Arbitration Agreements

Illinois Passes Workplace Transparency Act and Other Legislative Changes Intended to Fight Workplace Harassment and Discrimination

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In the latest of a series of major legislative development affecting Illinois employers, Governor Pritzker signed Public Law 101-0221 on August 9, 2019, which includes the new Workplace Transparency Act (the “WTA”) and also makes changes to the Illinois Human Rights Act and various other current laws. The WTA is an outgrowth of the #metoo movement and is intended to prevent harassment in the workplace and ensure incidents of harassment and discrimination are not kept buried from public disclosure, as allegedly happened for many years in the Harvey Weinstein situation. Most provisions of Public Law 101—0221 go into effect on January 1, 2020. The new legislation will impact what sorts of agreements can be put in place with employees, prospective employees, and former employees, how disputes relating to harassment and discrimination can be resolved, the training that must be conducted by employers, and what information about judgments and settlements must be disclosed to the government.

Restrictions on Agreements with Employees, Prospective Employees, and Former Employees

The WTA prohibits “[a]ny agreement, clause, covenant or waiver that is a unilateral condition of employment or continued employment” and that:

  • has the purpose or effect of “preventing an employee or prospective employee from making truthful statements or disclosures about alleged unlawful employment practices” or
  • “requires the employee or prospective employee to waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice to which the employee or prospective employee would otherwise be entitled under any provision of State or federal law….”

The WTA clearly is targeting, in the first place, confidentiality and non-disparagement provisions that are imposed unilaterally by an employer and that purport to bar an employee from disclosing unlawful employment practices and, in the second place, mandatory arbitration agreements, jury waivers, and similar terms imposed unilaterally by employers that make it more difficult for employees to vindicate their rights.

The attempt to restrict the use of arbitration agreements by employers may run afoul of federal law which contains an expressed policy in support of such agreements as stated in the Federal Arbitration Act. This potential conflict between State and federal law likely will be sorted out in future litigation.

Certain Mutual Employment Agreements Qualify for Different Treatment

The WTA sets up two exceptions to the general prohibitions described above. First, an employer is permitted to enter into an agreement that would otherwise violate the WTA if the agreement “is a mutual condition of employment,” is in writing, is supported by “actual, knowing, and bargained-for consideration from both parties,” and does not prevent an employee or prospective employee from: (1) reporting good faith allegations of unlawful employment practices to appropriate federal, State, or local agencies enforcing discrimination laws, (2) reporting good faith allegations of criminal conduct to appropriate federal, State, or local officials, (3) participating in a proceeding enforcing discrimination laws, (4) making any truthful statements or disclosures required by law, regulation, or legal process, or (5) requesting or receiving confidential legal advice.

Settlement and Termination Agreements Also are Treated Differently

The second exception under the WTA involves “valid and enforceable settlement or termination” agreements that include promises of confidentiality related to alleged unlawful employment practices. To qualify for the exception, the following criteria must be met:

  1. “[C]onfidentiality is the documented preference of the employee, prospective employee, or former employee and is mutually beneficial to both parties”;
  2. The employer must provide notice, in writing, of the employee, prospective employee, or former employee’s right to have an attorney review the agreement;
  3. There must be valid, bargained for consideration “in exchange for the confidentiality”;
  4. There must not be a waiver of claims that accrue after the date of the agreement;
  5. The employee, prospective employee, or former employee must be given 21 days to review the agreement; and
  6. “[U]nless knowingly and voluntarily waived,” the employee, prospective employee, or former employee must be given 7 days to revoke the agreement.

It is worth noting that the WTA makes clear that employers can still require individuals to keep allegations of unlawful conduct confidential if they receive complaints or investigate them as part of their job or if they are a participant in an investigation.

