Next year, most employers with employees working in New York City will be required to provide reasonable accommodations for pregnant employees.  The new requirement is an amendment to the New York City Human Rights Law and takes effect on January 30, 2014. Under the new law, employers in New York City with four or more employees will be required to provide reasonable accommodations needed due to pregnancy, childbirth, or related medical conditions, provided that the pregnancy or condition “is known or should have been known” to the employer.  The law states that accommodations may include, “bathroom breaks, leave for a period of disability arising from childbirth, breaks to facilitate increased water intake, periodic rest for those who stand for long periods of time, and assistance with manual labor, among other things.” Accommodations need not be provided if they would pose an “undue hardship."  Factors in determining undue hardship include the nature and cost of the accommodation, the nature of the facility, and the finances of the business. The law also contains a notice requirement.  Covered employers must notify employees of the right to be free from pregnancy discrimination.  The notice must be given to all new employees and existing employees.  The New York City Commission on Human Rights is expected to issue more specific guidance on the notice requirements.  The new law allows employees to file complaints with the Commission or proceed directly to court. It is fair to say that the New York City law broadens protections for pregnant workers beyond the scope of the Pregnancy Discrimination Act, the Americans with Disabilities Act, and the New York Human Rights Law.  Typically, those other laws have not been interpreted to require that employers accommodate a normal, healthy pregnancy.  Instead, the right to an accommodation is usually triggered only upon the showing of a particularized need or complicating medical condition, or at the point when the pregnancy becomes disabling (e.g., immediately before and after the birth).  The effect of the New York City law is to put a normal, healthy pregnancy on par with a disability for the purpose of workplace accommodations. Employers with employees in New York City are advised to review their policies and procedures concerning pregnancy and to educate supervisors and managers regarding the scope of these new protections.

As previously reported, the elimination of barriers in recruitment and hiring was identified as one of the Equal Employment Opportunity Commission’s six priorities in its 2013-2016 Strategic Enforcement Plan (“SEP”).  Accordingly, the EEOC is focusing its enforcement efforts and resources on eradicating both class-based intentional discrimination, as well as facially-neutral recruitment and hiring practices that have a discriminatory effect on particular groups.  To this end, the EEOC has been aggressively challenging employers’ use of criminal and credit background checks in recruitment and hiring, alleging that such practices have a disparate impact on certain applicants in protected classes.  However, in a significant victory for employers, the EEOC’s efforts were recently thwarted in a decision issued by the United States District Court for the District of Maryland. In EEOC v. Freeman, the EEOC challenged the defendant’s use of criminal background and credit checks, alleging that, although facially-neutral, the practice had a discriminatory effect on African-American and male applicants.  In granting the defendant’s summary judgment motion dismissing the complaint, the court held that the EEOC and their experts failed to identify a specific policy causing an alleged disparate impact and “something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks.”  The court further admonished the EEOC’s lack of factual support, stating that:

[b]y bringing actions of this nature, the EEOC has placed many employers in the "Hobson’s choice" of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.

To further underscore the importance of background checks to employers, the court pointed out that ironically, even the EEOC conducts criminal background investigations as a condition of employment for all employees, and conducts credit background checks on approximately 90% of its positions. The Freeman court explained that it is not the “mere use” of background checks that presents Title VII concerns, but rather “what specific information is used and how it is used.”  Here, Freeman’s use of criminal and credit checks were not used as automatic exclusions and were conducted only for specific types of jobs.  The Freeman court held that the use of these screening tools is a “rational and legitimate component of a reasonable hiring process.” Although this decision is an important victory for employers defending their right to refuse to hire applicants whose backgrounds call into question their character and qualifications for employment, it is unlikely to stop the EEOC’s enforcement efforts completely.  The SEP, together with the EEOC’s April 2012 Enforcement Guidance on criminal background checks, make clear that the EEOC is determined to seriously limit the use of background checks, if not prohibit their use altogether.  Therefore, employers should consult with legal counsel to ensure that any use of background checks is both job-related and consistent with business necessity, and that such use does not result in automatic exclusions.  Background checks should also be limited only to those positions where there is a direct correlation between the background check and the job involved.

