Update: The NLRB and Employment-At-Will Policies in 2014

July 21, 2014

By Daniel P. Forsyth
We originally addressed this topic on November 9, 2012, discussing the National Labor Relations Board's scrutiny of employer handbooks containing employment-at-will provisions.  Since these disclaimers are widely used in handbooks – as well as employment applications and offer letters – the NLRB’s sudden focus on such provisions was potentially significant.  Employers drew some comfort from two 2012 Advice Memoranda issued by the NLRB’s General Counsel’s Office (Case 32-CA-086799 & Case 28-CA-084365), but both of those Advice Memoranda warned employers that “the law in this area remains unsettled.” Fast forward to July 2014.  Is there anything new on this topic and if so, should employers be concerned?  In fact, there have been two noteworthy developments this year. First, on February 25, 2014, the General Counsel’s Office issued a memorandum on “Mandatory Submissions to Advice” which noted there should be “centralized consideration of certain issues” by the General Counsel's Office.  The memo went on to cite “cases involving ‘at-will’ provisions in employer handbooks” as an area identified for such centralized oversight.  Accordingly, the NLRB’s 26 regional offices will submit cases involving at-will provisions to the General Counsel’s Office for guidance, to the extent that prior NLRB case law precedent or earlier Advice Memoranda do not definitively resolve the legal issues being faced.  In sum, look for continuing developments coming straight from Washington, D.C., on this subject. Second, the General Counsel’s Office recently found the following at-will policy of Lionbridge Technologies in Redmond, Washington, did not obstruct employees from organizing a union or interfere with other concerted activity under Section 7 of the National Labor Relations Act:
Employment at [the Employer] is on an at-will basis unless otherwise stated in a written individual employment agreement signed by the [Senior Vice President of] Human Resources.  This means that employment may be terminated by the employee or [the Employer] at any time, for any reason or for no reason, and with or without prior notice. No one has the authority to make any express or implied representations in connection with, or in any way limit, an employee’s right to resign or [the Employer’s] right to terminate an employee at any time, for any reason or for no reason, with or without prior notice.  Nothing in this handbook creates an employment agreement, express or implied, or any other agreement between any employee and [the Employer]. No statement, act, series of events or pattern of conduct can change this at-will relationship.
(Brackets in original). In finding the above provision to be lawful, the GC’s Office reasoned:
  • the language, on its face, did not expressly limit any union organizing or concerted activity;
  • the employer did not promulgate the disclaimer in response to union organizing or concerted activity;
  • the employer had not applied the policy unlawfully;
  • employees could not reasonably construe the provision to prohibit union organizing or concerted actions;
  • the language did not threaten discipline for employees seeking to unionize to change their at-will status; and
  • the policy did not ask employees to waive any rights they held under Section 7.
In concluding the policy was lawful, the General Counsel’s Office essentially aligned with what employers have long intended regarding their at-will disclaimers:  such provisions have everything to do with providing a rock-solid defense to claims by ex-employees for breach of an implied employment contract and nothing whatsoever to do with inhibiting union organizing or other concerted activity.  While the latest news from Washington, D.C., is clearly favorable and pro-employer, employers should nevertheless carefully review any at-will policy to ensure it is lawful, in light of the NLRB’s continued interest in scrutinizing such provisions.

For-Profit "Religious Employers" May Exclude Certain Contraceptives From Preventive Care Requirement Under the Affordable Care Act

June 30, 2014

On June 30, 2014, the U.S. Supreme Court held, in Burwell v. Hobby Lobby Stores, Inc., that a for-profit corporation is a “person” that has religious rights under the Religious Freedom Restoration Act of 1993 ("RFRA").  Therefore, guidance under the Affordable Care Act ("ACA") that requires all 20 FDA-approved contraceptive measures to be covered with no employee cost sharing as a part of women’s “preventive services” does not apply to closely-held businesses where this mandate interferes with the ability to conduct business in accordance with their religious beliefs.  The Court determined that the $100 per day, per person, penalty that applies under the ACA for failure to satisfy the contraceptive mandate was a “substantial burden” on those corporations.  That burden could not be relieved by dropping health coverage and paying the (also substantial) $2,000 per employee annual penalty that would apply if even one employee got subsidized coverage on a state or federal exchange, according to the Court. The Court had difficulty reconciling ACA regulations that provide employees of nonprofit religious corporations access to contraceptives by requiring that insurers provide a contraceptive rider at no cost to the employer or employees.  This, the Court noted, provides a path to satisfying the government’s compelling interest in guaranteeing cost-free access to the challenged contraceptive methods.  However, the economies of this measure (saving the insurance companies the cost of undesired pregnancies) does not translate to self-funded health plans where the third-party administrator obtains no cost savings.  Third party administrators have no economic interest in the performance of self-funded plans, because all claims are paid from the general assets of employers, or from trusts. In New York, the Hobby Lobby decision would apply only to self-funded plans.  New York Insurance Law Sections 3221(l)(16) and 4330(cc)(1) require health insurance contracts to include a rider covering all FDA-approved contraceptive drugs and devices.  The exception for “religious employers” is both narrow and specific, requiring that all of the following conditions be met:

  • The inculcation of religious values is the purpose of the entity;
  • The entity primarily employs persons who share the religious tenets of the entity;
  • The entity primarily serves persons who share the religious tenets of the entity; and
  • The entity is a nonprofit organization.

