Social Hosts Beware: “One More for the Road?” May Be a Bad Idea

The company was hosting its annual holiday party.  The company had arranged to hold the event that Saturday night in a hotel ballroom.  Moods were festive, especially because the company’s profits were up about 10%.  Because he enjoyed doing it and served as a freelance bartender in his spare time, one of the company’s new sales employees, Tom Collins, was helping to tend bar.

Much of the company’s success that year was attributable to the efforts of Johnny Walker, V.P. of Sales, who, for understandable reasons, was in a celebratory mood.  When he, at about 11 p.m., bellied up to the bar for a fourth round, Tom couldn’t help but notice that Johnny, normally the epitome of self-control, seemed more than a little impaired.  Tom said to Johnny, “Mr. Walker, with all due respect, don’t you think that it may be time to slow down?  In fact, given the hour, I’ll be happy to arrange a ride to take you home.”  Johnny, now irritated, replied “Tom, you make an excellent highball, but I’d be grateful if you’d mind your own business, OK?”  Tom did as he was asked and poured Walker another drink.  With that, Johnny, armed with another scotch and soda, disappeared into the crowd.

The next morning, Tom, to his shock, learned that Johnny had gotten into his Volvo to drive home and promptly collided with another driver.  The other driver, as a result, was seriously injured and remained hospitalized in a coma for about nine months.  He then died.

Candy is dandy, but liquor is quicker, so be careful out there . . .

May an employer with employees in North Carolina, in appropriate circumstances, be held liable for the malfeasance of its employees and, specifically, be held liable as a “social host” because one of its employees served alcohol to a person when the employee knew or should have known that the person was drunk and would soon be driving on public roads and might hurt or kill someone?

Absolutely.  The doctrine of “social host liability” was first declared in North Carolina about 25 years ago.  The North Carolina Supreme Court, in the 1992 case of Hart v. Ivey, ruled that the plaintiffs had stated a valid claim when they alleged that various defendants had been negligent in throwing a party at which beer was served to an 18-year-old, under circumstances in which the defendants knew or should have known that the young man was intoxicated at the time he was served, that he would drive a motor vehicle from the party, and that he was likely to injure someone.

The court wrote that it had not been able to find a North Carolina case dealing with similar facts, but concluded “that the principles of negligence established by our decisions require that we hold that the plaintiffs .  .  . have stated a claim.”  The court emphasized that it was not recognizing a new claim, but was merely applying the established elements of negligence to find that the plaintiffs stated claims recognized by law.

What had the plaintiffs claimed?  Only:

  • That “the defendants served an alcoholic beverage”;
  • To a person they knew or should have known was under the influence of alcohol; and,
  • That the defendants knew that person would shortly thereafter drive an automobile.

The court’s conclusions in Hart, if you think about them, aren’t surprising:

If proof of these allegations were offered into evidence, [then] the jury could find from such evidence that the defendants had done something a reasonable man would not do and were negligent.  The jury could also find that a man of ordinary prudence would have known that such or some similar injurious result was reasonably foreseeable from this negligent conduct.  The jury could find from this that the negligent conduct was the proximate cause of the injury to plaintiffs.

Sadly, the court later had occasion to encounter just such a claim brought by the estate of a man killed by an employee who had attended a party for a retiring supervisor at the home of an officer of the employer.  In the 1995 case of Camalier v. Jeffries, the employer sponsored the party and hired a catering company to help with food and drink service and another company to handle parking arrangements.  The catering company and a company that it hired supplied all of the bartenders at the party.

The employee downed three or four gin and tonics and then decided to leave, and was taken by van to his car.  He then drove his car into an automobile whose driver suffered serious injuries and then died of the injuries about nine months later.  Within two hours after the time of the accident, a blood sample was drawn from the employee showing that his blood-alcohol concentration was well over the legal limit.

In ruling on the case, the North Carolina Supreme Court reiterated the elements of “social-host liability” that it had declared in Hart.  In Camalier, the defendant company and one of its officers dodged liability, but only because the evidence was insufficient to show that they knew or should have known that the employee was hammered when he was served alcohol at the officer’s home.

