Category Archives: Employment

Recent Decision Highlights Risk of Post-Employment Retaliation Claims

Contributed by Suzanne Newcomb, July 30, 2019

3d illustration of scales of justice and gavel on orange background

A federal court in Pennsylvania recently ruled that a former employee presented sufficient evidence to warrant a jury trial on a claim she was retaliated against after she resigned. The decision serves as a good reminder that anti-retaliation protections extend beyond the end of the employment relationship to protect former employees.

Cherie Leese complained of sexual harassment while employed by a state agency. She later filed a charge alleging she was issued discipline in retaliation for her report. The parties eventually settled. As part of that settlement, Leese resigned and agreed not to apply for or accept employment within a subset of state agencies. Leese expressly retained the right to seek employment in other areas of state government. When her numerous attempts to secure another position failed, Leese filed a new charge, this time claiming her former employer retaliated against her after she resigned by hindering her attempts to get a new job.

The state, like many large employers, coded former employees based on the circumstances of their separation. Leese was assigned an unusual code, “voluntary resignation contact former agency.” Inquiries regarding Leese were directed to the agency’s general counsel, who responded by stating, “I can make no comment regarding Ms. Leese’s separation.” Leese presented evidence to suggest the code and response were atypical and that they “raised a red flag” which took her out of the running for various positions. 

A well-drafted release protects against claims stemming from conduct occurring before the agreement is signed, but individuals generally cannot waive their rights with respect to future events. As some courts have put it, “an employer cannot purchase a license to discriminate.”

So what steps can an employer take to protect against post-employment retaliation claims?

First, establish a protocol for responding to requests for information regarding former employees, train all supervisors on the protocol, and insist they follow it, regardless of the circumstances underlying an employee’s departure. To better control what information is released, consider directing all requests to a designated individual or department (usually HR). To prove retaliation – whether post-employment or otherwise – a plaintiff must link her protected activity to an adverse action. Leese’s claim was bolstered by evidence that the agency deviated from its usual practice when responding to requests for information about her. The ability to prove that the plaintiff was treated in exactly the same manner as everyone else often allows an employer to avoid trial by defeating a retaliation claim on summary judgment. 

Second, when negotiating severance or a settlement, expressly discuss whether the individual is eligible for rehire and what information the employer will provide in response to reference requests and other inquiries about the individual (** be mindful of restrictions in your local jurisdiction and/or industry – in Vermont, for example, including a no-rehire provision may invalidate a sexual harassment settlement). Incorporating the parties’ agreement on these items into the formal agreement provides certainty for both parties and avoids surprises down the road.

United States Supreme Court Confirms and Limits Court’s Deference to Agency Guidance

Contributed by Allison P. Sues, July 11, 2019

Judge’s Supreme Court gavel with law books

On June 26, 2019, the U.S. Supreme Court confirmed the continued viability of Auer deference, an interpretive doctrine that requires courts to defer to an agency’s reasonable reading of a genuinely ambiguous regulation. In confirming the use of Auer deference, the Supreme Court also narrowed its scope, setting out clear limits to courts’ use of this doctrine. This decision came in the case Kisor v. Wilkie, which involved an ambiguous regulation of a Department of Veteran Affairs rule.  

In affirming Auer deference as a viable interpretive tool for courts to employ when deciding on two readings of a genuinely ambiguous rule, the Court reasoned that Congress generally wants agencies to play the primary role in resolving these questions. As the body that promulgated the rule at issue, the agency is in the best position to know the regulation’s original meaning and possess the expertise needed to interpret rules on specific subject matters. Determining the meaning of an ambiguous rule often requires policy-based judgment calls – a job more appropriate for politically accountable agencies than appointed judges. Finally, deferring to an agency’s interpretation of a rule promotes consistent application of those rules as an agency’s guidance has greater cover than a single district court. 

