Thursday, December 15, 2016

Proposed Bill Would Prohibit "Ban the Box" Ordinances Applicable to Private Employers in Texas

Earlier this year, and riding what appeared to be a nationwide backlash wave, Austin passed a "ban the box" ordinance requiring qualifying private employers to conduct an individualized assessment of an applicant's criminal background record after a conditional offer of employment has been made.  For more information on Austin's new law, see my April 29, 2016 blog post.
This week, Representative Paul Workman (R-Austin) filed House Bill 577, which, if enacted, will amend Chapter 106 of the Texas Labor Code to prohibit a political subdivision of the state from adopting or enforcing any ordinance or other local regulation that prohibits, limits, or regulates a private employer's ability to request, consider, or take employment action based on the criminal history record information of an applicant or employee.  See the text of the HB 577 here:
In its current form, HB 577 would not prevent a political subdivision of the state from adopting or enforcing an ordinance or other local regulation relating to the access to or consideration of the criminal history record information of an individual in certain circumstances, such as when the individual is entering into a contract or other agreement with the political subdivision.
If enacted, HB 577 would void all local laws which ban the box, including Austin's ordinance, and would put Texas law at odds with the Equal Employment Opportunity Commission's current position on the consideration and use of criminal background checks in the hiring process. 

Monday, November 28, 2016

Takeaways from the EEOC’s New Enforcement Guidance on National Origin Discrimination

On November 18, 2016, the Equal Employment Opportunity Commission (EEOC) issued its new, 49-page Enforcement Guidance related to national origin discrimination.  Not surprisingly, its views are broad, and employers should familiarize themselves with its positions, highlighted below, on this topic:

Definition:  national origin discrimination means discrimination because an individual (or his or her ancestors) is from a certain place or has the physical, cultural, or linguistic characteristics of a particular national origin group, and includes “perceived as” claims.  An employee’s place of origin, national origin group or ethnicity, as well as his association with someone of a particular national origin, or his citizenship status, may form the basis of a national origin discrimination claim.  While most employers think of national origin in terms of origin outside the U.S., “American” is a national origin subject to protection.
Scope of Coverage:  coverage extends to all employees and applicants for employment in the United States.  It also extends to: (1) U.S. citizens working for American employers operating in foreign countries (unless compliance with Title VII would cause the employer to violate the laws of the foreign country in which the workplace is located); (2) foreign employers doing business in the U.S. (unless the foreign employer is exempt from coverage by a treaty or international agreement); (3) U.S. citizens working abroad for a foreign employer that is controlled by an American employer; and (4) foreign nationals outside the U.S. who apply for U.S.-based employment (meaning a job in the U.S.).   
Employment Decisions:  these include recruitment, hiring, promotion, work assignments, segregation and classification, transfer, wages and benefits, leave, training and apprenticeship programs, discipline, layoffs, termination, and other terms and conditions of employment, and decisions are subject to both disparate treatment and disparate impact analyses.  Notably, the EEOC repeatedly expressed its belief that an employer’s reliance on word-of-mouth advertising to fill vacant positions may be discriminatory. 
Customer Preferences: employers cannot rely on the discriminatory preferences of coworkers, customers, or clients, and an employment decision based on the discriminatory preferences of others “is itself discriminatory.” 
Social Security Numbers:  newly hired employees should be allowed to work if they have applied for but have not yet received a Social Security number.  
Security Requirements and Screening:  in limited circumstances, primarily where an individual does not meet job requirements that are imposed in the interest of the national security of the United States under any security program in effect pursuant to or administered under any federal statute or executive order, employers may justify their employment selection decisions based on national origin.  The EEOC may, however, review whether the grant, denial, or revocation of a security clearance was conducted in a discriminatory manner, and whether procedural requirements for making security clearance determinations were followed without regard to an individual’s protected status.
Hostile Work Environment:  ethnic slurs, ridicule, intimidation, workplace graffiti, physical violence, or other offensive conduct directed at an individual because of his birthplace, ethnicity, culture, language, dress, or foreign accent can form the basis of a hostile work environment claim. 
Accent Discrimination:  due to the link between a person’s accent and his or her national origin, employment decisions or harassment based on accent may violate Title VII.  An employment decision may legitimately be based on an individual’s accent if the accent “interferes materially with job performance.”  To meet this standard, an employer must provide evidence showing: (1) effective spoken communication in English is required to perform the job duties; and (2) the individual’s accent materially interferes with his or her ability to communicate in spoken English. 
English Fluency Requirements:  generally, an English fluency or English proficiency requirement is permissible only if required for the effective performance of the position for which it is imposed. 
English-Only Rules and Policies:  since 1980, the EEOC has taken the position that blanket rules requiring employees to speak English in the workplace at all times are presumed to violate Title VII.  A limited language-restrictive policy, meaning one that does not apply at all times or to all jobs, workplace situations, or locations, may be permissible if the employer can establish that the policy is job related and consistent with business necessity.  To meet this burden, the employer must show that the policy is "necessary to safe and efficient job performance."
Whether this new Guidance will survive a change in administrations is uncertain, but for now, it will be cited and relied upon by the EEOC in its enforcement actions. 

Tuesday, November 22, 2016

Texas Judge Grants Nationwide, Preliminary Injunction on Implementation of New FLSA Regulations

Approximately one hour ago, a federal judge in Texas granted a nationwide, preliminary injunction preventing the majority of the new FLSA regulations from taking effect on December 1, 2016.  The Court found that the state plaintiffs established a prima facie case that the United States Department of Labor's salary level and the automatic updating mechanism are without statutory authority, and that the public interest is best served by the injunction preserving the status quo.

