Labor and Employment Law

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By Erin L. Kilgore

Last week, the Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against United Airlines, Inc. and alleged that United violated Title VII of the Civil Rights Act of 1964 (which prohibits employment discrimination based on sex, including sexual harassment) by subjecting a female flight attendant to a hostile work environment.

According to the EEOC, a United pilot frequently posted sexually explicit images and personally identifying information of a United flight attendant (his ex-girlfriend) to various websites, and the posts, which were seen by co-workers, adversely affected her work environment.  The EEOC contends that United failed to prevent and correct the pilot’s behavior, even after the flight attendant made numerous complaints and provided substantial evidence to support her complaints.

As explained by a trial attorney in the EEOC’s San Antonio Field Office: “Employers have an obligation to take steps to stop sexual harassment in the workplace when they learn it is occurring through cyber-bullying via the internet and social media.” According to the EEOC, by failing to take action to stop the harassment in response to the flight attendant’s complaints, United enabled the harassment to continue and created a hostile work environment.  United has stated that it disagrees with the EEOC’s description of the situation.

Additional information about the lawsuit can be found in the EEOC’s press release, and summaries can be found here and here.

By Brian R. Carnie

For those who think the chance of being assessed penalties for non-compliance with the Affordable Care Act are slim to none, think again.  The IRS’ efforts to enforce the ACA’s employer mandate are alive and kicking.  Since late November 2017, the IRS has been sending out proposed penalty notices to companies they believe were not compliant.  For now, the IRS is only assessing proposed penalties for the 2015 calendar year.  The notices are rolling out slowly, and the IRS has only mailed out a fraction of the total number of notices expected for 2015.  Moreover, the IRS has indicated they have enough information to start sending out similar notices for 2016.

Because of unfamiliarity with these notices, we are seeing a trend where companies fail to deal with the notice in a timely manner.  They don’t realize they generally only have 30 days from the date the notice was mailed to respond.  In addition, the notices may not even be addressed to the right person at the company.  Or the person receiving it may set it aside with the intention of figuring out how to deal with later.

This could be very costly for your company.

  • In every instance where Kean Miller has seen one of these notices, the estimated penalties have been grossly overestimated.   The reasons for this are varied.  The company may have filled out the informational forms incorrectly, which happens often because there is a lot of room for confusion and error in the IRS forms (e.g., incorrect or omitted indicator codes on the 1095 forms), or the employees themselves may have mistakenly provided incorrect information when applying for subsidized health care on the ACA marketplace website.
  • If your company receives one of these letters from the IRS and doesn’t dispute the penalty amount before the deadline you will have waived your rights to contest the amount.   There are no second chances.  Same can be said if you don’t timely exercise your appeal rights once you receive the IRS response to your protest.
  • If the company does not respond or appeal, the next thing they can expect from the IRS is a demand for payment letter.  The time to dispute the amount will be over, and the IRS will start collection proceedings for non-payment.

In short, the penalty notice letters are real, there is a deadline, and the IRS is (as always) serious.  Non-compliance with the ACA is a legal matter that demands prompt attention to ensure protection of your company’s rights.

By David M. Whitaker

In May the United States Supreme Court issued a long-awaited decision in a trio of cases that concerned whether employers can lawfully use mandatory arbitration agreements containing provisions that preclude employees from pursuing employment claims on a class action basis – and instead require them to pursue their claims in an individual private arbitration proceeding against the employer.  In a 5-4 decision, the Supreme Court decided that such provisions are legal and do not violate the provisions of the National Labor Relations Act, which provide non-management employees with the right to take collective action (including, but not limited to the formation of a union) with respect the terms and conditions of their employment.  See Epic Systems Corp. v. Lewis, Docket No. 16-285 (decided May 21, 2018).

The Epic Systems decision has paved the way for employers to use of such agreements to bar employees from participating in collective action lawsuit under the federal Fair Labor Standards Act, in which a single employee can file suit on behalf of themselves and other similarly situated employees to recover unpaid overtime or to recover for violation of the law’s minimum wage payment requirements.  In these cases, one employee is often able to certify a collective action, and the employer is then required to provide the names and mailing addresses of all similarly situated current and former employees to facilitate the Plaintiff’s attorney solicitation for these employees to join (opt in) the collective action lawsuit.  FLSA collective actions involving relatively small amounts of unpaid wages can result in significant liability, including liquidated (double) damages and an award of attorney fees to the Plaintiff’s counsel.  FLSA collective actions have grown increasingly popular with the Plaintiff’s bar due to the relative ease of certification of a collective action and the availability of statutory attorney fees, which can often dwarf the amount of the wages actually owed.

