Aaron Goldstein

Many Canadian employers expanding into the U.S. believe the U.S. legal presumption of at-will employment will provide them with additional protection against wrongful termination claims. Unfortunately for those employers, this belief is a trap. In Canada, employees who are terminated without cause often must be paid severance. In the U.S. however, an employer is generally not obligated to pay severance when an employee is fired without cause unless there is a contract requiring severance. The reality in the U.S. is that essentially every employee falls into an exception to the at-will employment doctrine. Wrongful termination claims in the U.S. are almost always discrimination or retaliation claims. In the former claim, the employee alleges that they were terminated due to some protected characteristic such as age, gender, or race. In the later claim, the employee alleges that they were terminated because they engaged in some protected activity, such as taking protected leave or complaining about workplace harassment. Once an employee alleges discrimination or retaliation, the presumption of at-will employment falls away and the employer must demonstrate a legitimate non-discriminatory and non-retaliatory reason for the termination, which the employee cannot show was a mere pretext. Because just about every employee is in some protected class or has recently engaged in some protected activity, U.S. employers must have a legitimate reason for the termination supported by strong documentary evidence. Otherwise, the employee gets to tell their story to a jury predisposed to rule against any employer who cannot provide a satisfying reason why they terminated that employee. And U.S. juries over the last several years have rendered several devastating verdicts, including a $366 million verdict handed down by a Texas jury in a case alleging race discrimination. As this case demonstrated, these verdicts are not limited to states with a reputation for being employee friendly such as California. Employers’ best defense against such verdicts is a strong performance management system that documents the legitimate non-discriminatory and non-retaliatory reasons for a termination. This requires documenting performance issues over time, not coming up with and documenting reasons after the fact. Even better, if an employer can show, with documentation, that they tried to help the employee be successful, but the employee lacked either the ability or the inclination to do so, it can help stop an employment claim before it can move much past the demand letter stage. Canadian companies taking on employees in the U.S. should make sure they have a firm grasp of the kinds of performance management practices that will keep them out of trouble. Relying on at-will employment alone is a recipe for disaster.

As a U.S. employment lawyer who advises numerous Canadian companies, I’ve seen several traps that Canadian companies frequently fall into. The first step in avoiding these traps is to identify them. At-Will Employment is Trap. One of the biggest differences between Canadian and U.S. Employment law is so called “at-will” employment. Theoretically, employers in the U.S. can fire employees without cause and not have to pay severance. But as I like to tell my clients, this means that you can fire employees in the U.S. for any reason you want … except for the 1.7 million reasons you can’t. If an employee is in a protected class (e.g. on the basis of age, race, national origin, sex, etc.) or if an employee recently engaged in protected activity (e.g. whistleblowing, protected leave, etc.), then the employer must have a legitimate nondiscriminatory and nonretaliatory reason for the termination. Practically every employee falls into at least one protected class or has engaged in some kind of recent protected activity. With the level of skepticism that U.S. juries now view employers, U.S. employers need strong evidence of a legitimate basis for any termination. This means that employers who terminate employees in the U.S. without a good and well-documented reasons are likely to face liability. Probationary Employment is a Trap. While it might make sense for a Canadian employer to include a probationary period in its employment agreement to avoid paying severance after an early termination, this practice can backfire in the U.S. U.S. courts have interpreted such probationary periods as an agreement by the employer to terminate the employee only for cause after the probationary period. In other words, the employer loses whatever protection at-will employment offers in the U.S. And while at-will employment can be a trap, at-will employment does mean that employers don’t have to pay any kind of statutory severance for a layoff or reduction in force. Just remember to have a good and well‑documented reason for the termination as discussed above. The Cost of Litigation and Settlement is a Trap. When Canadian employers see the kinds of settlements that plaintiffs in the U.S. are demanding and the kinds of awards that juries in