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    Welcome to the Labor and Employment Law Update where attorneys from SmithAmundsen blog about management side labor and employment issues. We cover topics including addressing harassment and discrimination in the workplace, developing labor law, navigating through ADA(AA), FMLA and workers’ compensation issues, avoiding wage and hour landmines, key legislative, case law and regulatory changes and much more!
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    The Labor and Employment Law Update is provided for information purposes only, and should not be construed as legal advice on any subject matter, nor should it be construed as creating an attorney client relationship. Do not send confidential information or facts about a legal matter. The opinions of this blog's contributors do not reflect the opinions of SmithAmundsen LLC as a whole. See the disclaimer page for further information.

Facebook, Twitter, Instagram…Oh My! What Wisconsin Employers Need to Know Before Requesting Access to an Employee’s Social Media Account…

Contributed by Samantha Esmond

On Tuesday, April 8, 2014, Scott Walker, Governor of Wisconsin, signed into law the “Wisconsin Social Media Protection Act.” The act went into effect on April 10, 2014, and places restrictions on the types of information that Wisconsin employers can and cannot seek from employees and/or job applicants regarding their personal social media accounts.

The act prohibits employers from requesting an employee or applicant to grant access to their personal internet account (i.e., internet based accounts created and used by an individual exclusively for personal communications, such as Twitter, Facebook, etc.) and likewise prohibits employers from requesting an employee or applicant to disclose information that would allow access or observation of their personal account. The term “access information” means requesting an employee or applicant’s user name and password, login information, or any other security information that protects access to a personal internet account.

Employers are prohibited from discharging, refusing to hire, or otherwise discriminating against any person who refuses its request to grant access to a personal internet account, for opposing such proscribed practices, or for filing a complaint relating to an improper request. The act provides for the imposition of a $1,000 penalty, in addition to other remedies, for noncompliance.

Right about now you are probably asking yourself – does this act apply to me? The answer is almost certainly, YES! The act broadly defines an “employer” as “any person engaging in any activity, enterprise, or business employing at least one individual,” and specifically includes the state and its political subdivisions. Additionally, the act places similar prohibitions on requests to access of personal Internet accounts by landlords with respect to tenants and prospective tenants and by educational institutions with regard to students and prospective students.

There are several key exceptions in the act, including, among others, that employers may still review information that is publicly available or that can be found in the public domain (i.e., Google). Notably, the act also authorizes employers to continue to conduct investigations, with reasonable cause, relating to the unauthorized transfer of company proprietary, financial, or confidential information or of any other alleged employment-related misconduct. The act further permits employers to require disclosure of access information in order to gain access or to operate an electronic communication device supplied or paid for in whole or in part by the company.

Bottom Line: Wisconsin is the latest state to pass legislation in recognition of the evolving need to update privacy laws to reflect the increased use of social media. Employers should evaluate and update all policies and practices relating to use of electronic communications and devices, internet usage, social media, and even hiring practices to ensure compliance with the act. As with any new law, stay tuned for the latest developments on how this act is enforced and litigated.

 

There’s No Escaping Taxable Wages: Are You Improperly Giving Employees Nontaxable Dollars to Purchase Individual Coverage?

Contributed by Rebecca Dobbs Bush

It’s that time of year again when we’re all settling up with the IRS and hoping and searching for as many deductions as we can.  Many employers would like a way to offer employees nontaxable dollars with which they could purchase individual coverage through the marketplace or in the individual private market, without the employer needing to establish its own group health plan (or allowing the employer to terminate the existing group health plan they might be providing).

However, the following prohibitions took effect January 1, 2014:

  • Stand-alone HRAs can no longer be used to provide employer-sponsored health coverage to active employees.
  • Employer payment plans are prohibited.
  • Premiums for coverage elected through the ACA Marketplace or a state-based exchange cannot be paid for or reimbursed through an employer’s cafeteria plan.
  • Health FSAs can be offered to employees only if those employees are also eligible for the employer’s group health plan (major medical plan).

As alternative options, employers can:

  • Adopt a small group market plan through the SHOP Marketplace for small employers
  • Pay for individual policies for employees with dollars reported as taxable wages and subject to employment taxes and income tax withholding, or
  • Reimburse employees with taxable dollars.

EEOC Cannot Proceed on Nationwide Pattern and Practice Litigation Because It Failed to Conduct a Nationwide Investigation During the Charge Stage

Contributed by Jill Cheskes

The United States District Court for the Western District of New York ruled in favor of Sterling Jewelers, Inc., and dismissed, with prejudice, the EEOC’s claim against the company alleging nationwide pattern and practice discrimination.  The court found that the EEOC did not present sufficient evidence to demonstrate that the agency undertook a nationwide investigation of the pattern and practice claims.  As such, the court found that the EEOC was barred from proceeding on those claims and granted summary judgment to Sterling Jewelers.

