The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) has significantly increased its focus on employers’ compensation systems during scheduled affirmative action compliance audits. In fiscal year 2011, OFCCP had 27 compliance evaluations with pay provisions for alleged compensation disparities, totaling $1.06 million in monetary benefits. In 2010, OFCCP reached 10 settlements for alleged bias in compensation. These are significant increases from 2009 and 2008; only two findings of alleged compensation discrimination were found in 2009 and zero in 2008.
Under Executive Order 11246, Federal contractors are required to conduct self-audits of their pay systems to identify potential gender or race based disparities. If pay disparities are found, contractors are expected to correct the disparities prior to any potential government audit. In light of the OFCCP’s increased scrutiny of compensation systems, contractors need to protect themselves by collecting and storing detailed data on factors affecting employees’ pay, such as years of prior job experience, time at the company, time in the position, education, performance ratings, pay grade or level, and additional compensation (commissions, bonuses, incentives, overtime, etc.). Federal contractors should also be sure to preserve all salary records for employees, to allow for the creation of a salary history for individual employees. In addition, contractors should have written compensation guidelines, as well as defined polices influencing compensation, such as the impact of performance evaluations on compensation.
It is expected that OFCCP’s heightened focus on compensation will continue to grow. To avoid significant back pay awards based on perceived pay disparities due to race or gender, employers must be proactive in self-auditing their compensation practices and making appropriate adjustments prior to any government review.
On September 26, 2012, the Second Department Appellate Division held that an employer who hires undocumented aliens in violation of the Immigration Reform and Control Act of 1986 ("IRCA") is still shielded by the Workers' Compensation Law if those employees are injured on the job.
IRCA was adopted by Congress in an attempt to curtail illegal immigration. Toward that end, it imposed a duty upon employers to verify a prospective employee's identity and work eligibility by examining the individual's documentation prior to hiring. Absent the requisite documentation, employment cannot be offered. Employers who violate IRCA are subject to civil and criminal penalties.
The Workers' Compensation Law insulates employers from personal injury claims brought by their employees, and also precludes third party claims against the employer for contribution and indemnification except in instances of “grave injury” or where the employer contracted to provide such indemnification.
How do these federal and state provisions relate? In a matter of first impression, the Second Department Appellate Division was asked to decide whether the protection afforded employers under the Workers' Compensation Law was still available in the event that the employer violated IRCA. Yes, it was, according to the decision in New York Hospital Medical Center of Queens v. Microtech Construction Corp.
In arriving at that conclusion, the Court made several observations. First, it noted that in adopting IRCA, Congress expressly preempted all state and local laws that imposed civil or criminal sanctions upon employers for similar offenses. It also observed that the statute was silent as to any further preemptive effect. Indeed, to the contrary, IRCA’s legislative history demonstrated a lack of intent to diminish existing labor protections. Consistent with that conclusion, the Court determined that there could be no express preemption of the Workers' Compensation Law, as none of its relevant provisions seek to impose civil or criminal sanctions for employing undocumented aliens.
While the Court acknowledged that stripping away the protections of the Workers' Compensation Law from an IRCA-violating employer may support the federal statute’s ultimate goals, it held nevertheless that retaining such protections despite an IRCA violation did not present such an obstacle to attaining Congress’ objectives that the Workers' Compensation Law could be considered preempted. Thus, the Court ruled that an IRCA violation did not serve to diminish or remove the protections afforded an employer under the Workers' Compensation Law.
On September 28, 2012, the National Labor Relations Board handed down its first decision regarding whether an employee’s termination in connection with his postings on Facebook was unlawful. In its decision, however, the Board dodged the more thorny aspect of the case, which was whether other Facebook postings of the employee that were openly critical of the employer were protected under the Act.
The Board concluded that the employee, a salesman at a BMW dealership, was terminated for posting pictures on Facebook of an unfortunate incident at an adjoining Land Rover dealership, which was also owned by the same employer. The incident depicted in the employee’s photos was of a Land Rover that had been driven into a pond by a customer’s teenage son and included the caption: “This is your car. This is your car on drugs.” He also wrote on his Facebook page:
This is what happens when a sales Person sitting in the front passenger seat (Former Sales Person, actually) allows a 13 year old boy to get behind the wheel of a 6000 lb. truck built and designed to pretty much drive over anything. The kid drives over his father’s foot and into the pond in all about 4 seconds and destroys a $50,000 truck. OOOPS!
