Category: Labor & Employment

What Is Going On With The Revised EEO-1 Form? Acting EEOC Chair Provides Insight Into Its Status

As loyal readers of our blog are aware, in February 2016, the EEOC released a rule to amend the Form EEO-1.  The new rule requires private employers (including federal contractors) with 100 or more employees to submit pay data with their EEO-1 reports.  Employers with fewer than 100 employees will still not need to file an EEO-1.  Federal contractors with 50-99 employees are still required to file an EEO-1, but are not required to submit the new pay data.  The rule is slated to go into effect on March 31, 2018.

Since the election of President Trump, employers have been watching anxiously to see if the new form and the burdens it places on them will be modified or ideally repealed.  Although employers are not required to submit the new form until March 2018, the addition of compensation information has dramatically increased the complexity of preparing EEO-1 submissions.  As a consequence, if the new EEO-1 form is to remain in effect, employers should start preparing for this new requirement immediately (if they have not already begun).

Efforts have been underway to rescind the new EEO-1 form – including efforts in Congress.  The Chamber of Commerce requested that the Office of Management and Budget (“OMB”) rescind the new form because it violates the Paperwork Reduction Act (“PRA”), arguing that the EEOC’s revised EEO-1 does not “(1) minimize the burden on those required to comply with government requests; (2) maximize the utility of the information being sought; and/or (3) ensure that the information provided is subject to appropriate confidentiality and privacy protections” as required by the PRA.

On August 3, 2017, Acting Chair of the Equal Employment Opportunity Commission (“EEOC”), Victoria Lipnic, speaking at the Industry National Liaison Group’s Annual Conference in San Antonio, Texas, discussed the fate of the revised Form EEO-1.  Speech provided new information about the EEO-1 and her efforts to have the revised form rescinded.

Chair Lipnic noted that the Office of Information and Regulatory Affairs (“OIRA”), which is housed within the OMB, would be the entity deciding Chamber of Commerce’s challenge.  Chair Lipnic informed the gathering that the Administrator of OIRA, Neomi Rao, had only recently been confirmed to the post, but that she (Chair Lipnic) had already reached out to discuss the issues raised by the new EEO-1 form.

Chair Lipnic shared that she has sent Administrator Rao a memorandum, asking OIRA to decide by the end of this month (August 2017) whether to implement or discard the wage data collection portion of the revised EEO-1.  Recognizing the burden posed by the new compensation data requirements, Chair Lipnic expressed that it was important to provide employers with information about the fate of the revised EEO-1 sooner rather than later, so employers can prepare to comply.  In Chair Lipnic’s words, “time is of the essence.”

This post was written by Connie N Bertram Guy Brenner and Alex C Weinstein of Proskauer Rose LLP.
Read more legal analysis at the National Law Review.

California Employers Face New Notice Requirement for Domestic Violence, Sexual Assault, and Stalking Time Off

The California Division of Labor Standards Enforcement (DLSE) has published a new form that must be added to the growing list of documents that employers are required to provide to employees at the time of hire.

The new form refers to employees’ rights under California Labor Code Section 230.1 relating to protections of employees who are victims of domestic violence, sexual assault, and/or stalking. Last October, we notified California employers about this new law amending Section 230.1, Assembly Bill (AB) 2337. The amended law requires employers with 25 or more employees to provide an employee with written notice of his or her rights to take time off for the following purposes:

  1. “To seek medical attention for injuries caused by domestic violence, sexual assault, or stalking.
  2. To obtain services from a domestic violence shelter, program, or rape crisis center as a result of domestic violence, sexual assault, or stalking.
  3. To obtain psychological counseling related to an experience of domestic violence, sexual assault, or stalking.
  4. To participate in safety planning and take other actions to increase safety from future domestic violence, sexual assault, or stalking, including temporary or permanent relocation.”

The law requires employers to provide the notice “to new employees upon hire and to other employees upon request.”

As we reported previously, employers were not required to distribute this information until the California Labor Commissioner published a form employers could use to comply with the law. The law gave the Labor Commissioner until “on or before July 1, 2017” to develop and post the form.

As required by AB 2337, the Labor Commissioner’s office recently released the notice. The DLSE has made both an English and Spanish version of the notice available on its website. The notice also contains information on employees’ rights to reasonable accommodation and to be free from retaliation and discrimination.