One day after issuing its decision in Hobby Lobby, the Supreme Court issued orders in six other cases that were decided by various federal appellate courts relating to religious objections to covering contraceptive measures in employee health plans.  Those orders signify that the Court’s reasoning in Hobby Lobby may not necessarily be limited to the four methods of contraception that were challenged in that case (two “morning-after” type drugs and two intrauterine devices), and may extend to all 20 FDA-approved contraceptive methods. It remains to be seen how employees in a self-funded health plan maintained by a religious employer can obtain contraceptive coverage without cost, as the Supreme Court suggests.  Undoubtedly, the Obama Administration and the Department of Health and Human Services are puzzling over changes to the ACA guidance to achieve this goal without violating the RFRA.  

U.S. Supreme Court Declares President Obama's NLRB Recess Appointments Unconstitutional

June 26, 2014

By Subhash Viswanathan

On June 26, 2014, the U.S. Supreme Court affirmed the decision issued by the U.S. Court of Appeals for the District of Columbia Circuit that President Obama's recess appointments to the National Labor Relations Board ("NLRB") on January 4, 2012, were unconstitutional.  The Supreme Court's decision in NLRB v. Noel Canning means that the NLRB did not have a valid quorum of three members from the date of the recess appointments to early August of 2013, when four new members were sworn in after being confirmed by the Senate.  Every decision issued by the NLRB during that approximately 19-month time period without a valid quorum has been rendered invalid by the Supreme Court's Noel Canning decision.  It remains to be seen how the NLRB will deal with this development, but it may now have to reconsider and issue new decisions in each and every case that was decided without a valid quorum in place.  However, in light of the fact that the majority of the NLRB members is still staunchly pro-union, it would be unrealistic to expect significantly different outcomes in cases that were decided against employers. Although the Supreme Court affirmed the D.C. Circuit's conclusion that President Obama exceeded his authority under the Recess Appointments Clause of the U.S. Constitution, the Supreme Court disagreed with the D.C. Circuit's narrow interpretation of the Recess Appointments Clause.  The Recess Appointments Clause permits the President to "fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session."  The D.C. Circuit held that the phrase "the Recess of the Senate" applies only to recesses that occur in between sessions of the Senate -- not to breaks in activity that occur during a session of the Senate.  The January 4, 2012, recess appointments were not made during a recess that occurred in between sessions of the Senate.  The D.C. Circuit also interpreted the phrase "Vacancies that may happen during the Recess of the Senate" to mean that the vacancy actually must arise during the Senate's inter-session recess in order for the President to have the authority to fill the vacancy without going through the Senate confirmation process.  None of the three vacancies that President Obama sought to fill on January 4, 2012 arose during the Senate's inter-session recess. The Supreme Court adopted a broader interpretation of the scope of the President's authority under the Recess Appointments Clause.  The Supreme Court held that the phrase "the Recess of the Senate" applies both to inter-session recesses (breaks that occur between sessions of the Senate) and intra-session recesses (breaks that occur in the midst of a formal session of the Senate) of substantial length.  The Supreme Court also held that the phrase "Vacancies that may happen during the Recess of the Senate" applies both to vacancies that first arise during a recess and vacancies that initially occur before a recess but continue to exist during the recess.  The Supreme Court nevertheless determined that President Obama's recess appointments during a three-day intra-session recess of the Senate were unconstitutional because the three-day recess was not of substantial length.  The Supreme Court held that a recess of less than ten days is presumptively too short to permit the President to make recess appointments, but left open the possibility that unusual circumstances might require the President to exercise recess appointment authority during a recess of less than ten days. Some of the NLRB decisions that have now been rendered invalid include:  (1) the NLRB's September of 2012 holding in Costco Wholesale Corp. that an employer's social media policy was overly broad and in violation of Section 8(a)(1) of the National Labor Relations Act ("NLRA"); (2) the NLRB's December of 2012 holding (and reversal of 50 years of precedent) in WKYC-TV, Inc. that an employer's obligation to check off union dues continues after the expiration of a collective bargaining agreement; (3) the NLRB's December of 2012 holding (and reversal of 35 years of precedent) in American Baptist Homes of the West d/b/a Piedmont Gardens that witness statements related to employee discipline are not necessarily shielded from disclosure to the union; and (4) the NLRB's July of 2012 holding in Banner Health System that an employer violated Section 8(a)(1) of the NLRA by asking employees not to discuss ongoing investigations with their co-workers. Although these decisions and many others will likely be revisited, it seems unlikely that the NLRB will issue significantly different rulings.  Accordingly, employers should assume at this point that the invalid decisions will be affirmed by the current NLRB.