The court observed that there was no question that the defendant employer and its officer caused alcohol to be served to the employee and knew or should have known that the employee would be driving an automobile after the party.  Thus, the first and third factors set forth in Hart were not in dispute.  But the court also found that the predicted evidence didn’t show that either the employer or the officer knew or should have known that the employee was drunk when he was being served.

The impaired employee who caused injury in Camalier had been served by a vendor hired by the employer rather than by an employee of the defendant employer.  It appears that North Carolina’s appellate courts have not yet held an employer liable as a “social host” based on the actions of an employee, but the circumstances in which a court may do so are not difficult to imagine.  Such liability can arise from an employer-hosted event at a restaurant, country club, pub, or similar establishment.  The location will not matter and a court is likely to find employer liability if there is proof that an employee, under circumstances intended to promote the interests of the employer, served alcohol to a person when the employee, or its representative, knew or should have known that the person was intoxicated and would soon be driving and that a third-party was injured as a result.

The Supreme Court of New Mexico, addressing such an issue, highlighted the principles of employers’ and employees’ liability as “social hosts” where the host purchases liquor and causes it to be served to a guest and, as a result, a third person is injured.  In the 2011 case of Delfino vs. Griffo, employees of a pharmaceutical company, in the course of their employment, entertained a physician’s employee in several restaurants.  The guest consumed considerable alcohol, became very intoxicated, departed in her car, and shortly thereafter caused a fatal accident.

The New Mexico court, discussing liability as a “social host,” observed:

Social hosting need not occur in a home; one may host in a bar or restaurant where the actual delivery of alcoholic beverages to the guests is performed by a licensed server.  Factors that are key to determining whether one is a social host in a public establishment are whether the alleged social host exercised control over the alcohol consumed by the guests; whether the alleged social host convened the gathering for a specific purpose or benefit to the alleged social host, such as promoting business good will; and whether the alleged host intended to act as ‘host’ of the event, meaning arrange for the service of and full payment for all food and beverages served to the guests.

The New Mexico court found, based on the facts of the Delfino case, that the employer was a “social host” for the drunk driver and, in such capacity, the employer could be sued and held liable.

Bring your carrier along for the ride . . .

Employers may consider purchasing general liability insurance to insure them against losses arising from the provision of alcohol by their employees to an intoxicated driver who then causes injury or death.  A typical general liability insurance policy includes a business liability provision that will pay for damages arising from causing or contributing to the intoxication of a third party, so long as the insured entity is not in the business of manufacturing, distributing, selling, or furnishing alcoholic beverages.  Employers can also buy a one-time special event policy if their current insurance doesn’t provide that kind of coverage.

Employers may also try to insulate themselves from “social host” liability by hiring professional caterers or bartenders who maintain such general liability insurance coverage, so that the employer, if it encounters a “social host” liability claim, may at least try to pass the liability to the caterer’s or bartender’s insurance carrier.

Employers should bear in mind, however, if tragedy occurs and litigation ensues, that it is the employer—not the insurance company—that will be sued, and that having insurance does not mean that the employer is immunized from liability.  It means only that the insurance carrier may have to pay if the employer is found liable (or, more likely, if the employer convinces the carrier to pay a pre-trial settlement to enable the employer to avoid an embarrassing lawsuit).  Moreover, a policy’s limits of liability are not always high enough to cover all claims.  The amount of liability can exceed the limits, in which case the employer, if held liable as a “social host,” can, to one degree or another, be on its own to pay a settlement or judgment.

Conclusion

One useful tip for employers who want to celebrate with their employees and host social events at which alcohol is served is to limit the access to alcohol, such as by setting limits on how much or how long alcohol is served at the event.  You can’t mandate good judgment, but you can decide how much temptation you’re willing to pour.

 

© 2017 Ward and Smith, P.A..
This post was written by Grant B. Osborne of Ward and Smith, P.A..
Read more Labor and Employment News on the National Law Review’s Labor and Employment Practice Group page.

Insurance Coverage in the Post-Weinstein Era

With new headlines involving sexual harassment and other inappropriate sexual conduct continuing to emerge on a daily basis, insurance coverage for claims that might emerge is something every company should consider.

