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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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Heads Up California Employers: A New Year Brings New Procedures for Investigating Employment Discrimination Complaints

Posted on February 14, 2013 by smithamundsen

Contributed by Carly Zuba

Beginning January 1, 2013, the California Fair Employment and Housing Act (FEHA) took on an entirely new look, thereby amending, repealing and adding to various provisions of FEHA.  These changes affect any employer with five or more employees working in California.

Notably, the new FEHA differs from the old FEHA in the following respects:

  • Elimination of the Fair Employment and Housing Commission (FEHC).
  • Creation of new authority for the Department of Fair Employment and Housing (DFEH) in enforcing FEHA and promulgating rules.  FEHC’s former regulatory and rulemaking functions were handed over to a seven-member Fair Employment and Housing Council within DFEH.  As such, employers should anticipate possible new regulations coming down the pike sometime this year.  Hopefully, some of these regulations will provide clarification to employers on some of the more complex areas of California employment discrimination law.  In addition, the council will conduct hearings on FEHA regulations and civil rights issues. Employers can participate in the rulemaking process by providing feedback and comments to the council. 
  • Authorization for DFEH to file cases directly in court.  If a discrimination claim before the DFEH is not resolved through mediation, conference, etc., DFEH can now bring a civil action against the employer on behalf of the Complainant, thereby standing in the place of the individual who originally brought the claim.  Employers will need to begin evaluating the differences between defending cases brought by DFEH versus cases brought by private attorneys. And, most significantly, the former caps on damages for claims brought to the FEHC have vanished – in contrast, there are essentially no caps on damages plaintiffs may recover in court.
  • Creation of mandatory dispute resolution procedure, before DFEH can proceed to court.  DFEH has a new Dispute Resolution Division.  Dispute resolution is now mandatory for all cases in which DFEH intends to file a civil action.  These dispute resolution services are provided to the parties free of charge.  The good news for employers and employees alike is that DFEH’s dispute resolution services boast an 80% settlement rate.
  • Ability for DFEH to collect attorneys’ fees and costs when it is the prevailing party in FEHA litigation.  If DFEH prevails in court, it can now obtain reasonable attorneys’ fees and costs, including but not limited to expert witness fees.  These fees and costs will be deposited into a Litigation Fund in the State Treasury. 

Of course, it is a bit too early to predict how these changes will truly affect the substance and volume of FEHA employment discrimination litigation.  Stay tuned, California employers…

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Want to use a Last Chance Agreement? Careful, it could be used against you.

Posted on February 5, 2013 by smithamundsen

Contributed by Michael Wong

While Last Chance Agreements (LCAs) have grown in popularity as a way to protect an employer’s decision to terminate an employee, the Central District of Illinois’s decision in EEOC v. Cognis has created a concern for employers that use LCAs.

In EEOC v. Cognis, the court issued a bold statement by granting the EEOC summary judgment and finding an employer, Cognis, had violated Title VII by terminating an employee after he revoked his promise to abide by an LCA. 

In the case, the employee was offered an LCA after his poor performance resulted in verbal warnings, counseling and a suspension. The LCA stated that “in lieu of termination,” the employee agreed to accept the terms of the LCA, including a release and waiver of any claims under state and federal employment law in relation to his right to employment with Cognis or his status under the LCA.  The employee understood that if he did not agree with all of the LCA terms, including the release and waiver, he would be immediately terminated.

After signing the LCA, the employee questioned whether he had waived his civil rights, including his ability to file an EEOC charge of discrimination.  Cognis’ response was simply that it would not alter the LCA.  Cognis did not explain if, or how, the LCA impacted the employee’s civil rights or ability to file a charge of discrimination. After learning that the LCA would not be modified, the employee revoked the LCA indicating that he refused to give up his civil rights.  Cognis then terminated the employee because he was unwilling to remain bound by the terms of the LCA.