the U.S. are making, it can make their eyes water. Plaintiffs in the U.S. regularly demand six figure settlements for emotional distress in wrongful termination cases that do not allege any outrageous behavior other than the wrongful termination itself. And at mediation, these same plaintiffs are demanding six figure attorney’s fees settlements, not because their attorneys have spent that much in fees (they are almost always paid on contingency anyway), but because they can make you spend several hundred thousand dollars in legal fees if you don’t settle. In February 2023, a Texas jury awarded a single plaintiff in a discrimination suit $366 million in damages. That number was later reduced on appeal, but if a jury in conservative Texas is willing to award that kind of money to a single plaintiff, the sky is no longer the limit. Canadian employers have to price this reality into the cost of having less than stellar performance management and documentation practices in the U.S. Canadian employers who think they can just settle with U.S. based employees whom they want to fire without solid documentation justifying the termination are going to have some serious sticker shock. The Sheer Number of Rules and Penalties is a Trap. As an attorney who represents employers, my biggest frustration with U.S. employment law is not that it is pro-employee. I understand the need to balance the scales, especially in regard to lower wage workers.  My biggest frustration is that the sheer number, complexity, and opacity of U.S. employment laws and regulations means that good employers who are really trying to comply with the law still being subject to massive liability. Whether it’s a multi-million-dollar class action brought under arcane pay transparency laws in Washington, or a $4,000 per employee pay stub and wage statement violation in California for even tiny errors, U.S. law is an absolute minefield. Canadian companies looking to expand into the U.S. cannot afford to wing it when it comes to employment law compliance. While good U.S. employment law advice can by expensive, it is always many orders of magnitude cheaper than the liability companies will face if they go it alone.

Early last year, the U.S. Federal Trade Commission (“FTC”) proposed a rule banning non-compete agreements nationwide. Yesterday, the FTC voted 3 to 2 in favor of adopting this rule. The FTC’s newly adopted rule bars for-profit employers from entering into new non-compete agreements with employees, including highly compensated and executive employees. Existing non-compete agreements with senior executives are still enforceable under the new rule, but employers must, by the rule’s effective date, notify all other employees with non-compete agreements that those agreements are unenforceable. The rule defines a “senior executive” as a worker who was in a policy-making position and earns at least $151,164 per year. The rule does not apply to agreements between franchisees and franchisors, nor does it apply to non-profit entities. The rule also includes an exception for non-compete agreements entered into in the context of the sale of a business. The FTC’s rule requires employers to provide workers who are subject to covered non-compete clauses “with clear and conspicuous notice … that the worker’s non-compete clause will not be, and cannot legally be, enforced against the worker.” The FTC’s rule also includes a form of notice that satisfies this requirement. FTC’s final rule defines “non-compete clause” broadly to include “a term or condition of employment that … functions to prevent a worker” from seeking or accepting work from a different entity after the conclusion of employment. Thus, a provision that would function to keep an employee from finding a new job, such as a very broad non-solicitation clause, might run afoul of the new FTC rule. For example, a non-solicitation clause that prohibits a former employee from contacting any customer or potential customer may encompass practically every consumer in the industry and thus effectively bar the employee from obtaining a new job in the industry. The FTC’s final rule does not specifically address terms such as stay bonuses or retention agreements. However, in its comments to its final rule, the FTC did state that agreements for deferred compensation and other structured payments may be permissible as long as they do not fall within the definition of a non-compete clause—that is, so long as they do not function to prevent employees from seeking or accepting a new job. A substantial signing bonus that an employee would have to pay back if they were to accept work with a competitor might function like a non-compete clause if it were so large that it would effectively be impossible for the employee to repay. While the FTC’s rule might sound like the death knell for most non-compete agreements in the U.S., there is a long road ahead for the FTC’s rule. While the FTC’s rule is set to become effective 120 days after it is published in the U.S. Federal Register, at least two lawsuits have already been