New Revision to the Indiana Code and What it Means for Employers

Contributed by Sara Zorich and Suzanne Newcomb, June 13, 2019

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On May, 1, 2019, Indiana Senate Bill 99 was signed into effect amending Indiana’s Wage Assignment Statute. The amendment makes the statute a bit more employer friendly by clarifying that, with proper authorization from the employee, an employer can deduct the cost of rental uniforms from an employee’s wages. Although the legislative intent behind the 2015 amendments to the Act may have been to allow deductions for rental uniforms, prior to the 2019 amendment, the statutory language only allowed employers to deduct wages for purchased uniform costs. In a 2018 case before the U.S. District Court for the Southern District of Indiana, the court found that the statute did not allow for deductions for rental uniforms. Weil v. Metal Tech. Inc., 305 F.Supp.3d 948, 957 (2018). With the recent amendment in place, employers can now deduct wages for the cost of uniform rentals as well as uniform purchases.

The new amendment is also retroactive. As a result, the 7th Circuit ordered the Judge to revisit her ruling in the Weil case which the employer had appealed prior to the amendment on the grounds that the pre-amendment statute allowed wage deductions for uniform rentals.

The 7th Circuit Court of Appeals stated that if the amendment never occurred, the court would affirm the decision for the employees. Weil v. Metal Tech. Inc., 2019 WL 2281567. But, since the Indiana law now allows for deductions for uniform rentals, the judgment for the employee was vacated and the case was remanded to the district court. Id at 1. It is the opinion of the court that the retroactive application of the amendment should apply in this case, but it is leaving that decision for the district court to revisit and decide. Id at 3.

The amendment to the Indiana Code has created a more employer friendly wage deduction act. Employers are no longer limited to only recovering costs from employees for uniforms purchased. Employers can now deduct costs from employees for rentals of uniforms, shirts, pants, or other job-related clothing. The amendment also adds clarity to the section authorizing deductions for “equipment” explaining that this includes tools necessary to fulfill the duties of employment. Moreover, because it is retroactive, any deductions made before the amendment went into effect are legalized, as long as the wage assignment was valid. This retroactivity is beneficial for any employer who was deducting costs from employees for the rental of uniforms prior to the amendment and gives a valid defense against an employee seeking to recover deducted wages.

Of course Indiana’s Wage Assignment Statute only applies to Indiana-based employment relationships and still requires written authorization from the employee in a form that strictly adheres to the requirements set forth in the statute. Wage deduction and assignment laws vary greatly by state. Employers should carefully examine local requirements before taking any deductions from employees’ wages.

Missouri Appellate Court Declines To Recognize Cause Of Action For Negligent Recommendation To A Prospective Employer

Contributed by Brian Wacker, June 12, 2019

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There is no duty of care to “not make a negligent recommendation to a prospective employer” in Missouri. That is the upshot of an April, 2019 ruling out of Missouri’s Southern District Appellate Court, Doe v. Ozark Christian College, which is sure to have Missouri employers and human resource professionals breathing a collective sigh of relief – at least for now.

In Ozark, the defendant is a religious college. The school educates students in ministry and from time to time makes recommendations to prospective employers – i.e., churches – regarding placement of those students in open positions. The college has no affiliation with the churches who hire students the school recommends. The plaintiff in Ozark claimed he was sexually abused by a minister at his church from 2006 to 2010. The minister had been hired by the church upon the college’s positive recommendation of him in 2004. The plaintiff filed suit against the college, alleging that it owed a duty to not make a negligent recommendation to the church about the employee who allegedly abused him years later. Even though no such duty had ever been recognized under Missouri law, the plaintiff invited the court to recognize a new cause of action based on policy arguments and the fact that other states (specifically, California and Texas) had arguably recognized such claims.

Luckily for employers across the state, the Southern District affirmed the lower court’s summary judgment and declined the plaintiff’s invitation to find such a duty exists. 

First, the court rejected the notion that the college somehow assumed a duty under Missouri law in making a “gratuitous provision of an employment recommendation.”  The court noted that the plaintiff did not even make such an allegation; instead, all he had alleged was that after graduation, the college assisted and guided the employee at various churches from 1998 to 2004. This, according to the court, did not support even an inference that the college intended to benefit the employer church when it gave the recommendation. As such, there was no such duty under existing Missouri law.

Second, and perhaps more consequential for Missouri employers, the court rejected the plaintiff’s policy-based arguments to create a new cause of action out of thin air. While the court noted that California and Texas arguably recognize the alleged duty the plaintiff was pushing, a majority of other states, including Kentucky, Indiana, Illinois and New York, have rejected it.  

