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New Ridesharing Legislation in California and Oregon Highlights Insurance Uncertainty in Emerging Industries

Proskauer Law firm

Managing a company’s exposure to new types of risks is often a complicated endeavor.  We’ve previously reported on the uncertainty that can arise when existing coverage models are applied to a new risk—such as losses arising from data breaches and other cyber-attacks.  Applying existing coverage models to emerging industries presents similar challenges.  These challenges were highlighted recently in the years-long dispute over insurance of ridesharing companies, like Lyft and Uber, which recently reached some degree of closure in California with the enactment of new insurance legislation for these companies.

Ridesharing companies have arisen in the past few years as an alternative to traditional forms of transportation, such as taxis.  These companies neither employ the drivers nor own the cars used for transportation; they essentially serve as an online “middleman” connecting passengers with freelance drivers for hire and expressly disavow that they provide any sort of “transportation services.”  This new business model—blurring the lines between traditional services and social media—presented many questions as to liability and, consequently, risk management.  These questions were brought to the fore earlier this year, when the family of a six year old girl killed by a ridesharing driver sued the ridesharing company.  The company disclaimed liability on the basis that it is not responsible for the acts of its drivers, especially when the drivers do not have ridesharing passengers or are not en route to pick up one.

Many ridesharing drivers have relied primarily on their personal automobile policies, eschewing business coverage altogether, reportedlyat the recommendation of the ridesharing companies themselves.  While ridesharing companies have carried excess insurance policies to cover ridesharing accidents, the insurance industry took the position that these policies did not cover such accidents because there was no primary coverage.  In other words, because the only “primary” insurance policies were personal use automobile policies that did not cover commercial livery use, the excess insurance could not be triggered.

On September 17, 2014, California AB-2293 was enacted to address this uncertainty of coverage.  The statute was the result of discussions between legislators, ridesharing companies, insurers, and traditional taxi companies.  It requires ridesharing companies in the state to provide $100,000 in coverage for their drivers that takes effect the moment a driver connects to the ridesharing company’s dispatch software and increases to $1 million once the driver agrees to pick up a passenger.  It also states that a personal automobile insurer does not have the duty to defend or indemnify claims arising out of ridesharing, unless the policy expressly provides such coverage, and it requires ridesharing companies to disclose this fact to their drivers.

Whether other states will follow California’s lead remains to be seen.  Legislation addressing ridesharing has been introduced across the country, and as one Pennsylvania state legislator observed, “By far the biggest issue is insurance.”  In other states, regulators are addressing the possible insurance gap.  Just days after California’s new statute was enacted, Oregon’s State Insurance Division issued a consumer advisory, warning of the potential unavailability of insurance coverage under personal insurance policies for ridesharing and other services provided in the peer-to-peer marketplace.

As Oregon Insurance Commissioner Laura Cali observed in connection with ridesharing, “When a new industry emerges, it often creates unique insurance situations.”  New industries may exist under insurance uncertainty for years or decades before legislation, regulation, or litigation clarifies the issue.  It is therefore critical when expanding into a nascent industry to consider how the risks of that industry may be managed, under either new or existing types of insurance coverage.

ARTICLE BY

Shawn Ledingham
OF
Proskauer Rose LLP

The Walmart List: Milk, Eggs, and a Doctor Visit? re: Primary Care Clinics

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By January 2015, Walmart will be operating dozen primary care clinicsacross the U.S. Six of these have already opened in South Carolina and Texas. Currently, some Walmart stores include acute care clinics that are operated through leases with local hospital operators. The new primary care clinics are distinct from the existing ones in several ways. The new clinics will be fully-owned by Walmart, offer a broader range of services, and be open seven days a week with longer operating hours. Walmart is partnering with QuadMed nationally to operate the clinics, rather than with local partners. The primary care clinics will be staffed primarily by nurse practitioners and medical assistants and will be supervised by a physician.

Walmart’s move into primary care comes at ideal time, as the Affordable Care Act has expanded coverage to millions of Americans. Many individuals are seeking new, more convenient sources of care. Pricing at the primary care clinics is reported to be $40 per visit – a low cost alternative to a doctor’s office. For Walmart employees and their dependents the cost is even lower – just $4 a visit!

What does this mean for traditional primary care providers? It is just one example of how the health care industry is transforming. As more companies like Walmart, Kroger, and Walgreens push their way into the market, providers must find a way to stay competitive. This may mean weekend accessibility, expanding into telehealth, or simply marketing services in a way that increases a provider’s exposure. Walmart has long been for a one-stop shop for grocery lists – now it is becoming the same for health care. It may be time providers step up their competitive edge.