The Board, affirming the ALJ, concluded that there was nothing protected or concerted about these posts by the employee because they did not concern any terms or conditions of employment and they were posted solely by the employee, apparently as a “lark.”
The Board did not consider whether more controversial postings by the employee on his Facebook page were protected, concerted activity under the Act. Those postings were critical of the employer’s “Ultimate Driving Event” at the BMW dealership. Specifically, the employee criticized the low budget food and drink offerings provided to customers -- the 8 oz. bag of chips, the $2.00 cookie plate from Sam’s Club and the hot dog cart where a customer “could attain a over cooked wiener and a stale bunn [sic],” among other criticisms. Because the Board agreed with the ALJ that the employee had been fired exclusively for the Land Rover postings, which were clearly unprotected, the Board found it unnecessary to determine whether the employee’s other postings were protected.
However, two members of the Board (with Member Hayes dissenting) concluded that the following policy of the employer was unlawful:
Courtesy: Courtesy is the responsibility of every employee. Everyone is expected to be courteous, polite and friendly to our customers, vendors and suppliers, as well as to their fellow employees. No one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.
Specifically, the Board found the broad prohibitions of the rule on “disrespectful” conduct and use of “language which injures the image or reputation of the Dealership” implicated protected Section 7 activities, including complaining about working conditions and seeking the support of others in improving them. The Board noted that there was nothing else in the rule -- or the employee handbook generally -- to suggest that conduct protected by Section 7 of the Act is excluded from the Courtesy rule. The two-member majority rejected the argument advanced by dissenting member Hayes that the words contained in the rule must not be read “in isolation,” and that the first two sentences inform employees that the rule is intended simply to promote civility in the workplace.
Just two weeks after the National Labor Relations Board’s first decision regarding the lawfulness of an employer’s social media policy, another employer received an adverse decision on its social media policy, this time by a Board administrative law judge. On September 20, 2012, ALJ Clifford Anderson ruled that EchoStar Technologies’ social media policy chilled employees’ Section 7 rights and thus violated Section 8(a)(1) of the National Labor Relations Act.
The challenged portions of the policy (i) prohibited employees from “mak[ing] disparaging or defamatory comments about EchoStar, its employees, officers, directors, vendors, customers, partners, affiliates, or our or their products/services”; and (ii) further prohibited employees’ participation in personal social media activities “with EchoStar resources and/or on Company time” without company authorization.
Applying the test set forth in Lutheran Heritage Village-Livonia, the judge preliminarily found that the EchoStar policy did not explicitly restrict Section 7 activity and noted the absence of a claim that the policy was promulgated in response to union activity or that it had been applied to restrict the exercise of Section 7 rights. He found, however, that the term “disparaging” was impermissibly overbroad and would be read by a reasonable employee to intrude on and chill the employee’s right to engage in activities protected by Section 7 of the Act.
ALJ Anderson further rejected EchoStar’s argument that a “savings clause” salvaged the rule. The clause advised employees to contact Human Resources if they had questions regarding the handbook and further stated that if a conflict arose between an EchoStar policy and the law, the appropriate law would govern and the policy would be conformed in accordance with that law. Noting that the clause appeared in the introductory sections of the handbook, several pages before the social media policy, the ALJ found that a general admonition to contact Human Resources does not create a “legal loop” that an employee must jump through before the rule may be challenged. He further found that a boilerplate clause that a document’s provisions be applied and interpreted in a legally permissible manner does not save an otherwise invalid rule under the Act. Without any analysis, the ALJ also found that the rule prohibiting employees from using personal social media with company resources and/or on company time also violated the Act.
Additionally, ALJ Anderson invalidated several other handbook policies (or portions thereof), including policies regarding “contact with the media” and “contact with government agencies," the “investigations” policy insofar as it required that employees “maintain confidentiality” during internal company investigations, and the portion of the “disciplinary actions” policy defining “insubordination” to include “undermining the Company, management or employees.” In each instance, the ALJ found the challenged language to be overbroad and likely to induce a reasonable employee to conclude that it encompassed, and thereby prohibited, protected Section 7 activity.
