police personal, non-work-related travel. That said, recent decisions in the Seventh, Eighth, and Eleventh Circuits have held that the disability discrimination protections of the ADA do not apply where an employer takes an employment action based on the potential for an employee to become ill and disabled in the future.  Specifically, the Eleventh Circuit found no liability under the ADA where an employer terminated an employee who requested time off to travel to Ghana to visit family because of the perceived risk that the employee would contract the Ebola virus, due to recent outbreaks of the disease in neighboring countries.  While courts have tended to take this view, it is worth noting that the EEOC has argued on at least one occasion that an employer acting on a potential future health condition may be viewed as “regarding” an employee as disabled as long as the condition otherwise qualifies as a disability under the law.  For this reason, employers should consider the risks with imposing a ban on personal, non-work-related travel to affected areas.

  • Provide relevant safety information to employees. Employers whose employees travel to affected areas should provide information to their employees about how the Coronavirus is transmitted, its symptoms, and how to avoid exposure – utilizing trusted and reputable sources such as the CDC. Employers would be well advised to also provide these employees with resources and contact information for local health departments and the CDC.
  • Understand that employee travel may be interrupted. The Chinese government has closed transit within and out of Wuhan and certain other areas of the Hubei Province. Hong Kong has also imposed certain restrictions on travel to and from the Chinese mainland. The United States is also re-routing passengers from Wuhan, China to certain designated airports (including Chicago O’Hare, Atlanta, New York JFK, Los Angeles, and San Francisco) for enhanced screening. While screening for common viruses usually takes several hours, officials have indicated that those suspected of having the Coronavirus could be delayed for up to a day if additional screening is needed.

What Should I Do if an Employee Has Recently Traveled to China or Otherwise May Have Been Exposed to the Coronavirus?

Employers should remember that the Americans with Disabilities Act (ADA) places certain restrictions on the kinds of inquiries that can be made into an employee’s medical status. Specifically, the ADA prohibits employers from making disability-related inquiries and requiring medical examinations, unless (1) the employer can show that the inquiry or exam is job-related and consistent with business necessity, or (2) where the employer has a reasonable belief that the employee poses a direct threat to the health or safety of the individual or others that cannot otherwise be eliminated or reduced by reasonable accommodation.

According to Pandemic Preparedness Guidance published in 2009 by the Equal Employment Opportunity Commission (EEOC) in the midst of the H1N1 influenza outbreak, whether a particular outbreak rises to the level of a “direct threat” depends on the severity of the illness.  Employers should look to the most up-to-date assessments being made by the CDC or other public health authorities, as they relate to the employer’s location, to determine the severity level of an illness and, in turn, whether an employee who potentially has been exposed to the illness may constitute a “direct threat.”  Employers should not rely on speculation or unofficial information when making determinations about whether there is a direct threat.  At the moment, the CDC is not classifying the Coronavirus as a pandemic and has not issued a heightened threat level for the United States.  However, the situation continues to rapidly evolve and we will provide updates should additional guidance be released by the CDC or other public health officials on this important issue.

All this being said, employers should keep in mind the following when it comes to employees who have traveled to affected areas:

  • Employers need not wait until an employee returning from travel develops symptoms to inquire about exposure to the Coronavirus. Inquiring about whether an employee has traveled to an affected area or about possible exposure to a contagious illness during such travel would not constitute a disability-related inquiry.  However, as discussed below, the extent to which an employer may act on the information received will depend on the most recent information available from the CDC or other public health officials.  Further, employers inquiring into whether employees have traveled to affected areas should do so of all employees known or believed to have recently traveled, rather than directing such inquiries only to employees of certain races, ethnicities, or national origins. Finally, employers should be mindful to keep confidential all medical-related information received from an employee, in accordance with the ADA.
  • Under certain circumstances, employers may require employees who have traveled to areas affected by serious health threats to stay home. If the CDC or other local public health officials recommend that people who visit specified locations remain at home for several days until it is clear they do not have illness symptoms, an employer may require an employee who traveled to an affected area to remain out of work for the suggested period of time.  While presently the CDC states that individuals who may have been in close contact with someone with the Coronavirus may continue with their daily activities so long as they are not showing any symptoms, employers should continue to monitor the CDC website for further developments. In the absence of a CDC directive that employees who have traveled to affected areas stay at home, an employer who is considering requiring such employees to remain home, they should consult with counsel.

What Other Things Should Employers Be Thinking About When it Comes to the Coronavirus?