ARTICLE BY

Molly Nicol Lewis

OF

McBrayer, McGinnis, Leslie and Kirkland, PLLC

DOT Proposes Rules for Rail Transport of Flammable Materials: New Standards for Classification, Tank Cars, Emergency Preparedness

Beveridge Diamond Law Firm

Following recent events highlighting the potential devastating effects of accidents involving rail transportation of flammable liquids, the Pipeline and Hazardous Materials Safety Administration (PHMSA) of the U.S. Department of Transportation (DOT) released a pre-publication copy of a Notice of Proposed Rulemaking (NPRM) on July 23 designed to improve the safety of transporting such materials. The proposed regulations come more than a year after the derailment and explosion of a train carrying 72 tank cars, each filled with 30,000 gallons of Bakken crude oil in Lac-Mégantic, Quebec, that killed 47 people. PHMSA will accept comments 60 days from the date of publication (not yet available) in the Federal Register. Given the extensive comments received on the Advanced Notice of Proposed Rule Making (ANPRM), the agency has indicated it does not intend to extend the comment period.

Classification and Characterization Requirements of Mined Liquids and Gases

Under the proposed regulations, all offerors and shippers would be required to implement a sampling and testing program for mined gases and liquids extracted from the earth (e.g., crude oil) to ensure their hazards are understood and accounted for in packaging and emergency preparedness. Offerors would be required to maintain documentation of the sampling and testing program, review their program annually, and make program documentation available to DOT upon request. The program would include:

  • Frequency of sampling to understand material variability;
  • Sampling of different points along the supply chain to understand changes during transportation;
  • Sampling methods that ensure samples representative of entire mixtures, as packaged;
  • Testing methods to ensure better analysis, classification, and characterization of materials;
  • Statistical justifications for sample frequencies;
  • Duplicate samples for quality assurance; and
  • Criteria for modifying sampling and testing programs.

Additional Operational Requirements for High-Hazard Flammable Trains

The proposed regulations would impose additional requirements for high-hazard flammable trains (HHFTs), defined by the NPRM as trains carrying 20 or more tank carloads of a Class 3 flammable liquid. Specifically, all HHFT units constructed after October 1, 2015 must comply with DOT-117 tank car design requirements for tank cars, such as inclusion of thermal protection systems and tank car plate thickness requirements. The rule would phase out DOT-111 tank cars, the oldest tank cars in use, on the following schedule:

HHFT Class 3 Flammable Liquid Packing Group DOT-111 Not Authorized After
I October 1, 2017
II October 1, 2018
III October 1, 2020

Along with changes to tank car design specifications, operators of HHFTs would have to implement the following requirements:

  • Use of Risk Assessment in Route Selection: The proposed rule would apply rail routing requirements currently required of trains carrying certain volumes of Toxic-by-Inhalation (TIH) Chemicals, and other highly hazardous materials to HHFTs. Carriers would be required to apply 27 safety and security factors, including population density along routes, emergency response capability along the route, among others, in selecting a route for HHFTs.
  • Notification to SERCs: The rule would make permanent a May 2014 DOT emergency order requiring HHFTs carrying more than one million gallons of Bakken crude oil to notify State Emergency Response Commissions (SERCs) and other appropriate state officials about the operation of such trains through their states. Carriers would be required to report such information within 30 days of the effective date of the rule and to maintain documentation of notifications that could be made available to the Federal Railroad Administration (FRA) upon request.
  • Speed Limits and Enhanced Braking Requirements: HHFTs would be limited to 50 mph in all areas. PHMSA seeks comments on whether HHFTs that do not meet design specifications should be subject to 40 mph speed limit options in certain areas. The proposed regulations also would require HHFTs to be equipped with alternative brake propagation systems as an added safety precaution.

Other DOT Actions

Along with the NPRM, DOT issued a companion ANPRM seeking comment on the application of oil spill response planning to the shipment of flammable liquids as well as an Operation Safe Delivery Update report containing data collected from its staff and the FRA from August 2013 to May 2014. This report concludes that Bakken crude oil is more volatile and flammable compared to other crude oils. In a press release, DOT claims that it will continue to monitor the data through the fall of 2014.

