Category: Labor & Employment

Esports Star Tfue Sues To Void His Contract With FaZe Clan

Fortnite player Turner Tenney, professionally known as “Tfue,” has sued to void his contract with Esports team, FaZe Clan, Inc. Tfue’s action, filed in Los Angeles Superior Court, alleges that the terms of the contract he signed to play for FaZe Clan’s Fortnite team are grossly oppressive, onerous, and one-sided and in violation of California law. His action could have a significant impact on the Esports industry and the players who participate in Esports as professional gamers.

Recognized as one of the world’s best Fortnite players, Tfue entered in an agreement with FaZe in April 2018.

The Complaint alleges that Tfue did not understand the terms of the agreement he signed and that he was exploited by FaZe. It further alleges that FaZe breached its fiduciary duty of loyalty by failing to share profits with him as mandated by the terms of his agreement and by rejecting a sponsorship deal and acting against his best interests. In addition,

Tfue alleges multiple violations of California law, including Section 16600 of the California Business and Professions Code, Section 17200 of the California Business and Professions Code, and California’s Talent Agency Act.

The contract refers to Tfue as an independent contractor. It mandates that he play in tournaments and training sessions, perform three days a month of publicity and promotional services, and participate in the company’s social media campaigns. In addition, Tfue is required to wear clothing bearing FaZe logos and identification, as well as items associated with specific FaZe Clan sponsors.

In exchange for an initial monthly base pay of $2,000 for the first six months of the contract, FaZe had an option to extend its deal with Tfue for an additional three-year period (which the company exercised) and unilaterally increase or decrease his monthly by 25%. The agreement also entitles Tfue to 80% of cash prizes earned from playing in Fortnite tournaments and an equal split with FaZe Clan of income earned from in-game merchandise, appearances, and touring and sign-up bonuses. The agreement also provides finder’s fees for brand deals that feature Tfue that can result in as much as 80% of the deal being retained by FaZe. The contract also limit Tfue’s ability to sign with another esports company at the end of his contract in 2021.

Tfue also seeks repayment of his sponsorship, fees, and commissions, as well as additional compensatory damages and punitive damages. In addition, he seeks to enjoin FaZe Clan’s ongoing alleged violations of California law.

It is probable that the court venue will be challenged. The agreement between FaZe and Tfue contains a choice-of-law provision, which provides that the agreement “shall be governed and construed in accordance with the laws of the State of New York” and the parties “submit exclusively to the state or federal courts in New York, NY for any claim” arising from the contract.

This suit will be watched closely by the industry. The lack of industry regulation and unified structure, employment law issues appear ripe for litigation. Esports team owners should ensure their contracts with players comply with federal and state employment laws and the contract language clearly defines sponsorships and endorsements, compensation, arbitration clauses, hours of service, health insurance, non-competition, and anticipated event participation.

Jackson Lewis P.C. © 2019
More in video gaming legal concerns on the National Law Review Entertainment, Art & Sports page.

Is Next-Day Pay the Next Big Thing?

Among the hardest-to-find workers in America today are restaurant and retail workers. The current labor market is the tightest in 49 years, and for the past year, there have been roughly a million more open positions in the United States than people looking for work. The hospitality sector always has faced recruitment challenges, but the recently shrinking applicant pool has forced employers to look for creative ways to lure workers to jobs in the food service and retail industries.

“Expedited pay”—also known as “same day pay,” “next day pay,” or “daily pay”—provides employees with all or some portion of their wages without having to wait for the weekly or semi-monthly payroll cycle to conclude. While direct deposit, pay cards, and electronic fund transfers all have shortened the time that employees have to wait to access their funds, PayPal, Apple Pay, Venmo, and the like, in conjunction with Millennials’ and Generation Z’s expectation of seamless and immediate financial transactions, have upped the ante for immediate distribution of wages.

In an effort to address the challenges, several food-service groups are currently test marketing the next-day pay model. For example, Church’s Chicken and Bloomin’ Brands are offering forms of expedited pay in an effort to recruit and retain talent. The expedited process provides workers with almost immediate access to funds to bridge the gap between paydays for expenditures.

