Labor and Employment

Labor and Employment

Better Call Sarah: Workplace DEI

Dear Sarah, I’ve been reflecting on how best to promote diversity and inclusion in my workplace. With year-end reviews and the holidays around the corner, I want to make sure that our DEI (diversity, equity, and inclusion) initiatives are truly making a difference. There’s also the looming concern of the potential rollback of education-based affirmative action policies and DEI programs under the upcoming Trump administration. With these shifts on the horizon, many in corporate America are wondering how to adapt and continue fostering inclusivity in their organizations. What strategies can I implement to ensure my team remains inclusive, diverse, and equitable in an evolving political and corporate landscape? - Inclusive Innovator Dear Inclusive Innovator, Thank you for your insightful question! November is a great time for you to focus on diversity, equity, and inclusion (DEI), especially as the holiday season approaches and often highlights cultural diversity. Fostering an inclusive workplace can enhance employee morale while driving innovation and productivity. Corporate DEI policies are facing increased scrutiny and legal challenges, even as the U.S. workforce becomes more diverse. As diversity continues to grow in both familiar and unexpected ways, DEI programs will be crucial for organizations looking to thrive in this evolving environment. While DEI programs will vary based on each organization’s unique goals, effective programs often share key elements: Make Anti-Discrimination Central to Your DEI Policy: Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, or national origin. Challenges to DEI programs frequently arise from claims of discrimination against protected groups. To prevent misinterpretations that could create perceptions of favoritism—and thus undermine your program’s effectiveness—ensure that strong non-discrimination principles are integral to your DEI policies. Legally, employers cannot favor specific races, genders, or religions in hiring and promotion. Evaluate whether your DEI initiatives truly foster an inclusive culture that values all employees and promotes an equitable playing field. A compliant DEI program can expand the talent pool for jobs and promotions by proactively engaging with diverse communities. Align DEI Goals with Your Organizational Mission and Culture: Before developing a DEI program, consider your organization’s identity. Understanding your mission, audience, operational methods, and regulatory context will help frame how DEI supports broader goals rather than appearing as an afterthought. Analyze Your Current and Future Workforce Composition: Root your DEI program in your current workforce. Understand individual and team dynamics to make informed decisions about future enhancements. While demographic statistics can offer insights, approach them carefully to avoid oversimplification. Instead of giving "preference" to specific groups, adopt identity-neutral DEI strategies that eliminate bias. These strategies can include structured recruitment and promotion processes with clear, transparent, merit-based criteria; removing biased language from evaluations; and applying employee benefits equitably. Clearly Define “Diversity”: Specify the aspects of diversity your DEI policy aims to address and why. In a compliant DEI program, a true commitment to non-discrimination in a diverse workforce should naturally lead to greater diversity within your organization. Clarify “Equity” and “Inclusion” Definitions: These terms can be broad and sometimes contradictory. Equity doesn’t mean identical outcomes for everyone but rather tailored support that enhances each employee’s chances for success. Inclusion means ensuring that all employees can thrive, fostering teamwork that appreciates diversity. Build a DEI program that encourages a more inclusive workplace culture without directly affecting individual employment benefits. Review Training Materials for Alignment with Your Organizational Values: DEI training materials vary widely in quality. Be cautious about training that could conflict with state laws, particularly in states where DEI-related legislation is being challenged. Given the current climate surrounding DEI, some organizations may hesitate to pursue these programs. However, as society and the workforce continue to diversify, it’s essential to adapt. Rather than retreat, consider this an opportunity to develop DEI programs that resonate with the needs of an evolving society.

November 21, 2024

Labor and Employment

Here We Go Again: The DOL’s Proposed Overtime Rule with its Accompanying New Salary Test is Struck Down by a Texas Federal Court

On November 15, 2024, in the case of State of Texas v. United States Department of Labor, Texas federal court judge Sean Jordan struck down what had been scheduled to be a mandatory adjustment in the so-called “white collar” overtime exemption classifications taking effect on January 1, 2025. The “white collar exemptions” included those employees classified as “executive”, “administrative” or “professional” employees who met both a “duties” test and a “salary” test under the Fair Labor Standards Act. Under a 2019 rule, the salary level needed to be met by an exempt employee was $684/week or $35,568 per year. The Department of Labor under the Biden administration promulgated a rule which mandated two adjustments to the exempt salary requirement for executive, administrative and professional employees. Those adjustments called for an increase on July 1, 2024 to $844/week or $43,888/year; and a further adjustment scheduled for 2025 of $1,128/week or $58,656/year. In his decision Judge Jordan, in vacating the DOL’s proposed rule, concluded that the DOL had impermissibly elevated the new salary requirement in a manner which, in essence, negated or drastically reduced the importance of an exempt employee’s bona fide job duties and thus exceeded its Congressionally delegated authority to determine the elements of a legitimate exempt employee under the FLSA. While it is certainly possible that Judge Jordan’s decision could be appealed to the Fifth Circuit, given the results of the recent presidential election and the predicted more conservative and employer-friendly trends that will most likely follow in agencies such as the DOL, EEOC and NLRB, it is more probable that for the time being the decision striking down the proposed new salary level will remain in effect. The implication of the decision is that the former salary level of $684/week for exempt employees will remain in effect now pending any further adjustment sometime in the future. From a business perspective, companies that adjusted their exempt salary levels back in July will have to decide whether it is more prudent and acceptable to keep those salary levels intact rather than reverting to the then-mandated July 1 adjustment.

November 21, 2024

Labor and Employment

Employer Alert: Employees’ Right to Time-Off for Voting

With the first Tuesday in November around the corner and matters both big and small on the ballots – from local environmental issues to the right to choose and election measures on state ballots to the exalted presidential election – it is an appropriate time to reexamine employees’ rights and employers’ obligations to provide time off to vote. Strangely, there is no federal law that addresses the rights of employees to voting leave. Instead, there is a tapestry of state laws addressing the issue. Some states require paid voting leave, while others only provide for unpaid leave. And, of those that require leave – some have specific exceptions if an employee has enough time to vote before or after work while polls are open. Still, other states require employers to notify employees of their rights. This, no doubt, results in a complex web of laws that is difficult for employers to navigate. For example, (a) New York requires employers post notice of employees’ voting leave rights and provide employees with at least two hours of paid voting time, unless the employee has at least four non-working hours while the polls are open, (b) Maryland requires that employers provide registered voters with up to two hours of voting leave, unless the employee has at least two continuous hours off-duty time while the polls are open, and (c) California requires employers post notice of employees’ voting leave rights and to pay employees for up to two hours of voting time at the beginning or end of a work shift. Employers are reminded that it is best practice to consult their own internal policies which may well provide employees with rights that go beyond those required by the state in which their employees are working. As November 5th approaches, Offit Kurman’s Employment Law Group is always available to answer any questions you might have on voting leave or any related matter.