Recently, media reports have discussed settlements of shareholder derivative claims against members of the boards of directors and other senior executives of public companies. These settlements illustrate both the type of corporate liability that can ensue from allegations that a company turned a blind eye to, or otherwise failed to prevent, sexual misconduct allegations, causing financial and reputational harm to the organization, and the critical role insurance can play in protecting companies and their executives against such claims.While reports indicate that one or more of the settlements is being funded entirely from insurance proceeds, it is unclear whether the settlement proceeds will be coming from D&O insurance or EPLI insurance, or both. D&O insurance is intended to cover corporate mismanagement claims but typically contains some form of employment practices liability exclusion. EPL insurance is intended to cover employment practices liability claims but may not cover management liability claims arising from allegations of sexual harassment. This creates a potential gap in coverage that could have serious consequences.

D&O and EPLI policies are not standard and contain different wording and exclusions.

WHAT TO DO?

In this environment, it behooves corporate management of every company to understand the scope of insurance coverage for sexual harassment and management liability claims and to ensure that appropriate coverage is in place without coverage gaps.

Here is what policyholders should do: comprehensively review all relevant corporate insurance programs to determine what coverage is in place for sexual harassment claims of any variety, and for claims arising from corporate actions that might be necessary in the wake of an issue or claim, such as claims of wrongful termination and defamation.

Policies to be reviewed should include CGL, EPL, D&O and E&O.

Determine whether coverage gaps exist and if so, consider enhancing coverage to ensure proper protection.

Understand what needs to happen in terms of notice to insurers in the event of a claim or knowledge of circumstances that might lead to assertion of a claim.

And be aware of the potential for coverage before agreeing to any payments or settlements that might preclude or limit coverage.

© 2017 Proskauer Rose LLP.
This post was written by Seth B Schafler of Proskauer Rose LLP.
Learn more at the Insurance Law Page on the National Law Review.

“Newly Minted” NLRB Majority Begins to Roll Back Decisions of the Obama Board

In two recent developments, the “new” National Labor Relations Board (“NLRB” or the “Board”), which includes two Members nominated by President Trump, has commenced the anticipated roll back of decisions and procedures rendered by the previous Administration’s NLRB.

1. The NLRB General Counsel can no longer demand settlements with a full remedy for all violations. 

In UPMC, 365 NLRB No. 153 (December 11, 2017), the Board reversed a 2016 decision that prohibited settlements of NLRB complaints over the objection of the NLRB General Counsel (Prosecutor) and the party filing the charge, unless the settlement provided complete remedies for all violations alleged in the Complaint. The 2016 decision, United States Postal Service, 364 NLRB No. 116 (2016), had overturned decades-long NLRB precedent established in Independent Stove, 287 NLRB 740 (1987).

In the UPMC majority’s (Chairman Philip Miscimarra, Member William Emanuel, Member Marvin Kaplan) view, requiring a settlement of all violations with a full remedy for the employees (and union) “imposed an unacceptable constraint on the Board itself which retained the right under prior law to review the reasonableness of any … settlement terms” offered by Respondents (employers and unions). According to the UPMC majority, the 2016 USPS decision unduly restricted the settlement of NLRB cases and ignored the risks inherent in NLRB litigation. The UPMC decision now allows a Respondent, with approval of the Administrative Law Judge, to settle a case without providing full and complete relief, so long as the resolution is “reasonable.” This approach should facilitate more settlements, and reduce the costs and uncertainty inherent in litigation (for employers and the NLRB).

The dissent strongly disagreed with what it called “an eleventh hour” decision during Republican Chairman Miscimarra’s last week as a Board member. However, Chairman Miscimarra will soon likely be replaced by another Republican.

2. The NLRB seeks comments on quickie elections – is more change likely? 

The day after the UPMC decision, the NLRB published a Request for Information (“RFI”) in the Federal Register seeking prompt public comments about the controversial 2014 Election Rule, commonly referred to as the “quickie election” rule.

Specifically, the RFI seeks public input from December 13, 2017 until February 12, 2018 regarding the following three questions:

  1. Should the 2014 Election Rule be retained without change?
  2. Should the 2014 Election Rule be retained with modifications? If so, what should be modified?
  3. Should the 2014 Election Rule be rescinded?

