Tag: employment

New Legislative Action on “Tip Pooling”

Congress and the President have waded into the ongoing debate regarding employers’ use of “tip pools” under the Fair Labor Standards Act (“FLSA”) by passing the Tip Income Protection Act (“TIPA”) as part of the omnibus spending bill.

The FLSA permits an employer to take a partial credit against its minimum wage obligations based on employee tips if the employee retains all of his or her tips, or they are made part of a tip pool shared only with employees who “customarily and regularly receive tips.” See 29 U.S.C. § 203(m). Thus, an employer utilizing a tip credit to comply with minimum wage obligations cannot establish a tip pool that includes non-tipped employees (e.g., back-of-the-house restaurant employees).  The FLSA left the allocation of tips unregulated where an employer did not use tip credits.

In 2011, the Department of Labor (“DOL”) issued a regulation applying the limitation on the use of tip pools to cases where the employer did nottake a tip credit and paid employees the full federal minimum wage.  See 29 C.F.R. § 531.52.  A number of federal courts concluded that the regulation was inconsistent with the text of the FLSA.  See, e.g., Marlow v. New Food Guy, Inc., 861 F.3d 1157, 1163-64 (10th Cir. 2017) (2011 DOL regulation was inconsistent with the FLSA, which did not authorize the agency to “regulate the ownership of tips when the employer is not taking the tip credit”).  However, the Ninth Circuit disagreed, reasoning that because the FLSA is “silent as to the tip pooling practices of employers who do not take a tip credit” it should defer to the DOL.  Oregon Rest. and Lodging Ass’n v. Perez, 816 F.3d 1080, 1090 (9th Cir. 2016).

In 2017, the DOL announced proposed rulemaking to rescind the 2011 regulation.  See here and here. After much deliberation regarding the proposed agency action, Congress enacted TIPA, which states, in relevant part:

“An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”

TIPA also provides that the 2011 regulation shall have “no force of effect.”  An employer that violates TIPA may be liable for any tip credit taken, the amount of the withheld tips, liquidated damages, and $1,100 civil penalty for each violation.

Stated simply, TIPA limits the permissible use of tip pooling for all employers irrespective of whether an employer takes advantage of a tip credit or whether its employees’ regular hourly rate exceeds the minimum wage.  However, TIPA’s language raises a number of interpretive questions, such as:

  • What does it mean for an employer to “keep tips” received by employees?  The law very likely prohibits an employer from diverting tips directly to its own coffers.  But does an employer “keep tips” by implementing a standard tip pool that does not include “managers or supervisors?”

  • TIPA does not define a manager or supervisor.  Assuming TIPA permits standard tip pools, does an employer violate the law if the pool includes modestly-paid hourly employees with minimal management responsibilities and limited or no ability to discipline employees (e.g., shift leads)?

These are a few of the questions employers with tipped employees will confront in the coming months and years as we await additional guidance from the courts and the DOL.  Employers in the restaurant and other industries should closely analyze how they distribute employee tips to ensure compliance with TIPA.

 

© Polsinelli PC, Polsinelli LLP in California
This post was written by James C. Sullivan and Brian K. Morris of Polsinelli PC, Polsinelli LLP in California.
For more on Employment Legislation, Check out the National Law Review’s Employment Law Page.

Raise Your Hand If You’re Confused about I-9 Reverifications for Employees with TPS

Temporary Protected Status (TPS) is a humanitarian benefit available to foreign nationals who are unable to return to their home countries because of certain temporary conditions including ongoing armed conflict such as civil war, an environmental disaster like an earthquake, hurricane, epidemic, or other extraordinary conditions. During TPS designation, qualifying foreign nationals are not removable from the US and can obtain work authorization and travel permission.

The Department of Homeland Security (DHS) has recently terminated TPS for nationals of El Salvador, Haiti, Nicaragua, and Sudan but has granted a period of orderly departure to allow time for this population to wind up their affairs in the US. This has left employers in a quandary about which TPS holders remain able to work and how to comply with Form I-9 Employment Eligibility Verifications.