November 1, 2024

Labor and Employment

Better Call Sarah: Mental Health in the Workplace

Dear Sarah, With October being Mental Health Awareness Month, I’m concerned about how we can better support our employees’ mental well-being at work. We’ve been hearing a lot about the importance of mental health, but as a small business owner, I’m unsure how to implement effective strategies. What can I do to create a more supportive environment? – Mindful in Marketing Dear Mindful in Marketing, Thank you for your thoughtful question! Mental health in the workplace is an increasingly relevant issue, especially during October, when awareness campaigns are in full swing. Supporting your employees’ mental well-being is more than a compassionate choice – it is a smart business strategy that can lead to increased productivity and lower turnover rates. You also need to comply with the law. If an employee’s mental health condition qualifies as a disability under the Americans with Disabilities Act (ADA), you are required to provide reasonable accommodations. Conditions like major depressive disorder, bipolar disorder, and schizophrenia meet this definition, while others such as PTSD, anxiety, and depression may also qualify. Mental health conditions may also trigger protections under the Family and Medical Leave Act (FMLA) [1]. It's important to be aware of these legal frameworks to protect both your employees and your business. It’s also especially important for businesses to comply with these laws, as the Equal Employment Opportunity Commission (EEOC) has emphasized its focus on protecting workers with mental health-related disabilities in its most recent Strategic Enforcement Plan. Fortunately, you can take proactive steps to support mental wellness in the workplace to support your employees and help protect your business from potential discrimination claims. Mental Health Policies and Procedures Employers should be prepared with the proper policies and procedures in place to address employee mental health concerns. Draft and Communicate a Mental Health Policy Create a clear mental health policy that outlines your commitment to employee well-being. Include resources available, such as Employee Assistance Programs (EAPs) and mental health days. Make sure this policy is easily accessible and communicated to all employees. Manager Training and Education Train managers and supervisors on their legal obligations under the ADA, FMLA, and related laws. This should include knowing how and when to involve HR. It’s also wise to designate HR professionals to handle leave requests and accommodation issues promptly and consistently. Engage in the Interactive Process If an employee approaches HR with a mental health-related issue that qualifies as a disability, employers must engage in the “interactive process.” This dialogue between employer and employee is aimed at finding reasonable accommodations that allow the employee to perform their job. Common accommodations to address mental health issues are extended leave, scheduling changes, and additional breaks. You need to listen to the employee and the employee’s healthcare provider. Always remember that this is an interactive process, so it may take several steps. Be patient and creative. Reduce Mental Health Stigma Historically, employers avoided discussing mental health with their employees. Even today, employers may feel uncomfortable bringing it up because they don’t know the “right” words or worry they might overstep. But it’s important to talk about. Employees who feel supported and who have receptive supervisors may be less likely to have a sudden need for an ADA accommodation. They are also less likely to file an EEOC charge. Check On Your Employees Regular check-ins with employees—whether through one-on-one meetings or anonymous surveys—can help you gauge how employees are feeling. When employees feel supported, they are more likely to seek help early, which can reduce the need for more formal ADA accommodations later on. Offer Mental Health Trainings Consider organizing workshops or inviting mental health professionals to provide guidance on recognizing the signs of mental health struggles and how to support colleagues. Train managers to approach sensitive conversations with empathy and understanding. Lead by Example As a business leader, it’s important to model healthy behaviors. Share your own strategies for managing stress and openly discuss the importance of mental health. When employees see leadership prioritizing well-being, they feel empowered to do the same. Create A Work Environment That Promotes Mental Well-Being Building a culture that supports mental health involves more than just offering workshops—it requires integrating mental well-being into everyday work practices. Flexibility, balance, and proper resources are straightforward ways employers can build a work environment that supports employees’ mental health. Flexibility Mental health can fluctuate over time, and offering flexibility—whether through adjustable workloads, flexible deadlines, or remote work options—can help employees manage stress during tough times. Encourage employees to communicate their needs and be open to adjustments as necessary. Work-Life Balance Promote a healthy work-life balance by encouraging employees to take regular breaks, use their vacation time, and, if possible, offering flexible work schedules. Employees who feel that their personal time is respected are more likely to be productive and less likely to experience burnout. Adequate Staffing and Resources Employers can reduce unnecessary stress by ensuring employees have access to the tools and resources they need to do their jobs effectively. This includes providing up-to-date technology, clear processes, and adequate staffing levels so employees aren’t overburdened. When employees have what they need to perform their tasks efficiently, they experience less frustration and can focus on their work without additional stress. Regularly assess whether your team has the proper support, equipment, and training, and address any gaps promptly to maintain a healthy and productive work environment. Incorporating mental health support into your workplace culture is a powerful investment in your business’s future. These strategies can ensure legal compliance while also fostering a positive, healthy work environment. Prioritizing employee well-being will reduce stress, improve productivity, and create an atmosphere where your team can thrive.  [1] The U.S. Department of Labor published “Fact Sheet #280: Mental Health Conditions and the FMLA” in May 2022, to explain leave eligibility under the Family and Medical Leave Act (FMLA) for use related to an employee’s own mental health condition or that of an immediate family member. Additionally, the FMLA’s definition of a serious health condition can be broader than the definition of a disability and encompass many illnesses, injuries, and physical or mental conditions that require multiple treatments and intermittent absences. State leave and disability laws can provide greater amounts of leave and/or benefits to employees, including those who may not be covered by the ADA or FMLA.

October 30, 2024

Labor and Employment

Top California Court Rules Gig Workers are Independent Contractors

In a recent ruling, the Supreme Court of California has allowed Prop 22 to stand, meaning more than 1.4 million Californians who work as app-based gig workers for companies such as Uber, Lyft, DoorDash, and Instacart can continue to be categorized as independent contractors as opposed to employees. This is just the latest development in the evolution of employee classification in the state, and it surely will not be the last. In this case, the Court upheld Prop 22, a 2020 voter-approved law allowing gig economy platforms to classify drivers as independent contractors rather than reclassify them as employees in California. The Court rejected claims brought by drivers and a labor union that the law is unconstitutional, citing interference with lawmakers’ authority over matters dealing with workers’ compensation. Prop 22 defined a new classification for workers entitled to limited benefits, including healthcare subsidies, occupational accident insurance, disability insurance, and a net earnings floor based on the state minimum wage, but not necessarily all rights granted to full-fledged employees. Numerous challenges have been raised to the legislation, which was reversed in 2021 and then reinstated in 2023 by the courts. The July 25, 2024 Supreme Court ruling ends the long legal fight over Prop 22 for now and is a significant win for rideshare giants Uber and Lyft, which have fought to classify their workers as contractors. While this ruling permits gig-work companies to treat their California drivers as independent contractors, it's important to note that there is still the possibility of future legal challenges to Prop 22. The potential for further legal action adds an element of intrigue to the ongoing debate about the classification of gig workers, which has been scrutinized in several state legislatures recently. However, this decision applies specifically to rideshare drivers in California.

October 14, 2024

FTC Non-Compete Rule

Texas Court Blocks Enforcement of FTC Non-Compete Ban

The Federal Trade Commission (FTC) will not be able to enforce its proposed rule banning non-competes per the latest ruling from a federal district court in Texas.   What does this mean for businesses?   For now, it’s business as usual. Companies can continue using non-compete agreements with their employees, provided they comply with applicable state and local laws.   Best practices regarding non-compete agreements Companies should still exercise caution, however. The FTC may appeal the Ryan decision or there could be other legal or regulatory changes that could impact the enforceability of non-compete agreements. Future legislation or regulatory reform around the use of employee non-competes may be especially likely, given the recent and widely publicized scrutiny. Employers should review their existing non-compete agreements with employment counsel to ensure they comply with current laws and regulations in the states in which they operate and have employees. Attorneys experienced with non-competes and other restrictive covenants can provide you with valuable insights and alternative strategies to protect your interests. Being prepared to adapt your policies in response to any changes will help safeguard your business.  Background Ryan LLC v. Federal Trade Commission, 3:24-cv-00986, (N.D. Tex.) was one of several lawsuits filed to challenge the FTC’s proposed rule banning non-competes. This rule, set to take effect September 4, 2024, would have banned the use of future non-compete agreements and nullified most existing ones. In a victory for employers, U.S. District Judge Ada Brown for the Northern District of Texas issued a ruling in the Ryan case on August 20, 2024, blocking the FTC from enforcing its proposed non-compete rule.