ARTICLE BY

Elizabeth M. Richardson
Fred R. Wagner
Gayatri M. Patel
Of:
Beveridge & Diamond PC

Retroactive Tax Planning Re: U.S. Shareholders of Foreign Corporations

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Converting Subpart F Income into Qualified Dividends

U.S. shareholders of foreign corporations are generally not subject to tax on the earnings of such corporations until the earnings are repatriated to the shareholders in the form of a dividend.  Moreover, when a foreign corporation is resident in a jurisdiction with which the United States has a comprehensive income tax treaty, the dividends distributed to its individual U.S. shareholders are eligible for reduced qualified dividend tax rates (currently taxed at a maximum federal income tax rate of 20 percent).

tax planning

Where a foreign corporation is classified as a “controlled foreign corporation” (“CFC”) for an uninterrupted period of 30 days or more during any taxable year, however, its U.S. shareholders must include in income their pro rata share of the Subpart F income of the CFC for that taxable year, whether or not such earnings are distributed.  A CFC is a foreign corporation, more than 50 percent of which is owned (by vote or value), directly or indirectly, by “U.S. shareholders.”  A U.S. shareholder, for the purpose of the CFC rules, is a U.S. person who owns, directly, indirectly or constructively, at least ten percent of the combined voting power with respect to the foreign corporation.

In addition to the inability to defer taxation on its share of a CFC’s subpart F income, one of the pitfalls of a U.S. shareholder owning stock in a CFC is that subpart F income is treated as ordinary income to the U.S. shareholder (currently taxed at a maximum federal income tax rate of 39.6 percent), regardless of whether the CFC is resident in a jurisdiction that has an income tax treaty with the United States.  Therefore, the U.S. shareholder would not be able to repatriate its profits at qualified dividend rates.

Among other things, subpart F income generally includes passive investment income (e.g., interest, dividends, rents and royalties) and net gain from the sale of property that gives rise to passive investment income.  Gain on the sale of stock in a foreign corporation, for example, falls within this category.  Consequently, when a CFC sells stock of a lower-tier corporation, the U.S. shareholders of the CFC will have to include their share of the gain from the sale as subpart F income, which will be taxed immediately at ordinary income rates.

Check-the-Box Elections

Pursuant to the “check-the-box” entity classification rules, a business entity that is not treated as a per se corporation is an “eligible entity” that may elect its classification for federal income tax purposes.  An eligible entity with two or more members may elect to be classified as either a corporation or a partnership. An eligible entity with only one member may elect to be classified as either a corporation or a disregarded entity.

Generally, the effective date of a check-the-box election cannot be more than 75 days prior to the date on which the election is filed.  However, Rev. Proc. 2009-41 provides that if certain requirements are met, an eligible entity may file a late classification election within 3 years and 75 days of the requested effective date of the election.  These requirements may be met if:

  1. The entity failed to obtain its requested classification solely because the election was not timely filed
  2. The entity has not yet filed a tax return for the first year in which the election was intended
  3. The entity has reasonable cause for failure to make a timely election

The conversion from a corporation into a partnership or disregarded entity pursuant to a check-the-box election results in a deemed liquidation of the corporation on the day immediately preceding the effective date of the election.  Distributions of property in liquidation of the corporation generally are treated as taxable events, as if the shareholders sold their stock back to the corporation in exchange for the corporation’s assets.  As a result, the corporation shareholders would recognize gain on the liquidating distributions to the extent the fair market value of the corporation’s assets exceeds the basis of the shareholders’ shares.  In addition, subject to limited exceptions, the corporation generally would recognize gain on the liquidating distribution of any appreciated property.

Converting Subpart F Income into Qualified Dividends

A CFC that elects to convert from a corporation into a partnership or disregarded entity generally would recognize Subpart F income on the deemed liquidation, to the extent it holds property that gives rise to passive investment income (such as stock in subsidiary corporations).  The subpart F income inclusion rules only apply, however, when the foreign corporation has been a CFC for a period of 30 uninterrupted days in the given taxable year.  Where the election is made effective as of January 2, the liquidation of the foreign corporation would be deemed to occur on January 1 of that year.  Because the foreign corporation would be deemed to have been liquidated on January 1, it would not have been a CFC for 30 days during the year of liquidation.  As a result, subpart F income would not be triggered on the deemed liquidation of the foreign corporation.

