Category: Labor & Employment

The Fairness for High-Skilled Workers Act May Endanger Economy

The Fairness for High-Skilled Workers Act has passed the House of Representatives, and is pending before the Senate where it may pass by unanimous consent (i.e., with no actual vote or hearing).

On its face, the Fairness Act seems fair. By eliminating the 7% per country cap, Indian nationals and Chinese nationals who have been waiting and would continue to wait for years to capture green cards would be placed at the front of line. But this would be at the expense of workers from other countries who are also important to the United States.

About 25% of all STEM workers in the U.S., including those in the fields of healthcare, physical science, computer, and math, are foreign-born and that figure is on the rise. One quarter of all doctors in the U.S. are foreign-born — many from sub-Saharan Africa — and are particularly important in poor, rural areas of the country where physicians are scarce. One in five pharmacists and one in four dentists are foreign-born. Other types of healthcare workers come from Asia, Mexico, Central America, and the Caribbean and our need for these workers rises as baby boomers age.

If the Fairness Act were to pass, recruiting from countries other than India and China might become more difficult, and this talent may well turn elsewhere. New Zealand, Ireland, Australia and the UK are also dependent on foreign-trained doctors.

High-tech workers from India and China are also important to the U.S. and its economy; but our current immigration system is driving them out as well. This started in 2008, when it became difficult for high-tech companies to get the number of H-1B visas they needed. That frustration has grown with the increased scrutiny of H-1B petitions and the long green card waiting lines. Indian and Chinese talent is heading for other countries, and Canada is welcoming them and their companies with open arms. South Africa, Argentina, India, Chile, Japan, Hong Kong, South Korea, Israel, Australia, and Ireland also are popular competitors.

Quotas of one kind or another have been part of the U.S. immigration system since the early part of the 20th century. Literacy requirements limited immigration from some of the poorer countries of the world. Country-of-birth quotas benefited those from the UK, Ireland, and Germany at the expense even of those born in southern and eastern Europe. The 1965 Immigration and Nationality Act (the Hart-Celler Act), which is the basis of our current system, abolished national origin quotas (to eliminate discrimination) and focused on family reunification. The 7% annual ceiling on the number of immigrants from any one country was established. The ceiling was not meant to be quota, but rather a “barrier against monopolization.”

Senator Rand Paul, who opposes the Fairness Act, introduced the BELIEVE Act (Backlog Elimination, Legal Immigration and Employment Visa Enhancement Act) (S. 2091) on July 11, 2019. That bill would simply quadruple the number of employment-based visas by doubling the number available annually and exempting dependents from being counted toward the annual quota of visas. His bill also would exempt all shortage occupations from green card limits.

The Fairness Act may be just an interim solution. Rather than pitting family-based immigration against employment-based immigration and rather than pitting one country against another or one industry against another, perhaps it is time for legislation like the BELIEVE Act that would simply increase the number of green cards available to everybody.

Jackson Lewis P.C. © 2019

For more on green card legislation, see the National Law Review Immigration law page.

The CCPA Is Approaching: What Businesses Need to Know about the Consumer Privacy Law

The most comprehensive data privacy law in the United States, the California Consumer Privacy Act (CCPA), will take effect on January 1, 2020. The CCPA is an expansive step in U.S. data privacy law, as it enumerates new consumer rights regarding collection and use of personal information, along with corresponding duties for businesses that trade in such information.

While the CCPA is a state law, its scope is sufficiently broad that it will apply to many businesses that may not currently consider themselves to be under the purview of California law. In addition, in the wake of the CCPA, at least a dozen other states have introduced their own comprehensive data privacy legislation, and there is heightened consideration and support for a federal law to address similar issues.

Below, we examine the contours of the CCPA to help you better understand the applicability and requirements of the new law. While portions of the CCPA remain subject to further clarification, the inevitable challenges of compliance, coupled with the growing appetite for stricter data privacy laws in the United States generally, mean that now is the time to ensure that your organization is prepared for the CCPA.

Does the CCPA apply to my business?

Many businesses may rightly wonder if a California law even applies to them, especially if they do not have operations in California. As indicated above, however, the CCPA is not necessarily limited in scope to businesses physically located in California. The law will have an impact throughout the United States and, indeed, worldwide.

The CCPA will have broad reach because it applies to each for-profit business that collects consumers’ personal information, does business in California, and satisfies at least one of three thresholds:

  • Has annual gross revenues in excess of $25 million; or
  • Alone or in combination, annually buys, receives for commercial purposes, sells, or shares for commercial purposes, the personal information of 50,000 or more California consumers; or
  • Derives 50 percent or more of its annual revenues from selling consumers’ personal information

While the CCPA is limited in its application to California consumers, due to the size of the California economy and its population numbers, the act will effectively apply to any data-driven business with operations in the United States.

What is considered “personal information” under the CCPA?

The CCPA’s definition of “personal information” is likely the most expansive interpretation of the term in U.S. privacy law. Per the text of the law, personal information is any “information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household.”

The CCPA goes on to note that while traditional personal identifiers such as name, address, Social Security number, passport, and the like are certainly personal information, so are a number of other categories that may not immediately come to mind, including professional or employment-related information, geolocation data, biometric data, educational information, internet activity, and even inferences drawn from the sorts of data identified above.