August 21, 2024

Labor and Employment

Navigating the FTC’s New Non-Compete Rule: Steps to Prepare by September 4, 2024

On April 23, 2024, the Federal Trade Commission (FTC) approved a new rule (FTC Rule) that invalidates most existing non-compete agreements for employees at for-profit businesses, except for those agreements for "senior executives" signed before September 4, 2024 (Effective Date). This FTC Rule fundamentally alters the longstanding practice of using non-compete clauses to safeguard an employer's interests. Overview of the FTC’s New Non-Compete Rule and Its Implications Under the new rule, non-compete agreements will only remain enforceable for senior executives—defined as those earning more than $151,164 annually and holding significant policy-making roles, such as president or CEO—and will remain enforceable if signed before the Effective Date. After September 4, 2024, employers will be prohibited from imposing non-compete agreements on new hires, even if they are senior executives. Employers are also required to inform both current and former employees bound by non-compete agreements that these agreements will not be enforced. The FTC has provided model language for this notice, available on its website in multiple languages. Employers should use this notice carefully and avoid issuing it to senior executives who the FTC Rule does not impact. Key points to consider: The term “worker” is broadly defined and includes employees, independent contractors, interns, volunteers, apprentices, and even sole proprietors. The FTC’s jurisdiction generally does not cover non-profit organizations, banks, savings and loan institutions, federal credit unions, common carriers, and air carriers, so the rule may not apply to these sectors. The rule does not address non-compete agreements that prevent employees from soliciting customers or other employees unless these agreements are overly broad and interfere with a worker’s ability to seek or accept new employment. Agreements designed to protect trade secrets and confidential information, such as non-disclosure agreements, remain enforceable. The FTC Rule does not apply to non-compete agreements related to the bona fide sale of a business entity and does not affect any pending enforcement actions pertaining to non-competes established before the Effective Date. The rule applies to post-employment non-compete agreements and does not impact agreements that limit competitive activities during employment. The FTC Rule overrides conflicting state laws but does not supersede state laws that provide greater protections, such as California’s comprehensive ban on non-competes for all employees, including senior executives. Current Legal Challenges to the FTC Rule It is no surprise that several federal lawsuits have been filed to challenge the enforcement of the FTC Rule. In one case, ATS Tree Services, LLC v. FTC, the U.S. District Court for the Eastern District of Pennsylvania ruled that the plaintiffs were unlikely to succeed in their claims against the FTC and denied their request for a preliminary injunction to halt the rule’s enforcement. Consequently, it is reasonable to anticipate that the ATS court may ultimately support the FTC’s position. In contrast, in Ryan LLC v. Federal Trade Commission, the U.S. District Court for the Northern District of Texas issued a limited preliminary injunction preventing the enforcement of the FTC Rule against the plaintiffs and intervenors involved in that case. The Ryan court is expected to decide by August 30, 2024, whether to grant a nationwide permanent injunction, just before the FTC Rule is set to take effect. Additionally, on June 21, 2024, Properties of the Villages, Inc. v. Federal Trade Commission was filed in the Middle District of Florida before Judge Timothy J. Corrigan. The plaintiff is seeking a preliminary injunction against the FTC Rule as it applies to them and an order to vacate it entirely under the Administrative Procedure Act. Judge Corrigan is scheduled to hear arguments on the motion for a preliminary injunction on August 14, 2024. Recommended Action for Businesses Before the FTC Rule Takes Effect Businesses should be prepared to act by the Effective Date. Despite ongoing litigation challenging the FTC Rule, no nationwide injunction has been issued, so employers should proactively: Strengthen other restrictive covenants (e.g., non-solicitation clauses) and develop strategies to address potential risks associated with the rule. Consider how the rule might impact valuations in mergers or acquisitions due to the potential for increased competition. (Note that the FTC Rule does not apply to non-compete clauses related to the bona fide sale of a business, a person's ownership interest in a business, or substantially all of a business's operating assets.) Evaluate options for updating or introducing agreements for senior executives before the Effective Date. Review and analyze the impact of the FTC Rule on existing non-compete agreements. Plan for issuing the required notices to affected employees and former employees. Offit Kurman has a dedicated practice group focused on issues related to employee mobility, including restrictive covenants and trade secrets. Our attorneys are uniquely positioned to guide you through these challenges, helping you weigh the risks specific to your business and make informed decisions that align with your business objectives. The information contained in this document is intended for informational purposes only. It should not be relied upon or construed as legal advice. In some states, this is considered advertising.

August 13, 2024

Labor and Employment

Federal Court Denies ATS Tree Services' Bid to Delay FTC Rule Implementation

On July 23, 2024, U.S. District Judge Kelley Brisbon Hodge, serving the Eastern District of Pennsylvania, rejected ATS Tree Services LLC’s request to delay the Federal Trade Commission’s (FTC) final rule, set to take effect on September 4, 2024. ATS also sought a preliminary injunction against the rule. Still, Judge Hodge also denied this request, concluding that ATS had not shown that the rule would cause irreparable harm or that it could establish a likelihood of success on the merits. This decision followed shortly after U.S. District Judge Ada Brown of the Northern District of Texas issued a preliminary injunction blocking the FTC from enforcing the rule against Ryan, LLC, a tax preparation company, and certain intervenors. Judge Hodge’s denial of ATS's motion was based on a determination that ATS had failed to prove it would suffer irreparable harm because of the rule. The court found that ATS’s claims of irreparable harm—such as nonrecoverable compliance costs and the potential loss of contractual benefits— were based upon either a choice or a “speculative risk,” which did not rise to the level of irreparable and immediate harm required for an injunction. The court cited Third Circuit precedent, stating that nonrecoverable compliance costs, such as monetary losses or business expenses, do not constitute irreparable and immediate harm required for an injunction. Additionally, the court held that ATS offered no binding precedent to support its argument that the loss of contractual rights is an irreparable harm, reiterating that such determinations must be on a case-by-case basis. Even if ATS could establish irreparable harm, the court found that it had not demonstrated a likelihood of success on the merits. Judge Hodge’s opinion included a detailed analysis of the FTC’s authority to issue substantive rules regarding unfair methods of competition. The court confirmed that the FTC has such authority, noting that Section 6 of the FTC Act does not limit the FTC to procedural rules alone. The use of the term "prevent" in Section 5 of the Act supports the FTC's ability to make rules to prevent harm before it occurs rather than merely remedying it. The court also referenced prior circuit court decisions and Congressional actions, such as the Magnuson-Moss Act, which affirmed the FTC’s rulemaking authority. The court also addressed ATS’s other challenges to the rule. It upheld the FTC’s authority to broadly regulate non-compete clauses as unfair methods of competition, rejected claims that regulation of non-competes is solely a state matter, and found that the Major Questions Doctrine does not apply to the rule. Additionally, the court dismissed ATS’s nondelegation challenge, affirming that Congress had provided a clear guiding principle for the FTC’s rulemaking authority under the FTC Act. Given these findings, the court did not need to evaluate the balance of equities or public interest considerations. This ruling is significant for several reasons. It contrasts with the earlier decision in Ryan LLC v. Federal Trade Commission, where Judge Brown granted a preliminary injunction, suggesting the plaintiffs would likely succeed on the merits. The Texas court has indicated it will decide on the enforceability of the FTC rule by August 30, 2024. While Judge Hodge’s decision represents a victory for the FTC, it may be temporary. The Texas court’s preliminary injunction in Ryan LLC hinted at potential future invalidation of the rule based on arguments that the FTC lacked statutory authority or that the rule was arbitrary and capricious under the Administrative Procedure Act (APA). If the Texas court rules against the FTC, it might vacate the rule entirely or issue a permanent injunction, though the specifics are yet to be determined. In the meantime, businesses should continue to assess and document their use of non-competes and explore alternative protections like non-disclosure agreements, invention protection, non-solicits, training repayment programs, garden leaves, and non-competes related to business sales. The FTC’s guidance suggests that if properly structured, these alternatives should comply with the new rule. Additionally, state legislation and actions by other federal agencies, like the National Labor Relations Board (NLRB), may further influence the legal landscape regarding non-competes.