To help ease the confusion, the chart below illustrates TPS-designated countries, the dates by which beneficiaries were required to re-register and, for those who do re-register, how long their current Employment Authorization Cards (EAD) are automatically extended pending decisions of EAD renewal applications. The TPS termination dates for El Salvador, Haiti, Nicaragua, and Sudan are also included.

Country

Re-Registration Period Ends

EAD Auto-Extended Until

TPS End Date

El Salvador

03/19/2018

09/05/2018

09/09/2019

Haiti

03/19/2018

07/21/2018

07/22/2019

Honduras

02/13/2018

07/04/2018

–

Nepal

12/27/2016

06/24/2017

–

Nicaragua

02/13/2018

07/04/2018

01/05/2019

Somalia

03/20/2017

–

–

South Sudan

11/20/2017

05/01/2018

–

Sudan

12/11/2017

05/01/2018

11/12/2018

Syria

09/30/2016

03/31/2017

–

Yemen

03/06/2017

09/03/2017

–

As reflected in the chart above, sometimes DHS issues a blanket automatic extension of the expiring EADs for TPS beneficiaries of a specific country in order to allow time for EADs with new validity dates to be issued. The automatic extension periods are available to those TPS beneficiaries who timely re-register and apply to renew their EADs.

Although an employer cannot specify which documents an employee can present in connection with the I-9 Employment Eligibility Verification process, TPS beneficiaries with automatic EAD extensions may present an expired EAD bearing the C19 eligibility code along with a Form I-797C Notice of Action indicating the eligibility category code A12 or C19. The codes need not be the same.

The M-274 Handbook for Employers is an excellent resource in determining how to complete the Form I-9 for those employees with automatic EAD extensions. It specifies that:

“For a current employee, update Section 2 of Form I-9 with the new expiration date as follows:

  • Draw a line through the old expiration date and write the new expiration date in the margin of Section 2;

  • Write EAD EXT in Section 2;

  • Initial and date the correction.”

For TPS beneficiaries, the new expiration date should correspond with the respective date as noted in the chart above. An employee whose employment authorization is automatically extended along with his/her EAD may cross out the “employment authorized until” date in Section 1, write the new expiration date as reflected in the chart, initial and date the change.

A new employee may present the expired EAD and Form I-797C Notice of Action indicating USCIS’s receipt of the employee’s timely filed renewal application. When completing Section 1, the employee should enter the corresponding date from the chart in the “employment authorized until mm/dd/yyyy” field.

When completing Section 2, the employer should enter into the Expiration Date field the date the automatic extension period expires, not the expiration date on the face of the expired EAD. The employer should enter the receipt number from the I-797C Notice of Action as the document number on Form I-9. Note that reverification is required when the employee’s automatic extension ends.

While an employer is not required to be an expert in I-9 documents and review, having access to reliable resources comes in handy and will take you to the head of the class.

 

Copyright © 2018 Womble Bond Dickinson (US) LLP, All Rights Reserved.
This post was written by Jennifer Cory of Womble Bond Dickinson (US) LLP.

New Jersey Amends Its Law Against Discrimination to Provide Protections to Nursing Mothers

On January 8, 2018, former New Jersey Governor Chris Christie signed new legislation (the “Amendment”) amending the New Jersey Law Against Discrimination (“NJLAD”) to add breastfeeding as a protected class under the law. The Amendment, which takes effect immediately, makes it unlawful to discriminate or retaliate against an employee that the employer knows, or should know, is either breastfeeding or expressing milk for her infant child.

The Amendment also requires employers to provide reasonable accommodations to nursing women, unless it would result in an undue hardship to the employer, and specifically requires employers to provide:

  1. Reasonable break time each day for the employee to express breast milk for her child; and
  2. A suitable location with privacy, other than a toilet stall, in close proximity to the work area for the employee to express breast milk for her child.

