The New York Workers’ Compensation Board published its final regulations implementing the New York Paid Family Leave Law today, Wednesday, July 19, 2017.  The final regulations largely mirror the proposed regulations issued on May 24, but the Board provided further clarification in certain areas.  For example, in its commentary, the Board clarified the rules applicable to coverage of out-of-state employees, the measurement of “days worked” as applied to part-time employees, and how to calculate an employee’s average weekly wage.  Core provisions, such as PFL coverage, eligibility, and interplay with other leave laws, remain the same.

Bond will discuss the final regulations in more detail at a live, complimentary webinar on July 25, 2017 (1:00 p.m. – 2:00 p.m.).  Click here to register for the webinar.  In addition, please continue to follow Bond’s New York Labor & Employment Law Report for additional updates leading up to the January 1, 2018 effective date of PFL in New York.

Now that the regulations are final, employers should begin, in earnest, to modify existing leave policies and processes to incorporate PFL requirements, and to develop new PFL policies that provide employees with information about their rights and obligations under the law.  Bond’s team of labor and employment attorneys are at the ready to answer questions and guide employers through this process.

If you have any questions about PFL, please contact the authors of this post, any of the attorneys in our Labor and Employment Law Practice, or the Bond attorney with whom you regularly work.

If you work in human resources anywhere in New York, you have inevitably heard about New York’s new paid family leave law (“PFL”).  But other than what the law’s name implies — that there will now be a form of paid family leave available to employees in this state — what are the administrative and practical implications that this new law will have on your workplace?  You are not alone if you have questions, and more questions, about what this new law will entail.  Although we are still waiting for final regulations to be issued by the New York State Workers’ Compensation Board that would definitively answer many questions being raised, based on the statutory language and the proposed regulations that are currently pending, here are answers to some of the more frequently asked questions regarding New York’s PFL.

1.  Does this new law apply to my employer?

Whether the PFL applies to a particular employer depends on whether the employer operates in the public or private sector.  All private sector employers in New York that have one or more employees are subject to and have to comply with the PFL.  In other words, this new law applies to virtually all private sector employers in New York State.

By contrast, however, the PFL does not apply to public sector employers unless the particular public employer has elected to opt in to provide benefits under the PFL.  Public employers whose employees are not represented by a union may opt in to the PFL if those non-unionized employees are given 90 days’ notice of the employer’s decision to opt in.  Public employers whose employees are represented by a union also have the option of opting in provided the employer and union negotiate the issue and agree to do so.

2.  When does the PFL take effect?

Covered employers are required to begin providing paid family leave benefits to eligible employees on January 1, 2018, and employees must contribute via payroll deduction to the cost of those benefits as of that same date.  However, covered employers are permitted to, but do not have to, begin collecting deductions from employees as early as July 1, 2017.

3.  For what reasons can an eligible employee take paid family leave?

Unlike the federal Family and Medical Leave Act (“FMLA”), an employee’s own serious health condition is not a qualifying reason under the PFL.  Otherwise, the qualifying reasons for leave under the PFL are similar to those already provided under the FMLA — i.e., to bond with a new child (either the birth, adoption, or placement in foster care); to provide care for a child, parent, grandparent, grandchild, spouse, or domestic partner with a serious health condition; and for qualifying exigencies arising from military service of the employee’s spouse, domestic partner, child, or parent.  What qualifies as a “serious health condition” or a “qualifying exigency” under the PFL is consistent with what qualifies under the FMLA.

4.  Are all employees eligible for this leave, or is there a threshold amount of time an employee needs to work before becoming eligible, like there is under the FMLA?

Although the PFL and FMLA are similar in several respects, the eligibility requirements under the two laws are quite different.  Under the FMLA, an employee must have actually worked a minimum of 1,250 hours in addition to being employed for a year preceding a period of leave before the employee becomes eligible for leave.  However, under the PFL, the only eligibility criteria is the employee’s length of employment.  Employees who work more than 20 hours per week become eligible to receive benefits under the PFL after they have been employed for 26 consecutive weeks, whereas employees who work less than 20 hours per week become eligible to receive PFL benefits after 175 days.  So long an employee meets the applicable 26-week/175-day threshold, there is no additional requirement that employees have actually worked a minimum number of hours in order to be eligible for benefits under the PFL.

5.  How much paid family leave time are eligible employees entitled to?

PFL benefits will be phased in over a 4-year period so that by 2021 when the PFL takes full effect employees in New York will be entitled to 12 weeks of paid family leave time annually for qualifying reasons.  Effective January 1, 2018, an eligible employee will be entitled to receive 8 weeks of leave paid at a rate of either 50% of the employee’s average weekly wage or 50% of New York State’s average weekly wage, whichever is less.  Effective January 1, 2019, an eligible employee will be entitled to receive 10 weeks of leave paid at a rate of either 55% of the employee’s average weekly wage or 55% of New York State’s average weekly wage, whichever is less.  Effective January 1, 2020, an eligible employee will be entitled to receive 10 weeks of leave paid at a rate of either 60% of the employee’s average weekly wage or 60% of New York State’s average weekly wage, whichever is less.  And finally, effective January 1, 2021, an eligible employee will be entitled to receive 12 weeks of leave paid at a rate of either 67% of the employee’s average weekly wage or 67% of New York State’s average weekly wage, whichever is less.