In addition, as a result of the check-the-box election, a U.S. shareholder of the foreign corporation would recognize gain on the deemed liquidation as if the shareholder sold its stock back to the corporation in exchange for the corporation’s assets.  Section 1248(a) provides, however, that when a U.S. person sells or exchanges its shares in a foreign corporation that was a CFC during the 5-year period prior to disposition, the gain from the sale is recharacterized as a dividend to the extent of the allocable share of the earnings and profits of the foreign corporation.  To the extent the foreign corporation is resident in a country with which the U.S. has an income tax treaty, its individual U.S. shareholders would be eligible for the reduced qualified dividend income tax rate on such dividend.

This may be illustrated by the following example:

A, a U.S. individual, is the sole shareholder of X, a foreign corporation resident in a country with which the United States has a comprehensive income tax treaty.  X owns 40 percent of the shares of Y, another foreign corporation.  In October 2013, X sells all of its shares of Y.  X is a CFC and the net gain from the sale of the Y shares constitutes subpart F income.  As a result, the gain would have to be included in A’s gross income as ordinary income.  Instead, X files a retroactive check-the-box election pursuant to Rev. Proc. 2009-41 to be treated as a disregarded entity as of January 2, 2013.  The election results in a deemed liquidation of X on January 1, 2013.  Because X has not been a CFC for a period of 30 uninterrupted days in 2013, however, subpart F income is not triggered on the deemed liquidation of X.  In addition, the gain recognized by A on the deemed liquidation of X is recharacterized as a dividend and subject to tax at the reduced rates applicable to qualified dividend income.

As a result, the combination of Section 1248(a) and the retroactive check-the-box rules allows individual U.S. shareholders of a CFC to convert gain that would be realized upon the sale of the CFC’s assets from subpart F income (taxed as ordinary income at rates up to 39.6 percent) to qualified dividend income (currently taxed at 20 percent).  Following the deemed liquidation of the foreign corporation, because all of the assets would be deemed to have been distributed to the shareholders in complete liquidation of the corporation, and the shareholders would recognize gain on the receipt of the assets, the basis of the assets would be stepped up to fair market value, reducing or eliminating gain recognized upon the subsequent sale of the assets of the former CFC.

Article By:

Jeffrey L. Rubinger
Nadia E. Kruler
Joshua Kaplan
Of:
Bilzin Sumberg Baena Price & Axelrod LLP

Happy Memorial Day!

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From your friends at
The National Law Review

2014 Legislative Developments Re: Labor and Employment Law

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This Alert highlights certain federal law developments as well as those occurring in Illinois, California, New York and Georgia that will affect employers in 2014. No significant employment-related statutory developments are to take effect in 2014 in Michigan or Washington, DC.

  • New OFCCP Rules: Effective March 24, 2014, government contractors will be required to comply with revised regulations under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) and Section 503 of the Rehabilitation Act of 1973 that were issued by the Office of Federal Contract Compliance Programs (OFCCP) last year. (Compliance with certain obligations with respect to affirmative action programs can be delayed until the employer’s first affirmative action program following the effective date, however.) Among the new obligations, government contractors will be required to invite applicants to self-identify as a protected veteran and as an individual with a disability at both the pre-offer and post-offer stage of the hiring process, utilizing specific OFCCP language with respect to status as an individual with a disability. Contractors also will be required to invite their existing workforce to self-identify disability status, utilizing specific language, and to establish a utilization goal for individuals with disabilities and a hiring benchmark for veterans. There are also new obligations with respect to documenting and updating comparisons with respect to the number of veterans and individuals with disabilities who apply for and fill jobs, notifications to subcontractors and the inclusion of specific language in covered subcontracts, assessment of outreach efforts, making postings accessible to individuals with disabilities, and new data and record retention requirements, among others. The OFCCP has provided and is updating compliance and technical assistance materials for these requirements on its website.