With the benefit of the Epic decision, it is now clear that a well-drafted mandatory arbitration agreement can be used to prevent employees from pursuing collective action litigation in this manner.  As the dust settles on this important decision, employers should take the opportunity to revisit whether or not mandatory arbitration agreements are appropriate for use with their workforce.

There are certainly benefits that may result from the use of employment arbitration agreements, including:

  • Avoidance of collective and class action lawsuits brought by employees under the FLSA and other state and federal statutes.
  • The employment dispute will be decided by an arbitrator (likely an attorney) who is well-versed in the law and on the average less likely to render a volatile decision than a jury.
  • Arbitration proceedings are private.
  • Discovery (depositions and document requests) is typically more streamlined in arbitration.
  • Arbitration proceedings can be resolved more quickly than some judicial proceedings.

But employers should also consider certain drawbacks presented by the arbitration process:

  • Arbitration of employment disputes are subject to certain “due process” considerations to make the process fair to employees – including the requirement that the employer pay the arbitrator’s fee (in court litigation neither party pays the judge’s salary).
  • Arbitrators are less likely to consider prehearing motions for summary judgment to dismiss the employee’s claims prior to an arbitration hearing. Although the likelihood for success varies with the judicial forum, employers generally have a good success rate on pretrial motions.
  • Some arbitrators have a propensity to try to reach a “fair” result, rather than the correct legal result. In these cases, an arbitrator may decide to “split the baby” and award something to an employee who was treated “unfairly,” even though the claim has no legal merit.
  • As a general matter, there is no right to appeal a bad arbitration award, even when it is clear that the arbitrator’s decision is factually or legally incorrect.

Also, employers should be aware that arbitration agreements will not be effective in preventing government agencies, such as the Equal Employment Opportunity Commission or the Department of Labor, from pursuing enforcement actions on behalf of its employees on a class-wide basis, as the Supreme Court has previously held that government agencies are not bound by the terms of private arbitration agreements.

The Supreme Court’s recent decision certainly provides another reason (avoidance of employee class action lawsuits) for employer’s to reconsider the benefits of mandatory arbitration agreements.  But employers should carefully weigh the costs and benefits unique to their workforce, employment claims experience, the court system in which employment claims are typically brought against the company and other factors before deciding.  Employers who decide to establish an arbitration program for use with employees should also work closely with counsel to ensure that the agreement is tailored to meet the employer’s needs and to ensure that the agreement is drafted in a manner that will be enforceable.

By Erin L. Kilgore

On July 17, 2018, the Equal Employment Opportunity Commission (“EEOC”) announced that Estée Lauder Companies will pay $1,100,000 and provide other relief to settle a class sex discrimination lawsuit filed by the EEOC.

In 2017, the EEOC filed suit against Estée Lauder in federal court in Pennsylvania.  The EEOC alleged that Estée Lauder discriminated against a class of 210 male employees in violation of the Equal Pay Act and Title VII of the Civil Rights Act of 1964, by providing them, as new fathers, less paid leave and related benefits for child bonding than it provided to new mothers. (The parental leave at issue was separate from the medical leave female employees received for childbirth and related issues). The EEOC also alleged that the company unlawfully denied new fathers certain return-to-work benefits that it provided to new mothers.

On July 17, the court entered a consent decree resolving the lawsuit.  Pursuant to the consent decree, Estée Lauder agreed: (1) to pay a total of $1,100,000 to the class of male employees who, under Estée Lauder’s parental leave policy, received two (2) weeks of paid parental leave when new mothers received six (6) weeks of paid leave for child-bonding after their medical leave ended; (2) to administer parental leave and related return-to-work benefits in a manner that ensures equal benefits for male and female employees and utilizes sex-neutral criteria, requirements, and processes; and (3) to provide training on unlawful sex discrimination and allow monitoring by the EEOC.

The EEOC’s full press release can be found here.

By David M. Whitaker

Employer compliance with the requirements of the Americans with Disabilities Act (ADA) has been among the EEOC’s top enforcement priorities under the Trump Administration. And a string of recent enforcement actions brought by the EEOC makes clear that the Agency will continue to be aggressive with respect to how employers manage employee return to work issues.  On June 6, 2018 the EEOC announced its entry of a $3.5 million consent decree against Dotty’s, a Las Vegas slot machine tavern operator, because the Agency found its return to work policies, which included a “100% healed” requirement, violated the ADA.