New Training Requirements

Also part of Public Law 101-0221, a new provision has been added to the Illinois Human Rights Act that will require employers to provide annual sexual harassment prevention training to employees. The Illinois Department of Human Rights has been directed to produce a model training program, and employers will be able either to use that model program or one of their own that equals or exceeds the minimum standards. Beyond describing the subjects that must be part of the program, the legislation gives few details about how long the training must be, whether it must be participatory, and whether it must be in-person. One helpful part of the legislation is that employers who do not comply with the training requirement will be given a thirty-day period after being cited during which they can provide the training.

Expansion of IDHR Coverage

Besides the new training provision described above, Public Law 101-0221 also expands the Illinois Human Rights Act by adding protection based on perceived membership in a protected class, adding a new definition of “harassment,” providing protection from harassment for nonemployees (i.e., contractors and consultants) who provide services to an employer, and making clear that an employer’s “work environment” is not limited to the physical location to which an employee is assigned. The legislation also makes clear that an employer will not be liable for the harassment carried out by non-managers and non-supervisory personnel unless the employer becomes aware of the conduct and fails to take reasonable corrective measures. This mirrors the treatment under federal law for non-managers and non-supervisory personnel.

New Reporting Requirements

Beginning in July of 2020, employers who have experienced an adverse judgment involving sexual harassment or workplace discrimination in the prior calendar year will be required to make certain reports to the Illinois Department of Human Rights. The Department of Human Rights also will have expanded powers to request settlement information as part of an investigation of a charge. Information shared with the Department of Human Rights will not be subject to Illinois’ FOIA law.

Expansion of VESSA

Finally, Public Law 101-0221 also amended Illinois Victims’ Economic Security and Safety Act (VESSA). This statute protects victims of sexual and domestic violence and certain family and household members from discrimination and gives them certain leave and accommodation rights. With the changes recently enacted, VESSA now also protects victims of gender violence, which is defined as “(A) one or more acts of violence or aggression satisfying the elements of any criminal offense under the laws of this State that are committed, at least in part, on the basis of a person’s actual or perceived sex or gender, regardless of whether the acts resulted in criminal charges, prosecution, or conviction; (B) a physical intrusion or physical invasion of a sexual nature under coercive conditions satisfying the elements of any criminal offense under the laws of this State, regardless of whether the intrusion or invasion resulted in criminal charges, prosecution, or conviction; or (C) a threat of an act described in item (A) or (B) causing a realistic apprehension that the originator of the threat will commit the act.”

What Should Illinois Employers Do Now?

Faced with the above provisions, Illinois employers likely will want to take several steps.

First, because it will be difficult to show that an agreement is “mutual” for purposes of the WTA, employers will want to assume that most agreements signed by employees as a standard condition of their employment are going to be “unilateral.” For these agreements, the safest route will be to carve out an employee’s right to make truthful statements or disclosures about unlawful employment practices and to remove any provisions that might diminish an employee’s right to pursue employment-related claims.

Second, for certain agreements with high-level executives that are truly the product of bargaining and for settlement and termination agreements, to the extent terms are included that otherwise would violate the WTA, employers will want to make sure that the agreements contain appropriate recitations demonstrating that one of the exceptions in the statute would be applicable.

Third, employers will want to make sure they revise their policies and handbooks to reflect the protection of nonemployees from harassment and the changes to VESSA.

Fourth, employers will want to begin planning to conduct annual anti-harassment and discrimination training.

To the extent you have more questions about the WTA and the other provisions of Public Law 101-0221, you should feel free to contact us.

 

Google stops requiring arbitration of employment claims

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It was less than a year ago that the Supreme Court ruled that employees could be required to individually arbitrate claims (and waive their right to participate in a class action), but arbitration agreements aren’t a silver bullet.  In fact, some employers are responding to local legislation and employee resistance by pulling back from arbitration requirements.

Just last week, Google responded to employee protests and announced that it would no longer require its workers to arbitrate employment related claims.  Read more about Google’s decision here.

Whether or not employee arbitration agreements make sense is a very company-specific decision.  Think carefully about what you’re trying to accomplish with these agreements and talk to your legal counsel about the risks and benefits.