The court sided with the latter states and declined to recognize this new cause of action.  However, the court appeared to couch its decision, at least in part, in its role as “error-correcting” court, as opposed to the Missouri Supreme Court, which is the “law-declaring” court. The plaintiff apparently read this language as an invitation because on May 2, 2019, he filed an application to transfer the matter to the Supreme Court for further review.

Also, it is important to note that in Ozark, there was no indication that the college had any knowledge or indication that the employee minister may sexually abuse someone when it made the recommendation. (The only allegation was that the employee subsequently abused the student.)  If that had been the case, the court could easily have gone the other way.  States such as Missouri’s neighbor Illinois have recognized a duty in making recommendations, where there is prior knowledge of bad acts or conduct, in this very type of circumstance.  See e.g., Doe v. McLean County Unit District No. 5, 973 N.E.2d 880 (Ill. 2012)

Obviously, how the Supreme Court rules will have a major impact on employers and human resource professionals in Missouri going forward. Potential exposure to liability for the future acts of applicants for whom someone simply responds to a request for recommendation could have a significant, chilling and stifling effect. What former employer would want to go out on a limb to make a recommendation for an applicant if they can be potentially liable based on that applicant’s potential future conduct? What incentive would they have to even respond?

And this is to say nothing of the harmful effect it could have on prospective employers, who would likely be deprived of otherwise helpful information about applicants in the hiring process. If recommendation requests go unanswered, the hiring employer has less useful information about the applicant to make its hiring and personnel decisions.

In short, a recognized cause of action for negligent recommendations could be bad news for Missouri employers and employees alike.

This blog will monitor the Supreme Court’s review and update when a final determination is made.

Register Today! EEOC Pay Data Collection and Other Equal Pay Issues – Complimentary Webinar

Join Allison Sues on Thursday, July 18 at 12:00 PM CT for a complimentary webinar as she guides employers on what they need to know before the pay data collection deadline. Employers who are EEO-1 filers must submit pay data for years 2017 and 2018 to the EEOC by September 30, 2019, as provided by the U.S. District Court for the District of Columbia’s recent ruling

Specific topics include:

  • The background of the EEOC’s efforts to collect pay data and the related case National Women’s Law Center v. U.S. Office of Management and Budget
  • Component 2 of the EEO-1 filings
  • Recent case law developments on the Equal Pay Act
  • Information on how to apply EPA precedent to employers’ audit of pay practices to avoid discriminatory pay claims

Who should attend? HR professionals, managers, and business owners

We hope you can join!

 

U.S. Citizenship and Immigration Services Policy Challenged on Third-Party Worksites

Contributed by Jacqueline Lentini McCullough, June 7, 2019

A U.S. Citizenship and Immigration Services (USCIS) memorandum-issued policy is at the heart of a court case challenging recent H-1B visa denials.

The “Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites” memo was issued on February 20, 2018 without any notice or comment period required by the Administrative Procedure Act (APA). The memo directs adjudicators to ensure a contractor has actual and exclusive “control” of the contractor’s employees at the third-party site as a criterion for visa approval. This requirement comes from a rigid interpretation of the Department of Labor’s definition of “employer” which reads: “Has an employer-employee relationship with respect to employees under this part, as indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee….” Instead of considering any one of these circumstances as qualifying, USCIS effectively changed the “or” to an “and,” requiring all of them.

H-1B visa denial rates skyrocketed the past two years, especially for contractors working at third-party worksites. Denial rates for initial H-1B petitions in Fiscal Year (FY) 2018 were 1 % for large technology companies but 34%-80% for companies that put H-1B visa holders at third-party sites. Third-party site work factors highly in IT consulting.

Visa Stamp

After having many H-1B visas denied or issued for short validity periods, several IT consulting firms filed lawsuits against USCIS. Those lawsuits have been consolidated into one under the aegis of the IT industry trade association ITServe Alliance.

Judge Rosemary Collyer presided over a court hearing of ITServe Alliance v. USCIS on 05/09/2019. Plaintiff attorneys produced data showing from FY 2012 to FY 2017, USCIS approved 94 % of their client’s ERP analysts’ H-1B petitions. During FY 2018 to FY 2019, the approval rate dropped to 19%.

Judge Collyer has taken issue with the disparate visa approval rates between different industries and USCIS’s requirement that contractors show three years’ worth of specific work assignments for H-1B petitioners when they are allowed “nonproductive” time as long as they are paid.

As Judge Collyer considers the case, she will rule on whether discovery is warranted to find out what has caused the different adjudications of H-1B petitions. Not only are H-1B approval rates markedly down for the IT industry, but requests for evidence and H-1B petition processing times have ballooned.

Requests for evidence (RFE) for all H-1B petitions have jumped from below 30% in first quarter FY 2017 to 60% in first quarter FY 2019. Meanwhile the number of petitions approved with a completed RFE has sunk from 80 % to just over 60 %.