6.  How do we know what New York State’s average weekly wage is?

New York State’s average weekly wage is currently $1,305.92.  On March 31^st of each calendar year, the New York State Department of Labor calculates the State’s average weekly wage based on statewide data from the prior calendar year.

7.  Whose obligation is it to pay for the paid family leave — employer or employee?

Although employers are required to provide PFL benefits to eligible employees, employers are not required to pay anything towards the cost of those benefits.  Paid family leave is intended to be 100% employee-funded.  That is not to say that employees pay themselves the actual wages they would be entitled to during periods of leave, but rather employees are required to contribute, via payroll deductions, to either the premium cost associated with the employer’s attainment of PFL insurance or to the employer’s cost for self-insuring.

One question that still remains open is whether employers may pay for PFL themselves, without taking deductions from their employees’ pay.  This question may be answered when the Workers’ Compensation Board issues final regulations later this year, so stay tuned.

8.  Is there a limit on how much can be deducted from an employee’s paycheck for PFL benefits?

Currently, 0.126% of the employee’s weekly wage up to a maximum of 0.126% of the New York State average weekly wage can be deducted from an employee’s paycheck for PFL purposes.  For example, let’s say that an employee earns $1,250 per week, which is less than the State’s average weekly wage (currently set at $1,305.92).  In that case, the maximum PFL deduction for that employee is 0.126% of that $1,250 weekly earnings, or $1.58 per week.  But if the employee earns more than the State’s average weekly wage, the maximum PFL deduction for that employee is 0.126% of the State average, or $1.65 per week.  In other words, regardless of whether the employee’s weekly earnings are $1,500 or $10,000 or even more, so long as his/her weekly earnings exceed the State average (currently set at $1,305.92), the most that can be deducted from that employee’s pay is $1.65 per week.  Just remember that the State’s average weekly wage is re-calculated each year (see Question 6 above), so the maximum amount that can be deducted from an employee’s paycheck may change each year even if the employee’s weekly wages remain the same.

9.  Is this mandatory or can employees opt out if they don’t want to participate?

This is mandatory.  With only one exception, all employees are required to contribute to the cost of PFL and must have the appropriate amounts deducted from their pay — even if they have not yet been employed long enough to themselves be entitled to benefits under the PFL.  The only exception to this is for employees (such as seasonal and temporary employees) who are hired for shorter periods of time than is necessary for them to be eligible to receive PFL benefits.  So if, for example, an employee is only hired for a two-month period of time, and therefore less than either the 26 weeks or 175 days necessary to become eligible for PFL benefits (see Question 4 above), that employee can opt out of making payroll deductions towards the cost of PFL by filing a PFL waiver with the employer.  But if that same employee’s term of employment changes so that now he/she will be employed for longer than the 26-week/175-day eligibility threshold, a previously filed opt-out waiver will be deemed revoked within eight weeks of the change, and the employee will have to make PFL deductions and make a retroactive payment for the period back to the employee’s date of hire.

10.  Can employees be required to take their accrued vacation/PTO time concurrently with this new family leave time?

No.  Unlike under the FMLA, under the PFL employees cannot be required to take vacation and other PTO time concurrently with their PFL leave.  Employees can choose to have PFL time run concurrently with any vacation or other PTO time so that they receive their full pay during periods of leave, but they cannot be required to do so.

11.  Is there a deadline for employers to decide whether to get insurance or self-insure?

Yes.  If an employer wants to forego getting insurance and to self-insure PFL benefits, the employer must elect to do so no later than September 30, 2017, by filing appropriate paperwork with the State.

We hope these answers have helped in your understanding of New York’s latest employee benefit.  Stay tuned for additional information, particularly once the Workers’ Compensation Board issues its final regulations later this year.  In the interim, our Bond team is available to answer any other questions you may have, assist with policies to address these issues, and help you navigate the PFL requirements.

The New York Paid Family Leave Law, which becomes effective January 1, 2018, will, when fully phased in, result in eligible employees being entitled to up to 12 weeks of paid family leave when they are out of work for certain qualifying reasons.  As discussed in previous blog articles (May 25, 2017, and March 13, 2017), the paid family leave program is intended to be funded entirely through employee payroll deductions and employers are not required to fund any portion of this benefit.  The proposed regulations issued by the New York Workers’ Compensation Board provide that employers are permitted, but not required, to begin to collect weekly contributions on July 1, 2017.  Under the statute, the New York Department of Financial Services was tasked with setting the maximum employee contribution by June 1, 2017, and annually thereafter.

