So Here’s What I Think About That Former Employee…

Contributed by Carlos Arévalo, April 23, 2018

Unless we have been living under a rock for the last few weeks, it is likely that we may have wondered if former FBI Director James Comey could sue President Trump for defamation. Indeed, President Obama’s former Ethics Chief, Norm Eisen, recently tweeted that the president’s “false, malicious accusation of criminal conduct is libel [published defamation] per se by Trump. @Comey could sue-& might win…”  Without weighing in on the viability of such a claim, however, it is prudent to review a few defamation principles to keep in mind.

gavelAcknowledging that laws vary from state to state, to establish a claim for defamation a plaintiff must show the following: 1) that the defendant made a false statement about the plaintiff; 2) that the defendant “published” the statement to a third party; 3) that the defendant either knew the statement was false or lacked reasonable basis to believe the statement was true; 4)  that the statement was not “privileged”; and 5) that the plaintiff was harmed by the publication of the false statement. In a per se defamation case, the plaintiff may not have to show harm because the statement is so damaging on its face, e.g. the individual is said to have “committed many crimes.”

In the context of employment, such claims typically arise in connection with an employee reference check. These kinds of claims are difficult to prove and laws generally provide certain defenses and privileges or immunities. For instance, truth is an absolute defense – if the statement is true, the claim would fail. In addition, statements of opinion will not be sufficient, even if they are negative and unkind (“slippery…not smart”). An individual making the statement may also have the protection of an “absolute privilege” or immunity, such as the president or other high ranking public officials who enjoy absolute immunity for statements made “in the course of their official acts.” Other types of statements fall under a “qualified privilege,” where the individual has a right to make the statement, such as might be found in the context of an employment relationship where a supervisor is engaged in evaluating an employee. Here, the plaintiff would have to show that the individual acted with malice to establish liability.

Of course, most employers and their agents will not enjoy “absolute immunity.” Depending on your home state, certain immunities in providing references may apply under a specific statutory framework. To minimize the incidence of such claims, however, it will be critical to establish specific guidelines to ensure consistency in handling reference requests. Designate certain individuals to respond to reference requests. Additionally, employers may want to maintain a database of how to address specific reference requests as there may be, in addition to written guidelines, specific separation agreements that will govern how references will be provided. Finally, managers and supervisors ought to be trained in proper evaluation and performance review methodology to avoid making statements that may be deemed defamatory by a disgruntled employee (e.g., sticking to the handbook policy the employee violated in a write up, as opposed to the opinion of the employee being a criminal or thief). And finally, do not use Twitter or other social media vehicles to address an employee’s performance or separation.

 

Changes in the Air – Employers Considering Prior Salary When Setting Wages Need to Know the Applicable Laws

Contributed by Michael Wong, April 18, 2018

The Equal Pay Act can create significant exposure for employers, if not considered when setting female employees’ wages – especially if you are relying upon a female applicant’s prior salary history and there is a difference in the pay of similar male employees.

33186296 - wage gap concept with blue figure symbolizing men and red pawn women

Wage gap concept with blue figure symbolizing men and red symbolizing women

The Equal Pay Act is dangerous for employers because plaintiffs are not required to prove discriminatory intent by the employer. All a plaintiff must show is that there is a wage disparity for equal work requiring the same skill, effort and responsibility, which is performed under similar working conditions. Once a plaintiff establishes that, the burden shifts to an employer to establish that the difference is based on one of the following four statutory exceptions:

  • a seniority system;
  • a merit system;
  • a system which measures earnings by quantity or quality of production; or
  • a differential based on any other factor other than sex.

Historically, the Equal Employment Opportunity Commission (EEOC) and the federal Appellate Courts for the Second (Connecticut, New York and Vermont), Eighth (Arkansas, Iowa, Minnesota, Missouri, Nebraska, South Dakota and North Dakota), Tenth (Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming) and Eleventh (Alabama, Florida, and Georgia) Circuits have taken the position that employers may consider prior salary as a mix of factors to set female employee wages without violating the Equal Pay Act – but prior salary cannot be the sole factor for any wage differential with a male employee in a similar role. On the other hand, the Seventh Circuit (Illinois, Indiana and Wisconsin) has held that using prior salary alone is a basis other than sex for wage differential that does not violate the Equal Pay Act.