Similar to the Board in Costco, ALJ Anderson appears to have closely tracked the reasoning of Acting General Counsel Lafe Solomon, as set forth in Mr. Solomon's three Operations Memos issued during the past 14 months. That said, the Board’s analysis of social media policies remains in its infancy and little specific guidance on permissible policy language is currently available. Until further decisions and guidance are issued, employers should continue to consult with counsel in crafting their social media policies, with an eye toward (i) avoiding broad, vague prohibitions; (ii) including specific examples of prohibited conduct; and (iii) inserting appropriate disclaimers within the policy itself.
On September 7, the National Labor Relations Board (“Board”) issued its first decision on the lawfulness of an employer’s social media policy under the National Labor Relations Act (“NLRA”). We have previously reported on three non-binding reports issued by the Board’s Acting General Counsel (“GC”) since August 2011, outlining his views of impermissibly restrictive social media rules. In Costco Wholesale Corp., the Board has indicated that it may take an approach similar to the GC in scrutinizing employer efforts to control employees’ online speech.
The Costco policy prohibited employees from electronically posting communications that “damage the Company, defame any individual or damage any person’s reputation, or violate the policies outlined in the Costco Employee Agreement.” Reversing the administrative law judge’s ruling, a three-member Board panel held that this rule was overly broad in violation of Section 8(a)(1) of the NLRA. In reaching this conclusion, the Board found that the wording of the policy “clearly encompasse[d] concerted communications” protesting Costco’s treatment of its employees. The Board further found that in the absence of any accompanying language that “even arguably suggests that protected communications are excluded from the broad parameters of the rule,” employees would reasonably assume the policy prohibited them from engaging in communications critical of Costco or its agents. Costco was ordered to rescind the policy insofar as it prohibited employees from making on-line statements damaging to the company’s or any person’s reputation.
Costco’s policy also provided that “sensitive information such as . . . payroll . . . information may not be shared, transmitted or stored for personal or public use without prior management approval.” The provision was deemed unlawful, because the Board determined that employees would reasonably conclude that it prohibited them from discussing their wages and other terms and conditions of employment. Costco’s argument that the rule should be read to prohibit only the sharing of the “confidential business component of payroll, such as budgeted payroll and expenses and the like” was rejected. Although the rule also prohibited disclosure of items unrelated to terms and conditions of employment, such as social security and credit card numbers, when read in the context of the entire document, the Board believed that term “payroll information” would reasonably be construed by employees to prohibit protected activity under Section 7 of the NLRA, such as discussing their compensation.
However, that portion of the Costco policy that required employees to use “appropriate business decorum” in communications with others was found to be lawful. The administrative law judge (affirmed by the Board) agreed that an employer may lawfully establish rules providing for a civil workplace. The GC’s contention, that the rule could be interpreted by employees as restricting Section 7 activities, was rejected. Rather, the Board held that the applicable legal standard is whether the rule in question would be construed by employees to restrict Section 7 activity.
Additional cases involving social media issues are likely to be decided by the Board over the next several months. Until further decisions and guidance are issued, employers should consult with legal counsel in crafting their policies. Employers would also be well-advised to avoid broad, vague restrictions (e.g., “non-disparagement”) and restrictions that plainly impinge on protected speech (e.g, “no discussion of wages”). Employers should also include specific examples of prohibited conduct and a “savings clause” or other disclaimer language making clear that the policy is not intended to restrict Section 7 rights.
On September 10, 2012, the U.S. Court of Appeals for the Second Circuit reversed a 2010 District Court decision and rejected a claim by a terminated public school district employee that she was subjected to retaliation for engaging in protected speech under the First Amendment to the U.S. Constitution. In Ross v. Lichtenfeld, the Second Circuit held that the employee's complaints upon which she based her retaliation claim were not protected by the First Amendment, and determined that the school district's superintendent was entitled to summary judgment.
Risa Ross was a payroll clerk typist for the Katonah-Lewisboro Union Free School District. Her duties included processing the school district's payroll, transmitting direct deposits, mailing checks, and notifying appropriate personnel of payroll mistakes. Between 2003 and 2006, Ross met with the school district's superintendent numerous times to express concern about payments that she believed to be improper.
In 2006, Ross was suspended with pay by the school district after it was discovered that Ross had failed to disclose on her employment application that she had been employed by three other school districts and had been discharged from her employment at each of those three school districts. During her suspension, Ross wrote to members of the board of education regarding the concerns she had previously expressed to the school district's superintendent about financial malfeasance, and her belief that she had been suspended in retaliation for raising those concerns. In those letters, Ross stated that, although she was an employee of the school district, she was writing on a "personal note" to express her frustration with the school district's administration.