Illinois

  • Workplace Violence Prevention: Effective January 1, 2014, employers with five or more employees will be permitted to take proactive steps to protect employees from workplace violence, harassment, and stalking. Employers will be able to apply for an order of protection against disgruntled workers who have made a documented threat against the business or another employee. Employers are required to provide an affidavit that there is a credible threat of violence against the workplace or an employee to apply for an order of protection.
  • Protection of Social Media Accounts: Effective January 1, 2014, an amendment to the Illinois’ Right to Privacy Act in the Workplace Act will go into effect. Since January 1, 2013, the Act has prohibited employers from requesting or requiring that employees or applicants provide passwords or related social media account information, or provide access to their profile on a social networking website. The amendment limits the scope of the Act’s prohibition on requesting or requiring access to social media accounts. Following the amendment, employers will be permitted to access professional accounts where the employer has a “duty to screen employees or applicants prior to hiring or retain employee communications as required under Illinois insurance laws or federal law or by a self-regulatory organization” as defined by the Securities Exchange Act. A “professional account” is defined by the Act as an account, service, or profile used or accessed by a current or prospective employee for business purposes of the employer. Employers will still be prohibited from requesting or requiring access to personal accounts unrelated to any business purpose of the employer.
  • Legalization of Medical Marijuana: Effective January 1, 2014, registered users suffering from a “debilitating medical condition” will be allowed to purchase medical marijuana from state-licensed dispensaries. Employers may not penalize employees for their status as patients who are qualified and registered to purchase medical marijuana, unless failing to do so would cause the employer to lose monetary funding under federal law. However, employers retain the right to restrict or prohibit the use of marijuana in the workplace and may implement and enforce a drug-free workplace policy, provided the policy is enforced in a non-discriminatory manner. Employers also may adopt reasonable policies regarding the consumption, storage, or timekeeping requirements regarding the use of medical marijuana.
  • Prevailing Wage Records Requirements: Effective January 1, 2014, contractors and subcontractors performing work on public works projects are required to keep payroll records, either electronically or on paper, of all workers employed on the project for at least five years (increased from three years) after the last payment on the contract.
  • Concealed Weapons Law Developments Following last summer’s adoption of the Illinois Fire Concealed Carry Act, employers seeking to prohibit individuals from bringing concealed weapons onto their private property are required to post a sign to that effect at building entrances. The Illinois State Police recently released proposed rules regarding the sign, which consists of a white background and a depiction of a handgun in black ink with a circle (of four inches in diameter) around the handgun depiction with a diagonal slash across the firearm in red ink. No text or other marking is contained in the sign, except the reference to the Illinois code section 430 ILCS 66/1. The sign must be posted clearly and conspicuously at the entrance to the property. A template of the approved sign is available here: https://ccl4illinois.com/ccw/Public/Signage.aspx
  • Same-Sex Marriage Recognized: Effective June 1, 2014, same-sex marriage will be recognized in Illinois. Same-sex and different-sex couples will be entitled to the same benefits, protections and responsibilities of civil marriage.