Thursday, November 3, 2016

Useful Reminders About an Employer's Obligation to Accommodate Disabilities

In Dillard v. City of Austin, Texas, No. 15-50779 (5th Cir. Sept. 26, 2016), the Fifth Circuit affirmed summary judgment for the City of Austin on a former employee's claims that the City violated the Americans with Disabilities Act, as amended (ADA), by terminating him for a disability and failing to reasonably accommodate him.  The Court's decision provides employers with useful reminders about the mechanics of the accommodation process.
Following a car wreck, the plaintiff was unable to perform his tasks as a manual laborer and field supervisor for the City's Public Works department.  Even though the plaintiff exhausted all available leave under the Family and Medical Leave Act and the allotted time under the City's Return to Work Program, the City allowed him to remain on leave.  Once he was released to limited duty, the City searched for other positions within the Public Works department to accommodate the restrictions, and offered him a temporary position as an administrative assistant.
The plaintiff accepted the temporary position even though he did not know how to complete administrative work.  To assist him with gaining the necessary skills, the City gave him on-the-job typing and computer training, and allowed him to shadow another administrative assistant.  His supervisor also showed him how to register for other City training programs, which he did not do.  The plaintiff's computer and typing skills did not improve, and his supervisor found him playing computer games, surfing the internet, sleeping, making personal calls, and applying for other positions within the City during his work time, allegations which he did not dispute.   The plaintiff told the City he was unhappy in the position and asked for another job because he lacked the skills needed to be an effective administrative assistant.  His doctors also provided further releases which expanded the list of activities he was cleared to perform. The City ultimately terminated the plaintiff's employment and the lawsuit followed.

In support of its decision affirming summary judgment for the City, the Court reminded employers of the following principles related to the duty to accommodate:
  • Just because the City could have fired the plaintiff after he exhausted all available leave options and had no specific return to work date, the fact that it retained him did not extinguish its obligation to reasonably accommodate him once he returned to work.
  • The interactive process is a two-way street, and requires the employer and the employee to work together, in good faith, to determine a reasonable accommodation.
  • Once an employee accepts a position as an accommodation, the employee must make an honest effort to learn and carry out the duties of the new job, particularly when the employer offers training assistance.
  • Even though the plaintiff asked for another position, he did not attempt to fill his new role in good faith, and for this reason, he could not argue that the City should have continued the interactive process by offering him a different job.
  • Employers should not attempt to elude the obligation to accommodate a disabled employee by giving him a job that he was destined to botch, with or without training, which was not the case here.
  • Terminating an employee whose performance is unsatisfactory according to management's business judgment is legitimate and nondiscriminatory as a matter of law.
  • The ADA provides a right to reasonable accommodation, not to the employee's preferred accommodation.
Employers should ensure that supervisors and Human Resources personnel understand the interactive process obligations and document all efforts to provide reasonable accommodations.

Wednesday, October 5, 2016

Court Holds Employer’s “Conflict Resolution Tool” Qualifies as a Religion for Purposes of Title VII

Faced with a deteriorating corporate culture, a small wholesale company in New York implemented “Onionhead,” later known as “Harnessing Happiness,” in the work place.  The employer described Onionhead as a “multi-purpose conflict resolution tool” to help employees develop better problem-solving and communication skills. 
A number of employees disagreed with the employer’s characterization of Onionhead as an improvement tool, and believed that the management-requested exchanges of “I Love You” to colleagues, along with the chants and prayers, and work place discussions, e-mails, and mandatory meetings referencing God, spirituality, souls, demons, Satan, divine destinies, purity, blessings, and miracles, among other things, smacked of a religion in which they felt they were being forced to participate.

The employer allegedly fired several employees who refused to participate in Onionhead, resulting in a lawsuit filed by the Equal Employment Opportunity Commission (EEOC).  See EEOC v. United Health Programs of America and Cost Containment Group, Inc., No. 14-cv-3673, In the United States District Court for the Eastern District of New York, filed on June 11, 2014.  On behalf of the employees, the EEOC pursued claims for reverse religious discrimination, hostile work environment premised on reverse religious discrimination, disparate treatment, failure to accommodate, and retaliation. 
The basis for a reverse religious discrimination claim, which is far less common than a religious discrimination claim, is that the employer subjected the employee to discrimination by imposing the employer’s religious practices and beliefs on the employee.

The EEOC moved for partial summary judgment on the issue of whether Onionhead is a religion for purposes of Title VII, and the employer moved for summary judgment on all claims.  In a recent decision spanning 102 pages, the Court found that Onionhead is a religion, and denied summary judgment for the employer on the reverse religious discrimination claims.
Acknowledging that there is no consensus on how to define religion for purposes of employment discrimination cases, the Court sought guidance from First Amendment cases, rejected a more narrow definition of "religion" applied by the Third Circuit, and determined that an “expansive conception” of the term “religious belief” is appropriate.  Applying its broader definition, the Court concluded that Onionhead qualifies as a religion. 
Evidence persuasive to the Court included Onionhead documents referencing, among other things, “God,” the “Garden of Eden,” “Universal Plan,” “the Creator,” a “Divine Plan,” “demons and angels,” and the “soul.”  According to the Court, the Onionhead system of beliefs and practices is “more than intellectual,” and involves the kinds of ultimate concerns signifying religiosity. 
In denying summary judgment for the employer on the reverse religious discrimination claims, the Court struggled with the issue of whether an employer’s beliefs must be “sincerely held” in order to qualify as religious for purposes of a reverse religious discrimination claim under Title VII, noting that in a typical Title VII case, the burden would be on the plaintiff to establish that her beliefs are sincerely held.   Placing the same burden on a plaintiff to prove that her employer’s religious beliefs are sincerely held “could erect an unnecessarily high barrier to relief” for plaintiffs pursuing reverse religious discrimination claims when the employer’s purported religion is nontraditional and the employer denies that its beliefs and practices are religious.
The decision reminds employers that there is a point where a management philosophy, tool or practice can become a religion, and that reverse religious discrimination claims, while rare, do exist.