In granting summary judgment against the employer, the court held that the employee’s revocation of the LCA was a protected activity and the employer’s decision to terminate his employment after the revocation (even though the employer was simply reverting to its prior decision to terminate the employee) constituted an adverse employment action, because it “might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” While the court refused to apply the same rational to the EEOC’s class claims, it specifically stated that it “believes that a jury could reasonably conclude that Cognis feared protected activity from poorly performing employees if they were terminated, and therefore offered LCAs which required the poorly performing employees to give up their civil rights as their sole alternative to termination.” 

Employers should carefully review their last chance agreements to determine whether they could fall into the same pitfall as Cognis. Revising the language of a last chance agreement to clarify an employee’s rights may provide some protection from the Central District’s decision. Regardless, employers should now be more careful when terminating an employee who refuses to sign or wants to revoke his or her promise to abide by a last chance agreement.

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Time to Revisit Employee Handbooks…Again?

Posted on December 27, 2012 by smithamundsen

Contributed by Jon Hoag

The Chief Judge of the Northern District of Illinois recently issued a decision that should get the attention of employers throughout Illinois.  The Judge determined that statements in an employee handbook may be enough to constitute an “agreement” under the Illinois Wage Payment and Collection Act (IWPCA).  The Judge ruled that the handbook statements were enough for the plaintiffs to avoid dismissal of their IWPCA claims.  So what’s the big deal?

The “big deal” is that the IWPCA has a statute of limitations of 10 years compared with other wage and hour laws (e.g. Illinois Minimum Wage Law, Fair Labor Standards Act, etc.) that carry 2-3 year statute of limitation periods.  In addition, the courts have determined that an “agreement” under the IWPCA does not require the formalities and accompanying legal protections of a contract.  As such, the standard disclaimer language that the statements in the handbook do not create a “contract” does not effectively disclaim an “agreement” under the IWPCA.

Most employers outline general compensation guidelines in the employee handbook, including general statements about legal requirements related to employee compensation.  For example, employers might include a statement that non-exempt employees will receive overtime at 1.5 times their wage for all hours worked over forty in a week.  This is a fairly innocuous statement that simply mirrors the general requirements under the law.  However, employers now have to be concerned that a statement such as this in an employee handbook exposes the employer to possible liability over a 10-year period instead of a 2-3 year period.  And what if the statement is simply that employees that work over forty hours in a week are entitled to overtime?  Does that mean that exempt employees might have a claim for overtime under the IWPCA?  The bottom line is that defending a claim under the IWPCA is going to prove more difficult than defending that same type of claim under the Illinois Minimum Wage Law or Fair Labor Standards Act. 

We expect to receive more clarity from the courts on this topic in the coming years.  In the meantime, Illinois employers should review and revise employee handbooks to limit unnecessary legal exposure under the IWPCA.

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The Ends Do Not Justify The Means – D.C. Circuit Court Orders NLRB to Explain Itself

Posted on December 20, 2012 by smithamundsen

Contributed by Beverly Alfon

Over the last several months, the National Labor Relations Board (NLRB) has continued to pick at common employment handbook provisions such as company investigation policies, policies prohibiting defamatory or disparaging comments, confidentiality policies, and social media policies.  Recent Board decisions and various memoranda from the NLRB’s General Counsel have bolstered the perception among employers that anything goes so long as the ends justifies the means. 

Last week, however, the U.S. Court of Appeals for the District of Columbia Circuit had the opportunity to review a Board decision related to an employer’s policy banning insulting, provocative, and confrontational messages on employee clothing and the enforcement of that policy with respect to an employee’s union-sanctioned t-shirt (Medco Health Solutions of Las Vegas Inc. v. NLRB, D.C. Cir., No. 11-1282, 12/14/12).  The Court remanded the case back to the Board, reasoning that the Board failed to explain how the employer violated the National Labor Relations Act.  Specifically, the Court emphasized the Board’s complete departure from the framework that it established in another case, Lutheran Heritage Village-Livonia. In Lutheran Village, the Board held that an employer’s rule that neither expressly nor inherently restricts protected activity violates the NLRA only if: (1) the rule was promulgated in response to union activity; and, (2) a reasonable employee would construe the rule to prohibit protected conduct.  According to the Court, neither factor from Lutheran Village was met here.