August 7, 2024

Labor and Employment

California Labor & Employment Update: PAGA Reform

On July 1, 2024, Governor Newsom signed Senate Bill 92 and Assembly Bill 2288, amending The Private Attorneys General Act (PAGA). The amendments are effective June 19, 2024, but do not affect civil actions that were filed or cases where the required notice to the employer and the Labor Workforce Development Agency (“LWDA”) was submitted prior to June 19, 2024. The amendment was a compromise reached among Governor Newsom, business leaders and the unions to remove a measure to repeal PAGA from the November ballot.  PAGA has been tough on businesses in California.  While the amendments are helpful, businesses still need to be vigilant to avoid the penalties under PAGA. PAGA was enacted in California in 2004, allowing employees to file lawsuits against employers for violations of the labor code on behalf of themselves, other employees, and the state of California. The law essentially deputizes employees to act as private attorneys general and to pursue civil penalties for violations that would typically only be enforceable by state labor agencies. If an employee believes there has been a violation of the California Labor Code by their employer, the employee can then file a claim under PAGA. Claims can include a broad range of violations ranging from overtime to meal and rest breaks. Part of the penalties recovered are distributed to the state, with affected employees and their legal representation receiving the remainder. The following summarizes the most significant changes to PAGA: Individual Plaintiffs Must Have Suffered a Violation for Each Claim Made in their Complaint. There are several changes to PAGA, but the most significant for businesses is that a plaintiff be able to prove that they were subject to the specific PAGA violations upon which their complaint is based.  Previously, a plaintiff, with one violation, could allege that the employer violated every section of the Labor Code.  For example, if the plaintiff only suffered meal period violations, they cannot now bring an action for unpaid overtime.  While this should limit some PAGA litigation and penalties, it will probably result in multi-plaintiff lawsuits, with employee plaintiffs alleging that they suffered differing violations.     Ability to Cure Once a Labor and Workforce Development Agency Notice if Received. The amendments expand when employers can cure violations when they receive the LWDA notice to avoid PAGA litigation.  However, it is unclear in the new legislation exactly how much is needed to cure the violation and make the employee whole.  What this provision does do is make it more important for employees to immediately contact counsel once they receive an LWDA notice to be able to audit their practices and attempt to cure them where allowed. Early evaluation conference. The bill would also authorize an employer who employed at least 100 employees and who has been served with a summons and complaint asserting a claim under PAGA to file a request and participate in an early evaluation conference and to request a stay of court proceedings.  The employer has the ability to cure violations by using this procedure.  The requirements are very specific and must occur shortly after the service of any action on the employer.  As a result, employers should take care to avail themselves of this new procedure because if the employer cures the violations as set forth in the procedures for the Early Evaluation Conference, the penalties are capped at $15 per employee. Penalty Reductions. One of the most difficult elements of PAGA are the penalties.  The new legislation:  (a) revises the penalty structure and reduces it in certain situations; (b) encourages compliance with labor laws by capping penalties on employers who quickly take steps to fix policies and practices and make workers whole after receiving a PAGA notice, as well as on employers that act responsibly to take steps proactively to comply with the labor code before even receiving a PAGA notice; (c) creates new, higher penalties on employers who act maliciously, fraudulently or oppressively in violating labor laws; and (d) ensures that more of the penalty money goes to employees by increasing the amount allocated to employees from 25% to 35%. Some examples of reduced penalties are as follows: Penalty Cap Reductions for Employers Who Take “All Reasonable Steps” to Comply with the Labor Code.  Penalties are reduced by 15% or 30% if a person accused of a violation has taken all reasonable steps to comply with the provisions alleged to have been violated in the required notice provided by the aggrieved employee.  Reasonable steps may include, but are not limited to, any of the following: (1)          The employer conducted periodic payroll audits and took action in response to the results of the audit. (2)          The employer disseminated lawful written policies. (3)          The employer trained supervisors on applicable Labor Code and wage order compliance or took appropriate corrective action with regard to supervisors. The amendments to PAGA state that whether the employer’s conduct was reasonable shall be evaluated by the totality of the circumstances and take into consideration the size and resources available to the employer and the nature, severity and duration of the alleged violations. The amendments further provide that the existence of a violation, despite the steps taken, is insufficient to establish that an employer failed to take all reasonable steps. Employers with Weekly Pay Periods.  The amendments reduce penalties for employers with weekly pay periods by one-half, effectively calculating penalties as if the employer had bi-weekly pay periods.  PAGA has significantly impacted labor law enforcement in the state, and these new reform measures will hopefully streamline the law even further. Employers should work with legal counsel to fully understand the details of this reform and any action that should be taken at this time. Given the new penalty structure, employers need to act quickly once they receive notice of a potential PAGA action.  Quick action can help to reduce and/or eliminate some of the penalties.

July 17, 2024

Business

Supreme Court Overturns Chevron Deference in Landmark Loper Bright Decision

On June 28, 2024, the Supreme Court issued its decision in Loper Bright v. Raimondo and Relentless v. Department of Commerce. As expected, following oral argument, the Court overruled the Chevron deference doctrine in a 6–3 decision written by Chief Justice John Roberts. The doctrine stems from a 1984 Supreme Court case, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc, 467 U.S. 837 (1984), establishing a two-step analysis for judicial review of statutory interpretation. Under Chevron, if a court concluded that a statute was silent or ambiguous, it had to defer to an agency’s permissible construction of the statute. Now, under Loper Bright, courts must “exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” Supreme Court Review: Chevron Doctrine's Applicability to Cases Post-Loper Bright In Loper Bright, two sets of fishing companies challenged a rule issued by the National Marine Fisheries Service requiring vessels operating in the Atlantic herring market to pay for a government-certified observer during their fishing trips. Applying Chevron, the district court in each case rejected the companies’ challenge to the observer rule and granted summary judgment to the government. Panels of the U.S. Courts of Appeals for the D.C. Circuit and First Circuit affirmed these decisions. The U.S. Supreme Court granted certiorari in both cases on the limited question of whether Chevron should be overruled or clarified. Supreme Court's Interpretation of APA in Loper Bright The Loper Bright decision is premised on what the majority believes is a plain text reading of the Administrative Procedure Act (APA), which governs judicial challenges to agency actions. The Court specifically determined that the APA, which was not considered in Chevron, reflects the traditional understanding of the judiciary's role. This role requires courts to independently interpret the meaning of laws. The Court dismissed the notion of a “presumption” of agency expertise, explaining that resolving unclear laws falls within the court’s jurisdiction, not the agencies. Put another way, while courts may use an agency’s interpretation to help “inform their inquiry,” they cannot dictate how courts interpret the law. The Loper Bright Court also rejected the idea that Chevron promotes consistency, highlighting inconsistencies in its application. Furthermore, it concluded that adherence to Chevron is not mandated by stare decisis. Chevron had proven “unworkable” because determining whether a statute is ambiguous is an indeterminate exercise. Consequently, the Court vacated and remanded the lower court’s decisions. Supreme Court Opinion: Chief Justice Roberts and the Majority Chief Justice Roberts delivered the opinion of the Court, in which Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett joined. Justices Thomas and Gorsuch each filed concurring opinions. Justice Kagan filed a dissenting opinion, in which Justices Sotomayor and Jackson joined.