DOL Proposes to Expand the Availability of FMLA Leave to All Same-Sex Spouses

June 23, 2014

By Kerry W. Langan
On Friday, June 20, 2014, the Wage and Hour Division for the U.S. Department of Labor (“DOL”) announced a proposed rule that would extend the spousal leave protections afforded by the Family and Medical Leave Act (“FMLA”) to include all eligible employees in legal same-sex marriages – regardless of where the employees live. The FMLA provides eligible employees with the right to take unpaid leave for a variety of qualifying reasons and to various qualifying family members.  When focusing purely on FMLA leave for spouses, eligible employees may take FMLA leave to care for their spouse under the following circumstances:  (1) when time off is needed to care for a spouse with a serious health condition; (2) when time off is needed to care for a spouse who is a covered servicemember with a serious injury or illness; and/or (3) when time off is needed for a qualifying exigency related to the covered military service of a spouse. The FMLA regulations currently define the term “spouse” to mean a “husband or wife, as defined or recognized under State law for purposes of marriage in the State where the employee resides, including common law marriage in States where it is recognized.”  This definition of spouse has historically excluded same-sex marriages because of certain definitions contained in Section 3 of the Defense of Marriage Act (“DOMA”), a federal law that permits states to refuse to recognize same-sex marriages granted under the laws of other states.  However, in June 2013, the United States Supreme Court declared Section 3 of DOMA unconstitutional in its U.S. v. Windsor decision.  What result did the Court’s Windsor decision have on the FMLA?  In sum, this decision enabled eligible employees in legal same-sex marriages residing in states that recognize their marriage to avail themselves of the various leave rights and protections to care for spouses offered under the FMLA. Despite the practical developments stemming from Windsor, many same-sex couples remain unable to take FMLA spousal leave.  For example, employees who are legally married in a state which recognizes same-sex marriages, but subsequently move to a state which does not, may not be entitled to seek FMLA spousal benefits because FMLA spousal benefits are governed by the state of the employee’s residence.  With its newly proposed rule, the DOL is attempting to rectify this inconsistency by revising the definition of spouse so that the FMLA regulations will look to the law of the state (or country) where the marriage was entered into, as opposed to the law of the state where the employee resides.  The DOL believes that this change from a “place of residence” rule to a “place of celebration” rule will allow all legally married couples, whether opposite-sex or same-sex, to have consistent FMLA rights, regardless of the state in which they reside. The DOL’s proposed rule would also permit eligible employees to take FMLA leave to care for their stepchild (child of the employee’s same-sex spouse) or stepparent (employee’s parent’s same-sex spouse) without establishing an in loco parentis relationship. Like all proposed administrative changes, this DOL rule is subject to a notice and comment period before it can be implemented.  We will continue to follow this FMLA issue and provide additional updates if and when a final rule is issued.

The New York Legislature Passes a Bill Eliminating the Annual Wage Notice Requirement

June 20, 2014

By Subhash Viswanathan
Under a bill passed by the New York Legislature, employers in New York will not have to issue annual wage notices to employees in 2015 and beyond.  On June 19, 2014, a bill was passed in both the New York Assembly and Senate that eliminates the requirement contained in the Wage Theft Prevention Act that employers provide a wage notice to all employees by February 1 of each year.  This is certainly a welcome development for employers in New York who found the annual wage notice requirement to be extremely burdensome and costly.  The bill also increases the penalties for an employer's failure to provide a wage notice upon hiring a new employee and for an employer's failure to provide appropriate wage statements to employees, and imposes significant consequences on employers who are found to be repeat offenders.  If Governor Cuomo signs the bill, the legislation will take effect 60 days after it is signed. The bill does not change the requirement that employers provide a wage notice upon hiring a new employee.  The Department of Labor has issued templates for wage notices that can be used by employers for this purpose.  The bill increases the damages that can be recovered for an employer's failure to provide the initial wage notice within ten business days of an employee's first day of employment to $50.00 per work day that the violation occurred up to a maximum of $5,000.00 (up from $50.00 per work week up a maximum of $2,500.00).  The bill also increases the damages that can be recovered for an employer's failure to provide appropriate wage statements to employees to $250.00 per work day that the violation occurred up to a maximum of $5,000.00 (up from $100.00 per work week up to a maximum of $2,500.00).  An employer who is faced with a claim that it failed to provide the required wage notice or wage statement can still avoid liability by establishing that it made complete and timely payment of all wages due to the employee who was not provided the wage notice or wage statement. If an order to comply has been issued to an employer who has previously been found to have violated the wage payment laws or to an employer whose violation is found to be willful or egregious, the employer will be required to report certain data regarding the wages paid to employees and the hours worked by employees (without employee identifying information), which the Department of Labor will publish on its web site.  Employers who are found to have committed a wage payment violation for the second time in a six-year period could be liable for a maximum civil penalty of $20,000, which is double the maximum civil penalty that can be imposed for a first violation in a six-year period. The bill also provides that an employer similar in operation or ownership to a prior employer who has been found to have violated the wage payment laws will be liable for the prior employer's violations.  This provision prevents an owner (or owners) of a business entity from avoiding liability by dissolving the business entity and creating a new one that has essentially the same business purpose. The bill adds a provision to the Limited Liability Company Law providing that the ten members of a limited liability company ("LLC") with the largest percentage ownership will be personally liable for all wages and salaries due to employees of the LLC.  This new provision of the Limited Liability Company Law is similar to Section 630 of the Business Corporation Law, which provides that the ten largest shareholders of a corporation are personally liable for all wages and salaries due to employees of the corporation. The bill also adds a provision to the Construction Industry Fair Play Act, requiring construction contractors and subcontractors who have been found to be in violation of the wage payment laws to notify all of its employees regarding the nature of the violations.  The notification must be made by an attachment to the pay checks of all employees at all work sites. On the whole, this legislation (if it is signed by the Governor) will be a positive development for employers in New York, who will no longer have to engage in the costly and time-consuming process of issuing wage notices to all employees between January 1 and February 1 of each year.

