Author Archives: smithamundsen

EEO Pay Data Update: Employers Must Submit Component 2 of the EEO-1 Reports for Both Calendar Years 2017 and 2018 by September 30, 2019

Contributed by Allison P. Sues, May 15, 2019

EEO-1 report filers should prepare to submit Component 2 pay data for both calendar years 2017 and 2018 by September 30, 2019. As we previously reported, the U.S. District Court for the District Court of Columbia previously ruled that employers must submit pay data for calendar year 2018 by September 30, 2019. In this ruling, the court also presented the EEOC with the option to either collect pay data for calendar year 2017 or calendar year 2019. The EEOC recently announced that it will collect pay data for calendar year 2017. Pay data for both 2017 and 2018 will be due September 30, 2019. 

The EEOC will begin collecting employer’s pay data for 2017 and 2018 beginning in mid-July 2019. Filers should continue to use the EEOC’s online portal to report Component 1 data of the EEO-1 reports, which is due by May 31, 2019 unless the employer has received an extension. 

September 30. Vector flat daily calendar icon.

In light of the September 30 deadline, employers should begin preparing to submit their pay data – a new process that, for many employers, requires compiling information from two different systems if payroll records are maintained separately from a human resources information system.  Recent court rulings and EEOC decisions have created a bit of a moving target as employers work to comply with this new EEO-1 reporting obligation. While we await further information and guidance from the courts and the EEOC, it is helpful to look to the previously approved plan that the EEOC had in place in January 2016 prior to the OMB’s stay as a reference point:

  • Who needs to file Component 2 pay data?  EEO-1 filers with 100 or more employees (both in the private industry and federal contractors and subcontractors)
  • What pay data will be collected? The EEOC sought to collect aggregate W-2 data in 12 pay bands for the 10 EEO-1 job categories. The EEOC advised that employers “will simply count and report the number of employees in each pay band. For example, a filer will report on the EEO-1 that it employs 3 African American women as professionals in the highest pay band.” 
  • Will employers also need to report the hours worked by employees? Yes. The EEOC previously stated that hours-worked data will be reported to account for part-time and partial year employment. The EEOC indicated that it would allow employers to use a proxy of 40 hours per week for full-time employees who are exempt under the Fair Labor Standards Act if the employer does not maintain accurate records on hours worked for these employees.
  • Should employers track the staff time spent to collect and report this pay data? Yes. The EEOC had previously indicated that it would request employers to provide the amount of time spent on complying with Component 2 obligations in order to quantify this survey’s burden on employers. 
  • What will the EEOC do with this pay data? The EEOC has previously suggested that it will use the pay data to improve its enforcement efforts to combat pay discrimination, identify trends, and help employers assess their pay policies and practices. While the EEOC represented that EEO-1 pay data will not be used as the sole basis to find discrimination, the agency stated that the data will be used to better focus its resources and investigations, and that a finding of discrimination could come after an investigation. Employers should audit their pay practices in advance of submitting the EEO-1 pay data. Following the audit, employers should remedy any pay inequities for female or minority workers completing the same work as others outside their protected classes, if the disparate pay cannot be easily explained by a legitimate, lawful reason.

States Mandating Companies’ Board Member Composition

Contributed by Noah A. Frank, May 9, 2019

In an effort to try and help root out discrimination, the Illinois legislature has followed California’s top-down approach of regulating the boardroom to ensure that decision makers include historically disenfranchised classes. 

black and white gavel

On March 29, 2019, the Illinois House sent HB 3394 to the Senate.  HB 3394 is modeled after California Corporations Code § 301.3, which requires publically held corporations (domestic and foreign corporations that list their outstanding shares on a major U.S. Stock Exchange), which state on their SEC Form 10-K that the principal executive offices are in California, to have at least one female board member by 12/31/2019 – with the number of female board members required increasing based on the board size. A corporation may also increase the number of directors on its board to comply. The Illinois bill is more expansive, as it requires at least one female director and one African American director on the board by 12/31/2020 (though the number of “designated seats” does not increase as board size increases). Much like the California law, publically held corporations whose principal executive offices are in Illinois may increase the number of directors on its board in order to comply with this proposed legislation. 