As a practical matter, if your business collects any information that could reasonably be linked back to an individual consumer, then you are likely collecting personal information according to the CCPA.

When does a business “collect” personal information under the CCPA?

To “collect” or the “collection” of personal information under the CCPA is any act of “buying, renting, gathering, obtaining, receiving, or accessing any personal information pertaining to a consumer by any means.” Such collection can be active or passive, direct from the consumer or via the purchase of consumer data sets. If your business is collecting personal information directly from consumers, then at or before the point of collection the CCPA imposes a notice obligation on your business to inform consumers about the categories of information to be collected and the purposes for which such information will (or may) be used.

To reiterate, if your business collects any information that could reasonably be linked back to an individual, then you are likely collecting personal information according to the CCPA.

If a business collects personal information but never sells any of it, does the CCPA still apply?

Yes. While there are additional consumer rights related to the sale of personal information, the CCPA applies to businesses that collect personal information solely for internal purposes, or that otherwise do not disclose such information.

What new rights does the CCPA give to California consumers?

The CCPA gives California consumers four primary new rights: the right to receive information on privacy practices and access information, the right to demand deletion of their personal information, the right to prohibit the sale of their information, and the right not to be subject to price discrimination based on their invocation of any of the new rights specified above.

What new obligations does a business have regarding these new consumer rights?

Businesses that fall under the purview of the CCPA have a number of new obligations under the law:

  • A business must take certain steps to assist individual consumers with exercising their rights under the CCPA. This must be accomplished by providing a link on the business’s homepage titled “Do Not Sell My Personal Information” and a separate landing page for the same. In addition, a business must update its privacy policy (or policies), or a California-specific portion of the privacy policy, to include a separate link to the new “Do Not Sell My Personal Information” page.

A business also must provide at least two mechanisms for consumers to exercise their CCPA rights by offering, at a minimum, a dedicated web page for receiving and processing such requests (the CCPA is silent on whether this web page must be separate from or can be combined with the “Do Not Sell My Personal Information” page), and a toll-free 800 number to receive the same.

  • Upon receipt of a verified consumer request to delete personal information, the business must delete that consumer’s personal information within 45 days.
  • Upon receipt of a verified consumer request for information about the collection of that consumer’s personal information, a business must provide the consumer with a report within 45 days that includes the following information from the preceding 12 months:
    • Categories of personal information that the business has collected about the consumer;
    • Specific pieces of personal information that the business possesses about the consumer;
    • Categories of sources from which the business received personal information about the consumer;
    • A corporate statement detailing the commercial reason (or reasons) that the business collected such personal information about the consumer; and
    • The categories of third parties with whom the business has shared the consumer’s personal information.
  • Upon receipt of a verified consumer request for information about the sale of that consumer’s personal information, a business must provide the consumer with a report within 45 days that includes the following information from the preceding 12 months:
    • Categories of personal information that the business has collected about the consumer;
    • Categories of personal information that the business has sold about the consumer;
    • Categories of third parties to whom the business has sold the consumer’s personal information; and
    • The categories of personal information about the consumer that the business disclosed to a third party (or parties) for a business purpose.
  • Finally, a business must further update its privacy policy (or policies), or the California-specific section of such policy(s), to:
    • Identify all new rights afforded consumers by the CCPA;
    • Identify the categories of personal information that the business has collected in the preceding 12 months;
    • Include a corporate statement detailing the commercial reason (or reasons) that the business collected such personal information about the consumer;
    • Identify the categories of personal information that the business has sold in the prior 12 months, or the fact that the business has not sold any such personal information in that time; and
    • Note the categories of third parties with whom a business has shared personal information in the preceding 12 months.

What about employee data gathered by employers for internal workplace purposes?

As currently drafted, nothing in the CCPA carves out an exception for employee data gathered by employers. A “consumer” is simply defined as a “natural person who is a California resident …,” so the law would presumably treat employees like anyone else. However, the California legislature recently passed Bill AB 25, which excludes from the CCPA information collected about a person by a business while the person is acting as a job applicant, employee, owner, officer, director, or contractor of the business, to the extent that information is collected and used exclusively in the employment context. Bill AB 25 also provides an exception for emergency contact information and other information pertaining to the administration of employee benefits. The bill awaits the governor’s signature – he has until October 13, 2019 to sign.

But not so fast – Bill AB 25 only creates a one-year reprieve for employers, rather than a permanent exception. The exceptions listed above will expire on January 1, 2021. By that time, the legislature may choose to extend the exceptions indefinitely, or businesses should be prepared to fully comply with the CCPA.

California employers would thus be wise to start considering the type of employee data they collect, and whether that information may eventually become subject to the CCPA’s requirements (either on January 1, 2021 or thereafter). Personal information is likely to be present in an employee’s job application, browsing history, and information related to payroll processing, to name a few areas. It also includes biometric data, such as fingerprints scanned for time-keeping purposes. Employers who collect employees’ biometric information, for example, would be well advised to review their biometric policies so that eventual compliance with the CCPA can be achieved gradually during this one-year grace period.

