The EEOC has taken a lot of heat on its controversial stance of aggressively litigating adverse impact cases involving background checks. In April, 2012, the EEOC issued a new enforcement guidance seeking to curtail the uses of criminal background checks in employment. That guidance resulted in the State of Texas filing a federal lawsuit challenging the EEOC’s authority over state agency hiring practices, and a series of EEOC initiated actions against large employers across the country.
On Friday, February 20, a panel of judges from the United States Court of Appeals for the Fourth Circuit, hammered the EEOC in a case involving an employer’s use of both a credit check and criminal background check during its hiring process. The lower court dismissed the case, and the appeals court agreed, noting that the EEOC’s statistics expert was “utterly unreliable” and “made a mind-boggling number of errors.” Remarkably, the court rebuked the EEOC’s continued use of this expert (who has been found to be biased in earlier cases) as “not serving the public interest well.” A copy of the decision can be found here.
This case is important because the EEOC’s enforcement position on the use of background checks rests almost exclusively on statistics. If the EEOC is willing to rely upon a biased manipulation of statistics, it is hard to imagine how an employer will get a fair shake during the charge process. This case is also a bell-weather of how the EEOC’s aggressive position on background checks will be received by the courts. Thus far, the EEOC has enjoyed very little success on these types of claims.
Unfortunately, when the price of oil goes down, the employment numbers also move downward in Houston. Many clients in the oil and gas industry are either planning or considering downsizing measures, which means that it is a good time to review your policies and procedures to make sure you adequately protect your business.
- Get to know the OWBPA: The Older Workers Benefits and Protection Act has a number of special requirements for a severance agreement which contains a release of an age discrimination claim. If you are terminating a single employee over 40 (not part of a broader layoff) an employer must: advise the employee to seek advice of counsel, provide up to 21 days to review the agreement, and allow up to 7 days to revoke the agreement after it is signed. For a layoff package offered to more than one person, the 21 day period is extended to 45 days. With a group layoff, the employer must also provide, in writing, detailed information about the persons being laid off, including their age and job titles. The purpose of this information is so employees over 40 can have all the facts and make a knowing waiver of a potential ADEA claim.
- Use Objective Criteria: If you have 5 employees in a department and one of them has to go, you should expect the laid-off employee to ask, “Why me?” If that employee happens to be in a protected class, and all of the retained employees are not, the employer will have some explaining to do (especially if there is a pattern of such choices). Using seniority is an easy way out of this conundrum, but most employers prefer to make selections on merit, not longevity. There is no law against using such a criteria, but it helps to formalize what “merit” means. Does it mean good attendance, management reviews, or tangible work production? To avoid discrimination claims, it is best to formalize the selection process and not just rely on supervisor discretion on who should stay or leave.
- Beware Disparate Impact: Even if you formalize your selection process and make good documented decisions, it is advisable to check your math. If the results have a clear bias against women, older workers, or a particular minority group, you should review your criteria and ensure that it is fair. Keep in mind that the law allows for employees to bring a case for discrimination where a facially neutral employment process has a disparate impact on a protected class.
- Don’t Forget Confidentiality: Although most severance agreements insist upon the confidentiality of the amount paid to the employee, this agreement is also a good opportunity to include a broader confidentiality agreement governing trade secrets obtained during employment (if you don’t already have one). That employee will likely be getting a new job soon, and it might be with your company’s most bitter rival. This is your last opportunity to lock down your trade secrets and make sure the employee does not take things out the door to a competitor.
- Close Out Wage and Hour Suits: Wage and hour claims are the prevailing type of class action plaguing employers. The law makes it difficult to obtain a release of a Fair Labor Standards Act claim in a severance agreement, but an employer can include a statement in a severance agreement noting that the employee has reported all of his or her time and been paid in full for all known overtime, bonuses, etc. This acknowledgment can be used against the ex-employee if he or she decides to later join a class action.
On its face, federal law does not list sexual orientation or trans-gender status as protected categories. Some states or cities have passed their own laws offering such protections, leaving a patchwork of laws across the country.
For this reason, many employers have delayed adding to their handbook’s list of protected classifications for either political reasons or to avoid arguably granting more protection than required in those local jurisdictions without expanded coverage. Looking forward, 2015 is the year where I can say that such a position is no longer optional — all employers should formally list these protected classifications in their policies. First, the list of state and local governments who have passed laws protecting employees from discrimination on the basis of sexual orientation or trans-gender status continues to grow, and now covers the majority of the country. Houston, Texas joined the ranks of cities with such laws last year. Second, the United States Attorney General issued a little-publicized memorandum in December 2014, making clear the federal government’s enforcement position that Title VII of the Civil Rights Act of 1964 should be interpreted as covering trans-gender employees. A copy of the memo can be found here.