  • Employers may – and should – send employees home if they exhibit potential symptoms of contagious illnesses at work. The EEOC has said that sending an employee home who displays symptoms of contagious illness would not run afoul of the ADA’s restrictions on disability-related actions because: (i) if the illness ultimately turns out to be relatively mild or “run of the mill” (such as seasonal influenza), then it would not have constituted a covered disability in the first place; and (ii) if the illness does turn out to be severe (such that it may constitute a disability under the law), then the actions would be warranted under a direct threat analysis. In either case, an employer can send an employee home who is displaying symptoms of contagious illness, even if this is against the employee’s wishes.  Employers should also consider making clear in their policies that employees who have symptoms of a potential contagious illness must not report to work while they are sick.
  • Determine whether the FMLA or other leave laws may apply. An employee who is experiencing a serious health condition or who requires time to care for a family member with such a condition may be entitled to take unpaid leave under the federal Family and Medical Leave Act (FMLA) or state-law analogues.  Employees may also be eligible for leave as a reasonable accommodation under the ADA or related state or local law, if the underlying condition constitutes a qualifying disability.  However, employees generally are not entitled to take FMLA or reasonable accommodation leave to stay at home to avoid getting sick (though an exception may exist where a preexisting medical condition is likely to be worsened by exposure to a contagious disease). Furthermore, employees in certain jurisdictions may be entitled to paid sick leave if needed to care for themselves or a sick family member in the event of an illness, or if their workplace or a child’s school or day care is closed due to a public health emergency.
  • Consider whether OSHA requirements may apply. While, as noted above, OSHA has not promulgated specific standards covering the Coronavirus, it has issued a notice indicating that employers should be aware of the following general standards to which employers may be subject under OSHA:
    • General Duty Clause: As discussed above, the OSHA General Duty Clause requires employers to furnish “a place of employment which [is] free from recognized hazards that are causing or likely to cause the death or serious physical harm to … employees.” To that end, there are some readily achievable steps that employers can take to prevent the spread of the Coronavirus (and other contagious illnesses) within the workplace, such as: providing hand sanitizer to employees, ensuring that surfaces and eating areas are disinfected regularly, and encouraging employees who are sick to stay home. Employers also may start to consider certain policy changes they may wish to implement in response to the Coronavirus should the situation become more severe in the U.S., such as allowing employees to work from home.
    • Personal Protective Equipment: OSHA requires that protective equipment, clothing, and barriers be provided whenever it is necessary to prevent employees from being exposed to environmental hazards. Employers are required to assess the workplace, determine if hazards are present, and if so, select and have employees use protective equipment. Employers whose employees may encounter individuals infected with the Coronavirus, such as those in the healthcare and travel industries, should begin to consider what protective equipment would be necessary to protect its workforce should the virus begin to spread within the United States.
    • Recordkeeping and Reporting Requirements: OSHA requires that certain employers keep a record of certain work-related illness and injuries (often referred to as an OSHA Form 300 log). While there is a regulatory exemption for recording instances of the standard cold and flu, OSHA has deemed the 2019 Novel Coronavirus a recordable illness when a worker is infected on the job. In addition, certain employers may be subject to reporting requirements under state and local law if they have a reasonable belief that a significant disease is present in the workplace.
    • Employers in Higher-Risk Industries: While, again, OSHA has yet to issue any standards or controls specific to Coronavirus, employers operating in industries where employees may be at a potential increased risk of exposure should prepare for the possibility that heightened requirements may be put in place. In the past, OSHA has issued such guidance for employers in industries such as healthcare, airlines, and mortuary services, such as during the MERS outbreak in 2015.

*          *          *

Information about the Coronavirus is constantly developing, so employers also should continue to refer to the CDC, WHO, and OSHA websites for the latest on appropriate precautions, including changes to travel notices.  Of course, we will continue to monitor this situation and report on any updates as they develop.

© 2020 Proskauer Rose LLP.

Proposed Washington State Law Would Create 32-Hour Workweek

New legislation recently introduced in the Washington State Legislature seeks to implement a 32-hour workweek for nonexempt Washington-based workers. If the proposal were to become law, employers would be required to pay overtime compensation to nonexempt employees whose workweeks exceed 32 hours.

Senate Bill (SB) 6516 proposes to amend RCW 49.46.130, the Washington law that establishes a 40-hour workweek in the state. Because the proposal would amend but not replace the existing law, the current exemptions would remain applicable—and none have been amended by the proposed bill. Instead, the bill’s proposed changes merely—but monumentally—revise the references in RCW 49.46.130 from a 40-hour workweek to a 32-hour workweek.

The lead cosponsor of SB 6516 is Washington State Senator Joe Nguyen. In several interviews, Senator Nguyen seems to view the proposal as a “conversation” starter and a “concept” to begin discussing. Because it appears to be a preliminary measure, we do not expect the proposal to pass, but, we will continue to follow SB 6516 closely and provide legislative updates as necessary.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

For more on workweek hour legislation, see the National Law Review Labor & Employment law page.