Notwithstanding this new legislation, there remains little clarity as to how the law will ultimately be applied in the employer-employee context, if and when the exceptions expire. Employers are encouraged to err on the side of caution and to reach out to experienced legal counsel for further guidance if they satisfy any one of the above thresholds.

What are the penalties for violation of the CCPA?

Violations of the CCPA are enforced by the California Attorney General’s office, which can issue civil monetary fines of up to $2,500 per violation, or $7,500 for each intentional violation. Currently, the California AG’s office must provide notice of any alleged violation and allow for a 30-day cure period before issuing any fine.

Are there any exceptions to the CCPA?

Yes, there are a number of exceptions. First, the CCPA only applies to California consumers and businesses that meet the threshold(s) identified above. If a business operates or conducts a transaction wholly outside of California then the CCPA does not apply.

There are also certain enumerated exceptions to account for federal law, such that the CCPA is pre-empted by HIPAA, the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act as it applies to personal information sold to or purchased from a credit reporting agency, and information subject to the Driver’s Privacy Protection Act.

Would it be fair to say that the CCPA is not very clear, and maybe even a bit confusing?

Yes, it would. The CCPA was drafted, debated, and enacted into law very quickly in the face of some legislative and ballot-driven pressures. As a result, the bill as enacted is a bit confusing and even contains sections that appear to contradict its other parts. The drafters of the CCPA, however, recognized this and have included provisions for the California AG’s office to provide further guidance on its intent and meaning. Amendment efforts also remain underway. As such, it is likely that the CCPA will be an evolving law for at least the short term.

Regardless, the CCPA will impose real-world requirements effective January 1, 2020, and the new wave of consumer privacy legislation it has inspired at the state and federal level is likely to bring even more of the same. It is important to address these issues now, rather than when it is too late.

© 2019 Much Shelist, P.C.

For more on the CCPA legislation, see the National Law Review Consumer Protection law page.

A Dark Day for Franchising: Ninth Circuit Reinstates its Misguided Vazquez Decision, Undermining the Franchise Business Model

In the course of a politically-charged frenzy to eliminate the misclassification of employees as independent contractors, the franchise business model has been trampled without respect by both the courts and the legislature in California, disrupting commercial relationships that have been a vital driver of the state’s economy for more than fifty years.  Only five years ago, the California Supreme Court acknowledged the vital importance of franchising to the California economy in generating “trillions of dollars in total sales,” “billions of dollars” of payroll and the “millions of people” franchising employs.  Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474, 489.

Taking into account the “ubiquitous, lucrative, and thriving” franchise business model and its “profound” effects on the economy, the Patterson court held that the usual tests for “determining the circumstances under which an employment or agency relationship exists” could not be applied to franchises.  Id. at 477, 489 and 503.  To avoid disruption of the franchise relationship and turning the model “on its head,” a different test that took into account the practical realities of franchising had to be applied to franchise relationships.  Id. at 498, 499 and 503.  The “imposition and enforcement of a uniform marketing and operational plan cannot automatically saddle the franchisor with responsibility.”  Id. at 478.  A franchisor is liable “only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.”  Id. at 497-98.  The special rule for franchising has been commonly referred to as the “Patterson gloss.”

On September 25, 2019, a panel of the Ninth Circuit Court reinstated an opinion it had previously published on May 2, 2019, then withdrew on July 22, 2019, recklessly undermining the delicate framework of the franchise business model in derogation of the California Supreme Court’s “Patterson gloss.”  Vazquez v. Jan-Pro, 923 F.3d 575 (9th Cir. May 2, 2019), opinion withdrawn, 2019 US App. Lexis 21687 (July 22, 2019), opinion reinstated, 2019 BL 357978 (9th Cir. September 24, 2019).

The “Patterson gloss” arose from the California Supreme Court’s subtle appreciation for the historical development of the franchise business model.  At the heart of all franchise relationships is a trademark license.  At common law, trademark licenses were seen as a representation to the public of the source of a product.  An attempt to license a trademark risked the forfeiture of any right to royalties and the abandonment of the licensed mark.  See Lea v. New Home Sewing Mach. Co., 139 F. 732 (C.C.E.D.N.Y. 1905); Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2d Cir. 1959).

Although the Trademark Act of 1905 did not allow for the licensing of trademarks, the Trademark Act of 1946, the Lanham Act, 15 U.S.C. § 1051, did allow a trademark to be licensed, but only where the licensee was “controlled by the registrant. . . in respect to the nature and quality of the goods or services in connection with which the mark is used.”  15 U.S.C. § 1127.   After the passage of the Lanham Act, a trademark could be licensed, as long as “the plaintiff sufficiently policed and inspected its licensees’ operations to guarantee the quality of the products they sold under its trademarks to the public.”  Dawn Donut, at 367.  After the Lanham Act had legitimized trademark licensing, the franchise model began to emerge in the 1950s, as the Patterson court noted (at 489), leading to the explosive growth of franchising over the last seven decades.

“Franchising is a heavily regulated form of business in California.”  Cislaw v. Southland Corporation (1992) 4 Cal.App.4th 1284, 1288.  Franchisors must provide prospective franchisees with detailed pre-sale disclosure documents under the California Franchise Investment Law, Corporations Code § 31000 et seq. and the FTC Rule, 39 Fed. Reg. 30360 (1974).  There are criminal, civil and administrative consequences for failure to comply.  Franchisees’ rights are protected by the California Franchise Relations Act, Business & Professions Code § 20000, et seq., which includes recently enhanced penalties for non-compliance.

