Tag: employment

No vaccine? No job! Court affirms employer’s ability to condition employment upon vaccinations

On December 7, 2018, the U.S. Eighth Circuit Court of Appeals held that an employee who was terminated for refusing to take a rubella vaccine was not discriminated or retaliated against, under the Americans with Disabilities Act, as amended (“ADA”).  See Hustvet v. Allina Health System, Case No. 17-2963.

In this case, Janet Hustvet worked as an Independent Living Skills Specialist. In May 2013, Hustvet completed a health assessment, during which she stated she did not know whether she was immunized for rubella.  Subsequent testing confirmed she was not.  Her employer — Allina Health Systems — then told Hustvet she would need to take one dose of the Measles, Mumps, Rubella vaccine (“MMR vaccine”).  Hustvet stated to an Allina representative that she was concerned about the MMR vaccine because she had previously had a severe case of mumps and had “many allergies and chemical sensitivities.”  Later, Hustvet refused to take the MMR vaccine, and was terminated for failure to comply with Allina’s immunity requirements.  Hustvet then sued Allina, alleging discrimination, unlawful inquiry, and retaliation claims under the ADA and Minnesota state law.  The district court granted Allina’s motion for summary judgment, and Hustvet appealed.

On appeal, the Eighth Circuit first addressed Hustvet’s unlawful inquiry claim; specifically, Hustvet alleged that Allina violated the ADA when it required her to complete a health screen as a condition of employment.  When affirming the district court’s grant of summary judgment, the court explained that the information requested and the medical exam, which tested for immunity to infectious diseases, were related to essential, job related abilities.  Indeed, Allina sought to ensure their patient-care providers would not pose a risk of spreading certain diseases – such as rubella – to its client base.  Thus, the inquiry was job-related and consistent with business necessity.

The court then did away with Hustvet’s discrimination claim based upon failure to accommodate because Hustvet was not disabled and, thus, she could not state a prima facie case of disability discrimination. There was simply no record evidence to support the conclusion that Hustvet’s purported “chemical sensitivities” or allergies substantially limited any of Hustvet’s major life activities. She was never hospitalized due to an allergic or chemical reaction, never saw an allergy specialist, and was never prescribed an EpiPen.  Rather, Hustvet suffered from “garden-variety allergies,” which was not enough to conclude she was disabled.

Finally, the court affirmed the district court’s grant of summary judgment regarding Hustvet’s retaliation claim. In pertinent part, the court reasoned that Hustvet could not show that Allina’s proffered reason for terminating her employment – her refusal to take an MMR vaccine – was a pretext for discrimination.  The record evidence demonstrated that Allina terminated Hustvet’s employment because her job required her to work with potentially vulnerable patient populations, and she refused to become immunized to rubella, an infectious disease.

This decision comes as welcome news to employers that provide healthcare-related services, and confirms that healthcare providers may condition employment upon taking certain vaccinations, so long as the vaccination is job-related and consistent with business necessity.  Employers with questions regarding implementing or enforcing such policies would do well to consult with able counsel.

 

© Polsinelli PC, Polsinelli LLP in California
This post was written by Cary Burke of Polsinelli PC.

#MeToo Movement Inspires Avalanche of New Laws Affecting California Employers

On September 30, 2018, Governor Jerry Brown signed several bills that will affect California employers. The following summarizes key aspects of these new laws. Unless otherwise noted, the new laws are effective January 1, 2019.

Major Changes to the Definition of “Hostile Work Environment” Harassment

Senate Bill (“SB”) 1300 significantly expands the circumstances in which hostile work environment harassment may be found to exist by rejecting the “severe or pervasive” standard developed and refined over several decades by California courts. Harassment is redefined to encompass a broad spectrum of conduct, specifically:

“Harassment creates a hostile, offensive, oppressive, or intimidating work environment and deprives victims of their statutory right to work in a place free of discrimination when the harassing conduct sufficiently offends, humiliates, distresses, or intrudes upon its victim, so as to disrupt the victim’s emotional tranquility in the workplace, affect the victim’s ability to perform the job as usual, or otherwise interfere with and undermine the victim’s personal sense of well-being.”

Government Code Section 12923, which declares the Legislature’s intent in enacting the new law, will provide guidance about what types of evidence will be sufficient to establish a harassment claim. It states that employees are no longer required to prove that their productivity has declined as a result of harassment. Now, they only need to show that the harassment made it “more difficult” for them to do their job. Even a “single incident of harassing conduct” is now sufficient to create a triable issue of fact, allowing a case to go to a jury. Furthermore, a single remark made by someone unconnected to a termination decision can be circumstantial evidence of discrimination. Finally, the Legislature made it clear that harassment cases are “rarely” appropriate for dismissal at the summary judgment stage.

Employers can be held liable for all forms of harassment – not just sexual harassment – directed at employees by non-employees, such as clients or vendors. This includes harassment based on race, national origin, religion, and other protected characteristics.

Finally, if an employer wins a sexual harassment lawsuit, it cannot recover attorney’s fees and costs unless it can prove that the plaintiff’s action was “frivolous, unreasonable, or groundless” either when filed or after it clearly became so.

Restrictions on Releases and Non-Disparagement Agreements

SB 1300 also prohibits employers from requiring a release of harassment, discrimination, or retaliation claims or to sign a non-disparagement agreement that purports to prevent disclosure of information about unlawful acts in the workplace, if the release is required to get a job, stay employed, or receive a raise or bonus. This does not apply to a negotiated settlement to resolve a claim filed in court, with government agencies, in arbitration, or through an employer’s internal complaint process, provided that the employee has an attorney or an opportunity to retain one.

Extended Statute of Limitations for Sexual Assault

The California Legislature lengthened from three years to ten years the statute of limitations for sexual assault claims. Under Assembly Bill (“AB”) 1619, a plaintiff may now bring a civil action for sexual assault within the later of “[ten] years from the date of the last act, attempted act, or assault with the intent to commit an act, of sexual assault by the defendant against the plaintiff” or “[w]ithin three years from the date the plaintiff discovers or reasonably should have discovered that an injury or illness resulted” from the defendant’s act.

Restrictions on Confidentiality and Testimony Provisions in Settlement Agreements

SB 820 prohibits settlement agreements that restrict plaintiffs from disclosing factual information about harassment claims in judicial proceedings. The bill does not, however, prohibit settlement provisions restricting disclosure of settlement amounts. Furthermore, a provision that shields the identity of a claimant may be included in a settlement agreement at the request of the claimant, unless a government agency or public official is a party to the agreement.

AB 3109 voids settlements that waive the right to testify regarding criminal conduct or sexual harassment, when the party has been required or requested to attend a proceeding by court order, subpoena, or other government request.

Enhanced Protection from Defamation

AB 2770 enhances protections from defamation claims made against sexual harassment claimants and employers that investigate such complaints. Three types of statements are privileged: 1) employee complaints of sexual harassment made without malice and supported by credible evidence; 2) communications made without malice between an employer and other interested persons regarding a sexual harassment complaint; and 3) answers provided without malice by a current or former employer in response to questions from a prospective employer regarding whether the current or former employer would rehire an employee, and whether the decision not to rehire is based on a determination that the former employee engaged in sexual harassment.

Broadened Definition of Non-Employment Related Harassment

SB 224 significantly expands sexual harassment claims in business, service, and professional relationships under California Civil Code Section 51.9. Going beyond the prior definition, which applied to physicians, attorneys, trustees, landlords, and other similar relationships, the law now prohibits harassment by individuals who “hold themselves out as being able to help the plaintiff establish a business, service, or professional relationship with the defendant or a third party.” Examples include investors, elected officials, lobbyists, directors, and producers.

The law also reduces the burden to establish a claim, removing the previous requirement that a plaintiff establish that he or she was “unable to easily terminate the relationship.” The law also allows the California Department of Fair Employment and Housing (“DFEH”) to prosecute non-employment based sexual harassment claims, and makes it unlawful to “deny or aid, incite, or conspire in the denial of rights of persons related to sexual harassment actions.”

Expanded Anti-Harassment Training

Under existing law, employers with fifty or more employees were required to provide two hours of anti-harassment training to supervisory employees every two years. Under SB 1343, any employer with five or more employees, including temporary and seasonal workers, must provide two hours of anti-harassment training to supervisors and one hour of training to non-supervisors by January 1, 2020, and then once every two years thereafter. The bill also requires the DFEH to develop these courses and to post them online.