July 12, 2024

Labor and Employment

Texas Court Blocks FTC Non-Compete Rule: What It Means for Businesses

On July 3, 2024, a federal district court in Texas took a significant step, temporarily blocking the Federal Trade Commission's (FTC) proposed rule banning non-competes. U.S. District Judge Ada Brown for the Northern District of Texas granted the motion for preliminary injunction filed by plaintiffs Ryan LLC and plaintiff-intervenors U.S. Chamber of Commerce, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce, effectively putting the FTC’s rule on hold for the named plaintiffs. Although the stay is temporary pending the court’s final decision on the merits of the case and applies only to the movants, it signals that a permanent and nationwide injunction is likely. Background on the FTC's Non-Compete Rule As a quick refresher, in April 2024, the FTC narrowly passed a rule along party lines intended to ban future non-compete agreements and nullify most existing ones. The FTC asserted its authority to enact this rule under Section 6(g) of the FTC Act, claiming it grants the power to establish substantive rules against unfair competition. Set to take effect on September 4, 2024, the rule would prohibit all new employment-related non-competes and invalidate nearly all existing ones. Ryan LLC and others immediately challenged the rule in court on various grounds. Judge Ada Brown's Ruling on the FTC Rule Judge Ada Brown, a former President Trump appointee, ruled in favor of the plaintiffs, determining that they successfully demonstrated all the necessary criteria for a preliminary injunction: (i) a strong likelihood of winning the case; (ii) a significant risk of irreparable harm if the injunction wasn't granted; and (iii) a favorable balance of the potential harms and benefits to both parties. Judge Brown’s opinion focused on two key points: The Scope of the FTC’s Authority: The court’s determination that the FTC lacked statutory authority to enact the rule is significant, particularly considering its alignment with the "major questions" doctrine. Historically, the FTC has disclaimed such power, but Congress has not expressly granted it. The court's reasoning aligns with the recent trend of limiting agencies' authority, echoing concerns in the "major questions" doctrine. Whether the Rule is Arbitrary and Capricious: Judge Brown ruled that the rule was arbitrary and capricious under the Administrative Procedure Act (APA) due to its overbroad nature and lack of supporting evidence. The opinion noted that no state has enacted a ban as broad as the one proposed by the FTC, and the FTC failed to justify its sweeping approach or consider less disruptive alternatives. Additionally, the court agreed that the rule would cause irreparable harm to the plaintiffs' businesses and that the balance of equities favored maintaining the status quo. Current Status and Potential Developments of the FTC Rule While the injunction only applies to Ryan LLC and the U.S. Chamber of Commerce (and not its members), no entities will be subject to enforcement before the rule's intended effective date of September 4, 2024. Additionally, Judge Brown indicated that she intends to issue a final ruling by August 30, 2024, which could invalidate or permanently enjoin the rule. In the interim, the parties will further brief the merits issues and the narrow scope of the court’s order, including whether the injunction should be expanded nationwide. A separate challenge brought by ATS Tree Services LLC is pending in Pennsylvania, with a hearing scheduled for July 10, 2024, potentially resulting in a nationwide injunction 1. This underscores the potential nationwide impact of the ongoing legal proceedings. Impact on FTC's Rulemaking Authority This ruling is a significant setback to the FTC's agenda to expand its rulemaking authority and regulate labor markets. It reflects a broader trend of constraining administrative agencies following the Supreme Court's recent decision (issued June 28, 2024) in Loper Bright Enterprises. In Loper Bright, the court overruled Chevron’s deference. It concluded that courts must interpret statutes de novo, and agency interpretations are not entitled to deference. The court found that even where a statute is “ambiguous,” there is a single “best reading” of the statute that courts, not agencies, are responsible for determining. Previously, courts often deferred to agencies under the Chevron doctrine if their interpretation of an ambiguous law was reasonable. However, Loper mandates that courts independently assess whether an agency acted within its authority, regardless of statutory ambiguity. This means the Ryan court's final decision will heavily depend on its own interpretation of the FTC's statutory power. Given this new precedent, it is plausible to expect the FTC's rule may be overturned, at least in part. The business community, which has strongly opposed the rule, likely sees this as a positive sign. However, state-level efforts to limit non-competes continue, and the National Labor Relations Board (NLRB) has taken the view that the proffer, maintenance, and enforcement of non-competes generally violate the National Labor Relations Act 2. Proactive Review of Non-Competes: Alternative Strategies Businesses are advised to proactively review their use of non-competes across their organization and explore alternative strategies to safeguard their interests. These alternatives include: Non-Disclosure Agreements (NDAs) Intellectual Property Protection Non-solicitation agreements Training Reimbursement Programs Garden Leave Clauses Non-Competes Linked to Business Sales The FTC has indicated that, when properly structured, these alternatives should not violate its proposed rule. _____________________________________________ 1 ATS Tree Services, LLC v. FTC, No. 2:24-cv-1743 (E.D. Pa. 2024). 2 On June 13, 2024, an administrative law judge for the NLRB held that certain non-compete and non-solicit covenants violated an employee’s labor rights under the NLRA. See J.O. Mory, Inc., 25-CA-309577, 25-CA-336995, JD-36-24 (2024).

July 10, 2024

Labor and Employment

Employee Classification: Recent California Developments

The battle over employee classification in California has been a long one, and there is still uncertainty surrounding the future of independent contractor vs. employee classification in the state.  One sector this impacts greatly is the gig economy, with companies such as Uber, Lyft, DoorDash, and Instacart awaiting a major decision that could have serious implications. The Background of Employee Classification in California Employee classification in California long relied on the Borello test, which came from a 1989 Supreme Court case. This was a multifactor case that focused on how much control the employer had over the manner and means by which the employee performed their work. However, in 2018, the Dynamx decision changed all that when the California Supreme Court adopted the ABC test for determining whether an employee was an independent contractor or an employee under California law. Post Dynamex, a worker is categorized as an employee unless the company can prove that A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work; B) The worker performs work outside the usual course of the hiring entity’s business; and C) The worker is also engaged in an independently established trade or business that is of the same nature they are performing for the hiring entity. AB5 was then signed in 2019 in California, codifying the decision in Dynamex. This became law in 2020, expanding the application of the ABC test to most workers and making it even more difficult for companies to classify workers as independent contractors. The Impact on the Gig Economy Because of the nature of the gig economy, this has had a significant impact on employers within the industry. These companies relied heavily on the ability to classify their workers as independent contractors, avoiding the benefits and employment regulations that come along with employee classification (such as insurance, overtime, and minimum wage requirements). So, it is no surprise that lawsuits and ballot measures followed AB5. Many gig economy companies also sponsored Proposition 22, which was a ballot initiative that exempted app-based transportation and delivery companies from AB5. California voters approved the measure in 2020, allowing these companies to continue classifying their workers as independent contractors. Recent Developments The passage of Proposition 22 is not where this story ends. There have, of course, been legal challenges, with a judge ruling it unconstitutional in 2021. That decision has been appealed, and we are waiting for a decision from the California Supreme Court this summer. AB5 has also been challenged in the courts, with Uber and Postmates claiming the law violated their rights under the Equal Protection Clause of the state and US constitutions. However, the 9th Circuit disagreed, recently blocking their efforts to overturn the law. This latest failure for Uber in the courts means gig economy companies must rely on the California Supreme Court to uphold Proposition 22 in order to continue classifying employees as independent contractors. Broader Implications While it might seem that this only impacts companies in this space in the state of California, this does have some broader implications to consider. It highlights the real issues that exist surrounding innovation and employment law. The technology that allows these companies to operate outpaced developments in regulations and legislation governing companies and workers in this space. And while it attempts to “catch up,” the legal battles have left a great deal of uncertainty for both sides. We will be watching for the California Supreme Court’s decision on Proposition 22 that should come down in the next few months and will update on the future of employee classification in the state and what companies need to know at that time.

