Author Archives: smithamundsen

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.


Avoid the Dangers of Misclassifying Employees as Independent Contractors

Contributed by Amanda Biondolino, March 13, 2018

A dangerous misunderstanding persists in the business community that an employer can choose to “1099” its workers, or classify them as independent contractors, so long as there is an agreement between the employer and employee and both are satisfied with the arrangement. This misguided belief can have dire consequences if blindly followed.

Independent contractorWhen a worker is classified as an independent contractor, the employer is not liable for federal tax withholding, payment of state unemployment tax, maintaining workers compensation insurance or compliance with state and federal wage and hour law. It is only logical that an employer would see this as an attractive option. The problem, however, is that the government may view this as opting to evade taxes and other statutory obligations.  Neither the employer nor the worker has the authority to choose to avoid legal duties, and an agreement between the employee and employer is not determinative of status.

Instead, state and federal government will use one of several “tests” to determine whether the worker is an employee or independent contractor. For example, the “ABC” test is frequently used under Illinois law. Under this test, a company defending its classifications is required to show that an individual providing services: A) is free from control and direction; B) performs services outside the usual course of business for the enterprise for which such service was performed; and C) is engaged in an independently established trade, occupation, profession, or business.

Other states, utilize the “IRS” test.  Under this test, twenty factors are weighed to determine whether a worker is an employee or independent contractor. To make it more confusing, the federal Department of Labor uses a six-factor “economic realities” test to determine liability under the federal wage and hour law, the Fair Labor Standards Act.  Other tests also are used, like California’s multi-factor “Borello” test, named for the lawsuit in which it was created. Generally speaking, the tests all turn on whether the employer has the right to control the worker. If the employer controls what work will be done, and how it will be done, then the worker is an employee notwithstanding any agreement, label or waiver to the contrary.

An employer who has misclassified its employees is subject to payment of back taxes and insurance premiums, unpaid wages and overtime, late fees and hefty penalties, not to mention civil lawsuits filed by misclassified employees, including class actions.  Government agencies often share information, resulting in a snowball effect that can have severe adverse effects on a business, and each has the power to audit an employer to ensure compliance. The burden is on the employer to defend its classification. Be advised, if an inquiry or audit is triggered by an “independent contractor” applying for unemployment, filing a workers compensation claim, or simply reporting non-compliance, strict anti-retaliation or whistleblower protections can result in significant liability if any adverse action is taken against the worker.

Employers should be aware that employment laws are passed for the protection of employees, and will be construed broadly in favor of finding employee status.  However, courts are willing to uphold an independent contractor designation, where appropriate.  Recently, a California federal court judge ruled that a Grubhub driver was correctly classified as an independent contractor because Grubhub exercised little control over the “manner and means” used by the worker to complete his job.  The court also considered a variety of secondary factors under the Borello test, but the scales tipped in favor of independent contractor status.

It is imperative for employers to consult with an experienced labor and employment counsel to determine if its workers are truly independent contractors to avoid the implications of misclassification.  This begins with understanding what test will be used, and evaluating each worker against the relevant factors.  Counsel should also be utilized to craft independent contractor agreements that do more than simply label the relationship as independent contractor, but also incorporate the language necessary to demonstrate that the contractor truly meets the applicable standards.

The Survival of Abood v. Board of Education, Part 4

Contributed by Carlos Arévalo, March 8, 2018

Just last week on February 26th, the United States Supreme Court heard arguments in Janus v. AFSCME, a case in the Court’s 2017 term with a potential of adversely impacting the viability and influence of public sector unions.  The case, originating in the seventh circuit with Judge Richard Posner, involves an appeal over the dismissal of a complaint that sought to invalidate agency fees and to reverse the Supreme Court’s 1977 decision in Abood v. Detroit Board of Education.

gavelJanus is the latest case to reach the Supreme Court challenging the 40 year precedent set in Abood which established that agency fees or “fair share” provisions in public sector union contracts could be imposed on non-union members for “collective bargaining, contract administration, and grievance adjustment purposes.”  Supporters maintain that agency fees are necessary to prevent “free riders” from benefitting from contracts negotiated by unions without bearing the expense of representation. Critics argue that such fees are tantamount to “compelled speech” that violate First Amendment rights.