To determine whether an accommodation would provide an undue hardship, the NJLAD provides that the following factors should be considered:

  • the overall size of the employer’s business with respect to the number of employees, number and type of facilities, and size of budget;
  • the type of the employer’s operations, including the composition and structure of the employer’s workforce;
  • the nature and cost of the accommodation needed, taking into consideration the availability of tax credits, tax deductions, and outside funding; and
  • the extent to which the accommodation would involve waiver of an essential requirement of a job as opposed to a tangential or non-business necessity requirement.

The Amendment also provides that breastfeeding employees are entitled to paid or unpaid leave as a reasonable accommodation, in the same manner as “provided to other employees not affected by pregnancy or breastfeeding but similar in their ability or inability to work.” While the Amendment does not provide an express right to leave, it requires employers to treat such a leave request as they would any other request for leave.

While many New Jersey employers have already been subject to similar requirements to provide breaks and private spaces for nursing mothers to express breast milk in accordance with the Patient Protection and Affordable Care Act’s 2010 Amendment to the federal Fair Labor Standards Act (“FLSA”), the key differences between the breast feeding protections in the FLSA and in the NJLAD are:

  1. Which employees are covered? The FLSA’s protections apply only to “non-exempt” workers (i.e., those workers entitled to overtime pay), while the NJLAD’s protections apply to all New Jersey employees.
  2. Which employers are covered? Small businesses (fewer than 50 employees) may not be covered by the FLSA break-time-for-nursing-mothers provision if they can demonstrate that compliance with the provision would impose an undue hardship. The NJLAD contains a similar “undue hardship” exception, but does not limit the exception to small businesses.
  3. How long must employers accommodate nursing mothers? Protections under the FLSA apply up until one year after the birth of the child, while the NJLAD’s protections do not provide a time limit and apply while the mother is “breast feeding her infant child.” The NJLAD does not define “infant child.”

What should employers do?

New Jersey employers should review their procedures and practices to ensure compliance with the Amendment by:

  1. Reviewing anti-discrimination and reasonable accommodation policies to ensure compliance with the law;
  2. Training supervisors and managers on how to handle accommodation requests related to breastfeeding;
  3. Providing an employee who is breastfeeding with reasonable break times and a suitable private location, other than a toilet stall, in close proximity to the work area to express breast milk for her child.

In addition, employers should consult with counsel before denying an employee an accommodation related to breastfeeding to determine whether an “undue hardship” may be established.

 

©2018 Epstein Becker & Green, P.C.
More Labor and Employment News on the Labor and Employment Practice Group page.

Keep Rollin’ Rollin’ Rollin’: DOL Reissues 17 Opinion Letters That Had Been Withdrawn Under the Obama Administration

In late June 2017, the United States Department of Labor (DOL) announced it would be reinstating Opinion Letters issued by its Wage and Hour Division, which was a practice that had ceased back in 2010. This announcement is significant from both the procedural and substantive basis. From 2010 to July 2017, Opinion Letters were replaced by Administrator Interpretations, which set forth a more general interpretation of the law and regulations as they pertained to a particular industry or set of employees. Opinion Letters, on the other hand, are official written opinions that set forth how wage and hour laws apply in very specific circumstances as presented to the DOL Wage and Hour Division via specific employer questions asking for a formal opinion to guide the employer as to how to proceed. In other words, employers submit questions based on their specific factual circumstances and policies and the DOL issues a written opinion as to the legality of the employer’s policies.

With Opinion Letters back, businesses have been waiting to see what the DOL would do with them. In the first week of 2018, the DOL answered that question by re-instating 17 Opinion Letters that were issued in January 2009 but withdrawn during the Obama administration. The DOL also reissued over a dozen advisory Opinion Letters that had been published during former President Bush’s administration, but were also later rescinded.

Because Opinion Letters answer specific business questions related to wage and hour issues in various business segments, the 17 reinstated Opinion Letters and the dozen plus reissued advisory Opinion Letters may provide businesses specific and tailored guidance on various wage/hour issues under the Fair Labor Standards Act (FLSA).