Corporate Boards of Publicly Held Corporations Must Include Female Representatives

SB 826 requires all publicly-held domestic and foreign corporations with principal executive offices in California to have at least one female on their boards by the end of 2019. By the end of 2021, the minimum increases to one female for boards with four or fewer members, two females for boards with five members, and three females for boards with six or more members. “Female” refers to an individual’s gender identification, not designated sex at birth.

The bill directs the Secretary of State to publish online reports documenting compliance. In addition, the Secretary of State may issue fines of $100,000 for failure to file board member information, $100,000 for the first violation of the member requirement, and $300,000 for subsequent violations. Each position not appropriately filled constitutes a separate violation.

Salary History Ban and Pay Scale Disclosure Guidance

Labor Code Section 432.3, enacted in January 2018, requires employers to provide applicants, upon request, with the pay scale for a position. It also prohibits employers from asking about or relying on prior salary in hiring or compensation.

An amendment to this bill enacted in July 2018 provides some necessary clarifications. It defines “pay scale” as a “salary or hourly wage range,” and it clarifies that the salary history ban and pay scale requirement do not apply to current employees. It also explains that employers are not required to provide pay scale information until after the initial interview. Employers are also allowed to ask about salary expectations. Finally, it allows employers to make compensation decisions based on existing salaries, so long as any differential is justified by a bona-fide factor such as seniority or merit.

Limitations on Criminal History Inquiries

Existing law restricts employers from considering applicants’ and employees’ judicially dismissed or sealed convictions or participation in pretrial or post-trial diversion programs. SB 1412 narrows the scope of an exception to this general rule. The bill permits employers to seek information from the applicant or other sources only about an applicant’s “particular conviction,” rather than a “conviction” generally.

An employer may inquire about a “particular” conviction only if: 1) the employer is legally required to obtain information regarding the conviction; 2) the applicant would be required to possess or use a firearm; 3) an individual with that conviction is legally prohibited from holding the position; or 4) the employer is legally prohibited from hiring an applicant with that conviction.

The employer may inquire about the particular conviction under these circumstances even if it has been expunged, sealed, statutorily eradicated, or judicially dismissed. The law further states that it does not prohibit an employer from conducting criminal background checks or restricting employment based on criminal history when legally required to do so.

Paid Family Leave for Active Duty Families

SB 1123 extends California’s paid family leave program to families with members on active duty in the armed forces. Beginning on January 1, 2021, an individual may take up to six weeks of paid family leave a year when participating in a qualifying exigency related to the covered active duty or call to covered active duty of the individual’s spouse, domestic partner, child, or parent.

Employment Record Inspection Rights

SB 1252 provides guidance regarding requests to inspect employment records. Employees have a right to receive a copy of their records, not merely inspect or copy them. An employer must deliver a copy within 21 days, and may charge the cost of reproduction to the employee. An employer who fails to provide an employee with a copy of his or her employment records within the 21-day time period will be subject to a $750 fine.

Expanded Lactation Accommodation Requirements

AB 1976 expands the existing lactation accommodation standards to now require that employers create a permanent lactation location in an area other than a bathroom. Before this change, employers were required to provide only an area other than a toilet stall. Employers may create a temporary location if they can demonstrate: 1) an inability to provide a permanent location due to operational, financial, or spatial constraints; 2) the temporary location is private and free from intrusion when needed for lactation; 3) the temporary location is only for lactation purposes when needed for that purpose; and 4) the temporary location otherwise meets state law requirements. If the requirements would create an “undue hardship”, however, the employer must make “reasonable efforts” to provide the employee with an area other than a toilet stall that is in close proximity to the employee’s work area where the employee can express milk in private.

California Construction Employers Temporarily Protected from PAGA Suits

California construction workers will no longer be able to bring suit against their employers under the Private Attorneys General Act of 2004 (“PAGA”) if they work under a collective bargaining agreement that meets certain requirements provided in AB 1654. To qualify, the agreement must: 1) provide for the wages, hours of work, and working conditions of employees, premium wage rates for all overtime hours worked, and for employees to receive a regular hourly pay rate of not less than 30 percent more than the state minimum wage rate; 2) provide for a grievance and binding arbitration procedure to redress labor code violations; 3) expressly waive PAGA’s requirements in clear and unambiguous terms; and 4) authorize the arbitrator to award any and all remedies available under law. This exception expires on the earlier of the collective bargaining agreement’s expiration date or the statute’s repeal date of January 1, 2028.

Petroleum Industry Employee Rest Breaks May be Interrupted

Although California law prohibits employers from requiring employees to work during their meal, rest, or recovery periods, AB 2605 creates an exception for certain workers in the petroleum industry who are covered by a qualifying collective bargaining agreement. Under this provision, employers may interrupt rest breaks taken by employees who hold safety-sensitive positions at petroleum facilities from their duties, to the extent the employee is required to carry and monitor a communication device and respond to emergencies or is required to remain on employer premises to monitor the premises and respond to emergencies. If a rest break is interrupted, an employer must promptly provide an additional rest break. If a rest break cannot be provided, the employer must pay the employee an hour of pay. This bill became effective immediately when it was signed by Governor Brown on September 20, 2018, and it will remain effective until the section is repealed in January 1, 2021.

Suggested Actions

In light of these changes, California employers should consider taking the following actions:

  • Train managers, recruiters, human resource professionals, and other relevant staff regarding these new requirements and restrictions.
  • Educate all employees, especially supervisory employees, about laws prohibiting harassment, including SB 1300’s expanded definition of harassment, and train employees on how to appropriately respond to complaints of harassment.
  • Update policies, procedures, and agreements in light of SB 1300’s new restrictions on non-disparagement agreements and releases and SB 820’s and AB 3109’s restrictions on confidentiality provisions in settlement agreements.
  • Update training policies, procedures, and materials to comply with SB 1343’s expanded requirements for sexual harassment training for all employees.
  • Consider updating procedures and policies regarding employment references to third parties to permit disclosures regarding eligibility for rehire. Employers should designate a single person or a human resources professional to provide references in order to ensure that disclosures fall within AB 2770’s defamation privilege.
  • Begin planning for SB 826’s requirements for female representation on corporate boards.
  • Ensure that application forms, candidate questionnaires, interview outlines and scripts, and other screening and hiring materials omit inquiries regarding salary history and inquiries regarding criminal history, consistent with applicable law.
  • Prepare policies and procedures for complying with the salary history ban’s pay scale disclosure requirements. Such policies and procedures should comply with the requirements described above.
  • Consider asking applicants about their salary expectations, rather than salary history. If an employee voluntarily offers salary information, contemporaneously document that the employee introduced the information into the discussion.
  • Review criminal history screening policies, procedures, and forms to ensure compliance with the restrictions on criminal history inquiries. Prepare policies for dealing with criminal history to avoid ad hoc decision-making by managers and consider involving human resource professionals.
  • Contemporaneously document any individualized assessments regarding an applicant’s suitability for employment based on criminal history information.
  • Update written policies regarding qualifying exigencies related to military service.
  • Ensure policies for responding to employee requests for records; permit employees to obtain copies of such records.
  • Ensure that there is an available space for lactation in the workplace that complies with the new requirements.
  • Reach out to us if you have any questions, concerns, or need guidance with respect to these new laws or your company’s obligations to comply with them.
Copyright 2018 K&L Gates.
This post was written by Spencer Hamer and Catherine C. Smith of K&L Gates.

Nurse Staffing Ratios May Be Coming to a Hospital Near You

On November 6, 2018, when Massachusetts voters go to the polls to select a new Governor and other key elected officers, they will also consider Ballot Question 1, which will mandate rigid registered nurse staffing ratios for hospitals across the Commonwealth effective as of January 1, 2019. This proposal would make Massachusetts the second state in the United States to have specific staffing ratios mandated in all units. This initiative follows only California, which passed a less comprehensive law through the legislative process in 1999 and provided over five (5) years for hospitals to implement by 2004.[1] The Massachusetts ballot initiative process, like that of some other states, allows the voters to write entirely new law into books. Question 1 appears to be the most heavily-fought ballot initiative in Massachusetts in recent memory. While Massachusetts seems to be the only state this year with a nurse staffing ratio as a referendum ballot initiative,[2] unions nationally will focus on the results of this year’s effort.

What is Question 1?