There are a variety of vendors and distribution methods for employers to consider. For example, Instant Financial provides immediate access to pay after a worker finishes his or her shift. PayActiv and FlexWage are app platforms through which employers may offer customized pay options to their employees.

Some vendors charge employers for their services while others deduct fees from employees’ pay. These fees vary, and employers will want to understand what they are being charged before either contracting with an app provider or making an app available through a payroll processing service. Similarly, employers may want to ensure that employees understand these fees as well. Additionally, employers may want to review state and local laws regarding whether passing along such fees to employees passes legal muster.

In determining whether to implement expedited pay, employers can ensure that all federal, state, and local minimum wage, overtime, and payday requirements will be met when deciding on a vendor or app for their workforce. Employers may also want to analyze the effectiveness of these expedited pay methods in assisting in recruitment efforts, employee engagement, and reducing turnover.

 

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

Mexico Mandates Protection From Workplace “Psychosocial Risks”

Globalization, technology developments, and the world’s economy, among other factors, have changed our day-to-day dynamics and have transformed the way we work. This means that employees must deal with emotions and circumstances that in the past were not significant but today are studied and classified by scientists as “psychosocial risks.”

The World Health Organization (WHO) and the International Labour Organization (ILO) define psychosocial risks as the interactions within the work environment, content of the work, conditions of the organization and capacities, needs and culture of the employee, and personal considerations—external from work—based on perceptions and experience that can negatively influence health, performance at work, and labor satisfaction.

International organizations are trying to create a broad awareness of psychosocial risks and thereby prevent such risks from damaging employee health, both physical and psychological.

Mexico’s Regulation of Psychosocial Risks at Work

Mexico has taken a big step in the protection of employees with the amendment to the Federal Labor Law on November 30, 2012. This amendment incorporates into the law the concept of “decent and dignified work,” which encompasses respect for the human dignity of employees and, in consequence, the prevention of harm that employees may suffer because of the activities they perform at work.

The amendment and subsequent obligations agreed upon by the current federal government in its national development plan, as well as internationally, compelled the Mexican Ministry of Labor and Social Welfare to issue the Federal Regulation of Health and Safety at Work. Its goal is to establish health and safety provisions, which must be observed at the workplace, “in order to have the conditions to prevent risks, and as a consequence, guarantee employees their right to perform their activities in an environment that assures their lives and health, according to the Federal Labor Law.”

What to Expect in 2019 and 2020: The Psychosocial Risk Factors Standard

Based on the above and with the purpose of complying with current legislation, the Ministry of Labor and Social Welfare developed the Official Mexican Norm: NOM-035-STPS-2018 “Psychosocial Risk Factors at Work – Identification, Analysis and Prevention.” Its main objective is to “identify, analyze and prevent psychosocial risk factors, as well as to promote a favorable organizational environment at workplaces.”

Though the rule has been valid since October 23, 2018, the Ministry of Labor and Social Welfare will not review employers’ compliance with the rule until the October 2019 or October 2020, depending on the employer’s size. Since this matter requires specialist analysis and evaluation, employers may want to contact a specialist on psychosocial risks in order to achieve compliance.

The following are employers’ main obligations under the rule:

  • Establish, maintain, and disseminate among the employees a psychosocial risks prevention policy

  • Identify psychosocial risk factors and evaluate the organizational environment (applicable to work places with more than 50 employees)

  • Use questionnaires to identify psychosocial risk factors (applicable to work places with 16–50 employees)

  • Disseminate to employees the policy and measures adopted to reduce psychosocial risks

  • Identify the employees subject to psychosocial damages while working or derived from their work

  • Provide a registry where employees can learn about psychosocial risk factors and corrective actions taken

  • Maintain a confidential complaint system so the employees can inform the employer about psychosocial risk factors

  • Take actions to prevent psychosocial risk factors and corrective measures if psychosocial damage occurs

Co-Authored by Natalia Merino, a law clerk in the Mexico City office of Ogletree Deakins.

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
Learn more about International Legal issues on the National Law Review Global page.