July 10, 2024

Labor and Employment

The Healthy Delaware Families Act: What Employers Should Know

In recent years, Delaware has taken significant steps to support its workforce through progressive employment legislation, including the Healthy Delaware Families Act. This act introduces paid leave benefits, aims to enhance work-life balance, and supports employees during critical life events. Here’s what employers need to know about this important initiative: Coverage and Eligibility Employees who have worked for their employer for at least 12 months and clocked in at least 1,250 hours during the last year are eligible for benefits under the Healthy Delaware Families Act, mirroring the federal Family and Medical Leave Act (FMLA). Coverage Requirements: Most businesses in Delaware are covered under the act and must provide eligible employees with paid leave. Exceptions: Certain businesses, such as seasonal ones and those with fewer than ten employees, are exempt. Employers with 10-24 employees are only required to participate in parental leave. Alternative Benefits: Businesses offering more generous paid leave benefits or those providing a state-approved alternative paid leave insurance plan meeting minimum standards may opt out of the program. Types and Duration of Leave Under the Healthy Delaware Families Act, eligible workers can take the following types of leave with pay: Parental Leave: Up to 12 weeks. Medical Leave: Up to six weeks, including care for a family member. Military Deployment: Up to six weeks. Intermittent Leave: Employees can use leave intermittently (not consecutively) if medically necessary, provided they take leave at least one day per week. Combined Parental Leave: If both parents work for the same employer, they can take up to 12 weeks combined. Benefits and Contributions Wage Replacement: Workers receive approximately 80% of their usual weekly wages while on leave, based on their average weekly wage over the last 12 months. Maximum Benefit: Currently set between $100 and $900 per week, adjusted annually for inflation. Contribution: Starting in 2025, participating businesses will contribute up to 0.8% of their payroll towards the program. Employees may also contribute up to 0.4% of their wages annually. Job Protection and Rights Job Security: Employees are entitled to retain their health insurance benefits and return to their previous position after taking leave. Protection from Retaliation: Employees who have been with their employer for at least 90 days are protected from retaliation for requesting or using leave. Administration and Compliance Administration: Delaware’s Department of Labor oversees the program, ensuring education, claims processing, financial stability, and compliance. Enforcement: The Department investigates violations and reports regularly to the Governor and Legislature on the program’s effectiveness. Conclusion The Healthy Delaware Families Act represents a significant step forward in supporting Delaware’s workforce with comprehensive paid leave benefits. For employers, understanding the act’s requirements and benefits is crucial for compliance and fostering a supportive workplace environment. By embracing these changes, businesses can enhance employee satisfaction, retention, and overall productivity. Please contact me for further information on the Healthy Delaware Families Act or similar legislation in Maryland. I am also available to present to large groups interested in understanding these important employment laws.

June 21, 2024

Labor and Employment

Navigating Overtime Regulations: Plaintiffs Challenge Department of Labor's New Overtime Rule

On May 21, 2024, a significant event unfolded in the legal landscape as several plaintiffs filed a lawsuit challenging the Department of Labor’s (DOL) new overtime rule.  This rule, which raises the salary threshold for professional and highly compensated employee exemptions, is scheduled to take effect on July 1, 2024. The rule, in essence, stipulates that a worker can only be exempt from overtime under the professional or highly compensated exemptions if they are paid at least $43,888 annually. For a highly compensated employee, the threshold is set at$132,964. These thresholds are set to increase over three years, beginning in January 2025. The lawsuit was filed in the Eastern District of Texas, the same court where plaintiffs successfully challenged the Obama-era overtime rule in 2016. That rule sought to raise the salary threshold for executive, administrative, and professional exemptions to $47,476. Plaintiffs argue that this rule’s “new salary threshold is so high that it is no longer a plausible proxy for delimiting which jobs fall within the statutory terms ‘executive,’ ‘administrative,’ or ‘professional.” It also maintains that the DOL’s planned three-year automatic increase to the salary is illegal. Moreover, the Trump-era overtime rule is currently under review by the Fifth Circuit Court of Appeals. If the Court of Appeals finds in the plaintiffs’ favor, the 2024 DOL rule would also be overturned. Businesses should still assume that the new rule will go into effect on July 1, 2024. There is no telling whether either court will decide these lawsuits before that date.  If you have any questions, please do not hesitate to contact me.

June 5, 2024

Labor and Employment

The Right to Disconnect for California Employees

California is often the first when it comes to new laws and regulations governing employers, and a new law introduced by San Francisco Assemblyman Matt Haney would be another first of its kind. If passed, this proposed legislation would make California the only state in the country to mandate that employers give their employees the ability to disconnect. Assemblyman Haney has introduced a bill giving employees the legal right to disconnect, ignoring non-emergency calls and emails after the workday has concluded.  The bill proposes a fine of at least $100 for violations. Assemblyman Haney is basing this law off similar legislation introduced in Australia that would give employees the right to disregard unreasonable calls and messages from their employer outside of normal work hours. The Australian legislation is designed to ensure employees are not working unpaid overtime. The proposed California  legislation, AB-2751, would require both public and private employers to establish workplace policies providing employees the right to disconnect from communications from the employer during nonworking hours, except as specified. The right to disconnect makes an exception for an emergency or for scheduling (scheduling is limited to changes to a schedule within 24 hours). Otherwise, an employee has the right to ignore communications from the employer during nonworking hours.  AB 2751 is silent on whether it applies to both exempt and non-exempt employees. The bill requires employers to establish clear nonworking hours via a written agreement between an employer and employee. Nonworking hours would include both before and after an employee’s assigned hours of work. Employees would be able to file a complaint with the Labor Commissioner if there is a clear pattern of violation, with employers subject to civil penalties. A pattern of violation is defined as three or more violations of the right to disconnect. Canada, France, Spain, and other countries in the EU already have similar laws on their books. But it is important to note that New York considered a very similar measure back in 2018, and that failed to pass. So, it will be interesting to see if California moves ahead with the first implementation of a right to disconnect in the US. We will be watching closely and updating as this develops, as this is something California employers will need to monitor.

