More Technology, More Headaches for Employers

Contributed by Noah A. Frank, June 7, 2018

Technology is great. I can use my smartphone to change a million TV channels without getting up (of course, there’s still nothing to watch until Game of Thrones returns).

technology

Close up of business man working on blank screen laptop computer 

Employers, too, are reaping the benefits of technology for the most routine areas of employee and facilities management – including timekeeping and building security. But with the transitions from handwritten and manually punched time cards to fingerprint scanner timeclocks, and mechanical keys to retinal scanners, employers face significant risk under privacy laws.

As a result, many states are beginning to pass employee privacy laws related to biometric data (including but not limited to retina or iris scans, fingerprints and voiceprints, and hand and face geometry). And with laws and regulations, comes the need for compliance to stave off lawsuits, including private causes of action and class actions.

For example, a Federal Court in Illinois recently found that, despite no concrete damage, an employee (and her putative class) might have a triable cause of action for violating her privacy and right to control her biometric data. The employer and its timekeeping vendor allegedly failed to:

  • inform the employee of the specific purpose or length of time fingerprints were to be collected, stored or used;
  • make available any biometric data retention policy or guidelines (if there was one);
  • obtain  employee releases and authorizations for the collection and use such biometric data;
  • and implement reasonable procedural safeguards.

The employer is further alleged to have systemically disclosed the biometric data by sharing it with the timekeeping vendor.

Biometric Data Done Right.

Biometric data is not something to be afraid of, as long as it is administered and used appropriately. The following key steps can help businesses ensure that they are complying with relevant laws:

  1. Establish a written policy that addresses the purpose(s) of biometric data use, how it will be collected, and how it will be stored.
  2. Be prepared to address any requests for reasonable accommodations based on disability, religious, or other reasons.
  3. If biometric data might leave a closed system, ensure that there are proper safeguards in place, including contractual liability shifting.
  4. Ensure that employees whose biometric data is used acknowledge the policy, and authorize its use and collection.
  5. Train supervisors on the company’s policies and practices to ensure consistency.
  6. Have the biometric data systems audited to ensure that data is not open to the public or a systems breach.
  7. Finally, consult with competent employment counsel to ensure that policies and practices comply with relevant law.

 

Save the Date! SmithAmundsen Complimentary Webinar – June 13th – Hiring 201: A Deeper Dive into Employee Interviewing and On-boarding

Join Jon Hoag and Mike Wong on Wednesday, June 13 at 12:00 PM CT for the latest installment of our Labor & Employment Quarterly Series. Jon and Mike will teach employers how to effectively hire the right person and minimize threats of litigation.

Specific topics covered include:

  • Avoid job posting and employment application pitfalls
  • Effective and legal interviewing techniques
  • Legal landmines associated with pre-employment screening/background checks
  • The job offer and related legal documentation
  • On-boarding to increase employee retention and reduce exposure to employment lawsuits

Who should attend? HR professionals, managers, and business owners. We hope you can join us!

 

Register for the webinar here!

 

Should Employers Be Grieving the Impending Death of the DOL’s Fiduciary Rule?

Contributed by Rebecca Dobbs Bush, May 31, 2018

Every employer offering a 401(k) plan is faced with decisions about what investment options to make available to participants. Investment options carry different risks as well as different costs. In designing available investment options, most plan sponsors rely on a third-party advisor. Industry estimates indicate that approximately 90% of these financial advisors are brokers, i.e., commissioned-based sales consultants.

Third-party financial advisors may or may not maintain fiduciary status in regards to the 401(k) plan (this depends on the specific terms of each individual plan). Where an advisor does not maintain fiduciary status, an employer is ultimately the party responsible for selection and monitoring of available investment options.

Employer

Person sitting at desk with a sign that says “Employer”

The final rule, issued back on April 8, 2016, increased the level of responsibility for every third-party advisor to a 401(k) plan from a weaker “suitability” standard to a “best interests” standard, meaning they must only offer advice in the best interests of plan participants and beneficiaries and must disclose any potential conflicts of interest. Understandably this is an incredibly difficult standard for a broker/financial advisor to meet and the financial industry has protested the rule vigorously. In March of 2018, the Fifth Circuit Court of Appeals vacated the Department of Labor (DOL) rule and the DOL has indicated they won’t be challenging that decision. On May 7, 2018, the DOL went a step further and issued Field Assistance Bulletin No. 2018-02 announcing a temporary non-enforcement policy.

Should employers be grieving the death of the fiduciary rule? Perhaps, but not necessarily. Ultimately no one will work for free and third-party advisors are no different. If broker/financial advisors can’t collect adequate compensation through commissions, they will likely change their fee structure to charge more direct service fees. At the end of the day, the costs to the plan and its participants would arguably be equivalent. That said, employers relying on third-parties for financial advice in designing and maintaining their plans need to keep this in mind. Blind trust is not an option when there is an inherent conflict of interest due to commission-based compensation. Employers are fiduciaries regardless of the death of the DOL’s fiduciary rule and need to be diligent in ensuring they understand their plan and are protecting the participants.