Supreme Court Permits Class Action Waivers In Arbitration Agreements

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As a follow up to our post last year, this week, in a 5-4 decision, the Supreme Court rejected the National Labor Relations Board’s position that class waivers in arbitration agreements violate federal labor law. The Court held that employers can legally require their employees, as a condition of employment, to agree that they will not pursue class action claims against their employers, but rather address legal issues through individual arbitration.

Writing for the majority, Justice Neil Gorsuch stated simply that, “The [Federal] Arbitration Act requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select.” In support of the decision, he compared the “simplicity and inexpensiveness” of arbitration to “slower, more costly” class actions, which are, in the view of the majority, “more likely to generate procedural morass than final judgment.”

The effects of the decision remain to be seen – Justice Ginsberg read her dissent from the bench, calling for Congress to address the matter. For now, though, employers with arbitration agreements in place will want to add a class-action waiver, and those that do not use arbitration agreements at all may want to reconsider that approach.

 

Supreme Court To Determine Permissibility of Class Waivers In Employment Arbitration Agreements

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pillarsLast month, the Supreme Court agreed to resolve a circuit split over whether class action waivers — mandating that any claims brought against the employer be brought individually rather than as a class — contained in employment arbitration agreements violate employees’ rights under the National Labor Relations Act. The Court recently announced that it would decide the highly-anticipated case in its 2017 term, beginning in October. Both the Seventh and Ninth Circuits have struck down class action waivers in arbitration agreements. The Fifth, Second, and Eighth Circuits have held the opposite. We will update when the Supreme Court has made its decision. In the meantime, companies should consider the rule in their circuit before rolling out new employment arbitration agreements.

 

Update on the EEOC’s Fight Against Separation Agreement Language Allegedly Limiting Employee Rights

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EEOC LOGOAs we have blogged about before (see related post links below), the EEOC has said one of its priorities is to challenge separation agreements that, in its view, interfere with the ability of employees to file charges with the EEOC or participate in investigations.

On December 2, the EEOC’s efforts in this area took another hit. A Colorado judge tossed out the EEOC’s claims against CollegeAmerica Denver Inc. relating to the company’s separation agreements, although the judge permitted the EEOC’s claims of retaliation to move forward. EEOC v. CollegeAmerica Denver Inc. The court ruled that the EEOC had not made an adequate effort to conciliate the claims relating to the separation agreements.

Earlier this year, a similar case against CVS also was dismissed on other grounds before the court addressed the separation agreement issue. The EEOC recently appealed the CVS decision to the 7th Circuit.

And it’s not just about separation agreements anymore either; in September, the EEOC sued Doherty Enterprises for using pre-employment arbitration agreements that allegedly interfered with the rights of employees to file charges and participate in investigations. EEOC v. Doherty Enterprises Inc.

Though the EEOC hasn’t had much success in court to date, companies should review their separation and arbitration agreements to ensure that they carve out employee rights relating to the EEOC process. Otherwise, they risk ending up in the EEOC’s cross hairs.

Another Court Rules in Favor of Class Action Waivers

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gavelpictureOn March 21, 2014, the Eleventh Circuit Court of Appeals (which covers Alabama, Florida, and Georgia) became the fifth federal circuit court to reject arguments against arbitration agreements containing class waivers, joining the Eighth, Second, Fifth, and Ninth circuits in enforcing such agreements.

In the Eleventh Circuit case (Walthour v. Chipio Windshield Repair), employees brought a class action alleging their employer violated the Fair Labor Standards Act by not paying them required minimum and overtime wages. The defendants moved to compel arbitration, citing agreements the plaintiffs had signed which stipulated that all employment disputes were to be resolved through individual arbitration. In the end, the court sided with the employer and the lower court, ruling that the arbitration agreements were enforceable and that the class action could not move forward.