Sizeable Penalties

Illinois’s (prospective) and California’s laws apply to public companies whose principle executive offices are in that state, according to SEC Form 10-K. Both laws empower their respective Secretary of State (“SOS”) to adopt rules, as well as impose penalties of (i) $100,000 for failure to fill the designated seat(s) as required, (ii) $300,000 for a second or subsequent violation, and (iii) $100,000 for failure to file board member information. Each designated seat must be held “during at least one point of a calendar year” to avoid a violation (e.g., it would not be a violation if a board member left mid-year and was not contemporaneously replaced). Presumably Illinois SOS’s regulations will address: (a) the process for filing board composition information, and (b) whether an individual female, African American director satisfies both composition requirements (e.g., can one person fill both “designated seats”).

Precedent for a National Movement

Equal opportunity laws – such as ban-the-box, salary history inquiry bans, and harassment training mandates – have been sweeping the nation in a patchwork, making compliance much more difficult.  While California is currently the only state mandating board composition, New Jersey’s AB 4726 (introduced 11/26/2018) is pending, and others states have passed non-punitive resolutions encouraging female representation on boards, including Illinois (HR 439) and Massachusetts (Res. S 1007) in 2015, and Pennsylvania (HR 273) in 2017. Other than Illinois HB 3394, we are unaware of any other legislation mandating composition based on race or any other protected-class.

Will HB 3394 Become Law?

In 2018, overriding then-Governor Rauner’s veto, the Illinois General Assembly amended the Illinois Equal Pay Act to add African Americans to women as protected classes, effective 1/1/2019. (Note: Governor Rauner rejected the limitation of “African Americans” and suggested expanding the protection to race, color, national origin, and ancestry.) Governor Pritzker, along with the current General Assembly, have taken steps to enact legislation that protects employees and increases expectations and obligations for employers and businesses, ranging from increased minimum wage, wage and hour penalties, attacks on unfair competition agreements, and the like. Given this backdrop, it seems likely that Illinois will pass a board composition law, with the question being whether the current proposed language will be amended or changed. 

Is Compliance Limited to Public Companies?

Like many experiments, these laws typically first apply to public corporations that are, presumably, sophisticated enough to know, understand, and comply with their legal obligations. If successfully implemented, the requirements may be expanded to cover unlisted public companies, nonprofits, and large companies or employers.

Public companies that might be subject to these laws should start planning now, including considering topics such as board succession planning to identify qualified directors, and amending governing documents to permit increasing the board size to comply. Of course, qualified counsel should be consulted to avoid unforeseen pitfalls created by these untested laws.

Hotel Workers’ Claims under the Biometric Information Privacy Act Are Not Subject To Arbitration Clause

Contributed by Michael Faley, May 7, 2019

In only the latest of potential blows to companies that collect or use biometric data, an Illinois Appellate Court has ruled that claims brought by employees of the Four Seasons luxury hotel for alleged violations of the Illinois Biometric Information Privacy Act (BIPA) are not subject to arbitration under the workers’ respective employment agreements with the hotel. Liu v. Four Seasons Hotel, Ltd., 2019 IL App (1st) 182645.

Lock on the converging point on a circuit, security concept

The BIPA was enacted to protect the privacy of individuals’ biometric data. It governs the collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and information, which includes retina or iris scans, fingerprints, voiceprints, or scans of “hand or face geometry.” 740 ILCS 14/1, et seq. BIPA contains a private right of action whereby a party may recover damages of $1,000 (or actual damages if greater) for each negligent violation of BIPA and $5,000 (or actual damages if greater) for each intentional or reckless violation, as well as attorney’s fees, costs, and expenses. Violations can be aggregated—meaning every day a company is not in compliance could serve as a separate “violation.” As reported in this blog, earlier this year, the Illinois Supreme Court lowered the bar for what a complaining-party must show in order to pursue a BIPA case against a company.

In Liu, the employees filed a class action complaint alleging that the Four Seasons violated BIPA through its method of collecting, using, storing and disclosing the employees’ biometric data (their fingerprints) for timekeeping purposes.

The Four Seasons maintained that the employees’ complaint fell within a provision of the employment agreement requiring arbitration of any claim for a “wage and hour violation.” The hotel argued that the sole reason for requiring employees to scan their fingerprints was to monitor the number of hours worked, which necessarily made it a claim for a “wage and hour violation.” However, the Appellate Court disagreed, holding that BIPA is a privacy rights law that applies inside and outside of the workplace. The Appellate Court explained that simply because an employer opts to use biometric data, like fingerprints, for timekeeping does not transform a potential BIPA-violation into a wage and hour claim. As a result, the Appellate Court found that the employees possessed the right to proceed with their claims in court.