Finally, the new law clarifies that employers that do not use the Labor Commissioner’s notice may use an alternative that is “substantially similar in content and clarity to the form developed by the Labor Commissioner.”

This post was written by Christopher W. Olmsted and Hera S. Arsen of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Read more legal analysis on the National Law Review.

Employees Celebrate Chip Party: Embedding RFID Chips – Would You Agree to This?

On 1 August 2017, employees of a Wisconsin-based technology company enjoyed a “Chip Party” – but not the salty kind.  21 of Three Square Market’s 85 employees agreed to allow their employer to embed radio frequency identification chips in their bodies. We are familiar with the Internet of Things, is this the Internet of People?

Three Square Market (known as 32M) highlighted the convenience of microchipping their employees, reporting that they will be able to use the RFID chip to make purchases in the company break room, open doors, access copy machines and log in to their computers.

While the “chipped” employees reported that they felt only a brief sting when the chips were inserted, chipping employees draws deeper cuts through ethical and privacy issues.

One such issue is the potential for the technology to gradually encroach with further applications not contemplated by its original purpose. RFID technology has the potential to be used for surveillance and location-tracking purposes, similar to GPS technology. It also has potential to be used as a password or authentication tool, to store health information, access public transport or even as a passport.

While these potential applications will offer convenience to employers and consumers, the value of the information generated by each transaction is arguably greater for the marketers, data brokers and law enforcement entities that use it for their own purposes. Once data like this exists it can be accessed in all manner of circumstances.  Can you ever provide sufficient advice and counselling to employees to create informed consent free from the power imbalance of the employment relationship?

All keen on tech here at K&L Gates, but no one was putting their hand up for a similar program here, we’ll all just use our pass card to open the door, thanks.  We were left brainstorming films that use implants to see where this technology could take us as it is all too common in Sci-Fi films.  Have a look at The Final Cut, 2004 (warning 37% Rotten Tomato rating), where implants took centre stage by storing people’s experiences.  We are not there yet, but we have taken the first wobbly step on the path.

Read more about 32M’s use of RFID chips here.

See here to find out more about tracking employees with other technologies.

Read more legal analysis on the National Law Review.

Olivia Coburn and Cameron Abbott of K&L Gates contributed this article.

Wave of the Future or a Step Too Far? Wisconsin Company Offers Employees Microchip Implants, Employment Issues Abound

When wireless is perfectly applied the whole earth will be converted into a huge brain, which in fact it is, all things being particles of a real and rhythmic whole. We shall be able to communicate with one another instantly, irrespective of distance. . . . and the instruments through which we shall be able to do his will be amazingly simple compared with our present telephone. A man will be able to carry one in his vest pocket.

–Nikola Tesla, 1926

While we may now take Tesla’s connected world for granted, one cannot help but wonder what readers thought of his predictions in 1926 when he made the above statements in a magazine interview. It remains to be seen whether a similar pattern of skepticism, realization, and acceptance will eventually emerge regarding news that a vending machine company is offering its employees the opportunity to have microchips embedded in their hands to allow more convenient access to facilities, computers, and financial accounts.

The Wisconsin-based employer is reportedly the first in the United States to offer microchips (at a cost to the employer of $300 each) to employees on a voluntary basis. The microchip, roughly the size of a grain of rice, would be inserted into an employee’s hand between the thumb and forefinger, and could be used instead of a key to access buildings, log onto computers or printers, and even pay for goods in the company’s break room. It is not unlike fingerprint or other biometric technology that is becoming more widely used. In this case, however, the pertinent information is stored on the embedded microchip.

The company noted that in the future, the chip may also be able to store medical information or be used for transactions outside of the company. The chip’s technology is not, however, currently able to use GPS to track employees’ whereabouts.

Employers considering whether to implement such emerging technology may want to carefully assess whether the convenience outweighs the risks. Among the legal issues are the following:

Personal Privacy

While the company making headlines has stated that it will not use the technology to track its employees’ whereabouts (and the technology cannot currently support GPS monitoring), embedded microchips like this could create an electronic trail of the employee’s whereabouts whenever the employee is scanned to access secured locations.