Over the years, California courts have acknowledged the fundamental obligation of franchisors to impose controls over their licensees and have uniformly held that such controls do not create an employment or agency relationship.  See, e.g., Cislaw, 4 Cal.App.4th at 1295 (the owner of a brand may impose restrictions on a licensee “without incurring the responsibilities or acquiring the immunities of a master, with respect to the person controlled.”); Kaplan v. Coldwell Banker (1997) 59 Cal.App.4th 746, (“If the law were otherwise, every franchisee who independently owned and operated a franchise would be the true agent or employee of the franchisor.”).  This doctrine came to be known as the “Patterson gloss” and is the glue that holds the franchise business model together—allowing the franchisor to exert the controls necessary to license a trademark without incurring the responsibilities of an employer.

In its September 25, 2019 decision in Vazquez, the Ninth Circuit once again discarded the Patterson gloss like an extra part found in the bottom of an Ikea box after the hasty assembly of an end table.  According to the Vazquez court, Patterson had no relevance because it was just a vicarious liability decision, not an employment decision.  But Patterson was an employment case.

Patterson was a Fair Employment and Housing claim brought by a teenage girl after her supervisor had repeatedly groped her breasts and buttocks.  Patterson, at 479.  It is hard to understand why the Vazquez court considered the wage order claims before it to be more significant than Taylor Patterson’s right to pursue legal claims for sexual harassment.

Even more disturbingly, the Vazquez court disregarded the “Patterson gloss” because Dynamex [Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903] had favorably cited two Massachusetts decisions that applied the ABC test in the franchise context.  Id. at 39.  The Massachusetts cases were cited in Dynamex only as examples of cases where it had been more efficient to address “the latter two parts of the [ABC] standard” on a dispositive motion, rather than all three prongs.  Dynamex, 4 Cal.5th at 48.  The court never mentions franchising or the inconsequential fact that the parties in cited cases were franchises.  The Dynamex court could not be fairly understood to have abandoned its stalwart embrace of the franchise business model in its 2014 Patterson decision, without ever bothering to mention the case or to make any reference to franchising.  Yet the Vazquez court concluded that a passing citation to cases that happened to involve franchise companies in the Dynamex opinion—to make a procedural point that was unrelated to franchising in any way—was an occult signal from the California Supreme Court that the “Patterson gloss” had been abandoned by implication five years after its creation.

Nor was it valid for the Vazquez court to confine the “Patterson gloss” to vicarious liability cases.  As Witkin points out, California law on vicarious liability and employment developed together, so that most “of the rules relating to duties, authority, liability, etc. are applicable to employees as well as other agents.”  Witkin, Summary of California Law (10th ed., Agency & Employment, § 4).  The core obligation to control a trademark licensee—hard-wired by the Lanham Act into every franchise relationship—must be respected in both vicarious liability and employment cases if the franchise business model is to be preserved.

The Vazquez court had it right when it withdrew and de-published its original decision on July 22, 2019.  When the court certified the retroactivity issue to the California Supreme Court that day, it could have also certified the franchise issue back to the court that created the Patterson gloss, but it did not do so.  Franchisors are now left to wonder how they are to maintain existing long-term commercial relationships and to continue to sell franchises after the Vazquez opinion has taken from them the fundamental right to license trademarks without incurring the unintended liabilities of employers.

© 2019 Bryan Cave Leighton Paisner LLP

Read more on the topic on the National Law Review Franchising Law page.

EEOC Provides Guidance on Reporting Non-Binary Gender Employees

Over the last few years, many employers have implemented diversity and inclusion programs, whether official or unofficial, emphasizing a work force that includes a wide variety of individuals based on, among other categories, race, gender, and sexual orientation.

Internally, companies have updated employment policies, expanded the scope of anti-harassment trainings, created avenues for diverse mentorship, and implemented changes to create workplaces that include and support a diverse office culture.

Externally, a number of states too have begun to update government documents to accommodate diverse individuals, including those who identify their gender as non-binary. For example, California recently enacted legislation permitting individuals to identify as female (F), male (M), or non-binary (X) on their drivers’ licenses.

Yet many employers with non-binary employees have been concerned as to how to appropriately report all of their employees on the federal EEO-1 reports and still comply with the law. As we previously reported, in 2017, the EEOC made it clear that the protections offered by Title VII include an “individual’s transgender status or the individual’s intent to transition,” “gender identity,” and “sexual orientation.”

The EEOC guidance also went further, stating that “using a name or pronoun inconsistent with the individual’s gender identity in a persistent or offensive manner” is sex-based harassment.  It is clear, therefore, that non-binary individuals must be afforded protections regarding their gender identity.  However, the EEO-1 report, which requires employers with over 100 employees to submit data specific to their employees’ gender and race/ethnicity, limits the gender categories to either male or female.  Employers with non-binary employees therefore have had no category to indicate the correct gender identity of these individuals, and several questioned whether it was appropriate (or even legally compliant) to request that non-binary employees choose a marker for which they do not identify.