The “quickie election” rule, effective since April 2015, impacted NLRB elections in three main ways:

  • It significantly shortened the time period between the date a petition for election is filed and the date of the election. As a result, elections frequently took place approximately three weeks after the petition was filed. This period shortened employers’ time to respond to the union’s campaign efforts from approximately 6 weeks to 23 days.
  • It considerably restricted the scope of any pre-election challenges that might result in litigation, such as individual voter eligibility issues, unless the question relating to eligibility affected twenty percent (20%) of the proposed unit. Eligibility issues, including determining who is a supervisor and thus is precluded from voting, were generally delayed until after the elections if the union won.
  • It forced employers to disclose a substantial amount of private employee information to the unions, including providing unions with employee contact information. In particular, the employer is required to disclose, for the first time, employee personal email addresses and phone numbers, including all cell phone numbers. Previously, only mailing addresses needed to be disclosed.

While the “quickie election” rule has not substantially increased union election win percentage, opponents of the rule have objected to the limited time it provides employers to communicate with employees regarding the election, the deferral of election eligibility issues until after the election, as well as the procedural challenges.

Takeaways

Moving forward, interested parties should monitor the new Board’s actions. The recent developments indicate the new Board could likely overturn some of the decisions rendered and procedures proffered by President Obama’s NLRB.

© Polsinelli PC, Polsinelli LLP in California
This post was written by W. Terrence Kilroy and Henry J. Thomas of Polsinelli PC.
Learn more at our Labor and Employment Practice Group Page.

PHMSA Raises Random Drug Testing Rate to 50% for 2018

The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration announced December 8, 2017 that during calendar year 2018, the minimum random drug testing rate will be increased to 50%.

Operators of gas, hazardous liquid, and carbon dioxide pipelines and operators of liquefied natural gas facilities must randomly select and test a percentage of all covered employees for prohibited drug use. The minimum annual random drug testing rate was 25% of all covered employees for calendar year 2017.  However, the PHMSA regulations require the Administrator to raise the minimum annual random drug testing rate from 25% to 50% of all covered employees when the data obtained from the Management Information System reports (required to be filed by covered entities under PHMSA regulations) indicate the positive test rate is equal to or greater than 1%.  In calendar year 2016, the random drug test positive test rate was greater than 1%.  Therefore, the PHMSA minimum annual random drug testing rate shall be 50% of all covered employees for calendar year 2018.

Jackson Lewis P.C. © 2017
This post was written by Kathryn J. Russo of Jackson Lewis P.C.
Check out the National Law Review Labor and Employment page for more information.

How Prevalent is Harassment in Organizations?

Recently it seems that we are constantly learning about another high profile individual who has allegedly engaged in sexual misconduct / harassment in the workplace.  These disclosures beg the question of how prevalent is sexual (or other forms of unlawful) harassment in our workplaces.  It is easy to believe that for every high profile individual who has misbehaved, there are countless of other employees who have similarly misbehaved.  Moreover, many of the recent disclosures suggest that the employer in question knew or had reason to know of the alleged misconduct, which had occurred over an extended period, but failed to take any prior action.  So what should organizations do now?

First, organizations should ensure that they have a comprehensive anti-discrimination policy, which includes a procedure for employees to share any concerns about harassment.  Second, organizations must educate its employees at all levels of the organization of its policy and procedure so that they become part of the organization’s culture.  Third, organizations can conduct training on its policy and the law prohibiting harassment.

Supervisors need to be regularly trained to identify conduct that could be considered harassment and how to address it, not ignore it.

Employees need to know that they are entitled to work in a harassment free environment, that they will be held accountable for their behavior at work and for their behavior out of work that can affect the work environment, and that the organization wants them to report any concerns regarding harassment so that they can be addressed.  With these steps, an organization should be able to create a culture that can quickly deal with any concerns of harassment before they present legal liability.

Authored by:  Michael Colgan Harrington of Murtha Cullina 

 © Copyright 2017 Murtha Cullina

Go to the National Law Review’s Labor & Employment Page for more information.