The board initiated a disciplinary hearing. The hearing officer found that Ross had knowingly made false statements on her employment application, and recommended that her employment be terminated. The board then voted unanimously to terminate Ross' employment.
Ross filed four claims against the superintendent, including a claim that she was discharged in retaliation for exercising her First Amendment rights. The District Court granted the superintendent's motion for summary judgment on every claim except the First Amendment retaliation claim, which it determined should proceed to trial.
The superintendent subsequently appealed the District Court's denial of summary judgment with respect to the First Amendment retaliation claim. In its decision, the Second Circuit cited well-established precedent that a public employee speaking "as a citizen . . . on a matter of public concern" is entitled to First Amendment protection for that speech. However, a public employee speaking pursuant to his or her official duties -- and not as a private citizen -- is not entitled to First Amendment protection for that speech, even if the employee's speech is a matter of public concern. In determining whether a public employee's speech is pursuant to his or her official duties, courts examine the nature of the employee's job responsibilities, the nature of the speech, and the relationship between the two.
Ross argued, among other things, that her letters to board of education members were sent as a private citizen because she specifically stated in those letters that she was writing on a "personal note" rather than as an employee of the school district. The Second Circuit rejected this argument, holding that "an employee's characterization of her own speech is not dispositive." The Second Circuit also rejected Ross' other arguments, and held that Ross' concerns about improper payments and/or financial malfeasance were raised pursuant to her job duties as a payroll clerk typist.
Accordingly, the Second Circuit reversed the District Court's decision and determined that the superintendent was entitled to summary judgment on Ross' First Amendment retaliation claim. In so holding, the Second Circuit reinforced well-established principles of what constitutes protected free speech by public employees.
As previously reported in this blog, on July 30, 2012, in the Banner Health System case, the National Labor Relations Board (“Board”), issued a 2-to-1 decision holding that a hospital violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”) by asking employees who make a complaint not to discuss the matter with co-workers while the investigation is pending.
Shortly after the Board issued that decision, the Buffalo, NY regional office of the United States Equal Employment Opportunity Commission (“EEOC”) took a similar position that a confidentiality instruction to an employee making a complaint of discrimination would, in that office’s view, constitute unlawful interference with the complaining employee’s efforts to oppose discrimination.
According to the EEOC's Buffalo office:
EEOC guidance states that complaining to anyone, including high management, union officials, other employees, newspapers, etc. about discrimination is protected opposition. It also states that the most flagrant infringement of the rights that are conferred on an individual by Title VII’s retaliation provisions is the denial of the right to oppose discrimination. So, discussing one’s complaints of sexual harassment with others is protected opposition. An employer who tries to stop an employee from talking with others about alleged discrimination is violating Title VII rights, and the violation is “flagrant” not trivial.
Although this position taken by the Buffalo office has not officially been adopted by the EEOC as a whole, the fact that two federal authorities are attacking the validity of confidentiality instructions is cause for concern. At a minimum, employers should take a step back and review their investigatory process to ensure that no undue restraint is being placed on employees. We offer the following practical pointers employers should keep in mind in conducting this review:
Preserving the integrity of an investigation by keeping harassment/discrimination complaints confidential is a laudable objective. However, official EEOC guidance requires that employers maintain the confidentiality harassment/discrimination complaints to the extent possible. Employers are not required or expected to, nor can they, guarantee that harassment/discrimination complaints will be kept strictly confidential. The Board’s Banner Health System decision also states that a generalized desire to protect the integrity of an investigation will not justify a general policy that matters be kept confidential.
It does not matter whether employees are unrepresented or unionized in determining whether their rights under the NLRA have been violated. Regardless of whether covered employees are represented by a union, they are protected by the NLRA. However, supervisors are not considered covered employees under the NLRA and therefore supervisors are not entitled to its protections. Consequently, notwithstanding the Board’s Banner Health System decision, an employer could request a supervisor, as opposed to a non-supervisory employee, not to discuss matters with co-workers without fear of violating Section 8(a)(1).