Back in 2014, the Supreme Court reviewed agency fees in Harris v. Quinn  and held that home health care workers in Illinois could not be compelled to financially support a union they did not want to join. The Harris ruling, however, was narrow because the home health care workers were not deemed “full-fledged public employees.” In 2015, it was expected that the Court’s conservative majority would overrule Abood in Friedrichs v. California Teachers Association, a ninth circuit case that upheld agency fees so long as dues were not used for other ideological or political purposes. However, the passing of Justice Antonin Scalia shortly after arguments resulted in a “no-decision” and the judgment of the ninth circuit was “affirmed by an equally divided Court.”

The tenor of arguments in Janus last week leaves no doubt that the eight justices who heard Friedrichs remain “equally divided.” As was the case in Friedrichs, Justice Elena Kagan continued to voice concerns that overruling Abood would adversely impact 23 state statutes that permit agency fees and would invalidate thousands of contracts covering millions of workers. Justice Anthony Kennedy, on the other side, forced David Frederick, AFSCME’s attorney, to acknowledge that unions would have less political influence if Abood were to be overruled, and then quipped “isn’t that the end of this case?”  Justice Stephen Breyer, interested in maintaining the status quo, suggested a compromise, namely a statutory-duties test that would draw a line between chargeable (collective bargaining, contract administration) and non-chargeable (lobbying, politicking) expenses. Attorney William Messenger arguing for Janus, however, skeptically noted such a test would allow “the government to decide what is constitutionally chargeable [which would include] collective bargaining” and that such is “the core of political activity which individuals cannot be compelled to support” under the First Amendment.

It is clear that the decision in Janus hinges on Justice Neil Gorsuch, who many anticipate will cast a vote to finally reverse Abood.  Somewhat uncharacteristically yet purposefully, Justice Gorsuch remained silent during arguments.  A decision is expected in June.

Check out our previous articles on Abood and the challenges to public sector agency fees:

Part One: Will Abood v. Detroit Board of Education Survive?

Part Two: Abood v. Detroit Board of Education Survives…for now?

Part 3: The Survival of Abood v. Detroit Board of Education, Part 3

DOL ERISA Enforcement

Contributed by William Scogland, February 26, 2018

The U.S. Department of Labor, Employee Benefit Security Administration (EBSA) is responsible for the enforcement of the Employee Retirement Income Security Act of 1975 (ERISA). EBSA recently announced that, in 2017, by enforcing ERISA, it restored $1.1 billion to employee benefit plans. Of this amount, about 60% was from civil investigations and 40% from informal complaint resolutions.

Of course, the flip side of $1.1 billion going to employee benefit plans is $1.1 billion paid by employers, fiduciaries and their insurers.

53855707 - hand holding megaphone - benefits

 hand holding megaphone – benefits

This announcement from EBSA appeared roughly contemporaneously with a number of surveys of defined contribution plan (e.g., 401(k) plan) fiduciaries, which found that an astonishing number, approximately 50%, do not know they are fiduciaries and that, consequently, their assets are potentially exposed under ERISA. Worse, many appear to believe that they can completely shed ERISA liability by hiring a third party.

Clearly, many plan sponsors need to revisit fundamentally their ERISA structures: who is a fiduciary?; who has what fiduciary duties?; what outside help – e.g., investment adviser or investment manager, is needed?; do the fiduciaries have adequate fiduciary liability insurance?; etc. Frequently, existing plan documents will be found inadequate. Perhaps, they were inadequate initially, but many have become outdated because of changing plans, regulatory revisions, personnel turnover, or other factors.

Other than the trustee and the plan administrator, which are always fiduciaries, the definition of an ERISA fiduciary is based on the actions and responsibilities of a person. Under ERISA, a person is a fiduciary to the plan to the extent the individual performs any of the following:

  • Exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.
  • Renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so.
  • Has any discretionary authority or discretionary responsibility in the administration of such plan.

The extent of fiduciary status can vary from person to person, depending on the specific plan duties each person performs. For example, an individual responsible for investment selection or monitoring will be a fiduciary for the assets under his control, but won’t be a fiduciary when it comes to benefit claim decisions assuming this is outside his or her duties.