In confirming the use of Auer deference, the Court was also insistent on its limits. There are several instances in which Auer deference is not warranted. First, the regulation in question must be genuinely ambiguous even after a court has exhausted all of its traditional tools of construction. Second, the agency’s interpretation must be reasonable. Third, the agency’s interpretation must be an “official” or “authoritative” position taken by the agency rather than an ad hoc statement by an agency employee that does not necessarily reflect the agency’s official views. Fourth, the agency’s interpretation must rely on its specific expertise. Finally, the agency’s interpretation must reflect fair, considered, and consistent judgment. 

The Court’s decision in Kisor is a significant one for employers because the DOL and EEOC have issued detailed regulations bearing on various employment statutes, and Courts often look to these regulations in deciphering employment law claims. When the regulation itself does not answer the question, parties may ask the Court to defer to the agency’s guidance on its regulations, be it in the form of a regulatory appendix, compliance manual, or other policy guidance documents or statements. The Supreme Court’s decision in Kisor allows this – but with clear limits. 

Take the Seventh Circuit’s recent decision in Richardson v. Chicago Transit Authority (decided just prior to Kisor but consistent with Kisor’s holdings), which held that obesity is not a disability under the ADA if there is no evidence of an underlying physiological condition. In arguing that his obesity should constitute a disability, the plaintiff pointed to EEOC interpretive guidance that, he contended, indicated that a person has an ADA impairment if his weight is outside of a normal range. The Seventh Circuit held that even if the EEOC guidance did state this, the Court would not defer to the agency’s guidance because it was inconsistent with the text of the regulation. The regulation defined impairment as a “physiological disorder or condition.”  Determining that this regulation was not truly ambiguous, Auer deference was not justified.

So what should employers take away for the Kisor case? Agency guidance, appendixes, and other policy statements should not be ignored. While there are strict limits to the application of Auer deference, courts will continue to defer to an agency’s interpretations of its own rules in certain situations.

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.

U.S. District Court Looks at Change of Employment Terms Sent by Email

Contributed by Michael Faley, November 15, 2018

Email image

Email mailing the world SMS messaging Laptop

The U.S. District Court in Connecticut recently issued an instructive decision on the ever-increasing practice of emailing employees to notify them of changes to the terms of their employment. Financial services giant Morgan Stanley sent employees an email detailing its new mandatory Convenient Access to Resolutions for Employees (CARE) arbitration program. It reflected an effort by Morgan Stanley to expand mandatory arbitration to all employee disputes including previously exempted statutory discrimination claims. After one employee filed a federal lawsuit for age discrimination, Morgan Stanley moved to compel arbitration.

The employee fought back. What was her defense? Well, the employee simply denied that she read her email. She argued that she couldn’t have accepted contract terms she hadn’t even read.

However, the court disagreed and noted that as an at-will employee her employment and its conditions are subject to change. The court found that the former employee had sufficient notice of the change and that her failure to read her email didn’t provide a valid excuse. The court also found it significant that Morgan Stanley provided additional opportunity to review the change by posting it on the company’s intranet. These days, it is “established business practice and expectation for employees both to routinely check email and internal business sites for important updates concerning the business, their employment, or changes in operations or procedures,” the court observed.

Notably, the email stated that employees had a month to opt-out by completing a CARE Arbitration Program Opt-Out Form. By giving an opt-out choice, Morgan Stanley avoided “the condemned practice of ‘unilaterally thrusting’ these changes” on their employees.

In the end, the court found that Morgan Stanley’s CARE program represented a binding and enforceable change to its employee arbitration policy. The case of Antollino v. Morgan Stanley, Case No. 17-cv-1777 (D. Conn. May 11, 2018) is currently under consideration by the U.S. Court of Appeals for the Second Circuit.

Tips for Employers:

  • Conspicuously label employment changes sent by email
  • Post the changes somewhere else too making them accessible to all employees
  • Consider opt-out options
  • Be sure to create a standardized process for notifying employees of changes

 

FDIC Publishes Final Rule on Section 19

Contributed by Carlos Arévalo, August 16, 2018

On August 3, 2018, the Federal Deposit Insurance Corporation (FDIC) published its final rule on proposed modifications to the Statement of Policy under Section 19 of the Federal Deposit Insurance Act. Section 19 prohibits, without prior written consent from the FDIC, the employment of any person who has either been convicted of, or who has entered a pretrial diversion program (program entry) for, a crime involving dishonesty, breach of trust or money laundering.