Just yesterday, June 1, 2017, the Superintendent of Financial Services issued its decision setting the maximum employee contribution at 0.126% of an employee’s weekly wage, up to and not to exceed 0.126% of the statewide average weekly wage (“SAWW”).  The SAWW, which was set by the New York State Department of Labor on March 31, 2017, is currently $1,305.92.  So, for example, if an employee’s weekly wage amounts to $1,000.00, the maximum payroll deduction for PFL would be $1.26 for that week.  For employees who make more than the SAWW of $1,305.92, the PFL deduction will be capped at $1.65 per week (0.126% of $1,305.92).  As a reminder, the SAWW is calculated annually on March 31^st based on the previous calendar year, so the maximum PFL employee contribution will likely increase in March 2018.

We will continue to provide updates on the PFL, including the status of the proposed regulations, as information becomes available.

Out-of-state entities with the power to dictate a New York employer's hiring and retention policies take notice:  you can be subject to liability under the New York Human Rights Law ("NYHRL") if you "aid and abet" discrimination against individuals who have a prior criminal conviction, even if you are not the direct employer of those individuals.  In Griffin v. Sirva, Inc., the New York Court of Appeals held that while liability under Section 296(15) of the NYHRL (which prohibits employment discrimination based on prior criminal convictions) is limited to an aggrieved party's employer, liability can extend beyond a direct employer under Section 296(6) of the NYHRL "to an out-of-state non-employer who aids or abets employment discrimination against individuals with a prior criminal conviction." In Griffin, the plaintiffs were employees of Astro, a New York moving company.  The plaintiffs had prior criminal convictions for sexual offenses against children.  After the plaintiffs were hired, Astro entered into a moving services contract with Allied, a nationwide moving company based on Illinois.  As a result of that contract, a large majority of Astro's work was thereafter performed on behalf of Allied. The contract required Astro to adhere to Allied's Certified Labor Program guidelines, one of which required that employees who perform work in a customer's home or place of business pass a criminal background check.  Under Allied's guidelines, employees with prior sexual offense convictions automatically failed the screening.  Pursuant to the contract with Allied, Astro would have been subject to escalating penalties if it used unscreened labor.  Accordingly, the plaintiffs were screened and when their convictions were identified, Astro fired them. The plaintiffs filed suit in the U.S. District Court for the Eastern District of New York against both Astro and Allied, alleging that their terminations based upon their prior criminal convictions violated the NYHRL.  Allied, which was not the plaintiffs' direct employer, moved for summary judgment on the NYHRL claims.  The District Court granted its motion, holding that:  (1) Section 296(15) of the NYHRL applies only to employers and that Allied was not the plaintiffs' employer; and (2) Section 296(6) of the NYHRL (the "aiding and abetting" provision) could not be used to impose liability on Allied because Allied did not participate in firing the plaintiffs. The plaintiffs appealed the District Court's decision to the Second Circuit Court of Appeals, which posed the following three questions to the New York Court of Appeals regarding the interpretation of Section 296(15) and 296(6) of the NYHRL:  (1) Does Section 296(15) of the NYHRL, prohibiting discrimination in employment on the basis of a criminal conviction, limit liability to an aggrieved party's "employer"?  (2) If liability under Section 296(15) is limited to an aggrieved party's employer, what is the scope of the term "employer" for purposes of that provision?  (3) Does Section 296(6) of the NYHRL extend liability to an out-of-state non-employer who aids or abets employment discrimination against individuals with a prior criminal conviction?  The Court answered the first question by holding that liability under Section 296(15) is limited to an aggrieved party's employer.  The Court answered the second question by holding that common law principles of an employment relationship should be applied, "with greatest emphasis placed on the alleged employer's power to 'to order and control' the employee in the performance of his or her work."  The Court answered the final question by holding that an out-of-state non-employer who engages in conduct that aids or abets employment discrimination against individuals with a prior criminal conviction -- for example, by imposing contractual terms on a New York employer prohibiting the use of employees with certain types of criminal convictions from performing work under the contract -- can be held liable under Section 296(6) of the NYHRL if the employer is determined to have violated Section 296(15) of the NYHRL by complying with the terms of the contract. While the plaintiffs' appeal to the Second Circuit regarding the dismissal of their claims against Allied was pending, their claims against Astro (their direct employer) proceeded to a jury trial.  The jury found that Astro did not violate the NYHRL by firing the plaintiffs due to their prior criminal convictions.  Therefore, in this particular case, it does not appear that Allied will be subject to liability.  However, the interpretation of Section 296(6) of the NYHRL set forth by the New York Court of Appeals can certainly be used in future cases to impose liability on an out-of-state non-employer who imposes contractual terms on a New York employer that cause the New York employer to violate Section 296(15) of the NYHRL.