Wednesday, September 28, 2016

Battle over Protection for Transgender Status Expands into Healthcare Arena

The issue of whether transgender employees, whether they are employed in the public or private sectors, are protected from discrimination based on sex is playing out in courts across the country.  The battlefront expanded again this week when a transgender employee at a Cincinnati public library sued her employer and its healthcare provider, Anthem Blue Cross and Blue Shield, alleging that the denial of insurance coverage for her sex reassignment surgery is a violation of both Title VII and the Affordable Care Act.  See Dovel v. The Public Library of Cincinnati and Hamilton County and Community Insurance Co., Case No. 16-cv-00955, filed in the United States District Court for the Southern District of Ohio.  This lawsuit follows on the heels of a similar suit filed in June 2016 by the American Civil Liberties Union against Dignity Health. 
In August 2016, the United States Supreme Court granted an emergency order to block a transgender male student in Virginia from using the boys' restroom until the Court can consider the matter when it reconvenes.  It remains unclear whether the Court, absent one Justice, will decide the substantive issue underlying all of disputes, which is whether discrimination based on gender identity is sex discrimination under Title VII and Title IX.

New California Law Restricts Choice of Law and Forum Provisions in Employment Contracts

On Sunday, September 25th, California Governor Jerry Brown approved Senate Bill 1241 as an amendment to the California Labor Code.  The new law makes voidable, upon the request of the employee, any provision of a contract that requires an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would require the employee to adjudicate outside of California a claim arising in California, or deprive the employee of the substantive protections of California law with respect to a controversy arising in California.  The law specifically requires that if a provision is rendered void, the matter shall be adjudicated in California, and California law shall govern.
For purposes of the new law, the term "adjudication" includes litigation and arbitration, and in addition to injunctive relief and any other available remedies, a court may award reasonable attorneys' fees to an employee who is enforcing his or her rights.  Notably, the new legislation does not apply to a contract with an employee who is individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated, or the choice of law to be applied.
Employers with operations in  California should review any existing employment-related agreements to ensure compliance with the new law, which applies to a contract entered into, modified, or extended on or after January 1, 2017.  A copy of SB 1241 can be found here:

Wednesday, September 21, 2016

21 States File Lawsuit to Block New Overtime Regulations

Late yesterday afternoon, twenty-one states, led by State of Nevada, and including Texas, filed a lawsuit in the United States District Court for the Eastern District of Texas, Sherman Division, asking the Court to declare that the new overtime rules and regulations are: (1) substantively unlawful under the Constitution; (2) in excess of statutory jurisdiction, authority, or limitations under the Administrative Procedure Act (APA); (3) taken without observance of procedure required by law under the APA; (4) arbitrary and capricious under the APA; and (5) unlawful as applied to states under the APA. They also seek an injunction preventing the government from implementing, applying, and enforcing the regulations. A copy of the Complaint can be found here:

Notably, although the lawsuit allegations focus primarily on the adverse impact the new regulations are expected to have on the plaintiffs, they also include a contention that private employers in the plaintiffs' states will suffer the same ill-effects of the new regulations.  

This litigation follows closely on the heels of the federal lawsuit filed several weeks ago by (and in) the State of Texas, wherein several states successfully blocked the government's attempt to enforce its interpretation of Title IX regulations that would require schools accepting public funding to allow transgender students to use the bathrooms of the sex with which they identify.  That lawsuit was filed in the Northern District of Texas.

Employers can expect the government to mount a vigorous defense.

Wednesday, August 31, 2016

EEOC Publishes New Enforcement Guidance on Retaliation and Related Issues

Last week, the Equal Employment Opportunity Commission (EEOC) issued its new "Enforcement Guidance on Retaliation and Related Issues," which supersedes its Compliance Manual Section 8: Retaliation, issued in 1998.  New Guidance.
According to the EEOC, the purpose of the new Enforcement Guidance is to set forth the Commission's interpretation of the law of retaliation and related issues, and to advise employers that the EEOC's interpretations may differ from courts' interpretations. 
Not surprisingly, the EEOC takes broad views of the definitions of  "participation" and "opposition," "materially adverse actions," and causation, and employers should familiarize themselves with these positions, particularly where they differ from those established by case law.
The EEOC reiterates that employers can minimize retaliation claims by implementing comprehensive written policies, training managers and staff, proactively following up with employees and managers during investigations, and scrutinizing employment actions, such as performance reviews, to ensure they are free from unlawful motivations.

Thursday, August 25, 2016

NLRB Reverses Itself in Back-to-Back Decisions Related to Jointly Employed Employees and Student Assistants’ Rights to Organize

During the past few weeks, the National Labor Relations Board (NLRB) issued two significant decisions reversing prior Board law.  In Miller & Anderson, Inc., Case 05-RC-079249 (July 11, 2016), the NLRB dumped the more than a decade old precedent established by Oakwood Care Center, 343 NLRB 659 (2004), and decided that employer consent is not necessary for bargaining units that combine jointly employed and solely employed employees of a single user employer. 
Jointly employed employees are those who, for example, are supplied by a temporary staffing agency to work at an employer’s worksite.  Under Oakwood, employees of the “user” employer and the staffing agency employees who worked together could not be represented for purposes of collective bargaining in a single unit, even if they shared a community of interest with one another, unless they obtained their employers’ consent.  Under Miller, consent by the employers is no longer required, and the user employer has an obligation to bargain over all the employment terms of the employees it solely employs, and the obligation to bargain over its jointly employed employees’ terms and conditions when it possesses the authority to control them. 
In Trustees of Columbia University in the City of New York, Case 02-RC-143012 (Aug. 23, 2016), the NLRB similarly dumped more than ten years of precedent established by Brown Univ., 342 NLRB 483 (2004), and held that “student assistants who have a common-law employment relationship with their universities are statutory employees under the Act.”
In Brown, the NLRB held that graduate assistants cannot be statutory employees because they are “primarily students and have a primarily educational, not economic, relationship with their university.”  In its new decision, the NLRB dismissed any distinction between educational and economic relationships, and found that student assistants, including assistants engaged in research funded by external grants, had a common-law employment relationship with the university, and were therefore entitled to the protections of the Act, including the right to organize.
Both decisions reflect the NLRB’s ongoing efforts to expand the scope of the Act.  

