Just like the infamous line that Congress had to pass the Affordable Care Act to know what was in it, it seems we had to pass the new tax law to find out all of the hidden surprises. One item that received little publicity was an addition to the Internal Revenue Code that now prohibits a business from taking a deduction of a settlement for a sexual harassment suit if the settlement contains a confidentiality provision: “No deduction shall be allowed … for (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorneys’ fees related to such a settlement or payment.”
This provision had little discussion in the legislative process and appears to be a knee-jerk response to the “#Metoo” movement and recent publicity involving high profile sexual harassment cases. Unanswered questions include how attorneys’ fees related to the defense of a sexual harassment case will be treated for tax purposes, and whether a company can structure a settlement to separate out the sexual harassment claims if a plaintiff sues under multiple theories. For example, if a plaintiff sues for sexual harassment and wrongful discharge, could the company settle the sexual harassment claim for one dollar without confidentiality, then execute a separate agreement on the remaining claim with a full confidentiality clause protecting the bulk of the settlement amount?
No doubt, plaintiffs’ lawyers are already jumping on the bandwagon and pushing sexual harassment cases in the wake of the recent publicity. This law will provide even more leverage because the company will now have to decide whether it wants to risk losing the deduction as a business expense for the litigation fees and settlement of a claim, versus allowing a plaintiff to publicize a settlement (which could encourage more litigation). Neither of those options are good choices for employers.
It’s that time of year again. You know the one. Supervisors hurriedly completing performance evaluations at the last minute to avoid nasty emails from the HR Department about missed deadlines. Sound familiar? If so, your company may be doing more harm than good. Evaluations are not a time for hurried compliance. These documents are important feedback tools and could be critical pieces of evidence in employment litigation. It is better to do nothing than to create an evaluation that paints a false picture of an employee’s performance.
So, what are some best practices?
- Quality over quantity. Evaluations don’t need to be 10 pages long. Short and to the point is better, especially if that format allows the author to provide some specific examples to support the assessment.
- Avoid evaluation inflation. What does “exceeds expectations” mean if it is third from the top and right above “average?” To a jury it means the employee is doing a good job, but in your organization it might mean that the employee is one step from being fired.
- Be specific. Multiple choice rankings work well in large organizations because managers do not like to write narratives, and the rankings allow the accumulation of data that can be useful in establishing trends and metrics. That said, every evaluation should have some narrative! Give examples of what the employee did well, or not so well, and some feedback on how to improve.
- Evaluate the Evaluator. HR has an important role in ensuring that evaluations are done correctly. That means more than just the mere fact they are completed on time. If a supervisor is giving everyone in his or her department high or low marks, that should raise questions. Similarly, if there is an employee whom everyone knows is having trouble, the evaluation should reflect those problems.
- Delivery is Key. Lastly, the paper evaluation is only half of the process. Delivering the message is equally important and should not be overlooked. Make time to have a meaningful meeting and not just a five-minute conversation. Reviews should include both praise and constructive feedback on areas for improvement. Ask the employee to provide his or her views on strengths and weaknesses. Many times they will identify the same weaknesses, which softens the blow.
The holidays are a busy and stressful time for everyone. Many companies have moved away from evaluations at the end of the year for this reason, but if not, it is important for this consequential process not to get lost in the shuffle. Supervisors must understand the significance of the process, and the need for both consistency and fairness. Sugarcoating helps no one, and giving everyone high marks diminishes the performance of the organization’s super stars. Balancing all of these interests is critical to creating a successful process that measures and rewards performance, and also protects the integrity of the process in case the company is forced to justify its decisions in litigation.
The Harvey Weinstein case has brought a spotlight to a problem that has plagued not only Hollywood but other professions as well. While Corporate America has largely cleaned up its act and instituted robust anti-harassment policies and procedures, the rise of social media and the lax workplace culture inspired by tech giants have left many wondering if the workplace has taken a step back in recent years. Recent examples of large companies hit by sexual harassment scandals include:
- UBER CEO and founder Travis Kalanack was removed after a checkered history which included, among other things, advising employees on drug use and proper etiquette for sex among employees at a company event.
- Roy Price, head of Amazon Studios, resigned after a female producer on the highly successful Man in the High Castle show leveled serious allegations of sexual harassment.
- Fox News Chairman Roger Ailes and host Bill O’Reilly were forced out of high profile positions over sexual harassment allegations
These cases have emboldened persons affected by sexual harassment to bring these cases to the attention of management and the press. Keep in mind that even old cases barred by statutes of limitation may still be eligible for criminal prosecution for assault, and lawyers for victims may still seek compensation in exchange for a confidential settlement that would avoid embarrassment to the company. Put simply, these recent high profile examples of skeletons in company closets rising up years after the fact are not unique, and can happen to any company, regardless of its size.