Yesterday, May 24, 2017, the New York Workers’ Compensation Board (the “Board”) issued another set of proposed regulations implementing the New York Paid Family Leave Law (PFL).  The initial proposed regulations were published on February 22, 2017, as discussed in a previous blog article.  During the comment period that followed, the Board received 117 formal comments.  With the newly proposed regulations, the Board provided a detailed assessment of those comments and its responses.  The release of the new proposed regulations opens a new 30-day comment period. The new proposed regulations contain very few revisions of significance.  There are many minor changes, but no major changes to the overall scheme of the program.  A few aspects of the commentary and changes are worth noting:

• The regulations were revised to allow an employer to charge an employee’s accrued paid leave “in accordance with the provisions of the FMLA” when FMLA is run concurrently with PFL.  It appears that the intent was to allow an employer to require an employee who takes concurrent FMLA and PFL leave to use accrued paid time off.  Recall, under the earlier regulations, an employer was prohibited from requiring an employee to use accrued paid time off.  The problem is that the new proposed language says “in accordance with the FMLA” and under the FMLA framework, while employers are generally permitted to force the substitution of accrued paid leave, they are prohibited from doing so when an employee is concurrently receiving disability or workers’ compensation benefits.  This is because such benefits are paid, rendering the FMLA substitution provisions inapplicable.  PFL, like disability and workers’ compensation, is a form of “paid” leave.  Thus, it could be argued that the FMLA rule allowing for employers to force the use of paid leave may be inapplicable.  This is just one example of the complex interplay between the state and federal statutes that employers will be required to carefully work through when developing new leave policies.  Hopefully, the Board will provide additional guidance to clarify this issue.
• The PFL eligibility criteria has been updated so that the eligibility of employees who work 20 hours or more per week is measured based on number of weeks in employment, which must be at least 26, and the eligibility of employees who work less than 20 hours per week is measured based on the number of days worked, which must be at least 175.  The earlier regulations considered any employee who worked less than five days per week to be part-time and required the employee to have worked 175 days of employment to be eligible for PFL.  This revision takes into account that some full-time employees work longer days for fewer than five days a week, and allows them to become eligible after 26 weeks, rather than 175 days.
• The proposed regulations were revised to clarify that an employee using intermittent leave must give the employer separate notice for each day of PFL.  This change is important because the prior set of proposed regulations permitted employees who wanted to take intermittent PFL to only provide notice to the employer once.  This is inconsistent with what is required under the FMLA and would have caused issues when FMLA and PFL are run concurrently.
• Comments from unionized employers called for “more detail about how a collectively bargained plan can take the place of an employer plan, and which sections of the regulations can be changed by agreement, and which cannot.”  While the Board made no changes to the proposed regulations, it points to Section 211(5) of the Workers' Compensation Law (governing disability benefits) and explains that an employer and union must apply to the Board in order to have a CBA fulfill the employer’s PFL responsibility, and that an assessment must be paid to the Board.  It also added two examples of the types of rules than can be changed by agreement.  First, unionized employees can establish eligibility through time worked at any employer covered by the CBA.  Second, the CBA can provide that the union, not the employer, be responsible for time records and payroll deductions.  Notably, as stated in our earlier blog article, the collectively bargained plan must provide benefits at least as favorable as the PFL law, including the length of leave and amount of payment.  This requirement may make it unlikely that existing or future CBAs qualify for an exemption from this law.
• Lastly, although no change was made to the proposed regulations, the Board addressed concerns about employers starting to take payroll deductions on July 1, 2017 when the PFL law does not go into effect until January 1, 2018.  The Board noted that because the law establishes January 1, 2018 as the date upon which benefit payments begin, it is necessary that employers be permitted to take payroll deductions in advance to offset the cost of acquiring the mandated insurance policies.  (The Department of Financial Services has been tasked with setting the maximum employee contribution by June 1^st).  The bottom line is that employers are allowed, but not required, to start taking payroll deductions on July 1, 2017.  If an employer chooses not to do so, the employer will not be able to take deductions in excess of the maximum weekly contribution to retroactively cover the cost of providing PFL benefits.

Bond’s team of employment attorneys will continue to study these proposed regulations and provide additional analysis on this blog.  Given the paucity of significant changes from the originally proposed regulations to the regulations proposed yesterday, we expect the final regulations will very closely mirror these proposed regulations.  Therefore, employers should soon begin the process of drafting new policies so that they are ready for roll out in advance of the January 1, 2018 effective date.

