In This Issue
December 2017 - March 2018 | Volume 6 Issue 1
Federal Law
- U.S. Department of Labor announces pilot program to assist employers with resolving inadvertent overtime and minimum wage violations.
- NLRB Establishes New Standard for Analyzing Employers' Policies
- How to Calculate New Federal Paid Family Leave Tax Credit
- Title VII Bars Discrimination Based on Sexual Orientation, Second Circuit Rules
- Ten Simple Steps to Avoid Employment Lawsuits
U.S. Department of Labor announces pilot program to assist employers with resolving inadvertent overtime and minimum wage violations.
WASHINGTON, D.C. – The Wage and Hour Division of the U.S. Department of Labor is announcing a new pilot program, the Payroll Audit Independent Determination (PAID) program, which expedites resolution of inadvertent overtime and minimum wage violations under the Fair Labor Standards Act.
The PAID program will ensure that more employees receive back wages they are owed—faster. Employees will receive 100 percent of the back wages paid, without having to pay any litigation expenses, attorneys’ fees, or other costs that may be applicable to private actions.
The PAID program facilitates resolution of potential violations, without litigation, and ensures employees promptly receive the wages they are owed. Under this program, the Wage and Hour Division will oversee resolution of the potential violations by assessing the amount of wages due and supervising their payment to employees.
The Division will not impose penalties or liquidated damages to finalize a settlement for employers who choose to participate in the PAID program and proactively work with the Division to fix and resolve their potential compensation errors. Employers may not participate in the PAID program if they are in litigation or currently under investigation by the Division for the practices at issue. Employers likewise cannot use the pilot program repeatedly to resolve the same potential violations, as this program is designed to identify and correct potentially non-compliant practices. Settlements will be limited in scope to only the potential violations at issue. The program further requires employers to review the Division’s compliance assistance materials, carefully audit their pay practices, and agree to correct the pay practices at issue going forward. These requirements improve the employers’ compliance with their minimum wage and overtime obligations, which helps ensure employees’ rights are protected.
The Division will implement the pilot program nationwide for approximately six months, after which it will evaluate the pilot program and consider future options. The Division encourages employers to proactively audit their compensation practices to identify potential non-compliant practices. More information concerning the pilot program is available at www.dol.gov/whd/paid. It is the mission of the Division to promote and achieve compliance with labor standards to protect and enhance the welfare of the nation’s workforce.
NLRB Establishes New Standard for Analyzing Employers' Policies
By: Steven Fulgham, Baker Donelson
In December of 2017, the NLRB, which now has a Republican majority, revisited the standard used to evaluate the legality of workplace rules under the NLRA, which guarantees employees "the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection."
Under the old standard, articulated in Lutheran Heritage Village-Livonia, 343 NLRB 646, 647 (2004), a workplace policy that on its face did not violate the NLRA was still illegal if an employee would "reasonably construe" the policy as restricting his or her rights under the NLRA. Further, the employer's justifications for having the policy were not part of the analysis, creating a very strict standard for employers.
Under the new standard, recently articulated in a December 2017 decision, The Boeing Co., 365 NLRB No. 154 (2017), the inquiry is not limited to whether employees might "reasonably construe" a workplace rule as violating their rights under the NLRA. Instead, when faced with "a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights and (ii) legitimate justifications associated with the rule." If the employer's legitimate justifications for the rule outweigh its potential impact on employees' rights under the NLRA, the rule will be designated as lawful to maintain.
Further, the Board elected to "delineate three categories of employment policies, rules and handbook provisions" to inject some predictability into the balancing test outlined above and its operation in future cases. Those categories are as follows:
- Category 1 will include rules that the Board designates as lawful to maintain, either because: (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.
- Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.
- Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.
In the Boeing case, the Board was faced with a work rule that "restrict[s] the use of camera-enabled devices such as cell phones on [the employer's] property." The Board noted that "Boeing's no-camera rule does not explicitly restrict activity protected by Section 7 of the NLRA, it was not adopted in response to NLRA-protected activity, and it has not been applied to restrict such activity." In upholding this workplace rule under the new standard, the Board found that Boeing's justifications for the rule, which were rooted in safety and security, were "legitimate" and "compelling." On the other hand, the Board determined that the rule's negative impact on protected rights was minimal. For example, if several employees want to conduct a protest, the rule would prevent them from photographing the protest but would not prevent the main protected activity – the protest itself. Thus, the Board held that the employer's justifications for the rule outweighed the potential adverse impact on protected rights such that the rule fell in Category 1 above and was found to be lawful.
This decision is good news for employers, as it provides clearer guidance on evaluating workplace rules that implicate the NLRA, including no-camera or recording rules, civility standards, and social media policies. If you are considering implementing or revising one of these policies or any similar workplace rule in light of the Board's recent decision, please contact the Baker Donelson attorney with whom you regularly work for guidance and more information about the new standards.
How to Calculate New Federal Paid Family Leave Tax Credit
By: Megan G. Holstein, Jackson Lewis
The Tax Cuts and Jobs Act of 2017 provides a tax credit to employers that voluntarily offer paid family and medical leave to employees.