After a brief hiatus prompted by the Federal Government shutdown, employers regained access to and use of the federal E-Verify system on October 17, 2013.  E-Verify is an Internet-based employment eligibility verification system administered by the U.S. Citizenship and Immigration Services (“USCIS”).  The E-Verify system does not serve as a replacement for the I-9 employment verification process, but rather serves as an additional method by which employers may confirm employee I-9 information against certain government databases (e.g., Department of Homeland Security and the Social Security Administration). Beginning on October 1, 2013, employers were denied access to the E-Verify system for the duration of the government shutdown.  Under normal circumstances, those employers enrolled in the E-Verify program – either voluntarily or involuntarily (e.g., mandatory for those federal contractors with a FAR E-Verify contract clause and employers in certain states such as Arizona and Mississippi) – are required to create a verification case in the E-Verify system for any newly-hired employee by no later than three business days after the employee starts to work for pay.  During the government shutdown, however, the USCIS suspended the “three-day rule” in which enrolled employers are mandated to create a case in the E-Verify system.  Now that E-Verify is once again operational, the USCIS has afforded employers a grace period in which to address E-Verify issues impacted by the government shutdown.  Specifically, the USCIS has issued guidance indicating that employers have until no later than November 5, 2013, to create E-Verify cases that could not be created for those employees due to the unavailability of the system. In its recent guidance, the USCIS also addressed how employers should properly enter a case in E-Verify now that access to the system has been restored.  Generally, when an E-Verify query is made more than three days after the date of hire, the E-Verify system will require the employer to provide an explanation for the delayed entry.  In its October 17 guidance, the USCIS advised that when an employer is prompted to provide a reason for a delayed case creation which was caused by the government shutdown, the employer should select “Other” from the drop-down list and enter the phrase “federal government shutdown" in the field. In addition, the USCIS noted in its October 17 guidance that federal contractors should follow the same instructions.  If a federal contractor was unable to comply with certain E-Verify deadlines due to the government shutdown, the federal contractor should contact its contracting officer and reference the instructions provided by the USCIS in its guidance. Additionally, the USCIS offered the following guidance on other tangential E-Verify issues that may have been impacted as a result of the government shutdown:

• Employees will be given an extension of 12 federal business days in order to contact the DHS or the SSA to resolve any Tentative Non-Confirmation (TNC) notice received or referred between September 17, 2013, and September 30, 2013, that the employee was unable to resolve due to the government shutdown.  Employers may add 12 business days to the date printed on either the Referral Letter or the Referral Date Confirmation.
• Employers are instructed to now initiate referral processing in E-Verify for employees who decide to contest any TNC issued during the unavailability period of E-Verify.
• Employers must close E-Verify cases for those employees who received a Final Nonconfirmation (FNC) or No Show due to the federal government shutdown by selecting one of the following options from the drop-down menu:  (1) “The employee continues to work for the employer after receiving a Final Non-Confirmation result”; or (2) “The employee continues to work for the employer after receiving a No Show result.”  The employer must then create a new E-Verify case for the employee.

Finally, employers should be aware that the USCIS’ suspension of the “three-day rule” during the government shutdown period did not extend or otherwise impact employers’ obligations regarding the timely completion of the Form I-9 or any other Form I-9 requirements.  Employers should also be mindful that the “three-day rule” for E-Verify cases is once again in effect for all newly-hired employees.

New York State has enacted several changes to the laws regarding unemployment insurance.  The changes are the result of the insolvency of the State’s Unemployment Insurance Trust Fund and the State’s need to repay the federal government $3.5 billion borrowed to cover increased costs incurred during the recession.  The New York State Department of Labor ("NYSDOL") has issued two fact sheets -- one directed toward employers and one directed toward claimants -- concerning these changes in the law.  Certain of the important revisions affecting employers are identified below.