This Justice Department memorandum is not a new development in the law, and only formalizes a line of cases that have long made discrimination on the basis of “gender identity” or sexual stereotyping illegal. Since discrimination based on “sexual stereotyping” can be used as a proxy for sexual orientation discrimination as well, and the Supreme Court has already made “same sex” harassment actionable, there are no meaningful gaps left to fill under federal law. Without an amendment of Title VII, the law has slowly but surely been changed to include classifications not originally in the law, and which were even the subject of unsuccessful Congressional legislative efforts. One can argue about whether changing the law in such fashion is a good or bad thing, but the shift in the law is now undeniable, and prudent employers should modify their policies to adapt to the new legal landscape.
On December 9, 2014, the U.S. Department of Labor (“DOL”) announced that it had achieved $4.5 million dollars in settlements from private employers as a result of a two year investigation into contractors working in the Marcellus Shale region of Pennsylvania and West Virginia. The DOL press release can be found here.
This investigation highlights the increased scrutiny on employers in the oil and gas industry, and the importance of regular compliance audits of wage and hour practices. With a highly mobile workforce, operating under ever-changing working conditions and schedules, following complicated state and federal overtime regulations can be a nightmare. The following are some important tips for maintaining compliance in this difficult area.
Make sure that any salaried exempt managers or other professionals meet the duties tests under federal law. It is not enough to simply call an employee exempt and pay him or her a salary.
If you classify an employee as exempt and pay him or her a salary – remember that the salary cannot change based on quantity or quality of the work performed. Before making any deductions, seek legal advice.
For hourly employees, be wary of day rates and other flexible pay arrangements which conflict with the overtime rules. Federal law requires all non-exempt employees to be paid overtime for hours worked in excess of 40 in a work week, with rare exceptions.
Federal law requires overtime to be paid at time and one half times the employee’s regular rate of pay for that work week. This rate must include all compensation, including bonuses, piece rates, and any other incentives.
When you have employees living at or near the worksite (like in the shale regions) it is important to have clear policies prohibiting “off the clock” work, and trained supervisors to enforce such policies. Supervisors should know whether and when employees are to be paid for safety training, waiting time, on call time, or other “gray areas” that are common in the industry.
Lastly, ensure you are fully and accurately recording all work time for non-exempt employees. Under federal law, it is the employer’s obligation to maintain accurate pay records, and such records are critical in providing a defense to government investigations or lawsuits.
Employers are under increased pressure to secularize religious holidays like Christmas. No one wants to be the Grinch, but at the same time, many companies are concerned that they will being perceived as favoring Christian holidays over Muslim or Jewish ones. I was interviewed for the linked article, which appeared on the Society for Human Resource Management’s (SHRM) website. It addresses many of these concerns and adds some practical tips on navigating the holiday season without being sued for religious discrimination.
Election day 2014 brought more than just a wave of new Republican politicians, it also brought a wave of minimum wage increases across the country. For employers with operations in multiple states, payroll just got more complicated. Five states approved minimum wage hikes, including Alaska, Arkansas, Nebraska and South Dakota. Illinois approved a non-binding measure which won’t immediately impact current law.
Alaska voted to raise its minimum wage to $9.75 by 2016; Arkansas will raise the minimum wage to $8.50 by 2017; Nebraska’s minimum wage will rise to $9.00 by 2016; and South Dakota’s minimum wage will increase to $8.50 by 2015. Illinois voters approved a non-binding measure to raise its minimum wage to $10.00. The cities are also getting into the game with San Francisco voting to increase its minimum wage to $15.00 by 2018, matching Seattle with the highest minimum wage in the country.
The takeaway from the election is that HR departments are going to have to work overtime to keep up with the patchwork quilt of minimum wage laws across the country. If you have employees who travel across state lines or into city limits with a higher minimum wage (even if they don’t live or office in those locations), you may have obligations under the respective laws. Also, the increases in minimum wage will have a ripple effect on wages in these regions. Employees who were comfortably above minimum wage may now find themselves working for slightly above the new rates, which will drive wage inflation up the chain.
Lastly, this election is likely not the end of the road for local minimum wage hikes. There have been 15 states with minimum wage ballot measures since 1996 and all 15 have passed. This trend is likely to continue and, if anything, only pick up steam.
Currently, 23 states and the District of Columbia have medical marijuana laws which allow a lawful level of marijuana use. One question which comes up often in such states is whether an employer can lawfully terminate an employee who fails a drug test. Until now, the answer appeared to be “yes” since an employer has a right to establish its own work rules, and can generally fire an employee for any reason absent a statutory restriction. Even if the employees had a right to use marijuana, they would not have a right to be under the influence at work, which could pose a safety risk or detract from performance.