Union Launches National Organizing Effort in Gaming and Tech Industries

The Communications Workers of America (CWA) has begun a nationwide union-organizing campaign targeting game and tech industry employees, in partnership with Game Workers Unite! (GWU), a so-called “grass-roots” worker group founded in Southern California in 2018 to spur unionization in the gaming industry. As here, such groups typically are founded and funded by established labor organizations.

The idea for the organizing effort is the result of discussions between the CWA and GWU over the past months. In addition, CWA Canada is partnering with the GWU chapter in Toronto. The CWA has used similar partnerships with other activist groups, most recently teaming up with the Committee for Better Banks to attempt to organize banking sector employees.

Organizing is being spearheaded by Emma Kinema, a co-founder of GWU, and Wes McEnany, a former organizer with the Service Employees International Union and leader of the “Fight for 15” effort. Kinema will lead the organizing on the West Coast, McEnany will focus on the East Coast. Organizers from CWA locals across the country will populate the teams. According to Kinema, the issues on which the union will focus are: “crunch,” or long hours for weeks or months to meet launch deadlines; cyclical layoffs; harassment; misogyny; gender-based pay discrimination; values and ethical issues, such as working with Immigration and Customs Enforcement (ICE); climate change; AI ethics; and pay, severance, and benefits. According to Tom Smith, CWA’s lead organizer, “For a lot of folks, that’s what led them to do this work in the first place, and people are feeling a disconnect between their personal values and what they’re seeing every day in the working lives.”

With the moniker CODE – Campaign to Organize Digital Employees – the ambitious initiative seeks to organize employees across the industry, typically at individual shops or employers. According to Kinema, “We believe workers are strongest when they’re together in one shop in one union, so the disciplines can’t be pitted against each other – none of that’s good for the workers. I think in games and tech, the wall-to-wall industrial model is the best fit.” Smith said the CWA would be open to craft-based organizing – where the focus is industry-wide bargaining units composed of employees performing similar work at different employers – if that is what employees want. In an industry where workers frequently move from employer to employer, portable benefits can be attractive.

An annual survey by the International Game Developers Association, an industry group, found that gaming worker interest in unions had increased to 47 percent by 2019. Indeed, a representation petition is pending at the Brooklyn office of the National Labor Relations Board on behalf of the employees at a gaming company. About 220,000 employees work in the two-billion-dollar gaming industry.

The union has established a website — www.code-cwa.org – as well as a presence on other social media platforms such as Facebook and Twitter.

As most union organizing is based on the presence in the workplace of unresolved employee issues, a comprehensive analysis of such matters may be valuable to employer. Also, supervisors and managers often interact frequently with employees when organizing is afoot or underway. Training regarding their rights and responsibilities under the labor laws often is essential.

Jackson Lewis P.C. © 2020

For more on unionizing news, see the National Law Review Labor & Employment law page.

Smoking Cannabis Legally in Illinois: What’s an Employer to Do?

On January 1, 2020, Illinois joined the growing number of states that allow the sale and use of marijuana for personal and recreational use. The law has been so popular that most of the cannabis dispensaries in Illinois sold out of their supply within the first week.

So, what now for employers in Illinois? May they tell workers who get stoned on a break that they must leave the workplace? Can they still maintain a drug-free workplace? Can they still do drug testing? The answer to all three questions is yes; however, as explained below, there are important steps that an employer must take should it decide to discipline an employee. While there will be much to work out as Illinois navigates its new cannabis laws, employers may maintain the same standards at work that they had before the law became effective. But they need to know and follow the new law’s requirements.

Parameters of the New Law

On January 1, 2020, the Cannabis Regulation Tax Act (CRTA), 410 Ill. Comp. Stat. Ann. 705/10 et seq., became law, permitting personal and recreational cannabis use for all individuals 21 years of age or older. Under the CRTA, Illinois residents may possess 30 grams of cannabis flower, 500 milligrams of a THC-infused cannabis product and 5 grams of cannabis concentrate for personal use.

The CRTA will not be interpreted to diminish workplace (includes buildings, real property and parking lots under control of the employer and used by the employee to perform job duties) safety. The act identifies and allows employers to adopt certain cannabis policies relating to use, consumption, storage and impairment to further protect employee safety, such as:

  • Employers are allowed to adopt a reasonable zero-tolerance policy for its employees or require a drug-free workplace.
  • Employers are permitted to adopt employment policies relating to drug testing, smoking, consuming, storing and using cannabis while an employee is at the workplace, performing job duties or on call.
  • Employers may prohibit an employee from using cannabis or from being under the influence of cannabis while at the workplace, performing job duties or on call.
  • Employers may undertake disciplinary measures or terminate an employee’s employment for violating a reasonable workplace drug policy.