Wednesday, August 24, 2016

Highlights of Austin's Organics Diversion Program for Restaurants Effective October 1, 2016

Following the completion of a pilot program, the City of Austin is ready to implement its Organics Diversion Program for restaurants, the goal of which is to decrease the amount of organic materials sent to the landfills.  Here are the highlights:
  • Beginning on October 1, 2016, restaurants that are 15,000 square feet or larger are required to establish an organics diversion program.
  • By October 1, 2017, restaurants between 5,000 square feet and 14,999 square feet are subject to the requirement.
  • By October 1, 2018, all restaurants will need to establish an organics diversion program.
  • Businesses will be required to submit an online Organics Diversion Plan; on a weekly basis, reduce or divert organic material generated onsite;  post informational signs; educate employees; and strategically place exterior organics collection receptacles.  
  • The City of Austin will enforce the program through the inspection process.

Monday, August 22, 2016

Seventh Circuit Begrudgingly Affirms Dismissal of Sexual Orientation Discrimination Claim and Implores Other Branches to Act

In a recent decision explaining its dissatisfaction with the current distinction between gender non-conformity claims, which are cognizable in the private employment context, and sexual orientation discrimination claims, which federal appellate courts have held are not,  a Seventh Circuit panel affirmed the dismissal of an adjunct professor’s sex discrimination claim based solely on sexual orientation discrimination.  Hively v. Ivy Tech Cmty. Coll., No. 15-1720 (7th Cir. July 28, 2016).
Noting that almost all discrimination on the basis of sexual orientation can be traced back to some form of discrimination on the basis of gender non-conformity, the Court made several, surprisingly candid observations about the current state of the law.

First, the existing distinction between gender non-conformity claims and sexual orientation claims has created an “odd state of affairs” in the law in which Title VII protects gay, lesbian, and bisexual people, but usually only to the extent that they meet society’s stereotypical norms about how gay men or lesbian women look or act (i.e., that gay men are effeminate or lesbian women have masculine mannerisms).  In contrast, lesbian, gay or bisexual people who otherwise conform to gender stereotyped norms in dress and mannerisms lose their claim.
Second, case law has created a “paradoxical legal landscape” in which a person can be married on a Saturday and then fired on a Monday, because although federal law now guarantees anyone the right to marry another person of the same gender, Title VII, to the extent it does not reach sexual orientation discrimination, allows employers to fire employees for doing so. 

Third, both Congress and the Supreme Court have had opportunities to consider the question of whether Title VII’s prohibition on sex-based discrimination extends to protect against sexual orientation discrimination, but “in addition to the Supreme Court’s silence, Congress has time and again said ‘no,’ to every attempt to add sexual orientation to the list of categories protected from discrimination by Title VII.”
Undeniably frustrated by the decision it felt compelled to reach based on the principle of stare decisis, the Court concluded its opinion with the following:

Perhaps the writing is on the wall.  It seems unlikely that our society can continue to condone a legal structure in which employees can be fired, harassed, demeaned, singled out for undesirable tasks, paid lower wages, demoted, passed over for promotions, and otherwise discriminated against solely based on who they love, date, or marry…this court undoubtedly does not condone it…but writing on the wall is not enough.  Until the writing comes in the form of a Supreme Court opinion or new legislation, we must adhere to the writing of our prior precedent…"
If Congress or the Supreme Court were to act, the Seventh Circuit has provided a blueprint for change.

Wednesday, August 17, 2016

Another Federal Court Invalidates the DOL's Tip Credit Regulation

At the end of July, the United States District Court for the Northern District of Georgia joined a number of other federal courts, including the Fourth Circuit, the Northern District of Illinois, the Southern District of New York, and the District Courts in Maryland and Utah, in holding that the United States Department of Labor’s regulation, which provides that, [t]ips are the property of the employee whether or not the employer has taken the tip credit under section [20]3(m) of the FLSA,” is invalid.  See Malivuk v. Ameripark, LLC, No. 1:15-cv-2570-WSD (N.D. Ga. July 26, 2016).

In Malivuk, the plaintiff, a valet, alleged her employer violated the FLSA by collecting tips given to the valets, distributing them in accordance with a formula among various valets working on a particular shift, and using a portion of the tip money to offset other business expenses, including valet employee hourly wages.  Notably, the plaintiff did not allege that she was not paid minimum wage or overtime, or that the defendant used tips as a credit against the minimum wage. 

Analyzing the plain text of Section 203(m) of the FLSA, the court explained that this provision provides that an employer: (1) must pay a tipped employee a cash wage, but if the cash wage is less than the federal minimum wage, the employer can make up the difference with the employee’s tips (take the tip credit); and (2) may take a partial tip credit toward its minimum wage obligations.   Put another way, the employer may take a partial tip credit toward its minimum wage obligations.

Agreeing with other courts, the Malivuk court held that, “The Court agrees…that if Congress wanted to articulate a general principle that tips are the property of the employee absent a valid tip pool, it could have done so without reference to the tip credit…the DOL Regulation violates the plain language of Section 203(m).”  (Additional citations and quotations omitted). 

The Malivuk decision provides further support for employers to argue that tips are not the sole property of the employee where the employer does not take the tip credit.