Stay tuned as we will continue to provide updates as new information emerges.

Gig Workers: An Evolving Trend or a Class Action Waiting to Happen?

Contributed by Rebecca Dobbs Bush, June 4, 2019

The workplace is changing: Millennials, Generation Z-ers, and Baby Boomers looking to supplement their retirement income. These individuals are more interested in autonomy and avoiding bad managers, office politics and lengthy, non-productive staff meetings. Plus, the tax-savvy individual knows the economic advantage of having access to traditional business deductions through a Schedule C, rather than being limited to the standard deduction or itemizing as a W-2 employee would be.

Business concept. Isolated on white

More and more businesses also seem to be interested in the advantages of a gig workforce, also called freelancers, subcontractors, contingent workforce, and more. After all, it allows a business to gain access to skills and talent without having to commit to hiring an individual as a full-time employee. According to Deloitte’s 2018 Global Human Capital Trends study, more than 40% of workers in the U.S. are employed in “alternative work arrangements.” These arrangements include contingent, part-time, or gig work.

So, is it a win-win for all involved? The problem is that current employment laws are simply not evolving at the pace required to keep up with this modern-day independent contractor. With this, a minefield is created for the unwary business. 

Under the Obama administration, the DOL had issued broad guidance suggesting that gig workers were likely to be considered “employees.” That guidance was rescinded with the change in administration. Then, on April 29, 2019, the DOL issued an atypical, 10-page opinion letter on the subject. The opinion letter lays out a detailed analysis of all the relevant factors for independent contractor status and then comes to the conclusion that the gig workers at issue are not employees.

For now, if your business is participating in the trend of the gig worker, you want to make sure the relevant factors are met. Those factors and the analysis change depending on which law the issue is being examined under. Some of the more common factors are: control, permanency of the relationship, integrality to business operations, ability to sustain a profit or loss, accountability for operating expenses, etc. In other words, is the individual truly operating as a stand-alone business? 

If you choose to engage gig workers, make sure to avoid these common mistakes:

  • Do not treat the individuals as employees. Do not even use the word “hire.” Instead, you are “engaging” their services, or “contracting” with them. And, commit to the arrangement in writing.
  • Do not be tempted to offer them benefits. Putting them in your health plan or letting them participate in a 401(k) will jeopardize any argument that they are not otherwise an employee. If it walks like a duck, quacks like a duck….
  • Do not make them sign a non-compete agreement. A critical factor in most cases is whether the individual is free to take on work from others or whether they are completely dependent on your business for work. If the individual is subject to a non-compete agreement and effectively being prevented from working for others, you will not win on this factor.

Because of the amount of exposure involved with a misclassification lawsuit, it is worthwhile to have competent employment counsel review your situation and any independent contractor agreement or contracts that you are using to help you make sure it’s being handled in the best possible manner to strengthen the individual’s status as an independent contractor.

Up in Smoke: Recreational Marijuana and its Impact on the Illinois Workplace

Contributed by Noah A. Frank, Michael D. Wong, and Jeffrey A. Risch, May 31, 2019

It appears Illinois will become the 11th state to permit recreational cannabis. Once Governor Pritzker signs the legislation, as promised, beginning January 1, 2020, the Cannabis Regulation and Tax Act (“Act”), will allow adults (21+) in Illinois to possess and consume cannabis. While there is a lot “rolled” into the 600 plus page law (pun intended), there are significant employment pitfalls for employers with regard to enforcing drug free workplaces.

Marijuana and a gavel

The Act expressly permits employers to adopt and enforce “reasonable” and nondiscriminatory zero tolerance and drug free workplace policies, including policies on drug testing, smoking, consumption, storage, and use of cannabis in the workplace or while on-call – which is good for employers.

However, the Act’s language indicates that employers are not allowed to take an adverse action against an applicant or employee for marijuana usage outside the workplace. This is bad for employers, as it makes it much more difficult for employers to identify and address use of marijuana by employees. In particular, the Act amends the Illinois Right to Privacy in the Workplace Act (“Right to Privacy Act”), which prohibits employers from restricting employees from using legal products outside of work. Specifically, the Right to Privacy Act is amended to provide that “lawful products” means products that are legal under state law, indicating that recreational and medical marijuana are legal products that must be treated like alcohol and tobacco. Thus, employers may not discriminate against an employee or applicant who lawfully uses cannabis (recreationally or medically) off-premises during nonworking and non-call hours. 