Under new Section 45S of the Internal Revenue Code, employers that voluntarily offer qualifying employees up to 12 weeks of paid family and medical leave annually pursuant to a written policy may claim a tax credit for a portion of the wages paid during leave. The leave benefit must satisfy the requirements in Section 45S.
A qualifying employee is one who has been employed by the employer for at least one year and is paid no more than 60 percent of the “highly compensated employee” dollar amount on an annual basis (i.e., $72,000 for 2018).
The credit sunsets at the end of 2019, unless reinstated by Congress. Further, the credit does not apply if paid leave is mandated by state or local law.
To determine if your company can take advantage of the paid family and medical leave tax credit, follow the four steps below.
Step 1
Review the company’s existing policies that include voluntary pay leave benefits (i.e., pay that is not required by law), such as a salary continuation disability policy or a parental leave policy. If the company provides paid time off for any of the following reasons, then move to Step 2:
- Employee’s serious health condition, including pregnancy
- Parental leave or bonding leave
- Care of a family member with a serious health condition
- Care of an injured service member
- Because of a qualifying exigency that arises when a family member is deployed abroad on active military duty
Step 2
Determine the company’s 2017 income replacement dollar amount that was used to pay out under one or all of the policies listed in Step 1. This is used to calculate a 2018 tax credit in Step 3.
Step 3
Estimate the potential annual tax savings using the Jackson Lewis Paid Family Leave Tax Credit Calculator.
Step 4
If the estimated calculation is a positive amount, then consult with counsel to ensure your policy complies with Section 45S before relying on the credit.
Employers without existing voluntary pay leave benefits may consider offering enhanced benefits, such as paid parental leave, to take advantage of the tax credit. The law provides a tax credit, that is, a dollar-for-dollar reduction in the company’s income tax obligation.
Jackson Lewis attorneys are available to answer inquiries regarding this new law.
Title VII Bars Discrimination Based on Sexual Orientation, Second Circuit Rules
By: Michelle E. Phillips, Richard I. Greenberg, & Christopher M. Repole, Jackson Lewis
In a much-anticipated decision, the federal appeals court in New York has held that Title VII of the Civil Rights Act of 1964 prohibits discrimination based on an individual’s sexual orientation. Zarda v. Altitude Express, No. 15-3775 (2d Cir. Feb. 26, 2017).
In its 10-3 decision, the full U.S. Court of Appeals for the Second Circuit reversed an April 2017 decision in which a three-judge panel of the Court declined to recognize sexual orientation discrimination under Title VII.
The latest decision deepens a circuit court split on the issue. The Second and Seventh Circuits have held Title VII prohibits sexual orientation discrimination, but the Eleventh Circuit has held it does not. This circuit split most likely will set up the issue for U.S. Supreme Court’s review.
In the case, a skydiving instructor, Donald Zarda, claimed he was fired by his employer, Altitude Express, because he was gay. In 2010, Zarda filed suit in federal district court in New York arguing, among other things, that the firing violated Title VII. According to Zarda, Title VII’s prohibition against workplace discrimination on the basis of “sex” also prohibits sexual orientation discrimination.
A district court judge ruled against Zarda, applying the Second Circuit’s then-current precedent. Simonton v. Runyon, 232 F.3d 33 (2d Cir. 2000). The Second Circuit in Simonton declined to hold that discrimination based on sexual orientation was prohibited under Title VII.
Zarda moved the district court to reconsider its opinion when, during the pendency of the district court action, the Equal Employment Opportunity Commission reached its decision in Baldwin v. Foxx, No. 01220133080 (July 16, 2015). There, the agency decided that discrimination based on sexual orientation is prohibited by Title VII.
The district court denied Zarda’s motion, holding Simonton was binding precedent. Zarda appealed to the Second Circuit. Zarda died in 2014, during the pendency of the appeal. His estate carried on the action, arguing Simonton should be reversed.
When Zarda initially raised his Title VII argument, his position had little direct support in the courts. Courts tended to interpret Title VII’s prohibition on “sex” discrimination somewhat narrowly. It was only in 1986 that the U.S. Supreme Court ruled Title VII prohibits workplace sexual harassment, see Meritor Savings Bank v. Vinson, 477 U.S. 57 (1986), and in 1989 held employers violate Title VII when using sexual stereotyping in making employment decisions. See Price Waterhouse v. Hopkins, 490 U.S. 228, 251 (1989).
Among the circuit courts, the Seventh Circuit was the first to endorse the EEOC’s position on sexual orientation discrimination. Hively v. Ivy Tech Cmty. College of Ind., 853 F.3d 339, 362 (7th Cir. 2017) (en banc). (See our article, Sexual Orientation Discrimination Prohibited by Title VII, 7th Circuit Finds.) That decision came after a divided Eleventh Circuit panel declined to recognize sexual orientation discrimination under Title VII. See Evans v. Georgia Reg’l Hosp., 850 F.3d 1248, 125 (11th Cir. 2017), cert. denied, 138 S. Ct. 557 (2017).