Depending on where access points are installed, an employer could gain useful information, such as how long an employee spent in the break room, in the same vicinity as another employee who was allegedly harassed, or where material went missing. Further, having a record of frequent “check-ins” throughout the day as the employee accesses buildings, printers, computers, vehicles, etc. might aid in verifying time records for payroll purposes or compliance with delivery schedules and other customer expectations. This technology is already available to employers through access cards, login PINs, and other devices. The embedded chip would be another technology to use for that purpose, and it would be more difficult to trick the system with “buddy punches” and other surreptitious behavior with microchip technology. On the other hand, an employer could also theoretically confirm how long an employee spent in the restroom, at a union meeting, or complaining to human resources.

If embedded chips ever advance to the point of supporting GPS, a current body of case law regarding non-embedded GPS devices (like phones and devices installed on company vehicles) offers insights into potential legal risks. Companies use these technologies to track the whereabouts of employees, but that also gives companies information that could form the basis of a discrimination claim. For example, a company may learn that an employee is regularly at a medical clinic, which the employee might use to claim disability discrimination. Or, in Wisconsin where state law protects against discrimination based on the use or non-use of lawful products, the employer might learn that the employee spends a lot of off-duty time at the neighborhood bar, which could lead to a claim that the employee was discriminated against for using legal products while not on duty.

In addition, requiring GPS tracking of employees’ whereabouts is a mandatory subject of bargaining for unionized employees. Even for non-union employees, courts have found that employers go too far if they track employees’ whereabouts in places where employees would have a reasonable expectation of privacy (like their homes). Public employers face even greater risks in using GPS technology because courts have found that GPS technology may qualify as a search under the Fourth Amendment.

Data Privacy

Information from the chip (e.g., banking information and medical information) has value and could be the target of theft. Just as personal information could be hacked from other company databases and infrastructure, hacking may be a possibility with this new technology. Because the chip is provided by the employer, would the employer be liable for damages resulting from the misappropriation of stolen information? If an employer were negligent in implementing security protocols on the microchips, there could be litigation over the employer’s liability.

Workers’ Compensation

If an employee has a medical reaction from the implant or the procedure of implanting the chip (for example, developing an infection), there is a possibility that the medical reaction could give rise to a workers’ compensation claim because the chip was provided by the employer for work-related reasons.

Medical and Religious Accommodation

The employer in question here is not requiring employees to embed the chips, but requiring employees to do so would be difficult. Employees would likely have a right to opt out of the requirement based on medical or religious objections. It is not unlike requiring employees to get an annual flu vaccine. Some employees are medically unable and must be granted a medical accommodation under the Americans with Disabilities Act and applicable state laws (absent an undue hardship to the employer). Others may object on religious grounds and therefore qualify for accommodations on that basis.  At least one court has supported an employee’s right to decline on religious grounds far less invasive biometric access technology.

A Look Into the Future

While the microchips currently in use appear to serve limited purposes, it is not farfetched that the technology will continue to develop and allow new uses. Employees may be comfortable with the current use, but not with future uses. Clear communication with employees as to the capabilities and uses of the chip would be essential to minimizing legal risk.

Even more practically, the technology of the chip itself may become outdated or employees might leave their employment with the company and the company would need to determine what to do with the chip already embedded into the employee. This could create medical challenges in removing the chip or controversies with the employee over who has rights to the chip itself or is obligated to pay for its removal.

While the company at issue here has not made implanting a microchip a condition of employment, social, economic, and practical influences could leave employees with little alternative. Just like the convenience of direct deposit has made paper payroll checks virtually obsolete, so too the convenience of chip technology may render physical keys, identification badges, and similar access control measures a thing of the past. Why risk losing or forgetting your identification badge when you can guarantee the necessary data is with you at all times? Financially, it seems likely that an employer could offer an incentive to employees who make use of the chip technology much like auto insurance companies offer premium reductions to those who permit tracking of their driving habits. Many employers already offer shift premiums, are chip premiums on the horizon?

Ultimately, while this developing technology may certainly provide some added convenience and may not be all that significant a departure from our society’s current reliance on mobile devices, embedding a microchip into an employee’s body takes the invasiveness of the technology and the legal ramifications one step further and requires a thoughtful weighing of the risks versus the benefits.

More legal analysis is added daily at The National Law Review.