A recent case out of Michigan, however, has upset this convention wisdom. A Michigan appeals court ruled last week that workers fired for failing a drug test were qualified for unemployment benefits because the medical marijuana law preempted the unemployment law. The appeals court reversed the Michigan Compensation Appellate Commission’s denial of unemployment benefits for three workers, holding that a provision in the state’s medical marijuana law prohibits penalties “in any manner” for those who are legally allowed to use marijuana. In this case, the employees were fired only for failure of a drug test and not for performance reasons or because they were acting intoxicated while on the job.
This decision is expected to be appealed to the Michigan Supreme Court and could very well be reversed. That said, the takeaway from this decision is that these state medical marijuana laws are relatively new and the law in this area is evolving. In some of the more liberal states, there is an increasing tendency for the courts to interpret the laws broadly to protect employees who lawfully use marijuana. Some states have already interpreted their state marijuana laws to not protect employees from termination (e.g., Washington State), while the question is still open in other states. Employers should also be aware of employees using other state laws to bootstrap protections for marijuana users. For example, some states have laws which make it unlawful to terminate an employee who engages in lawful conduct outside the workplace. These laws were originally intended to protect smokers from discrimination, but could easily be construed as providing similar protections to those who engage in lawful marijuana use. The next time you face a termination decision involving a medical marijuana user, it might make sense to consult with legal counsel and double-check the state law. The answer to this question might not be as easy as it looks.
Tomorrow, the Houston office of Cozen O’Connor will be sponsoring an informative seminar, which will include guest speaker Joe Bontke from the EEOC. Joe is the Outreach Manager and Ombudsman for the Houston EEOC office and is an excellent speaker. If you have not signed up, please click on the link below, which has all of the details. Guests can also register at the door.
Joining Joe will be Leila Clewis and Norasha L. Williams of Cozen O’Connor for this seminar being held from 8:30 to 11 a.m. at the Crowne Plaza Houston River Oaks, 2712 Southwest Freeway, Houston, TX 77098. Attending this event will earn you 2.0 hours of CLE – State Bar of Texas and 2.0 hours of CLE – SHRM. There is $40.00 registration fee, which includes valet parking.
The number of discrimination charges filed with the U.S. Equal Employment Opportunity Commission each year has steadily increased over time. And, for some employers, those charges have resulted in EEOC enforcement suits, including both direct lawsuits filed by the EEOC and intervention actions where the Agency joins in the litigation. This briefing will identify the most common and emerging issues that have received particular focus and interest by the EEOC, and will also explore ways in which employers can effectively respond to and defend against charges of discrimination or other EEOC actions. Employers can learn about:
- EEOC’s “Hot Button Issues”
- Developments in the EEOC’s Strategic Plan
- How to Effectively Defend Against an EEOC Claim
- Recent Litigation Trends Involving the EEOC
To register for this event, click HERE.
In many industries, it is common to pay incentives in the form of restricted stock options payable in the future if certain conditions are satisfied. In Exxon-Mobil v. Drennen, decided on August 29, 2014, the Texas Supreme Court reviewed the question of whether a clause in an incentive plan, which allowed the company to declare a forfeiture if the employee left and went to work for a competitor, constitutes a non-compete or just a loyalty bonus. The Texas Supreme Court concluded: “There is a distinction between a covenant not to compete and a forfeiture provision in a non-contributory profit-sharing plan because such plans do not restrict the employee’s right to future employment; rather, these plans force the employee to choose between competing with the former employer without restraint from the former employer and accepting benefits of the retirement plan to which the employee contributed nothing.” The employee, who left Exxon to work for rival Hess Corporation, ended up losing 57,200 shares of Exxon stock.
Notably, the Supreme Court also chose to honor a choice of law provision in the agreement which selected New York law. This choice of law provision was respected notwithstanding the fact that the employee worked in Texas and Exxon is headquartered in Texas. The Court instead relied heavily on the fact that New York has well-developed law in the area of stock and securities because the stock exchanges are located in New York, and Exxon’s stated desire to have uniformity in how its employee incentive agreement are interpreted. Although the Court’s decision was ostensibly rendered under New York law, it appears likely the Supreme Court would have no problem reaching the same result under Texas law as the opinion states “the enforcement of these provisions does not contravene any public policy in Texas” and concludes that loyalty agreements are distinct from non-competes under Texas law.
The takeaway from this case is that employers now have another tool in their tool kit in terms of drafting appropriate agreements to discourage key employees from leaving to work for a competitor. One option is the stick – the non-compete – which will be subject to a rigorous review for reasonableness under Texas law. The carrot option – loyalty bonus – will not be subject to the same strict review for enforceability and can be used either alone or in conjunction with a non-compete. Moreover, for any company that is publicly traded on a stock exchange in New York, the Exxon case lays out the roadmap for ensuring the enforceability of such loyalty agreements by bypassing Texas law altogether.