As a result, although the Court agreed that the employee was engaged in protected activity when he wore the t-shirt to work, it declined to approve the Board’s failure to respond to the Company’s “straightforward” argument that it prohibited the shirt because it was insulting to the company and harmful to the company’s effort to attract and retain customers and failure to identify what evidence it required from the company to support its position.

Bottom line:  The D.C. Circuit’s remand order in the Medco Health Solutions case sends a clear message to the Board that it must do a better job of explaining and supporting its rulings.  However, it will not curb the NLRB’s active scrutiny of common employment policies and handbook provisions.  Employers must remain alert regarding NLRB determinations in this area and consider the factors set forth in the Lutheran Heritage Village case before disciplining an employee for conduct that may be protected by the National Labor Relations Act.

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U.S. Supreme Court Decision Bolsters the Fact That Arbitration Provisions Are Here to Stay… For Now

Posted on December 18, 2012 by smithamundsen

Contributed by Carly Zuba

On November 26, 2012, the U.S. Supreme Court once again endorsed the arbitration of employment-related agreements.  The Court held that if a contract contains an arbitration provision and there is a subsequent challenge to the validity of the contract, the arbitrator – not a court – must hear that challenge.  In so holding, the Court reaffirmed its earlier precedent that when a contract contains an arbitration provision, the Federal Arbitration Act (“FAA”) trumps state law.

Specifically, the Court vacated an Oklahoma Supreme Court decision that voided the noncompetition provisions in two employment contracts on the grounds that they were against state public policy.  Both employment contracts contained the following arbitration clause:

Any dispute, difference or unresolved question between Nitro-Lift and the Employee (collectively the “Disputing Parties”) shall be settled by arbitration by a single arbitrator mutually agreeable to the Disputing Parties in an arbitration proceeding conducted in Houston, Texas in accordance with the rules existing at the date hereof of the American Arbitration Association.

After the employer served a demand for arbitration on two former employees, claiming that they had violated the noncompetition provisions, the former employees filed a lawsuit in Oklahoma state court seeking a declaration that the noncompetition provisions were void.  The trial court dismissed the case, finding that the arbitration provisions were valid and controlling and thus it was an arbitrator’s job to resolve the parties’ dispute.  On appeal, the Oklahoma Supreme Court rejected the trial court’s position, stating that “the existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement.”  Subsequently, the Oklahoma Supreme Court held that the noncompetition provisions were void and unenforceable under state law.

Well, the U.S. Supreme Court did not like this particular move by the state supreme court, holding that the decision ignored the U.S. Supreme Court’s precedent on the FAA.  The Court asserted that its string of decisions on the FAA forecloses this type of “judicial hostility towards arbitration.”  A pillar of the FAA’s substantive law is that allegations regarding the validity of a contract containing an arbitration provision must be resolved by an arbitrator – not by a federal or state court. 

Take-Away for Employers:  This U.S. Supreme Court decision cements the fact that when employment contracts contain arbitration provisions, employees cannot evade arbitration by seeking a judicial declaration that the contract is somehow void.  Arbitration clauses are alive, well and enforceable, folks – at least for the time being.

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To Pay or Not to Pay…That is the Question

Posted on November 20, 2012 by smithamundsen

Contributed by Julie Proscia

When terminating an employee, particularly a long term employee, one of the first questions that an employer asks is: “Am I required to pay severance?” Which is quickly followed up by: “If so, how much should I pay?”