Recently, the U.S. Court of Appeals for the Ninth Circuit (California, Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon and Washington) took its prior decisions a step farther by finding that prior salary does not fit within the exception of a factor other than sex because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality. In doing so, the Ninth Circuit held that allowing employers to consider prior salary would simply continue the gender-based assumptions and discrimination that the Equal Pay Act was intended to stop.

This recent decision falls in line with the increasing number of state and local laws being passed that prohibit employers from asking applicants for prior salary information. States and cities/municipalities that currently have laws prohibiting employers from requesting/considering prior salary information include the following:

  • California (all employers)
  • Massachusetts (all employers)
  • Oregon (all employers)
  • Delaware (all employers)
  • New York (state employers)
  • New Jersey (public employers)
  • Puerto Rico (all employers)
  • San Francisco (all employers)
  • New Orleans (city positions)
  • New York City (all employers)
  • Albany County, New York (all employers)
  • Philadelphia (all employers – currently subject to legal challenge)
  • Pittsburgh (city positions).

With these changes you need to be aware of the laws impacting your operations and if you want to request and/or consider prior salary history when setting wages. If you are not sure, seek legal counsel in reviewing your employment practices.

 

Considerations for Utilizing the DOL’s Pilot “PAID” Program

Contributed by Sara Zorich and Michael Hughes, April 16, 2018

In April 2018, the US Department of Labor (DOL) Wage and Hour Division, launched  the six-month pilot Payroll Audit Independent Determination (PAID) program which provides a voluntary framework for employers to self-report potential FLSA overtime and minimum wage violations to the DOL and to resolve those violations without incurring additional penalties or liquidated damages. There are important benefits (and potential risks) to consider before signing up for PAID:

  • Wage Hour

    Dollar bills with clock in background

    The benefit of the program is that if an employer self-reports, the DOL will only require the employer to pay back wages owed to current and former employees, but not liquidated damages (double the back wages) or civil money penalties. The employer can obtain a release from the employees under the FLSA, thereby fully resolving the violation without paying attorney’s fees or engaging in a class action lawsuit.

  • One risk of the PAID program for employers is that the company is exposing itself to potential liability. The DOL has indicated the process will be fast (estimated 90 days start to finish), and the company will be required to pay 100% of the back wages due based on the audit on the next pay period after the DOL’s determination. But the biggest risk is that not all employees will accept the payment though the PAID program and instead will choose to file an individual or class-action lawsuit. The employer itself may have laid the groundwork for the employee to collect liquidated damages and attorney’s fees in federal court. Moreover, the PAID program will not provide a release for state wage and hour claims, even if employees cash their back wage check.
  • Additionally, the DOL has discretion to accept or decline any company from the PAID program; however the DOL has stated (in a webinar on April 10, 2018) if the company is declined, that declination will not be used to start a DOL audit.

PAID might be the right avenue for a company to address wage and hour compliance issues, but companies should speak with their labor and employment counsel to fully understand the risks and benefits of the PAID program prior to voluntary submission.

High Court Says No More Narrow Construction Standard for FLSA Exemptions

Contributed by Sara Zorich and Michael Hughes, April 13, 2018

wage and hour

Scale weighing money and time

On April 2, 2018 in the matter of Encino Motorcars, LLC v. Navarro, No. 16-1362, 2018 WL 1568025 (U.S. Apr. 2, 2018), the Supreme Court rejected the long held principle that exemptions to the Fair Labor Standards Act (FLSA) should be construed narrowly and found that car dealership service advisors are exempt from the FLSA’s overtime-pay requirement. In a 5-4 decision, the Court held there was no reason or basis under the FLSA to narrowly interpret FLSA exemptions and that exemptions should be read equally as any other provision of the Act.