Thursday, July 21, 2016

NLRB Continues Assault on Employer Handbook Policies

In an opinion issued last week, the National Labor Relations Board once again found unlawful a number of employer handbook policies on the grounds that such policies could have a chilling effect on Section 7 rights.  CY-Fair Volunteer Fire Department and Robert Berleth, Case 16-CA-107721 (NLRB July 15, 2016).   You can find the case at:

Handbook policies the Board found unlawful in the employer fire department’s handbook included the following:

1.         Policies restricting employees from discussing or disclosing personal information of other employees.
     In the “Overview” of the handbook, the employer advised employees that disclosing or discussing the personal information of other employees is grounds for disciplinary action.
        Under its “Essential Behavioral Expectations” policy, the employer advised employees that they were expected to maintain the “confidentiality of business knowledge and member/employee information.”  

        In the “Blogging” policy, the employer prohibited employees from posting or discussing information about the employer’s “confidential and/or proprietary information,” and prohibited employees from using confidential and/or proprietary information.   

        In the “Proprietary Information/Confidentiality” policy, the employer cautioned that, “Information gathered in conversations, emails and meetings is confidential and proprietary, and may not be discussed with anyone outside the Department.”   

        Under the “Employee Records and Privacy” policy, the employer advised employees that, “Inappropriate disclosure and/or misuse of other employees personal information will result in disciplinary action, up to and including termination of employment.”   

        In the “Guidelines,” the policy advised employees not to “reference or site [sic] Department members, employees or vendors without their express consent.”
2.         Policies prohibiting the posting of insulting or damaging information.
        In its “Blogging” policy, the employer expressly prohibited “the use of embarrassing, insulting, demeaning or damaging info about the Employer, its products, customers or employees.”

        In its “Social Media” policy, the employer prohibited certain activities that have the effect of “harming the goodwill and reputation [of the employer] among its partners, vendors or in the community at large.”
3.         A policy prohibiting the use of the employer’s name, logos or trademark.
        In its “Social Media” policy, the employer prohibited the use of its name, logo or trademark without its consent.
4.         A policy prohibiting the solicitation and distribution of literature outside of work time in an area frequented by customers.
        The employer’s “No Solicitation/Distribution” policy provided that, “Solicitation and distribution of literature is also prohibited even when not on work time if such activity takes place in an area frequented by customers or otherwise interferes with work being performed by other employees.”
While it seems obvious that an employer would take issue with an employee disclosing another employee’s personal information, such as health, leave status, or social security number, or with an employee’s unauthorized use of the employer’s logo in social media postings, the Board continues to find that any type of policy that could even theoretically chill an employee’s Section 7 rights violates the National Labor Relations Act. 
Employers are advised to conduct regular reviews of their handbook policies to ensure compliance with the Board’s ever-growing list of unlawful policies. 

Monday, June 20, 2016

Philly Passes "Sugar-Sweetened Beverage Tax"

Last week, Philadelphia's City Council passed a new law taxing sugar-sweetened beverages.  Here are some FAQs:
What is a sugar-sweetened beverage?  Examples include soda, non-100% fruit drinks, sports drinks, flavored water, energy drinks, pre-sweetened coffee or tea, and non-alcoholic beverages intended to be mixed into an alcoholic drink.  The new law contains an ingredient-based definition.
Are there exclusions from the tax?  Yes, exclusions include, among other things, baby formula, any product, more than 50% of which, by volume, is milk, and any syrup or other concentrate that the customer combines with other ingredients to create a beverage.
How much is the tax?  The tax is one and one-half cents per fluid ounce for sugar-sweetened beverages. 
How is the tax imposed?  The tax is imposed on each of the following:  (a) the supply of any sugar-sweetened beverage to a dealer; (b) the acquisition of any sugar-sweetened beverage by a dealer; (c) the delivery to a dealer in the City of any sugar-sweetened beverage; and (e) the transport of any sugar-sweetened beverage into the City by a dealer.  The tax is imposed only when the supply, acquisition, delivery or transport is for the purpose of the dealer's holding out for retail sale within the City the sugar-sweetened beverage or any beverage produced therefrom.
How does it work?  The new law defines a "dealer" as any person engaged in the business of selling sugar-sweetened beverages for retails sale within the City, including restaurants, retail stores, street vendors, owners and operators of vending machines, and distributors who engage in retail sales.  The law defines a "distributor" as any person who supplies sugar-sweetened beverages to a dealer.
Distributors must register with the City, and dealers must notify distributors that the dealers are subject to the new law through a sale for the purpose of resale exemption certificate.  The tax is paid to the City by the registered distributor, and the dealer is not liable to the City for payment of the tax as long as the registered distributor has received the proper notification from the dealer.
Are waivers available?  Yes, the City retains discretion to grant a waiver from the tax upon a showing of extraordinary circumstances.
Are there penalties for noncompliance?  Yes, a violation is a Class II offense, and a repeat violation within a twenty-four month period subjects the offender to suspension of his or her commercial activity license.
When is the new law effective?  January 1, 2017.

Wednesday, June 15, 2016

Fifth Circuit Finds Employer Violated FLSA through Unlawful Credit Card Tip Deductions

