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.

On July 30, 2012, the National Labor Relations Board (“Board”), in a 2 to 1 decision, held 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.  Section 8(a)(1) of the NLRA forbids employers from interfering with the exercise of an employee's Section 7 rights, such as the right to organize, form, join, or assist a labor union, to bargain collectively, or to engage in other concerted activities for mutual aid or protection.

In Banner Health System, the hospital’s human resources consultant routinely asked employees who made a complaint not to discuss the matter with co-workers while the investigation was ongoing.  It is common for employers to make this type of request to ensure confidentiality and to protect the integrity of their investigation.  What is troubling about this case is that the Board found that an employer’s legitimate interest in protecting the integrity of its investigation is generally insufficient to outweigh an employee’s Section 7 right to discuss workplace concerns with co-workers.  The Board held that before an employer prohibits an employee from discussing an ongoing investigation, the employer must make an individualized assessment and be able to demonstrate that it has a legitimate business reason that outweighs the particular employee’s Section 7 rights.  In undertaking this analysis, the employer must consider whether:  (1) there are witnesses in need of protection; (2) evidence is in danger of being destroyed; (3) testimony is in danger of being fabricated; or (4) there is a need to prevent a cover-up.  An employer’s blanket rule prohibiting employees from discussing ongoing investigations without considering these factors would not meet this requirement.

In light of this recent decision by the Board, employers should be cautious about their communications to employees during the course of a workplace investigation.  In particular, it would be prudent for employers to make an individualized assessment in each case before deciding whether to ask an employee not discuss a matter with co-workers.  In undertaking this analysis, it would be wise to consider the four factors identified by the Board.  If, after considering these factors or any other compelling factors, an employer ultimately decides to ask an employee not to discuss matters under investigation, the employer should document its rationale for making the decision in the event that the decision is later challenged.  In addition, rather than “prohibiting” or “requiring” an employee to maintain confidentiality, it may be wise to express that it is the employer’s “preference” that an employee not discuss the matter with co-workers while the investigation is pending.

On April 25, 2012, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued its Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.  The guidance follows prior statements by the EEOC concerning employers’ use of arrest and conviction information when making employment decisions, including whether to hire, retain, or promote individuals.  The EEOC has also published additional information concerning its new enforcement guidance in a Question and Answer-form summary.

Effect of the EEOC's Guidance

Employers can rest assured that the EEOC’s guidance does not make it a per se violation of Title VII to consider criminal history information.  It does, however, send a clear signal that the agency intends to scrutinize employment decisions that are based on an individual’s criminal past.  The EEOC stresses that criminal history information may be relevant to both “disparate treatment” claims (where people with the same criminal history are treated differently because of a legally protected characteristic) and “disparate impact” claims (where an employer’s facially neutral policy has a disproportionately adverse impact on a specific protected group).

In the disparate impact context, an employer can avoid liability by showing that the policy at issue is job related for the position and consistent with business necessity.  Under the new EEOC guidance, however, an employer will not typically satisfy this showing by merely tying its policy of considering prior criminal backgrounds to its general concern for property or safety.  Rather, employers are now expected to conduct a multi-factor analysis to confirm that the underlying policy is appropriately applied to a specific individual.

"Targeted Screens" and "Individualized Assessments"

In its guidance, the EEOC makes clear its position that a policy excluding everyone with a criminal background from employment will violate Title VII because it is not job related and consistent with business necessity.  The EEOC states that, at the very least, a policy must be rooted in a genuine nexus between a position and a particular crime.  To be valid, such a “targeted screen” must take into account the nature of the crime, the time elapsed, and the nature of the job in question.  The EEOC also emphasizes, however, that a targeted screen alone may be inadequate to avoid a disparate impact claim in many situations.  It therefore suggests that employers also conduct what it terms an “individualized assessment.”

To complete an individualized assessment in accordance with the new EEOC guidance, an employer must:  (1) notify the individual that he or she has been targeted for exclusion because of past criminal conduct; (2) give the individual an opportunity to explain why he or she should not be excluded; and (3) consider any information supplied by the individual to assess whether the practice or policy, as applied, is job related and consistent with business necessity.  The EEOC lists several examples of potentially relevant information that should be considered during the individualized assessment, including:  possible inaccuracies in the criminal history report; the applicant/employee’s age at the time of the offense; the number of offenses committed; whether similar work has been performed without incident; the applicant/employee’s employment history; rehabilitation efforts; and employment or character references.

