Labor and Employment

As previously reported here, earlier this year a federal district court in Texas issued a preliminary injunction preventing the Department of Labor (“DOL”) from enforcing the new Persuader Rule, which was to go into effect as of July 1, 2016. Last week, the court issued a ruling converting its preliminary injunction into a permanent one, which now imposes a nationwide ban on implementation of the new rule.

By way of a refresher, the new Persuader Rule, proposed in March earlier this year, sought to require employers to report highly detailed information regarding their “indirect persuader activities.” Such indirect activities potentially included attorneys advising employers on how to respond to employees attempting to unionize or what actions might discourage unionization. Several experts in the district court proceedings provided evidence that the new reporting requirements effectively restricted employers’ ability to obtain any advice concerning unionization-related issues. Prior to the new rule, employers were simply required to report “direct persuader activities,” which only included activity where there was direct contact with employees to persuade them regarding their rights to unionize.

To read the rest of this article, please visit the HRUSA blog at http://blog.hrusa.com/blog/texas-federal-court-permanently-blocks-persuader-rule/

By Jessica Schoendienst

Thanksgiving comes two days early for employers across the country who anticipated the new Department of Labor (“DOL”) overtime Final Rule creating significant pre-holiday expenses.  For those employers, who have been living in denial or under a rock for the last six months, the DOL Final Rule increased the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $921 per week ($47,892 annually).  Although California exempt employees expected a slightly smaller increase, given that California exempt employees’ minimum salary level is currently $800 per week ($41,600 annually), California and national employers alike viewed the DOL Final Rule as an attack on their businesses.

In late September, a lawsuit was filed in the Eastern District of Texas by the Nevada attorney general and joined by 20 other states, including Arizona, Texas, Georgia, Nevada, Utah, and others.  Shortly afterwards, over 50 business organizations also filed a lawsuit challenging the Final Rule.  Both lawsuits ask for preliminary and permanent injunctions preventing the Final Rule from taking effect.  The Court consolidated the actions and heard oral arguments on the preliminary injunction on November 16, 2016.

Today, the Court granted the Plaintiffs’ motion for a preliminary injunction.  The injunction applies nationwide and prevents the DOL from implementing the Final Rule pending further order of the Court.  The Court granted the preliminary injunction on the basis that (1) the Final Rule exceeded the DOL’s rule making authority; (2) the Plaintiffs will suffer irreparable harm, including increased costs and detrimental effect on government programs and services; (3) the DOL failed to articulate any harm in delaying the implementation of the Final Rule; and (4) the injunction serves the public interest because it will maintain the status quo for the Court to render a meaningful decision on the merits without forcing employers and states nationwide to incur the expense and burden of complying with a potentially invalid rule.

The Court supported its decision on the basis that the Final Rule created an improper salary-based test rather than focusing on the duties employees perform to determine exempt status.  The Court found that Congress unambiguously expressed its intent for employees doing “bona fide executive, administrative, and professional capacity” duties to be exempt from overtime, but that Congress did not intend the exemption to depend on the employees’ salary.  The court held that although the DOL has the authority to define the types of duties that may qualify an employee for the exemption, nothing indicates that the DOL had the authority to raise the minimum salary level such that it supersedes the duties test. In essence, the Court held that because the new rule increased the salary so significantly, it constituted a fundamental change to the statutes operations – effectively creating a de facto salary-only test.

What Employers Should Do

Employers across the country may be wondering “What should I do now”?  If you are an employer that planned to reclassify your employees based only on the salary increase, you can now postpone (and possibly cancel) that reclassification at least until the Court issues a permanent injunction or until the preliminary injunction is appealed (and overturned).  If you are an employer that used the impending salary increase to reevaluate your exempt employees’ job duties and reclassify those employees who were unlikely to be truly exempt, we encourage you to reconsider postponing or cancelling the reclassification and to consult with legal counsel to determine the best approach for your business.  Misclassifying employees can expose your business to significant risk of unpaid wage and penalty liability.  The time may still be right for you to reclassify those employees!  After all, it may be only a matter of time until the injunction is lifted and the Final Rule is enforceable against all employers.