May 9, 2024

Labor and Employment

FTC's Final Rule: Understanding the Ban on Non-Compete Clauses

On April 23, 2024, the United States Federal Trade Commission (FTC) announced its final rule on non-competition clauses, voting 3-2 to adopt the final regulations, known as the “Non-Compete Clause Rule.” This rule marks a significant milestone, establishing a comprehensive ban on non-compete agreements. The decision comes fifteen months after the FTC released its proposed rule in January 2023. The final rule will not take effect until 120 days after publication in the Federal Register, and lawsuits have already been brought challenging the authority of the FTC to issue such a broad rule. Nonetheless, it is crucial for employers to understand the broad requirements, the exceptions, and how to protect legitimate business interests in the wake of the FTC’s rule.   The rule applies to all businesses and individuals within the FTC’s jurisdiction, which covers all types of companies in nearly all industries. However, certain entities fall outside the FTC’s jurisdiction and, therefore, are exempt from the ban. These include banks, savings and loan institutions, federal credit unions, common carriers, air carriers, and certain non-profits. The rule restricts businesses and individuals from including non-competition language in future employment agreements, policies, handbooks, or websites for their workers. Additionally, it extends to non-solicitation and confidentiality agreements that function as de facto non-competition agreements. Importantly, this prohibition applies to all workers (not just “employees”), including independent contractors, interns, externs, volunteers, apprentices, and others. According to the rule’s preamble, “it is an unfair method of competition—and therefore a violation of section 5—for employers to, inter alia, enter into non-compete clauses with workers on or after the final rule’s effective date.” Once the rule takes effect, agreements and policies containing non-compete language will become unenforceable, with the only exception being for “Senior Executives.” The rule defines “Senior Executives” as a worker earning more than $151,164 annually and holding a “policy-making position.” Compensation can include salary, commissions, performance bonuses, and any other agreed-upon forms of compensation, excluding benefits or board and lodging. If the individual only worked part of the year, their earned compensation can be annualized to determine whether they meet the threshold. Policy-making positions include the president, CEO, or individuals with authority to make company-wide policy decisions. While “Senior Executives” will not have their non-competes retroactively voided like other workers, the rule prohibits covered businesses and individuals from entering into such agreements with future workers, even if they qualify as “Senior Executives.” Once in effect, the rule will also require businesses and individuals to notify workers of the ban and rescind existing non-competes (except those with senior executives). Model language for an appropriate notice can be accessed at Noncompete Rule | Federal Trade Commission (ftc.gov). Consequently, the bulk of existing restrictions will become unenforceable upon the rule’s enactment. The FTC anticipates the rule will increase employee earnings by at least $400 billion over the next decade. While the rule fundamentally prohibits all non-compete agreements between businesses and their workers, exceptions exist for non-competes between businesses and between the seller and buyer of a company. Specifically, the FTC’s rule prohibits anything that restricts, penalizes, or prevents a worker from pursuing a different job or starting a business after leaving their current job. That includes: Prohibitive terms and conditions expressly saying that a worker cannot get another job, such as with a competitor or embark on a business venture; Terms and conditions mandating financial penalties for workers who get another job or start a business; or Terms and conditions that aren’t labeled as non-competes but are so restrictive that they effectively prevent a worker from getting a new job or starting a business. This may include overly broad confidentiality clauses, which could potentially violate the National Labor Relations Act, Employers are advised to seek guidance from experienced employment counsel to ensure compliance. As noted at the outset, given the extremely broad nature of the rule, legal challenges are anticipated, potentially leading to further delays or permanently preventing the rule’s enactment. We will continue monitoring developments and providing updates accordingly. In the meantime, employers are encouraged to take advantage of this period by: Evaluating and analyzing existing agreements to ensure certain protections are in place in anticipation of the rule’s implementation; and Consulting with trusted legal counsel to devise a communication strategy regarding the notice requirement for impacted workers, ensuring effectiveness and compliance with legal standards. If you have any questions or need assistance with navigating these changes, please reach out to Gabriel Celii and Sarah Goodman

April 25, 2024

Ask Sarah: Navigating Sexual Harassment Complaints- Best Practices for Employers

Dear Sarah, I’ve recently been informed about a troubling situation involving ongoing sexual harassment within our organization. It appears that this behavior has occurred for several months, yet this is the first time it has been brought to my attention. The incidents range from inappropriate actions in the office to unwelcome advances at company-sponsored events and unsolicited messages outside of working hours. This is a serious issue that requires immediate attention. What should my organization do in response to this complaint? Can we really be liable for behaviors outside the workplace, such as at a bar? — HR Rep Unsure of How to Handle Sexual Harassment Investigations in the Wake of the #MeToo movement Good to hear from you, though I’m sorry it is under these circumstances. Conducting a thorough workplace investigation is paramount here. These are serious allegations; employees expect accountability, and the employer is responsible for ensuring a fair and transparent process. Regarding your question about liability for incidents outside of the workplace, such as those occurring at a bar, it's essential to understand that sexual harassment is by no means confined to the workplace. Put another way, it is not required for the harasser to be in the process of rendering his or her job duties at the time the harassment takes place; as long as an employment relationship exists at the time of the conduct, the employer may be liable. While the situation may seem complex, addressing all instances of harassment, regardless of where they occur, is imperative to avoid legal consequences. Failure to do so could leave the organization vulnerable to legal consequences. Below, I've outlined key steps for conducting a comprehensive investigation. Conduct Timely Investigations: Addressing workplace issues and complaints promptly is essential. Offering multiple reporting avenues to ensure the complainant feels comfortable coming forward and encouraging open communication can help mitigate reporting delays. Create an Investigation Plan: Developing a clear plan that outlines the complaint’s nature, investigation scope, and the involved participants is crucial. Consider whether the investigation will be privileged and designate the investigator. This ensures focus and efficiency, allowing flexibility if needed while maintaining the structure for a complete investigation. Determine the Investigation Scope: Clearly defining the goals of the investigation, such as ensuring fairness and reaching a resolution, is essential. Specify the scope by detailing the specific questions the investigation aims to address, maintaining focus and clarity. Avoid legal inquiries (i.e., was the complainant subject to a hostile work environment) and instead focus on factual aspects, such as determining if the complainant received unwelcome advances from a supervisor at the company holiday party. Gather and Preserve Relevant Documents: Collecting and maintaining relevant documentation throughout the investigation process is vital. This includes policies, witness statements, and any other pertinent information. Before interviewing any witnesses, the investigator should begin to gather, assemble, and review relevant documents that will eventually form the investigation file. Continuously update the investigation file as new documents become available. During witness interviews, take detailed notes, documenting observations and conversations with clear and descriptive language. Details such as body language and specific incidents should be included to provide a comprehensive overview. Finalize the Investigation File: Whether conveying the investigation findings through a written report or informal communication, it is crucial to ensure that all parties involved receive the information. There are some instances where a written report may not be wise; you should consult with counsel before determining how to conclude the investigation. Additionally, preserving the investigation file separately from personnel records ensures accessibility and confidentiality. It is also essential to securely store relevant communications, notes, and documents in a central repository. By following these steps and maintaining transparency throughout the process, the employer can uphold the integrity of its organization and provide a sense of fairness to all involved parties. If you have any further questions or concerns about conducting internal investigations, please don't hesitate to reach out. Blog Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered legal advice. Consult a qualified attorney for advice on specific legal issues. 