Now is a great time for companies to review their policies and procedures to make sure there are not festering problems that have been left unaddressed. Some takeaway suggestions include:
- Ensure that anti-harassment training and policies are being supported by every level of the organization, especially the C-Suite level. Executives and valuable employees should not be exempt.
- Is there a legacy of harassment that has been left unaddressed in the organization? Are there skeletons in the closet ready to jump out? If so, develop a game plan for that contingency.
- Revisit your organization’s policies with a fresh eye and perspective. Is there an effective complaint mechanism? Are employees using it? Just because you have no complaints, doesn’t mean you have no problems. Maybe the system is broken.
On July 26, the Dept. of Labor (DOL) published a Request for Information (RFI)(which can be found here), looking for input from the public on next steps after the Obama Administration’s effort to increase the minimum salary threshold for exempt employees was struck down in the courts. Although that case is still on appeal, the Trump Administration has not backed the Obama regulations and has only asked the courts to affirm that the DOL has the authority to increase the minimum salary threshold.
This new RFI opens up a number of new possible approaches to the appropriate salary level for an exempt employee, and signals that DOL is still committed to making changes. The current amount of $455 per week has not been updated since 2004. The Obama administration sought to increase this minimum amount to $913 per week, but the new Secretary of Labor, Alex Acosta, has said publicly that he thinks that amount was too high. This new RFI offers some insight into how DOL is now looking at this issue by asking for comments on the following approaches:
1. Different minimum salary thresholds depending on the size of the employer or the region of the country.
2. Different minimum salary thresholds based on the type of exemption – i.e. executive v. administrative.
3. Different thresholds for highly compensated employee exemption, based on geography, company size, etc.
4. Different methods for updating the above numbers based on either inflation or some other measure, and the appropriate time period to make these adjustments.
Responses to this RFI are due on September 25, 2017. It is widely expected that the agency will take some action to update the minimum salary threshold in late 2017 or early 2018.
With the first tropical storm of the season bearing down on the Gulf Coast, it is a good time to dust off your HR Department’s Hurricane Plan and make sure it is up to date. If you don’t have one, it is an even better time to put one together. Attached is Cozen O’Connor’s HR Guide for Hurricane and Disaster Preparation. This is a handy checklist for the most common Human Resources issues that should be addressed in such a plan. These issues include:
1. Compliance with Chapter 22 of the Texas Labor Code: This law protects from discrimination employees who are absent because if an evacuation order. This law has certain exceptions, including emergency services personnel or those required to provide services for the general public during emergency situations. That said, companies who require such employees to work during a storm must provide emergency shelter.
2. Payment for Employees Who Are Absent Due to Weather: The FLSA treats exempt employees differently from non-exempt. Non-exempt employees must only be paid for actual hours worked. Exempt employees, however, must be paid if the work site is closed or unable to open because of weather for less than a full workweek.
3. On-Call/Waiting Time: Weather events often create unique circumstances that don’t fall neatly into existing policies. Employees may be stuck at work waiting for the weather to clear before they go home – is this compensable time? What if employees are on-call to return to the office after the storm has passed. Is this compensable “on-call time?”
4. Protected Leave Under FMLA: Disasters often create family issues, especially where there are elderly or sick family members who must be moved or cared for during such an event. These situations could trigger protection for absences under the FMLA.
5. Payday: No one wants to miss a paycheck. Make sure your company has a contingency plan in place to communicate with employees and maintain personnel functions like payroll and benefits processing even during a disaster.
Comp time has long been available to public sector employees, but never for private companies. That might be changing soon.
On May 2, the House passed the Working Families Flexibility Act. This bill would amend the Fair Labor Standards Act to allow comp time as an option in lieu of overtime. The full text can be found here. Some key points of the bill include:
– Comp time could only be used if the employee agrees, in writing, before the hours worked.
– Employees could not accrue more than 160 hours of compensatory time.
– Companies would be required to pay out unused comp time at the end of the year (i.e. no carrying over), and upon separation.
– Employees would be able to use comp time unless it would “unduly disrupt” the employer’s operations.
– Employees could ask for payment of all accrued comp time and would be able to opt out of comp time if requested in writing.
Democrats in the Senate have said they would filibuster the bill, so the fate of this bill is uncertain. Obviously, there are a number of important legislative measures right now, including tax and health care reform, so this bill will not be at the top of the list. Stay tuned.