filed to block the rule, including one filed by the U.S. Chamber of Commerce. The U.S. Chamber of Commerce’s suit seeks to block the implementation of the rule while an ultimate decision on the rule’s merits is pending. Among other arguments, the U.S. Chamber of Commerce’s asserts that the FTC rule violates the “major questions doctrine” under which the U.S. Supreme Court has asserted that an administrative agency, such as the FTC, must have “clear congressional authorization” before adopting a rule that implicates a matter of major political or economic significance. During the COVID-19 pandemic, the U.S. Supreme Court relied upon the major questions doctrine to strike down the U.S. Occupational Safety and Health Administration’s emergency temporary standard requiring large employers to vaccinate their employees or require them to wear masks and test for COVID-19. Even if the FTC’s ban is ultimately struck down, many U.S. states have been separately restricting or outlawing non-compete agreements altogether. California has long outlawed non-compete agreements and has more recently passed laws declaring non-compete agreements void in California, even if they were entered into outside of California and the employee performed services for the enforcing employer entirely outside California. In addition to California, Minnesota, North Dakota, and Oklahoma have banned non-compete agreements entirely. New York’s legislature recently passed a bill that would outlaw non-compete agreements, which New York’s governor vetoed but with a suggestion that she would sign a bill focused on low wage workers. Colorado has passed a law limiting non-compete agreements to employees deemed “highly compensated” and now requires that employers provide notice to candidates for employment before they accept a job offer and to current employees at least 14 days before the effective date of any additional consideration for the non-compete provision. The District of Columbia recently passed law creating a similar pay threshold that non-compete must meet and Washington State has had such income requirements in place for over three years. Several states have also included wage thresholds below which non-compete agreements are not enforceable. These states include Colorado, Illinois, Maine, Maryland, Massachusetts, Nevada, New Hampshire, Oregon, Rhode Island, Virginia, Washington, and Washington D.C. Such thresholds are often tied to a cost of living index such that the threshold will increase each year. Many of the states that have restricted the use of non-compete agreements, but still allow them under certain circumstances, have created penalties for employers who unsuccessfully attempt to enforce non-compete agreements. Washington, for example, has passed a law requiring the employer to pay the employee’s attorney fees if the non-compete agreement is deemed partially or entirely invalid by the court. Other states have even passed laws creating criminal sanctions for employers who try to enforce unenforceable non-compete agreements. Even in states that have not passed laws restricting non-compete agreements, courts have grown increasingly skeptical of employers’ need for such protections. The general rule in states without non-compete legislation is that non-compete agreements are only enforceable if the employer can show a compelling need for them. Such need usually involves a need to protect sensitive confidential information and trade secrets, or a need to protect customer goodwill in situations where employees develop close relationships with customers. U.S. courts are, on average, becoming more skeptical of employers arguments that they need such protections except in cases where employees have access to truly sensitive information, or could do real damage by going to a competitor and taking substantial business with them. While the fate of the FTC’s rule remains uncertain, employers should be prepared to come into compliance by the rule’s effective date (120 days after the rule is published in the federal register, barring any judicial injunction). For example, companies should be prepared to issue the required notices to workers that their non-compete agreements will not be enforced and are unenforceable by the rule’s effective date. Companies should also consider that their workers may not understand the status of their non-compete agreements or the unfolding process by which the enforceability of those agreements is being determined. Workers may believe that their non-compete agreements are already unenforceable, and begin to act accordingly. Companies with existing non-compete agreements should have plans in place for handling such situations, including how they communicate their intent to enforce or not enforce their existing non-compete agreements while the fate of the FTC rule is up in the air. There are no one size fits all solutions to such tough questions, and companies should consult with counsel experienced with navigating non-compete agreements to come up with a plan that fits the company’s particular needs and goals.