NLRB ALJ Rules That An Interim Grievance Procedure Does Not Require An Arbitration Option

June 17, 2014

By Sanjeeve K. DeSoyza
In a decision issued last week, an Administrative Law Judge (“ALJ”) for the National Labor Relations Board (“NLRB”) ruled that an interim grievance procedure between an employer and a newly-certified union did not have to include an arbitration option in order to relieve the employer of the obligation to provide the union with notice and an opportunity to bargain before imposing significant discretionary discipline. As we previously posted, in late 2012, the NLRB issued a groundbreaking decision in Alan Ritchey, Inc., requiring for the first time that in the absence of a binding agreement addressing discipline, an employer must provide the union with a bargaining opportunity prior to issuance of significant discretionary discipline (i.e., suspension, demotion, or discharge).  This issue would ordinarily arise during the period after a union is newly certified, but before an agreement has been reached with the employer on an initial contract. The Alan Ritchey decision did not specifically address whether an interim grievance procedure had to offer an arbitration option if internal grievance efforts failed to resolve any disagreement over the proposed discipline.  There was no binding agreement between the employer and the union in the Alan Ritchey case and, recognizing the significant change in the law that the decision entailed, the NLRB decided to apply the new requirement on a prospective basis only. In Medic Ambulance Service, ALJ Cracraft found that an interim grievance procedure did not require an arbitration option to satisfy the Alan Ritchey requirements.  In Medic Ambulance, while negotiations for an initial collective bargaining agreement were underway, the employer and the newly certified union agreed to follow the first two steps set forth in the grievance/arbitration section of the employer’s expired agreement with a prior union.  The parties also expressly agreed, however, that the third step (arbitration) would not be available until a new contract was signed. ALJ Cracraft found that the agreement regarding the first two grievance steps constituted an agreed-upon interim grievance procedure that relieved the employer of its obligation to bargain with the union prior to imposing significant discretionary discipline.  The General Counsel for the NLRB contended that the procedure did not satisfy the Alan Ritchey requirements because it did not include an arbitration option, but ALJ Cracraft summarily rejected that argument:
Surely if the Board intended to mandate arbitration as a part of an interim grievance procedure, its decision would have clearly provided such guidance.  Thus, in disagreement with the General Counsel, I find that Alan Ritchey does not specifically require that an interim grievance procedure contain an arbitration component.
Having concluded that arbitration was not a required element of an interim grievance procedure, the ALJ held that the two-step “grievance only” procedure was sufficient to relieve the employer of its obligation to provide the union with notice and an opportunity to bargain before it terminated several employees. The ALJ's Medic Ambulance decision offers a welcome constraint to the far-reaching scope of the NLRB's Alan Ritchey decision.  Employers should be cautioned, however, that the ALJ's decision is not binding precedent and the union may still pursue an appeal to the NLRB.