April 24, 2024

Labor and Employment

In the Know Series - Labor & Employment Law Changes – Federal

Stay Ahead of the Curve with Key Insights from Our L&E Team Now that the first quarter is behind us, employers across the nation must navigate changes in federal labor and employment regulations. Our team has compiled a comprehensive overview of the latest updates at the federal level, providing insights to help you stay compliant and proactive in managing your workforce. While not updates to the law, notable issues are below: With increased scrutiny on the ERC, the Service is starting to send out letters denying the credit. We anticipate it will send letters to employers who deserve the credit. Misdirected payroll tax deposits by payroll companies have increased, particularly where the payroll company handles payroll for related companies. Because they involve payroll taxes, the Service is particularly aggressive in its collection efforts. The quicker the client lets us know, the easier (and quicker) it is to resolve.  ACA Issues: companies are receiving deficiency notices for failure to provide MEC. Most notices now are for the 2020 tax year. It is important for employers to understand that Treas. Reg. § 54-4980H-5((e)(2)(ii) does not define whether an offer of coverage is affordable. It simply provides a safe harbor. IRC § 36B(c)(2)(C)(i) determines whether an employer’s offer of coverage is affordable, which means even if coverage does not meet the safe harbor, it still may be affordable, so the employer avoids a penalty. We have obtained penalty abatements for several clients on this issue. Employer-Sponsored Healthcare Plans - The Next ERISA Fiduciary Duty Battlefield: With the issuance of much awaited final regulations, DOL has made clear that ERISA fiduciary duties apply with equal force to health and welfare benefit plans. Plaintiffs’ lawyers are actively looking for plaintiffs who are participants in employer-sponsored plans, particularly following the recent court decision regarding Johnson & Johnson’s healthcare plan.  As in many areas, the best offense is a strong defense, which begins with companies implementing a health and welfare benefits committee to take a much more active role in the selection and negotiation of health plan benefits and documenting this process   We have guided many clients on how to organize and structure health and welfare benefit committees.

April 15, 2024

Labor and Employment

Ask Sarah: Handling Extended Employee Absences Effectively

Dear Sarah: Help! I have an employee who has been out of work for twenty weeks. He has an “expected” return to work date, but we have not received anything definitive. Because of his absence, business is suffering, and I need to find someone to take over his job duties. What am I legally permitted to do here!? — Frustrated & Confused HR Rep Believe it or not, encountering this issue is not uncommon. When an employee requests additional time off beyond their twelve-week Family Medical Leave Act (FMLA) entitlement (assuming FMLA applies to that employer), it often leaves employers feeling perplexed. Accommodating a disabled employee under the Americans with Disabilities Act (ADA) can pose significant challenges for employers. If the employee's limitations prevent them from fulfilling essential job duties, granting an unpaid leave of absence may be deemed a reasonable accommodation. However, relying solely on unpaid leave creates staffing challenges for employers. Nonetheless, if other alternative accommodations are not feasible, unpaid leave should be considered an option. Reasonable accommodations for a qualified individual with a disability — defined as someone who, with or without reasonable accommodation, can perform the essential functions of their job — may involve various measures, including:   Eliminating non-essential job duties Modifying job processes Providing supportive aids to assist the employee Adjusting schedules to accommodate needs Offering light duty positions if available Facilitating transfers to open positions Granting an unpaid leave of absence, among other options While an employer is not obligated to provide the exact accommodation requested by an employee, it is required to provide a reasonable accommodation that enables the employee to effectively perform essential job functions. If implementing the only feasible reasonable accommodation would result in substantial difficulty or expense for the employer or fundamentally alter the nature of the job, it may be deemed an undue hardship, exempting the employer from providing it. The threshold for defining undue hardship may vary based on the employer's size and resources, but meeting this standard can be particularly challenging in certain circumstances. The Equal Employment Opportunity Commission's (EEOC) ADA guidance suggests that considering unpaid leave as a reasonable accommodation is wise for employers. While EEOC guidance lacks the weight of law, courts often find it persuasive due to the agency's role in ADA enforcement. The duration of leave an employer must grant is not explicitly defined and should be assessed on a case-by-case basis. The EEOC and numerous federal courts assert that an indefinite leave of absence without a reasonable estimate of the return-to-work timeframe may constitute an undue hardship and is not mandatory. However, situations where an employee's medical provider recommends an extended absence before the employee returns to the job pose challenging and context-specific questions influenced by factors such as the nature of the employer's business, the employee's role, and the anticipated duration of absence. While definitive answers may not exist for every scenario, if the requested leave has a defined duration and supporting medical documentation suggests it will enable the employee to return to work, employers retain the right to deny it if granting the leave would unduly burden the business. Furthermore, even if a specific leave initially seems manageable, circumstances may change over time, emphasizing the importance of requiring thorough documentation throughout the leave period. For example, requesting a note from the treating physician specifying an estimated return-to-work date and asking the medical provider to opine on the medical rationale for the leave may help make the leave process more transparent and facilitate the employee's return. Additionally, gathering this information could help employers apply the undue hardship analysis in a manner that is advantageous to its operations. Handling successive leave requests cautiously and seeking consultation before making decisions are crucial practices to uphold. In conclusion, navigating extended employee leaves beyond the FMLA entitlement can be daunting for employers, especially when accommodating disabled employees under the ADA. While unpaid leave may be a reasonable accommodation, it can pose operational challenges. Employers must explore alternative accommodations while considering undue hardship factors, such as significant difficulty or expense. The EEOC's guidance on unpaid leave underscores its importance as a potential accommodation, albeit without a specified duration. However, indefinite leaves without a return-to-work timeframe may constitute undue hardship. Employers should carefully assess each situation, document medical rationales, and seek legal advice to make informed decisions. If you're facing similar HR dilemmas or need legal guidance on employment matters, don't hesitate to contact me for assistance. Reach out today to ensure compliance with ADA regulations and protect your business's interests. Blog Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered legal advice. Consult a qualified attorney for advice on specific legal issues. 

April 10, 2024

Labor and Employment

In the Know Series - Labor & Employment Law Changes in California

Stay Ahead of the Curve with Key Insights from Our L&E Team Now that the first quarter is behind us, all California employers should ensure that they are aware of and are in compliance with the new 2024 California employment laws. Our team has compiled a concise overview of these changes to keep you informed and prepared for compliance. The west coast was fairly active this year and the following are the major changes in the law: Effective January 1, 2024: State-mandated sick leave increases to 5 days. If the client has PTO, the analysis may be a math problem. Also, remember that several California cities have their own sick leave laws that require more than 5 days of sick leave. All employers, regardless of size, must allow up to 5 days of reproductive loss leave (for failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction). This is in addition to family medical leave. The state has codified the fact that non-competes are void, with the exception of the sale of goodwill when a business is sold as set forth in Business and Professions Code § 16601. One new statute states they are void regardless of where signed (even outside the state). Another statute requires employers with employees who have signed non-competes to notify them by February 14, 2024, that the non-compete provision is void. Marijuana use becomes a protected basis under the Fair Employment and Housing Act. Employees cannot use or be under the influence at work, but an applicant cannot be denied employment if they test positive for marijuana. The regulations regarding criminal background checks were revised requiring the employer to conduct a detailed individualized assessment before denying an applicant employment. The minimum wage is increasing to $16.00/hour on January 1, 2024, which means exempt employees need to earn a minimum of $66,560 annually and $5,546.67 monthly in order to be exempt. Effective April 1, 2024 The minimum wage for fast food workers rises to $20/hour. Effective July 1, 2024: All employers will be required to have a workplace violence plan. Similar to an Injury & Illness Prevention program if you are familiar with those plans – in other words, it needs to be in writing, employees need to be trained and it will take some effort to be in compliance.

April 5, 2024