A new New York City law covering freelance workers goes into effect on May 15, 2017.  The law, informally called the “Freelance Isn’t Free Act,” gives non-employee independent contractors the right to a written contract upon request.  Penalties are imposed for failing to provide a contract on request, failing to pay freelancers timely and in full, and for retaliating against freelancers who exercise their rights under the law. The purpose of the law is to provide protection to individuals who do not fit the legal definition of “employee,” and whose income is reported on a 1099 form instead of a W-2. The law covers only those independent contractors that consist of one person, whether or not they are incorporated or use a trade name.  The law covers only those freelancers whose contracts with the hirer in any 120-day period exceed $800 in value.  Sales representatives are excluded, but sales representatives are covered by an even stricter law, Section 191-a of the New York Labor Law.  Lawyers and medical professionals are also excluded.  The law applies to the private sector only. Written contracts with freelancers must include an itemization of the services to be provided, and the amount, rate, timing, and method of compensation.  Unless the contract states otherwise, the presumption will be that the freelancer is entitled to payment within thirty days of the completion of the work.  The written contract required by this law need not be extensive.  In many cases, a few short sentences should suffice. There is no penalty for simply failing to provide a contract.  Penalties are imposed only if the hirer refuses to provide a written contract after the freelancer requests one.  It would be prudent, though, for hirers to provide written contracts to freelancers as a matter of routine. The penalty for failing to provide a written contract upon request is $250.  The penalty for failing to pay a freelancer as promised is double damages.  The penalty for retaliation is the value of the contract.  In each type of case, the freelancer’s attorneys’ fees can also be awarded.  Hirers who are found to have engaged in a “pattern or practice” of violating this new law can be fined up to $25,000.

In a prior blog post, we used the Star Wars Universe as the backdrop for a discussion about obtaining a preliminary injunction in the context of a noncompete agreement.  But we left a discussion of the inevitable disclosure doctrine for another day.  Today is that day. By way of background, the inevitable disclosure doctrine typically plays out as follows.  A key employee of a company who possesses all manner of company secrets leaves for a competitor without a trail, digital or otherwise, of actually taking records with him or her to the competitor.  Nonetheless, even in the absence of physical copying, the company’s secrets are still in the employee’s head.  In the words of the Seventh Circuit Court of Appeals in the case of PepsiCo, Inc. v. Redmond, this leaves the company in the predicament of a "coach, one of whose players has left, playbook in hand, to join the opposing team before the big game." Common experience tells us that, even assuming good faith, the former employee simply cannot help using confidential information to lure away his/her former employer’s customers or otherwise help the new employer gain a competitive advantage.  For example, if the employee knows the confidential pricing for a specific customer, how would he/she not use that information in a sales pitch for the new employer?  Indeed, that would likely be a primary reason for the competitor’s recruitment of the employee in the first instance. As is often the case, however, gut feel of misuse or misappropriation of a trade secret is not necessarily accompanied by direct proof of it.  Even when there is proof, using it may not be so easy.  For example, when a loyal customer reports an improper solicitation by the former employee, do we really want to drag that customer in to testify in a hearing on a preliminary injunction? This all begs the question:  How can the company convince a judge to issue a temporary restraining order and preliminary injunction barring the employee’s use of confidential information without proof of the employee’s misconduct?  Enter the inevitable disclosure doctrine. The inevitable disclosure doctrine, at its core, is a rule of pragmatics.  It recognizes the practical reality that once employees have knowledge of a company’s confidential business information, it is impossible to compartmentalize that knowledge and avoid using it when they go to work for their new employer in the same industry. The doctrine in New York has roots going back to 1919, in the case of Eastman Kodak Co. v. Powers Film Products, Inc.  In the 1990s, the doctrine hit its peak in two contexts.  First, in Lumex, Inc. v. Highsmith, the U.S. District Court for the Eastern District of New York held that when the departing employee had signed a noncompete agreement, the doctrine supplied the missing element of actual proof of use of trade secrets on a motion for a preliminary injunction even when the departing employee acted with the utmost good faith.  Second, in DoubleClick Inc. v. Henderson, the New York State Supreme Court in New York County held that, even in the absence of a noncompete agreement, when the departing employee left with physical or electronic files, the inevitability of use of the trade secrets in such a circumstance springs from the already proven misconduct of the employee. The decisions in Lumex and DoubleClick seemed to usher in a more welcoming attitude towards the doctrine.  But that was somewhat short-lived.  The doctrine receded from its high water mark when employers attempted to broadly use it as a substitute for a noncompete agreement.  In Earthweb v. Schlack, decided by the U.S. District Court for the Southern District of New York, the employer sought to enjoin its former employee from working for a competitor even though the parties’ agreement contained no such prohibition.  The Court held that in absence of evidence of actual misappropriation of confidential information, it would not essentially draft a noncompete for the parties under the guise of inevitable disclosure.  The Appellate Division, Third Department, reached a similar result in Marietta Corp. v. Fairhurst, where the Court refused to use the inevitable disclosure doctrine in a manner that would convert a nondisclosure agreement into a noncompete agreement. Most recently, on December 30, 2016, the U.S. District Court for the Southern District of New York, in Free Country Ltd. v. Drennen, declined to use the inevitable disclosure doctrine to enjoin the solicitation of customers in the absence of a noncompete agreement. The issue now is whether the inevitable disclosure doctrine has lost its teeth and, if it hasn’t, how can an employer actually use it to stop its trade secrets from being used when it can’t prove misappropriation.  The short answer is that the inevitable disclosure is not dead.  It still has its power when used in its proper context. If a company truly wants to protect itself from competition from former employees who possess its confidential information, there is simply no substitute for a narrowly crafted noncompete agreement.  The inevitable disclosure doctrine can be used quite effectively to enforce such a noncompete agreement on an application for a preliminary injunction. The narrower the scope of the restriction, the more receptive a court will be to enforcing it.  Before drafting a noncompete, there ought to be a careful discussion of what the employer is really worried about in terms of an employee leaving.  More often than not, the concern is about the employee working for a limited group of competitors and/or soliciting a limited group of major customers.  In such circumstances, to increase the likelihood of success of enjoining a former employee, a noncompete agreement should actually list the specific group of competitors where the employee would be prohibited from working in the same or similar capacity and/or a specific list of customers whose solicitation would be prohibited.  The noncompete itself may also have a clause stating that if the employee were to work for one of the listed competitors or attempt to solicit a listed customer it would be inevitable that the employee would use confidential information.  A high level executive, particularly one with access to legal counsel to review and negotiate the agreement, would be hard pressed to later dispute that which he/she expressly acknowledged. Finally, for those high level executives for whom it is absolutely critical that a noncompete be enforceable, the agreement should provide for the payment of compensation during the period of noncompetition.  This was done effectively in Lumex. Employers are well served to use narrowly crafted noncompete agreements for a limited class of employees whose departure could damage the company’s legitimate business interests.  The inevitable disclosure doctrine, for all of its long and winding permutations, can still be a powerful tool -- not a substitute -- for enforcing a noncompete agreement.