Looking Ahead

Although the EEOC’s new guidance does not go so far as to prohibit employers from considering an individual’s criminal history when making employment decisions, it should serve as a reminder that this screening method is rife with potential legal pitfalls.  The EEOC’s emphasis on the national conviction rates for certain minority groups suggests that it is predisposed to litigating claims under a disparate impact theory.  The EEOC will consider whether the employer followed the several steps described in the new guidance to assess whether a screening policy is truly job related for a particular position and consistent with business necessity.

In addition, it is important for employers to remember that several states and municipalities have passed laws to prohibit discrimination on the basis of an individual’s criminal history.  For instance, the New York Human Rights Law and Corrections Law make it unlawful to base employment decisions on prior arrests or criminal convictions.  An exception exists that allows an employer to deny employment when the underlying conviction directly relates to the job or when employment would pose an unreasonable risk to property or the safety or welfare of specific individuals or the general public.  Before relying on this exception, however, employers must consider a variety of factors, including:

• the public policy of New York State to encourage employment of persons with criminal records;
• the specific duties and responsibilities of the position;
• the bearing the underlying offense will have on the person's fitness or ability to perform those duties and responsibilities;
• the time elapsed;
• the age of the person when the offense was committed;
• the seriousness of the offense;
• any information concerning the person's rehabilitation and good conduct; and
• the legitimate interest of the employer in protecting property or safety or welfare of individuals or the public.

By conducting this analysis, New York employers will also very likely be able to satisfy the EEOC’s expectations as stated in its new guidance.  To better insure compliance, however, it is strongly recommended that employers contact labor and employment counsel when assessing internal policies relating to the use of criminal history information in connection with employment decisions.

On June 28, 2012, the United States Supreme Court issued its landmark decision on the constitutionality of the Patient Protection and Affordable Care Act (“Act”), and ruled that all of the challenged health care reform provisions in the Act are constitutional other than a portion of a Medicaid expansion provision.  Although future challenges to the implementation of some or all of the Act will occur through the electoral process, additional litigation, and the legislative process, those challenges are unlikely to result in any significant changes in the requirements of the Act before the end of this year at the earliest.  In the meantime, there are a number of new requirements in the Act that covered employers will need to comply with in the near future, including:

• finalizing the Summary of Benefits and Coverage that most employers will be required to provide on the first day of open enrollment this fall;
• taking the steps necessary to comply with the $2,500 annual limit that will apply to health flexible spending accounts beginning in 2013, including making sure that open enrollment materials that will be distributed to eligible employees prior to the beginning of the 2013 plan year accurately describe the new limit;
• implementing any procedures necessary to track and record health coverage costs in 2012 to prepare for the new Form W-2 reporting requirement for group health plan coverage costs that will apply to Forms W-2 that will be issued by certain employers in January of 2013; and
• coordinating with any applicable insurer or administrator to make sure that the research fees that will be imposed by the Act on specified issuers of health insurance policies and plan sponsors of self-insured health plans starting with the first plan or policy year ending on or after October 1, 2012 are timely paid in 2013.

In addition to these requirements, the Act will impose numerous other requirements on covered employers in the next few years that should be planned for in advance of the applicable deadlines. Some of the more important of those requirements are described below:

• preventive care requirements for women that certain health plans will have to implement starting with plan years that begin on or after August 1, 2012;
• medical loss ratio rebate requirements that will apply to certain insured health plans starting in August of 2012 (certain insurers that fail to spend a specified percentage of premiums received on covered medical claims and quality improvement-expenses will have to provide rebates to the applicable health plans starting in August of 2012, and employers that have such plans will have to decide how to handle such rebates);
• 2013 increases in Medicare payroll taxes and FICA taxes for certain highly compensated individuals;
• certain employers will be required to provide a notice to their employees in March of 2013 about the health insurance exchanges that will become operational in 2014 (in addition to this notice requirement, certain employers will want to do an analysis in 2013 about how the health insurance exchanges might impact the health coverage they provide);
• the employer mandate requirement (commonly referred to as the “pay or play” requirement) that will apply in 2014 to certain employers having at least 50 full-time equivalent employees, which will require those employers to decide whether they will provide minimum essential health coverage to their full-time equivalent employees in 2014 or pay a financial penalty;
• nondiscrimination requirements for certain insured group health plans that will apply after the applicable regulations are issued; and
• numerous other requirements that will apply to many group health plans in 2014 or later, including expanded dependent coverage rules for “grandfathered” health plans, new preexisting condition exclusion requirements, a restriction on eligibility waiting periods that exceed 90 days, a requirement to eliminate all annual dollar limits for covered group health plans, new incentive/penalty requirements for wellness incentives, new minimum essential coverage requirements, new clinical trial coverage requirements, new provisions regarding guaranteed availability and renewability of insured health coverages, changes to Medicare Part D coverage, new automatic enrollment requirements that will apply to certain employers after the applicable regulations are issued, and a new “Cadillac” plan excise tax that will apply in 2018 if the aggregate value of certain health coverages exceed a specified amount.