Misidentification of Employer in Discrimination Charge Not Enough for Dismissal

The U.S. Court of Appeals for the Seventh Circuit recently gave an employee a pass in his age discrimination suit against his former employer, where he inaccurately identified his former employer in the charging document. Significantly, the Seventh Circuit forgave the technical defect in the plaintiff’s charge, where the plaintiff had acted diligently and the failure to provide notice to the employer rested almost entirely with the Equal Employment Opportunity Commission (EEOC).

Reversing the district court’s dismissal of the complaint for the plaintiff’s “minor error in stating the name of the employer,” the Seventh Circuit explained that “it is particularly inappropriate to undermine the effectiveness of [the Age Discrimination in Employment Act (ADEA)] by dismissing claims merely because the victim of the alleged discrimination failed to comply with the intricate technicalities of the statute.”

In Trujillo v. Rockledge Furniture LLC, d/b/a Ashley Furniture Homestore, the Seventh Circuit overturned a decision by the U.S. District Court for the Northern District of Illinois granting the defendant employer’s motion to dismiss. The plaintiff filed a charge of discrimination in May 2016, asserting age discrimination and retaliation. The plaintiff supplied the EEOC with the correct address and telephone number of his work location, but misidentified his employer as “Ashley Furniture Homestore.” His employer’s trade name was actually “Ashley Furniture HomeStore – Rockledge.”

Inexplicably, the EEOC did not contact the employer at the address or telephone number provided, but instead forwarded the charge to a Texas entity that operated Ashley Furniture stores in that state. When the EEOC informed the plaintiff’s counsel that the Texas entity had no record of his employment, the plaintiff’s counsel sent the EEOC a paystub listing the entity name and address for the defendant. However, the EEOC still did not contact the defendant. Instead it issued a right to sue letter, and the plaintiff brought suit in April 2017.

Given the plaintiff’s failure to precisely identify the defendant in his charge, the defendant moved to dismiss, arguing a failure to properly exhaust his administrative remedies. The district court granted the motion.

On appeal, the Seventh Circuit reversed for two reasons. First, it found that the plaintiff’s trivial naming error, akin to a misspelling, should not defeat his ability to pursue his claim. Second, and most significantly, the Seventh Circuit explained that, given the information provided to the EEOC, the plaintiff should not have been barred from pursuing his claims as a result of the EEOC’s failure to locate the correct employer.

Notably, the EEOC filed an amicus brief in support of plaintiff’s appeal, admitting its error and arguing that the focus should be on the information provided to the EEOC, not what the EEOC did with that information. The court agreed, stating that the information provided by the plaintiff should have been sufficient for the EEOC to investigate the plaintiff’s allegations and to attempt to eliminate the alleged unlawful practices – which is the purpose of the charge-filing requirement. According to the Seventh Circuit, penalizing the charging party plaintiff for the EEOC’s mistake would frustrate the purpose of charge filing.

The practical effect of this decision is that it narrows the grounds on which employers may obtain dismissal of discrimination suits based upon the plaintiff’s failure to exhaust administrative remedies. While the employer had no notice of the charge, and thus had no opportunity to attempt pre-litigation conciliation, the court gave plaintiff the benefit of the doubt – likely due in no small part to the EEOC admitting it dropped the ball.

Nevertheless, as we highlighted in our blog last week, where appropriate, employers facing discrimination litigation would still be wise to raise the exhaustion defense at the pleading stage, so as not to waive it. Facts may come to light that would permit an exhaustion defense later in the case.

© 2019 BARNES & THORNBURG LLP
More on employment discrimination issues on the National Law Review Labor & Employment page.

#MeToo-Inspired Laws Hit the Midwest: Illinois Passes Anti-harassment, Pay Equity, and Board Diversity Legislation

After ending 2018 with a slew of new employment laws, Illinois continues to enact legislation impacting employers. Following the example set by California, Washington, and other states recently, the Illinois legislature passed four new bills targeting equity, transparency, and discrimination last week, and Governor J. B. Pritzker is expected to sign them into law. This gives Illinois companies the opportunity to reevaluate their policies and practices with regard to sexual harassment, equity, and discrimination.