This post was written by Keith E. Kopplin  and Sarah J. Platt of Ogletree, Deakins, Nash, Smoak & Stewart, P.C..

Take a Screen Shot of This: Supervisor Unlawfully Interrogated Employee Through Text, NLRB Says

Texting has become one of the most common ways  people communicate. Despite its prevalence, however, texting can raise serious concerns for employers, particularly when such communication takes place between a supervisor and employee in the context of a union election.  A recent National Labor Relations Board (NLRB) case makes that point clear. In RHCG Safety Corp and Construction & General Building Laborers, Local 79, the Board held that a coercive text message from a supervisor to an employee could serve as evidence that an employer unlawfully interrogated employees concerning their union support.

This decision echoes other NLRB decisions holding that an unlawful interrogation does not need to be face-to-face to be in violation of the National Labor Relations Act (NLRA). The Board has held that such unlawful interrogation can occur over a phone call, a written job application form, and now, it seems, via a short text message containing 40 characters.

The case arose in the context of a union election. During the union’s campaign, an employee texted his supervisor asking if he could return to work after a leave of absence. The supervisor responded, by text message, “U working for Redhook or u working in the union?” (Redhook is how RHCG Safety is known.) The Board found that by juxtaposing working for the employer with working in the union, the supervisor’s text strongly suggested that the two were incompatible. The Board accordingly ruled that the text constituted an unlawful interrogation and violated Section 8(a)(1) of the NLRA.

Significantly, the NLRB found that for purposes of determining legality, it doesn’t matter whether the message actually coerced the employee, so long as the interrogation was coercive in nature. To this end, the Board found certain facts weighed in favor of making the text coercive in nature. First, the employee was not an open union supporter at the time of the interrogation. Second, the supervisor did not communicate to the employee any legitimate purpose for asking if he was working in the union. Finally, the supervisor didn’t provide the employee with any assurances against reprisals.

This case suggests that seemingly offhanded communications between supervisors and employees may be determined to be coercive, interrogative, and in violation of the NLRA. Employers should consider their communication policies and train supervisors on methods of communicating with employees, particularly during a union election.

Read more legal analysis at the National Law Review.

This post was written by Minal Khan of  Barnes & Thornburg LLP.

Chicago and Cook County Paid Sick Leave Laws Go Into Effect July 1: Are You Ready?

As the holiday weekend approaches, many employers in Chicago and Cook County find themselves scrambling to prepare for the Chicago and Cook County Paid Sick Leave Ordinances that will take effect this Saturday, July 1, 2017. The Ordinances, though straightforward in their purpose of providing some limited sick paid time off to employees, raise a number of thorny, confusing questions and various administrative concerns for all employers. To add to this uncertainty, the City of Chicago only yesterday released its extensive final interpretative rules on the City’s Ordinance, which raise a number of interpretative questions and, in places, appear to diverge from the previously-issued final rules of the Cook County Commission on Human Rights on the County’s Ordinance. Not only that, the list of Cook County’s municipalities that are opting out from the County’s Ordinance has been changing, literally, by the hour. To help you get up to speed and make any final necessary changes, in this Alert we will review some key requirements and provide responses to some FAQs employers have been asking related to paid sick leave in Chicago and Cook County.

Paid Sick Leave Requirements

The Ordinances require employers in Chicago and certain municipalities in Cook County to provide all employees, regardless of full-time, part-time, seasonal, or temporary status, with one (1) hour of paid sick leave for every for 40 hours worked, up to a maximum accrual cap of 40 hours in any benefit year. Employees are entitled to begin using accrued paid sick leave following 180 days of employment, provided they have worked at least 80 hours in any 120 day period.

Employees must be allowed to use paid sick leave for any of the following reasons:

  • The employee is ill, injured, or requires medical care (including preventive care);

  • A member of the employee’s family is ill, injured, or requires medical care;

  • The employee or a member of his or her family, is the victim of domestic or sexual violence; or

  • The employee’s place of business, or the childcare facility or school of the employee’s child, has been closed by an order of a public official due to a public health emergency.

In addition to providing employees with paid sick leave, employers are required to inform employees about their rights to paid sick leave by posting the Chicago and Cook County notices in the workplace and distributing these notices to employees with their first paycheck following the Ordinances’ effective date, or with any new employee’s first paycheck.