Considerable guidance is going to be issued by the applicable governmental agencies to help employers implement the requirements described above, and that guidance should be monitored carefully to help ensure timely compliance with those requirements.

On June 8, 2012, the U.S. Court of Appeals for the D.C. Circuit refused to enforce a decision and order of the National Labor Relations Board ("Board") on the ground that the Board had "departed, without giving a reasoned justification, from its precedent . . . ."  Prior to the Board's 2010 decision and order in E.I. Du Pont de Nemours v. NLRB, Board law had, for almost a decade, allowed an employer to make certain unilateral changes in terms and conditions of employment, both during the term of a collective bargaining agreement and after expiration of a collective bargaining agreement, provided that the changes are consistent with an established past practice.  However, in its 2010 Du Pont decision, the Board held that Du Pont's unilateral changes to its health plan constituted unfair labor practices in violation of the National Labor Relations Act ("Act"), despite the undisputed existence of a past practice permitting such changes.  The D.C. Circuit Court of Appeals rejected the Board's change of direction on this subject.

In the Du Pont case, the Board acknowledged that Du Pont had annually and consistently revised the terms of its health plan -- which applied both to union and non-union employees -- each year during an annual enrollment period, under the terms of the plan.  These changes typically included revised coverage terms, changed options, and increased premiums.  The management rights clause in the collective bargaining agreement with the union also encapsulated the employer's right to make these changes.

When Du Pont continued this annual practice of revising its health plan in 2004 following expiration of the collective bargaining agreement, the union filed an unfair labor practice charge, and the Board found that Du Pont had violated Sections 8(a)(5) and 8(a)(1) of the Act by making impermissible unilateral changes in the terms and conditions of employment.  The Board distinguished the employer's past practice of similar annual revisions to the health plan, noting that those prior occasions had occurred during the term of the collective bargaining agreement, not after the expiration of the collective bargaining agreement.  The Board also held that Du Pont could not rely on the expired management rights clause to justify the post-expiration unilateral changes.

In rejecting the Board's holding, the D.C. Circuit Court of Appeals observed that, under the Board's existing precedent, the undisputed existence of a past practice permitting similar changes served to immunize those changes from scrutiny under the Act, regardless of whether the changes were made during the term of a collective bargaining agreement or after the expiration of a collective bargaining agreement.  The Court also noted that this immunity did not turn on the existence of a management rights clause in an unexpired collective bargaining agreement.  The Court stated:

Under the Board's precedent, therefore, Du Pont's making annual changes to [its health plan] became a term and condition of employment the Company could lawfully continue during the annual enrollment period, irrespective of whether negotiations for successor contracts were then on-going.

The Court's refusal to enforce the Board's Du Pont decision signals some judicial impatience with the Board's deviation from existing precedent without providing a well-reasoned justification for the sudden change in policy.

On or about June 20, 2012, the U.S. Department of Labor, Wage and Hour Division, released a 16-page guide to the Family and Medical Leave Act (“FMLA”) in an effort to inform employees about the FMLA and to make the law more accessible to them.  This publication, entitled “Need Time? The Employee’s Guide to The Family and Medical Leave Act” (“Guide”), provides a basic overview of the FMLA.  Through a combination of text, flow-charts, and examples, it answers common questions that employees may have about their rights under the FMLA.

So what does this new publication mean for employers?

Although the Guide is specifically geared toward employees, it may also be useful to employers for the reasons set forth below.