Illinois State Law Changes

  • Sexual Harassment (Senate Bill 75)

As the #MeToo movement continues to be a top priority of state legislatures throughout the country, Illinois joins several other states, such as Arizona, California, Delaware, Oregon, Louisiana, Maine, Maryland, New Jersey, New York, Tennessee, Vermont, and Washington, in passing proactive legislation on the topic. SB 75 contains several provisions designed to prevent harassment and discrimination in the workplace.

First, the law limits unilateral nondisclosure agreements and mandatory arbitration agreements relating to sexual harassment and employment discrimination claims. It remains to be seen whether, upon challenge, courts will find this law and others like it that prohibit arbitration agreements to be preempted by the Federal Arbitration Act.

The legislation also requires employers to disclose to the Illinois Department of Human Rights (IDHR) by July 1, 2020, and each July 1 thereafter, the total number of final adverse administrative rulings or judgments in the preceding year and whether any equitable relief was ordered. In addition, SB 75 requires employers to disclose to the IDHR during an investigation the total number of settlements entered into during the preceding five years that relate to any act of alleged sexual harassment or unlawful discrimination. However, the law prohibits the IDHR from relying on the existence of any settlement to support a finding of substantial evidence.

SB 75 also permits employees who are victims of gender-based violence to take unpaid leave and requires hotels and casinos to provide employees working in isolated spaces with panic buttons to prevent sexual harassment or assault.

Finally, under this law Illinois joins California, New York, Delaware, Connecticut, and Maine in requiring employers to hold annual sexual harassment training for all employees. Like New York’s law, SB 75 calls for the IDHR to produce a model sexual harassment training program, including a program specifically tailored to the restaurant and bar industry.

  • Equal Pay Act (House Bill 834)

HB 834, like recent legislation in Colorado, Washington, and Maine, prohibits employers from screening prospective employees based on salary histories and bars employers from requesting or requiring prospective employees to provide their salary history as a condition of being considered for employment. Importantly, the law expressly states that it does not apply to current employees applying for promotions or transfers with the same employer. The law also expressly permits discussions about an applicant’s expectations with respect to compensation and benefits.

HB 834 would ban employers from requiring employees to sign a contract or waiver that would forbid the employee from discussing compensation information (though human resources employees and supervisors may be prohibited from disclosing compensation information learned in their jobs).

This legislation amends Illinois’s Equal Pay Act of 2003. The law previously prohibited discrimination in pay among jobs that require “equal” skill, effort, and responsibility, but the new law will require employers to compare jobs that require “substantially similar” skill, effort, and responsibility. It also now requires that any factor that accounts for a pay differential must not be “based on or derived from a differential in compensation based on sex or another protected characteristic,” must be job related and consistent with business necessity, and must account for the entire differential. Employers that violate the law may be subject to compensatory or punitive damages. These changes to the Illinois Equal Pay Act may, therefore, call for a fresh look at an employer’s pay equity analysis.

  • Lower Threshold for “Employer” under the Illinois Human Rights Act (House Bill 252)

HB 252 amends the Illinois Human Rights Act (IHRA) and provides that “employer” includes any person employing one or more employees within Illinois during 20 or more calendar weeks within the calendar year of or preceding the alleged violation. This significantly expands the previous definition of employer, which included any person employing 15 or more employees in Illinois (matching Federal Title VII’s requirements).

  • Disclosure of Board Demographics (House Bill 3394)

HB 3394 requires publicly traded companies based in Illinois to report the demographics of their board and executives, including the self-identified gender and race of each member of its board. The University of Illinois will then publish an annual report card on Illinois companies’ diversity. Companies will also need to report on their policies and practices for promoting diversity. A previous version of the bill would have required companies to include at least one woman, one African-American, and one Latino on their boards, but these requirements were removed from the bill before it was passed by the state legislature.