Consider only “asking” an employee to keep things confidential or “suggesting” the employee be “discreet” about the “sensitive issue,” rather than “instructing,” “ordering,” or “directing” an employee to maintain confidentiality. Explain to the employee the benefits of confidentiality and how the employer does not want any information leaked that could potentially hinder its ability to complete a thorough investigation or to gather accurate, untainted evidence. Confidentiality could also be suggested to the employee without an express directive by mentioning the “sensitive” nature of the matter and how he/she would not want allegations made against him/her to be publicly discussed. By ultimately leaving some choice with the employee, the employer should still be able to argue it did not violate the employee’s rights under the NLRA or interfere with the employee’s Title VII rights to oppose discrimination.
Employers should analyze each case on an individual basis before asking an employee not to discuss the matter with co-workers, specifically taking into account the factors enumerated by the Board in Banner Health System: (1) Are there witnesses in need of protection? (2) Is evidence in danger of being destroyed? (3) Is testimony in danger of being fabricated? and (4) Is there a risk of a cover-up? Although Banner Health System involved a “request,” not a directive, that the employee maintain confidentiality, the Board did not take issue with the request itself but rather with the employer’s blanket practice of requesting confidentiality of all employees without making an individualized assessment as to whether a request was appropriate in any given case. The Board ultimately viewed this blanket practice as effectively prohibiting any discussion of investigations amongst employees and therefore violative of Section 8(a)(1). Blanket requests or instructions to maintain confidentiality in all, or virtually all, investigations will likely not be upheld.
Employers should also consider other intangible factors, such as whether the individual is likely not to discuss the matter on his/her own accord even without any request from the employer to keep it confidential. If the employee would likely maintain confidentiality without any direction from the employer, why risk potential liability by issuing a request?
If a decision is ultimately made to issue a confidentiality instruction or directive, notwithstanding the potential risk of liability in doing so, all of the reasons underlying this decision should be clearly and promptly documented, in writing, in case the decision is ever challenged in the future.
Once the investigation is complete, consider affirmatively lifting any confidentiality instruction that was issued. Doing so could potentially limit the time period for which an employer could be held liable for the confidentiality instruction if it is ultimately held unlawful.
As we reported in a prior blog post, an amendment to New York's wage deduction statute -- New York Labor Law Section 193 -- was passed by the Senate and Assembly in June. Governor Andrew Cuomo signed the legislation on September 7. This amendment – effective on November 6, 2012 – will permit New York employers to make a wider range of payroll deductions than currently enumerated in Section 193 and will impose several new deduction-related requirements.
As many employers are aware, the New York State Department of Labor (“NYSDOL”) in recent years significantly narrowed its interpretation of Section 193. To summarize, NYSDOL has taken the position that a wage deduction is not permissible unless it is very “similar” to those expressly recognized in the statute as lawful (e.g., deductions for “insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, [and] payments for dues or assessments to a labor organization”). This interpretation varied from the NYSDOL’s historical focus on whether the deduction is for the “benefit of the employee.”
Diverging from this historical focus, NYSDOL more recently opined that the following types of employee wage deductions, among others, are unlawful: (a) deductions for loans, wage overpayments, or wage advances owed to an employer; (b) deductions for the recoupment of tuition assistance monies owed to an employer; and (c) deductions for purchases from employers or employer-sponsored stores, cafeterias, and like establishments. To reiterate, NYSDOL found these types of deductions to be unlawful (even with an employee’s voluntary agreement and written authorization) because they were not sufficiently “similar” to Section 193’s enumerated list of permissible payments.
Fortunately for New York employers and employees, the recent amendment to Section 193 will expand the enumerated list of permissible wage deductions to include deductions for:
Prepaid legal plans;
Purchases made at events sponsored by a bona fide charitable organization affiliated with the employer, where at least twenty percent of the profits from the event are contributed to a bona fide charitable organization;
Discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle an employee to use mass transit;
Fitness center, health club, and/or gym membership dues;
Cafeteria and vending machine purchases made at the employer’s place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college or university;
Pharmacy purchases made at the employer’s place of business;
Tuition, room, board, and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions;
Day care, before-school and after-school care expenses; and
Payments for housing provided at no more than market rates by non-profit hospitals or affiliates.
The amendment will also expressly permit deductions made in conjunction with an employer-sponsored pre-tax contribution plan approved by the Internal Revenue Service or other local taxing authority. As the above list indicates, some of the new enumerated deductions will only be permitted for certain types of employers (e.g., hospitals, colleges and universities). It is not apparent why legislative drafters included these limitations.