Impact – Car dealerships can confidently rely on Encino Motorcars to support their classification of service advisors as exempt from federal overtime. While this decision doesn’t impact service advisors working outside of a car dealership, the 7(i) exemption is still in play.

However, this decision is much more far reaching in its overall impact on FLSA exemptions. Encino Motorcars is a WIN for employers who for decades have had to overcome court and DOL-imposed heightened standards when applying the FLSA overtime exemptions. This decision should make it easier for employers to establish the applicability of an FLSA exemption if challenged by an employee.

FYI, Text Messages and IMs Are Discoverable Too

Submitted by Suzanne Newcomb, April 12, 2018

Back in November we reported on a federal judge ordering several members of management to turn over messages from their personal email accounts and counseled employers to be proactive in managing employees’ use of personal email for company business. The guidance set forth there rings true for text messages and other forms of electronic communication (e.g. WhatsApp, Slack, Trello and myriad others) as well.

49297353 - woman using mobile phone in office workplace.As we explained in our prior post “document production” encompasses not only “documents” in the traditional sense, but all relevant information “stored in any medium” along with its metadata. To be fair, private entities are not required to retain every communication or even every document generated in the course of conducting business. But certain communications are subject to retention regulations and knowledge that litigation is “reasonably foreseeable” triggers a separate and distinct obligation to retain all information relevant to the potential dispute.

Companies that fail to preserve information once an obligation to do so arises run the risk a court will issue a “spoliation instruction” which allows the jury to assume, based on the fact that a party failed to retain relevant evidence, that the evidence it lost or destroyed must have been unfavorable to that party’s position in the litigation. Not a comforting thought for any business.

So, how does a company square the need to keep pace in today’s world of lightning-fast communication and also avoid falling victim to claims of spoliation?

  1. Electronic Communications Are Business Records. Remind employees all communications – including text messages and electronic communications sent via messaging apps — are official business records subject to retention policies and discovery in the event of litigation.
  1. Review your Litigation Hold Notice Form. Make sure it covers not only documents in the traditional sense, but also email, text messages, instant messages, and other forms of electronic communication.
  1. Regulate and Police How Your Employees Communicate. Publish clear policies addressing when texting and other forms of electronic communications are appropriate and when they are not. Can an employee text his/her boss if s/he is going to be late? Is it appropriate for sales personnel to negotiate terms with customers by text?
  1. Involve IT Professionals. Enlist the help of IT professionals to safeguard electronic communications the organization is required to retain and to establish protocols that will allow you to quickly capture communications (along with their metadata) that are relevant to actual or potential litigation when the need arises.

 

Your Company’s Bonuses Are Discretionary, You Say?

By Steven Jados, April 5, 2018

When it comes to employee bonuses, employers often prefer “discretionary” bonus policies—as opposed to more rigid and definite policies and procedures that answer the questions of “who” is eligible to receive bonuses, “when” bonuses will be paid, and “how much” the bonuses will be.

29483972 - bonus of businessmanA problem can arise, however, when the underlying method the employer uses to award bonuses remains consistent from year to year.  Under Illinois law, for example, past practice—even in a non-union setting—can give rise to a legally-enforceable expectation that a given employee is entitled to a bonus under the same method that has been used, uninterrupted, in prior years.

So what is an employer to do to protect itself?

The actual facts behind the company’s method for awarding bonuses will dictate whether a bonus is truly discretionary or not.  But the bottom line is that if your company intends to make changes to a long-used and fairly clearly-defined method of calculating bonuses, such changes should be made and announced to affected employees prior to the start of the bonus year.  Employers should also bear in mind that changes to a bonus procedure made in bad faith (for instance, where it appears clear that bonus procedures were changed specifically to deny a particular employee a bonus) may not withstand a court’s scrutiny.