Notably, the outcome may have been different had the Four Seasons’ employment agreements contained a broader arbitration clause or otherwise been updated to account for ongoing changes in the law.

To avoid and/or minimize any BIPA issues or potential liability, we continue to recommend that employers take the following steps:

  1. Review policies and procedures and identify if, and when, biometric data, such as retina or iris scans, fingerprints, voiceprints, or scans/pictures of hand or face geometry are being used.
  2. Establish a written policy that addresses the purpose(s) of biometric data use, how it will be collected, and how it will be stored.
  3. Be prepared to address any requests for reasonable accommodations based on disability, religious, or other reasons.
  4. If biometric data might leave a closed system, ensure that proper safeguards are in place, including contractual liability shifting.
  5. Ensure that employees whose biometric data is used acknowledge the policy, and authorize its use and collection.
  6. Train supervisors on the company’s policies and practices to ensure consistency.
  7. Have biometric data systems audited to ensure that data is not open to the public or a systems breach.
  8. Consult with competent employment counsel to ensure that policies, practices and agreements comply with the relevant law.
  9. Regularly review policies, procedures and agreements for compliance with updates to the law and current case law.

Employers, Get Ready! D.C. Court Rules That EEOC Must Collect EEO Pay Data by September 30, 2019

Contributed by Allison P. Sues, May 1, 2019

September 30. Vector flat daily calendar icon.

On April 25, 2019, the U.S. District Court for the District of Columbia ruled that employers must submit pay data by September 30, 2019. For a more detailed background on the case at issue, National Women’s Law Center v. Office of Management and Budget (OMB), please see our blog from last month. As a brief background, years ago the U.S. Equal Employment Opportunity Commission (EEOC) set out to collect pay data from employers in an effort to identify and address pay discrimination against women and minority workers. The EEOC already collects data from employers regarding the sex, race, and ethnicity of employees in various job categories (Component 1 of EEO-1 report). In order to also collect pay data (Component 2 of EEO-1 report), the EEOC needed permission from the OMB.

The OMB initially approved the pay data collection, and then stayed its permission in 2017 bringing the EEOC’s pay data efforts to a halt. Women and minority workers advocacy groups filed a lawsuit in the D.C. Circuit court to vacate the OMB’s self-imposed stay. In ruling on motions, the court asked the EEOC to provide guidance on an acceptable deadline by which it would be able to implement collecting pay data from employers. The EEOC said it would not be able to collect this data any earlier than September 30, 2019, and in doing so would need to rely on an outside contractor to perform the data collection.

On April 25th 2019 Court Order requires the EEOC to do the following:

  • The EEOC must collect EEO-1 Component 2 pay data for calendar year 2018 by September 30, 2019.
  • In addition to the pay data for calendar year 2018, the court ordered that the EEOC must either collect:
    • EEO-1 Component 2 pay data for calendar year 2017 by September 30, 2019; OR
    • EEO-1 Component 2 pay data for calendar year 2019 in the 2020 EEO-1 reporting period.

The EEOC must alert the court by May 3, 2019 if it elects to collect 2019 pay data in lieu of 2017 pay data. 

  • The court ordered that OMB’s approval of EEOC’s pay data collection shall expire on April 5, 2021.

Stay tuned as the EEOC is expected to provide further guidance on its pay data collection soon.  In the meantime, employers should plan on submitting Component 2 of the EEO-1 reports for calendar year 2018 by September 30, 2019, and ensure that it submits Component 1 of the EEO-1 reports for calendar year 2018 by May 31, 2019. 

Do I Have to Pay Employees to Attend Company-Sponsored Volunteer Events?

Contributed by Suzanne S. Newcomb, April 30, 2019

Volunteer Charity Helping Hands Give Concept

Company sponsored volunteer activities foster a positive corporate culture and can improve employee engagement and morale. On March 14, 2019, the U.S. Department of Labor issued an Opinion Letter that makes wage and hour compliance associated with corporate volunteer campaigns a bit easier. The Opinion Letter clarifies that employers are not required to pay non-exempt employees for volunteer time outside their normal work hours so long as participation is truly voluntary and the employer does not direct the volunteer activities. The DOL further confirmed that an employer can incentivize volunteering to a limited degree.