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Black and white gavel 

Certain modifications in the final rule are intended to expand the FDIC’s de minimis criteria which obviate the need for a consent application. Currently, a covered offense is deemed de minimis if: 1) there is only one conviction or program entry; 2) the offense was punishable by imprisonment for a term of one year or less and/or a fine of $2,500 or less and the individual served three days or less of jail time; 3) the conviction or program entry was entered at least five years prior to the application; and 4) the offense did not involve a bank or insured credit union.

Pursuant to the new rule, not only will “jail time” be more specifically defined (to include significant restraint on individual’s freedom of movement including confinement to a facility), but the following additional de minimis exceptions will be added:

  1. A conviction or program entry that occurred when the individual was 21 years of age or younger;
  2. Multiple conviction(s) or program entry(ies) for writing “bad” or insufficient funds check(s) if there is no other conviction or program entry and the aggregate value of all “bad” checks is $1,000 or less;
  3. A conviction or program entry for small dollar, simple theft (less than $500);
  4. A conviction or program entry for the use of a fake, false or altered form of identification for the purpose of obtaining alcohol

So why is this final rule important?  On the one hand, FDIC institutions apply Section 19 and disqualify applicants with criminal histories because filing consent applications are neither a sure thing nor an immediate process. On the other, Section 19 generally conflicts with federal, state and local anti-discrimination laws. For instance, the use of arrest or criminal history information as a basis to refuse employment is a civil rights violation under the Illinois Human Rights Act. As a result, FDIC institutions must be careful and thorough in their application of Section 19. This is particularly important in light of the expansion of the de minimis exceptions outlined in the final rule published last week.  While Section 19 may serve as a defense to a claim of discrimination, such a defense may not hold if Section 19 is improperly applied. Accordingly, we recommend FDIC institutions consult experienced counsel regarding updates to internal policies and to ensure existing and new Section 19 de minimis exceptions are properly taken into account when evaluating candidates for employment.

 

Dust off Those Handbooks: NLRB Restores Sanity to Employment Policies

Contributed by JT Charron, December 27, 2017

Thirteen years ago the National Labor Relations Board issued its decision in Lutheran Heritage Village-Livonia, 343 NLRB 646, which held that facially neutral work rules violated the National Labor Relations Act if employees would “reasonably construe” the rule to restrict the employees’ rights to engage in protected concerted activity under Section 7 of the Act. Following that decision, the Board used the “reasonably construe” standard to invalidate even the most well intentioned work rules. See e.g., T-Mobile USA Inc., April 29, 2016 (finding that employer’s policy requiring employees to maintain a positive work environment violated the NLRA).

On December 14, in The Boeing Company, 365 NLRB 154, the Board overturned Lutheran Heritage and articulated a new test for evaluating the validity of facially neutral work rules. In place of the unworkable “reasonably construe” standard, the Board introduced a balancing test for analyzing facially neutral work rules. Under the new standard, the Board will “evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.” (emphasis in original).

Workplace investigation

Examining Documents

Utilizing this standard, the Board reversed the administrative law judge’s decision that Boeing’s no-camera rule violated the NLRA. Instead, it found that the employer’s legitimate business reasons for the policy — protecting proprietary information and national security interests — outweighed any potential Section 7 violation. The Board also articulated three broad categories of work rules that would result from the new balancing test:

  • “Category 1 will include rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.”
  • “Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.”
  • “Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.”

Boeing is a big win for employers and represents a clear change in the Board’s attitude towards work rules. While only time — and additional Board decisions — will tell, the new standard should provide “far greater clarity and certainty” to employers in drafting workplace policies. Additionally, employers may want to consider taking a second look at policies previously removed and/or revised in the wake of Lutheran Heritage and its progeny. Finally, as we head into 2018, employers should evaluate all workplace policies in light of the Board’s new balancing test and be prepared with strong justifications for any policies that have the potential to infringe on an employee’s rights under the Act.