Category Archives: News & Tips

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.

Conducting an HR Audit for 2019

Contributed by Jeffrey Risch, December 17, 2018

When was the last time you conducted an HR audit for your organization?

We’re all busy and get distracted easily. Often times HR considers a thorough review of the Employee Handbook is enough to ensure all is well from a legal compliance perspective as to personnel policies and practices. Not quite. A closer examination of an employer’s forms, contracts, procedures, practices and actual day-to-day management is essential. In other words, a deeper dive into an organization’s HR-universe is necessary these days. In a world of increased workplace regulation and litigation risks, a more thorough review and audit is required.

For a sample of a comprehensive checklist of the subjects, topics, and issues that a common HR audit entails, please take a moment and familiarize yourself with our HR Audit Checklist here.

OVERTIME RULE UPDATE – DOL APPEALS PRELIMINARY INJUNCTION

Contributed by Noah A. Frank

As we previously reported, on 11/22/2016, Judge Amos Mazzant (E.D. Texas) granted a preliminary injunction that halted the 12/1/2016 implementation of the DOL’s Final Overtime Rule, which would have more-than-doubled the minimum salary level for executive/administrative/professional exempt employees.Wage-Hour2

On 12/1/2016, the U.S. DOL filed a notice of appeal to the Fifth Circuit Court of Appeals, indicating that it strongly believes that the DOL followed all required administrative processes, and there is no reason to delay implementation of the Final Rule.

This fight is not over. Employers that have not yet undertaken serious analysis of the duties of claimed exempt positions should do so promptly and determine the strategies they will implement should the injunction be vacated. Stay tuned for further news and analysis of this hotly evolving issue.

Use This Language to Comply with the Notice Requirements in the New Federal “Defend Trade Secrets Act”

Contributed by Jeff Glass, May 17, 2016

As we reported on May 13, 2016, there is now a federal statute, called the Defend Trade Secrets Act (DTSA) that provides a federal cause of action for trade secret misappropriation. The full DTSA is found here.

One important feature of the DTSA is that it, like most state trade secret statutes, allows employers to recover punitive damages and attorney’s fees for the unauthorized use or disclosure of trade secrets. However, unlike the state statutes, the DTSA conditions the availability of these remedies on compliance with certain notice requirements contained in Section 7 of the Act.

The notice must be provided “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The DTSA also allows notice to be provided by cross referencing a policy document that is provided to the employee.  Although the Act specifically mentions contracts with “an employee,” elsewhere it defines “employee” to include “any individual performing work as a contractor or consultant for an employer.”

The scope of contracts covered by the Act is wide. It would appear to include not only confidentiality agreements entered into at the time of hire, or during employment, but also severance and separation agreements that contain confidentiality provisions.

We strongly suggest that employers add the following language to any contracts that relate to the protection of trade secret information:

Notice of Rights Pursuant to Section 7 of the Defend Trade Secrets Act (DTSA)

Notwithstanding any provisions in this agreement or company policy applicable to the unauthorized use or disclosure of trade secrets, you are hereby notified that, pursuant to Section 7of the DTSA, you cannot be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law.  You also may not be held so liable for such disclosures made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  In addition, individuals who file a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.

We will keep you updated on further developments under the DTSA.

New Statute Creates Federal Trade Secret Claim

Contributed by Jeff Glass, May 13, 2016

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA).  DTSA provides a new federal cause of action for misappropriation of trade secrets. A “trade secret” is a broad category of intellectual property. Essentially, it includes any business information that is confidential and derives value from not being known to competitors. It can include everything from technology, to business strategies, to proprietary information about customers and prospects. Unlike patents, copyrights or trademarks, there is no registration system for trade secrets nor is there any set expiration date.

Frequently, trade secret claims are asserted where parties accuse competitors of stealing proprietary information. Trade secret claims can also be used where an employee uses his or her access to company information to compete unfairly, but never signed a restrictive covenant.

Legal protection of trade secrets has been available for many years under the Uniform Trade Secrets Act (UTSA), which has been enacted in some form by 47 states. Now, under DTSA, so long as the trade secret dispute meets threshold Commerce Clause requirements – basically, a nexus with interstate commerce – litigants can access the federal courts. DTSA does not pre-empt state statutes or common law doctrines that govern trade secret misappropriation.

The DTSA adopts the framework of the UTSA with some subtle definitional changes which may or may not be significant depending on how courts interpret the Act. This blog will provide updates as the statute is interpreted. Like the UTSA, it provides for recovery of legal fees for willful violations, allows for punitive damages, and provides for sanctions for bad faith lawsuits. DTSA is not retroactive. It applies to violations that occur on or after May 11, 2016.

Although DTSA is similar to UTSA in most respects, there are some noteworthy differences:

  • The Act has a “whistleblower” notice provision that requires employee confidentiality agreements to include language putting employees on notice that they are immune from DTSA liability if they disclose trade secrets in confidence to the government with suspected violations of law or in compliance with subpoenas. If this notice is not provided, an employer cannot avail itself of exemplary damages or attorneys’ fees in DTSA litigation against such persons. Accordingly, employers should update their agreements to provide this notice.
  • The Act provides for ex parte seizures of property in “extraordinary circumstances.”
  • The Act has heightened criminal penalties for trade secret misappropriation.

Notwithstanding these provisions, for most employers, the main impact is the option to file in federal court. This enhances lawyers’ ability to choose the best forum for their clients’ claim. In addition, as the DTSA is interpreted by federal courts, substantive differences in the law applicable to trade secret misappropriation may develop between the state and federal statutes, such that employers would be better served by filing in federal court as opposed to state court.

We will keep you updated in this blog as to the development of the DTSA. Click here to read a follow up on how to comply with notice requirements regarding DTSA.

“Cadillac Tax” on Health Plans Delayed Until 2020

Contributed by Kelly Haab-Tallitsch

Employers are receiving a temporary reprieve from the controversial “Cadillac Tax” on health plans as part of a large spending and tax bill signed into law by President Obama on Friday, December 18, 2015. The Consolidated Appropriations Act (the “Act”) delays the effective date of the Affordable Care Act’s (ACA’s) excise tax on so-called high cost health plans, known as the “Cadillac Tax,” until January 1, 2020.

The Cadillac Tax, previously scheduled to take effect on January 1, 2018, is a 40% excise tax on employers and insurers who offer health insurance plans that exceed specified high-cost limits ($10,200 for individuals and $27,000 for families for 2018). The 40% tax applies to the cost of the plan above these thresholds.

In addition to the delay, the Act makes the Cadillac Tax a tax-deductible expense for employers, somewhat cushioning its impact. The Act also calls for an examination of suitable benchmarks to be used for the adjustment of the excise tax thresholds in future years.

The delay comes after mounting criticism of the Cadillac Tax from employers, insurers, labor unions and lawmakers. Critics argue that the tax, which was expected to affect an estimated 25% to 30% of employers in 2018, and as many as 50% within the next 10 years, unfairly penalizes employers and unionized workers and will ultimately lead to employees paying more out of pocket for medical expenses.

What Does this Mean for Employers?

While opponents of the Cadillac Tax are citing the delay as the first step towards a repeal of the tax, employers must remain cautious and plan for the tax to be implemented in 2020. Employers should continue evaluating the costs of the health coverage offered to their employees and begin to consider alternatives to reduce exposure to the tax in 2020. Additionally, employers should review the accounting consequences of the now deductible Cadillac Tax.