Much like with the Illinois medical marijuana law, the Act changes the emphasis from whether an employee “used” marijuana while employed, to whether the employee was “impaired” or “under the influence” of marijuana while at work or working. As a result, drug testing without any other evidence of the employee being impaired at work or while working will open the door to legal challenges. Specifically, refusing to hire, disciplining, terminating, refusing to return an employee to work or taking an adverse action against an employee or applicant who fails a pre-employment, random, or post-leave return to duty drug test for marijuana will arguably create a claim for the employee against an employer for a violation of Illinois law. For example, an employee who undergoes a urine drug test (which shows use of marijuana within 30-45 days) following a workplace accident may argue that “recreational cannabis was lawfully used outside of work, and the accident/injury was unrelated to the employee’s legal use of cannabis outside of work.” Without more than the drug test result, the employer would be in a vulnerable position to argue against or defend such a claim. However, if the employer completed a post-accident report, which included a reasonable suspicion checklist, in which a trained supervisor observed and recorded symptoms/behaviors of drug use, the employer would be in a much better position to take an adverse action against the employee and dispute any such claim by an employee based on the observations and positive drug test.

With the changes to the Right to Privacy Act, it is important for employers to understand the potential exposure and damages. Under the Right to Privacy Act, aggrieved employees can recover actual damages, costs, attorneys’ fees and fines. As such, employers should make sure their practices and procedures are practical in light of these changes, until and unless the legislature or a court provides further clarity. Of course, the Illinois Department of Labor can provide such clarity through administrative rulemaking. However, that will likely not happen any time soon. 

Interestingly, the Act neither diminishes nor enhances the protections afforded to registered patients under the medical cannabis and opioid pilot programs (while cannabis use is not protected under federal law, the underlying medical condition is likely an ADA and IHRA-covered disability!). Much like under the Illinois medical marijuana law, the Act appears to require employers to take an additional step before disciplining or terminating an employee based on a “good faith belief” that the employee was impaired or under the influence of cannabis while at work or performing the job. After the employer has made a “good faith belief” determination and drug tested the employee, but before disciplining or terminating an employee, the employer must provide the employee with a reasonable opportunity to contest that determination. Once the employee is provided a reasonable opportunity to explain, an employer may then make a final determination regarding its good faith belief that the employee was impaired or under the influence of cannabis while on the job or while working, and what, if any, adverse employment action it will take against the employee without violating the Act. Requiring an employee to go through drug testing is still currently the best practice as a positive drug test will provide additional support for a supervisor’s reasonable suspicion determination.

What Employers Should Do to Diminish Legal Risks and Protect ‎their Workforce?

  1. First, get educated and evaluate all policies and practices that touch on providing and ensuring a safe workplace, including job descriptions. Review the law. Talk to legal counsel on an intimate basis. Assess workplace cannabis-tolerance (in general) and implement policies that can be enforced consistently amongst similarly situated employees. Policies that should be reviewed (and that could be affected) include those addressing health and safety (including accident reporting, smoking, and distracted driving), equal employment opportunity policies, workplace search/privacy policies and drug testing policies. Companies should also review with legal counsel, their drug testing vendor as well as their Medical Review Officer, the drug testing methodology being used to make sure that such is producing results that are useful, accurate and well vetted.
  2. Second, ensure managers and supervisors are well trained and capable of enforcing policies. Remember – exceptions and favoritism lead to discrimination claims.  Conducting training, especially training on reasonable suspicion detection, will be necessary to avoid legal challenges to a supervisor’s reasonable suspicion determination. Creating and/or updating forms for accident reporting (including witness statements), reasonable suspicion checklists, and established protocols for addressing suspected impairment in the workplace, is now more critical than ever.
  3. Third, clearly communicate management’s position and policies to employees, especially where there is a shift in current policy or practice. Educate employees on the effect of lawful and unlawful drug use and the employer’s policies regarding marijuana.
  4. Fourth, engage competent legal counsel to assist you in this process and in addressing difficult situations before they lead to costly and time-consuming litigation.

Finally, stay tuned for further state and national developments in this growing area of law. Be assured that SmithAmundsen’s Labor & Employment Group will be presenting timely webinars and seminars on this subject in the coming weeks and months.

Register Today! Reasonable Accommodations: Employer Obligations under the ADA and Beyond — Complimentary Webinar

Join Suzanne Newcomb at noon ET on June 19 for an in-depth look at workplace accommodations, specifically legal obligations, best practices, and emerging trends.

Workplace accommodations take many forms. Most often, accommodations are thought of as modifications which allow individuals with disabilities to perform essential functions of positions for which they are otherwise qualified.

While certainly the most common, workplace accommodations are not limited to an employer’s obligations under the ADA. Accommodations can also allow employees to practice their religious beliefs, allow pregnant employees to continue working until they give birth, allow new mothers to return to work and breastfeed their newborns, and assist transgender employees to navigate workplace obstacles.

During this webinar attendees will learn:

  1. How to determine whether an individual is entitled to ADA protection
  2. How to distinguish between “reasonable” accommodations and those that impose “undue hardship”
  3. How to properly document the ADA-mandated “interactive process”