Question 1, if passed, would mandate highly-prescriptive and specific nurse-to-patient ratios based on the type of patients/units in hospitals, regardless of market, acuity of the patient, physician orders, or nursing judgement. Hospitals are required to implement a written plan detailing the maximum number of patients to be assigned to a registered nurse by unit at all times, while also “concurrently detailing the facility’s plans to ensure that it will implement such limits without diminishing the staffing levels of its health care workforce.”

Hospitals would also be required to develop a “patient acuity tool” for each unit to be used to determine whether the maximum number of patients that may be assigned should be lower than the assignment limits in the law. Notices regarding the patient assignment limits must be posted in conspicuous places, including each unit, patient room, and waiting area.

What are the Ratios?

The specific ratios mandated are summarized as follows (nurse:patient):

  • Step-down/intermediate care 1:3
  • Post anesthesia care (PACU) 1:1; PACU post-anesthesia 1:2
  • All units with operating room (OR) patients 1:1; OR patients post-anesthesia 1:2
  • Emergency Services Department: 1:1, 1:2,1:3, or 1:5 depending on the emergent or urgent nature of a patient which often changes by the minute
  • Maternal child care patients:
    • Active labor, intermittent auscultation for fetal assessment, and patients with medical or obstetrical complications 1:1
    • During birth and for up to two hours immediately postpartum 1:1 for mother and baby; when the condition of the mother and baby are determined to be stable and the critical elements are met, 1 nurse may care for both the mother and the baby(ies)
    • During postpartum for uncomplicated mothers or babies 1:6 (either 6 mothers or babies, 3 couplets of mothers and babies, or, in the case of multiple babies, not more than a total of 6 patients
    • Intermediate care or continuing care babies is 1:2 for babies
    • Well-babies 1:6
  • Pediatric 1:4
  • Psychiatric 1:5
  • Medical, surgical and telemetry patients 1:4
  • Observation/outpatient treatment 1:4
  • Rehabilitation units 1:5
  • All others 1:4

How Would the New Law be Enforced?

Question 1 also requires the state’s Health Policy Commission (HPC) (as opposed to the Department of Public Health, which is the state authority to license and regulate hospitals and other health care providers) to promulgate regulations and conduct inspections governing the implementation of the initiative.  The HPC is a six year old independent state agency charged with monitoring health care spending growth, it does not have the staff or infrastructure to conduct routine hospital surveys to monitor internal facility management and operations. It is also important to note that the proposed ballot would restrict the HPC by preventing it from issuing any delays, temporary or permanent waivers, or modifications of the ratios. Thus, even if the HPC believed that the January 1st  implementation date was unfeasible, it may be prohibited from offering waivers.

The HPC may report violations to the State Attorney General, who could file suit to obtain injunctions as well as civil penalties of up to $25,000 per violation and up to $25,000/day for continued violations.

The Impact if Question 1 Passes

Coalitions have lined up on both sides of Question 1.  Each side has painted dramatically-different pictures of a future for the industry with mandated nurse staffing ratios. The supportive nursing union has cast the initiative as being relatively small dollars for the industry, costing only $47 Million for all hospitals in the state in total according to their study.[3],[4]  The Massachusetts Health and Hospital Association and a broad-based coalition of health care providers and other nursing organizations opposed to the initiative point to studies estimating that the cost will be in excess of $1 Billion to the industry.[5]  Increased costs are based on the need to recruit new nurses, as well as the across-the-board increases in pay. There will be a need to hire 5,911 registered nurses within 37 business days to comply with January 1st  deadline and this is in a state that already has a shortage of approximately 1,200 registered nurses.[6]  Individual community hospitals are reporting projected additional expenditures that amount to more than the $30 Million per year, with teaching hospitals anticipating increased expenditures higher than that.[7]

On October 4, 2018, the HPC issued its independent report on the estimated costs of Question 1, essentially validating the opposition’s concerns, and projecting annual increased costs of $676 Million to $949 Million, and noted that the projections were “conservative.” The HPC study undercounted costs as it only looked at increased costs in certain units, and excluded costs associated with increased staffing in emergency departments, observation units, outpatient departments, or any costs for implementation or to non-acute hospitals.[8]  Wage increases of 4 – 6% are predicted in the HPC study, based on the California experience with across-the-board staffing requirements in place, and estimated increases of total health expenditures in Massachusetts of 1.1 – 1.6%, with increases of 2.4 – 3.5% for hospital spending alone, again, based on a conservative and partial analysis. Thus, it appears that the industry fears of greater than $1Billion in annual increased expenses are valid.

Ancillary adverse impacts anticipated by the HPC included reduced access to emergency care, increased wait times, decreased patient flow, increased “boarding,” and more ambulance diversions.

The HPC also compared Massachusetts to California hospitals and concluded that there was “no systematic improvement in patient outcomes post-implementation of ratios.”

What Should Hospitals be Doing Now?

Question 1, if passed, would only apply to Massachusetts licensed hospitals.  But hospitals and health systems in other jurisdictions should be prepared for similar efforts in their states. The following are some initial steps hospitals should be considering

Access Management.  Access problems will be common starting in January if Question 1 passes. Elective procedures, non-emergent appointments and other services may need to be curtailed effective January 1, 2019.  Hospitals will need to meet staffing levels on that day with respect to then-current inpatients and outpatients.  Avoiding new admissions in December may be necessary to assure the hospital is not in instant violation on New Year’s Day. Early patient contact to warn about the possibility of rescheduling procedures will prudent.

Payer Contract “Reopeners.”  Payer contracting “reopeners” should be added to managed care contracts now. The hospital community has been watching the interest of the unions in pushing nurse staffing ratios in Massachusetts and other states for a number of years. Health systems and hospitals negotiating long-term contracts with payers have often included “reopeners” to permit the hospital to revisit contract rates even during the term of an agreement if certain extreme events come to pass.  Hospitals in all jurisdictions are encouraged to consider adding such reopeners to their agreements today.

Massachusetts hospitals should review their payer contracts now to confirm if they have the right to a mid-term reopening and, if so, provide notice immediately upon passage to their payers that the hospital will need to renegotiate rates to address the increased costs. Charge masters will also need to be reviewed immediately.

Union status? Based on their efforts to rally public support around Question 1, the Massachusetts Nurses Association is trying to do an end-run around the collective bargaining table where their past efforts on the issue of staffing ratios have failed.  Health systems and hospitals should review their collective bargaining agreements to determine whether they are in a position to trigger a reopener during the term of the contract to address the numerous monetary and non-monetary consequences of rigid staffing ratios contemplated by Question 1.

Unit Closure Plans.  If passed, hospitals in Massachusetts will likely need to immediately assess whether and how they could comply with these new ratios. Units that already operate at a loss, or for which meeting the staffing requirements is impossible, should be closed or reduced to the smallest possible patient compliment.  Closure plans and negotiations will need to commence immediately.

Massive Recruitment Efforts.  While there are believed to be a few hospitals that may already meet these staffing levels (at some times), most hospitals will need to recruit many more registered nurses, as well as have additional nurses standing by for fluctuations in patient loads on various units on a daily basis.  As noted above, the law will require hiring nearly 6,000 RNs in the fourth quarter of this year.[9]

Conclusion

If Question 1 passes, conservative projections estimate extreme new costs will be incurred by Massachusetts hospitals, which will result in both reductions in levels of service, and increased costs to payers and patients.  It is important to note that the dire circumstances of the ballot has led to an increasing large number of nursing organizations and physician groups in Massachusetts to all oppose Question 1. While Massachusetts hospitals are making plans akin to natural disaster preparedness, hospitals in other states should watch carefully these events to be ready should similar initiatives arise locally.

———————————

[1] A few other states have limited ratios in certain special types units (like intensive care units), but Question 1 applies to all hospital units.

[2] See http://www.ncsl.org/research/elections-and-campaigns/ballot-measures-database.aspx(June 6, 2018); downloaded on October 8, 2018.