1. Under the new law, the payment of severance to an employee, in an amount exceeding the maximum weekly benefit (which is currently $405 per week), will preclude an employee from receiving unemployment insurance benefits.  However, unemployment insurance benefits will be available if the severance is not paid out until thirty days after the employee’s last day of employment.
2. The law has been amended to provide that employers who submit incomplete or late submissions to NYSDOL regarding the agency’s request for information concerning a claim for benefits will not be relieved of any charge to its account, even where the agency later determines that the employee was ineligible for benefits or received an overpayment.  Employers must complete fully and return the agency’s request for information by the date specified by NYSDOL.
3. The new law increases an employer’s contributions based on the Federal Unemployment Tax Act.  Specifically, under current law, this employer tax is based upon the number of employees and the employer’s experience rating.  However, the tax is assessed only on the first $8,500 of each employee’s earnings.  Beginning January 1, 2014, the tax will be assessed on the first $10,300 of each employee’s earnings and this amount will rise gradually each year moving forward.
4. Finally, the law requires employees to be “actively seeking work” in order to be eligible for benefits.  Currently, the law eliminates benefits only for those who are not capable of work, or are not “ready, willing and able to work.”  The revised law defines “actively seeking work” as being “engaged in systematic and sustained efforts to find work."  The revised law also requires the agency to promulgate regulations on the issue and to set standards of proof necessary to establish these work efforts.

On October 16, our firm conducted a webinar, which provided a detailed explanation of the wage deduction regulations promulgated by the New York State Department of Labor ("NYSDOL") on October 9.  If you wish to view a recording of the webinar in its entirety and print out a copy of the PowerPoint slides from the webinar, you can click here.

The New York State Department of Labor (“NYSDOL”) just published final regulations on its website, governing employee wage deductions under Section 193 of the Labor Law.  According to NYSDOL, the final Section 193 regulations are effective today – October 9, 2013 – and will be codified at and replace the existing 12 N.Y.C.R.R. Part 195.  As we previously reported, these regulations were published in draft form earlier this year and made available for public comment.  The final regulations contain only minimal changes from this earlier draft version. Most notably, the final Section 193 regulations retain and set forth detailed procedures which employers must follow when seeking to recover wage overpayments and advances by payroll deduction.  As the Section 193 regulations are now in force and effective, it is imperative that employers establish and implement the correct procedures before attempting to recover overpayments and advances by payroll deduction.  An employer’s failure to follow these mandatory procedures will create a presumption that the deductions were illegal. Among other things, the final regulations also list specific prohibited deductions, impose precise requirements for obtaining proper “authorization” from employees, and provide guidance on what types of deductions may be deemed permissible “similar payments for the benefit of the employee.” We will be following up soon with more detailed guidance on these and other issues under the final Section 193 regulations, and encourage you to check back for an updated post.

A recent decision issued by the Appellate Division, Second Department, in Matter of Board of Education of Hauppauge Union Free School District v. Hogan, provides a valuable reminder to school districts and other public employers that an arbitrator’s interlocutory ruling in a disciplinary proceeding against an employee may not really be an interlocutory ruling at all, and in some circumstances, may be subject to immediate judicial review.  The decision makes clear, at least under the circumstances of that case, that a court has authority to review an “interlocutory award” which dismisses a misconduct charge in a disciplinary proceeding commenced pursuant to Education Law Section 3020-a.  In justifying its review, the Court distinguished between an arbitrator’s interlocutory ruling on a procedural matter, which is generally not reviewable, and the dismissal of a misconduct charge, which it deemed to be “a final determination subject to review under CPLR 7511.” In 2006, Hogan (the individual who was the subject of the disciplinary proceeding) submitted an application to the school district seeking employment as a physical education teacher.  In 2010, more than three years after he submitted the application, the school district preferred charges against him alleging that Hogan had knowingly failed to disclose on his application that he had resigned from a previous probationary teaching position after being confronted with allegations that he had engaged in corporal punishment and being advised that he would not receive tenure. The first disciplinary charge, which formed the subject matter of the litigation, alleged misconduct in the knowing presentation for filing of a false and incomplete application.  The school district alleged that such conduct was in violation of Penal Law Section 175.30 -- Offering a False Instrument for Filing in the Second Degree.  Hogan filed a pre-hearing motion to dismiss the first charge, maintaining that it was time barred by the three-year limitations period contained in Education Law Section 3020-a.  The arbitrator granted the motion and dismissed the charge, finding that the school district had not pled sufficient facts to establish that Hogan had violated the Penal Law, and thus, could not invoke the exception to the three-year limitations period applicable when the charged misconduct constitutes a crime. The school district immediately commenced a proceeding in New York State Supreme Court pursuant to CPLR Article 75 and Education Law Section 3020-a, seeking to vacate the arbitrator’s decision to dismiss the disciplinary charge as arbitrary and capricious.  Hogan argued that the arbitrator's decision was an "interlocutory award" that was not subject to immediate appeal.  The Supreme Court rejected Hogan's argument, granted the petition, and restored the disciplinary charge. The Second Department affirmed.  It held that the disciplinary charge at issue was the only one preferred which constituted misconduct, and if dismissed, would prevent the school district from “adducing evidence in support of the alleged misconduct at the hearing.”  As such, the arbitrator’s award was deemed to be final and reviewable. In addition to finding the arbitrator's decision reviewable, the Court affirmed reinstatement of the disciplinary charge.  It noted that an arbitrator’s determination is subject to greater judicial scrutiny when the obligation to arbitrate arises by statute, and that an award in a compulsory arbitration such as an Education Law Section 3020-a hearing must have evidentiary support.  The Court held that the arbitrator’s determination was arbitrary and capricious, and that the facts alleged by the school district, if proven, would constitute the crime of offering a false instrument for filing in the second degree.