The reinstated letters cover a wide variety of topics including, appropriate inclusions in an employee’s regular pay rate, types of employment that qualify for the FLSA’s minimum wage and overtime exemptions, and how ambulance service workers’ “on-call” time should be treated for purposes of “hours worked” under the FLSA. Here is the full list of reinstated Opinion Letters (all dated January 5, 2018) and links:

Number

Letter Subject

FLSA2018-1

Construction supervisors employed by homebuilders and section 13(a)(1)

FLSA2018-2

Plumbing sales/service technicians and section 7(i)

FLSA2018-3

Helicopter pilots and section 13(a)(1)

FLSA2018-4

Commercial construction project superintendents and section 13(a)(1)

FLSA2018-5

Regular rate calculation for fire fighters and alarm operators

FLSA2018-6

Coaches and the teacher exemption under section 13(a)(1)

FLSA2018-7

Salary deductions for full-day absences based on hours missed and section 13(a)(1) salary basis

FLSA2018-8

Client service managers and section 13(a)(1)

FLSA2018-9

Year-end non-discretionary bonus and section 7(e)

FLSA2018-10

Residential construction project supervisor and section 13(a)(1)

FLSA2018-11

Job bonuses and section 7(e)

FLSA2018-12

Consultants, clinical coordinators, coordinators, and business development managers under section 13(a)(1)

FLSA2018-13

Fraud/theft analysts and agents under section 13(a)(1)

FLSA2018-14

Calculation of salary deductions and section 13(a)(1) salary basis

FLSA2018-15

Product demonstration coordinators and section 13(a)(1)

FLSA2018-16

Volunteer fire company contracting for paid EMTs – joint employment and volunteer status

FLSA2018-17

Construction supervisors employed by homebuilders and section 13(a)(1)

As demonstrated by the list above, there are a number of broad topics covered, i.e., Section 13(a)(1) of the FLSA, which exempts employees employed in a bona fide administrative function, and a number of extremely narrow ones, e.g., those dealing with helicopter pilots, coaches, construction supervisors employed by homebuilders.

Here is a summary of some of the noteworthy findings in the reinstated Opinion Letters:

Bonus Compensation

The DOL reviewed the issue of whether certain bonuses (or other payments) should be included in an employee’s regular rate of pay under the FLSA. See FLSA2018-5, FLSA2018-9, and FLSA2018-11.

Exempt Employee Deductions

The DOL reviewed the issue of whether a salary deduction is permissible when an exempt employee is absent for a full day, but does not have enough leave time in the employee’s leave bank to cover the entire absence. The DOL concluded that, “if the absence is one full day in duration, the employer may deduct one full day’s pay or less. Therefore, in answer to your first question, if an employee is absent for one or more full days, but does not have enough time in his or her leave bank to cover the entire absence, the employer may make a deduction from the employee’s pay for any portion of the full-day absences that is not accounted for by the leave bank.” SeeFLSA2018-7.

Administrative Exemption

In reviewing whether client service managers at an insurance company qualified as exempt administrative employees, the DOL focused on the “independent judgment” factor in determining that their primary duty was to use independent judgment over matters of business significance when issuing advice and, generally, without first seeking upper-level management approval.

On-Call Hours

The DOL concluded that on-call hours of ambulance service personnel are not compensable time under the FLSA for purposes of the regular rate and overtime calculations. The issue arose from an ambulance service’s unwritten policy that required on-call employees to arrive for service at the ambulance garage within five minutes of being notified. The DOL determined the five-minute requirement was “not a significant hindrance” to the employees that would require the employer to convert their on-call time to compensable hours worked. Notably, the scope was an ambulance company servicing a small city of approximately 4,000 individuals.

Takeaways:

  1. Nothing New as the DOL Returns to the Prior Opinion Letter Process. The important news is the return to the more focused, less-sweeping means to establishing DOL-interpretation policy. Otherwise the information provided in the reinstated Opinion Letters is not new; it has been available to businesses for years and, as such, most businesses with issues relevant to the topics in the reinstated Opinion Letters are likely already complying. The reinstated Opinion Letters do not take on any topics that had been severely altered during the Obama administration. We addressed this rolling-back issue in our All Things HR in a post titled “The Way We Were: The NLRB’s Time Machine Resets the Clock on Employer Work Rules and Joint Employer Status” demonstrating this is not just a NLRB mantra, it looks to be the DOL’s too.