NLRB Asserts Jurisdiction Over a Charter School in New York

June 16, 2014

For the first time in New York State, a Regional Director for the National Labor Relations Board ("NLRB") has asserted NLRB jurisdiction over a New York charter school, and ordered an election for a unit of approximately 35 teachers at the school.  The decision, Hyde Leadership Charter School Brooklyn, Case No. 29-RM-126444, preempts the New York Public Employment Relations Board ("PERB") from asserting jurisdiction, and conflicts with prior PERB decisions holding that charter schools are public entities for labor relations purposes. The Hyde Leadership decision involved a representation petition for teachers at a charter school in Brooklyn, New York.  On April 14, 2014, the United Federation of Teachers, Local 2 (the "Union"), filed a petition with PERB seeking certification for a unit of approximately 35 teachers at the school.  That same day, the school filed a representation petition with the NLRB seeking an election for the same unit of employees.  Because the National Labor Relations Act excludes “any state or political subdivision thereof,” the NLRB was tasked with deciding the public or private nature of the charter school. To establish jurisdiction over the Hyde Leadership school, the NLRB would have to determine that the school was not a “political subdivision” of the state under the Supreme Court’s standard set forth in its NLRB v. Natural Gas Utility District of Hawkins County decision.  Under the Hawkins County decision, an entity is a political subdivision if it is created directly by state so as to constitute a department or administrative arm of the government, or if it is administered by individuals who are responsible to public officials or to the general electorate. Applying the Hawkins County standard to the Hyde Leadership school, the NLRB acknowledged the blend of public and private characteristics embedded in New York charter schools and the New York State Charter Schools Act (“Charter Schools Act”).  Factors suggesting a public character include:  the Board of Regents, a public entity, issues the charter and can revoke the charter upon discovering certain problems such as fiscal mismanagement; the school is funded almost entirely with public funds; the language of the Charter Schools Act refers to charter schools as independent and autonomous public schools and states that charter school employees are public employees for purposes of New York’s public employment relations law; the charter schools are subject to certain public officers laws; and New York City charter schools are subject to audit by the city comptroller. However, factors suggesting a private character include:  private individuals create and submit the charter agreement for approval (although this can optionally be done in conjunction with a public entity); except for laws specified in the Charter Schools Act, the charter schools are exempt from “all other laws and regulations governing public or private schools”; the charter schools are non-public for designation of textbooks, health services, student transportation, and other services; charter school employees are employees of the “education corporation” that runs the charter school, not the public school district; and there is no requirement that the board of directors for the charter schools be appointed or elected by any public entity or include any public officials. The Regional Director weighed the factors and concluded that the Hyde Leadership school was not a political subdivision under the Hawkins County test and therefore was subject to NLRB jurisdiction.  Specifically, the Regional Director held that the charter school was not “created by the state” because private individuals applied to establish the charter school, and it was not an “administrative arm of the government” because the governance and control of the charter school “vested solely in the private incorporators” rather than in the public entities.  Moreover, the school was not administered by individuals who are responsible to public officials or the general electorate, as none of the school’s governing trustees are appointed by public officials. Accordingly, the Regional Director asserted NLRB jurisdiction over the school and directed an election.  Although this does not establish a “bright line” rule that all New York charter schools will necessarily be subject to NLRB jurisdiction (and the Union may still challenge the Regional Director's decision), the factors that contributed to the holding are largely statutory, and may compel a similar conclusion for other charter schools in New York.

The City of Rochester Adopts a "Ban the Box" Ordinance

June 4, 2014

By Katherine S. McClung

The City of Rochester recently unanimously enacted a “Ban the Box” ordinance, which prohibits employers from asking applicants about criminal convictions at any time before the employer has conducted an initial employment interview or made a conditional offer of employment.  This new ordinance takes effect on November 18, 2014.  It applies to all public and private employers and employment agencies that employ individuals within the City of Rochester, as well as any vendors, contractors, or suppliers of goods or services to the City of Rochester (regardless of their location). There are some exceptions to this general prohibition on inquiries about criminal convictions.  For example, the ordinance allows inquiries where the conviction would legally bar employment in that position or where inquiries into convictions are specifically authorized by another applicable law or by a licensing authority for licensed trades or professions.  Additionally, employers with less than four employees are not covered by the ordinance.  The ordinance also does not apply to applicants for positions in the City of Rochester Police Department, the Fire Department, or any other positions as “police officers” or “peace officers.” The ordinance provides for a private right of action for an aggrieved party to seek injunctive relief, damages, costs, and reasonable attorneys’ fees.  The City of Rochester’s Corporation Counsel may also initiate a court action seeking penalties of $500 for the first violation of the ordinance and $1,000 for each subsequent violation. Although this new ordinance does not prohibit employers from considering a criminal conviction after the candidate submits an application and attends a first interview, employers must be aware that Article 23-A of the New York Corrections Law protects an applicant from discrimination based on a past criminal conviction unless:  (1) there is a “direct relationship” between the criminal offense and the position sought; or (2) granting employment would pose an “unreasonable risk” to property or to the safety or welfare of specific individuals or the general public.  This analysis requires an employer to consider all of the following eight factors:

  1. The public policy of the state to encourage the employment of persons previously convicted of one or more criminal offenses.
  2. The specific duties and responsibilities necessarily related to the employment sought or held by the person.
  3. The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities.
  4. The time which has elapsed since the occurrence of the criminal offense or offenses.
  5. The age of the person at the time of the occurrence of the criminal offense or offenses.
  6. The seriousness of the offense or offenses.
  7. Any information produced by the person, or produced on his behalf, regarding his rehabilitation and good conduct.
  8. The legitimate interest of the public agency or private employer in protecting property and the safety and welfare of specific individuals or the general public.

To ensure compliance, any employers who are covered by this new ordinance should revise their employment applications to omit any questions about criminal convictions.  Covered employers should also train their human resources personnel, managers, supervisors, and any other employees who have contact with job applicants regarding the requirements of this new ordinance, as well as the limitations contained in Article 23-A of the New York Corrections Law.