The U.S. Department of Labor recently issued a final rule which narrows the companionship exemption to the Fair Labor Standards Act (“FLSA”) and extends the FLSA’s minimum wage and overtime protections to most direct care workers who provide essential home care assistance for the elderly and individuals with illnesses, injuries, or disabilities.  The new rule will take effect on January 1, 2015. The final rule defines “companionship services” to include “fellowship” (engaging the person in social, physical, and mental activities) and “protection” (being present to monitor the person’s safety and well-being).  The final rule also provides that “companionship services” may also include “care” (assistance with activities of daily living, such as dressing, feeding, and bathing), but only if such services do not exceed 20 percent of the employee’s total hours worked in a workweek per consumer.  In other words, an employee who spends more than 20 percent of his or her workweek performing “care” will not fall within the companionship exemption and will be entitled to minimum wage and overtime under the FLSA. The final rule also specifies that third-party employers of direct care workers (such as staffing agencies, public agencies, and home care agencies) may not claim either the exemption for companionship services or the exemption for live-in domestic service employees, even when the employee is jointly employed by the third-party employer and the individual, family, or household using the employee’s services.  However, the individual, family, or household may still claim any applicable exemption, even where there is a third-party joint employer. Although the final rule does not go into effect until January 1, 2015, home healthcare agencies should begin evaluating which of their currently exempt employees will need to be converted to non-exempt status as a result of the final rule.  Home healthcare agencies will need to ensure that their non-exempt workers are paid at or above the minimum wage for each hour worked and are paid overtime for all hours worked in excess of 40 in a workweek.  Agencies will also need to ensure that they maintain required records for such non-exempt employees and pay non-exempt employees appropriately for all travel time, sleep time, and waiting time between patient visits, to the extent required by the FLSA.

Recently, in Quicken Loans, Inc., the National Labor Relations Board ("NLRB") continued its close scrutiny of employers' confidentiality rules by affirming an administrative law judge's decision invalidating a rule prohibiting non-union employees from disclosing personal information about themselves or their co-workers, such as home phone numbers, cell phone numbers, addresses, and email addresses. Quicken's "Proprietary/Confidential Information" rule that was included in certain employment agreements prohibited employees from disclosing non-public information relating to the company's personnel, including "all personnel lists, rosters, personal information of co-workers, managers, executives and officers; handbooks, personnel files, personnel information such as home phone numbers, cell phone numbers, addresses, and email addresses" to any person, business, or entity. In affirming the administrative law judge's decision, the NLRB held that "there can be no doubt that these restrictions would substantially hinder employees in the exercise of their Section 7 rights."  Quicken defended the rule as necessary to protect the time and expense invested in its employees, and to protect the confidential and proprietary information entrusted to the company.  The NLRB rejected this defense, and agreed with the administrative law judge that complying with Quicken's rule would prohibit employees from discussing with union representatives or their co-workers their own wages and benefits, or the names, wages, benefits, addresses, or telephone numbers of other employees.  The NLRB concluded that "this would substantially curtail their Section 7 protected concerted activities." The NLRB also affirmed the administrative law judge's invalidation of Quicken's Non-Disparagement provision in its entirety.  The provision stated that employees would not "publicly criticize, ridicule, disparage or defame the Company or its products, services, policies, directors, officers, shareholders, or employees, with or through any written or oral statement or image . . . ."  The NLRB concluded that an employee would reasonably construe this provision as restricting his or her rights to engage in protected concerted activities. In the wake of this decision, and considering the fact that the NLRB is now comprised of a Senate-approved Democratic majority led by Chairman Mark Gaston Pearce, employers should expect continued close scrutiny of confidentiality policies.  Employers should carefully review their confidentiality rules to ensure that they do not prohibit employees from discussing wages, benefits, or other terms and conditions of employment either with their co-workers or with union representatives.  Employers should also consider including specific examples of prohibited disclosures and a clause specifically providing that the rule is not intended to prohibit an employee's exercise of rights protected by Section 7 of the National Labor Relations Act.