  2. Ranging Applicability. As the ambulance-employer DOL Opinion Letter demonstrates, some of the reinstated Opinion Letters will have very limited applicability as Opinion Letters are only as good as the overlapping facts in the circumstances presented in them and the business seeking to use them as guidance. Nevertheless, while many Opinion Letters focus on specific legal issues specific to certain employers/businesses/industries, they are still valuable resources and may provide answers or guidance in many areas in wage and hour law.

  3. More Defenses Available to Businesses. Opinion Letters were and continue to be another tool businesses have in their arsenal to help ensure compliance with the FLSA, and another tool in their defense arsenal. Specifically, Section 10 of the Portal-to-Portal provides businesses an affirmative defense to all monetary liability if the business can demonstrate it acted “in good faith and in conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation” of the DOL Wage and Hour Division. See 29 U.S.C. § 259 and 29 C.F.R. Part 790.

In addition, Opinion Letters can be used to prove the “good faith” defense against the double liquidated damages penalty available under the FLSA, and the third-year of damages in the case of willful violations, of which the bar is extremely low. See 29 U.S.C. § 260. The availability of newly-issued Opinion Letters means that a business can request and obtain an Opinion Letter addressing a specific practice, policy, and/or factual circumstance for guidance and rely on a favorable Opinion Letter in response to a charge or lawsuit on the same issue.

  1. This is a Good Thing. This is good news for businesses because it demonstrates two things: (1) businesses will be able to have and rely on additional resources to meet their statutory and regulatory wage and hour obligations; and (2) the Trump administration seems intent on turning back the clock to a time pre-Obama administration, but not necessarily instituting new guidance or interpretations (not in the labor and employment context at least). This means that businesses are likely already familiar with what they should be doing and have been doing it.

© Copyright 2018 Dickinson Wright PLLC
For more Labor and Employment news go to the National Law Review’s Labor and Employment Page.

ICE Raids on 7-Eleven Franchise Stores Result in 21 Arrests

On January 10, U.S. Immigration and Customs Enforcement (ICE) agents commenced employment audits at nearly 100 7-Eleven franchises across the U.S., signaling the biggest crackdown on suspected illegal workers since President Trump took office. The raids resulted in 21 administrative arrests. Following the raids, ICE Deputy Director Thomas Homan said in a statement: “Today’s actions send a strong message to U.S. businesses that hire and employ an illegal workforce: ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable.”

ICE gave no reason why 7-Eleven, famous for the Slurpee, was targeted. The notices of inspection, also known as  I-9 audit notices, were served on stores in Washington, D.C., and in California, Colorado, Delaware, Florida, Illinois, Indiana, Maryland, Michigan, Missouri, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, and Washington. The franchise owners have three days to provide the agency with the immigration status of their workers.

The recent raids stem from a 2013 ICE investigation that resulted in charges against nine 7-Eleven franchise owners and managers. All of those individuals have now been arrested as of November 2017, and eight out of the nine pleaded guilty and were ordered to pay more than $2.6 million in restitution for back wages.

In its own statement, 7-Eleven said it is aware of the raids and its franchisees are “independent business owners” who are “solely responsible for their employees including deciding who to hire and verifying their eligibility to work in the United States.” 7-Eleven says it has terminated the franchise agreements of franchisees convicted of violating immigration laws.

President Trump ran on a campaign promise to prevent U.S. business from employing undocumented workers. ICE’s actions against 7-Eleven are a clear indicator of keeping that promise. Expect ICE to move forward with similar enforcement actions, as one top ICE official stated the 7-Eleven raids were “a harbinger of what’s to come” for employers.

 

© 2018 Barnes & Thornburg LLP.
This post was written by Joseph D. Hess from Barnes & Thornburg LLP.
Click here for more Immigration Coverage from the National Law Review.