As discussed in our earlier post Tide Continues in Favor of Class Action Waivers in Arbitration Agreements, more employers are using these types of agreements to reduce the risk of class claims. The Walthour decision continues a trend of court cases in favor of the agreements.

There are advantages and disadvantages to arbitrating disputes with employees, but for employers that fear class claims, either because of the nature of their workforce or their industry, arbitration agreements can make a great deal of sense.

Court of Appeals Deals a Blow to NLRB and a Boon to Individual Arbitration

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In a long awaited decision in the D.R. Horton casegavelpicture, the 5th Circuit Court of Appeals ruled yesterday that an employer was within its rights to require employees to sign an arbitration agreement that mandated individual arbitration (i.e. not allowing for class claims).  The National Labor Relations Board had taken the position that employees’ right to engage in concerted activity means that they cannot waive their right to participate in class or collective litigation or arbitration.  The court disagreed, finding that the Federal Arbitration Act required that the arbitration agreement be enforced as written.  This is a significant win for employers that seek to avoid class and collective actions by requiring employees to sign arbitration agreements that require that claims be brought individually.  Employers using or considering such agreements should take heed, though, at the court’s finding that arbitration agreements need to make clear that they do not prohibit an employee from filing charges with the NLRB.

Employment Law Update: A Look Back and a Look Ahead

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This year, LP’s Labor & Employment attorneys tried something different with our annual “Employment Law Update” and hosted the program as a webinar. The new format allowed us to record this year’s program and make it available for all our blog friends, colleagues and clients who were unable to participate.  LP labor and employment attorneys Peter Donati, Laura Friedel and Kenneth Kneubuhler highlighted recent updates in labor and employment law and tips to keep your workplace practices current.

You can find the recording here and the presentation materials here.

To give you an idea of what topics are covered in this year’s “Employment Law Update” here are the topics we discussed:

•The impact of recent Supreme Court decisions on supervisor liability and the burden of proof for retaliation claims

• Trends involving arbitration agreements: Will they prevent class claims?  Should your business be using them?

• Same sex marriage: How it affects employee rights under the FMLA and benefit plans

• Recent Illinois cases involving non-compete agreements.  Will your agreements be enforceable when you need them?

• New developments at the National Labor Relations Board that affect both union and non-union workplaces

• How to properly use background checks to avoid scrutiny by the EEOC and avoid violating state laws

• Current wage and hour issues, including developments involving interns and independent contractors

• Other important state law trends, including laws on concealed weapons, medical marijuana, and social media passwords

Tide Continues in Favor of Class Action Waivers in Arbitration Agreements

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On Friday, the U.S. Court of Appeals sitting in New York handed down its decision in Sutherland v. Ernst & Young, giving employers yet another leg up in enforcing requirements that their employees forego class actions and pursue their claims individually in arbitration.

Since the Supreme Court’s decision two years ago that a class action waiver in an arbitration agreement was enforceable (which, practically, means that a party can avoid class actions if it’s agreed to in advance in an arbitration agreement), plaintiffs’ attorneys and government agencies have been trying to find exceptions to the Court’s holding in the employment context. The three primary arguments have been (1) that the National Labor Relations Act gives employees an unwaiveable right to participate in collective litigation, (2) that the Fair Labor Standards Act’s special provisions for collective (opt-in) actions trump the Federal Arbitration Act, and (3) that plaintiffs can’t be required to arbitrate individually if their claims are so small that individual actions are impractical. The third of these arguments was rejected by the Supreme Court this June in the Amex decision. In the Sutherland decision last week, the Second Circuit Court of Appeals joined the majority of courts in rejecting the first and second arguments as well.

What does this mean for your business? It means that you should seriously consider implementing a mandatory arbitration policy that requires individual arbitration of employee claims. Arbitration isn’t perfect – and a requirement that cases be arbitrated individually could be turned against an employer if a large group of employees each files an individual claim – but in many cases the downsides of arbitration are far outweighed by the ability to avoid class actions.