A Fine Line

One of the trickier aspects for Illinois employers will be making a determination of when an employee is impaired or under the influence of cannabis. The law provides that an employer can express a “good faith belief” that the employee manifests certain articulable symptoms that decrease or diminish the employee’s job performance and responsibilities. The CTRA identifies a number of symptoms an employer may consider in finding an employee is impaired or under the influence, such as “symptoms of the employee’s speech, physical dexterity, agility, coordination, demeanor, irrational or unusual behavior, or negligence or carelessness in operating equipment or machinery; disregard for the safety of employee or others, involvement in any accident that results in serious damage to equipment or other property; disruption of a production of manufacturing process; or carelessness that results in any injury to the employee or others.”

When an employer takes any action against an employee for being under the influence of cannabis, the CTRA requires that an employee be provided a reasonable opportunity to challenge the basis of an employer’s determination. Employers should notify an employee in writing of its determination and invite the employee to state their case as to why the employer’s determination may be incorrect before it takes an adverse action against the employee. All activity in the appeal process should be documented.

Employers’ Rights and Liability

Some good news for employers is that the CTRA does not create or imply a cause of action against an employer for the actions taken relating to an employer’s reasonable workplace drug policy. IL LEGIS 101-593 (2019), 2019 Ill. Legis. Serv. P.A. 101-593 (S.B. 1557) (WEST). Actions taken relating to an employer’s reasonable drug policy include subjecting an employee or applicant to a drug and/or alcohol test, nondiscriminatory random drug testing, disciplining employees, termination of employment or withdrawing an offer for employment because of a failed drug test. The amendments to the CTRA now expressly limit an employer’s liability for disciplining or terminating employment resulting from a failed drug test. Further, the amendments to the CTRA clarify and reinforce an employer’s ability to administer pre-employment and random drug testing policies.

Employers must be careful, however, to not take action against an employee when the use of cannabis is after work hours. The Right to Privacy in the Workplace Act was amended, effective January 1, 2020, 820 Ill. Comp. Stat. Ann. 55/5, to specifically prohibit employers from terminating employment because of an employee’s personal or recreational use of lawful products (including cannabis) outside of the workplace during nonworking, off-call hours. In the event an employee is disciplined or employment is terminated because of cannabis use outside of the workplace during off-duty hours, an employee may bring a discrimination cause of action under the Right to Privacy in the Workplace.

It is anticipated that there will be tension between individuals contesting an employer’s determination that he/she was impaired or under the influence of cannabis at the workplace with the contention that any use was during off-duty hours. For instance, what if an employee used cannabis four hours before starting a shift? The employee may claim protection under the Right to Privacy in the Workplace, whereas the employer may argue the employee was nonetheless under the influence in the workplace. This tension is exacerbated by the fact that there is currently no test to determine how recently an individual has used, consumed or smoked cannabis. Further, there is no test that determines how high or low cannabis levels are in an individual.

Illinois employers will need to understand and follow the CTRA laws and Right to Privacy in the Workplace laws. Employers should prepare specific written policies to address these new issues.

© 2020 Wilson Elser

ARTICLE BY David M. Holmes of Wilson Elser Moskowitz Edelman & Dicker LLP, with assistance from Gabriela C Herrera (Law Clerk-Chicago).
For more on the intersection of recreational cannabis & employment law, see the National Law Review Labor & Employment law section.

Can an Employer Implement a Nicotine-Free Hiring Policy?— It Depends on State Law (US)

Nicotine products are highly addictive and have been linked to a variety of serious health issues, including lung cancer and other respiratory illnesses.  In addition to the numerous health risks associated with nicotine use, there is also a causal connection between employee nicotine use and lower productivity in the workplace, as well as higher healthcare costs for employers.  In response to these issues, and in an effort to promote and empower a healthy workforce, more employers are enacting health-conscious workplace policies and anti-smoking/vaping initiatives.