ERISA mandates that a plan fiduciary must discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and –

  • for the exclusive purpose of providing benefits to participants and their beneficiaries; and defraying reasonable expenses of administering the plan;
  • with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
  • by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
  • in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with ERISA.

A fiduciary should be aware of others who serve as fiduciaries to the same plan because all fiduciaries have potential liability for the actions of their co-fiduciaries. For example, if a fiduciary knowingly participates in another fiduciary’s breach of responsibility, conceals the breach or doesn’t act to correct it, that fiduciary is also liable.

Certain transactions are prohibited under ERISA to prevent parties from exercising improper influence over the plan. Fiduciaries are prohibited from taking advantage of their position or acting in one’s own self-interest rather than in the best interest of the plan.

A fiduciary that breaches any of the responsibilities, obligations or duties imposed under ERISA can be personally liable for reimbursing the plan for any losses. Even if a fiduciary delegates duties to others, the delegating fiduciary retains fiduciary responsibility for prudently monitoring their performance.

Will Amazon, Berkshire Hathaway and JP Morgan Change Healthcare for Employers?

Contributed by Suzannah Wilson Overholt, February 19, 2018

What happens when you combine Amazon, Berkshire Hathaway and JPMorgan Chase? Apparently, a new non-profit health care company. That was the news last month when the three companies announced that they are forming their own health care company to increase transparency for their employees.

Health Insurance and Money

Health insurance policy and dollar bills on white background 

Anyone involved with employee benefits knows that one of the most dreaded moments annually is getting the renewal quote for the health benefit plans. The quote starts the agonizing dance of trying to get the astronomical increase to a manageable number while calming the budgeting folks, panicked by the opening salvo. The idea of somehow removing the mystery and agony of that process is incredibly appealing. But is it possible? Maybe.

The push for transparency appears to be aimed at the elimination of the overhead costs that are built into the health insurance expense. According to the Wall Street Journal, the new venture plans to help current vendors work better by focusing on technology solutions, improved patient experience and customer service.  Initiatives might include flat fees and using technology to provide more tracking and care outside traditional health-care settings. The final outcome could result in providers being adequately paid for the services they provide, new technology for streamlining services, and reduced costs due to elimination of unnecessary overhead charged by the insurance companies.

While the new company will be focused on the employees of its founders, its success will likely have a ripple effect. The companies hope the project will save them hundreds of millions of dollars and possibly be a blueprint for others.

The gain for employers would be a potential reduction in the cost of insurance, which, as reported by SHRM, currently consumes on average around 10% of operating budgets. While CNN reports that the rate of increase has slowed over the past few years, a recent study found that employers expect health care costs to increase by more than 5% this year. Thus, reduced costs could eliminate the annual debate between giving raises or keeping insurance contributions in check.

Don’t expect changes anytime soon, though. The existing insurance marketplace has big players with the infrastructure to provide services to millions of people. The new company will have to prove itself. We’ll keep you posted.


I Heart You! Office Romance and Risk Management

Contributed by Beverly Alfon, February 13, 2018

As most turn their thoughts to love and romance this Valentine’s Day, we remind you of the potential liability that Cupid’s arrow may unleash. In this post-Weinstein and #MeToo period, the thought of office romance may catapult an employer into sheer panic. Although a recent CareerBuilder survey indicates that office romance is at a 10-year low, the stats are still telling: 36% of workers admitted to having dated a colleague in the past year. Of workers who had an office romance, 30% dated someone in a higher position. Yikes. A soured relationship at work can result in a broken heart for the employer – usually in the form of a sexual harassment claim. How can an employer address this?

A Love Contract?


Red outline of heart on white background

These things exist. They are written relationship agreements that employers seek from employees to confirm the existence of a consensual relationship. The employer’s goal is to mitigate risk by documenting the employer’s expectation that they comply with all existing policies, including anti-harassment policies. They can also be used to set ground rules for other conduct, including public displays of affection (PDA), favoritism – and retribution (in case the relationship turns sour).  However, while these contracts can be a good “band-aid” for addressing the relationship, if a company does not have an anti-harassment program or policy regarding office relationships; it is not the best option.

A love contract alone will not likely defeat an employee’s claim of harassment. Most sexual harassment plaintiffs can claim that they were coerced into signing one because their employer presented the agreement in the context of their at-will employment. Practically, a love contract is also difficult because it requires employees to admit to the existence of a relationship in the first place. In the same CareerBuilder survey, 41% of the workers kept their romance a secret – and almost 25 of survey respondents admitted to an affair with a colleague where one person involved was married at the time.