Illinois Employers Face A Recent Rash of Class Action Lawsuits Filed Under State Biometric Information Privacy Law

Illinois enacted its Biometric Information Privacy Act (“BIPA”) in 2008 to regulate, among other things, employer collection and use of employee biometric information.  Biometrics is defined as the measurement and analysis of physical and behavioral characteristics.  This analysis produces biometric identifiers that include things like fingerprints, iris or face scans, and voiceprints, all of which can be used in a variety of ways, including for security, timekeeping, and employer wellness programs.

Illinois is not the only state with a biometrics privacy law on its books, however, its version is considered the nation’s most stringent.  BIPA requires a business that collects and uses biometric data to protect the data in the same manner it protects other sensitive or confidential information; to establish data retention and destruction procedures, including temporal limitations of three years; to publish policies outlining its biometric data collection and use procedures; and to obtain prior, informed consent from any individuals from whom it plans to obtain and use biometric data.   The statute also requires  businesses to notify employees in the event of a data breach.

Protection of biometric data is viewed as critical because, unlike passwords comprised of letters, numbers, or typographical characters, biometric data is unique and cannot be replaced or updated in the event of a breach.  Technology now allows biometric data to be captured surreptitiously, such as recording a voice over the phone, or face mapping individuals in a crowd or through photographs, increasing the risk for its theft or unauthorized or at least, unknown, use.  In fact, these more furtive methods of collecting and using biometric data is what led to the filing of five BIPA class action lawsuits in 2015 – four against Facebook, and one against online photo website Shutterfly – that alleged these companies used facial recognition software to analyze online posts, but did not comply with BIPA’s consent or other procedural requirements.  These first lawsuits brought attention to the private right of action authorized under BIPA, which provides that any “aggrieved” person may sue and recover $1,000 for each negligent violation and $5,000 for each intentional or reckless violation, or, in both circumstances, actual damages if greater than the statutory damages.  Prevailing parties may also recover their attorneys’ fees and costs.

The plaintiffs’ employment bar recently has gotten seriously into the BIPA class action game; since August 2017, approximately 30 lawsuits have been filed in Cook County, Illinois (where Chicago is), alone.  These putative class actions have been filed against employers in many industries including gas stations, restaurants, and retail, and typically involve the employer’s use of fingerprint operated time clocks.  The cases allege that the defendant employers failed to obtain proper informed consent or fail to maintain and inform employees about policies on the company’s use, storage, and destruction of biometric data.  Many of these lawsuits also allege the employer companies have improperly shared employee biometric data with third-party time clock vendors, and some even name the vendor as a defendant.

In addition to the obvious cost of class action litigation, these suits present additional legal challenges because many aspects of BIPA remain untested.  For example, the statutory term “aggrieved” person leaves open the question whether a plaintiff must be able to prove actual harm in order to recover.  The U.S. District Court for the Northern District of Illinois and U.S. District Court for the Southern District of New York both have dismissed BIPA suits for lack of standing where the plaintiffs did not allege actual harm.  The latter case, Santana v. Take-Two Interactive Software, is currently before the United States Court of Appeals for the Second Circuit, which heard oral argument in October 2017, but has not yet issued its ruling.   Other aspects of BIPA also remain in flux – such as whether facial recognition through photography is biometric data, as defined under the statute, and what forms of consent are compliant.  On the other side, defendants are challenging the constitutionality of the damages provisions, arguing that their potentially disproportionate nature to any actual harm violates due process.  As these issues are flushed out under BIPA, they are certain to affect other states who have already enacted, or may seek to enact, laws regarding use of biometric data.

This post was written by Daniel B. Pasternak of Squire Patton Boggs (US) LLP., © Copyright 2017
For more Labor & Employment legal analysis go to The National Law Review 

Haitian TPS Program Will End in July 2019

Six months after then-Secretary of Homeland Security John Kelly announced the extension of Haitian Temporary Protected Status (TPS) for only six months (until January 2018, when he would reevaluate the determination), Acting Secretary of Homeland Security Elaine Duke announced her decision to terminate the designation with a delayed effective date of 18 months.  She said this would allow for an orderly transition before the designation terminates on July 22, 2019.