Last month, the EEOC offered guidance by updating its Frequently Asked Questions to address this issue.  In the FAQ, the EEOC advises that employers “may report employee counts and labor hours for non-binary gender employees by job category and pay band and racial group in the comment box on the Certification Page,” and further provides examples as to how employers may comply with submitting the EEOC-required data in the future for those employees who identify as non-binary.

While describing these details in a comment box as opposed to checking a pre-marked gender identity box is not as streamlined or efficient as some employers would have hoped, it is at least a step toward ensuring that employers have a means to comply with reporting requirements and support their employees by acknowledging the gender identity of their choice.

© 2019 Foley & Lardner LLP

For more on diversity in the workplace, see the National Law Review Labor & Employment law page.

Finally, the Final Part 541 Rule: $35,568 Is the New Salary Threshold for Exempt Employees

In its final part 541 overtime rule, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) set the salary level or amount test at $684 per week/$35,568 per year for exempt executive, administrative, and professional employees of section 13(a)(1) of the Fair Labor Standards Act (FLSA). The total annual compensation test for a highly compensated employee is $107,432. The standard salary level test of $684 is comparable to the amount proposed earlier this year since the WHD used the same methodology as it applied in the notice of proposed rulemaking (NPRM). The total annual compensation level for highly compensated employees of $107,432 is lower than that proposed earlier this year in its NPRM because it is based on the 80th percentile of weekly earnings of full-time salaried employees nationally.

According to the DOL, which released the final rule on September 24, 2019, this final part 541 overtime rule “has been submitted to the Office of the Federal Register (OFR) for publication, and is currently pending placement on public inspection at the OFR and publication in the Federal Register.” These new thresholds for exemption from both the overtime and minimum wage provisions of the FLSA go into effect on January 1, 2020.

This final rule is the culmination of a long-term effort to increase these salary and total annual compensation requirements—set forth in part 541 of title 29 of the Code of Federal Regulations—which were last increased in 2004. These regulations define and delimit the exemptions for bona fide executive, administrative, and professional employees. As we wrote previously, the DOL/WHD published a notice of proposed rulemaking in March 2019, with a 60-day comment period that expired on May 21, 2019. After its review of the comments, the DOL submitted its draft final rule to the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget on August 12, 2019. OIRA completed its review of the final overtime rule and returned it to the DOL on September 13, 2019.

In addition to finalizing the salary amount test for exempt employees and the total annual compensation requirement for highly compensated employees, the final rule also permits employers to apply non-discretionary bonus and other incentive payments to satisfy up to 10 percent of the standard salary level, provided such non-discretionary payments are paid at least annually or more frequently. Also in keeping with its proposed rule, the final overtime rule does not include a provision that automatically would increase the salary level test or total annual compensation amount on some regular or periodic basis. Most significantly, the final overtime (part 541) rule does not make any changes to any of the duties tests for these exemptions.

As you may recall in 2016, employer-aligned interests brought suit to challenge the final overtime rule issued during the final year of the Obama administration. The litigation was successful, and the 2016 final rule was enjoined by a federal district court in Texas and has never gone into effect. The 2019 final part 541 rule formally rescinds the 2016 final rule. At this juncture, it is difficult to predict whether employee advocates will mount a similar legal challenge to this rulemaking. While several have expressed interest in doing so, almost all of these advocates argue that the salary level test in the 2019 final rule is insufficient. Instead, they support a salary level requirement along the lines of that published in the 2016 rulemaking that set the salary level test at $913 per week/$47,476 per year for exempt executive, administrative, and professional employees..

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more DOL regulation, see the National Law Review Labor & Employment Law page.

Changing Course: “Contract Coverage” is the New Standard for Unilateral Action

The National Labor Relations Board (NLRB) departed from precedent last week when it addressed whether an employer’s unilateral action under a collective bargaining agreement was lawful.

The case in question – M.V. Transportation, Inc. and Amalgamated Transit Union Local #1637, AFL–CIO, CLC., Case 28– CA–173726 – concerned what standard the Board should apply to determine whether a collective bargaining agreement grants an employer the right to take certain unilateral actions, without further bargaining with the union. Under prior case law, the Board had applied the “clear and unmistakable waiver” standard, under which the employer would be found to have violated the Act unless a provision of the collective bargaining agreement specifically refers to the type of employer decision at issue, or mentions the kind of factual situation that the case presents.

In M.V. Transportation, the Board noted that several appeals courts have rejected the “clear and unmistakable waiver” standard in favor of a “contract coverage” standard, including, importantly, the United States Court of Appeals for the District of Columbia Circuit, which, by statute, has full jurisdiction to review NLRB decisions.  Under the “contract coverage” standard, the decision-maker must examine the plain language of the collective bargaining agreement to determine whether the action taken by an employer was within the “compass or scope of contractual language granting the employer the right to act unilaterally. The Board cited the example of a collective bargaining agreement that broadly grants the employer the right to implement new rules and policies and to revise existing ones, noting that under such circumstances, an employer would not violate the law by unilaterally implementing new attendance or safety rules or by revising existing disciplinary or off-duty-access policies.