[3] See https://www.massnurses.org/news-and-events/p/openItem/11083

[4] See https://safepatientlimits.org/wp-content/uploads/Shindul-Rothschild-Esti…

[5] See https://www.protectpatientsafety.com/get-the-facts/

[6]  See Mass Insight Global Partnership, Protecting the Best Patient Care in the Country, Local Choices v Statewide Mandates in Massachusetts (April, 2018)  http://www.bwresearch.com/reports/bwresearch_mha-nlr-report_2018Apr.pdf (“Mass Insight Study”)

[7] See Financial impact of nurses ballot question? Depends who’s counting, Priyanka Dayal McCluskey, Boston Globe (Sept. 17, 2018).  https://www.bostonglobe.com/metro/2018/09/17/financial-impact-nurses-ballot-question-depends-who-counting/mlS4yZa5IB8hcDaFZ7ojXM/story.html

[8] See Analysis of Potential Cost Impact of Mandated Nurse-to-Patient Staffing Ratios, October 3, 2018, https://www.mass.gov/doc/presentation-analysis-of-potential-cost-impact-…

[9] Mass Insight Study.

 

© 2018 Foley & Lardner LLP
This post was written by Lawrence W. Vernaglia and Donald W. Schroeder of  Foley & Lardner LLP.

New Federal Overtime Rule Expected in Early 2019

It doesn’t seem that long ago that employers were busily preparing for the new overtime rule that would have doubled the minimum salary level for the “white collar” exemptions from $23,660 to nearly $48,000.  That new rule—finalized in May 2016 and set to take effect on December 1 of that year—was struck down by a Texas federal court in late November 2016.

President Trump took office in January 2017, and the DOL—with less interest in so aggressively raising wages as the predecessor administration—pushed the pause button on revisions to the overtime rule.  In public comments, however, Labor Secretary Alexander Acosta, who assumed the post in late April 2017, repeatedly indicated that he favors some increase in the minimum salary threshold for exemption, which was last raised in 2004 (and before that, in 1975).

In July 2017, the DOL began seeing public comment on a revised overtime rule, publishing a Request for Information in the Federal Register.  The comment period closed in September 2017.

In its Spring 2018 Regulatory Agenda, the Trump Administration formally announced its intention to issue a Notice of Proposed Rulemaking (NPRM) in January 2019 “to determine what the salary level for exemption of executive, administrative, and professional employees should be.”

So what should employers expect in a new overtime rule?  Likely an increase in the minimum salary for exemption to something in the low-to-mid $30,000s.  This would be consistent with Secretary Acosta’s comments on the issue, but still considerably lower than the level proposed by the Obama Administration.  It would also be significant lower than some state law minimum salaries for exemption (consider New York’s minimum for exempt executive and administrative employees, which will climb to $58,500 at the end of 2018).

Another thing we could see in a new overtime rule are more modern examples of how the various exemptions might apply in today’s workplaces.  The DOL included a number of new examples in its sweeping revisions to the overtime exemption rules in 2004.  It would make sense to revisit those examples, and to consider additional examples, given how the workplace has evolved in the last 15 years.

It’s also possible the DOL will depart from a one-size-fits-all salary minimum and propose different tests for smaller or non-profit employers.  Small businesses, non-profits, and educational institutions were among the loudest voices in opposition to the 2016 overtime rule changes, and would be among the hardest hit by any increase in the minimum salary levels.

What I don’t expect from a new overtime rule are automatic future increases (which were part of the 2016 rule) or a change from a qualitative to a quantitative (e.g., California-style) primary duties test.

I also don’t expect any new overtime rule to take effect before 2020.  Even assuming the DOL meets its expected deadline of proposing a new rule in January 2019, it will likely receive (and have to review) hundreds of thousands of public comments.  (The DOL received more than 270,000 comments in response to the proposed overtime rule that was finalized in 2016.)  In all likelihood, the DOL will give employers plenty of lead time to plan and prepare for any increases in the minimum salary for exemption.  So for employers who are not subject to more stringent state rules around exemption, it’s likely you have at least a year and a few months before you’d have to implement any changes.

 

© 2018 Proskauer Rose LLP.
This post was written by Allan Bloom of Proskauer Rose LLP
Learn more labor and employment news on the National Law Reviews Labor & Employment page.

Incentive Compensation That is Never Subject to Income Tax – Too Good to Be True?

Clients frequently ask if they can provide incentive compensation to their employees and executives in a manner that gives them flexibility and drives performance, but receives coveted capital gains treatment. This usually sounds too good to be true. In most cases, you can defer or sometimes minimize income tax for employees (retirement plans, deferred compensation arrangements, stock appreciation rights, non-qualified stock options), but there is one tool that enables employees to skip income tax, FICA, and withholding altogether – well-designed and-well managed incentive stock options or “ISOs.”

Incentive stock options – sometimes called statutory options because they are established and governed by Internal Revenue Code 422 – are a kind of stock option that can provide “special” tax treatment to the recipients if certain requirements are satisfied. There are two key differences between incentive stock options and their more common cousin – the non-qualified stock option:

  • First, executives will not recognize any ordinary income tax at exercise of an ISO (as compared to a non-qualified option – which requires executives to recognize ordinary income on the spread – or difference between the exercise price and the value of the option on the date of exercise – and come up with money to pay their withholding on that amount). This can be a big benefit as long as the exercise does not end up triggering the AMT (which has historically been an issue for many incentive stock option holders, but is less likely now in light of changes made to the AMT by the Tax Cuts & Jobs Act).

What is AMT?  At a very high level, the Alternative Minimum Tax (AMT) is simply an alternative tax structure to the more well-understood and more often used regular income tax method. In order to determine which tax to apply, taxpayers must calculate taxes under the regular income tax method and the alternative minimum tax and then pay whichever amount is greater. This does not come up particularly often for most normal taxpayers, but is relevant for most ISO recipients because the value of the spread at exercise is not taken into account under the regular tax method, but it is considered as a preference item in the AMT method. The larger the spread, the more likely ISOs will trigger the AMT.

  • Second, if all of the statutory requirements are satisfied, then the gain – the difference between the incentive stock option’s exercise price (generally, the fair market value of the stock on the date of grant) and the amount the holder will receive when she ultimately sells the stock after exercise – will all be taxed at the lower capital gains rate (currently, 15 percent or 20 percent, depending on income level), rather than income tax (the top tax bracket is currently at 37 percent), and no FICA or withholding obligations will apply. That is a tax savings of more than 17 percent!

The flipside is that ISOs are less tax advantageous to employers because, if all goes as planned, they will never be permitted to take a deduction for the compensation. However, because the corporate tax rate was reduced with the Tax Cuts & Jobs Act, some employers are taking a second look at whether to issue ISOs now, considering that the deduction is now less valuable.

To receive this special treatment, the plan document, award agreement, and management of the incentive stock option award must meet certain requirements:

Plan and Award Agreement

  • Incentive stock options must be issued pursuant to an equity incentive plan.
  • The plan must provide the number of shares reserved for issuance as ISOs.
  • The plan must be approved by the company’s shareholders within 12 months before or after it is adopted by the company, and re-approved at least every 10 years thereafter.
  • The award agreement must provide an exercise price that is no less than the fair market value of the stock underlying the options on the date of grant (100 percent of the fair market value for 10 percent owners). [This will also help with Code Section 409A compliance.]
  • Each award must have a stated term of no more than 10 years (five years for 10 percent owners).

Eligibility and Operation

  • ISOs may only be issued to employees – not to consultants or non-employee directors.
  • ISOs may only be issued by corporations.
  • No more than $100,000 of ISOs may become exercisable in any given calendar year (based on the fair market value on the grant date). [This seems straightforward until companies add fancy features like accelerated vesting on a change in control event.]
  • Certain limits on post-termination exercise apply, notably ISOs must be exercised within three months of a standard termination (longer periods apply in the event of death or disability).
  • After the option is exercised, and stock is actually purchased, the stock must be held until the later of (i) the second anniversary of the grant date or (ii) one year from the exercise date. [This tends to be one of the most difficult requirements to satisfy because many employees want to wait to exercise until a liquidity event – or change in control – but will not satisfy the holding period if they sell their stock shortly after exercise.]
© 2018 Foley & Lardner LLP
This post was written by Casey K Fleming of Foley & Lardner LLP.
Please find more tax legal news on the National Law Review tax type of law page.

Your Presence Is Required: Employee Unable to Travel to Job Site Was Not “Qualified” Within the Meaning of the ADA

In recent years, particularly with technology making it easier for employees to work remotely, courts have struggled to determine whether onsite attendance is an essential job function under the Americans with Disabilities Act (“ADA”).  This question is often dispositive because only qualified individuals—those who can perform a job’s essential functions with or without a reasonable accommodation—are protected by the ADA.  A federal court in South Carolina recently ruled that an employee who could not get to his worksite for a six-month period could not perform the essential functions of his job and thus his employer did not run afoul of the ADA in terminating his employment.  Dunn v. Faithful+Gould Inc., Case No. 6:15-cv-04382 (June 18, 2018).