California

  • California Minimum Wage Increase: Effective July 1, 2014, AB 10 will increase California’s minimum wage from $8 to $9 per hour. After July 1, 2014, the minimum monthly salary to preserve exempt status under California Labor Code § 515 will rise to $3,120 per month (currently $2773.33).
  • Domestic Worker Compensation: Effective January 1, 2014, AB 241, known as the Domestic Worker Bill of Rights, establishes overtime compensation at a rate of one and one-half times the regular rate of pay for domestic workers who work more than nine hours in any workday or more than forty-five hours in any workweek. The bill does not apply to individuals who care for persons in facilities providing board or lodging in addition to medical, nursing, convalescent, aged or child care, including residential care facilities for the elderly.
  • Protected Military or Veteran Status Under the FEHA: Effective January 1, 2014, AB 556 adds “military and veteran status” to the categories of persons protected from employment discrimination under the FEHA. ABA 556 also adds language providing “nothing in this section shall be interpreted as preventing the ability of employers to identify members of the military or veterans for purposes of awarding a veteran’s preference as permitted by law.”
  • Temporary Leave of Absence to Voluntary Firefighters: AB 11 requires employers with 50 or more employees to allow an employee who performs emergency duty as a volunteer firefighter, reserve peace officer, or as emergency rescue personnel to take a temporary leave of absence for the purpose of engaging in fire, law enforcement, or emergency rescue training.
  • Liquidated Damages Awards for Minimum Wage Violations: Effective January 1, 2014, AB 442 amends Labor Code sections 1194.2 and 1197 to make an employer who is liable for minimum wage violations subject to liquidated damages equal to the amount of wages that should have been paid, in addition to civil penalties.
  • Expanded Anti-Retaliation Protections: Effective January 1, 2014, AB 263: (1) makes it illegal under Labor Code § 98.6 for employers to retaliate against employees who make oral or written complaints regarding unpaid wages, and makes the employer liable for a penalty of up to $10,000 per violation regardless of the employee’s immigration status; (2) amends Labor Code Section 98.7 to provide that an employee need not exhaust administrative remedies or procedures to enforce the Labor Code unless the provision in question requires exhaustion; and (3) prohibits an employer from retaliating against an employee who provides information to, or testifies before, any public body conducting an investigation, hearing, or inquiry. AB 263 also makes it unlawful for an employer or any other person to engage in, or direct another person to engage in, an unfair immigration-related practice against a worker in retaliation for exercising a legal right. An “unfair immigration-related practice” is defined as: (1) requesting more or different documents than required under federal immigration law and/or refusing to honor documents that reasonably appear to be genuine; (2) using the federal E-Verify system when not required to do so by federal law; (3) threatening to file or filing a false police report regarding the worker; or (4) threatening to contact or contacting immigration authorities. An “unfair immigration-related practice” does not include conduct undertaken at the express and specific direction or request of the federal government. AB 263 creates a rebuttable presumption that engaging in an unfair immigration-related practice within 90 days of a person’s exercise of rights protected under the Labor Code or local ordinance constitutes unlawful retaliation.
  • Changes to Exhaustion of Administrative Remedies Requirements. Also effective January 1, 2014, SB 666 creates Labor Code Section 244. Section 244 provides that it is not necessary for an employee to exhaust administrative remedies in order to bring a civil action for violation of any provision of the Labor Code unless the provision specifically requires exhaustion. The bill further subjects an employer’s business license to revocation or suspension if the licensee has been determined by the Labor Commissioner to have violated Section 244. Further, SB 666 makes it a cause for suspension, disbarment, or other discipline for any California licensed attorney to report or threaten to report the suspected immigration status of a witness or party to a civil or administrative action, or the person’s family member, because the person exercises a right related to employment.
  • Time Off for Victims to Testify: SB 288 creates Labor Code § 230.5. This section prohibits employers from discriminating or retaliating against employees who are victims from taking time off from work to appear in court to be heard at any proceeding in which the victim’s right is at issue in connection with the following offenses: vehicular manslaughter while intoxicated; felony child abuse; assault resulting in the death of a child under eight years of age; felony domestic violence; felony physical abuse of an elder or dependent adult; felony stalking; solicitation for murder; a serious felony, as defined in the Penal Code; hit-and-run causing death or injury; felony driving under the influence causing injury; and sexual assault, as defined in the Penal Code. A “victim” means any person who suffers direct or threatened physical, psychological, or financial harm as a result of a crime or delinquent act, and also includes the person’s spouse, parent, child, sibling or guardian. SB 288 also revises Labor Code Sections 230 and 230.1 to extend protections to stalking victims. Employers must engage in an interactive process and provide reasonable accommodations, absent undue hardship, for a victim of domestic violence, sexual assault or stalking who requests an accommodation for his or her safety while at work, who has disclosed his or her status as a victim. The employer may request certification from the employee requesting an accommodation demonstrating his or her status as a victim.
  • Premium Payments For Denial Of Heat Recovery Periods: Labor Code Section 226.7 requires employers to make a premium payment consisting of one hour’s pay to employees who are required to work during legally mandated meal or rest periods. Effective January 1, 2014, Section 226.7 is expanded to include “recovery periods,” as well as meal and rest periods. Section 226.7 defines “recovery periods” as a “cool down periods afforded to an employee to prevent heat illness.” Where such recovery periods are required by law (for example, under Cal OSHA) and the employer fails to comply, SB 435 now requires the employer to pay one hour’s pay to each affected employee.
  • Recovery of Defense Costs in Wage Disputes: SB 462 amends Labor Code section 218.5 to provide that an employer who prevails in defending against an employee’s unpaid wages claim cannot recover its defense costs unless the employer proves that the action was brought “in bad faith.”
  • Pre-Employment Questions Regarding Prior Convictions: SB 530 amends Labor Code section 432.7 to add that an employer cannot ask an applicant to disclose, nor can the employer use as a factor in determining any condition of employment, information concerning a conviction that has been judicially dismissed or ordered sealed. Section 432.7 creates exemptions where (1) the employer is required by law to obtain that information; (2) the applicant would possess or use a firearm in the course of his or her employment; (3) an applicant is banned from holding the position regardless of whether the conviction was expunged; and (4) the employer is prohibited by law from hiring an applicant who has been convicted of a crime.
  • Paid Family Leave Benefits: Effective July 1, 2014, SB 770 expands the definition of “family” for Paid Family Leave benefits to include seriously ill grandparents, grandchildren, siblings and parents-in-law. This law does not create any new family care leave entitlement under the California Family Rights Act (“CFRA”).
  • Sexual Harassment Need Not Be Motivated By Sexual Desire: Effective January 1, 2014, employees who assert claims of Sexual Harassment under California’s Fair Employment and Housing Act (“FEHA”) need not show that the harassment was motivated by sexual desire. Rather, sexually crude, offensive, and/or demeaning statements or gestures may be actionable if they meet the other elements of a sexual harassment claim.