One of underlying themes of the now defunct “O’Reilly Factor” was that the liberal elites have brought about the “wussification” of America.  In Mr. O’Reilly’s world, personal responsibility has given way to excuses and coddling, begging the question:  where is good old fashioned comeuppance when it is needed?  We can answer that question. While Mr. O’Reilly was a lynchpin to Fox News’ highly rated nightly line-up, he was still an employee subject to all of the common law duties and liabilities as everyone else.  As an employee, he owed his employer a duty of loyalty.  Employed in New York, Mr. O’Reilly is subject to “the mother of all” employer remedies, the so-called “faithless servant doctrine.”  Under this doctrine, if Fox News decided to play the very type of hard-ball championed by Mr. O’Reilly, it could -- if it proves the misconduct -- recoup from him every stitch of compensation paid to him during the period of time that he was allegedly sexually harassing Fox employees, every penny owed to him as part of any “parachute,” and punitive damages.  Fox may also be able to recoup from Mr. O’Reilly the investigative costs it recently paid to its outside law firm. In New York, the faithless servant doctrine is more than one hundred years old.  This doctrine, a subspecies of the duty of loyalty and fiduciary duty, requires an employee to forfeit all of the compensation he/she was paid from his/her first disloyal act going forward.  The doctrine has a deliberate harsh deterrent purpose and public policy goals.  Important here, the fact that Mr. O’Reilly brought in millions of dollars of revenue to Fox is irrelevant to a salary forfeiture against him, if the disloyal acts can be proven. The doctrine has been applied in the specific context of sexual harassment.  In Astra USA Inc. v. Bildman, the Massachusetts Supreme Court interpreted and applied New York law, holding that New York’s Faithless Servant Doctrine permitted an employer to recover compensation it had paid to a high level executive who had been the subject of numerous sexual harassment complaints by other employees.  Under Astra, the doctrine can reach misconduct that does not involve theft or financial damages to the employer.  In upholding a $7 million complete forfeiture, the court aptly stated:  “For New York . . . the harshness of the remedy is precisely the point.” The Astra court relied on the New York Appellate Division, Second Department’s decision in William Floyd Union Free School District v. Wright (argued by the author of this article without any “spin” or “pinhead” elocution).  In that case a multi-million dollar forfeiture was obtained by a public school district against two high level employees who had stolen from it.  In language now cited in other cases, the Court held:  “Where, as here, defendants engaged in repeated acts of disloyalty, complete and permanent forfeiture of compensation, deferred or otherwise, is warranted under the Faithless Servant Doctrine.” Despite Astra and William Floyd, disloyal employees have tried to limit the scope of the forfeiture.  On June 2, 2016, the Appellate Division, Third Department added strength and vigor to the faithless servant doctrine in a case where an employee committed repeated acts of theft.  In City of Binghamton v. Whalen (also argued without spin by the author of this article), the Court reaffirmed the strict application of the faithless servant doctrine:  “We decline to relax the faithless servant doctrine so as to limit plaintiff’s forfeiture of all compensation earned by the defendant during the period of time in which he was disloyal.”  The Court specifically noted that the faithless servant doctrine is designed not merely to compensate the employer, but to create a harsh deterrent against disloyalty by employees. Published reports indicate that Mr. O’Reilly is parachuting out of Fox with tens of millions of dollars.  Under the earnest moral convictions and biblical brimstone that were the hallmark of Mr. O’Reilly’s long tenure with Fox, he should forfeit it all back if the allegations of sexual harassment can be proven by Fox.  Mr. O’Reilly famously closed his show with a “word of the day.”  We offer two such words:  “Faithless Servant.”