Frequently Asked Questions

When updating their employment policies and/or practices, employers should be mindful of the following frequently asked questions:

Do the Ordinances apply to all employees working in Chicago and/or Cook County?

The Ordinances are broadly worded such that employers are required to provide paid sick leave to all employees working in the geographic boundaries of the City of Chicago and/or Cook County. However, the Cook County Ordinance permits municipalities in Cook County to opt out of the Ordinance prior to its effective date.

So far, more than half of the municipalities in Cook County have opted out of the Cook County Ordinance, meaning that employers are not required to provide paid sick leave to employees working in these locations. However, if an employee should change work locations, or travel for work, into a municipality that has not opted out of the Cook County Ordinance (such as the City of Chicago), the employee would be entitled to accrue paid sick leave for hours worked in that municipality.

Are employees able to carryover accrued paid sick leave?

The Ordinances permit employees to carryover half of their accrued unused paid sick leave, up to a cap of 20 hours, into the next benefit year. Employees working for employers covered by the Family Medical Leave Act (FMLA) may carryover up to an additional 40 hours of paid sick leave into the next benefit year, to be used exclusively for FMLA-specific purposes.

Nonetheless, in most instances, employers may cap the amount of paid sick leave that an employee can use in a benefit year at 40 hours. The exception to this rule being that employees who carryover and use all 40 hours of FMLA-specific paid sick leave may use an additional 20 hours of regular paid sick leave in any benefit year. Thus, in limited circumstances employees may be able to use as many as 60 hours of paid sick leave in a single benefit year.

Are employers permitted to front-load paid sick leave?

Both Ordinances permit employers to front-load paid sick leave at the start of the benefit year, or at the time of hire. Employers who front-load paid sick leave do not need to track paid sick leave accrual or permit the carryover of paid sick leave into the next benefit year, provided that the requisite amount of paid sick leave has been front-loaded. The precise amount of paid sick leave to be front-loaded may depend on whether the employer is subject to FMLA and/or based in Chicago or Cook County, as their respective rules address front-loading differently. Employers with questions regarding the precise amount of paid sick leave that must be provided to employees should contact counsel.

Are employers able to provide paid time off in lieu of paid sick leave?

Employers may provide employees with paid time off (PTO) instead of paid sick leave, provided that all their employees are provided at least as much PTO as the Ordinances require to be made available for paid sick leave use in a benefit year. Employers should note, however, that accrued unused PTO must be paid out upon termination of employment. There is no such requirement to pay out accrued unused paid sick leave.

Recommendations

In light of the impending effective date for Chicago’s and Cook County’s Paid Sick Leave Ordinances, it is important that employers take any remaining necessary steps to ensure that their paid sick leave policies and practices will comply with the Ordinances. Policies that do not provide the requisite benefits to employees, or those that are silent on key issues such as paid sick leave accrual and/or usage restrictions, will be construed against the employer and could lead to costly violations.

This post was written by Alexis M. Dominguez and Sonya Rosenberg  of Neal, Gerber & Eisenberg LLP.

Rule the Rules of Workplace Wellness Programs

Being Healthy in the workplace is a great goal, but there are considerable factors to keep in mind.  The book covers health and workplace wellness, but the focus is on the legal and logistic aspects and helping guide the professionals developing legally healthy wellness programs in the workplace.

ABA WellnessClick here to purchase the guide.

The approach of this book is to inform the reader of the “what,” “why” and “how” of workplace wellness program laws:

 1) What laws are important for workplace wellness program compliance;

 2) Why do those laws exist and why are they important for workplace wellness program design and implementation; and

3) How can workplace wellness professionals and organizations apply workplace wellness laws effectively?

Oregon Expands Effort to Achieve Equal Pay

This month, Oregon joined a number of other states, including California, Massachusetts, Maryland, and New York by strengthening existing equal pay laws. The new law, the Oregon Equal Pay Act of 2017 (“OEPA”), has three (3) central components:

  • Applying equal pay protections to disparities based on race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age;
  • Curbing an employer’s ability to obtain or rely upon an applicant’s prior compensation to determine his or her current compensation; and
  • Changing and substantially limiting the defenses available to employers sued for alleged equal pay violations.

The bulk of the OEPA’s substantive provisions is effective January 1, 2019.