Siding with the Seventh Circuit in its decision, the Second Circuit reversed Simonton, holding that “because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.” The Court’s decision effectively holds that Title VII covers lesbian, gay, and bisexual employees who claim they were discriminated against because of their sexual orientation. The Court, however, specifically stated that discrimination against transgender individuals is a “distinct question” and not at issue in Zarda’s case. It remains to be seen whether that question, and whether the circuit split on sexual orientation discrimination, will be addressed by the Supreme Court.
Employers should review their equal employment opportunity and harassment policies to ensure that sexual orientation is not only included as a protected group, but also that sexual orientation discrimination, along with other forms of harassment and discrimination, are addressed in harassment prevention training. This case is a stark reminder that even in jurisdictions where sexual orientation is protected under state law (e.g., New York), HR professionals and supervisors must be vigilant in ensuring that all employees will be respected for who they are, regardless of their sexual orientation, gender identity, race, color, age, disability, religion, national origin, ethnicity, or any other protected characteristic.
Please consult with the Jackson Lewis attorney with whom you work for compliance and follow-up actions stemming from this important Second Circuit decision.
Ten Simple Steps to Avoid Employment Lawsuits
By: Adam H. Gates, Baker Donelson
- Make Reporting Complaints Easier. The earlier you learn of an employee's complaint, the better. You can't fix a problem you don't know about. Providing more than one option for employees to complain ensures that they can bring legitimate issues to management's attention and that a supervisor cannot hide issues from Human Resources and upper management. Using the chain of command is often best, but employees sometimes need a direct line to their boss's boss. It promotes accountability and transparency. It may also provide a defense to a lawsuit. If an employee has available to her various ways to complain about harassment but does not take advantage of them so that the employer has an opportunity to fix the problem, she may be barred from recovery. So set up a complaint hotline and email address or make employees aware (in writing) that they can report issues directly to the director of HR if their supervisor is the problem or has ignored their complaints.
- Timeliness is Next to Godliness. Be proactive. This is simple to understand but difficult to do. Once you learn of a problem, you have to respond. The company's response will obviously depend on the problem, but understand that the response – or lack thereof – will be scrutinized. Simply documenting the issue may be enough. Other times, an investigation that results in disciplinary action will be necessary. But the company must act. If management or HR becomes aware of a problem (whether it's overheard in the breakroom or received as a written complaint), it must be addressed.
- Document Performance Deficiencies. As every HR pro knows, you document everything. But performance problems and conduct violations are more important than other issues. If you want to discourage a lawsuit, make sure the employee you just fired for performance issues has already been written up twice for poor performance. Under those circumstances, proving the actual reason for her termination was her performance and not her race, gender, or disability is easy. It may be awkward to call a team member out, but it's best for the team.
- Don't Make Exceptions. A big part of being perceived as a fair employer is consistent application of the rules. When you make an exception for one employee, you alienate the others. So, consistent application of policies regarding promotions, vacation, pay, assignments, awards, discipline, and termination is the only way to go. After all, the alleged unfair application of the rules is the basis of almost every employment lawsuit.
- Train Your Front Line. Training does not cost money, it saves money. As frustrating as it can be to pay for good training and interrupt your employees' otherwise productive workday, good training usually pays for itself many times over. Who needs it the most? Well, who interacts with employees more than any other level of management in your company? Front-line managers. They handle the day-to-day gripes that, if not handled properly, become lawsuits. So invest in your first level of management. Train them to spot issues, to be proactive, and to be consistent. Equip them to be good managers now so they don't have to be good witnesses later.
- Create Specialists. Some employment laws have become extremely complex, and expecting one person to stay on top of all of the changes is unrealistic. Use the strength of your team and spread the load. Designate a member of your HR or management team as the FMLA specialist or the ADA specialist, and make sure that person gets additional, specific, and regular training in that area.
- Make Your Handbook a Tool, Not a Stumbling Block. An employee handbook is a tool that communicates a company's expectations to its employees. It should include statements addressing at-will employment; equal employment and harassment issues; work hours; leave and accommodation under the FMLA and the ADA; workplace violence; trade secrets and confidentiality of company information; work rules and the consequences for violating them; and other important issues. But often handbooks include too many policies or complicated policies with unnecessary deadlines and commitments that trip companies up. Simplify your handbook. Keep it up-to-date. And make sure employees sign acknowledgments that they received and read it.
- Terminate Slowly. You're probably an employee. Imagine losing your job; it would be a life-changing event that should not be taken lightly. The decision to terminate someone's employment should therefore at least (1) be reviewed by more than one manager, (2) involve someone with Human Resources training, and (3) be well documented. If you are unsure of important facts or someone is not available to review the decision, suspend the employee and wait. Get counsel. Sleep on it. A rush to judgment can be expensive.
- Consider Severance Agreements. Sometimes paying a small amount early is smart. A severance agreement usually results in the company paying an employee a few weeks (or even months) of salary in exchange for the employee releasing all claims against the company. If done correctly, this eliminates the chance of a lawsuit. If a mistake has been made, it often saves the company money.
- Operate by the Golden Rule. That's right – when in doubt, treat employees as you would like to be treated. This might be a cliché, but it's also the most important step. If your team can consistently pull this off, it will significantly reduce your company's legal exposure and result in a more loyal and productive workforce.