First, regardless of what you heard (from your friend Bob who heard from his cousin, who heard from her sister) there is no requirement in the State of Illinois, or on the federal level, that employers must give employees severance when conducting a lay off or termination.  Individuals frequently confuse severance pay with the requirement to pay out PTO/vacation. PTO/vacation time, if earned and accrued, must be paid with final wages at the next regularly scheduled pay period following separation. There is no requirement to pay severance. The two (final wages and severance) are different; one is payment for monies already earned and accrued while the other is money that has not been earned.

Think of severance as free money that you are giving to buy peace of mind (i.e. release agreement and/or reward for service).  The only time that you are required to give severance pay is if you have an internal policy, collective bargaining agreement or employment agreement that designates the same. In the absence of an internal document requiring the payment of severance it is a company’s sole discretion as to whether or not it wants to give severance.

Likewise, if an employer chooses to give severance there is no designated amount that it is required to give. I frequently hear employers ask if they are required to give one week for every year of service. There is no requirement to do so. This was often the case in high level executive separations in the boom time of the eighties but quickly dissipated with the bust of the 2000s.

In the new era of mass layoffs severance is often impractical (it is hard to lay off 100 people because of budgetary constraints and then pay them each severance) and is thus irregular for large separations.  In these cases, severance, if given, is done more to assist the employee with COBRA payments or to continue an employee’s salary to the end of the month.  On an individual basis severance is frequently only given to be consistent with past practices or to prevent a “risky” separation from turning litigious (i.e. to the only employee in the group who is over 40 and who also recently filed a harassment complaint, not the 25 year-old Caucasian male). The analysis of whether or not you should give an employee severance is one that should be done with your labor and employment counsel to determine the legal risks of the separation and the cost-benefits to the package.

So then the question becomes whether to pay or not to pay. Just remember, if you choose to pay make sure that the package includes a release agreement.  The release agreement is imperative; there is nothing that irritates a company more than when it gives an employee $10,000 in severance and the employee gives that money to an attorney for a retainer for his wrongful termination lawsuit….

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The Holiday Season is Near… Time to Review Your Bonus Payment Practices

Posted on November 15, 2012 by smithamundsen

Contributed by Sara Zorich

It is that time of year again when the snow begins to fall and the holiday shopping begins.  It is also the time of year when employers determine whether their employees are entitled to certain bonuses – thus it is a good time to review your pay practices!

When employers analyze paying bonuses, the first step is reviewing whether an employee is exempt or non-exempt.  An exempt employee is exempt from the overtime requirements under the Fair Labor Standards Act (FLSA) and the Illinois Minimum Wage Law (IMWL).  Thus, if you provide an exempt employee with a bonus, you need not worry about any overtime owed to the employee.  However, non-exempt employees are entitled to overtime and some types of bonuses require the employer to go back and recalculate the employee’s regular rate of pay and pay additional overtime based on the payment of a bonus to a non-exempt employee.

There are generally two types of bonuses: discretionary and non-discretionary.

  • Discretionary Bonus – This type of bonus is one in which the employer has the discretion both with regard to (1) paying the bonus at all and (2) the amount of the bonus.  The amount of the bonus is not dependent on any prior promise to the employee and is not announced to the employee until a time near that in which the payment will be made.  Further, the amount of the bonus is not included in the regular rate of pay calculation.  Typically a holiday bonus given as a gift is considered a discretionary bonus.
  • Non-Discretionary Bonus – This type of bonus is articulated and promised to the employee in advance and is usually awarded to encourage efficiency, performance, attendance and/or productivity.  The bonus may be given on a regular basis based on specific requirements met to qualify for the bonus or at the end of a period or year. 

So what do you do if you have determined you owe a non-exempt employee a non-discretionary bonus?  First, you must determine what time period the bonus covers.  This will be determined based on the agreement with the employee as to when the bonus is earned.  Once you have determined the time period for the bonus you will need to apportion the bonus over the given time period.  For example, a monthly bonus of $100 for perfect attendance would be allocated at $25 for each of the four weeks of the month.