In wrongful termination cases in the U.S., the primary source of liability for employers is an employee’s alleged lost wages. Under U.S. law, an employee who is terminated for a discriminatory or a retaliatory reason is entitled to recover the amount of wages the employee would have earned had the employee not been wrongfully terminated. In a normal labor market, an employee might be able to argue that it will take him or her six months or even a year to find a new job, and the employer, therefore, should pay the employee six months' to a year's worth of lost wages. In a tight labor market, however, it is much harder for employees to argue that they are entitled to lost wages when they can easily go across the street and get a new job—perhaps even a higher paying job. Plaintiffs in wrongful termination cases have a duty to mitigate their damages by trying to find a new job that pays as well as the one they lost. As a result, we have seen a significant decrease in the number of wrongful termination cases being brought during the recent tight labor market. Instead, many of the new cases being filed against employers are wage and hour class actions, such as cases involving failure to pay minimum wage or overtime, where the plaintiff does not have a duty to mitigate their lost wages. Given the increased difficulty plaintiffs are facing in bringing wrongful termination cases, employers may be tempted to let their guard down on their performance management practices or employment documentation. While employers might get away with doing so in the very near term, the events of last several years suggest that employers that do so may find themselves facing a wave of wrongful termination litigation. Most employers’ performance management systems were highly disrupted during COVID when employers were forced on a moment’s notice to start managing their employees remotely. The regular channels and methods for providing formal documented performance feedback stopped. Further into the pandemic, the U.S. government began issuing so called Paycheck Protection Program loans, which were forgivable if the employer maintained its headcount. Essentially, the U.S. government began paying companies to not fire anyone. This created a huge incentive for employers to not fire poorly performing employees. As the economy began to open up, employers began to find it very difficult to find employees to fill open positions. This extremely tight labor market made employers desperate for headcount and very fearful of losing employees. Many employers adopted the calculus that it was better to have a poorly performing employee rather than none at all. As a result, many poorly performing employees were given passing grades on evaluations. These events have led to evaluation grade inflation and a population of employees whose performance may be far lower than their evaluations would suggest. Such employees are apt to see a lawyer when they are terminated for performance reasons, despite having had at least decent reviews. This flood of wrongful termination litigation has been held at bay by a continued strong labor market. But as soon as that labor market softens and employees cannot simply go across the street to find a new job, those employees will be able and motivated to sue for substantial lost wages. Now is the time for employers to re-evaluate their performance management and documentation practices to make sure that they can justify any performance based terminations they may need to make. Reigning in evaluation grade inflation and reinstituting performance management best practices is difficult and requires careful planning. Employers with U.S. based employees should reach out to their employment counsel now, before a flood of wrongful termination cases begins.

Companies utilizing noncompete agreements in the U.S. in the employment context should reevaluate their practices in light of recent changes to law and a rapidly changing legal landscape that is growing increasingly hostile to noncompete agreements. Early this year, the Federal Trade Commission (“FTC”) proposed a rule that would ban noncompete clauses nation-wide in the U.S. However, there is a long road ahead for the FTC’s proposed noncompete ban, and the proposed ban may very well be struck down by U.S. courts even if it is ultimately adopted. The FTC will not vote on the proposed ban until next April, and while 18 states’ attorneys general submitted a joint public comment letter in favor of the ban, numerous small business groups and the U.S. Chamber of Commerce submitted letters in opposition. Even if adopted, the rule would not go into effect until 180 days after its publication and it is likely that there would then be numerous challenges to the rule, which may ultimately need to be decided by the U.S. Supreme Court. While the future of the FTC’s noncompete ban is uncertain, states are, in the meantime, making noncompete agreements harder and harder to enforce across the country, and in many cases, banning noncompete agreements altogether. California, for example, has long outlawed noncompete agreements and has more recently passed laws declaring noncompetes void in California, even if they were entered into outside of California and the employee performed services for the enforcing employer entirely outside California. In addition to California, Minnesota, North Dakota, and Oklahoma have banned noncompete agreements entirely. New York’s legislature recently passed a bill