• The Guide is written in plain English. For this reason, the document serves as a useful reference to refresh employers’ understanding regarding the basic rights and protections afforded to employees under the FMLA, as well as the obligations that the statute places on employers themselves.  For example, the Guide contains a flowchart which employers may find useful when determining whether an employee is eligible for FMLA leave.
• The Guide also reminds employees of their own responsibilities under the FMLA.  For instance, it notifies employees of their obligation to provide an employer with appropriate notice of the need for leave.  In addition, the Guide reminds employees that they are responsible, at their own expense, for ensuring that their employer receives a timely, compete, and sufficient medical certification form.  The Guide also reminds employees that their request for FMLA leave may be denied if they fail to provide employers with requested medical certification(s).  Finally, as a practical matter, the Guide stresses the need for employees to communicate with their employers.

A word of caution . . .

Many employers who are well-versed in the FMLA may not be inclined to utilize or familiar themselves with the Guide.  However, it is important for all employers to understand that this Guide also advises employees, in specific detail, regarding an employer’s obligations to the employee under the FMLA.  For example, the Guide states that employers must notify employees of their eligibility and rights and responsibilities within 5 business days, and must also notify employees within 5 business days if a leave request has, in fact, been designated as FMLA leave.  In addition, the Guide informs employees of their right to continued health benefits while on leave, as well as their right to be returned to the same or nearly identical position upon their return from FMLA leave.  Most importantly, employers should be aware that the Guide contains an entire page of detailed information informing employees how to file a complaint with the U.S. Department of Labor if they feel their FMLA rights have been violated.

Finally, employers are reminded that while the Guide can be a helpful and informative resource to employers and employees alike, it does not serve as a substitute for a well-drafted FMLA policy that is compliant with the law.

Yesterday, an amendment to New York’s wage deduction statute – New York Labor Law Section 193 – passed both the New York State Senate and Assembly.  The amendment is expected to be signed by Governor Cuomo.  This legislation, if enacted, would permit employers to make a wider range of payroll deductions than currently enumerated in Section 193.

As we previously reported, the New York State Department of Labor has over the last couple of years issued several opinion letters which significantly narrow 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., payments for insurance premiums, pension, or health and welfare benefits).  This interpretation varies from the NYSDOL’s historical focus on whether the deduction is for the “benefit of the employee.”

The pending amendment to Section 193 would expand the enumerated list of permissible wage deductions to include, among other things, deductions for:  (1) discounted parking costs; (2) certain mass transit costs; (3) gym membership dues; (4) certain cafeteria, vending machine, and gift shop purchases; (5) pharmacy purchases made at the employer’s place of business; (6) tuition, room, and board payments for educational pursuits; and (7) day care costs.  Notably for employers, the legislation would also permit the recovery of wage overpayments and wage advances by payroll deduction under certain circumstances and subject to future NYSDOL rulemaking.

We will continue to monitor this development and will provide additional details on our blog if and when the amendment is signed into law.

Employers in New York are well aware that the state agency that has jurisdiction over employment discrimination and harassment claims under the New York Human Rights Law (“NYRHL”) is the New York State Division of Human Rights (“Division”). The Division also has jurisdiction under the NYHRL to investigate and adjudicate certain other types of discrimination claims outside the employment context, such as alleged housing discrimination. However, in a recent case handled by Bond, Schoeneck & King on behalf of the Ithaca City School District (“ICSD”), the Division’s overly broad interpretation of its jurisdiction was curtailed by New York’s highest court. On June 12, 2012, the New York Court of Appeals held that the Division does not have jurisdiction over discrimination and harassment complaints filed by public school students under the NYHRL.

The case began in 2006, when a parent of a middle school student filed a complaint with the Division, alleging that her daughter had been subjected to racial harassment by other middle school students. The complainant alleged that ICSD was liable for the harassment under Section 296(4) of the NYHRL, which provides:

It shall be an unlawful discriminatory practice for an education corporation or association which holds itself out to the public to be non-sectarian and exempt from taxation pursuant to the provisions of article four of the real property tax law . . . to permit the harassment of any student or applicant, by reason of his race, color, religion, disability, national origin, sexual orientation, military status, sex, age or marital status . . . .

ICSD commenced a proceeding in Supreme Court, Tompkins County, under Article 78 of the Civil Practice Law and Rules, seeking an order prohibiting the Division from exercising jurisdiction over the complaint on the ground that a public school district is not an “education corporation or association” under Section 296(4) of the NYHRL. The court denied ICSD’s petition, and held that the Division could conduct a hearing regarding the complaint.

A hearing was held before a Division Administrative Law Judge (“ALJ”). The ALJ issued a recommended decision finding ICSD liable for the harassment of the student by other middle school students. The Commissioner of Human Rights adopted the ALJ’s recommended decision regarding liability, but reduced the amount of the ALJ’s recommended damages award to the student and her mother.