Court of Appeals Holds That Student Safety Concerns Outweighed Teachers' Picketing Rights

May 13, 2014

By Subhash Viswanathan

On May 6, 2014, in Santer v. Board of Education of East Meadow Union Free School District, the New York Court of Appeals held that a school district did not violate the First Amendment by disciplining teachers who participated in a picketing demonstration, because the teachers' right to engage in constitutionally protected speech was outweighed by the school district's legitimate interests in protecting the health and safety of students and in maintaining effective operations. The picketing activity that resulted in the discipline of the teachers occurred on March 2, 2007.  The teachers had, for over two years prior to that date, engaged in weekly protests (including picketing) to express their dissatisfaction with the lack of progress in reaching a new collective bargaining agreement with the school district.  On March 2, 2007, due to inclement weather, the teachers decided to park their cars on the two-way street in front of the middle school and place picketing signs in their car windows instead of walking along the middle school's sidewalk holding their signs.  Because of the manner in which the teachers were parked, parents dropping off their children to school were unable to pull directly up to the curb and instead had to stop their cars in the middle of the street to drop off their children.  As a result, traffic became congested in both directions and students had to cross through traffic in the rain to reach the school. On March 16, 2007, the school district commenced disciplinary proceedings under Education Law Section 3020-a against the teachers who had participated in the picketing activity on March 2, alleging that the teachers created a health and safety risk by purposely parking their cars in a manner that precluded students from being dropped off at the curb.  The teachers were found guilty of the alleged misconduct after their hearings and were assessed fines as disciplinary penalties. The teachers filed petitions in New York State Supreme Court to vacate the disciplinary decisions.  The Supreme Court denied the petitions.  The Appellate Division reversed the lower court's decision and vacated the disciplinary decisions on the ground that the school district failed to meet its burden of showing that the teachers' exercise of their First Amendment rights constituted such a threat to the school's effective operations that the imposition of discipline was justified.  The Appellate Division also held that the discipline imposed on the teachers would likely have a chilling effect on the teachers' speech regarding an important matter of public concern. The Court of Appeals reversed the Appellate Division, and reinstated the disciplinary penalties imposed on the teachers.  The Court of Appeals recognized that the teachers' picketing activity was a form of protected speech that related to a matter of public concern, but found that the school district had satisfied its burden of showing that the teachers' conduct posed a significant risk to the health and safety of students.  The Court of Appeals noted that the school district was not required to prove that a student was actually injured as a result of the teachers' picketing activity in order to justify its discipline of the teachers.  The potential risk to student safety was sufficient to justify the discipline.  The Court of Appeals also found it significant that the teachers had engaged in picketing activity prior to March 2, 2007, and after March 2, 2007, without being subjected to any discipline.  The Court of Appeals determined that this demonstrated that the school district's disciplinary actions were not motivated by the content of the teachers' protected speech. Despite the Court of Appeals' decision in the East Meadow case, school districts and other public employers should continue to proceed cautiously if they are considering disciplinary action against an employee for conduct that could constitute protected speech under the First Amendment.  Disciplinary proceedings should be commenced in such instances only if it can be demonstrated that the employee's conduct constituted such a threat to the employer's effective operations that the imposition of discipline is justified.

Court of Appeals Holds That Employer's Failure to Engage in Interactive Process Regarding Employee's Accommodation Request Precludes Summary Judgment in State and City Disability Discrimination Claims

April 23, 2014

By Richard S. Finkel

Discrimination claims are expensive to defend and if they reach a jury, the results are often unpredictable.  The summary judgment motion, when utilized properly, is an effective risk and cost containment tool available to employers attempting to fend off such claims before they reach a jury.  Therefore, employers need to make sure that they do everything within their power to keep this tool available to them if a discrimination lawsuit is filed.  A recent New York Court of Appeals decision, Jacobsen v. New York City Health and Hospitals Corp., underscores this point.  In Jacobsen, the Court of Appeals held that an employer who does not participate in an interactive process regarding a disabled employee’s accommodation request is thereafter precluded from obtaining summary judgment with respect to any state or city disability discrimination claims related to that request. Both the trial court and the Appellate Division, First Department, held that summary judgment was appropriate because in their view, on the facts of the case, there was no reasonable accommodation available that would have enabled the terminated employee to perform the essential functions of his position.  However, there was one dissenting opinion in the Appellate Division’s decision.  The dissenter noted, among other things, that the record lacked any evidence that the employer had engaged in a good faith interactive process to determine the existence and feasibility of a reasonable accommodation.  Given such failure, the dissenter felt that summary judgment in favor of the employer was inappropriate. The Court of Appeals concurred with that aspect of the dissenter’s opinion, and reversed the decision granting summary judgment to the employer.  After examining the legislative history and intent of the statutes, particularly the provisions of the New York Human Rights Law, the Court of Appeals held that employers are required to “give individualized consideration” to a disabled employee’s accommodation request and that:

In light of the importance of the employer’s consideration of the employee’s proposed accommodation, the employer normally cannot obtain summary judgment on a State HRL claim unless the record demonstrates that there is no triable issue of fact as to whether the employer duly considered the requested accommodation.  And the employer cannot present such a record if the employer has not engaged in interactions with the employee revealing at least some deliberation upon the viability of the employee’s request.