Beginning on October 29, 2013, an amendment to New York State’s smoking law prohibits smoking anywhere on the grounds of a general hospital or residential health care facility.  The amendment also prohibits smoking in areas within 15 feet of any building entrance or exit, and within 15 feet of any entrance to or exit from the grounds of a general hospital or residential health care facility.  Although there is a narrow exception for patients of residential health care facilities and their visitors or guests, there is no exception for employees of general hospitals or residential health care facilities.  Therefore, general hospitals and residential health care facilities should take immediate steps to notify their employees of the new smoking restrictions and ensure that their employees comply with those restrictions effective October 29, 2013.

The amendment, signed into law by Governor Cuomo on July 31, 2013, modifies New York Public Health Law Section 1399-o, Subdivision 2, which governs smoking in outdoor areas.  As a result of the amendment, general hospitals and residential health care facilities must prohibit their employees from smoking on their grounds and within 15 feet of all entrances to or exits from their grounds.  However, depending on how the law is eventually interpreted, smoking might be permitted in employees' private vehicles parked on the grounds of general hospitals and residential health care facilities due to a “private automobile” exception in a pre-existing, unmodified provision of the smoking law.  The Department of Health has not yet issued guidance on this issue, or on the new law generally.

Prior to the amendment, the only outdoor areas subject to the law were certain outdoor areas of schools and railroad stations.  The smoking law’s restrictions on smoking in indoor areas (including indoor areas of general hospitals and residential health care facilities) are contained in a separate section and are not modified by the amendment.

As noted above, the law contains an exception for patients of residential health care facilities and their visitors or guests.  This narrow exception permits these individuals to smoke in a designated smoking area that is at least 30 feet away from any building structure (other than a non-residential structure wholly contained in the designated smoking area).  This exception does not apply to patients of general hospitals and their visitors or guests.

On August 27, 2013, the Office of Federal Contract Compliance Programs (“OFCCP”) announced final new regulations for Federal contractors for compliance under Section 503 of the Rehabilitation Act of 1973 ("Section 503") and the Vietnam Era Veterans' Readjustment Assistance Act ("VEVRAA").  The final rules will become effective 180 days after publication in the Federal Register.

For the first time, both rules require contractors to establish annual hiring benchmarks for qualified disabled individuals and protected veterans.  The OFCCP’s new Section 503 rule establishes a 7% utilization goal for individuals with disabilities for each of a contractor’s Job Groups, or for the entire workforce if the contractor employs 100 employees or less.  The new VEVRAA rule establishes a requirement for an annual benchmark for protected veterans, but allows contractors to choose one of two methods.  One option is to establish a benchmark equal to the national percentage (currently 8%), which will be published annually by the OFCCP.  Another option for contractors is to establish their own benchmark based on the best data available.