In fact, over the last decade, employers—particularly hospitals and businesses in the medical field—have adopted anti-smoking/vaping policies in those states in which it is lawful to do so, with the goal of encouraging a more healthy work environment, as well as to increase worker productivity and reduce healthcare costs.  As the health risks associated with nicotine use become increasingly apparent (particularly with the recent wave of vaping-related illnesses), it is likely that more employers will consider their policies toward these important health issues. For example, on December 30, 2019, U-Haul International announced a new nicotine-free hiring policy that will go into effect in 21 states on February 1, 2020.  Although U-Haul subsidiaries operate in all 50 US states and 10 Canadian provinces, due to legal restrictions in some jurisdictions, the policy will be implemented only in the following 21 US states: Alabama, Alaska, Arizona, Arkansas, Delaware, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, Maryland, Massachusetts, Michigan, Nebraska, Pennsylvania, Texas, Utah, Vermont, Virginia, and Washington.  Prospective employees in those states will see statements regarding the nicotine-free hiring policy on application materials and will be questioned about nicotine use. Further, to be considered for employment in states where nicotine testing is allowed, applicants will be required to consent to submit to nicotine screening in the future.  U-Haul employees hired prior to February 1, 2020 will not be affected by the new policy.

U-Haul will be the first major company in its field to refuse to hire applicants who are nicotine users, and the new policy has caused some to question whether companies which, like U-Haul, are deeply invested in the well-being of their employees, are allowed to enact such policies.  The answer to that question depends on the jurisdiction in which the company operates.  Nicotine users are not a “protected class” under any federal anti-discrimination law, and thus state law governs this issue.  In each of the 21 states in which U-Haul companies will implement its policy, there are no laws that protect the rights of nicotine-users or prohibit employers from declining to hire applicants due to their engaging in otherwise lawful conduct outside the workplace.  Therefore, a policy refusing to hire nicotine users is perfectly legal in those jurisdictions, and employers in those states are free to enact nicotine-free hiring policies if they so choose.

However, employers who are considering implementing such nicotine-free hiring policies should tread carefully.  The rest of the 29 states where U-Haul subsidiaries are not implementing its policy (and the District of Columbia) have various anti-discrimination or employee privacy laws preventing employers from enacting such policies.  These states provide varying degrees of protection to employees.  For example, some states broadly forbid employers from discriminating against applicants or employees based on the use of “lawful products” or for “lawful conduct,” whereas other state laws specifically protect an applicant’s or employee’s right to smoke or use other tobacco products.  Although these states are generally more employee-friendly in this context, in some of these jurisdictions, employers can require smokers to pay higher health insurance premiums, so long as the additional amount reflects the actual differential cost to the employer.  Further, employers can still regulate and limit an employee’s on-site smoking, and can typically offer financial incentives for employees who participate in wellness programs to help them quit smoking.

Given the state-specific nuances associated with this issue, employers thinking about implementing a nicotine-free hiring policy should consult with an attorney before implementing such a policy to ensure it may lawfully do so.

© Copyright 2020 Squire Patton Boggs (US) LLP

For more on employers’ healthy-workplace initiatives, see the National Law Review Labor & Employment law section.

Employee Video Surveillance: Position of the European Court of Human Rights

On October 17, 2019, the European Court of Human Rights (ECHR) approved the installation of a Closed-Circuit Television (“CCTV”) surveillance system which was used to monitor supermarket cashiers without informing those employees of the fact that it had been installed.

In this case, a Spanish supermarket manager decided to install cameras in the supermarket because of suspected thefts. He installed (i) visible cameras pointing at the supermarket’s entrance and exit of which he had informed the staff and (ii) hidden cameras pointing at the cash registers of which neither employees nor staff representatives had been informed.

The hidden cameras revealed that thefts were being committed by several employees at the cash registers. The concerned employees were dismissed. Some of them brought an action before the Spanish Labor court arguing that the use of CCTV without their prior knowledge was a breach to their right to privacy and that such evidence could not be admitted in the dismissal procedure.

Like French law, Spanish law requires the person responsible for a CCTV system to inform the concerned employees of the existence, purpose, and methods of the collection of their personal data, prior to implementation of the system.

The case was brought before the ECHR, which gave a first decision on January 9, 2018, concluding that Article 8 of the European Convention for the Protection of Human Rights, relating to the right to privacy, had been breached. The case was then referred to the Grand Chamber.

The issue raised was to find the proportionality and the balance between (i) the reasons justifying the implementation of a CCTV system (i.e., the right of the employer to ensure the protection of its property and the proper functioning of its business) and (ii) the employees’ right to privacy.

The ECHR stated that “domestic courts must ensure that the introduction by an employer of surveillance measures that infringe the employees’ privacy rights is proportionate and is implemented with adequate and sufficient safeguards against abuse”, referring to its previous case law [1].