As most employers are aware, the 2008 amendments to the ADA greatly expanded the definition of what is considered a protected “disability.” As a result of this expansion, many injuries (whether suffered on or off the job) and illnesses that result in employee medical leaves of absence are the result of underlying conditions that may arguably qualify as a protected “disability” for ADA purposes – even where the condition is not permanent.

In many cases, an employee on medical leave of absence may be given a release to return to work with some restrictions (such a limits on lifting, maximum number of work hours, or other physical activities, like climbing). A key requirement of the ADA is that employers provide “reasonable accommodation” to an employee with a disability that will allow the employee to perform the essential functions of the job.  That might require the employer to make modifications to the workplace or to re-assign non-essential job duties to other employees.  What is a “reasonable” accommodation will depend upon the facts of each situation, but the ADA makes clear that an employer is required to engage in an interactive dialogue with the employee to determine what is reasonable under the circumstances.

In the return to work context, some employers have taken the position that an employee must be “100%,” or released to return to work “without restriction” before the employer will permit the employee to return to active employment. The reasoning of such employers is often out of concern that an employee who is less than fully recovered from an earlier injury or illness poses an increased threat to the health and safety of the employee and his co-workers. Notwithstanding these concerns, the EEOC’s longstanding position is that these kinds of policies are unlawful because they are inconsistent with the interactive reasonable accommodation dialogue that is at the heart of the ADA.  According to EEOC guidance regarding employer-provided leave, “An employer will violate the ADA if it requires an employee with a disability to have no medical restrictions — that is, be “100%” healed or recovered — if the employee can perform her job with or without reasonable accommodation…” Federal courts, including the Fifth Circuit, have likewise found return to work with “no restrictions” policies to be unlawful.

In addition to requiring the employer to discontinue these practices and assessing $3.5 million in monetary relief for the benefit of the affected employees, the consent decree also requires the employer to coordinate with the EEOC regarding re-employment opportunities for employees, to develop effective workplace disability leave policies, to engage a consultant to monitor its compliance with the terms of the consent decree and to provide ADA training to its employees and supervisors.

The EEOC has sued other employers in a string of cases that have ended with similar consent decrees that included substantial monetary awards to the affected employees: Lowe’s Company ($8.5 million); American Airlines ($9.8 million) and United Parcel Services ($1.7 million).

In a press release announcing the Dotty’s consent decree, the EEOC said the suit was filed as part of the Commission’s continuing “quest to identify and eradicate systemic disability discrimination.” The message from these EEOC enforcement actions is clear – ADA and return to work issues are a priority enforcement concern for the Agency, and employers should take the time to review their medical leave and return to work policies and practices to ensure they are ADA compliant.

By A. Edward Hardin, Jr.

Bloomberg Law and the Tampa Bay Times reported that Florida Senator Marco Rubio announced the he would soon release proposed federal legislation creating paid family leave.  No details regarding the proposed legislation were released.  The Family and Medical Leave Act of 1993 (or as its commonly known – the FMLA) established a federal system for leave under certain circumstances for eligible employees who worked for covered employers.  FMLA leave is unpaid leave, but employees can elect, or employers can require, that certain periods of paid leave be substituted for unpaid FMLA leave.  Unlike the FMLA, Sen. Rubio’s legislation apparently would provide for paid leave.  Stay tuned.  For more click here.

 

By Chelsea Gomez Caswell

In recent years, the National Labor Relations Board’s joint employer standard has been in a state of flux, making it hard (if not impossible) for employers to feel like they can get a handle on this important standard and plan/organize/prepare accordingly. This week, we have again seen movement from the NLRB on the issue.

On June 5th, Chairman John Ring issued a letter to several U.S. Senators concerning the NLRB’s announcement that it plans to go through the notice and comment rulemaking process to address the joint employer conundrum. That letter may be found here.  In his letter, Chairman Ring confirmed that the “NLRB is no longer merely considering joint-employer rulemaking” but that a “majority of the Board is committed to in rulemaking.” The NLRB is working to issue a Notice of Proposed Rulemaking as soon as possible, and indicated that it will certainly be issued by this summer. Chairman Ring opined that notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the joint employer standard ought to be, as compared to the NLRB’s traditional case-by-case adjudication. The letter stated that rulemaking is appropriate for the joint employer subject because it will allow the NLRB to consider the issue in a comprehensive manner and “will enable the Board to provide unions and employers greater ‘certainty beforehand as to when [they] may proceed to reach decisions without fear of later evaluations labeling [their] conduct an unfair labor practice.’”