Haitians with TPS will be required to reapply for Employment Authorization Documents in order to legally work in the United States until the end of the period. Further details about this termination for TPS will appear in a Federal Register notice. Termination of TPS will affect not only some 50,000-60,000 Haitians who are in the U.S. on TPS, but also their families, including approximately 30,000 U.S.-citizen children born in the U.S. to Haitians in TPS status since 2010 (when TPS was conferred after the earthquake that killed thousands on the island).

A number of advocacy groups, members of Congress, and the U.S. Chamber of Commerce had been urging a further extension based on ongoing problems from the devastating 2010 earthquake and Haiti’s limited capacity to reabsorb these nationals and family members.  They also highlighted that termination will create labor dislocations in certain construction, food processing, hospitality, and healthcare industries that have relied on Haitian TPS workers since 2010. Florida and Texas may be particularly hard hit as they continue to recover from Hurricanes Harvey and Irma.

This post was written by Michael H. Neifach of Jackson Lewis P.C. © 2017
For more Immigration legal analysis go to The National Law Review 

Yoga and Massage Therapist Fired for Being “Too Cute” Sees Gender Discrimination Revived on Grounds of Unjustified Spousal Jealousy

A New York appeals court recently ruled in Edwards v. Nicolai (153 A.D.3d 440 (N.Y. App. Div. 1st Dep’t 2017)) that an employment termination motivated by the sexual jealousy of an employer’s spouse may support a claim for gender discrimination under the New York State Human Rights Law (“NYSHRL”) and the New York City Human Rights Law (“NYCHRL”).

Defendants Charles Nicolai and his wife Stephanie Adams – a former Playboy model – were co-owners of a chiropractic center located in New York City. In 2011, Nicolai hired plaintiff Dilek Edwards, a female yoga and massage therapist, and was her direct supervisor. Edwards’s complaint alleged that during the course of her employment, her relationship with Nicolai was “purely professional” and that Nicolai “regularly praised [her] work performance.”

However, in June 2013, Nicolai purportedly told Edwards “that his wife might become jealous of [her], because [Edwards] was too cute.” Several months later, Adams sent plaintiff a text message saying, “You are NOT welcome any longer at Wall Street Chiropractic, DO NOT ever step foot in there again, and stay the [expletive] away from my husband and family!!!!!!! And remember I warned you.” A few hours later, Edwards allegedly received an email from Nicolai stating, “You are fired and no longer welcome in our office. If you call or try to come back, we will call the police.” One day later, Adams filed an allegedly false complaint with the New York City Police Department claiming that Edwards placed “threatening” phone calls to Adams which caused Adams to change the locks at her home and business. Edwards’s complaint alleges that she has “no idea what sparked . . . Adams’ [sic] suspicions.”

Edwards’s NYSHRL and NYCHRL gender discrimination claims were dismissed at the trial court level. However, that decision was overturned on appeal, with the court holding that “adverse employment actions motivated by sexual attraction are gender-based, and therefore, constitute unlawful gender discrimination.” The court explained that while Edwards does not allege that she was subjected to sexual harassment, it can be inferred that Nicolai was motivated to terminate Edwards “by his desire to appease his wife’s unjustified jealousy.” Further, it can also be inferred that Adams was motivated to terminate Edwards based on Adams’s own jealousy. Accordingly, the court found it plausible that each defendant’s motivation to terminate Adams was sexual in nature and therefore unlawful.

In reaching its decision the court observed that, “while it is not necessarily unlawful for an employer to terminate an at-will employee at the urging of the employer’s spouse,” a plaintiff may find relief for such a discharge if the spouse requested the termination for unlawful, gender-related reasons. Here, assuming Edwards’s allegations are true, her termination was unlawful not because Adams asked Nicolai to fire Edwards, but because she did so for no other reason than her belief that Nicolai was sexually attracted to Edwards.

Laura Doyle contributed to this post.

This post was written by Jonathan Sokolowski of Sheppard Mullin Richter & Hampton LLP., Copyright © 2017
For more Labor & Employment legal analysis, go to The National Law Review

Survey Says: Employees Still Value Validation Over Compensation

For decades, survey after survey has shown that recognition, respect, etc., are far more important to employees than compensation. A new survey from Globoforce’s WorkHuman Research Institute confirms that the trend continues. One of the best things about this, in my opinion, is that every manager can impact things like recognition in the workplace in a positive way. In short, there are small things managers can do every day to improve their workplaces, employee morale and engagement.