Addressing Workplace Sexual Harassment in the Wake of #MeToo

Revelations of the Harvey Weinstein scandal, and those that have followed, have ignited sexual harassment complaints against employers across all industries. Recent news more than confirms that the issue of sexual harassment is not limited to Hollywood. As U.S. Equal Employment Opportunity Commission (“EEOC”) Acting Chair Victoria Lipnic recently said in an interview with Law360, “We see this everywhere. This happens to women in workplaces all over the place.”

With the outpouring of support for victims of sexual harassment, the creation of the #MeToo movement in the last quarter of 2017, and Time magazine’s “Silence Breaker” person of the year, it is clear that this is an issue that employers will need to proactively address in 2018. A study by theBoardlist and Qualtrics, based on a survey conducted this summer, reported that 77 percent of corporate boards “had not discussed accusations of sexually inappropriate behavior and/or sexism in the workplace.” Less than 20 percent of the 400+ people surveyed had reevaluated their company’s risks regarding sexual harassment or sexist behavior, even in light of the recent revelations in the media. Plainly, those numbers are expected to, and no doubt will, increase in the coming year.

Failure to take affirmative steps to prevent harassing behavior and adequately respond to allegations of sexual harassment can have serious consequences. While sexual harassment claims may originate as internal complaints, which must be promptly addressed, they may also result in a discrimination charge filed with the EEOC or the corresponding state or local agency. Since fiscal year 2010, roughly 30 percent of the approximately 90,000 charges of discrimination received by the EEOC each year have alleged sex-based discrimination, and the number of charges alleging sex-based harassment has gradually increased from just below 13 percent to just above 14 percent. Next year, this number is expected to increase because employees are becoming more comfortable reporting and publicizing incidences of sexual harassment in light of recent news, and due to the EEOC’s digital upgrade that allows employees to file EEOC complaints online.

Sexual harassment claims may also lead to litigation, which can be expensive and time-consuming and can create negative publicity. For instance, Mr. Weinstein’s former company, The Weinstein Co. (“TWC”), has been named in a $5 million civil suit alleging that executives of the company did nothing to protect women who did business with Mr. Weinstein, despite being aware of his inappropriate behavior. On December 6, 2017, TWC was one of the named defendants in a proposed class-action racketeering lawsuit alleging that TWC helped facilitate Mr. Weinstein’s organized pattern of predatory behavior. Additionally, the New York attorney general’s office is investigating TWC for potential civil rights violations in its handling of claims of sexual harassment.

There may also be unseen consequences of sexual harassment on the makeup of a workforce. Various studies have reported that harassment may lead to the departure of women from the workforce or the transition into lower-paying jobs. Further, women in jobs with a higher risk of sexual harassment often earn a premium over employees in positions with a lower risk of sexual harassment. Sexual harassment, therefore, may have real impact on compensation and implicate the pay gap and pay equity.

For these reasons, many employers are looking to implement and also supplement sexual harassment training seminars provided for their employees in order to combat sexual harassment in the workplace.

Employers should also consider whether their current practices include the following:

  • A robust complaint procedure. Sexual harassment at work often goes unreported. According to the EEOC, as many as three-quarters of harassment victims do not file workplace complaints against their alleged harassers. Make sure that you have reporting mechanisms in place to receive complaints and consider allowing employees to complain directly to human resources, to a supervisor, or to an anonymous hotline.
  • A prompt investigation of complaints. Upon receiving a complaint, promptly and thoroughly investigate the allegations, and make sure that your employees do not retaliate against the alleged victim or any person who cooperates in the investigation.
  • Independent investigations. Ensure impartiality in the process. In certain cases, that may mean hiring an outside consultant or outside legal counsel to conduct the investigation.
  • Thorough communication practices. A common objection asserted by complainants is that they are not informed about the status of an investigation. While complainants need not (and should not) be notified about the details or even given regular status reports, inform the complainant that an investigation will occur and be sure to provide closure—regardless of the outcome of the investigation.
  • A proactive approach. Consider conducting employee engagement or climate surveys (with or without a consultant) to better understand the work atmosphere, rather than simply reacting to workplace complaints. Before doing so, consult with counsel to determine whether and how such a survey may be conducted (potentially under the self-critical analysis privilege, depending on the jurisdiction) to avoid it unwittingly becoming evidence in a proceeding.
  • An atmosphere of inclusiveness. Foster an atmosphere of inclusiveness to help prevent sexual harassment. Make sure that your top-level management is involved in setting the tone, modeling appropriate behavior, and effecting positive change. Some organizations should consider creating a task force to root out and address inappropriate conduct—again with the oversight of legal counsel.
  • Effective training. While most employers conduct some form of anti-harassment training (and those that don’t offer training, should), make certain that your training is designed to effectively combat sexual harassment. Tailor the training to your specific workplace and audience. Use real-world examples of what is, and is not, harassment, and make sure that managers know how to spot potential issues and respond to any and all complaints.
©2017 Epstein Becker & Green, P.C. 
For more labor and employment news visit the National Law Review’s Labor and Employment page.