Importantly, the amendment will additionally permit employers to recover inadvertent wage overpayments and wage advances by payroll deductions under certain circumstances and subject to future NYSDOL rulemaking. According to the amendment, these forthcoming rules must include provisions governing the terms and conditions under which employers may deduct for wage overpayments and advances and must also include provisions relating to employee notice and dispute resolution procedures.
The amendment also imposes new deduction-related requirements, which New York employers must follow. For example, the amendment provides that “all terms and conditions of the payment and/or its benefits and the details of the manner in which the deductions will be made” must be provided to employees in advance. Additionally, employers must give advanced notice to employees if there is a “substantial change” in the terms or conditions of the payment (e.g., a change in the amount of the deduction, or in the corresponding benefits). The amendment also establishes limitations on the total amount of deductions that may be made for certain purposes each pay period, and requires that employees have access to real-time information regarding certain deduction-related expenses.
Employers must now also keep any “written authorization” required under Section 193 for the respective employee’s entire period of employment and, then, for an additional six (6) years after the end of that employment. For employers with union-represented workers, the amended Section 193 clarifies that the requisite “written authorization” may be provided pursuant to the terms of a collective bargaining agreement. Except where a deduction is “required or authorized” in such a current collective bargaining agreement, the amendment further provides that employees are free to revoke their authorization at any time. In such an event, employers must then cease the wage deduction in question “as soon as practicable” and not later than four pay periods or eight weeks after the employee’s revocation, whichever occurs sooner.
Finally, New York employers should take note that the amendment has a three-year “sunset” provision, and, therefore, would require additional legislation to make the corresponding changes to Section 193 permanent. As with any new legislation, employers should carefully review the amendment to Section 193 and should prepare accordingly in advance of the pending effective date.
On July 6, 2012, the Fourth Department Appellate Division held that the 2008 amendments to the Wicks Law, including a requirement that contractors and subcontractors participate in apprentice training programs approved by the Department of Labor in order for a project labor agreement ("PLA") to qualify for an exemption from the Wicks Law, are valid and constitutional.
The Wicks Law requires that governmental entities in New York prepare separate bid specifications and award separate contracts for the plumbing, heating and ventilation, and electrical components of those publicly-funded construction projects that exceed their monetary cost threshold. This requirement is often fiscally and administratively burdensome to the public entity.
In 2008, to alleviate some of that stress, the formerly uniform monetary threshold was modified to a three-tier system with trigger amounts of $3,000,000 for the five New York City counties, $1,500,000 for Nassau, Suffolk and Westchester, and $500,000 for all other counties. Labor Law Section 222 was adopted at the same time, providing for a full exemption from the Wicks Law requirements where the project is covered by a qualifying PLA. The statute defines a PLA as:
a pre-hire collective bargaining agreement between a contractor and a bona fide building and construction trade labor organization establishing the labor organization as the collective bargaining representative for all persons who will perform work on a public project, and which provides that only contractors and subcontractors who sign a pre-negotiated agreement with the labor organization can perform project work.
In order for the PLA to qualify the project for exemption, it must provide that each contractor and subcontractor participate in apprentice training programs approved by the Department of Labor.
In Empire State Chapter of Associated Builders and Contractors v. M. Patricia Smith, both the three-tier threshold and the apprentice training program requirement were challenged as unconstitutional. The three-tier threshold was attacked, in part, upon the premise that it was enacted with procedural deficiencies that violated the home rule provisions of the New York State Constitution. However, the Court held that the enactment bore a direct and reasonable relationship to a substantial State concern, and was a valid exercise of legislative power under Article IX of the Constitution.
The apprentice training program requirement was challenged as exclusionary. According to the plaintiffs, it unfairly burdened contractors and subcontractors by requiring them to maintain apprentice training programs of their own, for all public projects meeting the new thresholds. They argued that the legislation served to disqualify out-of-state contractors from large public construction projects, and inhibited a disproportionate number of minority-owned and women-owned businesses from qualifying for work on such projects. The Court disagreed with the plaintiffs' interpretation of Labor Law Section 222. The Court held that the apprentice training requirement is not universal, and applies only to those projects where the government entity has elected to utilize a PLA. Further, the Court also held that any contractor or subcontractor entering into a qualifying PLA is deemed to be participating in an apprentice training program. The individual contractors and subcontractors need not maintain an apprentice training program of their own.
