Reminder: Review Your Record-Keeping Procedures

laptop-file-cabinet (2)Employment laws regularly include record keeping requirements.  And while these requirements are rarely front and center, they can rear their head and open companies to legal action.  This month the EEOC filed suit in Philadelphia against a nationwide provider of janitorial and facilities management services for failing to maintain records and other information relating to how its employee selection procedures impact equal employment opportunities.

Under Title VII, covered employers must maintain records that disclose the impact that their selection procedures have on employment opportunities of individuals identifiable by race, sex, or ethnic group. In this lawsuit, EEOC claims that the company failed to make and keep records of applicants’ criminal background checks and criminal history assessments, information that they use to make ultimate hiring decisions.  According to the EEOC, these records are necessary to show the impact that the company’s selection procedures have on individuals identifiable by race, sex, or ethnic group.  The EEOC is seeking an injunction requiring the company to make and keep these records.  This case is an important reminder for employers to ensure that they are properly making and keeping the records required by applicable federal, state, and local statutes and regulations.

Given the EEOC’s focus on records regarding criminal history and background checks, companies should also confirm compliance with federal, state and local laws regarding background checks, and how and when they are conducted and used.  As we have previously discussed in this blog, a growing number of state and local governments have enacted “Ban-the-Box” legislation, putting restrictions on when criminal history information may be gathered.  Companies that haven’t recently reviewed policies and procedures relating to retention of employee and applicant information, or that haven’t carefully considered whether their use of background checks is legally compliant, should do so.

The Steep Consequences of Misclassification

Two recent developments are a good reminder that companies who have independent contractors are under increased scrutiny and face a high bar in establishing that independent contractors are properly typingclassified as such — and not employees.

On July 15th, the Department of Labor issued a guidance saying that most workers qualify as employees under the Fair Labor Standards Act (FLSA) regardless of what the worker and the company may have agreed to. The guidance doesn’t announce a new test for independent contractor status. Instead, it starts with the “economic realities” test for independent contrator status that courts regularly use and a reads it together with a broad view of the FLSA’s definition of employ to reach a conclusion that most independent contractors are misclassified and should, instead, be treated as employees.

The DOL’s guidance was close on the heels of a decision by the Seventh Circuit Court of Appeals, which reversed the lower court and ruled that FedEx delivery drivers are employees under Kansas state law, not independent contractors.  In making its decision, the 7th Circuit certified the question of whether the drivers were employees under the Kansas Wage Payment Act to the Kansas Supreme Court.  The Kansas Supreme Court, applying a 20-factor test, found that the drivers were employees because FedEx, among other things, assigns drivers their routes; requires them to check in with FedEx managers at the start of their day; regulates their appearance; and decides whether to hire a driver after the driver submits resumes and references like any other employee.

So what are the consequences of misclassification?  Companies that misclassify employees as independent contractors face penalties for failing to pay employment taxes, for failing to withhold taxes from pay, for failing to comply with wage and hour requirements (such as overtime), for failing to contribute to unemployment compensation, and for failing to comply with other employment-related laws.  In addition, the Affordable Care Act opens companies that misclassify workers to significant penalties — both based on failure to offer coverage to the required portion of the workforce and where a misclassified worker obtains coverage on an exchange.

In light of these developments, we strongly recommend that any company that has independent contractors work with counsel to determine if these workers are properly classified.  A thorough review now could save you lots of money, time, and aggravation later.

Is Your Company Ready For A Union Campaign?

vote-unionThe NLRB’s “ambush election rules” – which became effective this Spring – continue to be challenged by business trade groups. See previous blog posts. These groups, however, have yet to persuade a court that the rules violate any laws.  What that means is that employers should take precautionary steps to prepare for a union organization effort, rather than waiting for a petition to be filed. If you wait for that petition, you won’t have much time at all (as little as 10-21 days) to effectively communicate with your employees .

What can be done now?