Dunn worked as a chief scheduler for Faithful+Gould (“FG”) from 2011 until his termination in August 2014.  For the first eighteen (18) months of his employment, Dunn worked remotely from his house because no local office had been established.  In 2013, a local office was formed, and Dunn changed supervisors.  Dunn’s new supervisor did not allow Dunn or other schedulers to work from home.  In the summer of 2014, Dunn had two epileptic seizures.  According to his doctor, Dunn had no restrictions and could return to work, but he could not drive for six months because South Carolina law prohibits someone from driving within six months of an epileptic seizure.  Dunn requested that he be permitted to work from home until his driving privileges were restored.  While FG was willing to allow Dunn to work from home one day a week for a four-week period while Dunn figured out a long-term transportation solution, FG refused to allow Dunn to work from home daily for an extended period.  In September 2014, Dunn’s employment was terminated after he exhausted all leave available under the FMLA and company policy.

Despite the fact that Dunn’s job description made no reference to onsite attendance and despite the fact that he worked from home for the first eighteen months on the job, the court concluded that onsite attendance was an essential function of Dunn’s job.  The court gave significant weight to the judgment of Dunn’s supervisor that onsite attendance was essential and Dunn’s statements to his doctor that he could not perform his job from home.  The court also noted that Dunn’s job had changed, and while onsite attendance may not have been essential during his first eighteen months on the job, it was at the relevant time.  The court rejected Dunn’s argument that FG should have granted him extended leave as a reasonable accommodation while he waited the six months to be able to legally drive again.  The court ruled extended leave was not a reasonable accommodation because it would have required FG to reallocate Dunn’s essential job duties to other employees for an extended period of time.

Dunn illustrates well the case-by-case analysis required in determining whether a job function such as onsite attendance is essential and that the essential nature of a function can actually change over time.  Thus, in considering potential accommodations, employers should always conduct an individualized assessment to determine whether any job function, including onsite attendance, is an essential function of a particular position.

Dunn is consistent with the Sixth Circuit’s en banc decision in EEOC v. Ford Motor Company, discussed in a previous blog.

 

Jackson Lewis P.C. © 2018
This post was written by Jonathan A. Roth of Jackson Lewis P.C. 

Brett Kavanaugh Nominated to U.S. Supreme Court

In the wake of Justice Anthony Kennedy’s retirement, President Donald Trump was presented with the rare opportunity to make his second U.S. Supreme Court nomination in as many years, nominating the Honorable Brett M. Kavanaugh to succeed Justice Kennedy. If confirmed by the Senate, Judge Kavanaugh would bring more than a dozen years of judicial experience to the position.

While the nomination process was swift, the confirmation process is likely to be contentious. Any nominee to the Supreme Court can expect deliberate and careful scrutiny, but in the context of losing Justice Kennedy’s critical “swing” vote, Judge Kavanaugh’s record of judicial decisions will receive even more attention than usual.

Career

Judge Kavanaugh, a federal judge on the U.S. Court of Appeals for the D.C. Circuit, received his B.A. from Yale College in 1987 and his J.D. in 1990 from Yale Law School, where he was a Notes Editor on the Yale Law Journal. Judge Kavanaugh’s lengthy experience with the judicial process began immediately upon graduation from law school, having clerked for Judge Walter Stapleton of the U.S. Court of Appeals for the Third Circuit (1990-1991) and for Judge Alex Kozinski of the U.S. Court of Appeals for the Ninth Circuit (1991-1992). Judge Kavanaugh served as a law clerk to the man he has been nominated to replace, Justice Anthony M. Kennedy of the U.S. Supreme Court, during October Term 1993.

Immediately following his U.S. Supreme Court clerkship, Judge Kavanaugh served in the Office of the Solicitor General of the United States. From 1994 to 1997, and for a period of time in 1998, Kavanaugh was Associate Counsel in the Office of Independent Counsel Kenneth W. Starr. He also spent time in private law practice, as a partner at Kirkland & Ellis in Washington, D.C., from 1997 to 1998 and again from 1999 to 2001. From 2001 to 2003, he was first Associate Counsel, and then Senior Associate Counsel to the President in the George W. Bush White House. From July 2003 until May 2006, Judge Kavanaugh was Assistant to the President and Staff Secretary to the President.

President Bush nominated Judge Kavanaugh to the D.C. Circuit and on May 30, 2006, he was appointed after being confirmed by a vote of 57-36.

Key Labor and Employment Decisions

 Judge Kavanaugh’s judicial philosophy is regarded as conservative; he is a textualist and an originalist, following in the footsteps of the late Justice Antonin Scalia. He generally takes a narrow and demanding approach to employment-related lawsuits and statutory interpretation, and routinely rules in favor of employers. That said, some of his opinions written for the majority, along with his dissents, reveal a flexible and nuanced approach to discrimination claims. How will Judge Kavanaugh treat workplace law cases that come before the Supreme Court? Following are summaries of several key decisions that illustrate his approach to deciding such cases.

Corporate Governance and Internal Investigations

 Judge Kavanaugh’s opinions display a tendency to refer to the plain text of statutes and their history, especially when voicing his support for the authority of the Executive Branch. See PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75, 165-67 (D.C. Cir. 2018) (Kavanaugh, J., dissenting). In his PHH dissent, Judge Kavanaugh held that the structure of the Consumer Financial Protection Bureau is unconstitutional, because having only one director erodes the President’s Article II powers. Id. at 166. Judge Kavanaugh reasoned that: (1) in light of historical practice, there has never been any independent agency so unaccountable and unchecked; (2) the lack of a critical check runs the risk of abuse of power and threatens individual liberty; and (3) Presidential authority to control the Executive Branch is of great importance and is diminished by this single-director independent agency. Id. at 167.

In an earlier dissent in Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 537 F.3d 667, 686 (D.C. Cir. 2008), Judge Kavanaugh asserted that the Public Company Accounting Oversight Board (PCAOB), created by the Sarbanes-Oxley Act, is unconstitutional because the appointment and for-cause removal powers of the PCAOB lie with the SEC, another independent agency. Kavanaugh stated this structure unconstitutionally restricted the President’s appointment and removal powers, either directly or through an alter ego, which he said has “never before [happened] in American history.” Id.

Discrimination in the Workplace

Judge Kavanaugh frequently writes opinions in a manner designed to portray himself as giving precise meaning to statutes, and resisting the urge to expand the law or “legislate from the bench.” See, e.g., Miller v. Clinton, 687 F.3d 1332, 1358 (D.C. Cir. 2012) (Kavanaugh, J., dissenting) (denouncing the majority’s decision to apply Age Discrimination in Employment Act (ADEA) to the State Department and quoting from Antonin Scalia & Bran A. Garner, Reading Law: The Interpretation of Legal Texts).

Several of Judge Kavanaugh’s decisions suggest he construes anti-discrimination statutes in a manner that may be considered plaintiff-friendly, but there is not a sufficient sample from which to draw a definitive conclusion on this issue. In both Ortiz-Diaz v. United States HUD, 831 F.3d 488, 494 (D.C. Cir. 2016), rev’d 867 F.3d 70, 81 (D.C. Cir. 2016), and Ayissi-Etoh v. Fannie Mae, 712 F.3d 572, 579-80 (D.C. Cir. 2013), Judge Kavanaugh argued in favor of making it easier for plaintiffs to establish a prima facie case of employment discrimination. In Ortiz-Diaz, Judge Kavanaugh was part of a three-judge panel that initially affirmed a district court’s ruling that refusal to grant a lateral transfer is not an adverse employment action under Title VII. See Ortiz-Diaz, 831 F.3d at 494. The ruling prevented the plaintiff from demonstrating harm resulting from his employer’s refusal to grant him a lateral transfer away from an allegedly racist and biased supervisor who the plaintiff claimed was hurting his ability to develop and succeed professionally. Id. at 491-92. Several months later, however, that three-judge panel reversed itself sua sponte, holding that when an employer denies a lateral transfer for reasons based on race or gender or other protected grounds, that employer violates Title VII. Ortiz-Diaz, 867 F.3d. at 74-77. In both decisions, Judge Kavanaugh wrote a concurring opinion arguing in favor of expanding the definition of adverse employment action to include discriminatory refusal to grant requests for lateral transfers. Id. at 81; Ortiz-Diaz, 831 F.3d at 494. Similarly, in Ayissi-Etoh, 712 F.3d at 579-80, Judge Kavanaugh wrote a concurring opinion, arguing that a single verbal incident ought to be sufficient to establish a hostile work environment. Judge Kavanaugh opined, “[t]he test set forth by the Supreme Court is whether the alleged conduct is ‘sufficiently severe or pervasive’ — written in the disjunctive — not whether the conduct is ‘sufficiently severe and pervasive.’” Id. at 579. He continued, “in my view, being called the n-word by a supervisor — as Ayissi-Etoh alleges happened to him — suffices by itself to establish a racially hostile work environment.” Id. at 580.