This week, the US Court of Appeals for the Seventh Circuit became the first Federal Court of Appeals to hold that discrimination based on sexual orientation is actionable under Title VII of the Civil Rights Act. A news article about the decision can be found here. A copy of the legal opinion can be found here. This decision is remarkable in that it is joined by both Republican and Democrat judges, including Posner, one of the most respected jurists in the Country.
Although many disagree with the court’s analysis of Title VII to include “sexual orientation” as part of the statute’s prohibition against “sex discrimination,” the reality is that this decision increasingly reflects the main stream view that such discrimination is either already covered under Title VII or should be prohibited as a matter of public policy. When you couple this important decision with the EEOC’s enforcement policy, the myriad of state and local laws already prohibiting discrimination on the basis of sexual orientation, it is hard not to see the “writing on the legal wall.” In fact, for large employers operating in multiple jurisdictions, it is more likely than not that a majority of the workforce is already protected from discrimination based on sexual orientation.
One takeaway from this decision is that it is a good time to review your employee handbook. Does your company policy prohibit discrimination based on sexual orientation and trans-gender status? If not, you may want to update that policy. Although technically not required in every state and jurisdiction, a contrary position is becoming increasingly risky, and could be a barrier to recruiting. If your supervisor training does not already include a discussion about how to address potential discrimination based on employee sexual orientation, it would again be a good time to add such training.
President Trump has only been in office a little over a month, but one thing is clear. He intends to do what he said he would do on the campaign trail, especially in regard to immigration. What does that mean for employers? First, President Trump has said multiple times that he intends to cut down on the “job magnet” and aggressively enforce immigration laws. This priority was right up there with building a wall, deporting illegal immigrants with criminal records, and banning refugees from terrorist countries. The other priorities have garnered all of the news headlines but make no mistake, ICE and other federal agencies are now under the control of a new administration and employers should expect stepped up enforcement of workplace immigration laws.
Starting January 2, 2017 a new updated I-9 form was required, and ICE recently increased fines for document violations related to the I-9 verification process. Clearly, there has been an increased enforcement focus on I-9 compliance and prudent employers should take steps now to get their house in order. Federal law only requires 72 hours’ notice for an I-9 inspection, which leaves little time to conduct an audit and fix mistakes. It is much easier to be proactive and potentially stop small mistakes from being repeated. After all, the same person(s) typically prepare I-9 forms, and if a mistake is being made, it is likely to be repeated until identified in an audit or training session.
Lastly, another issue worth watching is the future of employees working under DACA permits (a/k/a “Dreamers”). These permits were issued under a program unilaterally implemented under President Obama. Although he vowed to end the program when running for office, President Trump has recently been silent as to the fate of this program, and the government is still issuing work permits. There is much uncertainty as to whether the program will be stopped or existing permits will be renewed when they expire (which typically is within two years), which creates practical issues for employers who employ such persons. The main takeaway is that employers should already have a tickler system to re-verify employees with expiring work eligibility and should consider providing extra notice to DACA holders so that all parties are aware of the deadlines and potential political changes that could affect employment eligibility.
Well, 2017 is here; and Cozen O’Connor has just issued its annual Labor and Employment Observer, which contains thoughtful analysis on the year and review of what to expect in the future. A link to the materials can be found here.
With a new President and a Republican majority in Congress, changes are likely to be coming fast and furious once the inauguration is done. Some employment issues likely to get immediate attention are changes to Obamacare and deciding the fate of the Department of Labor’s effort to raise the minimum salary threshold (which was stayed by a federal judge in Texas and is currently on appeal).
My contribution to the 2017 Observer was an article on the rise of state and local employment legislation. This is a trend to watch as it will likely pick up steam as democrat-controlled cities and states seek to fill in the perceived gaps in areas like minimum wage and sick pay laws. As an example of where this trend may be headed, see the attached article discussing an effort in Philadelphia to limit an employer’s right to question applicants about their salary histories.
The enforceability of employee restrictions on competition has traditionally been up the states, with some, like California, largely banning such agreements, while others, like Texas, allowing them with reasonable limitations. On Tuesday, October 25, the White House took the unprecedented step of calling on state legislatures to ban non-compete agreements. A news report on the White House announcement can be found here.
Although the Obama administration’s effort will be largely symbolic, and have no legal effect, it is important as it may be the first in a series of steps to apply pressure to states or employers that allow restrictions on employee competition. For example, it would not be a surprise to see this President, or a future one, restrict government contracts for employers that require employees to sign non-compete agreements. Other legal avenues of attack may include regulations or enforcement actions under anti-trust laws.
For those businesses that rely on such agreements, this is a major wake-up call as it is the first time a President has taken a position on state laws in this area. If we have another Democratic President, or a change in control of Congress, it is possible this issue could gain more traction.