New York

  • Minimum Wage Increase: New York state’s minimum hourly wage increased effective December 31, 2013 from $7.25 to $8.00. Effective December 31, 2014, the minimum wage will rise to $8.75, and then to $9.00 on December 31, 2015.
  • Exempt Employee Salary: Effective December 31, exempt executive and administrative employees must receive at least $600 per week. The minimum salary for exempt workers will increase again on December 31, 2014 and December 31, 2015, to $656.25 and $675 per week, respectively.
  • Pregnancy Accommodation: On January 30, 2014, the most recent amendment to the New York City Human Rights Law takes effect, obligating city employers to accommodate an employee’s pregnancy, as well as childbirth and related medical conditions, as long as the accommodation enables the employee to perform the essential functions of her position.
  • Sick Leave: On April 1, 2014, the New York City Earned Sick Time Act will require New York City businesses that employ 20 or more workers to provide employees with up to 40 hours of paid sick leave every year. Implementation for New York City companies that employ between 15 and 20 workers is delayed until October 2015.
  • Unemployment Benefits: Effective January 1, 2014, pursuant to the Unemployment Insurance Integrity Act, a former employee is precluded from receiving unemployment benefits for any week in which the employee receives severance pay greater than the maximum benefit rate, with lump sum severance payments allocated on a weekly basis. A claimant will remain eligible for unemployment benefits where he or she receives the severance pay 30 or more days after the last day of employment.

Georgia

  • Background Checks for Child Care Employees: On January 1, 2014, H.B. 350 takes effect, which requires Georgia’s approximately 6,000 child care facilities to undergo national fingerprint-based background checks for employees. (Previously, only state and local background checks were required, thus allowing people with criminal backgrounds in other states to be cleared to work in Georgia child care programs.) Any employee hired after January 2014 will undergo a fingerprint-based background check, and all current child care employees must be fingerprinted no later than Jan. 1, 2017.

Article by:

Of:

Schiff Hardin LLP

Washington D.C. Living Wage Increased to $13.40, Retroactive to January 2013

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In the first change since 2010, the wage rate required by the Washington D.C. Living Wage Act has been increased to $13.40 per hour. The increase is retroactive to January 2013.

The Act, which went into effect June 8, 2006, requires recipients of D.C. contracts or government assistance (e.g., grant, loan or tax increment financing) to pay affiliated employees and subcontractors who perform services under the contracts no less than a specified living wage. Limited exemptions apply to services performed under collective bargaining agreements and prevailing wage law wage determinations with higher rates, among others.

Certain home health workers (e.g., those working at home care agencies, community residential facilities, or group homes for individuals with developmental disabilities) now are considered covered by the Act, as well. Home health workers providing services as part of a managed care organization, however, remain exempt.

Because the rate increase is retroactive to January 2013, affected workers are entitled to back pay. However, contractors can request a waiver if they can prove “significant financial hardship.” It is unclear whether the retroactive-pay provision will be enforceable and, if so, whether contractors and government assistance recipients will be successful in charging retroactive pay to the D.C. contracting agency or funding authority with which they worked.

Finally, another rate increase is likely (“likely” as opposed to “certain,” since the law requires annual updates, but the District missed them for three years in a row) as the District has announced the 2014 calculation will be published no later than March 1st.

The Living Wage Act has a posting requirement and employee’s rights are enforced under the D.C. Wage Payment and Collection Law.

Article by:

Leslie A. Stout-Tabackman

Of:

Jackson Lewis P.C.

Will New Jersey Go “Ban the Box” and Beyond? New Jersey Takes Step to Prohibit Employers From Asking About a Job Applicant’s Criminal History

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Recently, in a 6-3 vote, New Jersey’s Assembly Labor Committee advanced a bill (A-3837), known as the Opportunity to Compete Act, that would prohibit New Jersey employers with 15 or more employees from asking candidates about their criminal history on employment applications, and from conducting criminal background checks on applicants prior to a conditional job offer. If passed, this legislation would become one of the toughest “ban the box” measures in the nation (derived from the ubiquitous check box on employment applications inquiring whether an applicant has a criminal record), and would place several new administrative burdens on employers. New Jersey would join the 64 states, counties and cities (including Newark, New Jersey) that have already enacted laws aimed at benefiting job seekers with a criminal history. And many states (including New York) prohibit employers from disqualifying an applicant based on a conviction absent a clear nexus between the nature of the conviction and the job sought.