  • Training. Your managers/supervisors need to know how to detect union “storm warnings.” They should be aware – and immediately inform higher management – of:
    • Employee complaints changing or increasing
    • Employees being out of normal areas
    • Employees being on premises while “off duty”
    • Employees making unusual requests for information and materials concerning job descriptions, pay, benefits, compensation, policies, etc.
    • Employees asking unusually aggressive or argumentative questions at group meetings
    • Normally talkative and open employees avoiding speaking with managers/supervisors
    • Employee group conversations quieting down when managers/supervisors pass by
    • Lunchroom, locker room, and bathroom cartoons and graffiti
    • Over-qualified job applicants with spotty backgrounds
    • Employee complaints being made by groups of individuals
    • Strangers on company premises
    • Use of unusual technical language by employees
  • Communicate now. Educate your employees on the company’s position on unions and unionization now. Make sure your managers/supervisors are maintaining an open door policy with their employees and continue to train them on effective communication.
  • Review your policies and practices. Make sure all employment policies and practices are compliant with employment laws and the views of the NLRB.
  • Develop campaign materials in advance if any “storm warnings” are detected. You want campaign materials at your fingertips when a petition is filed so you can start campaigning right away.

The future of the NLRB’s new election rules is unknown. But as of right now, they stand, and employers need to be prepared.

DOL Announces New Proposed Minimum Salary for Overtime Exemptions

600px-US-DeptOfLabor-Seal_svgThis morning the Department of Labor announced that it is seeking to increase the number of employees eligible for overtime pay by increasing the minimum salary required if an employee is to be considered exempt under the administrative, executive and professional exemptions.  The proposed increase would take the minimum annualized salary from $23,660 to $50,440.  In addition, under the proposed rule the threshold for the FLSA’s Highly Compensated Employee exemption would rise from $100,000 to $122,148.  Both the minimum salary and the Highly Compensated Employee threshold would be indexed for inflation. The DOL also suggested that it may seek other changes to limit the available overtime exemptions.  If this change becomes a final rule, we would expect it to become effective in 2016.

Note that even if employees meet the higher minimum salary requirement, they still must meet the other requirements for exempt status — being paid on a salary basis and satisfying one of the duties tests — to qualify as exempt from overtime requirements.

No action is necessary at the moment as the proposed rule is not final.  We will keep you updated on future developments.

What Does The Supreme Court’s Same-Sex Marriage Ruling Mean For You?

On June 26th, in a ground-breGay_flag_svgaking decision, the Supreme Court ruled that same-sex couples have a constitutional right to marry. Full text of the Court’s decision in Obergefell, et al. v. Hodges, et al. can be found here.

But beyond the general public response, employers need to consider how the ruling will impact employment policies and practices — especially in states that previously have not recognized same-sex marriages.  Following are some of the areas where employers might see Obergefell’s impact:

Employee Benefit Plans

If you offer any employee benefit plans through a separate insurance company, all “spousal” benefits must now be extended equally to same-sex spouses as they are to opposite-sex spouses. You may not be under the same restraints if you are self-insured, but if you deny benefits to same-sex spouses in this instance, you run a high risk of discrimination lawsuits.

It’s a good time to review your employee benefit plans and the costs associated with these plans. You should anticipate that the Court’s ruling may add some new couples — and associated costs — to your plans, especially if you did not previously offer benefits to domestic partners or same-sex spouses.

Equal Employment Opportunity

Marital status is a protected class under many state and local laws. These laws now protect all married people, including those in same-sex marriages.

Family and Medical Leave Act

As we discussed in a previous post, the FMLA has recently been amended to include same-sex spouses in the definition of “spouse.” Given the heightened publicity of the Court’s ruling, be sure to review your FMLA policies and practices to ensure that same-sex spouses are included.

Additional Policies and Practices

We recommend reviewing your employee handbook and any other employment policies to make sure that the policies as written – and in practice – apply equally to employees in same-sex marriages or rely on a qualification other than marriage.

Supreme Court Speaks on Religious Accommodation

supreme court sealYesterday, the Supreme Court handed down its decision in EEOC v. Abercrombie & Fitch Stores, Inc., ruling in favor of a Muslim woman who claimed that she was denied employment at an Abercrombie & Fitch (A&F) store because she wore a headscarf.  With this decision, the Supreme Court sent a clear message: an employer may not make a hiring decision based on an applicant’s need for a religious accommodation, regardless of whether the employer had actual knowledge of such a need.