Consistent with the June 5th letter, the NLRB announced that it will not reconsider its order (Hy-Brand II) vacating the controversial ruling (Hy-Brand I) that most recently addressed the standard for joint employer status under the NLRA. Instead, the NLRB simultaneously released a separate decision and order, replacing Hy-Brand I, holding that Hy-Brand and Brandt were commonly owned and managed companies constituting a “single employer;” thereby avoiding the need to address Hy-Brand’s status as a joint employer. Therefore, the Hy-Brand I definition of joint employer (holding that businesses can be joint employers of a group of employees only if each has exercised direct and immediate control over those employee) will not be the NLRB’s controlling standard, at least for the time being. The NLRB’s full docket activity for the Hy-Brand proceedings may be found here.

So where do we stand until the NLRB completes the rulemaking process you ask? The Hy-Brand II decision to vacate Hy-Brand I effectively restored the NLRB’s 2015 decision in Browning Ferris Industries of California, Inc. which expanded the definition of joint employment beyond those employers that exercise direct control and authority over employees’ terms and conditions of employment to include employers that share indirect or potential control over a group of employees.

And now we wait for the completion of the rulemaking process to see where the pendulum will land—whether a Hy-Brand I or Browning Ferris type definition will carry the day.

 

By A. Edward Hardin, Jr.

A recent story from New Orleans demonstrates that overtime violations can be costly.  In the case of a New Orleans bakery that paid employees for overtime at their straight time rate and paid some workers in cash, the issue cost the employer over $125,000 in back wages alone.  Pursuant to the federal Fair Labor Standards Act, non-exempt employees are entitled to a half-time premium for all hours worked over 40 in a workweek (i.e., employees must receive “time and a half” for overtime hours).  In the case of the New Orleans bakery, the employees were paid their regular rate of pay for the hours worked, but were not paid the half-time premium for their overtime hours, a major issue under the FLSA.  For more on the story, click here and here.

By A. Edward Hardin, Jr.

America’s dad, America’s newscaster, and Louisiana’s Secretary of State all recently occupied headlines regarding allegations of sexual misconduct.  Last month, a Norristown, Pennsylvania jury found Bill Cosby guilty of three counts of sexual assault.  This was the same Bill Cosby who played the role of Dr. Cliff Huxtable on The Cosby Show in the 1980s and early 1990s, was formerly known as “America’s Dad,” and was named as the greatest television dad of all time.  That same week, former NBC News anchor Tom Brokaw was accused of making unwanted advances toward a former NBC correspondent.  Then, May kicked off with the announcement that Louisiana’s Secretary of State, Tom Schedler, had resigned amid allegations of sexual harassment by a former employee.  These recent headlines clearly demonstrate the need for effective policies and training at all levels on issues of sexual harassment and discrimination.  If employers ignore training opportunities and the chance to get ahead of the issues, you or your business may be in the next round of headlines.  Be proactive, it’s important.

For more on these recent headlines, see the following links:

By Ed Hardin

On April 2, 2018, the United States Supreme Court issued its opinion in Encino Motorcars, LLC v. Navarro.  In a 5-4 decision, the Court ruled that automobile service advisors are not entitled to overtime under the federal Fair Labor Standards Act (“FLSA”).  In the Encino Motorcars case, the Court was asked to decide whether automobile dealership service advisors were exempt from federal overtime requirements based on an FLSA exemption for salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles, trucks, or farm implements.  The Supreme Court held that the service advisors in question were exempt employees under the FLSA.  As Fox Business reported, the decision affects more than 18,000 dealerships and more than 100,000 service advisors.  However, the case has much broader implications, well beyond automobile dealerships.  In its decision, the five justice majority stated that pursuant to “a fair reading” of the exemption in question, service advisors were exempt from overtime because the service advisors sell goods or services.  Although the Court’s specific holding is somewhat narrow (applying to automobile service advisors), how the Court arrived at the holding represents a major shift in interpretation of the U.S. Department of Labor Wage and Hour Division’s regulations on the FLSA exemptions.  For decades, exemptions from overtime requirements were narrowly construed to provide overtime coverage under the FLSA.  In the Encino Motorcars case, the Supreme Court expressly rejected a narrow construction of the exemption “as a useful guidepost for interpreting the FLSA” in favor of a fair reading.  As the Court remarked, “We have no license to give the exemption anything but a fair reading.”  The door may now be open for employers and the courts to give less restrictive readings to FLSA exemptions in favor of a more “fair reading” of those exemptions, which may in turn lead to fewer employees being entitled to overtime, but may also certainly lead to more litigation.  For more on the decision see: https://www.foxbusiness.com/markets/supreme-court-rules-for-car-dealerships-in-overtime-case or http://www.latimes.com/politics/la-na-pol-court-autos-overtime-20180402-story.html