While the Board did choose to adopt the “contract coverage” standard, it did not totally abandon the “waiver” concept. It warned that if an agreement does not clearly cover the employer’s disputed act, and that act has materially, substantially and significantly changed a term or condition of employment constituting a mandatory subject of bargaining, the employer will have violated the law unless it demonstrates that the union clearly and unmistakably waived its right to bargain over the change, or that its unilateral action was privileged for some other reason.

In a move that is becoming more common in NLRB cases, the Board also decided to apply the new standard retroactively in all pending unilateral change cases where the determination of whether the employer violated the law turned on whether contractual language granted the employer the right to make the change in question.

Under the new standard, employers should take care in collective bargaining to make sure that the plain language of the collective bargaining agreement supports any unilateral action that the employer wants to reserve the right to take. The language should be clearly written and explicit in its grant of authority, and its meaning should be clear when applying ordinary principles of contract interpretation. By doing that, the employer can assure that its unilateral action does not violate the law or the agreement.

Copyright © 2019 Godfrey & Kahn S.C.

Uh-Oh: Company’s Social Media Policy Ruled Unlawful

Facebook. Instagram. Twitter. Snapchat. As the list of social media platforms continues to grow and people increasingly choose to use them as communication vehicles, more and more employers are drafting and implementing policies seeking to regulate their employees’ posted content and messaging on those sites. A recent National Labor Relations Board (NLRB) advice memo, however, is another reminder that companies – including non-union ones – should keep in mind there are legal parameters that come into play in this sphere.

At issue in the case was a company’s social media policy that prescribed certain expectations for employees on social sites and proscribed various types of statements on such platforms. The board ultimately concluded two provisions in the policy ran afoul of the National Labor Relations Act (NLRA).

The first provision found to be unlawful stated:

“Make sure you are always honest and accurate when posting information or news, and if you make a mistake, correct it quickly. Be open about any previous posts you have altered. Remember that the Internet archives almost everything; therefore, even deleted postings can be searched. Never post any information or rumors that are false about Friendship Ridge, fellow employees, owners, residents, suppliers, people working on behalf of Friendship Ridge.”

The NLRB determined this was unlawful because “Board and court precedent has long recognized that employees have the right to make a wide variety of statements in the context of a labor dispute, including inaccurate statements, as long as those statements do not constitute malicious defamation.” In other words, the proscription here was too broad.

The second provision held to be unlawful provided:

“Maintain the confidentiality of Friendship Ridge private or confidential information. Do not post internal reports, policies, procedures or other internal business related confidential communications.”

This was found to violate the NLRA because “the requirement that employees keep confidential the Employer’s ‘policies, procedures’ would reasonably be interpreted by employees to include information about their terms and conditions of employment.” Under the NLRA, employees have the presumptive right to disclose and discuss the terms and conditions of their employment – such as wage rates – so this too was overbroad.

While having a social media policy may make sense, it is important for any company that decides to maintain such a policy to keep in mind that there are limits on what can be proscribed.

 

© 2019 BARNES & THORNBURG LLP

For more on workplace & social media see the Labor & Employment law page of the National Law Review.

California Arbitration Roundup: Employers Are 3-1 For Favorable Arbitration Rulings

California employers received mostly good news this past month on the arbitration front, with a trio of pro-employer arbitration-related rulings.  The California Supreme Court’s recent ruling invalidating an employer’s arbitration agreement (discussed below) is a notable exception.

California Supreme Court Invalidates Employer’s Arbitration Agreement As Unconscionable.

In OTO LLC v. Ken Kho, the California Supreme Court ruled that an Oakland Toyota dealership’s arbitration agreement with a former employee was unenforceable and was so unfair and one-sided that it was procedurally and substantively unconscionable.  “Arbitration is premised on the parties’ mutual consent, not coercion, and the manner of the agreement’s imposition here raises serious concerns on that score,” the majority opinion said.

In 2013, Ken Kho, then an employee of the dealership, One Toyota, was asked to sign several documents, including an arbitration agreement.  Kho signed it, and was later terminated.

The California Supreme Court acknowledged that California and federal laws strongly favor arbitration. However, the Court considered the following factors in determining that One Toyota’s arbitration agreement was unconscionable:

  • The arbitration agreement purported to waive Kho’s right to file a wage claim with the Labor Commissioner and to have a “Berman” hearing before the Labor Commissioner (while not dispositive, the Court noted that this remains a significant factor in considering unconscionability of employee arbitration agreements);

  • The agreement was presented to Kho in his workspace, along with other employment-related documents;

  • Neither its contents nor its significance was explained;

  • Kho was required to sign the agreement to keep the job he had held for three years;

  • Because One Toyota used a piece-rate compensation system, any time Kho spent reviewing the agreement would have reduced his pay;

  • A low-level employee (a porter) presented the agreement to Kho, “creating the impression that no request for an explanation was expected and any such request would be unavailing”;

  • By having the porter wait for the documents, One Toyota conveyed an expectation that Kho sign them immediately, without examination or consultation with counsel;

  • There was no indication that the porter had the knowledge or authority to explain the terms of the agreement;

  • Kho was not given a copy of the agreement he had signed;