In general, an employer must compensate non-exempt employees for all the time they are required or allowed to work. Under federal Fair Labor Standards Act regulations, even time a non-exempt employee devotes to public and charitable causes is compensable if the employer requests the employee engage in the volunteer efforts, directs or controls the employee’s efforts, or requires the employee to be on the employer’s premises. However, time an employee voluntarily devotes to public and charitable activities outside of his or her normal working hours is not compensable. 29 C.F.R. § 785.44.

At issue in the recent opinion was a bonus paid to the group of employees whose volunteer efforts had the greatest community impact. Citing earlier opinions, the DOL said an employer may consider employee volunteer efforts as a factor in calculating bonuses without incurring wage liability for volunteer time outside of regular working hours so long as (1) volunteering is truly optional; (2) choosing not to volunteer does not adversely affect working conditions or employment prospects; and (3) volunteering does not guarantee any employee a bonus.

Of course, volunteer activities must benefit a public or charitable purpose. One cannot “volunteer” to benefit a for-profit company. Even non-profit employers must be careful not to designate any time employees devote to their regular work duties as “volunteering.” Employees of non-profit organizations can only volunteer for that organization in a capacity that is distinct from their normally assigned tasks.  

The opinion letter and this post address obligations arising under federal law only. States can and often do impose more stringent regulations so the requirements in your particular jurisdiction may dictate a different outcome. Moreover, the DOL opinion is limited to the particular circumstances presented.

So in general, under federal law, if your employees engage in company sponsored volunteer activities during work hours or time they would ordinarily be working, you must pay them for that time.  You do not need to pay employees who voluntarily choose to volunteer outside of regular work hours. However, time an employee spends volunteering, even if outside regular work hours, can become compensable if participation is required by the employer, employees suffer adverse consequences for choosing not to participate, the employer directs or controls the employees in their volunteer activities, or those who participate are provided a direct guaranteed rewarded.

Prevailing Wage Law: An Effective Sword of Labor Unions to Hurt their Enemies in the Public Bid Process

Contributed by Jeffrey A. Risch, April 25, 2019 – www.illinoisprevailingwage.com

Construction hat and gavel

Having handled countless prevailing wage disputes, the local, state or federal administrative agency assigned to administer compliance (i.e. the US Department of Labor) is the only government entity that can lawfully determine whether a contractor is in violation of an applicable prevailing wage law and push for debarment.  Ultimately, a contractor who has been determined by a government agency to have violated its prevailing wage obligations (i.e. a clerical mistake, an accounting error, poor or missing paperwork) is a long way from getting on a “debarment list.” First, in order to get debarred from public work, the government is looking for willful violators with a track record of fraud and deceit. This is, of course, very rare.  Second, the contractor does enjoy fundamental due process and a chance to be fully heard prior to actual debarment. However, it’s becoming a growing trend for certain labor unions (along with their aligned third party “watch dog” groups) to file prevailing wage complaints against contractors, with who they have an issue. They may do this in order to then use the ensuing government investigation/audit to help soil the name of the contractor who has a pending low bid for a public works construction project. 

Take note, there’s no “gatekeeper” when processing such complaints. Generally, anyone can file a complaint against anyone, without limitations, and without actual evidence of any wrongdoing. And, in many jurisdictions, EVERY COMPLAINT must be investigated.

Many public bodies, especially local units of government, are being told that they must reject the bid of a contractor who has any past or pending prevailing wage complaint against it, even when the contractor is the “low bidder.” These public bodies are often being fed “bad information” — “misleading information” — “outdated information” against contractors who have every legal right to bid and perform public works projects. By rejecting bids or terminating contracts with non-debarred contractors, public bodies are depriving contractors of fair due process while ignoring their obligations to the taxpayer.

Contractors must know their rights! Although public bodies have an enormous amount of discretion in ascertaining the “lowest responsible bidder” for public construction projects, they cannot make arbitrary decisions in contradiction to applicable law. Contractors should never be discouraged from submitting bids despite what certain public bodies are being told. From experience and observation, contractors should push back. This push back can be in many forms. Although the filing of a lawsuit or motion seeking injunctive or declaratory relief is sometimes necessary (and, quite effective at times), the public body often simply needs clarity concerning the misinformation it has received. This clarity can usually be achieved through simple letter writing, establishing a dialogue, or other non-legal channels.

Contractors need to be extra cautious and careful in any and all communications with any government agency investigating prevailing wage compliance. To be clear, every complaint must be taken seriously by the contractor to ensure that the record ultimately reflects that the contractor is not only complying with its legal obligations, but also free to bid and perform public construction projects without interference.