Practical Takeaways for Employers

Employers should be acutely aware of how these legislative changes affect their workplaces. To prepare for the implementation of the laws above, employers doing business in Illinois may consider doing the following:

  • Ensuring their sexual harassment and discrimination policies comply with the requirements outlined in SB 75
  • Adopting annual sexual harassment trainings that cover the standards set forth in Illinois law and federal law and preparing for such trainings
  • For employers with under 15 employees that were previously not covered by the IHRA, reevaluating policies to ensure they are in compliance
  • Limiting the use of arbitration or nondisclosure agreements with respect to harassment claims where necessary, and revising all employment agreements to ensure their nondisclosure and arbitration clauses meet the standards set forth in SB 75
  • Adjusting hiring or recruitment processes to eliminate questions about salary history as required by HB 834
  • Conducting privileged pay equity audits to evaluate compliance with the amended Illinois Equal Pay Act

Although #MeToo has not changed the fundamentals of federal discrimination law, the cultural shift continues to place new obligations on employers.

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
This post was written by Kayla A. McCann and Sarah J. Platt at Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
More on Employment & Pay Equality on the National Law Review Labor & Employment page.

It’s Not Just A Game – Addressing Employment Law Issues in Esports

The vast video gaming ecosystem is comprised of a wide range of stakeholders, including game publishers, professional and amateur teams, leagues, tournament and event organizers, broadcasters and other media distributors, sponsors and advertisers. And, last but not least (as this is a labor and employment law blog), there are the skilled players who are central to the growth of competitive video gaming known as esports.

While professional leagues, competitions, and teams of players form around various game titles such as Overwatch, League of Legends, Call of Duty, and Fortnite, legal risks often rise in lockstep with commercial growth and opportunity. Those legal risks can become heightened for nascent businesses that myopically focus on revenue and growth, while giving little attention to the operational aspects of how that business will grow. Indeed, the internet landscape is littered with warnings to industry stakeholders about various legal issues they should – but may not – be considering as they endeavor to grow their businesses and operations. These issues include, for example, data privacy and the use and protection of intellectual property. Invariably, labor-management relations and other workplace and employment-related issues are found at or near the top of every list.

As team operators hire players to compete in leagues and other competitions, they are submitting themselves – perhaps unwittingly – to a panoply of labor and employment laws and regulations that may govern the team-player relationship. In a prior post, we addressed the culture of gaming and the challenges of conforming the behavior of players and other team personnel to workplace laws concerning sexual harassment and other forms of prohibited employment discrimination.

Recently, workplace issues in esports were back in the spotlight when one of the world’s most recognized professional Fortnite players, Turner Tenney (known as “Tfue”), filed a lawsuit against his esports team, FaZe Clan, in a California court. In his lawsuit, Tfue seeks to undo his allegedly oppressive three-year contract with the team and asserts that the team unlawfully deprived him of business opportunities and failed to pay him his share of team sponsorship revenues. Central to the case are the personal branding opportunities that Tfue claims to be unfairly missing and are somewhat unique to professional gamers, who, outside of competitive gaming activities, spend hours connecting with and creating media content for millions of fans and followers through internet streaming platforms like YouTube and Twitch.

While the merits of the Tfue-FaZe Clan case are uncertain and difficult to assess, it does highlight the varied and complex legal issues bound up in the team-player relationship. Those issues are critically driven by whether the team does (or should) engage the player as an independent contractor or as an employee. Improperly classifying a player as an independent contractor can trigger significant legal issues and problems for a team relating to income and employment tax withholding, wage and hour laws, workers’ compensation and other benefits, media and intellectual property rights, unionization and unfair labor practices, and control of player business and sponsorship activities and other conduct.

The worker classification question is only the beginning. Additional concerns relating to the engagement of players by teams include the impact of child labor laws as to players who are under the age of 18 (and there are many such players in professional gaming), as well as cross-border considerations, including immigration laws and the procurement of visas for foreign players competing in the United States and for American players competing abroad.

Irrespective of its merits, the Tfue-FaZe Clan case should serve as a wake-up call for esports and the larger video gaming industry. It is a reminder that commercial and revenue growth is best built on the creation – not at the expense – of a proper operational and legal business foundation. Carefully constructing or reassessing player contractual relationships should be part of that proper foundation. To do that requires input from sophisticated legal counsel and business advisors, preferably before the potential storm clouds form and unleash their fury. As President John F. Kennedy once wisely said, “The time to repair the roof is when the sun is shining.”

 

© 2019 Foley & Lardner LLP
This post was written by Jonathan L. Israel of Foley & Lardner LLP.
Read more on Labor and employment issues on our employment type of law page.