  • The agreement was written in an extremely small font in the form of a “single dense paragraph” of 51 lines, and the text was “visually impenetrable” and “challenge[d] the limits of legibility”;

  • The sentences were complex, filled with statutory references and legal jargon;

  • Kho was not offered a version to read in his native language (while the Court noted this factor, it did not consider it because it did not know Kho’s English proficiency);

  • The arbitration agreement did not make clear One Toyota’s obligation to pay arbitration-related costs (and rather cited to statutory provisions and referenced legal precedent; the Court noted “It would have been nearly impossible to understand the contract’s meaning without legal training and access to the many statutes it references. Kho had neither.”);

  • One Toyota’s agreement did not mention how to bring a dispute to arbitration, nor did it suggest where that information might be found (e.g., by citing to a commercial arbitration provider such as JAMS or AAA); and

  • One Toyota’s arbitration process was complicated to navigate and would likely require an attorney, making it cost-prohibitive for Kho.

The Court concluded that “[w]e have not said no arbitration could provide an appropriate forum for resolution of Kho’s wage claim, but only that this particular arbitral process, forced upon Kho under especially oppressive circumstances and erecting new barriers to the vindication of his rights, is unconscionable.”

Employers would thus be well-advised to revisit their employee arbitration agreements to ensure that they do not contain any of the defects discussed by the Supreme Court in the Kho case.

NLRB Upholds Employer Conduct Related to Mandatory Arbitration Agreements

In Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019), the National Labor Relations Board (NLRB) addressed the lawfulness of employer conduct surrounding mandatory arbitration agreements for the first time since the U.S. Supreme Court’s 2018 decision in Epic Systems v. Lewis, where the Court held that mandatory arbitration agreements do not violate the National Labor Relations Act (NLRA) (see here).  In Cordua Restaurants, the NLRB ruled in part that employers are not prohibited under the NLRA from: (1) informing employees that failing or refusing to sign a mandatory arbitration agreement will result in their discharge; and (2) promulgating mandatory arbitration agreements in response to employees opting in to a collective action under the Fair Labor Standards Act or state wage-and-hour laws.

The NLRB’s decision in Cordua Restaurants is a natural extension of the Supreme Court’s analysis and ruling in Epic Systems.  There, the Court held that Congress, when passing the Federal Arbitration Act (FAA) in 1925, instructed courts to enforce arbitration agreements as written.  Since the passage of the FAA predates the NLRA by ten years, and since the NLRA says nothing about overruling the FAA, the NLRB could not, under the guise of enforcing the NLRA, rule that an arbitration agreement that otherwise is lawful on its face violates the NLRA.  This decision by the NLRB is further evidence of that agency’s retreat from past policies advanced by the NLRB in the prior administration and likely will not be overruled.

California Court of Appeals Compels Employee to Arbitrate Claims Even Though He Filed Suit Before Signing Arbitration Agreement

In Quiroz Franco v. Greystone Ridge Condominium, the California Court of Appeals compelled an employee to arbitrate his claims against his employer even though the employee filed his lawsuit two days before he signed an arbitration agreement.  The Court held that the arbitration agreement was clear in that it required arbitration of any claims and that it did not contain any restriction based on when a claim was filed.

In the case, Quiroz Franco, the employee, was given an arbitration agreement on March 9, 2018, and a Spanish translation shortly thereafter.  On March 19, 2018, he filed a lawsuit against his employer, alleging harassment, discrimination, and wage and hour claims among others.  On March 21, 2018, Quiroz Franco handed in his signed arbitration form, which the employer used to attempt to compel him to arbitrate. The lower court ruled that the claims in the employee’s suit started to accrue before he signed the arbitration agreement, so arbitration couldn’t be compelled.  The employer appealed and the Court of Appeal overturned the lower court’s decision.

California Court of Appeals Rules that Unfair Competition Law Claims Are Arbitrable

In Clifford v. Quest Software Inc., the California Court of Appeals addressed whether an employee’s claim against his employer for unfair competition under Business and Professions Code section 17200 (the UCL) was arbitrable, ruling that it was.  The employee brought various wage and hour claims against his employer, and the employer moved to compel arbitration based on the parties’ arbitration agreement.  The trial court granted the motion in part and ordered to arbitration every cause of action except the employee’s UCL claim, which the court concluded was not arbitrable.  The Court of Appeals reversed, holding that the employee’s UCL claim was subject to arbitration along with his other causes of action—more good news for California employers.

© 2019 Mitchell Silberberg & Knupp LLP

New Jersey and New York Further Strengthen Wage and Hour Laws to Protect Employees: Part 1 – NJ Developments

On August 6, 2019, New Jersey substantially amended its wage and hour laws in several critical respects by, among other provisions, expanding the statute of limitations, increasing damages and criminal penalties, strengthening anti-retaliation provisions and, overall, making it easier and more lucrative for employees to prevail on wage and hour claims. The new “Wage Theft” Law is effective immediately, except for one provision identified below. Here is a summary of the key provisions:

    • The Statute of Limitations Expands from 2 to 6 years – The amendment triples the amount of time available to file claims for unpaid minimum wage and overtime payments, thereby tripling the potential damages available to employees. New Jersey now joins New York in implementing a 6-year statute of limitations for such claims. In contrast, the statute of limitations under federal law remains at 2 years or 3 years, depending on whether a willful violation was committed.