The ECHR considered that in order to ensure the proportionality of CCTV measures in the workplace, domestic courts should take into account the following factors when balancing the interests involved:

  1. Has the employee been informed of the possibility of being subject to a video surveillance measure?
  2. What is the extent of the video surveillance and what is the degree of intrusion into the employee’s private life?
  3. Has the use of video surveillance been justified by the employer on legitimate grounds?
  4. Was there an alternative surveillance system based on less intrusive means and measures available to the employer?
  5. What were the consequences of the surveillance for the employee who was subject to it?
  6. Was the employee concerned by the video surveillance measure offered adequate guarantees?

Therefore, prior notification to the employees is only one of the criteria taken into account in the balance of interests.

In this particular case, the ECHR approved the examination of proportionality of the video surveillance measure. The Judges decided that despite the lack of prior notification to the employees, the CCTV was (i) justified by suspicions of theft, (ii) limited in space (only a few checkout counters), and (iii) limited in time (10 days). The Court also noted that very few people watched the recordings and then concluded that the degree of intrusion into the employees’ privacy was limited.

Consequently, the Grand Chamber considered that there was no violation of the employees’ privacy rights.

Although this decision does not directly concern France, it remains very interesting since French regulations (i.e., the Data Protection Act, the General Data Protection Regulations, and the Labor Code) provide:

  • that the monitoring measures implemented by an employer must not impose restrictions on the employees’ rights and freedoms which would neither be proportionate nor justified by the nature of the task to be performed (Article L. 1121-1 of the Labor Code); and
  • that concerned employees and staff representatives must be informed prior to the implementation of a video surveillance system (Article L. 1222-4 of the Labor Code).

According to French case law, any system that is not compliant with the above is considered illicit and the information collected could not be used as evidence of an employee’s misconduct [2].

The ECHR’s decision seems to challenge French case law: where the absence of prior notification to employees is considered as an overwhelming obstacle by French judges, the ECHR considers that it is merely one of the several criteria to be taken into account to assess the proportionality of the infringement to the employee’s right to privacy.

The question that remains is: what will be the impact of the ECHR’s decision in France?

NOTES

[1] ECHR, Grand Chamber, September 5, 2017, n°641996/08, Bărbulescu c. Roumanie; ECHR, decision, October 5, 2010, 420/07, Köpke c. Germany.

[2] See French Supreme Court, June 7, 2006, n°04-43866 ; French Supreme Court, September 20, 2018, n°16-26482.

Copyright 2019 K & L Gates

ARTICLE BY Christine Artus of K&L Gates.
For more on employee privacy rights, see the National Law Review Labor & Employment Law section.

SECURE Act Brings About Significant Changes to IRAs

As we reach the end of 2019 and prepare to flip the calendar to 2020, Congress and the president have finally passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act. The act brings about significant changes to federal tax law impacting individuals and business owners alike. Here are some of the law’s most significant provisions:

Removes Some Stretch Distributions for Inherited IRAs

This is a long-expected change that significantly impacts what an IRA beneficiary receives upon the death of the account owner. Under current law, any traditional IRA account owner must begin taking required minimum distributions (RMDs) from the IRA upon reaching age 70½. If the account owner dies after that age, any funds remaining in the IRA at the owner’s death may be inherited, with the RMDs being paid out to the heir over his or her life expectancy in most cases. This stretch enabled a younger beneficiary to grow the inherited IRA substantially (and tax-free), sometimes over many decades.

As a result of the SECURE Act, most beneficiaries will be required to distribute the entirety of an inherited IRA over a 10-year period. The writing has been on the wall since 2014 when the Supreme Court declared that an inherited IRA in the hands a non-spouse beneficiary was not a retirement account in the bankruptcy context (Clark v. Rameker). However, RMDs payable to the following persons still qualify for the stretch:

  • Surviving spouse of an account owner
  • Person who is not more than 10 years younger than the account owner
  • Minor child of the account owner
  • Disabled person
  • Chronically ill person

These new RMD rules apply to retirement accounts whose owners die after December 31, 2019.

Increases RMD Ages

As noted above, under current law, any traditional IRA owner must begin taking RMDs upon reaching age 70½. Under the SECURE Act, this age has been raised to 72, providing for a slightly increased period of tax deferral as well as greater clarity given the lack of half-birthday celebrations.

Removes Age Limitations on Traditional IRA Contributions

Under current law, while an individual could contribute to a Roth IRA without any age restriction, contributions to a traditional IRA were disallowed upon attaining age 70½. As a result of the SECURE Act, any individual may continue contributing to a traditional IRA throughout his/her lifetime with no age restriction.

The benefit of the removal of the contribution age restriction is significantly muted when read in conjunction with the removal of the stretch distributions for non-spousal beneficiaries above. Nevertheless, the removal of age restrictions on contributions presents an attractive tax deferral opportunity for the septuagenarian wage earner with a younger spouse who is named as the IRA’s beneficiary.