New Year’s Resolution Series – Ringing Your Post-Employment Covenants into the New Year

Many state legislatures spent 2017 tinkering with post-employment covenants.  Given the growing trend to legislate locally and the employee mobility issues that seem to nag every employer, we thought the New Year would be a perfect time to review and revisit your post-employment covenants. So for our multi-jurisdictional employers (which seems to be everyone these days), how do your post-employment covenants legally measure up?

Even California got into the act this year. Everyone (well, almost everyone) knows of the long-time California legislative non-compete ban (except in the context of a sale of business or equity). But did you know that as of 2017 California now regulates choice of law provisions in employment contracts? This new Labor Code provisionwas passed in an effort to stamp out the practice of some out-of-state employers who were using choice of law/venue provisions in the hope of applying some other state’s law to their California-based employees, thereby (they hoped) avoiding California’s non-compete ban. A review of that provision is in order for any employer hiring individuals in California.

Other states have gotten into the act by banning or regulating non-competes. Nevada, not known for its active employee mobility legislation, passed legislation this year governing non-competes, joining Colorado, Florida, Georgia, Illinois, and Texas, to name a few. New Jersey is also actively considering similar legislation.

And while Massachusetts tried but failed to pass statewide legislation, don’t overlook specific Massachusetts provisions addressing non-competes for Physicians, nurses, psychologists, social workers, and those in the broadcasting industry.

But don’t stop at a state law review. Remember: many states (and many state statutes) require an assessment of the reasonableness of post-employment covenants. The very best evidence of reasonableness is employer mindfulness regarding what agreements are truly necessary to protect some legitimate interest of the employer – and, most importantly, a deep dive into why they are necessary.

So here are a few action items to consider for your post-employment covenants resolution for 2018:

  • Where are your employees performing services for you? Do your post-employment covenants comply with the legislative mandates applicable in the various jurisdictions in which you have employees?
  • What impact, if any, do promotions have on your employees? Do they now have access to sensitive information, in addition to expanded job duties? If so, should they have new or different post-employment covenants?
  • How if at all has your business changed? Are you doing business in new locations or have you abandoned business in other locations?
  • Are post-employment covenants truly necessary – or will a solid proprietary rights agreement (and the applicable trade secrets law) provide the legal protection you really need?
  • Are you just as eager to recruit individuals bound by these agreements as you are to enforce your own? Have you considered the possible cognitive dissonance of such an approach?

We hope you have enjoyed our New Year’s Resolution Series and we look forward to a prosperous, productive and compliant 2018!

©1994-2017 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Administration’s Regulatory Agenda Signals Continued Push to Align Visa Programs With “Hire American” Goals

On December 14, 2017, the Office of Information and Regulatory Affairs (OIRA) released the Fall 2017 Unified Agenda of Regulatory and Deregulatory Actions, which is a report on the rulemaking efforts U.S. administrative agencies intend to pursue in the near- and long-term.