Samantha Elauf (Elauf) is a practicing Muslim who wears a headscarf for religious reasons. Elauf claims that she applied for a job at an A&F store and that, although she was otherwise qualified to be hired, she was ultimately denied employment because her headscarf would violate A&F’s “Look Policy.” The Look Policy prohibits “caps” because they are too informal for A&F’s desired image. Elauf never identified her headscarf as religious to anyone at A&F, nor did she ever communicate a need for any religious accommodation.  The EEOC sued A&F on Elauf’s behalf, claiming that A&F’s refusal to hire her violated Title VII.  In response, A&F argued that it could not be found to have discriminated against Elauf by failing to priovide a religious accommodation unless it had “actual knowledge” of Elauf’s need for a religious accommodation.  The district court disagreed with A&F’s argument and held in favor of Elauf the EEOC.  However, the Tenth Circuit reversed, agreeing with the “actual knowledge” standard put forth by A&F.

The Supreme Court reversed the Tenth Circuit and remanded the case for further consideration, holding that, under Title VII, an applicant only needs to show that her need for an accommodation was a “motivating factor” in the employer’s decision — she need not show that the employer had actual knowledge of the need for an accommodation. In other words, an “employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions” [emphasis added]. The Court gave as an example a situation where an employer thinks (but doesn’t know for sure) that a job applicant may be an orthodox Jew who will observe the Sabbath and thus unable to work on Saturdays. If the applicant actually does require accommodation of that religious practice and the employer’s wish to avoid the accommodation is a motivating factor in its decision to not hire the applicant, the employer violates Title VII. The Court was clear in its decision that its ruling only applies to accommodation under Title VII, and not to accommodation under the Americans with Disabilities Act (ADA), which follows a different framework.

The take away here?  Employers need to avoid basing employment decisions on any protected characteristic — whether confirmed or suspected. Although this case centered on a hiring decision and the anticipated need for an accommodation, it should apply equally to other terms and conditions of employment.

We recommend that managers, supervisors and those involved in the hiring process be trained on the legal requirements surrounding equal employment opportunity and on how to appropriately respond to requests for  — or other information suggesting that there is a need for — an accommodation.

Full text of the EEOC v. Abercrombie & Fitch Stores, Inc. decision can be found at:  http://www.supremecourt.gov/

DOL Releases Busy Spring Agenda

600px-US-DeptOfLabor-Seal_svgThe U.S. Department of Labor (DOL) has released its spring 2015 regulatory agenda, which provides a window into what we can expect from the agency over the coming months.  The agenda provides updates on 70 rulemaking measures and suggests that — with President Obama’s term approaching its end —  the DOL is putting its rule-making into high gear.

Here are some highlights from the agenda:

Overtime Pay

The DOL indicates that we should see the proposed rule redefining the white-collar exemption under the Fair Labor Standards Act (FLSA) in June. As we reported last year, President Obama has directed Labor Secretary Thomas Perez to “modernize and streamline” the regulations defining this exemption for executive, administrative, professional, outside sales, and computer employees. We expect that the proposed rule will narrow the white-collar exemptions, resulting in fewer employees qualifying as exempt from overtime requirements.

Use of Technology during Non-Working Hours

Also on the agenda is information seeking – in the pre-rule stage – on “the use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours.” It appears that the DOL is seeking this information with an eye toward proposing a rule clarifying how this type of 21st Century off-the-clock work is compensated (likely to the benefit of employees).  The request for information is expected in August.

Reporting under the Labor-Management Reporting and Disclosure Act

Lastly, the DOL agenda also indicates that we should expect a controversial final rule on the narrowing of the “advice” exception under the Labor-Management Reporting and Disclosure Act (LMRDA) in December. The LMRDA requires employers and labor relations consultants (or other similar individuals) to report any agreement or arrangement they have to engage in activities to persuade employees concerning the right to organize or bargain collectively.  The LMRDA contains an exception for “advice,” stating that no employer or consultant has to file a report concerning services of a consultant if that consultant just gives “advice” to the employer. The proposed rule would limit the definition of “advice” to “oral or written recommendations,” so that any other activity would need to be reported.  This proposed rule has been on the books for a number of years and continues to face serious opposition from many groups — including the American Bar Association — because it raises critical concerns about attorney-client privilege.  We expect lengthy legal challenges to this rule.

It should be a busy second-half of the year for the DOL. We will keep you updated on any new developments.

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