Adds Penalty-Free Distributions for Birth of Child or Adoption

As a default rule, withdrawals from retirement accounts prior to age 59 1/2 are subject to income tax on the withdrawn amount plus a 10 percent penalty. The SECURE Act provides a specific carve-out from the penalty if the funds – up to $5,000 – are withdrawn in order to pay expenses associated with a qualified birth or adoption. You’ll still pay income tax on the funds withdrawn but only if they aren’t repaid.

Adds Qualified 529 Plan Expenditures

The Tax Cuts and Jobs Act signed into law back in December 2017 permitted 529 account funds to be used for the payment of K-12 education expenses on behalf of the account beneficiary. The SECURE Act further expands the list of permissible uses of 529 funds to include costs associated with registered apprenticeships and student loan repayments.

Unfortunately, Michigan residents are still in a strange limbo with regard to using 529 account funds to pay K-12 education expenses as Michigan has not amended state law in coordination with the change in federal law. As a result, while withdrawals from 529 accounts for K-12 education expenses are explicitly qualified withdrawals under federal tax law, they may or may not be qualified expenses under Michigan state law. This position is further complicated by the presence of the Blaine amendment in Michigan’s constitution requiring that no money be appropriated from the state treasury for the benefit of any religious sect. If the Michigan Department of Revenue determined that withdrawals for the payment of K-12 education expenses were not qualified, any income withdrawn from the 529 account would be subject to income tax as ordinary income along with a 10 percent penalty.

Enhances Small Employer Access to Retirement Plans

Congress previously authorized the creation of the SIMPLE (1996) and SEP (1978) IRAs in an effort to improve access to retirement accounts for small employers. In the SECURE Act, Congress acknowledged that those previous efforts produced some success but left room for improvement. The new law should increase the willingness of small employers to participate in pooled retirement plans by softening the impact for an employer when another employer in a pooled plan fails.

The act also increases the credit for plan start-up costs, which will make it more affordable for small businesses to set up retirement plans. The existing $500 credit is increased by changing its calculation from a flat dollar amount to the greater of (1) $500 or (2) the lesser of (a) $250 multiplied by the number of nonhighly compensated employees of the eligible employer who are eligible to participate in the plan or (b) $5,000.

The SECURE Act will bring about both opportunities and complications for individuals planning their own financial futures as well as employers seeking to maximize their attractiveness to potential employees.

© 2019 Varnum LLP

For more on retirement regulation, see the National Law Review Labor & Employment law page.

Congress (Finally) Passes the SECURE Act

After a delay of several months, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, clearing the way for one of the most substantial pieces of retirement plan legislation in years to become law.

The House of Representatives initially passed the SECURE Act in May by an overwhelming 417−3 vote. Although the Act was set for easy bipartisan passage, it foundered in the Senate. The bill found new life at the eleventh hour of the 2019 legislative session as an attachment to the must-pass $1.4 trillion spending bill, which passed by significant margins.

The SECURE Act brings quite a few changes that will affect both plan sponsors and participants. It is intended to incentivize employers (particularly small businesses) to offer retirement plans, promote additional retirement savings, and enhance retiree financial security, including several provisions that will impact current plan administration. The changes brought by the Act are generally positive in our view, but certain ones will create some new administrative challenges and questions.

Key changes include:

Open Multiple Employer Plans (MEPs)

Among several other MEP-related provisions, the Act provides for the establishment of defined contribution Open MEPs – referred to as “Pooled Plans” – which will be treated as single ERISA plans. Under current law, where a plan is sponsored by a group of employers that are not under common control, the employers must have certain “commonality” of interests, or the arrangement may be treated as multiple component plans for ERISA purposes. Even though the recent Department of Labor regulation on “Association Retirement Plans” relaxed the commonality requirement significantly, a limited commonality requirement nonetheless remained. As a result, Open MEPs (which are generally offered by service providers and open to any employer who wishes to adopt them) remained subject to potential treatment as multiple ERISA plans. In a move largely cheered by the industry, the SECURE Act goes further by abolishing the commonality requirement entirely.

Part-Time Employee Eligibility for 401(k) Plans

Sponsors of 401(k) plans will be required to allow employees who work at least 500 hours during each of three consecutive 12-month periods to make deferral contributions ─ in addition to employees who have satisfied the general “one year of service” requirement by working at least 1,000 hours during one 12-month period. Long-term part-time employees eligible under this provision may be excluded from eligibility for employer contributions, and the Act provides very significant nondiscrimination testing relief with respect to this group. Nonetheless, this is an example of a provision that – while positive in the sense of encouraging additional retirement plan coverage – will nonetheless create new recordkeeping and administrative challenges.