Broadening Scope of Equal Pay Protections

The OEPA prohibits disparities in “wages or other compensation” between employees performing work of a “comparable character” based on race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age. Work is of a “comparable character” if it requires “substantially similar knowledge, skill, effort, responsibility and working conditions [.]” This is a substantial expansion of prior law, which only applied to sex-based pay disparities.

The OEPA also limits an employer’s ability to rely upon prior compensation by:

  • Making it unlawful to seek information about an applicant’s or employee’s compensation history; and
  • Prohibiting employers from screening job applicants or determining compensation based on a prospective employee’s current or past compensation.

However, these pay history restrictions do not apply “during a transfer, move or hire of [an] employee to a new position with the same employer.”

Limited Defenses to Equal Pay Claims

Under prior Oregon law, an employer could defend a sex-based pay disparity by demonstrating that it was based on (a) a seniority or merit system, or (b) good faith factors other than sex.

However, under the OEPA an employer can only pay differential wages for work of a comparable character if the disparity is attributable to “a bona fide factor that is related to the position in question and is based on” one or more of the following:

  • A seniority system;
  • A merit system;
  • A system that measures earnings by quantity or quality of production;
  • Workplace locations;
  • Travel, if travel is necessary and regular for the employee;
  • Education;
  • Training; or
  • Experience.

The employer must also demonstrate that the factor(s) creating the pay disparity account for the entirety of the differential.

Potential Limits on Remedies

In addition to back wages, employees bringing claims under the OEPA may also seek compensatory and punitive damages. However, the law limits remedies against employers that take specified steps to achieve pay equality.

Under the OEPA, a court “shall” disallow an award of compensatory or punitive damages if the employer shows that within three (3) years of the employee bringing the OEPA claim, the employer conducted a good faith equal pay analysis that: (a) was “[r]easonable in detail and scope in light of the size of the employer”; (b) related to the protected class at issue in the action (e.g., sex, age, race, etc.); and (c) “[e]liminated the wage differentials for the plaintiff and [] made reasonable and substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff.”

What This Means for Employers

Because the bulk of the OEPA changes are not yet effective, now is the time for employers to commence their compliance efforts including:

  • Reviewing job applications to ensure they do not seek prior compensation information;
  • Auditing compensation data to identify protected class-based disparities, if any. If this analysis reveals disparities, employers can avoid or limit future claims and damages by eliminating any identified differentials;
  • Training managers and human resources professionals regarding the permissible considerations when making compensation decisions, and how to document such decisions;
  • Revising employee job descriptions to ensure they reflect the substantive distinctions between positions – i.e., the fact that jobs are not of a “comparable character” is reflected in job descriptions; and
  • Revising employee reviews on which compensation decisions are based to ensure they reflect the considerations that are permissible grounds for a pay disparity under OEPA.
This post was written by Brian K. Morris of Polsinelli PC.

 

Department of Labor Signals Move to Limit Definition of “Employment”

On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced the immediate withdrawal of the U.S. Department of Labor’s (DOL’s) 2015 and 2016 Administrative Interpretations regarding joint employment and independent contractors. While this withdrawal signals the current administration’s attempt to limit the expansive definition of “employment,” the DOL made clear that it does not relieve companies of their legal obligations under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act.

Many businesses had argued these obligations were unduly burdensome on employers. For the past several years, the Wage and Hour Division (WHD) has worked with the IRS and numerous states to combat employee misclassification and to ensure that workers receive all the wages, benefits and protections to which they are entitled. In Fiscal Year 2015, for example, WHD investigations resulted in some $74 million in back wages for more than 102,000 workers, many of which were concentrated in traditionally low-wage industries such as janitorial, temporary help, food service, day care and hospitality. Withdrawal of the Administrative Interpretations may be the first step to rein in these enforcement efforts.

Specifically, the DOL has withdrawn guidance regarding:

  • The Presumption That Most Workers Are Employees: The withdrawn guidance on independent contractors stated that “most workers are employees” under the FLSA. United States Supreme Court precedent makes clear that there is no single rule or test for determining whether an individual is an employee or an independent contractor for purposes of the FLSA. Thus, even now, the inquiry into independent contractor status remains complex and fact-intensive.