 

In a Dramatic Turn, an Arbitrator Finds that the Substitutes Act Does Not Prohibit Municipality from Shutting Down Ambulance Services

Contributed by Julie Proscia and Carlos Arévalo, May 25, 2018

In an unprecedented fashion, an arbitrator recently issued an award limiting the scope of Public Act 095-0490, otherwise known as the Substitutes Act. In doing so, the City of Mattoon successfully fought, through SmithAmundsen attorneys Julie Proscia and Carlos Arévalo, and won the right to close their ambulance service. So why is this award important? This award now serves as a basis for municipalities to be able to have the autonomy to review their scope of services and determine which services are best for their community as opposed to the scope of services being dictated by the union.

ambulance

Ambulance driving on street with lights and sirens on

The case, involving the City of Mattoon and the IAFF, started in July 2017 when after a months’ long internal and comparative evaluation, the city determined that due to rising operational, personnel and pension related costs, its ambulance service was no longer sustainable.  Accordingly, the city adopted a resolution seeking the future elimination of its ambulance service effective May 1, 2018, the expiration of the current contract. Once implemented, ambulance services would be solely performed by area private ambulance companies. Not surprisingly, the union filed a grievance attacking the city’s resolution primarily basing its challenge on the Substitutes Act, which was specifically incorporated into the contract. The city denied the grievance and, to no avail, sought to bargain the impact of its decision with the union.

During arbitration, the union argued that the Substitutes Act specifically prohibited the city from replacing qualified firefighters or paramedics with unqualified persons, and that only those who have gone through the appointment process before the City of Mantoon’s Fire and Police Commissioners are properly qualified. As a result, the union claimed, the ambulance service could only be performed by full-time firefighters belonging to the union. The Substitutes Act has been used as both a veritable sword and a shield by unions attesting that no non-bargaining unit members can ever be given work that is currently or previously performed by the unit. If successful, the union would have made it virtually impossible to ever eliminate a service.

The arbitrator rejected the union’s arguments and found that the “Substitutes Act imposes no limitation on the elimination of ambulance services in any municipality… [but] only prevents municipal fire departments from hiring persons “not qualified” for regular appointment…to be used as a temporary or permanent substitute for a municipality’s fire department.” Further, the arbitrator continued, “the Employer is not planning to hire unqualified or uncertified firefighters to staff the ambulance service. The Employer seeks to completely eliminate the city-operated ambulance service…There is no language in the Substitutes Act preventing private ambulance companies from providing ambulance services to municipalities.”

In rejecting the union’s arguments, the arbitrator weakened unions’ typical stance that they need not engage in bargaining pursuant to the Substitutes Act. This award establishes that municipalities are not as hamstrung by the act as unions suggest, and may pursue discontinuing services if doing so presents a more viable alternative to facing a financial crisis. While impact bargaining and other procedural hurdles associated with discontinuing services will still have to be addressed, municipalities now have the latitude to determine the scope of services that are most appropriate for their community.

 

Supreme Court Rules Class Action Waivers Enforceable Ending Uncertainty for Employers

Contributed by Suzanne Newcomb, May 21, 2018

36419114 - hand about to bang gavel on sounding block in the court room

The U.S. Supreme Court ruled this morning that employers can enforce class action waivers included in employment-related arbitration agreements. An arbitration agreement is a contract through which an employee and an employer agree in advance to resolve any disputes that may arise through binding arbitration rather than in court. The issue before the Supreme Court was whether an employer could enforce an arbitration agreement provision requiring each employee to arbitrate his or her disputes individually rather than collectively or as part of a class action. The Court ruled that so called “class action waivers” are enforceable.

For several years the general counsel for the National Labor Relations Board (NLRB) has argued that class action waivers violate Section 7 of the National Labor Relations Act which protects employees’ right to engage in “concerted activity.” The Federal Court of Appeals for the Fifth Circuit rejected this argument, but the Seventh and Ninth Circuits agreed with the NLRB prompting the Supreme Court to look at the issue.

The Supreme Court sided with the Fifth Circuit ruling that employees and employers can agree that future disputes arising between them will be resolved only through binding one-on-one arbitration. The decision provides welcome clarity to employers and their counsel and unequivocally returns a useful tool to the employers’ risk-management toolbox.

Still, the larger question of whether an arbitration agreement is right for your particular business remains. The fact that you can require employees to sign arbitration agreements does not always mean that you should. Employers who are considering asking their employees to sign arbitration agreements should seek the advice of experienced legal counsel and carefully evaluate the pros and cons of submitting various types of employment-related disputes to binding arbitration.