By: Melissa M. Whitehead

Last week, voters in seven states passed new laws relating to marijuana use, both recreational and medical, which has left many employers wondering what this means to them. Can employers still enforce “zero tolerance” drug use policies? Do they have to allow employees to use marijuana in the workplace or during work hours, if they have a medical prescription? Some, but not all, state marijuana laws include specific provisions guiding employers in their handling of these issues. Take, for example, two of the laws passed last week, in Florida and Nevada.

On November 14, 2016, The Department of Homeland Security (through USICS) released a revised version of Form I-9, Employment Eligibility Verification. Employers may continue using Form I-9 (with a revision date of 03/08/2013) through January 21, 2017.  By January 22, 2017, employers must use the revised form. Employers should continue to follow existing storage and retentions rules for all of their previously completed Forms I-9. Read the USCIS News Release, and visit I-9 Central for more information.

By Vida L. Thomas

On October 11, 2016, the U.S. Seventh Circuit Court of Appeals granted en banc (by the full court) review in Hively v. Ivy Tech Community College. This rare move means that the entire Seventh Circuit court will reconsider its previous decision, which was originally issued on July 28, 2016.

Kimberly Hively began teaching as a part-time adjunct professor at Ivy Tech Community College in 2000.  In 2013, representing herself, she filed a complaint in district court alleging that she had been blocked from full-time employment at Ivy Tech because of her sexual orientation, in violation of Title VII.  Hively alleged that although she had the necessary qualifications for full-time employment and had never received a negative evaluation, Ivy Tech refused to even interview her for any of the six full-time positions for which she applied between 2009 and 2014.

On September 25, 2016, Governor Brown approved a very short but powerful piece of legislation for California employees who work for employers who are based outside of California and wish to have another state’s laws govern the employment relationship. Senate Bill 1241 adds Section 925 to the California Labor Code and states expressly that after January 1, 2017, an employer is limited in the use of forum selection and choice of law provisions in employment contracts with California employees.

Specifically, Section 925 states that:

“(a)        An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:

                (1)          Require the employee to adjudicate outside of California a claim arising in California.

                (2)         Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.

(b)          Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.

(c)           In addition to injunctive relief and any other remedies available, a court may award an employee who is enforcing his or her rights under this section reasonable attorney’s fees.

(d)          For purposes of this section, adjudication includes litigation and arbitration.”

The one exception to the new rule is when an employee is represented by counsel when the employment contract is being negotiated.  Specifically, Section 925(e) states that:

“(e)        This section shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.”

In addition to the statutory right an employee has to challenge any choice of law or forum selection clause that violates section 925, if an employee suffers some adverse action (e.g. failure to hire or termination) because of either: 1) his/her refusal to sign an employment agreement that he/she believes violates section 925; or 2) his/her legal action to challenge the employment agreement under section 925, it is likely that the employee will also be able to bring a common law claim for violation of public policy based on the public policy contained in section 925.

Take Away:  Employers should review and update the various forms of employment agreements they require their California employees to sign as a condition of employment (e.g. employment agreements, arbitration agreements, confidential & proprietary information agreements) to ensure they comply with the new law after January 1, 2017.

On October 11, 2016, the California Department of Industrial Relations (“Labor Commissioner”) issued an opinion letter clarifying the method of calculation for paid sick leave under Labor Code section 246 (the “Healthy Workplaces, Healthy Families Act of 2014”) for employees paid by commissions and for exempt employees who also receive an annual bonus.  Here is what the Labor Commissioner said:

1. Commissioned Employees.

The amount of paid sick leave (PSL) due to an employee who is paid almost entirely by commissions may be calculated using either method available under Labor Code section 246(k)(1) or (2), which read as follows:

“(1)      Paid sick time for nonexempt employees shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that week.

(2)        Paid sick time for nonexempt employees shall be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.”

Thus, the Labor Commissioner has taken the position that for purposes of PSL under the statute, commissioned employees (either outside sales employees, or employees who meet the inside sales exception to overtime requirements) are not exempt and their PSL can be calculated like non-exempt employees under section 246(k)(1) or (2).  To support its position, the Labor Commissioner points to certain legislative history behind the statute that indicates that the language in Labor Code section 246(k)(3) (which governs the calculation of PSL for exempt employees), was meant to apply only to an employee who is exempt under the “administrative,” “executive,” or “professional” exemption.