Most hospitality employers that take the tip credit and accept credit card payments for tips for tipped employees offset a particular amount, usually a percentage, to recover direct fees charged by the credit card companies.  These direct fees, referred to as  "credit card issuer fees," include swipe fees, charge backs, void fees, and manual-entry fees.
In a 2006 Wage and Hour Division Opinion Letter, the United States Department of Labor opined that employers are permitted to deduct an average offset for credit card issuer fees as long as "the employer reduces the amount of credit card tips paid to the employee by an amount no greater than the amount charged to the employer by the credit card company."
In a decision issued yesterday, the Fifth Circuit agreed that a restaurant employer violated the Fair Labor Standards Act (FLSA) when it deducted and retained 3.25% of its tipped employees' credit card tips because the deduction exceeded the direct costs of collecting credit card tips for those employees.  Steele v. Leasing Enterprises, Ltd., No. 15-20139 (5th Cir. June 14, 2016).
In Steele, the employer chose to pay its servers their charged tips in cash on a daily basis, and arranged for armored vehicles to deliver cash to its restaurants three times per week.  The employer's 3.25% deduction from the tipped employees' credit card tips included deductions for the credit card issuer fees, as well as for the cash delivery expenses. 
Pursuant to the FLSA, an employer can only claim a tip credit if all tips received by a tipped employee are retained by the tipped employee, with an exception that is not relevant to the case.  The issue in Steele was whether the employer violated the tip retention requirement when it offset credit card tips to recover costs that exceeded the credit card issuer fees.
The employer claimed the credit card issuer fees and expenses for cash delivery services always exceeded the 3.25% offset amount, although in nine individual restaurant years, the offset did not exceed these costs.  It also claimed it could maintain the offset and still retain the tip credit.
Agreeing with the District Court that the employer violated the FLSA, the Fifth Circuit noted that credit card fees are a compulsory cost of collecting credit card tips, and as a result, an employer may offset credit card tips for credit card issuer fees without running afoul of the employee tip retention requirement. 
In contrast, the employer's cash delivery system was a business decision, and not a fee directly attributable to its cost of dealing in credit, and was therefore unlawful.  Put succinctly, "an employer only has a legal right to deduct those costs that are required to make such a collection."   Allowing the employer to offset employees' tips to cover discretionary costs of cash delivery would conflict with the requirement that all tips received by such employees must be maintained by the employees for the employer to retain the tip credit.
Interestingly, the Court left some ambiguity because it determined it was unnecessary to opine whether any costs, other than the credit card issuer fees, associated with collecting credit card tips could ever be deducted by an employer.

Monday, June 13, 2016

Fifth Circuit Upholds NLRB's Quickie Election Rules

In an opinion issued on Friday, the Fifth Circuit agreed with a decision from the United States District Court for the Western District of Texas finding that the National Labor Relations Board's (NLRB's) rules amending the procedures for determining whether a majority of employees wish to be represented by a labor organization for purposes of collective bargaining did not violate the National Labor Relations Act (NLRA) or the Administrative Procedure Act.  A copy of the opinion can be found on the Fifth Circuit's website:
Among other changes, the new rules: (1) allow for employees to take a vote on union representation as soon as eleven days after a petition for representation is filed; (2) defer employer challenges to voter eligibility issues until after an election is held; (3) remove the standard, twenty-five day delay that normally occurs between the time a regional director directs an election and the actual election; and (4) require the expanded disclosure of employee contact information.  The new rules are often referred to as the "quickie election" rules.
In the underlying lawsuit, several Texas-based trade and advocacy associations representing construction employers and small business owners brought a facial challenge to enjoin enforcement of the quickie election rules. The facial challenge standard is high, and required the business entities to establish that no set of circumstances exist under which the new rules would be valid. 
The District Court agreed with the Board that the standard was not met.
In its decision affirming the District Court's decision, the Fifth Circuit noted that the NLRA gives the Board authority to resolve questions of representation, and sets forth basic steps for that process, as well as authority to proscribe rules for processing election petitions.  The Court squarely rejected arguments that the rule changes impermissibly restricted the scope of the pre-election hearing, and that the new rules requiring expanded disclosure of employee contact information conflicted with federal privacy law. It also rejected the argument that the rules interfere with protected speech during election campaigns.
In short, the Fifth Circuit now joins the United States District Court for the District of Columbia in upholding the NLRB's quickie election rules.

Wednesday, June 8, 2016

New Final Rules, Publications, and Fines---Are you Keeping up with the EEOC?

The Equal Employment Opportunity Commission (EEOC) has been busy over the past few weeks.  Here are the highlights of its latest activities:

1.  Issuance of Final Rules on Employer Wellness Programs.  If you offer employees a voluntary wellness program that's part of a group health plan, you'll want to review the final rules just issued, which, among other things, cap incentives an employer can offer to employees who participate.

2.  Publication on "Employer-Provided Leave and the Americans with Disabilities Act."  In this document, the EEOC provides general information to employers and employees regarding its position on when and how leave must be granted for reasons related to an employee's disability.  It also inclues a discussion related to the interactive process, maximum leave policies, and reassignment. Of interest is the EEOC's discussion related to assessing whether an undue hardship will prevent an employer from granting leave as an accommodation.
3.  Increase in Penalties for Notice Posting Violations.  The EEOC increased the maximum penalty for employers that violate notice posting provisions related to Title VII, the ADA, and GINA from $210 per violation to $525 per violation. Free copies of the required posters are available on the EEOC's website.

Employers can find additional information related to these topics at

Monday, June 6, 2016

Battle of the Bathrooms---An Update on the Transgender Bathroom Fight

The battle over whether student privacy rights trump a transgender student's right to use the bathroom that corresponds to the sex with which he or she identifies continues, and two new developments move the issue closer to a possible review by the Supreme Court.
First, at the end of May, and on behalf of the State of Texas, Texas Attorney General Ken Paxton filed a lawsuit against the Obama Administration challenging the Administration's directive to allow transgender students to use the bathroom that matches their gender identity.  Alabama, Arizona, Georgia, Louisiana, Maine, Oklahoma, Tennessee, Utah, West Virginia, and Wisconsin joined in the lawsuit.  The suit is pending in the Northern District of Texas, Wichita Falls Division.  All of the plaintiffs seeks declaratory and injunctive relief.
Second, last week, the Fourth Circuit denied a rehearing request in Grimm v. Gloucester County School Board, No. 4:15-cv54, in the United States District Court, Eastern District of Virginia, Newport News Division.  In Grimm, a three judge panel previously ruled that prohibiting a transgender student from using the boys' bathroom violated Title IX of the Education Code.  Based on the rehearing denial, the prior decision remains in place.
Opponents of the Administration's directive have repeatedly urged that the directive leaves girls vulnerable to male predators in female restrooms.  Interestingly, in the Grimm case, Grimm was born a female but identifies as a male, and sued to use the boys' bathroom.  Little if anything has been said by opponents about the potential for female predators in male bathrooms.