If any overtime is worked by a non-exempt employee in a week in which a bonus payment is allocated, the employer must recalculate the regular rate of pay to include the additional bonus payment.  Then the employer would review the overtime amount previously paid to the employee and compare it to the new overtime amount due based on the increased regular rate of pay.  The employer must then pay the employee any additional overtime due.

Employers must be cognizant of these requirements regarding bonuses to (1) avoid the surprise of paying large additional overtime payments to employees working many overtime hours per week and (2) avoid costly litigation for failing to pay overtime properly.

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Neither Snow Nor Rain

Posted on November 8, 2012 by smithamundsen

Contributed by Caryl Flannery

… nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.  (unofficial post office motto). 

If only all employees felt that way!  It’s November and that means we’re still in hurricane season with winter storms not far behind. Bad weather can bring on bad headaches for employers.  Should I close the office?  Can I get sued if I don’t cancel deliveries?  Do I have to pay employees if I close the plant for the weather?  How does this affect overtime?  The action points below are a good starting point for establishing your inclement weather policy.  These are general rules and we encourage you to contact your labor and employment attorney to resolve your specific inclement weather questions.

Have a Policy – This is a good time to review (or establish) your procedures for closing the office, cancelling shifts, timekeeping, and granting leave.  Weather-related absences are considered personal absences and employees can be required to use vacation time or unpaid leave if they choose not to come to work due to the weather.  There are exceptions to that rule, however.  If the employee has no leave available, there may be limits on docking pay.  Exempt employees must be paid if they work part of a day or if the employer closes the business for the day.  Non-exempt employees must be paid for hours actually worked and, in some states, must also be paid for a minimum number of hours if the workplace is closed when they arrive or closes during the day.  If you choose to let non-exempt employees make up the missed time, you have to pay overtime if the make-up time puts the employee over 40 hours for the week.

Have a Communication Plan – Whether it’s a phone tree, a post on your company’s Facebook page, a recorded message, or some other method; be sure your employees know how and when you will communicate information about inclement weather changes in the workplace.  Some states require employers to compensate employees who report to work because they didn’t receive adequate notice that the workplace was closed.

Identify Essential Employees – If your business must operate regardless of the weather, identify the type and number of employees that are required to keep things running.  Make plans and budget for special transportation, overnight accommodations, remote computer access, or other arrangements that will ensure that the people you need are where they need to be when you need them to be there.

Encourage Common Sense – Regardless of your pay and leave policy, employees who feel that it is not possible to travel to work safely should stay home.  To avoid potential lawsuits and liability, don’t discipline employees who stay home for safety reasons and don’t force employees to engage in work-related activities that are potentially unsafe (e.g. making deliveries in flooded areas).  Consider a policy that incentivizes employee attendance with additional leave time.

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NLRB Memo Clarifies At-Will Employment Position

Posted on November 1, 2012 by smithamundsen

Contributed by Terry Fox

We recently wrote about the NLRB taking the position that at-will employment clauses with employer’s personnel handbook violated the collective action provisions of Sections 7 and 8 of the National Labor Relations Act (NLRA).  On October 31, 2012, the NLRB’s Office of the General Counsel issued Advice Memoranda in two cases where employees claimed at-will statements violated the NLRA. 

In the case of Rocha Transportation, CA.32-CA-086799, the employer’s handbook language stated that employment is at will, and provided that:

“No manager, supervisor, or employee of Rocha Transportation has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will. Only the president of the Company has the authority to make any such agreement and then only in writing.” Advice Memorandum, p.1.

That language was found NOT to violate the NLRA’s guarantees of collective action by employees due to the language only precluding certain employer’s representatives from entering into a contract for a specified term.  Thus, the General Counsel concluded, the provision could not be read by an employee to preclude collective activities. 

The handbook provision at issue in SWH Corporation, 28-CA-084365, stated “No representative of the Company has authority to enter into any agreement contrary to the foregoing ‘employment at will’ relationship.” Advice Memorandum, p.1.