State Attorney Generals Brace for Battle with Department of Labor Over Newly Proposed Federal Overtime Salary Exemption Threshold

After the March 7, 2019 unveiling by the U.S. Department of Labor (“DOL”) of its long- awaited proposed rule, which would make more workers eligible for statutory overtime  pay, the attorneys general (“AGs”) of 14 states and the District of Columbia announced on May 21, 2019 that they oppose DOL’s proposed rulemaking. Included among the states opposing DOL’s proposal are New Jersey and New York.

The existing annual salary overtime exemption threshold under the Fair Labor Standards Act (“FLSA”) is $23,600 for full-timers (or $455 per week). Employees who are paid below that salary must be paid overtime if they work more than 40 hours per week. The FLSA salary threshold test has not changed since 2004.

DOL’s newly proposed rule, characterized as an Executive Order 13771 “deregulatory action,” would, among other things, increase the qualifying salary threshold for overtime exemption to $35,308 annually for full-time workers (or $679 per week). In doing so, the rule, if promulgated, would effectively convert an estimated one million workers to hourly wage status and qualify them for time-and-one-half overtime pay for hours they work in excess of 40 in a given workweek.

The newly proposed rule also would clarify the type of compensation (such as payments made for vacations, holidays, illness, or failures to provide sufficient work) which would be excluded from the definition of an employee’s “regular rate” for purposes of calculating whether overtime pay is due, and increase the total annual compensation threshold for “highly compensated employees” (for whom overtime wages generally need not be paid) from $100,000 to $147,414 annually.

The proposed new rule stands in sharp contrast to the final rule promulgated by DOL during the Obama Administration in 2016, which would have raised the annual salary exemption threshold to $47,476 for full-timers (or $913 per week) and require automatic adjustments to the salary threshold standard every three (3) years. However, on November 22, 2016, a federal district court in Texas held that that rule was inconsistent with Congressional intent and issued a nationwide injunction staying its implementation. On October 30, 2017, DOL appealed the district court’s summary judgment decision to the Fifth Circuit Court of Appeals. On November 6, 2017, the appellate court granted the Government’s motion to hold the appeal in abeyance while DOL reexamined the salary threshold test.

The AGs argue that the proposed rule does not go far enough, championing instead the Obama-era 2016 Final Rule, which would have made roughly four million workers newly eligible for overtime pay. In the May 21, 2019 letter signed by each of the AGs, they contend, among other arguments, that the newly proposed rule would be arbitrary and capricious, and therefore unlawful under the  federal  Administrative Procedure Act, because it would unreasonably institute a markedly lower salary threshold level and improperly eliminate mandated periodic reviews of the salary threshold standard. Meanwhile, Congressional Democrats have announced plans to introduce legislation that would revive the Obama-era salary exemption threshold.

On March 29, 2019, DOL published its newly proposed rule, triggering a 60-day public comment period that expired May 28, 2019. Presumably, DOL will be reviewing the comments it received and publishing its final rule, though the final rule’s promulgation date is uncertain. Given the anticipated political and judicial battles over what the new threshold should be, it is not clear what overtime salary exemption threshold ultimately will emerge.

Takeaways for Employers

  • Employers should closely monitor administrative, judicial and legislative developments relating to the proposed increase in the salary exemption overtime threshold.

  • An increase in the threshold is likely, though the amount of the increase and the effective date of same remain uncertain.

  • Once the threshold is increased, certain employees previously exempt from overtime will be eligible for hourly overtime pay depending on what dollar amount is established as the new salary threshold standard, and employers will be required to maintain time worked records for those newly converted hourly employees.

  • In anticipation of the change in the threshold amount, employers should begin the process of identifying job classifications that potentially may be impacted by a change in the salary exemption standard.

© Copyright 2019 Sills Cummis & Gross P.C.
This post was written by Clifford D. Dawkins, Jr. and David I. Rosen of Sills Cummins & Gross P.C.
Read more news on the DOL Overtime Regulations on the National Law Review’s Employment Law Page.