Employee Benefits

Some of Judge Kavanaugh’s dissenting and concurring opinions offer insight into what his approach may mean for employers. In Priests for Life v. United States Dep’t of Health & Human Servs., 808 F.3d 1, 14 (D.C. Cir. 2015), Judge Kavanaugh dissented from the denial of a rehearing en banc in a Religious Freedom Restoration Act (RFRA) challenge to the process for accommodating religious objections to the Affordable Care Act’s contraceptive mandate. Under the accommodation, the carrier still provides the services to the plan participants, but directly to those requesting them rather than the plan paying for the services as the mandate requires. The panel decision had upheld the accommodation, stating that a court is not required “simply to accept whatever beliefs a RFRA plaintiff avows—even erroneous beliefs about what a challenged regulation actually requires.” Id. at 4. Rather than join other conservative dissenters, who would have held for the religious organization agreeing that the government has no compelling interest in contraception facilitation, Kavanaugh wrote, “It is not our job to re-litigate or trim or expand Supreme Court decisions. Our job is to follow them as closely and carefully and dispassionately as we can. Doing so here, in my respectful view, leads to the conclusion that the plaintiff religious organizations should ultimately prevail on their RFRA claim, but not to the full extent that they seek.” Id. at 14.

Judge Kavanaugh’s approach to his cases is objective and literal, and he has shown a depth of understanding of ERISA, as well as an employer’s duties and responsibilities. His dedication to the text of the law or the plan document does not favor one side over the other, but rather illustrates his commitment to interpreting the language objectively before applying it to the situation.

Immigration

Judge Kavanaugh’s immigration decisions indicate a tendency to interpret the law to protect U.S. workers rather than employers who want to hire foreign nationals. For example, his dissent in Fogo de Chao (Holdings) Inc. v. U.S. Department of Homeland Security, 769 F.3d 1127 (D.C. Cir. 2014), offers a glimpse into his approach to immigration law. Fogo de Chao, a Brazilian steakhouse restaurant chain, claimed that a critical component of its success included employing genuine gaucho chefs, churrasqueiros, who “have been raised and trained in the particular culinary and festive traditions of traditional barbecues in the Rio Grande do Sul area of Southern Brazil.” Id. at 1129. Over the years, the company had brought over 200 chefs to the U.S. on L-1B visas. To qualify for an L-1B visa, the company must show that the individual has worked for the company abroad for at least one year in the prior three years and has “specialized knowledge.” The statutory definition states that an employee possesses specialized knowledge “if the alien has a special knowledge of the company product and its application in international markets or has an advanced level of knowledge of processes and procedures of the company,” and the regulation followed suit. 8 U.S.C. § 1184(c)(2)(B). The U.S. Citizenship and Immigration Services (USCIS) denied Fogo de Chao’s petition, and the district court granted the government summary judgment. The D.C. Circuit reversed, holding that: (1) the regulation regarding “specialized knowledge” would not be given Chevron deference because the regulation merely mirrored the statute; (2) judicial review was not barred because the denial was not statutorily in the discretion of the Attorney General or the Secretary of Homeland Security; and (3) the agency’s denial based upon a categorical bar on culturally acquired knowledge to prove specialized knowledge was not sufficiently supported. Fogo de Chao, 769 F.3d at 1149.

Judge Kavanaugh dissented, noting that even if Chevron deference was not required, under a de novo standard of review, the agency’s decision should have been upheld. He reasoned the categorical bar on culturally acquired knowledge was correct because any other interpretation would “gut the specialized knowledge requirement and open a substantial loophole in the immigration laws.” Id. at 1152. Moreover, Judge Kavanaugh agreed with the agency that Fogo de Chao’s argument that American chefs could not be trained in a reasonable amount of time was inadequate. He noted that Fogo de Chao already employed some American chefs and “common sense tells us that the chefs who happen to be American citizens surely have the capacity to learn how to cook Brazilian steaks and perform the relevant related tasks.” Id. at 1153.

Ultimately, Judge Kavanaugh concluded that Fogo de Chao’s argument was at least in part based on their desire to cut labor costs and that “mere economic expediency does not authorize an employer to displace American workers for foreign workers.” Id. He further stated that: “By claiming that its Brazilian chefs possess ‘cultural’ knowledge and skills that cannot be learned by Americans within a reasonable time, Fogo de Chao has attempted an end-run around the carefully circumscribed specialized knowledge visa program.” Id. at 1154. Finally, in an interesting footnote, Kavanaugh pointed out that the agency could adopt a binding regulation (instead of relying on a policy memo) that would make it clear that workers such as the chefs in this case do not possess specialized knowledge under the statute ― then their decision would be entitled to Chevron deference. Id.

Judge Kavanaugh’s majority opinion in Int’l Internship Program v. Napolitano, 718 F.3d 986 (D.C. Cir. 2013), also illustrates his inclination to protect U.S. workers from being undercut based on an employer’s economic needs. Napolitano involved an organization that sponsored a cultural exchange program that helped Asians find jobs in American schools. The exchange program applied for Q visas for these individuals. The USCIS denied several of these petitions because the individuals participating in the program were not paid. The agency interpreted the Q visa statute and regulations to require payment of wages. Id. at 987.

The plaintiff argued that unpaid interns were eligible for Q visas as long as there were comparable American workers in the program who were unpaid because the statute stated that the foreign participants “will be employed under the same wages and working conditions as domestic workers.” Id. citing 8 U.S.C. § 1101(a)(15)(Q). Judge Kavanaugh disagreed, opining that the terms included in the statute and regulations (“employed,” “wages,” “workers,” and “remuneration”), were “best read to require foreign citizens to receive wages and that those wages be equivalent to the wages of domestic workers.” Int’l Internship Program, 718 F.3d at 987.

Labor

Because Judge Kavanaugh sits in the D.C. Circuit, he has frequently been involved in cases reviewing National Labor Relations Board (NLRB) decisions, which he appears to analyze on a case-by-case basis rather than in service of an overarching judicial philosophy. Judge Kavanaugh has written several majority opinions that vacated an NLRB order. Writing for the majority in S. New Eng. Tel. Co. v. NLRB, 793 F.3d 93, 94 (D.C. Cir. 2015), Judge Kavanaugh vacated an NLRB decision that had found an employer unlawfully banned employees (who went into customer’s homes) from wearing union t-shirts that stated “Inmate” and “Prisoner of AT.” Judge Kavanaugh opened his opinion by noting: “Common sense sometimes matters in resolving legal disputes,” and criticized the Board for applying “the ‘special circumstances’ exception in an unreasonable way.” Id. at 94, 96; see also Verizon New Eng. v. NLRB, 826 F.3d 480, 483 (D.C. Cir. 2016) (granting the employer’s petition for review of an NLRB decision which had overturned a labor arbitration decision that had ruled for the employer); Venetian Casino Resort L.L.C. v. NLRB, 793 F.3d 85, 87 (D.C. Cir. 2015) (granting employer’s petition for review, finding employer had a First Amendment right to contact police regarding a union demonstration allegedly trespassing on its private property).