Wednesday, May 18, 2016

The Top Ten Things Employers Need to Know About the New FLSA Regulations Released Today

Today the United States Department of Labor issued the long-awaited, updated Final Rule revising the federal regulations under the Fair Labor Standards Act ("FLSA") implementing the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees.  Here are the highlights from the 508-page release that employers need to know:
  1. The salary test for EAP workers (defined as executive, administrative and professional employees under the current FLSA tests) has more than doubled from $455 per week ($23,360 per year) to $913 per week ($47,476 per year).  
  2. The DOL did not make any changes to the EAP duties tests.
  3. The highly-compensated employee total annual compensation level has increased from $100,000 to $134,004.
  4. For the first time, employers will be permitted to count non-discretionary bonuses, incentives, and commissions toward up to 10% of the standard weekly salary test, as long as employers pay those amounts on a quarterly or more frequent basis.
  5. The DOL will permit a "catch-up" payment at the end of each quarter with respect to the 10% amount noted in #4 above provided it is made within one pay period of the end of the quarter. Any such catch-up payment will count only toward the prior quarter's salary amount and not toward the salary amount in the quarter in which it was paid.
  6. White collar employees subject to the salary level test earning less than $913 per week will not qualify for the EAP exemption.
  7. The Final Rule provides for salary and compensation threshold updates every three years, and the first update will take place on January 1, 2020.
  8. The DOL contends the new regulations will decrease the amount of litigation.
  9. Employers will be forced to make some difficult choices related to reclassifying employees.
  10. The effective date for the Final Rule is December 1, 2016, which means employers have about six months to become compliant.

Monday, May 9, 2016

The Tangled Web: Different Tests under Texas and Federal Laws Leave Franchisors and Franchisees Wondering Whether and When They Are Joint Employers

The International Franchise Association defines franchising as a method for expanding business and distributing goods through a licensing agreement.   In the franchisor-franchisee relationship, a franchisor typically grants a license to a franchisee to conduct business under the trademark and trade name of the franchisor. 
For obvious reasons, the franchisor has a vested interest in ensuring that the franchisee maintains the quality and integrity of the brand, which in turn, generally requires some level of oversight of the franchisee’s operations.  But how much control can a franchisor exercise before it crosses the threshold and becomes a joint employer with its franchisee for purposes of establishing liability?

The Texas Labor Code
Effective September 1, 2015, and in an apparent response to the federal government’s efforts to find joint employers behind every corner, the Texas Legislature amended seven provisions of the Texas Labor Code to clarify that franchisors (defined as any person who grants a franchise and participates in the franchise relationship), are not the employers of a franchisee (defined as any person who is granted a franchise) or franchisee employees unless a court of competent jurisdiction in Texas has found that the franchisor has exercised a type or degree of control over the franchise or the franchisee’s employees not customarily exercised by a franchisor for the purpose of protecting the franchisor’s trademarks and brands.
The seven sections of the Texas Labor Code that were amended are:  Chapter 21 (Employment Discrimination); Chapter 61 (Payment of Wages); Chapter 62 (Minimum Wage); Chapter 91 (Professional Employer Organizations); Chapter 201 (Unemployment Compensation); Chapter 401 (Workers’ Compensation); and Chapter 411 (Workers’ Health and Safety). 
The obvious questions raised by the amendments are: (1) what is the meaning of the phrase, “not customarily exercised”?; and (2) what test or factors will a court apply to determine whether a degree of control is or is not customarily exercised by a franchisor?

Board Law 
In the Browning-Ferris Industries decision it issued in August 2015, the National Labor Relations Board (NLRB) restated its standard for how it will determine the existence of a joint employer relationship. Under the restated standard, the Board may find that two or more entities are joint employers of a single work force “if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”  
In determining whether a common-law employment relationship exists, the Board looks to the Restatement (Second) of Agency (1958) for guidance, which provides that, “a servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other’s control or right of control.”  The phrase “essential terms and conditions of employment” is broadly construed to include, for example, hiring, firing, discipline, supervision, direction, controlling scheduling, seniority and overtime, determining wages and hours, and the manner and method of work performance. 
Importantly, the Board’s decision expressly rejects its prior standard that required both the possession and exercise of the authority to control the terms and conditions of employment to find a joint employer relationship.  Now, reserved authority, even if not exercised, and indirectly exercised control, such as through an intermediary, may establish joint employer status.