Throughout the last few years, there have been many court decisions granting the EEOC almost unfettered discretion in conducting their investigations and conciliating with employers.  One exception to that trend has been that courts have generally been dismissing class claims if the EEOC did not discover those claims during the investigation stage.  Courts have dismissed class claims brought by the EEOC where the EEOC used the discovery process in litigation to identify a class, holding that the EEOC needs to identify that class during its investigation and not wait until litigation to determine if there is a class.  One court held that “where the scope of its pre-litigation efforts [is] limited in terms of geography, number of claimants, or nature of claims – the EEOC may not use discovery in the resulting lawsuit as a fishing expedition to uncover more violations.”

In this case, Sterling Jewelers asserted the absence of a nationwide pre-suit investigation as an affirmative defense to the case and discovery was conducted on that issue.  The EEOC presented no evidence of any nationwide investigation and, in fact, the investigation appeared limited to two facilities.  The EEOC argued that a court may not inquire into the scope of its pre-suit investigation.  However, the court did not buy that argument and found that the EEOC has a statutory obligation to conduct an investigation and the court could inquire into whether the EEOC actually did conduct an investigation on the nationwide pattern and practice claims.  The court found that “where, as here, the EEOC completely abdicates its role in the administrative process, the appropriate remedy is to bar the EEOC from seeking relief….”

This is an important reminder for employers to keep in mind and document during the investigation stage as well as after the EEOC has filed suit alleging a class or pattern and practice allegations.

April Showers: Update For Your State and Federal Employment Laws

Contributed by Heather Bailey

Federal:   The OFCCP has published the data for federal contractors and subcontractors who must now comply with having protected veteran benchmarks for their affirmative action plans and hiring goals.  Currently, that nationwide threshold is 7.2% unless the contractor wants to create its own individualized benchmarks, to which that state specific veteran data is supplied. See, http://www.dol-esa.gov/errd/VEVRAA.jsp.  Other OFCCP resources are also available, such as assistance with outreach and recruiting efforts for protected veterans:  http://www.dol-esa.gov/errd/resources.html.

That is not all.  Contractors are now required to also request individuals to self-identify if they are an individual with a disability pre-offer stage.  Again, the OFCCP has given us guidance on how to do so.  http://www.dol.gov/ofccp/regs/compliance/section503.htm.  This all came into effect on March 24, thus, time is of the essence to get compliant if your current plans are expiring soon (if not, you will be required to be compliant with your next plan – but you should start planning now).

Connecticut: Minimum wage is set to increase on January 1, 2015 to $9.15 per hour, and then to $9.60 a year later and then up to $10.10 by January 1, 2017.

Illinois:  In March, the Supreme Court found Illinois’ eavesdropping law on electronic monitoring (except video) unconstitutional.  What does this mean for employers?  Originally, all parties had to consent to being recorded – not the case anymore.  Although that allows employers to secretly record conversations (which is not advised), it allows employees to secretly record conversations during performance, discipline or even discharge meetings with management or HR.

Maryland: Have tipped employees in Maryland?  So long as their non-tip work is less than 20% of their productivity, you can pay them the minimum tip wage for that non-tip work.

New York: The New York City Earned Sick Time Act (ESTA) went into effect on April 1.  The NYC Department of Consumer Affairs finally came out with the required notices.

Here is where you can go to get copies:  http://www.nyc.gov/html/dca/downloads/pdf/MandatoryNotice.pdf   and Spanish: http://www.nyc.gov/html/dca/downloads/pdf/MandatoryNotice_Spanish.pdf .

The Department also has them available in Italian, Chinese, Korean or Russian.  These notices need to be handed to all current and new employees effective May 1, 2014.  Thus, all new hires will have to get a copy once you disperse the initial notices.  You are encouraged, but not required to post these notices at the work location.  Consequently, you cannot just post at the work site in lieu of handing the employees a copy.

Spring Cleaning For Your Confidentiality Agreements and Policies

Contributed by Beverly Alfon

This should be an easy one to cross off your to-do list.  Dust off the confidentiality and non-disclosure language that you require your non-supervisory employees to adhere to – whether through a specific agreement, employee handbook or general company policy.  Last week, the U.S. Court of Appeals for the Fifth Circuit served up a reminder that what used to be considered standard language regarding an employer’s expectation of confidentiality, now opens the door to potential liability under federal labor law, for both union and non-union employers.

In Flex Frac Logistics, LLC v. NLRB, 5th Cir., No. 12-60752, 3/24/14, a non-union trucking company required its employees to sign a document acknowledging the following:

Confidential Information.  Employees deal with and have access to information that must stay within the Organization.  Confidential Information includes, but is not limited to, information that is related to…our financial information, including costs, prices; current and business plans, our computer and software systems and processes; personnel information and documents, and our logos and art work.  No employee is permitted to share this Confidential Information outside the organization, or to remove or make copies of any [Organization] records, reports or documents in any form, without prior management approval.  Disclosure of Confidential Information could lead to termination, as well as other possible legal action.”