In addition, Judge Kavanaugh has authored several dissenting opinions in favor of employers’ arguments. Most recently, in Island Architectural Woodwork, Inc. v. NLRB,2018 U.S. App. LEXIS 16109, at *32 (D.C. Cir. June 15, 2018), he dissented from the majority opinion enforcing an NLRB order holding an employer was an alter ego of a unionized shop and thus violated the National Labor Relations Act (NLRA). Judge Kavanaugh stated that “the Board’s analysis is wholly unpersuasive.” Id. at *34. In NLRB v. CNN Am., Inc., 865 F.3d 740, 765-66 (D.C. Cir. 2017), Kavanaugh dissented in part, finding that the NLRB erred in its analysis of both the joint-employer and successor-employer issues when it found that CNN had violated the Act, stating, among other things, that he agreed with conservative Member Miscimarra’s dissent in the underlying NLRB decision. Judge Kavanaugh ended his decision bluntly, “Bottom line: In my view, the Board jumped the rails in its analysis of both the joint-employer and successor-employer issues.” Id. at 767.

Judge Kavanaugh also dissented in Agri Processor Co. v. NLRB, 514 F.3d 1, 10 (D.C. Cir. 2008), refusing to join the majority’s decision enforcing an NLRB decision that held individuals who are not legally authorized to work in the United States are nonetheless “employees” for the purposes of the NLRA (and permitted to organize and vote in Union elections involving their employer). Judge Kavanaugh’s dissenting opinion stated, “I would hold that an illegal immigrant worker is not an ‘employee’ under the NLRA for the simple reason that, ever since 1986, an illegal immigrant worker is not a lawful ‘employee’ in the United States.” Id. In Kavanaugh’s view, the case should have been remanded to the Board “to determine how a party can challenge a union election or certification upon discovering after the fact that illegal immigrant workers voted in the election and effected the outcome.” Id.; see also Midwest Div.-MMC, LLC v. NLRB, 867 F.3d 1288, 1304-05 (D.C. Cir. 2017) (dissenting from majority, stating he would hold Weingarten rights do not apply to peer-review committee interviews, noting he would vacate the Board’s order to the extent it ruled the Union was entitled to peer-review information).

However, Judge Kavanaugh has sided with the NLRB in some instances. Most recently, in Veritas Health Servs., Inc. v. NLRB, 671 F.3d 1267, 1269-70 (D.C. Cir. 2012), Kavanaugh enforced an NLRB decision that had determined that certain pro-union conduct of charge nurses (supervisors) did not taint a union election, determining the employer did not show that the Court should overturn the decision upholding the election that resulted in the union’s certification. See also New York-New York, LLC v. NLRB, 676 F.3d 193 (D.C. Cir. 2012) (finding the NLRB had been granted discretion pursuant to an earlier Circuit decision to decide whether a property owner could prohibit employees of an on-site contractor from distributing handbills on its property); Raymond F. Kravis Ctr. for the Performing Arts, Inc. v. NLRB, 550 F.3d 1183, 1186 (D.C. Cir. 2008) (enforcing Board Order holding the employer violated the NLRA when it unilaterally changed the scope of the bargaining unit and withdrew recognition from the union); United Food & Commercial Workers v. NLRB, 519 F.3d 490, 492 (D.C. Cir. 2008) (enforcing NLRB decision that held employer was required to engage in effects bargaining with the union after positions no longer constituted an appropriate bargaining unit due to technological change); E.I. du Pont de Nemours & Co. v. NLRB, 489 F.3d 1310, 1312 (D.C. Cir. 2007) (enforcing Board Order finding that employer’s refusal to provide requested information to the union precluded lawful impasse).

Workplace Privacy

Judge Kavanaugh’s dissent in Nat’l Fed’n of Fed. Employees-IAM v. Vilsack, 681 F.3d. 483 (D.C. Cir. 2012), is perhaps indicative of his stance on privacy issues. In Vilsack, the plaintiff union challenged the constitutionality of a policy of random drug testing of all employees working at the Job Corps Civilian Conversation Center (specialized residential schools for at-risk youth) run by the defendant, the Secretary of Agriculture and Chief of the U.S. Forest Service. 681 F.3d at 485. The district court granted the Secretary’s summary judgment motion, concluding that the government interest in preventing illegal drug use justified intrusion of employee privacy interests and Fourth amendment rights. Id. at 488. The D.C. Circuit Court reversed and remanded the case. Id. at 486.

The panel opinion considered the balancing of the government’s interest in a drug free work place with employee privacy interests, using the Skinner test in assessing the employees’ privacy interests, to determine both “the scope of the legitimate expectation of privacy at issue” and the “character of the intrusion that is complained of.” Id. at 490. In ruling in favor of the plaintiffs and their interest in employee privacy, the opinion emphasizes the defendant’s lack of explanation of how “general program features loosely ascribed staff responsibilities serve to undermine the reasonable expectations of privacy held by Job Corps employees” and the lack of notice of such testing, given that for over a decade employees in the same position were not tested. Id. at 493. Moreover, typically drug testing is considered permissible in high security or safety positions; however, here the Secretary defendant designated all employees to drug testing, and the court concluded the defendant’s rationale supporting “special needs” to justify drug testing all employees was too speculative. Id. at 494-95, 498.

Judge Kavanaugh’s dissent narrowly addressed the issue of drug testing government employees who work at specialized residential schools for at-risk youth, and avoided an assessment of when drug testing should or should not be permissible in the government setting in general. Id. at 499-500. In the specific context of random drug testing at a “public school” for “at-risk youth,” Kavanaugh stressed that there was no Supreme Court precedent. Id. at 500. He distinguished a case the majority relied on, Vernonia School Dist. v. Acton, 515 U.S. 646 (1995), that cautioned against “suspicionless drug testing” passing “constitutional muster” in the public school setting. In Vernonia, the public school attempted to justify “suspicionless drug testing” of teachers and other staff on the basis that in the same school, drug testing of student athletes was permitted. Judge Kavanaugh found the Secretary’s rationale supporting “special needs” to be persuasive. See Vilsack, 681 F.3d at 501. “To maintain discipline, the schools must ensure that the employees who work there do not themselves become part of the problem,” Kavanaugh stated. Id. “That is especially true when, as here, the employees are one of the few possible conduits for drugs to enter the schools.” Id.

Judge Kavanaugh emphasized that his dissenting opinion was narrowly limited to this specific factual situation. See id. at 499-500. Therefore, in this case, although Kavanaugh ultimately concluded that the government’s interest outweighed the employees’ right to privacy, it remains difficult to assess the degree to which this case signals Kavanaugh’s stance on privacy issues generally.

***

Next steps: Judge Kavanaugh’s nomination must be approved by the U.S. Senate after the Senate Judiciary Committee holds a hearing. After a hearing, the committee votes on whether to put Kavanaugh before the Senate. If the committee votes to move forward, the Senate will vote on the nomination. A majority vote of the Senate is needed to put Judge Kavanaugh on the Court.

President Trump will have the opportunity to leave a lasting mark on the federal judiciary, which currently has more than 100 vacancies pending in the U.S. District Courts and the Courts of Appeals. In addition to the selection of the current nominee and Justice Gorsuch’s appointment in April 2017, Trump may have occasion to fill another Supreme Court seat in the coming years, with Justice Ruth Bader Ginsburg at age 85 and Justice Stephen Breyer at age 79.

Jackson Lewis P.C. © 2018
For more legal news and analysis, check out the National Law Review’s Homepage.

Some California “Sanctuary State” Employer Obligations Are Struck Down

On July 4th, U.S. District Judge John. A. Mendez issued an order enjoining California from enforcing parts of the California Immigration Workers Protection Act (Assembly Bill 450), a new state law that restricted private employers from cooperating with federal immigration enforcement.

Among other things, the law imposed fines on private employers of up to $10,000 per violation if they “voluntarily consent” to giving federal immigration authorities access to nonpublic areas of a “place of labor” and/or to employee records, and it mandated that the employer insist that the authorities obtain a judicial warrant or subpoena before such information would be turned over. Cal. Gov’t Code §§ 7285.1 and 7285.2. The court sided with the U.S. Department of Justice in finding that several provisions of AB 450 discriminate against private employers who cooperate with the federal government.

In his Order, Judge Mendez stated that “these fines inflict a burden on those employers who acquiesce in a federal investigation but not on those who do not.” Thus, the court found that “a law which imposes monetary penalties on an employer solely because the employer voluntarily consents to federal immigration enforcement’s entry into nonpublic areas of their place of business or access to their employment records impermissibly discriminates against those who choose to deal with the federal government.”