Snap out of it!

You can more effectively mitigate legal risk by focusing on your anti-harassment program. If you don’t have a written policy in place, invest the time and dollars to get one. Having a policy on the books is not enough. It should be supplemented with annual interactive training courses (a legal requirement for California employers) – ones tailored for non-supervisory and supervisory employees. The goal is to document that employees have been trained on the internal complaint procedures. Equally important is training your supervisors on how to avoid harassment claims and how to properly handle claims if the supervisor receives knowledge of a claim. A solid anti-harassment/discrimination program demonstrates employer good-faith and can form a defense against such claims.

A general workplace romance or “fraternization” policy can address concerns over PDA and favoritism. Don’t play footsie over this. Specifically address office relationships to make it clear that you expect professional and respectful behavior of all employees, regardless of any personal relationship between them. You can prohibit PDA in the office or on company time. And yes, you can forbid romantic relationships between supervisors and subordinates. According to a 2013 survey conducted by SHRM, of businesses that had a romance policy, 99% banned supervisor-subordinate relationships. And, it’s no wonder. In addition to harassment claims, soured relationships can result in claims of assault and battery, false imprisonment and defamation against the alleged harasser. Inevitably, the employer will be rolled into any related litigation.

Bottom Line: Love contracts are uncomfortable and not very effective.  It is more effective to prohibit the risky conduct in the first place. Implementing a strong anti-harassment program and addressing employee relationships in a policy will go further in mitigating risks.


In 2018, Resolve to Keep Employment Records Secure

Contributed by Noah A. Frank, February 8, 2018

Though hacked systems are alarming, too often, data breaches come from much more obvious sources, such as computers without passwords (or weak ones), files left sitting out on desks, and even briefcases left on airplanes (like Department of Homeland Security analysis of terrorist threats at the Super Bowl). An employer’s exposure for data breaches can be significant. At minimum fines, civil suits (including class actions), lost trust and bad publicity, and remediation costs.

Data breach 2

Lock on a computer keyboard

In 2017 alone, some of the major headline data breaches include the Paradise Papers and Panama Papers scandals (two data breaches totaling 3.9TB of data and 24.5M documents), a credit reporting agency, a telecom provider and a wholly owned web service provider. As we previously discussed, employers are obligated through various statues and regulations to keep and maintain many types of employment records containing significant personal, confidential, and highly sensitive information. Such records range from job applications and resumes, to tax forms and benefits applications, to medical records stemming from workers’ compensation, disability, and FMLA claims. These records contain employees’ (and their dependents’) addresses, phone numbers, social security numbers, dates of birth, banking and financial information, and highly sensitive medical information. Other internal files may contain client information, usernames, and even passwords that employees keep the same across work and personal accounts. In short, employers maintain all of the information necessary to completely hack sensitive information exposing all employees to possible identity theft, or other adverse use of their private information. 

Data Security in the 21st Century

The significant data breach risks require companies to practice good record maintenance hygiene. Some important and simple steps to follow in 2018 include:

  • Secure electronic systems: restrict access to necessary programs, folders, and files, with employees using unique, memorable passwords/passphrases. Perform a physical “audit” to ensure employees are not storing passwords beneath keyboards (yes, it still happens!).
  • Utilize protection: lock offices, install privacy screen filters, keep files secured. Remember, a data breach can be as simple as one prying employee looking in another’s file left on a desk – or the cleaning service pocketing an entire file.
  • Keep communications confidential: avoid unintentional disclosure through speakerphone and group printers.
  • Enable remote wipe capabilities in case portable devices are lost, stolen, or otherwise compromised.
  • Plan for the unexpected: establish protocols to secure systems and maintain data integrity should it be necessary to terminate an employee, including the chief technology officer, and how to handle a data breach should it occur.
  • Engage legal counsel as necessary to perform audits of policy and practice, address high risk situations to ensure legal compliance, and shepherd remediation and handle concise communications if and when a breach occurs.

Through strategic planning and implementation of security policies and protocols, companies can be prepared to efficiently address situations in a fluid and dynamic manner without impeding operations.