  • The Expansion of the “Joint Employer” Definition: The withdrawn guidance on joint employment distinguished between “horizontal” joint employment and “vertical” joint employment scenarios. Under this guidance, the joint employment inquiry focused on the “economic realities” of the relationship between the employee and the potential joint employer. Its withdrawal signals a shift back to applying joint employer status only when a business has direct control over another business’s workplace.

More is expected from the Trump Administration and the courts on the ever-changing law surrounding independent contractors and joint employment.

This post was written by Angela M. Duerden and Elisabeth (Lisa) Shu of Wilson Elser Moskowitz Edelman & Dicker LLP.

Defendants’ Timing Defense to DTSA Claims Faces Mixed Results

With the law’s first anniversary in the rear view mirror, defendants have established a viable defense to claims arising under the Defend Trade Secrets Act (“DTSA”) – a plaintiff may be precluded from bringing a claim under DTSA if it only alleges facts that show acts of misappropriation occurring prior to May 11, 2016 (the date of DTSA’s enactment).   In the last few months, four different courts have tackled this “timing defense,” and defendants raising it in motions to dismiss DTSA claims have encountered mixed results.

In Brand Energy & Infrastructure Servs. v. Irex Contr. Grp., No. 16-cv-2499, 2017 U.S. Dist. LEXIS 43497 (E.D. Pa. Mar. 23, 2017), a Pennsylvania federal court rejected the defendants’ attempt to invoke the timing defense because the plaintiff’s amended complaint alleged various times after the enactment of the DTSA that the defendants “used” the plaintiff’s alleged trade secrets.  The court also noted the plaintiff’s inclusion of allegations in the amended complaint showing that “to this day, the defendants continue to ‘obtain access to [its] confidential and proprietary business information ….”  Based on this pleading, the court held that the plaintiff could pursue its DTSA claim.  Similarly, in AllCells, LLC v. Zhai, Case No. 16-cv-07323, 2017 U.S. Dist. LEXIS 44808 (N.D. Cal. Mar. 27, 2017), a California federal court denied the defendants’ motion to dismiss a DTSA claim because “even if [defendants] copied and thus acquired the alleged trade secrets before May 11, 2016, [the plaintiff] has sufficiently alleged that there was at least use of the trade secrets after that date.  Hence, the Act applies.”

In Molon Motor & Coil Corp. v. Nidec Motor Corp., No. 16-cv-03545, 2017 U.S. Dist. LEXIS 71700 (N.D. Ill. May 11, 2017), a plaintiff’s DTSA claim survived dismissal, overcoming the defendant’s argument that “no acts occurred after the effective date of the Act.”  The court held that the plaintiff’s allegations regarding the inevitable post-enactment disclosure of its trade secrets to the defendant by its former employee were sufficient to state a plausible DTSA claim:  “[i]f it is plausible that some of the alleged trade secrets maintain their value today, then it is also plausible that [defendant] would be continuing to use them.”  The court noted, however, that further discovery would be needed to determine whether post-enactment disclosure of the trade secrets was in fact inevitable.

By contrast, a California federal court granted a defendant’s motion to dismiss where a complaint lacked sufficient allegations regarding the timing of the alleged appropriation in Cave Consulting Grp., Inc. v. Truven Health Analytics Inc., No. 15-cv-02177, 2017 U.S. Dist. LEXIS 62109 (N.D. Cal. Apr. 24, 2017).  In Cave, the plaintiff alleged that the defendant acquired trade secrets and used them in a 2014 client meeting, but that conduct predated the enactment of the DTSA.  The court held that plaintiff had failed to make any “specific allegations that defendant used the alleged trade secrets after the DTSA’s May 11, 2016 enactment.”  Because the plaintiff failed to allege that any “postenactment use occurred,” the plaintiff had not stated a plausible DTSA claim.

These decisions illustrate that the likelihood of success of the timing defense largely is a matter of drafting, and provide an important takeaway for both sides of a trade secrets dispute. A plaintiff should be mindful in drafting its pleading to include factual allegations showing that the defendant’s misappropriation occurred (or inevitably will occur) after DTSA’s enactment.  The defendant, on the other hand, should carefully scrutinize the complaint to determine whether a timing defense applies.

This post was written by Jonathan L. Shapiro by Epstein Becker & Green, P.C..