    • Liquidated Damages – The amendment provides that, in addition to having to pay earned, unpaid wages, employers also will be liable for liquidated damages of up to 200% of the wages owed. Previously, liquidated damages were not available under New Jersey law. A limited “good faith” defense will be available to first-time violators under certain circumstances.

    • Anti-Retaliation – The amendment expands the anti-retaliation provisions by making it a disorderly persons offense to take retaliatory action by discharging or otherwise discriminating against an employee for making a complaint, instituting an action, or informing other employees about their rights concerning wages and hours of work.There is a rebuttable presumption of retaliation for adverse actions taken within 90 days of an employee filing a complaint with the Department of Labor or a court action. Liquidated damages are available for claims of retaliation.

    • Fines and Penalties – It is now a disorderly persons offense for an employer to (i) knowingly fail to pay wages, compensation or benefits when due, (ii) take retaliatory action, or (iii) fail to pay agreed-upon wages within 30 days of the date when payment is due. An employer who commits any such offense must pay wages due plus 200% of that amount in liquidated damages, reasonable costs and attorneys’ fees, a fine of $500 for a first offense (which increases for subsequent offenses) and, under certain circumstances, an additional penalty of 20% of wages due and/or imprisonment. The amendment provides for a broad definition of “employer” to include officers of a corporation and “any agents having the management of that corporation.”

    • Creation of a New Crime – The amendment creates a new crime of “pattern of wage nonpayment” for a person convicted of violating certain provisions of the Criminal Justice Code and/or wage and hour laws on two or more occasions. Though this is classified as a “3rd – degree” crime, there is no presumption of nonimprisonment. This provision will become effective three months from the August 6 enactment date.

    • Joint and Successor Liabilities – The amendment expands the circumstances under which organizations may now be held liable as joint or successor employers.

    • Failure to Maintain Records – The amendment provides that employers who fail to produce required records are subject to a rebuttable presumption that allegations by the employee concerning the time period the employee was employed and the wages that are due are true.

    • Employer Notice Requirement – The amendment imposes a new written notice obligation on employers. NJ employers will be required to distribute both to current employees and new hires a form the NJ Department of Labor and Workforce Development will publish.

Take Aways

Wage and hour compliance has long been a vulnerable area for employers, and New Jersey employers must now contend with wage and hour protections that are among the strongest in the nation. It is more imperative than ever for New Jersey employers to (i) properly classify workers, where warranted, as employees rather than as independent contractors, (ii) properly classify employees as exempt or non-exempt from overtime requirements, (iii) timely pay employees all wages, compensation and benefits due, including overtime, and (iv) maintain required wage and hour records for at least 6 years.

 

© Copyright 2019 Sills Cummis & Gross P.C.
For more wage-hour laws, see the National Law Review Labor & Employment law page.

DHS Proposes Fee of $10 to File H-1B Petition

Department of Homeland Security (DHS) has proposed a fee of $10 per H-1B petition. The agency considers this to be an “appropriate, nominal fee” to recover some costs involved.

In January 2019, DHS published the rule establishing an H-1B electronic registration system. At that time, no fee was proposed, but the “door was left open.” In mid-August, DHS announced that there would be a fee.

As to what information will be required, that is still a bit up in the air – again, the door is left open by DHS. The agency wants enough information to be able to check for fraud, duplicate registrations filed by the same company, and to ensure that those selected during the registration period ultimately file H-1B petitions. In addition to company identification, each registration would include the beneficiary’s:

  • Full name
  • Date of birth
  • Country of birth
  • Gender
  • Passport number

Each registration also will require the petitioner to complete an attestation about the “bona fides” of the registration. Frivolous registrations, DHS warns, “may be referred to appropriate federal law enforcement agencies for investigation and further action as appropriate.” Under a “catch-all,” DHS could require: “any additional basic information requested by the registration system to promote certainty.”

Some concerned about frivolous registrations suggested that information include job title, worksite address, salary offers, SOC code, LCA wage level, and specific educational qualifications. Others suggested including disclosure of any recent labor violations or disputes and EEOC complaints and whether the petitioner is H-1B dependent. DHS rejected these ideas (for now), noting that much of that information would be used to review eligibility once an H-1B petition is filed.

Questions remain about what DHS does with the information it gathers during the electronic registration. In accordance with the Administration’s “Buy American, Hire American” Executive Order,  DHS is already gathering and sharing much information on its H-1B Data Hub. The public can search the number of H-1B approvals and denials by company and by year. The public also can see, by employer, the number of approved H-1B petitions by salary and degree type. In addition to making the information public, DHS has stated in a description of the H-1B registration tool that it “may share the information with other Federal, State, local and foreign government agencies” and “may also share [the] information, as appropriate, for law enforcement purposes or in the interest of national security.” The full scope of this statement is not yet known.

It is unclear whether the electronic registration will be ready in 2020 or when the promised trial period for stakeholders will occur.

Jackson Lewis P.C. © 2019

ARTICLE by Amy L. Peck of Jackson Lewis P.C.
For more on DHS filing, see the National Law Review Immigration Law page.