On the union avoidance front this is key. In many cases, the catalyst for unionization of a workforce is mistreatment of employees by management (including lack of recognition on the job). This latest survey confirms the importance of maintaining positive employee relations. Accordingly, companies should consider ensuring union-free plans contain a strong component of positive employee relations training/planning.

This post was written by David J. Pryzbylski of BARNES & THORNBURG LLP., © 2017
For more Labor & Employment legal analysis, go to The National Law Review

Maryland’s Montgomery County Joins Jurisdictions Increasing Minimum Wage to $15.00

Montgomery County, Maryland, where the minimum wage already is $11.50, is set to join two states (California and New York), the neighboring District of Columbia and at least six local jurisdictions (Flagstaff (Arizona), Los Angeles, Minneapolis, San Francisco, San Jose, SeaTac and Seattle) that have enacted legislation increasing the minimum wage for some or all private sector employees to $15 over the next several years.

On November 7, 2017 the Montgomery County Council unanimously passed Bill 28-17, which increases the minimum wage for “large employers” — those with 51 or more employees in the county — to $15.00 by July 1, 2021, with intermediate increases to $12.25 on July 1, 2018, $13.00 on July 1, 2019, and $14.00 on July 1, 2020.

The bill also increases the minimum wage to $15.00 by July 1, 2023 for “mid-sized employers,” those who (1) employ 11 to 50 employees; (2) have tax exempt status under IRC Section 501(c)(3) of the Internal Revenue Code; or (3) provide “home health services” or “home or community based services,” as defined under federal Medicaid regulations and receive at least 75% of gross revenues through state and federal medical programs.

The bill additionally increases the minimum wage to $15.00 by July 1, 2024 for “small employers” — those with 10 or fewer employee (including non-profits and Medicaid funded home health and home or community based service providers of that size) — with intermediate increases to $12.00 on July 1, 2018, $12.50 on July 1, 2019, $13.00 on July 1, 2020, $13.50 on July 1, 2020, $14.00 on July 1, 2022 and $14.50 on July 1, 2023.

Notably, the rates of increases  is considerably slower than in the neighboring District of Columbia, which is already at $12.50 and will reach $15.00 on July 1, 2020 for all private sector employers.

In addition, the bill includes an “opportunity wage” that allows payment of a wage equal to 85% of the County minimum wage to an employee under the age of 20 for the first six months of employment.

The bill further adopts provisions to automatically adjust the minimum wage rate (1) for large employers annually starting July 1, 2022 to reflect average increases in the CPI-W for Washington-Baltimore for the previous year, and (2) for mid-sized and small employers starting July 1, 2024 and 2025, respectively, to reflect the same CPI-W increase for the previous year, plus one percent of the previous year’s required minimum wage, up to a total increase of $0.50, until the rate is equal to the amount for large employers. An employer’s size is calculated as of the time it first becomes subject to the law, and it remains subject to the applicable schedule regardless of the number of employees employed in subsequent years.

In addition, the Director of Finance must make certifications by January 31 of each year from 2018 through 2022 regarding certain reductions in county private employment, negative growth in the gross domestic product, or whether the U.S. economy is in recession. If certain targets are for that year, for no more than two times.

The bill specifically addresses concerns the County Executive expressed in vetoing a prior version of the bill that passed by a narrow majority in January 2017, by postponing the prior effective dates for large and small employers by one and two years, respectively; increasing from 26 to 51 the number of employees required to be a larger employer; creating a new mid-size employer category of 11 to 50 employees and defining a small employer as one with ten or fewer employees; and adding non-profits and Medicaid funded home health and home health services providers with more than ten employees to the extended schedule for mid-size employers. The County Executive has stated that he will sign the bill.

Notably, it is likely that an effort will be made in the upcoming state legislative session to further increase the state minimum wage, already at $9.25 and set to go to $10.10 on July 1, 2018.

This post was written by Brian W. Steinbach of Epstein Becker & Green, P.C. All rights reserved.,©2017

For more Labor & Employment legal analysis, go to The National Law Review