Colorado Revamps Existing Wage Discrimination Law

On May 22, 2019, Colorado’s Governor Polis signed the Equal Pay for Equal Work Act (the “Act”), which brings significant changes to the existing Wage Equality Regardless of Sex Act. C.R.S. § 8-5-101 et seq.  Effective January 1, 2021, the Act will prohibit employers from paying an employee of one sex less than an employee of a different sex for substantially the same work.

Employers will also be required to announce or post all opportunities for promotion to all current employees on the same calendar day, and include the hourly or salary compensation, prior to making a promotion decision. Additionally, employers will be required to keep records of job descriptions and wage rate history for each employee for the duration of employment plus two years after the end of employment.

Note that wage differentials between employees of different sexes who perform substantially similar work are allowed where the employer can demonstrate that the difference in wages is based upon one or more factors, including:

  • A seniority system;
  • A merit system;
  • A system that measures earnings by quantity or quality of production;
  • The geographic location where the work is performed;
  • Education, training, or experience to the extent that they are reasonably related to the work in question; or
  • Travel, if the travel is a regular and necessary condition of the work performed.

Also, the Act will prohibit an employer from:

  • Seeking the wage rate history of a prospective employee or relying on a prior wage rate of a prospective employee to determine a wage rate;
  • Discriminating or retaliating against a prospective employee for failing to disclose the employee’s wage rate history;
  • Discharging or retaliating against an employee for asserting the rights established by the Act;
  • Prohibiting employees from disclosing their wage rates; and
  • Requiring an employee to sign a waiver that prohibits an employee from disclosing their wage rate information.

Importantly, the Act will remove the authority of the Colorado Department of Labor and Employment to enforce wage discrimination complaints based on sex and permit aggrieved employees to file a civil action in district court, where a prevailing employee may recover liquidated damages and attorneys’ fees.

Employers may wish to consider auditing their existing pay structures to make sure employees are receiving equal pay for equal work in compliance with the Act and would do well to post all opportunities for promotion to all current employees at the same time. Employers with questions regarding the Act, or pay audits generally, should consult with competent counsel.

 

© Polsinelli PC, Polsinelli LLP in California.
This post was written by Gillian McKean Bidgood and Mary E. Kapsak of Polsinelli PC.
Read more state employment news on our labor and employment type of law page.

Colorado Enacts Equal Pay for Equal Work Law, Effective 2021

Colorado Governor Jared Polis signed the Equal Pay for Equal Work Act (Senate Bill 85) into law on May 22. The intent of the new law is to help close the gender pay gap in Colorado and ensure that employees with similar job duties are paid the same wage rate regardless of sex, or sex plus another protected status. Unless a referendum petition is filed, the law goes into effect on January 1, 2021, providing employers with 19 months to come into compliance. Key points of the legislation follow.

Prohibited Conduct and Scope

The Act prohibits employers from:

  • paying differing wages based on an employee’s sex or on the basis of sex in combination with another protected status (disability, race, creed, color, sex, sexual orientation, religion, age, national origin, or ancestry) unless one of the statutory exceptions apply;

  • seeking the wage rate history of a prospective employee or relying on a prior wage rate to determine a wage rate for the position in question;

  • discriminating or retaliating against a prospective employee for failing to disclose their wage rate history;

  • discharging or retaliating against an employee for asserting the rights established by the Act, invoking the Act’s protections on behalf of anyone, or in assisting in the enforcement of the Act;

  • discharging, disciplining, discriminating against, coercing, intimidating, threatening, or interfering with an employee or other person because they inquired about, disclosed, compared, or otherwise discussed the employee’s wage rate; and

  • prohibiting an employee from disclosing wage rate information.

The Act defines “employer” broadly to include “the state or any political subdivision, commission, department, institution, or school district thereof, and every other person employing a person in the state.”  “Employee” is defined as “a person employed by an employer.”

Exceptions to the Act

The Act allows exceptions to the prohibition against a wage differential based on sex if the employer demonstrates the difference in wages is reasonably based upon one or more factors, including:

  • a seniority system;

  • a merit system;

  • a system that measures earnings by quantity or quality of production;

  • the geographic location where the work is performed;

  • education, training, or experience to the extent that they are reasonably related to the work in question; or

  • travel, if the travel is a regular and necessary condition of the work performed.