Arbitration agreements – like all contracts – can be challenged on other grounds. If an employer decides, after careful consideration, that an arbitration agreement best fits its needs, care must be taken in drafting and implementing the agreement to guard against allegations that the agreement is unfair or unconscionable, or that the employee’s acceptance of the agreement was the result of fraud or duress.

Can Employees Voluntarily Work During FMLA Leave?

Contributed by Allison P. Sues, May 15, 2018

66028068 - fmla family medical leave act ,fmla

“FMLA Family Medical Leave Act” with doctor in background

Last month, the United States Court of Appeals for the Fifth Circuit issued an opinion that provides a helpful reminder about the extent to which an employer may ask an employee to work during a leave taken under the Family Medical Leave Act (FMLA). In D’Onofrio v. Vacation Publications, Inc., a sales representative requested FMLA leave to care for her husband, who had suffered a major back injury. Her employer gave her two options – she could either go on unpaid leave or she could log on remotely a few times per week during her leave in order to service her existing accounts and keep her commissions. The sales representative opted to continue servicing her accounts during her leave. Later, the sales representative sued her employer and alleged, among other claims, that her employer denied her entitlements under the FMLA by requesting that she work during her leave. The court quickly dismissed this claim because the sales representative had voluntarily agreed to the work. The employer had not coerced this work and had not conditioned the sales representative’s continued employment on completing the work during her leave. The court stated that “[g]iving employees the option to work while on leave does not constitute an interference with FMLA rights so long as working while on leave is not a condition of employment.”

This case serves as an example of a black and white rule – an employer may not condition continued employment on completing work while on FMLA leave or otherwise coerce or require an employee to work while out on FMLA leave. However, there is a lot of gray area surrounding this clear rule. While an employer may not require an employee to complete full assignments or regular work during leave, nothing in the FMLA statute or regulations prohibits an employer from contacting an employee during leave with de minimis requests or short and simple questions. For example, an employer may contact an employee on FMLA leave to request a password to access a file, to locate paperwork, or to obtain a quick update on where a particular matter was left.

To best avoid interference claims under FMLA, employers should limit contact with employees who are on leave. Any communication about work assignments should be short and not require the employee to travel to the workplace or otherwise require the employee to expend significant time or effort. Should an employee voluntarily agree to work during leave, the employer should communicate that the work is not required and document the nature of the voluntary agreement. And, if the employee is out on unpaid FMLA and has agreed to complete some assignments, the employer should ensure the employee is compensated to avoid any wage and hour issues.

 

Revival of Age Discrimination Lawsuit a Warning to Employers

Contributed by Jonathon Hoag, May 8, 2018

At age 58, Dale Kleber was an out of work experienced attorney searching for full-time employment. He applied for a position as a “Senior Counsel, Procedural Solutions” that required the ability to assume complex business projects. The position description also stated that applicants must have at least 3 years but no more than 7 years of relevant legal experience. Kleber had more than 7 years of experience and he was not selected for the position. The employer filled the position with a 29-year-old applicant.

68565758 - book with chapter age discrimination and a gavel.

Book chapter opened to age discrimination and a gavel

Kleber sued under the Age Discrimination in Employment Act (ADEA) alleging the 7-year experience cap had a disparate impact on qualified applicants over the age of 40. The district court dismissed the claim finding that the ADEA’s disparate impact provision does not cover job applicants, relying on the Seventh Circuit’s holding in E.E.O.C. v. Francis W. Parker School, 41 F.3d 1073 (7th Cir. 1994). However, a divided three-judge panel of the Seventh Circuit reversed the dismissal finding that its decision in Francis Parker School had been abrogated by the Supreme Court in Smith v. City of Jackson, 544 U.S. 228 (2005). Circuit Judge William J. Bauer dissented finding the plain language of the ADEA made it clear the disparate impact provision did not apply to outside job applicants.

The Seventh Circuit recognized its holding could be seen as creating a circuit split, but a majority of the judges in active service declined to rehear the case en banc.  For now, the case has been directed back to the district court for Kleber to pursue the merits of his case.

Employers frequently use hiring programs that cater to “recent graduates” to fill entry level positions.  These programs have been addressed by the courts as generally permissible under the ADEA provided there is no implication that persons older than the normal “recent graduate” are disfavored. In other words, “recent graduate” programs are not, alone, evidence of discriminatory treatment based on age.  However, under a disparate impact theory, “recent graduate” hiring programs are risky, as there is likely a disparate impact on older applicants.  Moreover, some states frown upon such job ads and make it discriminatory under state comparable ADEA laws (e.g., New York Human Rights Law).

Employers should use caution with hiring programs that might disparately favor younger applicants – at least until the Supreme Court or Congress determines job applicants are not protected by the disparate impact provision of the ADEA.