The United States Department of Labor
In January 2016, and not wanting to miss a ride on the joint employer bandwagon, United States Department of Labor (DOL) Wage and Hour Administrator David Weil issued Administrator’s Interpretation No. 2016-1 (AI), wherein he sets forth the DOL’s “guidance” for determining a joint employer relationship under the Fair Labor Standards Act (FLSA).  
The AI provides guidance regarding both vertical and horizontal joint employment.  Horizontal joint employment may be established when an employee is employed by two or more technically separate but related or overlapping employers.  For example, this analysis would apply where a server works for two separate restaurants that are operated by the same entity, and the question is whether the two restaurants are sufficiently associated with respect to the server such that they jointly employ him.
The AI identifies a number of factors when analyzing the degree of association between, and the sharing of control by, potential horizontal employers, including the: (a) existence of common ownership; (b) overlap of officers, directors, executives, or managers; (c) sharing of control over operations, including hiring, firing, payroll, advertising, and overhead costs; (d) degree to which the joint employers’ operations are intermingled; (e) supervision by one employer over the work of another employer; (f) treatment of employees as a pool of employees available to both employers; (g) sharing of clients or customers; and (h) existence of any agreement between the potential joint employers. 
Vertical joint employment, as defined in the AI, may exist when an employee of one employer, referred to in the AI as an “intermediary employer,” is also, with regard to the work performed for the intermediary employer, economically dependent of another employer, referred to as a “potential joint employer.”  According to the AI, where there is vertical joint employment, there is usually a contract or other arrangement, but not necessarily an employment relationship, between the intermediary employer and the potential joint employer. 
In vertical joint employment situations, one employer typically contracts with an intermediary employer to provide it with labor, and/or perform some employer functions, such as hiring and payroll.  The vertical joint employment analysis is used to determine, for example, whether a construction works who works for a subcontractor is also employed by the general contractor.
A threshold question in the vertical joint employment analysis is whether the intermediary employer is actually an employee of the potential joint employer, because if it is, then all of the intermediary employer’s employees are employees of the potential joint employer too, and there is no need to conduct a vertical joint employer analysis.  For example, if a farm labor contractor is not actually an independent contractor, but is an employee of the grower for which it provides services (meaning it is economically dependent on the grower as a matter of economic reality), then all of the farm labor contractor’s employees are also employees of the grower.  As set forth in the AI, it is therefore important to first determine whether the intermediary employer is an employee of the potential joint employer before proceeding with the joint employment analysis.  Interestingly, the AI requires a look at the economic reality of the relationship before proceeding to the vertical joint employment analysis, which is itself an economic reality test.
The AI identifies seven economic realities factors it contends should be applied to further the expansive definition of employment under the FLSA: (a) directing, controlling, or supervising the work performed; (b) controlling employment conditions; (c) permanency and duration of the relationship; (d) repetitive and rote nature of the work; (e) integral to business; (f) work performed on premises; and (g) performing administrative functions commonly performed by employers. 
According to the majority opinion in the Browning-Ferris decision, the economic realities test used by the DOL “is significantly more expansive” than the Board’s common-law test. 

The Fifth Circuit
In 2014, the Fifth Circuit applied its version of the economic realities test to determine whether a pizza and pasta restaurant franchisor was a joint employer with its franchisee for purposes of liability for alleged FLSA violations.  Orozco v. Plackis, 757 F.3d 445 (5th Cir. 2014).  In that case, a cook employed by the franchisee sued the franchisee for various FLSA violations, settled with the franchisee, and then added the franchisor owner, individually, as a defendant under the joint employer theory.  The jury ultimately returned a verdict for the cook, and the lower court denied a motion for judgment as a matter of law, resulting in the franchisor’s appeal.
Under its test, the Fifth Circuit evaluated whether the individual franchisor: (a) possessed the power to hire and fire the employees; (b) supervised and controlled employee work schedules or conditions of employment; (c) determined the rate and method of payment; and (4) maintained employment records.  The court was clear that a party need not establish each element in every case. 
The court agreed there was insufficient evidence for the jury to find a joint employer relationship because: (a) there was no evidence the individual franchisor maintained the cook’s employment records; (b) despite the movement of employees between the franchisor and franchisee locations, and the fact the franchisor gave advice to the franchisee on improving profitability, there was no direct evidence that the franchisor had authority to hire and fire the franchisee’s employees; (c) there was insufficient evidence to show the franchisor supervised and controlled employee work schedules or conditions of employment, even though the franchisor reviewed the work schedules, trained the cook and the franchisee, and frequently met with shift managers and provided suggestions to improve profitability; and (d) the cook testified the franchisor did not control the cook’s rate of pay.  Further, the court rejected the cook’s argument that the franchise agreement between the parties, which provided that the franchisee would at all times comply with all lawful and reasonable policies promulgated the franchisor, established sufficient control by the franchisor to create a joint employer relationship. 
The Fifth Circuit’s economic reality test is far narrower than both the DOL’s vertical joint employer test and the Board’s restated joint employer test, which places far greater emphasis on the potential for control of workplace terms and conditions, as opposed to actual control of them. 

For the foreseeable future, government agencies will more than likely continue to expand the definition and scope of the joint employer relationship, and employers will look to the courts to validate or reject the expansion, and provide meaningful guidance regarding the types of activities a franchisor can take with respect to its franchisees without losing its status as a single, not joint, employer.
Franchisors cannot insulate themselves from a joint employer finding simply by stating in a franchise agreement that the parties do not intend to create a joint employment relationship.  To the contrary, a franchisor should consult with counsel to determine its potential risk for a joint employer finding based on the realities of its relationship with its franchisee(s).  Once it does so, it can determine how, if at all, it will modify its franchise arrangements.



Thursday, May 5, 2016

Colorado Jury Tosses Religious Failure to Accommodate Claims

After a nearly eight-year battle with the Equal Employment Opportunity Commission (EEOC) and several intervenors, a Denver airport contractor defeated a lawsuit alleging it failed to accommodate Muslim women who asked to wear long skirts at work based on their religious belief that women should dress modestly.  See EEOC v. Jetstream Ground Services, Inc., No. 13-cv-02340-CMA-KMT, in the United States District Court for the District of Colorado. 
The contractor, Jetstream Ground Services, argued that allowing the women to work in long skirts as aircraft cabin cleaners posed an undue hardship based on the safety risks they faced when accessing aircraft from jetway stairs.  Last fall, the district court refused to grant summary judgment on this issue for Jetstream, and the case proceeded to trial.

Last week, a federal jury in Colorado returned a verdict that found the EEOC and the intervenors failed to prove their discrimination claims. 

Employers faced with discrimination claims based on an alleged failure to accommodate religious beliefs should be mindful that the determination of the existence of an undue hardship is based on the facts of each case, and cannot be based on speculative safety concerns.