In the aftermath of the Fourth Department's decision, it would be economically prudent for governmental entities to examine the feasibility of a PLA that complies with Labor Law Section 222 for their next public construction project.
A recent decision by New York’s highest court highlights the value to employers of initially setting forth the terms of employment in a written offer letter. In Ryan v. Kellogg Partners Institutional Services, the New York Court of Appeals upheld an award of $380,000 for an unpaid wage claim and attorneys’ fees, principally because the jury believed the plaintiff’s testimony that he was promised a $175,000 bonus by the defendant’s managing partner, and notwithstanding the managing partner’s testimony that he made no such promise.
Neither the employer’s employment-at-will policy and disclaimers, nor the Statute of Frauds provided a defense to the claim, but a properly drafted employment offer letter, which was missing here, would have made all the difference in the result.
The plaintiff testified that he was recruited to work for the defendant, which at the time was a fledgling securities brokerage firm. He testified that he sought an annual salary of $350,000 to change jobs, and, to meet his demand, the managing partner offered him compensation consisting of a salary of $175,000 and a guaranteed bonus of $175,000 payable within the first year of his employment. After accepting the position, but before starting, plaintiff completed an employment application with an employment-at-will acknowledgment. He also signed off on the employer’s handbook that confirmed his “at will” status, and specifically provided that:
[no] representative of the company . . . has the authority to enter into any agreement for employment for any specified period of time or to make any agreement contrary to [the employee’s at-will status]. [N]othing contained in the handbook may be construed as creating a promise of future benefits or a binding contract with [the employer] for benefits or any other purpose.
The new business started slowly and, according to the plaintiff, within the first year, the managing partner asked him to postpone the bonus for a year. Plaintiff claimed to reluctantly agree. There was, apparently, no documentation of this discussion or agreement. The plaintiff also testified that he discussed the bonus “many times” with the managing partner who, according to the plaintiff, “put him off.” Ultimately, plaintiff was offered a $20,000 bonus, which he refused to accept, and subsequently was terminated.
At trial, the managing partner contradicted the plaintiff’s testimony in “every conceivable way” on the topic of bonuses. He told the jury that the subject of a $175,000 bonus was never discussed before or after plaintiff was hired, and that bonuses were entirely discretionary.
The jury credited the plaintiff’s testimony and awarded the $175,000 bonus. The court found the failure to pay the bonus to be a violation of the wage payment provisions of the New York Labor Law and awarded attorneys’ fees of $205,000.
The Court of Appeals affirmed in all respects. In particular, the Court reasoned that the employment-at-will policy and acknowledgments did not provide a defense to this claim because, while the employment-at-will policy established that the plaintiff was not guaranteed employment for any period of time, and that his employment, compensation, and benefits were subject to termination, that policy did not establish that bonuses were discretionary, or that the plaintiff was not entitled to payment of compensation that he claimed was promised at the outset of his employment. According to the Court, the at-will disclaimers did not preclude an employee from recovering remuneration earned before his employment ended. It was for the jury to decide what agreement the parties had reached on the plaintiff’s bonus compensation.
The Statute of Frauds (New York General Obligations Law §§ 5-701 et seq.), which limits the enforceability of oral contracts by requiring a writing in certain enumerated circumstances, was not a defense here because there was adequate consideration for the alleged promise, and the bonus was scheduled to be paid within one year.
The Court of Appeals also approved the award of attorneys’ fees to the plaintiff on the theory that the failure to pay the bonus constituted a failure to pay wages under New York Labor Law. The Court noted that, subsequent to trial, the relevant Labor Law provision, Section 198(1-a), had been amended to increase the potential recovery to include liquidated damages of 100% of the wages found due (i.e., double damages plus attorneys’ fees).
The facts in Ryan v. Kellogg Partners illustrate the significant risk that employers take in not confirming the terms of employment through a written offer letter. Such an offer letter can incorporate at-will employment principles before the employee accepts a position. In addition, important terms of employment, including salary, benefits, bonus and incentive opportunities, can be clearly identified and not left to the vagaries of jury deliberations. The warning of Ryan v. Kellogg Partners is that substantial jury verdicts can rest on the testimony of a former employee. Employers who heed that warning will have thorough employment documentation -- beginning with a well-crafted offer of employment.