On February 22, 2017, the New York State Workers’ Compensation Board unveiled proposed regulations concerning the state's new Paid Family Leave (PFL) law.  The PFL law was passed as part of the 2016 state budget and will eventually require virtually every New York employer to provide employees with up to 12 weeks of paid leave:  (1) for the birth, adoption, or placement of a new child; (2) to care for a family member with a serious health condition; or (3) for a qualifying exigency arising from a family member's military service (as defined in the federal Family and Medical Leave Act).  This program will be funded through employee payroll deductions.  PFL is not intended to cover an employee's own serious health condition; rather, PFL is intended to complement the already existing state disability insurance program.  The basics of the PFL law can be found in our earlier blog article on this subject. The Workers' Compensation Board will be accepting comments on the proposed regulations for 45 days from the date of their release -- until April 7.  Click here to review the proposed regulations and to access an online link to submit comments.  The state also recently launched a website providing information about PFL for employers and employees and set up a new helpline.  Notably, however, the details on this new PFL website reflect the program as it would exist under the proposed regulations, meaning the information there is not yet final (despite how it appears). The proposed regulations contain a great deal of detail to digest, but several significant points will immediately catch the attention of employers:

• First, the state proposes a system where employees apply directly to the employer's insurance carrier for PFL benefits.  The employer merely completes one section of a claim form before it is submitted to the carrier by the employee.  The insurance carrier makes the final determination -- not the employer.  The proposed regulations provide specific details on the format, contents, and timing of claims and decisions on claims.  This is significant because the insurance carrier's determination will have an impact beyond just the payment of benefits to the employee:  it will also require the employer to protect the employee's job, and to maintain his/her health insurance benefits for the duration of the leave.  Additionally, for employers and employees covered by the Family and Medical Leave Act (FMLA), FMLA and PFL benefits will typically run concurrently (more on this below).  Therefore, employers will be faced with a situation where they are making a leave decision simultaneously with an insurance carrier for the same exact leave.  There could be a situation where the employer denies leave, and the carrier approves it.  (Consider, for example, a situation where the employer believes the medical certification is not sufficient, but the carrier disagrees.)  Additionally, the proposed regulations do not include any key employee exceptions like FMLA.  Thus, no matter the size of the employer or the role played by the employee, once the carrier approves the leave, the employer must grant it and guarantee reinstatement at the conclusion of the leave.
• Second, the proposed regulations set up an arbitration system for the purpose of appealing claims denials.  The arbitrator is appointed by the State Workers’ Compensation Board.  The proposed regulations do not appear to contemplate a situation where the employer could appeal because it believes the benefits were wrongly awarded.  Moreover, it is easy to anticipate the complications that could arise if an arbitrator reverses a claims denial.  If the employer denied the time off because the claim was denied and the purpose for the leave has long passed, what is the employee’s remedy?  On the other hand, if the employee already took the time off but used paid time off, do they receive PFL benefits on top of the wages already received?  Must the employer restore the employee’s paid time off that was used?  All of this is unclear.
• Third, employers cannot require employees to use accrued paid time off (such as PTO, sick, or personal time) for the requested PFL time.  It can offer the option and then, if the employee elects this option, seek reimbursement from the insurance carrier.  If the employee elects to use accrued paid time, the employee is still entitled to be reinstated.  If an employee declines this option, he or she can effectively save PTO to be used after his or her return from PFL (which is likely inconsistent with the reason the employer offered various forms of PTO in the first instance).
• Fourth, state disability and PFL will not run concurrently.  This means that in the case of maternity leave, it appears that an employee could conceivably collect disability payments for the first 6-8 weeks of leave (which would not be a PFL-covered absence), and then transition to PFL for an additional 12 weeks job-protected paid leave, for a total of 18-20 weeks off with partial pay.
• Fifth, the regulations do allow PFL and FMLA leave to run concurrently (as mentioned above).  However, this will hinge on the employer designating the leave as FMLA leave by providing the notice required under the federal FMLA regulations.  Employers need to remember to provide the FMLA designation notice.  The insurance carrier's acceptance of a claim for PFL benefits does not automatically cause FMLA leave to run concurrently.  Also related to the interplay with FMLA, the differing eligibility standards between PFL and FMLA sets up a situation where a new employee becomes eligible after only working 26 weeks for the employer, and can immediately take up to 12 weeks of job-protected leave.  Then, once the employee returns to work and reaches the FMLA threshold of 1,250 hours in 12 months, the employee will be eligible for another 12 weeks of job-protected leave.