Because of its broader coverage, the Court also held that the “City HRL unquestionably forecloses summary judgment where the employer has not engaged in a good faith interactive process regarding a specifically requested accommodation.” The Court of Appeals made clear that, despite its holding, a plaintiff’s burden at trial remains the same and that he/she still has to prove the existence of a reasonable accommodation that was requested and denied.  Moreover, the Court of Appeals rejected the even harsher notion that the failure to engage in a good faith interactive process compels a grant of summary judgment or a verdict in the employee’s favor. The lesson here is simple.  Prudent employers should always at least consider a disabled employee’s accommodation request, engage in a dialogue with the employee regarding the feasibility of the accommodation request, and suggest potential alternatives if the initial request is not feasible.  Employers should also document their interactions with a disabled employee and the resolution of the employee's accommodation request.  That way, employers can ensure that they have a fully equipped tool belt to employ in fending off any potential disability discrimination claims.

Transportation Industry Beware: New York Quietly Enacts New Legislation Targeting Worker Misclassification

April 9, 2014

By Andrew D. Bobrek
New York has enacted new legislation, which will have a significant impact on the state’s commercial transportation industry.  The legislation was initially made effective on March 11, 2014, but was subsequently amended to incorporate some “technical corrections” and to include a new, later effective date of April 10, 2014.  Known as the “Commercial Goods Transportation Industry Fair Play Act” (the “Act”), this new law is intended to curtail what New York government officials view as the “misclassification” of workers – as independent contractors, rather than employees – in the transportation industry.  As summarized below, the legislation will not only significantly restrict the use of such independent contractors, but will also impose other new requirements applicable to New York businesses in the commercial goods transportation industry. Why is New York Taking This Action? In addition to the Act, New York previously enacted similar legislation in the construction industry, and, more generally, has established a multi-agency “task force” designed to curb the purported misclassification of workers in New York.  Through these efforts, New York government officials are seeking to recoup “lost” revenue, e.g., employment-based tax withholdings not captured where there is a non-employment relationship between the business and individual service provider.  In contrast, where there is an employer-employee relationship – now presumed to be the case for commercial drivers and businesses covered by the Act – there is an affirmative obligation to withhold and pay these taxes to the state. The Act is therefore another step in the state’s effort to “crack down” on the use of independent contractors by New York businesses.  It should also be noted by management that organized labor, particularly the Teamsters union, has been strongly supportive of this legislation.  It can therefore be reasonably expected that the Teamsters and other unions will utilize this legislation as an aid to organizing workers in the transportation industry. Presumption of Employment Status for Covered Commercial Drivers The centerpiece of the new legislation is the establishment of a presumed employment relationship for certain drivers who provide “commercial goods transportation services for a commercial goods transportation contractor.”  (These underlined terms are explained below.) In other words, covered commercial drivers who provide these services are presumed to be employees under the law.  It is then left to the respective business receiving such services to “rebut” this presumption by proving the driver in question is a bona-fide “independent contractor” or constitutes a “separate business entity.”  As explained below, businesses seeking to disclaim an employment relationship with covered drivers must satisfy specific, multi-factor tests under either prong. Businesses failing to rebut the presumption of employment status through these tests will face significant penalties.  Additionally, the misclassification of workers can raise other significant legal issues, such as workers’ compensation insurance coverage failures, unemployment insurance contribution shortfalls, and improper income tax withholding and reporting. The Act applies to all “commercial goods transportation contractors.”  This term is broadly defined to include:
[A]ny sole proprietor, partnership, firm, corporation, limited liability company, association or other legal entity that compensates a driver who possesses a state-issued driver’s license, transports goods in the state of New York, and operates a commercial motor vehicle as defined in subdivision four-a section two of the transportation law.
The term “commercial goods transportation services” is defined as “the transportation of goods for compensation by a driver who possesses a state-issued driver’s license, transports goods in the state of New York, and operates a commercial motor vehicle as defined in subdivision four-a section two of the transportation law.”  In turn, the referenced section of New York’s transportation law defines a “commercial motor vehicle” as including a “motor vehicle used on a highway in intrastate, interstate or international commerce [that] has a gross vehicle weight rating or gross combination weight of ten thousand one pounds or more, whichever is greater.” Rebutting the Presumption of Employment Status A covered business can rebut the presumption of employment status in one of two ways. First, the business can show the driver is a bona-fide “independent contractor.”  To do so, all of the following criteria must be met under the Act’s so-called “A-B-C” test: A. the individual is free from control and direction in performing the job, both under his or her contract and in fact; B. the service must be performed outside the usual course of business for which the service is performed; and C. the individual is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue. Second, the business can show the driver is a “separate business entity.”  To establish this alternative defense, the business must specifically show that each and every part of a detailed, eleven-factor test is met. Significantly, one of the “technical corrections” to the Act made explicit that even if one of the above tests is otherwise met, a person performing transportation services will be presumed to be an employee if his/her services are not reported on an IRS Form 1099. What are the Penalties for Non-Compliance? The Act imposes new, significant penalties for businesses failing to properly treat covered drivers as employees. Violations deemed to be “willful” are punishable by substantial civil and criminal penalties.  Willful violations are defined as violations where a party “knew or should have known that his or her conduct was prohibited.”  Civil remedies include a penalty of $2,500 per misclassified worker for a first violation, and a penalty of $5,000 per misclassified worker for subsequent violations.  Criminal penalties include up to 30 days imprisonment or a fine not to exceed $25,000 for the first violation, and up to 60 days imprisonment or a fine not to exceed $50,000 for subsequent violations. These civil and criminal penalties may also be imposed under certain circumstances against corporate officers and against shareholders who own or control at least ten percent of the corporation’s outstanding stock.  Further, non-compliant businesses, as well as certain corporate officers and shareholders, may be “debarred” from public works contracts in New York for a period of up to one year for a first violation and up to five years in the event of subsequent violations. Agency Information Sharing In the event of a violation, the Act additionally mandates prompt information sharing among the New York State Department of Labor (“NYSDOL”), Workers’ Compensation Board, and Department of Taxation and Finance.  Thus, a misclassification finding by one state agency will in all likelihood raise other significant legal issues before other state agencies. Other Requirements The Act imposes other additional requirements for New York businesses in the transportation industry, some of which appear to apply regardless of whether the respective business actually uses independent contractors. For example, the Act expressly prohibits employers and their agents from retaliating “through discharge or in any other manner against any person in the terms of conditions of his or her employment” for:
  • making, or threatening to make, a complaint to an employer, co-worker or to a public body that rights guaranteed under [the Act] have been violated;
  • causing to be instituted any proceeding under or related to [the Act]; or
  • providing information to, or testifying before, any public body conducting an investigation, hearing or inquiry into any such violation of a law, rule or regulation by such employer.
Violations of this anti-retaliation provision are subject to the Act’s civil penalty scheme discussed above and to a private cause of action. Additionally, the Act requires all commercial goods transportation contractors to post a notice describing:
  • the responsibility of independent contractors to pay taxes;
  • the rights of employees to workers’ compensation, unemployment benefits, minimum wage, overtime and other protections; and
  • the protections against retaliation.
According to the Act, this notice must also contain contact information for individuals to file complaints or inquire with the Commissioner of the NYSDOL about employment classification status, and must be provided in English, Spanish or other languages required by the Commissioner.  It is expected that the NYSDOL will soon publish a model notice on its website.  Businesses failing to comply with this posting requirement will face monetary penalties of up to $1,500 for a first violation and up to $5,000 for subsequent violations. Conclusion New York has significantly raised the stakes for covered businesses in the transportation industry and their use of independent contractors.  These businesses should carefully consider the potential implications of such use, as well as the other requirements imposed by the Act. Although the Act permits covered businesses to rebut the new presumption of employment status under certain, limited circumstances, management should carefully consider whether the necessary factors can indeed be met in the event of a legal challenge.  Given that this legislation is brand new, it remains to be seen how the NYSDOL and other state regulators will interpret and apply these new tests. That said, one point is clear:  New York state regulators will have their “sights set” on the classification of workers as independent contractors within the commercial transportation industry.  Be prepared!