2. Exempt Employees Who Receive a Non-Discretionary Bonus.

The Labor Commissioner said that normally an exempt employee would be entitled to continue to receive his or her full pay without deduction for a sick day of less than 8 hours, but the day or partial day of sick leave may be deducted from earned or fronted leave balances.   The non-discretionary bonus would not figure into the salary of an exempt employee (in this case, those administrative, executive or professional employees exempt under Labor Code section 515(a)) because such bonuses are only figured into the pay of a non-exempt employee in order to determine the regular rate of pay for overtime and to figure the PSL rate under Labor Code section 246(k)(1)-(2).

So, under Labor Code section 246(k)(3), the PSL for exempt employees is calculated in the same manner as the employer calculates wages for other forms of paid leave time.  For a full-time exempt employee, the annual salary would be divided by 52 weeks and then by 5 days to determine the daily wage that would have been paid for the sick day.

Take Away:  Employers must be sure that they are not only properly granting and tracking accrued sick leave under the Healthy Workplaces, Healthy Families Act, but that they are also properly calculating the compensation due employees when they take a paid sick leave day under the law.  The attorneys in Weintraub Tobin’s Employment Law Group assist employers in all areas of employment law compliance, including the new and frustrating world of mandatory sick leave.  Contact any one of us if we can be of assistance.

On October 5, 2016, the Eleventh Circuit held in Villarreal v. R.J. Reynolds Tobacco Co., that an unsuccessful job applicant cannot sue a prospective employer under the Age Discrimination in Employment Act (ADEA) for a disparate impact claim.  In so holding, the Eleventh Circuit reverses its November 30, 2015 decision holding the opposite.

The ADEA generally protects employees aged 40 and older from discrimination in employment on the basis of their age.  A job applicant who is denied employment because of a practice that is discriminatory on its face, can sue under the ADEA under a disparate treatment claim, by proving that the employer acted with the intent of discriminating against the job applicant.  However, Villarreal now forecloses the possibility that an applicant can state an ADEA claim against a practice that, while not discriminatory on its face, has the effect of disproportionately discriminating against persons aged 40 and older.

The 49-year-old plaintiff in Villarreal applied online with R.J. Reynolds for the position of a territory manager and was screened out by a recruiting contractor under R.J. Reynolds’ guidelines which provided that a “targeted candidate” was someone only “2-3 years out of college” and to “stay away from” an applicant who had been “in sales for 8-10 years.”  After receiving no response to his first application, the plaintiff applied five more times over the next two years and was rejected each time.  The plaintiff filed a collective action on behalf of all job applicants aged 40 and older who were rejected for the position of territory manager.  R.J. Reynolds moved to dismiss plaintiff’s disparate impact claim on the basis that it was not statutorily authorized under the ADEA.  The district court dismissed the claim, finding that the ADEA only authorized disparate impact claims by employees, not applicants.

Almost all employers are business people. They are used to credits and debits in handling and accounting for commercial accounts,  they are used to the application of credit in one transaction to make up for a shortfall in another.  A customer over pays for a delivery in March but under pays by the same amount for a delivery in April. Most businesses are satisfied to have the debit in one month offset the credit in another.  A recent Third Circuit Court of Appeals case reminds employers that payments to employees can only rarely be treated in the same way as commercial accounts.

In Smiley v. DuPont, plaintiffs in a class action unpaid wage lawsuit, claimed that they had not been paid wages and overtime for time spent “donning and doffing” equipment and apparel necessary to perform work. DuPont sought to offset this allegedly unpaid work time by pointing to the fact that DuPont voluntarily paid its workers for meal periods. That voluntary lunch payment is not required by law. Thus, DuPont argued that the voluntary meal period payment should offset any wages not paid for “donning and doffing” time.

Find out if the trial court agreed with DuPont’s analysis by visiting the HRUSA blog post at http://blog.hrusa.com/blog/unpaid-work-time-is-not-offset-by-voluntary-payment/.