In relying on these factors, the employer must not rely on prior wage rate history to justify a disparity in current wage rates.

New Employer Obligations

The Act also imposes new affirmative obligations on employers. Once the Act is in effect, employers must:

  • announce to all employees employment advancement opportunities and job openings, and the pay range for the openings; and

  • maintain records of job descriptions and wage rate history for reach employee for the duration of their employment, plus two years.

Private Right of Action and Enforcement

Employees have a private right of action in district court to pursue remedies specified in the law. They need not first file administrative wage discrimination complaints with the Colorado Department of Labor and Employment before bringing suit.

The Act sets a two-year statute of limitations; a violation of the statute occurs each time a person is paid a discriminatory wage rate.

An employee may recover both economic damages (measured as the difference between the amount the employer paid and what the employee would have received had there been no violation) plus additional liquidated damages, equal to the amount of the economic damages. The liquidated damages provision is intended to compensate an employee for the delay in receiving amounts due. Employees may also recover attorneys’ fees and costs, and obtain legal and equitable relief, which may include reinstatement, promotion, and a pay increase.

The Director of the state Department of Labor and Employment is also authorized to enforce actions against an employer involving transparency in pay and employment opportunities, including fines of between $500 and $10,000 per violation. An employer’s failure to comply with the Act for one promotional opportunity or job opening is considered one violation.

Good Faith Defense and Wage Audits

An employer may avoid liquidated damages for a violation if it can establish that it had reasonable grounds for believing it was not in violation of the Act. The Act states that one factor to be considered in determining good faith is whether the employer had completed within the prior two years a “thorough and comprehensive pay audit of its workforce, with the specific goal of identifying and remedying unlawful pay disparities.”

Rebuttable Presumption Regarding the Failure to Keep Records

If an employer fails to keep required wage records and is later sued, the Act permits the court to impose a rebuttable presumption that the records not kept by the employer contained information favorable to the employee’s wage claim and the jury may be instructed that the failure to keep records is evidence that the violation was not in good faith.

Lessons for Employers

With pay equity issues increasingly in the news, we expect this new legislation to spur an uptick in litigation after it goes into effect in 2021. Because these are inherently fact-intensive cases, litigation involving the new Equal Pay for Equal Work Act will be complex and protracted. Colorado employers should audit and review their compensation systems now in order to identify and address potential problems. Consideration should be given to involving outside counsel in these audits in order to cloak them with the attorney-client privilege against public disclosure.

Copyright © by Ballard Spahr LLP
This post was written by Steven W. Suflas and Rachel R. Mentz of Ballard Spahr LLP.
Read more labor and employment news on the National Law Review’s Employment law page.

Five Fast Facts about Washington’s New Noncompetition Law

On May 8, 2019, Washington Governor Jay Inslee signed into law a bill that prohibits employers from entering into noncompetition covenants with employees whose W-2 earnings are less than $100,000, and with independent contractors paid less than $250,000 per year.

In addition to the above, employers should be aware of the following five provisions in the new law:

  • The law creates a presumption that any covenant longer than 18 months is unreasonable and unenforceable as a matter of law.  A party to the covenant may rebut the presumption by showing through clear and convincing evidence that a duration longer than 18 months is necessary to protect the party’s business or goodwill.
  • A covenant will be unenforceable unless the employer discloses its terms to a prospective employee in writing.
  • If a covenant is entered into after employment begins, the employer must provide consideration in addition to employment to support the covenant.
  • If an employee subject to a noncompetition covenant is terminated in a layoff, the covenant is void unless the employer pays the terminated employee base salary for the remainder of the covenant’s terms, less compensation earned through subsequent employment.
  • If a court determines a noncompetition covenant violates the new law, the party seeking enforcement must pay the aggrieved person the greater of the actual damages or $5,000, plus reasonable attorneys’ fees and costs.

The new law will take effect January 1, 2020.

 

© Polsinelli PC, Polsinelli LLP in California.
This post was written by Cary Burke of Polsinelli PC.
Read more on Washington’s noncompete agreement law the National Law Review’s Labor and Employment page.