ICSD appealed the Commissioner’s decision on several grounds, including the same jurisdictional ground upon which the initial Article 78 proceeding had been based. This time, the Supreme Court, Tompkins County, granted ICSD’s appeal and annulled the determination of the Commissioner. The court held that ICSD was not an “education corporation or association” under the NYHRL and that the Division therefore lacked jurisdiction over the complaint.

The Division appealed the decision to the Third Department Appellate Division, which reversed and held that the term “education corporation or association” should be interpreted broadly to include public school districts such as ICSD.

ICSD appealed the Third Department’s decision to the New York Court of Appeals. In a 4-3 decision, the Court of Appeals reversed the Third Department and held that a public school district is not an “education corporation or association” under the NYHRL and that the Division does not have jurisdiction over complaints filed by public school students for alleged discrimination or harassment. The Court of Appeals thoroughly analyzed the legislative history of the term “education corporation or association,” and determined that the legislature never intended that term to include public school districts.

The Court of Appeals rejected the Division’s argument that the term “education corporation or association” should be liberally construed, stating that “it is evident from the legislative history that the term ‘education corporation or association,’ the origins of which can be traced to the Tax Law, refers to only private, non-sectarian entities that are exempt from taxation under [article four of the real property tax law].” The Court of Appeals also observed that a public school district would never need to “hold itself out to the public to be non-sectarian and exempt from taxation” as stated in Section 296(4) of the NYHRL because all public school districts are non-sectarian and all public school districts are exempt from taxation by virtue of the fact that they are public entities.

Accordingly, although the Division can still exercise jurisdiction over employment discrimination and harassment claims filed against public school districts under the NYHRL, it can no longer exercise jurisdiction over discrimination and harassment claims filed by public school students.

On June 18, 2012, the U.S. Supreme Court affirmed a decision of the Ninth Circuit Court of Appeals finding that pharmaceutical sales representatives at GlaxoSmithKline fall within the outside sales exemption from the overtime pay requirements of the Fair Labor Standards Act ("FLSA").  As reported in a previous blog post, the Second Circuit Court of Appeals had reached the opposite conclusion in July of 2010, finding that pharmaceutical sales representatives employed by Novartis were not FLSA-exempt and that a class of more than 7,000 current and former employees in that position were entitled to pursue their overtime claims.  The Supreme Court's 5-4 decision resolves the split in the Circuit Courts on the scope of the FLSA's outside sales exemption and addresses the amount of deference owed to the Secretary of Labor's interpretation of the U.S. Department of Labor's regulations promulgated under the FLSA.

In amicus briefs filed with both the Second and Ninth Circuits, the Secretary of Labor initially took the position that a "sale" as described in the regulations required a "consummated transaction directly involving the employee for whom the exemption is sought."  Because pharmaceutical sales representatives promote drugs to physicians in exchange for nonbinding commitments to prescribe the drugs in appropriate cases, the Secretary argued that they did not "make sales" and, accordingly, could not qualify for the outside sales exemption.  After the Supreme Court granted certiorari, however, the Secretary argued instead that an employee does not make a sale unless he "actually transfers title to the property at issue."

Although an agency's interpretation of its own ambiguous regulations is normally entitled to deference, the majority found "strong reasons" for not deferring to the Secretary's interpretation in this instance.  Specifically, the majority found that the Secretary's current interpretation would impose potentially massive liability on employers without fair warning, especially given the U.S. Department of Labor's apparent acquiescence in the longstanding pharmaceutical industry practice of treating sales representatives as exempt.  In addition, the majority found that the Secretary's interpretation was not persuasive in its own right for a number of reasons, including that it was first announced in a series of amicus briefs with no opportunity for public comment, that the Secretary's initial interpretation argued before the Second and Ninth Circuits had proven to be untenable, and that it was "flatly inconsistent" with the FLSA's definition of "sale."

The majority held that the FLSA's statutory language regarding the outside sales exemption called for a functional inquiry, taking into consideration an employee's responsibilities in the context of the particular industry in which he or she works.  In light of the unique regulatory environment within which pharmaceutical companies operate, including the prohibition against dispensing certain drugs without a physician's prescription, the majority found that the sales representatives' promotional efforts to obtain non-binding commitments from physicians was "tantamount . . . to a paradigmatic sale of a commodity" within the pharmaceutical industry.  Furthermore, the majority found that its holding comported with the apparent purpose of the FLSA's exemption, because pharmaceutical sales representatives who typically earn over $70,000 per year are hardly the type of employees the FLSA was intended to protect.