The court also struck down a provision of the law limiting an employer’s ability to re-verify an employee’s employment eligibility unless otherwise required by federal law on the ground that it “frustrates the system of accountability that Congress designed.” Cal. Lab. Code § 1019.2. The court left standing an employer obligation to warn employees in writing of an imminent inspection of I-9 forms by federal immigration authorities. Cal. Lab. Code § 90.2(a)(1).

This decision means that private sector employers may not be prosecuted for: (i) consenting to a federal immigration enforcement agent’s request to enter nonpublic areas in the workplace; (ii) granting federal immigration enforcement agents access to employee records; or (iii) re-verifying an employee’s eligibility to work in the United States. The decision will likely be appealed, which means there may be more twists in store.

 

© 2018 Proskauer Rose LLP.
This post was written by Anthony J Oncidi and Tracey L Silver of Proskauer Rose LLP.

Employment Litigation Impacted By U.S. Supreme Court Decision Reining In Successive Attempts at Class Litigation

In 1974, the U.S. Supreme Court decided in American Pipe & Construction Co. v. Utah, 414 U.S. 538, that the timely filing of a class action complaint tolls the applicable statute of limitations for all persons encompassed by that complaint. The impact of that ruling was that potential class members did not have to intervene as individual plaintiffs in the class representatives’ case unless and until the class ultimately was not certified (assuming the case remained pending at the time intervention was sought). Alternatively, as determined in later cases interpreting American Pipe, former class members can pursue their own individual claims rather than intervening in a former class action, even if their individual claim would otherwise be untimely.

American Pipe left unresolved whether a former putative class member can still pursue relief on a class basis after the statute of limitations has run on the underlying claim, or if the former putative class member is limited to bringing only his or her own individual claim. The Supreme Court answered that question on June 11, 2018 when it issued its unanimous opinion in China Agritech, Inc. v. Resh, 584 U.S. ___ (2018), in which the Court concluded that a putative class member cannot commence an otherwise untimely class action upon denial of class certification in the earlier-filed suit. His remedies are limited to promptly joining an existing suit or filing an individual action, but serial attempts at class certification after the statute of limitations has run are impermissible.

Resh was not an employment case, but instead involved three successive putative class actions brought on behalf of purchasers of China Agritech’s common stock, each alleging essentially the same violations of the Securities Exchange Act of 1934. Class certification was denied in the first of the three actions and it settled. Shortly thereafter, the lawyer in the first action filed a new complaint alleging nearly the same facts, but with new putative class representatives. Once again, the court denied class certification and the case settled. Plaintiffs’ counsel filed yet a third putative class lawsuit naming as putative class representative an individual, Michael Resh, who had not sought lead-plaintiff status in either of the two previous cases, but who would have been within the scope of the class had it been certified in either earlier case. There was no dispute Mr. Resh’s claim was untimely unless it had been tolled under American Pipe. The trial court dismissed his class claims as untimely but the Ninth Circuit Court of Appeals reversed, holding that the reasoning of American Pipe extends to successive class claims.

The Supreme Court disagreed and reversed, thereby resolving the Circuit split over the implication of American Pipe and its progeny on successive class litigation. The Court held that the “efficiency and economy of litigation” that supports tolling of individual claims until after class certification has been ruled on is not present where one seeks to litigate untimely successive class actions. Class certification is intended to determine early whether claims are better resolved individually or as a class, and whether certain putative representatives and their counsel are suited to represent the class’ interests. Class representatives who commence suit after expiration of the limitation period are not diligent in asserting claims and pursuing relief, for themselves or the putative class members. Therefore, the Court limited American Pipe to permitting only individual intervention or individual claim prosecution after the denial of certification of a class to which the individual otherwise would have belonged. In other words, although parties who were part of a proposed-but-ultimately-rejected class can bring claims after denial of class certification, they can only do so on their own individual basis, and not as a proposed class action.

Although a securities case, the Resh decision has (welcome) implications for employers. Should one or a group of employees seek certification of a class with respect to a particular employment practice, such as for employment discrimination affecting a broad class of workers or for alleged wage and hour violations, and should the motion for class certification be denied, the would-be class members must promptly move to intervene in the representatives’ non-class lawsuits or promptly file lawsuits on their own individual behalves, or else their right to proceed will be time-barred. The decision eliminates the uncertainty – the “endless tolling of a statute of limitations” – that employers would face if plaintiffs’ lawyers could continually refile putative class actions related to the same policy or incident notwithstanding the statute of limitations having run, until they define the class sufficiently well or find adequate representatives such that the trial court grants class certification. After Resh, once the statute of limitations on a claim has run, so too has the threat of further class action litigation.

 

© Copyright 2018 Squire Patton Boggs (US) LLP.

Ninth Circuit’s Decision Holds That Salary History Is Not a Defense to Equal Pay Claims

The federal Equal Pay Act (“EPA”) mandates equal pay for equal work regardless of sex.  Employers that pay men and women different wages for the same work are strictly liable for violations of the EPA unless they can show that one or more of four exceptions apply to explain the wage disparity. The four statutory exceptions are seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex.”  The Ninth Circuit recently took up the question of the meaning of the fourth, catchall exception – “any factor other than sex” – in order to consider whether an employer may rely, in whole or in part, on an employee’s prior salary as a basis for explaining a pay differential in Aileen Rizo v. Jim Yovino.

Rizo was a math consultant who worked for the Fresno County Office of Education (“County”). After learning that comparable male employees were earning more for the same work, Rizo filed suit against her employer, alleging that its practice of calculating the salaries for newly hired employees based on their salary history violated the EPA. The County did not dispute that Rizo was paid less than her male counterparts, but it argued that basing her salary on past earnings was a lawful reason for the pay differential as it constituted a “factor other than sex” under the EPA.

On April 9, 2018, the Ninth Circuit sitting en banc rejected the County’s argument. The Court held that “prior salary alone or in combination with other factors cannot justify a wage differential.” Writing for the majority, Judge Reinhart stated that justification of a pay disparity based on “‘any other factor other than sex’ is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” The Court explained that the terms “job-related” and “business-related” are not synonymous and that an employer cannot explain a pay differential based on the benefit to the business as opposed to a legitimate work-motivated consideration.  Some examples of job-related factors identified by the Court included shift differentials, job hazards, physical job requirements, and training.  Unlike each of these things, past salary was not a “job-related” factor but rather, potentially, a business-related factor.

The Court further opined that permitting an employer to rely on historical pay information was inconsistent with the purpose of the EPA, which was to correct past pay discrepancies caused by sex discrimination.  “It is inconceivable,” wrote Reinhart, “that Congress, in an Act the primary purpose of which was to eliminate long-existing ‘endemic’ sex-based wage disparities, would create an exception for basing new hires’ salaries on those very disparities….”  Thus, the majority concluded that relying on past salary in order to explain a wage differential was improper, even if it was only one of the factors ultimately considered.  Confusingly, the Court also noted that there could be instances in which past salary might play a role in individualized negotiations and declined to resolve whether past salary could be taken into account in such circumstances.  However, given the broad pronouncement against factoring past compensation into current salary considerations, it would seem unlikely that the current court would countenance such an exception.

In finding that past salary may never be considered, the Rizo decision overrules the Ninth Circuit’s prior ruling in Kouba v. Allstate Insurance Co. 691 F.2d 873 (9th Cir. 1982).  Kouba held that past salary could be one of the factors considered by employers in evaluating pay, as it was a “factor other than sex” permissible to justify pay gaps between men and women under the EPA.  Notably, four of the eleven judges on the panel concurred with the decision in Rizo, because salary history was the sole reason for the pay disparity, but separated from the majority on the issue of excluding salary history from consideration under any circumstance.  The Rizo decision has also exacerbated a circuit split on whether salary history may be considered, and to what extent.  While certain circuits have taken an approach similar to the concurring judges in Rizo, permitting it as long as it is not the sole basis for a pay disparity, the Seventh Circuit has held that salary history is always a legitimate factor other than sex.

While California employers are no longer entitled to inquire about past salary as part of the job application process as of January 1, 2018, in light of the Rizo decision, employers with operations in California, Oregon, Washington, Idaho, Montana, Nevada, Arizona, Alaska, and Hawaii may wish to take actions to ensure that any pay disparities are not based on salary history, such as not asking about salary history during the hiring process (even in states where this practice is not prohibited by law) and conducting pay equity audits.

 

©2018 Epstein Becker & Green, P.C. All rights reserved.
Read more on equal pay at the National Law Review’s Labor and Employment Page.