Required Minimum Distributions (RMDs)

The age at which required minimum distributions must commence will be increased to 72 from 70 1/2. This is another example of a helpful change that will nonetheless lead to additional compliance questions.

Increased Tax Credits

The cap on start-up tax credits for establishing a retirement plan will increase to up to $5,000 (depending on certain factors) from $500. Small employers who add automatic enrollment to their plans also may be eligible for an additional $500 tax credit per year for up to three years.

Safe Harbor 401(k) Enhancements

Employers will have more flexibility to add non-elective safe harbor contributions mid-year. Additionally, the Act eliminates the notice requirement for safe harbor plans that make non-elective contributions to employees. The automatic deferral cap for plans that rely on the automatic enrollment safe harbor model (known as the “qualified automatic contribution arrangement” or “QACA” safe harbor) also will increase to 15% from 10%.

Other Retirement Plan Highlights

  • Penalty-free (but of course, not tax-free) retirement plan withdrawals for a birth or adoption.
  • An objective fiduciary safe harbor for the selection of a lifetime income provider is being added to encourage employers to offer in-plan annuity options. The Act also provides for tax-advantaged portability for a lifetime income product from one plan to another or between plans and IRAs to help avoid surrender charges and penalties where the lifetime income product is removed from a particular plan.
  • A separate provision also requires participant lifetime income disclosures illustrating the monthly payments if the participant’s account balance was used to provide lifetime income in an annuity.
  • Nondiscrimination testing relief for some closed defined benefit plans.
  • Certain clarifications relating to the termination of 403(b) custodial accounts and 403(b) retirement income accounts within church-sponsored plans.
  • Increase in penalties for failing to file plan returns on time.

While it is not related directly to employer-sponsored plans, readers may be interested to know that the Act also repeals the maximum age for IRA contributions and eliminates the stretch IRA. As to the latter, non-spouse beneficiaries of inherited IRAs will be required to take their benefits in income on an accelerated basis (as compared with current law) – this will have estate planning implications for individuals and families that should be understood and reviewed.

The SECURE Act is one of the most comprehensive retirement plan reforms in a decade and brings many changes for consideration. Plan sponsors should consider how the SECURE Act will impact the administration of their plans. Employers that do not currently sponsor retirement plans may wish to consider (or reconsider) doing so given the Act’s additional incentives ─ or may consider joining a MEP.

Most provisions of the Act will go into effect on January 1, 2020. In the coming months, it will be necessary to consider its practical effects on plan design and administration, including the interplay between certain of the Act’s provisions and existing regulatory guidance where there is subject-matter overlap.

©2019 Drinker Biddle & Reath LLP. All Rights Reserved

More on retirement regulation on the National Law Review Labor & Employment law page.

Sexual Harassment Training Becomes Mandatory for All Professionals Licensed by IDFPR

All professionals licensed by the Illinois Department of Financial and Professional Regulation (IDFPR) whose licenses come up for renewal after January 1, 2020 and who must satisfy continuing education requirements need to complete one hour of sexual harassment and prevention training under a law that Governor J.B. Pritzker recently signed.

Health care companies that employ registered nurses, pharmacists, doctors and other health care professionals licensed by IDFPR should start making plans to conduct sexual harassment training to help their employees avoid license renewal issues next year.

Most large and medium-sized corporations have conducted in-house harassment and discrimination training for years. More than 20 years ago, the U.S. Supreme Court ruled that companies may have an affirmative defense against lawsuits alleging that a supervisor sexually harassed a subordinate if the employer adopted and annually trained its employees on policies that:

  • define the different forms of sexual harassment,

  • detail to whom to report harassment complaints,

  • detail how the company will investigate such complaints, and

  • prohibit retaliation for good-faith reporting of such complaints

After those Supreme Court decisions, the Equal Employment Opportunity Commission adopted a similar standard for all forms of illegal discrimination.

The new Illinois law, an outgrowth of the #MeToo movement, governs only sexual harassment, not other forms of discrimination. But smart employers will protect their employees and themselves by combining sexual harassment training with training on other types of discrimination. That approach allows employees to obtain the needed continuing education credits under the new law while simultaneously ensuring that employees understand what constitutes harassment and discrimination, to whom employees can report complaints and how their employers will investigate such complaints.

The new state statute is short on details. It simply says that all professionals who have continuing education requirements and are renewing their licenses after January 1, 2020 need one hour of continuing education credits on sexual harassment. The statute authorizes IDFPR to provide detailed regulations on such training, which IDFPR has not yet done.

© 2019 Much Shelist, P.C.

For more states requiring sexual harassment training, see the National Law Review Labor & Employment law page.