On May 30, the NLRB's Acting General Counsel ("GC") issued a third report on social media cases.  We have addressed the NLRB's treatment of social media cases in several prior blog posts, including a summary of the GC's second report on social media cases.  The focus of this third report is social media policies, and for the first time, the GC has provided the full text of a social media policy that was determined to be lawful under the National Labor Relations Act ("NLRA").  In addition, the report addresses six other cases in which the GC concluded that at least some of the provisions of employers' social media policies were overly broad and unlawful under the NLRA.  The following summary touches on just a few of the highlights contained in the GC's 24-page report.

A number of the provisions of social media policies that were found to be unlawful were restrictions on communicating confidential information.  Where a social media policy simply prohibits the disclosure of confidential information, the GC has determined that such a prohibition is overly broad because it could reasonably be interpreted to prohibit employees from discussing and disclosing information regarding their own and their co-workers' conditions of employment.  For example, the GC indicated in the report that the following provisions were found to be unlawful:

• "Don't release confidential guest, team member or company information. . . ."
• "Make sure someone needs to know.  You should never share confidential information with another team member unless they have the need to know the information to do their job.  If you need to share confidential information with someone outside the company, confirm there is proper authorization to do so.  If you are unsure, talk to your supervisor."
• "Watch what you say.  Don't have conversations regarding confidential information in the Breakroom or in any other open area.  Never discuss confidential information at home or in public areas."
• "Employees are prohibited from posting information regarding [Employer] on any social networking sites . . . that could be deemed material non-public information or any information that is considered confidential or proprietary.  Such information includes, but is not limited to, company performance, contracts, customer wins or losses, customer plans, maintenance, shutdowns, work stoppages, cost increases, customer news or business related travel plans or schedules."

The GC also found unlawful a provision of a social medial policy prohibiting "offensive, demeaning, abusive or inappropriate remarks" in social media communications.  According to the GC, this provision "proscribes a broad spectrum of communications that would include protected criticisms of the Employer's labor policies or treatment of employees."  Similarly, the GC found that provisions of an employer's social media policy that cautioned employees not to "pick fights" and to avoid "topics  that may be considered objectionable or inflammatory" when communicating on social media sites were unlawful.  The GC reasoned that discussions about working conditions or unionism have the potential to become heated or controversial, and that "without further clarification of what is 'objectionable or inflammatory,' employees would reasonably construe this rule to prohibit robust but protected discussions about working conditions or unionism."

The GC also addressed provisions regarding the "friending" of other employees on social media sites.  In general, the GC has found such provisions to be unlawful because they may be interpreted to restrict concerted activity.  For example, the GC concluded that the following provision was overly broad because it could potentially discourage employees from engaging in discussions and communications with their co-workers:

• "Think carefully about 'friending' co-workers . . . on external social media sites.  Communications with co-workers on such sites that would be inappropriate in the workplace are also inappropriate online, and what you say in your personal social media channels could become a concern in the workplace."

Provisions restricting the use of company logos or trademarks in an employee's social media posts were also generally found by the GC to be unlawful.  According to the GC, such provisions are overly broad because an employee could reasonably interpret them to prohibit the use of photos or videos of employees engaging in union activities such as holding picket signs with the employer's logo or trademark.

In the report, the GC also addressed again an employer's use of a "savings clause" in a social media policy (which essentially provides that the policy should not be interpreted or applied in a way that would interfere with an employee's rights under the NLRA).  As in previous reports, the GC reiterated that such clauses do not cure other provisions of the policy that are found to be unlawful.

In general, the GC advises employers to include limiting language and definitions in social media policies in order to give context to provisions that might otherwise be overly broad.  For example, instead of simply prohibiting the disclosure of confidential information, an employer should define what is deemed to be confidential information to ensure that an employee could not reasonably interpret the prohibition to apply to information about the employee's terms and conditions or employment.  The GC also suggests that an employer's social media policy should contain specific examples of activities that would be prohibited by the policy.

As a result of this report and the GC's prior reports on social media cases, it is now extremely difficult for employers to create a lawful and meaningful social media policy that adequately protects its own interests with minimal risk that the policy will be found to violate employee rights under the NLRA.  Employers who wish to create a new social media policy or wish to revise their existing policy would be well-advised to consult with their legal counsel.