In the coming weeks, many employers may notice that Form I-9 – which employers are required to complete for newly-hired employees – is set to expire on August 31, 2012. Employers should be aware that the U.S. Citizenship and Immigration Services (“USCIS”) has advised continued use of the current Form I-9 past this looming expiration date.
As for developments on a new Form I-9, the USCIS published notice of the revised Form I-9 on March 27, 2012, followed by a public comment period, which ended on May 29, 2012. Until further notice from the USCIS, employers should continue to use the current Form I-9.
As background, employers are required to complete the Form I-9 to verify and/or re-verify an employee’s identity to confirm the individual is (or remains) authorized to accept employment in the United States. For recordkeeping purposes, an employer must retain completed I-9 forms for the later of three (3) years after an individual’s date of hire or one (1) year after the employment relationship ends.
The Bond Immigration Practice Group will continue to monitor the availability and issuance of the new Form I-9 and will provide additional details on this blog when further information becomes available.
One would think that an elected official would be free, if not obligated, to express his/her opinions on a matter of public interest without fear of financial repercussion. Sometimes, though, as the decision in Matter of Lancaster v. Incorporated Village of Freeport teaches us, the exercise of such freedom may come with a cost.
The case arose when a municipality’s statutory obligation to defend and indemnify its elected and appointed officials clashed with the desire of a minority of those officials to voice opinions critical of a settlement made on their behalf and on behalf of the municipality that they represented.
The municipality’s duty, which arises under the Public Officers Law, is analogous to an insurance company’s contractual obligation to defend its insured. The duty is conditioned upon an official’s cooperation in the defense of the claim, and a failure to cooperate could result in a disclaimer of coverage. Like the insurance company, the municipality seeking to disclaim coverage would have to demonstrate that it: (1) acted diligently in seeking to bring about the official’s cooperation; (2) its efforts were reasonably calculated to bring about the official’s cooperation; and (3) the attitude of the official, after cooperation was sought, was one of willful and avowed obstruction.
That brings us to Lancaster, where a majority of the Village Board wished to resolve a costly and controversial claim, but a potentially vocal minority did not. Not surprisingly, the approval vote was split along political lines. When it came time to execute the stipulation of settlement, however, that voting minority chafed at the requirement that they consent to a non-disparagement clause which served to prevent public criticism of the resolution. Their refusal jeopardized the entire settlement.
The majority of the Board responded by voting to terminate the dissenting officials’ defense and indemnification. How does that action hold up against existing precedent?
In Bond v. Floyd, 385 U.S. 116 (1966), the United States Supreme Court explained that:
Legislators have an obligation to take positions on controversial political questions so that their constituents can be fully informed by them, and be better able to assess their qualifications for office; also so they may be represented in governmental debates by the person they have elected to represent them. We therefore hold that the disqualification of Bond from membership in the Georgia House because of his statements violated Bond’s right of free expression under the First Amendment.
The Supreme Court also recently made clear in Nevada Commission on Ethics v. Carrigan, 131 S.Ct. 2343 (2011), however, that an elected official’s First Amendment rights are not unfettered. At issue there was an ethics law requiring public officials to recuse themselves from voting on or advocating for the passage or failure of a matter in which he/she had a conflict. The Court gave the law its blessing. The act of voting was not protected speech, and the advocacy preclusion was deemed a reasonable time, place, and manner restriction.
So how much protection did the First Amendment provide to the dissenting officials in Lancaster? Not much. The Village resolution was upheld, both at the trial court level and on appeal.
The lower court upheld the resolution after employing a balancing test. It found that consent to a non-disparagement clause was a reasonable concession when considered against the “benefits achieved by the petitioners from the settlement.”
The Second Department made no reference to a balancing test or to any risk-benefit analysis. It simply held that the refusal to execute the non-disparagement clause constituted willful and avowed obstruction and justified the disclaimer, and that the clause, in and of itself, did not constitute a prior restraint on speech.
Lancaster was limited to the circumstances of the case, thus leaving open the question as to whether a non-disparagement clause within the context of a municipal settlement can ever constitute an unlawful prior restraint of an elected official's speech. However, Lancaster serves as a cautionary flag for elected officials, who if confronted with such a clause (for example, in an agreement to settle an employment discrimination case or an employee discipline case), must seriously consider if rejecting it to voice a dissenting opinion is worth the risk of personal financial exposure.