H-1B Petition Filings for Fiscal Year 2015 Exceed Number of H-1B Visas Available

April 8, 2014

As expected, on Monday, April 7, 2014, the U.S. Citizenship and Immigration Services (“USCIS”) announced that a sufficient number of H-1B petitions had been received from April 1, 2014, through April 7, 2014, to meet the statutory cap for fiscal year 2015.  The statutory cap was reached in both the general Bachelor’s category, as well as the U.S. advanced-degree category.  In short, more H-1B petitions were filed than the USCIS is authorized to approve for fiscal year 2015, which begins on October 1, 2014.  Consequently, for the second year in a row, USCIS will conduct a random selection process (i.e., lottery) to determine which filed H-1B petitions will be selected for processing/adjudication.  The USCIS has not yet announced the date when the lottery will be held. As background, the USCIS is only authorized to issue 85,000 H-1B approvals for each fiscal year, which includes 20,000 visas under the advanced-degree category and another 65,000 visas under the general category.  The 65,000 H-1B visas are available for beneficiaries who possess at least a Bachelor’s degree, with 6,800 of those available visas allocated as H-1B1 visas for qualifying nationals from Chile and Singapore.  An additional 20,000 approvals are available under the U.S. advanced-degree exemption for beneficiaries with a Master’s or higher degree obtained from a U.S. college or university. Consistent with USCIS practice, the USCIS will first utilize the lottery for petitions that qualify for the advanced-degree category under which 20,000 visas are available.  Eligible petitions that are not selected for processing in this category will be submitted for the general lottery under which 65,000 visas are available.  Any petitions not selected in the H-1B lottery will be returned to the employer, together with any applicable filing fees. Although the H-1B season for fiscal year 2015 appears to be complete, certain H-1B petitions are exempt from the numerical statutory cap.  Therefore, employers may continue to file H-1B petitions with the USCIS for new H-1B employment with a college or university, or a nonprofit research or governmental research organization – often referred to as “cap-exempt institutions.”  In addition, employers may continue to submit H-1B petitions for current workers who have previously been counted against the H-1B cap. Finally, employers seeking to employ foreign nationals in the United States should note that there may be other non-immigrant visa categories that could be a viable alternative to the H-1B category, including (but not limited to) the TN (NAFTA Professionals), the L (Intra-Company Transferee), the E (Investor), and the O (Extraordinary Ability) categories.