For companies that truly do use a discretionary bonus system, include language in employee handbooks and other policy documents clearly stating (1) that bonuses are a discretionary, voluntary contribution by the company, based on company profitability and employee performance; (2) that bonuses are not earned until they are actually awarded and, as such, may be withheld, increased, decreased, or discontinued, at any time up to the bonus award date; and (3) that management reserves the unilateral right to change bonus policies at any time and for any reason. Whether the company’s bonus procedure is truly discretionary or not, factors that disqualify employees from bonus eligibility should also be clearly stated in all relevant handbooks and policies documents.

If you have concerns that your company’s discretionary bonus policies may not stand up to court scrutiny, we recommend contacting experienced employment counsel for a comprehensive bonus policy review.  In doing so, employers should bear in mind that state law often controls the question of whether a bonus is discretionary or not, and the law may differ significantly from state to state, so employers must be sure they seek legal advice covering all states in which the employer operates.

 

Sixth Circuit Says Transgender Discrimination is Protected Under Title VII

Contributed by JT Charron, March 15, 2018

Last week, the United States Court of Appeals for the Sixth Circuit held—for the first time—that discrimination based on transgender and transitioning status violates Title VII. Although the court has previously held that discriminating against transgender employees because of gender non-conforming behaviors constitutes gender stereotyping in violation of Title VII, this decision takes it one step further—protecting all transgender and transitioning employees regardless of any outwardly observable behaviors or characteristics.

36419114 - hand about to bang gavel on sounding block in the court room

 hand about to bang gavel on sounding block in the court room

In EEOC v. R.G. & G.R. Harris Funeral Homes, Aimee Stephens was fired by her boss—and owner of the funeral home—after she informed him that she was transitioning from male to female. After investigating Stephens’s complaint of sex discrimination, the EEOC filed a lawsuit claiming that the funeral home violated Title VII by terminating Stephens’s employment because of her transgender or transitioning status and her refusal to conform to sex-based stereotypes.

The sixth circuit court of appeals reversed the trial court’s decision in favor of the employer, holding that “[d]iscrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex.” In reaching this conclusion, the court rejected the funeral home’s argument that Title VII’s definition of “sex” does not encompass transgender status, finding that “it is analytically impossible to fire an employee based on that employee’s status as a transgender person without being motivated, at least in part, by the employee’s sex.” The court also cited the U.S. Supreme Court’s decision in Price Waterhouse v. Hopkins, which held that Title VII requires “gender to be irrelevant in employment decisions.” According to the sixth circuit, “Gender (or sex) is not being treated as irrelevant . . . if an employee’s attempt or desire to change his or her sex leads to an adverse employment decision.”

The court also rejected the Funeral Home’s argument that the Religious Freedom Restoration Act (RFRA) precludes the EEOC from enforcing Title VII against it here because doing so would substantially burden its religious exercise. Instead, the court held, as a matter of law, that:

  • “[A] religious claimant cannot rely on customers’ presumed biases to establish a substantial burden under the RFRA”;
  • “[T]olerating an employee’s understanding of her sex and gender identity is not tantamount to supporting it”; and
  • “[B]are compliance with Title VII—without actually assisting or facilitating Stephens’s transition efforts—does not amount to endorsement of Stephens’s views.”

Practical Impact

Employers in Michigan, Ohio, Kentucky, and Tennessee should immediately review and—if necessary—revise policies, procedures, application forms, or other documents to ensure that transgender status is referenced as a protected category. Employers should also consider providing training to managers and other supervisory personnel on how to appropriately respond when an employee indicates that they are transgender and/or transitioning.

The decision also has potential ramifications for employers across the United States. It is the third federal appellate court decision in the past 12 months holding that Title VII prohibits discrimination based on an individual’s LGBTQ status. The first came last year when the seventh circuit issued its decision in Hively v. Ivy Tech Community College of Indiana (as we previously blogged about), holding that discrimination based on sexual orientation is prohibited by Title VII. The second circuit reached the same conclusion on February 26, 2018, in Zarda v. Altitude Express. As courts take a more expansive view of Title VII’s protections, employers everywhere should take proactive measures to ensure they are complying with this evolving area of the law.