With the above in mind, there are 5 basic rules for anyone performing public construction work:

  1. Know your legal obligations under any and every local, state or federal prevailing wage ordinance/law that applies to your business (note: what’s permissible under Federal Davis-Bacon may be unlawful under Illinois prevailing wage law);
  2. Ensure your business is complying with all applicable prevailing wage obligations for every worker, every day, every week, every job;
  3. Never allow a prevailing wage audit or investigation  to be closed or remain in limbo without some document that confirms your full compliance with your legal obligations (you may have to do this yourself);
  4. Never sign any settlement agreement concerning prevailing wage issues without first reviewing it with competent legal counsel to help ensure that no admission of liability or guilt is made and to expressly state that you are free and clear to bid and perform future public construction work; and
  5. Educate your local units of government on who you are and highlight your good name and business reputation — get to know the public officials, get involved and form relationships.

Don’t Let Your Lattes Go Cold When Employees Complain About Customer Harassment

Contributed by Heather Bailey and Jeff Glass, April 23, 2019

A currently pending federal case reminds us that hospitality employers could have claims for sexual harassment and discrimination brought against them based on the alleged inappropriate conduct of their customers. 

The case is Hashway v. Starbucks Corp. (D.R.I., No. 1:19-cv-00125), filed on March 11, 2019. The plaintiff is a former female Starbucks barista. The case arose from the alleged inappropriate conduct of a male customer. The claim was that the customer allegedly would routinely come to the store and stare at the employee, make lewd and inappropriate comments about her breasts, and generally make her feel uncomfortable.

The barista alleged that eventually she arranged with her co-workers to go to the back of the store whenever the customer would come in and return to the front once he left — which was extremely stressful on the employee. Despite this attempt to avoid contact with him, she claimed that the customer continued to come in the store and make additional lewd and inappropriate comments to her. This culminated in her claiming to have a panic attack at work in front of her co-workers. She eventually sought treatment for the anxiety allegedly caused by the customer.

Render illustration of Harassment title On Legal Documents

According to the employee, she repeatedly reported the problem to Starbucks management both at the store and at the corporate level. The employee alleged she was told that management spoke with the customer, but no further action was taken against the customer. When the conduct continued the employee complained again. At that point, she was allegedly told that her options were to (1) serve the customer and engage in friendly conversation with him, (2) change her hours to avoid him, or (3) transfer to another Starbucks. The latter two options were not viable for her. The customer purportedly was a frequent visitor to the store and so changing shifts would not result in avoiding him. The alternate Starbucks location could not guarantee the employee weekday or full time hours, which she needed because she had another job on the weekends.  As such, she claimed that she had no choice but to continue working at the store and to continue to go in the back to avoid the customer when he would come in.

Subsequently, other employees purportedly complained to management of discriminatory comments by the customer, including the alleged sexual harassing comments by the customer directed at the employee. Despite the additional reports, management and Human Resources allegedly did not take any action. Rather, the general manager and supervisor of the store were alleged to have advised the employee that she could no longer go in the back when the customer came in and must serve him.

The employee alleged that, after she made repeated complaints, she was disciplined for attendance issues that other employees were not disciplined for and then was terminated because she had been 15 minutes late for a shift, an infraction which normally did not lead to termination. The employee filed a charge of discrimination alleging that her termination was due to her complaints about sexual harassment by the customer. She then filed suit, alleging sexual harassment and that she had basically been forced to endure the sexual harassment in order to keep her job. At this time the case is still pending.

Although the facts alleged in this case may seem extreme, it is certainly not unusual in the restaurant and bar industry to have patrons (both male and female) who make inappropriate comments – even physical contact – to bartenders and wait staff. This case is a reminder that such allegation and complaints must be taken seriously, and proactive steps need to be taken immediately to protect the employee from purported inappropriate and harassing conduct.

Some general practice tips include:

  • Start an immediate investigation into your employee’s complaints about the customer.
  • Immediately keep your employee safe and away from the harassing customer.
  • Determine a course of action on how to respond to the employee’s complaint, which may ultimately include asking the patron not return to your establishment. This action should not punish the employee for complaining.
  • Train employees on how to react and what to say to customers who are making them feel uncomfortable.
  • Train management on how to handle these situations.
  • When in doubt, contact your labor and employment counsel to guide you through this process to minimize risk.   

Remember, if the patron is allegedly acting inappropriately to one employee, s/he is probably doing it to others as well. How you handle the situation could make a major difference on whether that employee will take you to court or not.