Highlights of the final rules that affect both Section 503 and VEVRAA include:

• Data Collection:  The requirement that contractors document and update annually the number of individuals with disabilities and protected veterans who apply for jobs, as well as the number who are hired.  The data must be maintained for three years.
• Invitation to Self Identify:  The requirement that contractors invite applicants to self-identify at both the pre-offer and post-offer stage.
• Incorporation of the EO Clause:  New specific language to be used in subcontracts.
• Records Access:  The requirement to allow OFCCP access to review documents related to a compliance check or focus review, either on-site or off-site.  In addition, contractors must, upon OFCCP’s request, inform OFCCP of all formats the records are maintained and provide them to OFCCP if requested.

On August 9, 2013, in Sutherland v. Ernst & Young LLP, the Second Circuit Court of Appeals ruled that the Fair Labor Standards Act (“FLSA”) does not prohibit the enforcement of a class action waiver in an arbitration agreement.  The Second Circuit determined that nothing in the FLSA could be construed to override the liberal policy favoring the enforceability of arbitration agreements established by the Federal Arbitration Act ("FAA").  The Second Circuit further held that a class action waiver in an arbitration agreement was not rendered invalid simply because that waiver removed the financial incentive for the employee to pursue a claim under the FLSA.

Stephanie Sutherland (“Sutherland”) sued her former employer, Ernst & Young LLP (“E&Y”), in a putative class action to recover overtime wages under the FLSA and the New York State Department of Labor’s Minimum Wage Order.  When Sutherland accepted her offer of employment with E&Y, she signed an offer letter and a confidentiality agreement, both of which provided that disputes between Sutherland and E&Y would be resolved in mandatory mediation and arbitration, pursuant to the terms of E&Y’s Common Ground Dispute Resolution Program (the “Arbitration Agreement”), a copy of which was attached to the offer letter and the confidentiality agreement.  Sutherland and E&Y agreed that the Arbitration Agreement barred both civil lawsuits and any class arbitration proceedings.

After Sutherland filed her putative class action in federal court, E&Y filed a motion to dismiss or stay the proceedings, and to compel arbitration on an individual basis.  The U.S. District Court for the Southern District of New York denied the motion, and E&Y appealed.  The Second Circuit reversed the District Court’s order.

The Second Circuit noted that the FAA establishes a liberal federal policy favoring arbitration and that federal courts should enforce arbitration agreements according to their terms unless there is a contrary congressional command overriding the FAA’s mandate in favor of arbitration.  The Second Circuit held that the FLSA contains no contrary congressional command against waiving class actions.  The court reasoned that since Section 16(b) of the FLSA requires an employee to affirmatively opt-in to any collective action brought under the statute, the employee surely also has the power to waive participation in class proceedings as well.  Notably, the Second Circuit expressly declined to follow the National Labor Relations Board’s decision in D. R. Horton, Inc., which held that a waiver of the right to pursue a claim under the FLSA collectively in any forum violates the National Labor Relations Act.

Sutherland asserted that the Second Circuit should invalidate the class action waiver in the arbitration agreement because the waiver prevented her from effectively vindicating her statutory claims, and thus operated as a prospective waiver of her "right to pursue” statutory remedies.  She argued that she could not effectively vindicate her FLSA claims because she had no financial incentive to pursue those claims on an individual basis.  She claimed that she would be forced to expend approximately $200,000 in an individual action to recover less than $2,000 in damages.  The District Court had been persuaded by this argument, relying on the Second Circuit’s 2009 decision in In re: American Express Merchants’ Litigation.

After the District Court’s ruling, however, the Supreme Court reversed the Second Circuit’s decision in American Express.  The Supreme Court held that the plaintiffs in that case could not justify the invalidation of a class action waiver under the “effective vindication doctrine” by showing that they had no economic incentive to pursue their antitrust claims individually in arbitration.  The Supreme Court noted that the mere fact that it was not worth the expense to prove a statutory remedy did not constitute an elimination of the right to pursue that remedy.  Accordingly, the Second Circuit concluded that its 2009 American Express decision, upon which the District Court relied, was no longer good law.

With this decision, the Second Circuit has joined the trend among the federal circuit courts to enforce class action waivers in FLSA lawsuits.  Given the high cost of litigating wage and hour class actions, arbitration agreements containing class action waivers can be a useful tool for some employers.  Employers should carefully evaluate whether it would be worthwhile to enter into arbitration agreements with employees and whether to include a class action waiver in such arbitration agreements.