Under the proposed legislation, only after the employer determines the candidate is qualified and provides a conditional job offer, may it inquire about and consider the individual’s criminal history. Then, before the employer may look into the candidate’s criminal history, it must first provide the candidate with a written notice of the inquiry (along with a “Notice of Rights) and obtain the candidate’s consent.

The bill authorizes employers to consider in their employment decision making process convictions for certain serious crimes regardless of when the crime occurred. These crimes include murder or attempted murder, arson, a sex offense for which the offender served time in State prison and is required to register as a sex offender, robbery, kidnapping, human trafficking, possession of weapons, burglary, aggravated assault and terrorism. Separately, employers may only consider other crimes of the 1st through 4th degree if the crime was committed within the previous 10 years. Employers may also consider convictions for disorderly persons offenses that occurred within the last 5 years and pending criminal charges until the case is dismissed. The bill further provides that if any of the candidate’s criminal history is subject to consideration by employers due to the fact that it occurred within 10 years for crimes of the 1st through 4th degree, or 5 years for disorderly persons offenses, then the employer may also consider any prior criminal history, regardless of when it occurred.

Under the bill, when making an employment decision, employers may not consider or require a candidate to disclose or reveal any arrest or criminal accusation made against the candidate which is not then pending or which did not result in a conviction. Records which have been erased or expunged, records of an executive pardon or legally nullified records may not be considered by employers, nor may the employer consider an adjudication of delinquency of a juvenile, any violation of a municipal ordinance or any record which has been sealed.

The proposed legislation requires employers to make a good faith effort to discuss with the candidate any questions or concerns related to the candidate’s criminal history and provide the candidate with an opportunity to explain and contextualize any crime or offense, provide evidence of rehabilitation, and rebut any inaccuracies in the criminal history.

In deciding whether to hire a candidate, employers must consider the results of any criminal history inquiry in combination with factors such as: (1) information provided about the degree of the candidate’s rehabilitation and good conduct; (2) information provided about the accuracy of the criminal record; (3) the amount of time that has elapsed since the conviction or release from custody; (4) the nature and circumstances surrounding the crime(s); and (5) the duties and settings of the job. This last factor—job-relatedness—is critical, as employers may not disqualify a candidate if the nature of his or her conviction bears no relationship to the job sought. The reasonable consideration of these factors must be documented by employers on a “Criminal Record Consideration Form.”

If an employer makes an adverse employment decision, including rescinding a job offer, after a discussion of a candidate’s criminal history, the employer must provide the candidate in one package by registered mail: (1) written notification of the adverse employment decision; (2) a copy of the results of the criminal history inquiry; and (3) a completed copy of the Criminal Record Consideration Form.

A candidate who received an adverse employment decision has 10 business days after receipt of this written information to provide evidence to the employer related to the accuracy and relevance of the results of the criminal history inquiry. Employers may, but are not required to, hold the position open for the candidate. Employers who uphold an adverse employment decision after considering any additional information provided by the candidate are required to provide to the candidate a written notice of the final decision within 45 days of receipt of the additional information.

There is good news for employers here: the bill does not provide applicants with the ability to sue them in court for a violation of the law. Instead, the applicant would have to file a complaint with the New Jersey’s Division on Civil Rights (“DCR”) in the Department of Law and Public Safety, and the DCR may impose civil fines ranging from $500 to $7,500 depending on the number of employees the employer has and whether the employer has committed previous violations. Additionally, as noted above, the bill does not apply to smaller employers with under 15 employees. Moreover, employers can take solace in that the bill would give employers the highest protection against negligent hiring/retention suits of any state in the nation in the form of a “grossly negligent” standard, meaning that there must be a finding that the employer consciously acted with a reckless disregard for the safety of others in its hiring decision.

There is no certainty that the proposed Opportunity to Compete Act will be passed into law in its current form or any other form for that matter. Governor Chris Christie, who could very well exercise his veto power, has not indicated whether or not he supports the bill. Needless to say, we will closely monitor this legislation.

Article by:

David M. Katz

Of:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.