The General Counsel concluded that language was not offensive to chill Section 7 collective action rights, because it is commonplace language used by employers not to preclude unionization-type activities but, instead, to defend against an employee claiming the handbook created contract rights. 

In both Advice Memoranda, the NLRB observed that the case of American Red Cross Arizona Blood Services, was resolved by an administrative law judge and did not reach Board review, suggesting the result would have been different if reviewed by the Board.  The Memorandums also distinguished American Red Cross by the provision in that handbook in that case requiring the employee to sign her agreement that she could do nothing to change the at-will status.  However, each Memoranda concludes with the direction for all regions of the NLRB to submit all cases involving handbook provisions to the Division of Advice. 

It appears that the tempest created over the Red Cross decision has subsided, at least temporarily, and employers can take that issue off the front burner.  A review of the at-will provision in your handbook should be considered, however, to ensure that it is consistent with the NLRB’s recent determination just in case . . . .

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It’s Election Time: What Are the Rules Again?

Posted on October 29, 2012 by smithamundsen

Contributed by Beverly Alfon & Carly Zuba

Election day is around the corner – Tuesday, November 6th.  It is time to dust off and review company policies regarding employee time off for voting. 

The legal requirements – how much time the employer has to give, when the employee must take the time off, and whether that time off is paid or unpaid – depends on what state your company is operating in.  Here is a sampling of state laws:

Illinois (Election Code, 10 ILCS 5/17-15)

  • The employee may have up to 2 hours’ leave if work hours begin less than 2 hours after opening of polls and end less than 2 hours before polls close. 
  • It is illegal to penalize employees who take time off to vote – including any reduction in compensation due to time off for voting.
  • The employee must request time off before election day.
  • The employer may select the time taken for voting.   

California (Elections Code § 14000)

  • The employee may have an amount of leave time that, when added to the voting time available to him or her outside of working hours, will allow the employee sufficient time to vote (unless the employee is able to vote during nonworking time). 
  • The employee must provide notice 2 working days before the election if, on the 3rd working day prior to the election, the employee knows or has reason to believe he or she will need time off in order to vote.  
  • Time must be taken at the beginning or end of the work shift, whichever allows the most time for voting and the least time off from work, unless otherwise mutually agreed. 
  • No more than 2 hours of time taken off for voting shall be without loss of pay.

Florida (Election Code §104.081)

  • It is illegal for an employer to discharge or threaten to discharge an employee who votes in an election or who refuses to vote.
  • Some local ordinances require unpaid time off.

New York (Election Law§3-110)

  • If an employee does not have sufficient time to vote outside of working time, s/he may take off working time so that, when added to the employee’s available time outside of working hours, it will allow the employee time to vote.
  • Up to two (2) hours of that working time taken to vote must be paid. 
  • However, if the employee has four (4) consecutive hours to vote before or after his/her work shift, it is considered sufficient time and the employee is not eligible for such leave. 
  • The employee must provide notice of leave at least two (2) days, but not more than ten (10) days, prior to the election. 
  • The employer can designate the hours available for leave.  Leave must be given at the beginning or end of the work shift, unless otherwise agreed.

Your company policy may be more generous than these state law requirements.  Notably, some state courts recognize wrongful termination claims where an employer discharges an employee for taking time off of work to vote, so it is important for employers to be aware of their requirements under the law.

Ultimately, the goal is to avoid any violations of applicable election laws and minimize disruptions in the workplace.  To that end,  (1) be familiar with poll opening and closing times in your state so that you have the information that you need to manage time off requests for voting; and, (2) as soon as possible, remind employees of your company’s expectations with respect to time off for voting.  This reminder could take the form of a company-wide memorandum or through posting on your company bulletin board. 

If you have employees working in states outside of those mentioned above, you can access state-by-state information about voting time leave laws on this map.

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