If enacted, several items in the agenda have the potential to impact employers’ immigration programs. The relevant proposals include the following items:

  • U. S. Citizenship and Immigration Services (USCIS) is proposing to issue a rule that would eliminate the ability of certain H-4 spouses to obtain employment authorization documents (EADs).
  • USCIS is proposing to issue a rule (originally introduced in 2011) that would establish an electronic registration system for H-1B petitions that are subject to the annual quota (H-1B cap filings). DHS notes that the rule is “intended to allow USCIS to more efficiently manage the intake and lottery process” for these petitions. USCIS notes that this rule may include a provision for a modified selection process, as outlined in the Buy American and Hire American Executive Order, such that “H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.”
  • USCIS is proposing to issue a rule that would revise the definitions of “specialty occupation,” “employment,” and “employer-employee relationship” in the H-1B context. USCIS notes that the purpose of these changes would be to “ensure that H-1B visas are awarded only to individuals who will be working in a job which meets the statutory definition for [H-1B eligibility].” The rule may also contain provisions regarding the payment of appropriate wages to H-1B visa holders.
  • The Department of State is proposing and finalizing several rules that would enact various modifications to the exchange visitor (J-1) program. These changes include arrangements relating to the administration of the J-1 program, provisions to help ensure the safety and well-being of foreign nationals who enter the U.S. as exchange visitors, and efforts to reinforce the cultural exchange and public diplomacy aspects of the program. Changes may also include an expansion of the types of jobs that are prohibited under the summer work travel category.
  • As a “long term action,” U.S. Customs and Border Protection (CBP) is proposing a rule that would clarify the criteria for admission to the United States as a temporary visitor for business (B-1) or pleasure (B-2). CBP also notes that the proposed revisions would “make the criteria [for entry as a temporary visitor] more transparent.”
  • Immigration and Customs Enforcement (ICE) is proposing to issue a rule that would effectuate a comprehensive reform of the practical training options (OPT) available to nonimmigrant students. The proposed provisions include increased oversight over the schools and students participating in the program. The stated purpose is to “improve protections of U.S. workers who may be negatively impacted by employment of nonimmigrant students.”

Employers may want to keep in mind that although the abstracts listed in the agenda seemingly have the potential to impact many areas of the immigration system, it is premature to draw conclusions about the effect of these proposed changes without first seeing the text of the rules themselves—none of which have been released, and some of which may not even be drafted. Additionally, both the agenda itself and the timing for the rules, are aspirational; in prior years, only a select number of proposals have actually turned into rules, and ever fewer have actually followed the stated timelines. As noted previously, for example, a proposed regulation on the electronic registration system for H-1B quota petitions was originally introduced in 2011, but no further action occurred.

Should a proposed rule actually be issued, the agencies must conform to the notice-and-comment protocols of the Administrative Procedure Act. Effectively, this requires the agency to issue a proposed rule that explains the agency’s plan to accomplish a certain goal or address a problem.  This is followed by a comment period, during which time any interested parties can submit comments about the proposed rule. Prior to issuing the final rule, the agency must review all comments and indicate its reasoning for either modifying the rule on account of a comment or explain why the proposed comment does not merit a revision to the rule. Rulemaking is typically a prolonged process that takes a minimum of several months to accomplish. In other words, a proposed rule (which is different than most of the abstracts found in this agenda, which only state the intent to issue a rule) would be the first step in what could be a complex and lengthy rulemaking process that may take many months before promulgation of any final rule.

Finally, employers may want to take note that many of the administration’s prior attempts to enact changes to the immigration system have been subject to lengthy and robust legal challenges. Any such litigation on a proposed rule could increase the timeline for implementation, assuming the rule survives the legal challenge at all.

In summary, although the agenda provides some insight into the goals of the administration on employment-based immigration, the publication of the agenda itself does not alter the status quo.

© 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C

This post was written by Jacob D. Cherry of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more information check out the National Law Review’s Immigration page.

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

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

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

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

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

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

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

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

What had the plaintiffs claimed?  Only:

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

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

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

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

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

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

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

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

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

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

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

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

Bring your carrier along for the ride . . .

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

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

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

Conclusion

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

 

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

Insurance Coverage in the Post-Weinstein Era

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

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

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

WHAT TO DO?

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

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

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

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

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

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

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