Many of you reading this undoubtedly have similar language in your new hire materials and employee handbooks.  What could be unlawful about this language?  Certainly, an employer has the right to protect its confidential information.  However, the National Labor Relations Board (NLRB) found that this company’s rule unlawfully interfered with the right of employees “to engage in concerted activity for their mutual aid or protection” because of its reference to “personnel information.” 385 N.L.R.B. No. 127 (2012).  The NLRB found that the company’s employees could reasonably interpret the confidentiality restrictions on “personnel information” to encompass wage information – typically, a primary subject of discussion between employees and unions.  Based on this tendency to restrain or interfere with non-supervisory employees’ rights to discuss their work terms and conditions, the NLRB held that the rule violated federal labor law.  The employer appealed the decision, but the Fifth Circuit Court of Appeals agreed with the NLRB.

Bottom line:  Your confidentiality/non-disclosure agreements and policies should be reviewed for potential liability.  The law on this issue continues to develop, but what is clear is that even seemingly innocuous confidentiality language can result in a finding of a violation of the National Labor Relations Act.  Carefully crafted language can protect your company’s interests while avoiding potential liability under federal labor law.

Supreme Court Holds that Severance Payments for Departing Employees are Subject to Payroll Taxes

Contributed by Sara Zorich

On March 25, 2014, the Supreme Court in United States v. Quality Stores, U.S., No. 12-1408, 2014 WL 11168968, 3/25/14) overturned the Sixth Circuit and unanimously held severance payments made to terminated workers were subject to payroll taxes including the Federal Insurance Contributions because the payments constituted “wages” and were in connection to services employees provided to the employer.

The defendant, Quality Stores, had made severance payments to employees who were voluntarily terminated prior to a Chapter 11 bankruptcy.  Quality Stores paid and withheld taxes subject to the Federal Insurance Contributions Act (FICA) but later believed the payments should not have been taxed and sought a refund from the U.S. government on behalf of itself and the 1,850 employees for which payments and withholdings had been made.  The Sixth Circuit held that the severance payments were not wages under FICA and thus, Quality Stores and the employees were not responsible for FICA taxes.

The U.S. Supreme Court reviewed the matter and overturned the Sixth Circuit’s decision.  The High Court held that that term “wages” is interpreted very broadly under FICA.  The Court determined the severance payments were being paid for the employee’s “service” which is not only the work actually done but constitutes the entire employer-employee relationship.  Thus, under FICA’s broad definition of wages, Quality Stores’ severance agreements were taxable as wages under FICA.  The Court recognized there is an exemption to taxable wages for certain severance plans that are tied to the receipt of state unemployment benefits.  However, the Court found that the severance plans at issue varied based on employee seniority and time served, and were not linked to the receipt of state unemployment benefits so they were taxable wages.  It should be noted that the Court addressed the distinction for severance payments and plans that are tied to the receipt of state unemployment benefits which are exempt from income-tax withholding and FICA taxation, and made no comment on such plans since they were not at issue in this matter.

Based on this ruling, employers must be careful when drafting severance agreements and understand that the definition of such wages will be interpreted broadly when determining whether such wages are taxable under the law.

EEOC Issues Guidance on Religious Accommodations for Religious Garb and Grooming Under Title VII

Contributed by Michael Wong

On March 6, the EEOC issued guidance on Title VII’s application to the issue of religious garb and grooming in the workplace. The guidance does not create any new obligations for employers. Rather, it illustrates the complex nature of accommodating religious beliefs and practices, and provides insight into how the EEOC views employers’ legal responsibilities with respect to religious garb and grooming under Title VII. It also indicates this will be an area of increased EEOC enforcement in coming years.

Title VII protects all aspects of religious observance, practice, and belief. Title VII defines religion broadly to include not only traditional, organized religions, but also uncommon religious beliefs that are not part of a formal church or sect. Title VII’s protection extends to any practice motivated by religious belief, even if others engage in the same practice for purely secular reasons. That being said, Title VII only applies to religious beliefs that are “sincerely held.” While employers may legally question whether a religious belief is sincerely held, the EEOC’s guidance cautions that the sincerity of a religious belief is usually not in dispute in a claim of religious discrimination.

The guidance stresses that employers may not automatically refuse to accommodate an applicant or employee’s religious garb or grooming practice, even if it violates the employers’ dress code, uniform policy or expectations regarding appearance. Instead, an employer must allow the religious practice unless it can show that accommodating the practice places an undue hardship on its business operations. An undue hardship is something more than a de minimis cost or burden. Title VII also prevents employers from taking actions against employees based on the discriminatory religious preferences of others, including customers, clients or co-workers. For example, it is unlawful to re-assign an employee to a non-customer service position because of customer complaints about the employee’s religious garb.

In light of this guidance, employers should review their policies to make sure they clearly state a commitment to reasonably accommodate religious beliefs and prohibit discrimination and harassment based on religion. Additionally, employers should educate their management team on the proper procedures for responding to religious discrimination complaints and accommodation requests based on religion. Finally, if faced with a request for an accommodation based on a religious belief, employers should carefully evaluate whether the belief is sincerely held and whether providing an accommodation would impose an undue hardship.

Note that the EEOC guidance does not address any applicable state or local laws regarding religious discrimination or harassment. For example, the Illinois Human Rights Act also prohibits discrimination and harassment based on religion.  Employers should make sure that their policies are not only in line with Title VII, but any applicable state or local laws as well.

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