A few other aspects of the proposed regulations will also interest employers.  Under the proposed regulations, disability insurance carriers will be required to offer PFL coverage in conjunction with their existing disability insurance policies.  Employees who are covered by a disability insurance policy will automatically be covered for purposes of PFL effective January 1, 2018.  Carriers who choose to get out of the disability insurance business in New York, so as to avoid administering the PFL insurance program, must notify New York State by the earlier of July 1, 2017 or within thirty days of the date the community rates for premiums are published by the state (or within 180 days of discontinuing coverage, if discontinued after 2018).  Employers who are self-insured for disability purposes have the option of either self-insuring for PFL benefits or obtaining alternative coverage.  The employer must make the election to self-insure by November 30, 2017. Unionized employers with leave provisions in their collective bargaining agreement that are at least as favorable to employees as the PFL program are exempt from the law.  However, it is not clear who will make the determination of whether the CBA’s benefits are sufficiently favorable.  Additionally, public employers are only covered if they elect to opt-in. These are just a few highlights.  There is much more detail covered in the 48 pages of proposed PFL regulations.  Employers should take the time to review these regulations and submit comments to the Workers' Compensation Board on how the proposed provisions will impact their workplace. It is possible that many aspects of the regulations will change between now and when they are finalized.  Due to the unknown, we do not recommend that employers begin drafting and revising leave policies on the basis of these proposed regulations.  However, we do recommend that employers take an inventory of current leave practices and policies and begin to anticipate how they might need to change.  Once the final regulations are published, it will be critical for employers to quickly respond.  Among other things, employers will be required to provide written details of how PFL benefits are administered to employees.  Those written details will need to reflect the processes set forth in the final PFL regulations. We will continue to analyze these proposed regulations and provide additional updates on how they might impact your workplace.  Stay tuned to our blog for further updates.

In a decision issued yesterday, the New York State Industrial Board of Appeals (IBA) revoked the regulations regarding payment of wages by debit card and direct deposit.  While the full decision is available here, the upshot is that the IBA concluded that the Commissioner exceeded his “rulemaking authority and encroached upon the jurisdiction of the banking and financial services regulators.” Accordingly, the regulations governing the payment of wages by debit card and direct deposit, which were set to go into effect on March 7th, are revoked.  Employers need not act to come into compliance with those regulations. An appeal is possible.  Stay tuned.

Pursuant to new regulations that take effect on March 7, 2017, New York employers will be required to satisfy certain notice requirements and obtain employees' informed consent before paying wages by debit card or direct deposit.  (Additional information concerning those regulations can be found here.)  In connection with those regulations, this week the New York State Department of Labor posted model templates for written notice and consent for public comment and feedback. The notice and consent for payroll debit cards can be found here. The notice and consent for direct deposit can be found here. Comments and feedback can be submitted to regulations@labor.ny.gov through February 10, 2017.  The Department indicates that after making any changes from such comment and feedback, it will post updated templates prior to the March 7 effective date of the rule, along with translations into additional languages specified during the rulemaking process.

As expected, this morning, the New York State Department of Labor published its final rule increasing the salary threshold applicable to exempt executive and administrative employees in New York State. While the ultimate fate of the USDOL’s regulations remains unclear, New York employers now know that the salary threshold applicable to exempt executive and administrative employees will increase effective December 31st. As previously reported, under New York’s Labor Law, the salary threshold for executive and administrative employees (NY law does not set a salary threshold for professional employees and thus the federal salary of $455 applies) is currently $675 per week -- 75 times the current minimum wage of $9.00 per hour.  With the minimum wage set to gradually increase in coming years (at different rates depending on geography), the New York State Department of Labor has implemented corresponding increases in the applicable salary threshold.  The first of these increases will take effect in just three days. Specifically, the increases to New York's salary threshold for executive and administrative employees are as follows: Employers Outside of New York City, Nassau, Suffolk, and Westchester Counties

• $727.50 per week on and after 12/31/16;
• $780.00 per week on and after 12/31/17;
• $832.50 per week on and after 12/31/18;
• $885.00 per week on and after 12/31/19;
• $937.50 per week on and after 12/31/20

Employers in New York City "Large" employers (11 or more employees)

• $825.00 per week on and after 12/31/16;
• $975.00 per week on and after 12/31/17;
• $1,125.00 per week on and after 12/31/18

"Small" employers  (10 or fewer employees)

• $787.50 per week on and after 12/31/16;
• $900.00 per week on and after 12/31/17;
• $1,012.50 per week on and after 12/31/18;
• $1,125.00 per week on and after 12/31/19

Employers in Nassau, Suffolk, and Westchester Counties

• $750.00 per week on and after 12/31/16;
• $825.00 per week on and after 12/31/17;
• $900.00 per week on and after 12/31/18;
• $975.00 per week on and after 12/31/19;
• $1,050.00 per week on and after 12/31/20
• $1,125.00 per week on and after 12/31/21

A chart summarizing these thresholds is available on the NYS DOL website. What does this mean?  It means that if you have any exempt executive or administrative employees who are currently paid less than the applicable salary threshold set forth above, you must increase their salary to at or above that threshold or reclassify them as nonexempt.  But fear not -- you have three days. What a perfect way to end the year -- a significant change imposed on New York employers with virtually no notice. Happy New Year everyone!