that would outlaw noncompetes, which is now awaiting New York’s governor’s decision on whether to sign it. Colorado recently passed a law limiting noncompete agreements to employees deemed “highly compensated” and now requires that employers provide notice to candidates for employment before they accept a job offer and to current employees at least 14 days before the effective date of any additional consideration for the noncompete provision. The District of Columbia recently passed law creating a similar pay threshold that noncompetes must meet and Washington State has had such income requirements in place for over three years. Even in states that have not passed laws restricting noncompete agreements, courts have grown increasingly skeptical of employers’ need for such protections. The general rule in states without noncompete legislation is that noncompete agreements are only enforceable if the employer can show a compelling need for them. Such need usually involves a need to protect sensitive confidential information and trade secrets, or a need to protect customer goodwill in situations where employees develop close relationships with customers. U.S. courts are, on average, becoming more skeptical of employers' arguments that they need such protections except in cases where employees have access to truly sensitive information, or could do real damage by going to a competitor and taking substantial business with them. Many of the states that have restricted the use of noncompete agreements, but still allow them under certain circumstances, have created penalties for employers who unsuccessfully attempt to enforce noncompete agreements. Washington, for example, has passed law requiring the employer to pay the employee’s attorney fees if the noncompete agreement is deemed partially or entirely invalid by the court. Other states have even passed laws creating criminal sanctions for employers who try to enforce unenforceable noncompete agreements. Companies with employees in the U.S. must be sure to stay up to date on the rapidly changing legal landscape governing noncompete agreements. Not only is noncompete litigation extremely expensive, but there is a growing additional risk to employers in the use of noncompete agreements in circumstances where no compelling need can be established. Accordingly, employers should reevaluate their employment practices and considering limiting such agreements to employees that have access to truly sensitive confidential and trade secret information, and/or employees with responsibility for key client relationships that could easily be transferred to a competitor.

The U.S. Equal Employment Opportunity Commission (“EEOC”) has released guidance confirming that employers face potential liability if they use AI tools to screen applicants in a way that disproportionately impacts employees on the basis of a protected class such as race, color, religion, sex, or national origin. While ChatGPT and its competitors are new, the legal framework used to assess other applicant screening tools has been around for quite some time.  Employers and the legal system have struggled for years over whether and to what extent employers should be allowed to take a person’s credit scores or even their criminal record into account when making hiring decisions. Indeed, the system by which a person’s credit score is calculated is via an algorithm which is applied to large body of data to make predictions about a person’s future behavior. There is a well-developed body of case law addressing situations where facially neutral hiring criteria end up having a disparate negative impact upon particular group of historically marginalized people. This so called “disparate impact” analysis requires that employers show that their facially neutral hiring criteria are job related and consistent with business necessity if those hiring criteria disproportionally disadvantage individuals of a particular race, sex, national origin, or other legally protected class. As the EEOC has confirmed, this disparate impact analysis definitively applies to employers’ use of AI in the hiring process. Employers may not use AI to select applicants in way that adversely impacts individuals on the basis of race, sex, national origin, or other legally protected classes unless the selection criteria are “job related for the position in question and consistent with business necessity.” For example, screening on the basis of physical strength would not be allowed for an office job where physical strength is not necessary because such a requirement would disproportionately exclude female applicants and not be job related. Similarly, Employers cannot use AI in a way that adversely impacts a protected class, without also showing that they are selecting for job related criteria. The conventional wisdom is that it would be hard to sue an employer for using AI, which was not explicitly programmed to exclude members of a protected class, when making hiring decisions. While a plaintiff might be able to show that an algorithm is disproportionately disadvantaging people of a certain race, gender, or other protected class, the employer has a legal defense if the employer can show that the selection criteria are job related and consistent with business necessity. In other words, even if the algorithm is disproportionately screening out people in a certain protected class, if the algorithm is selecting for goals such as decreased turnover or high sales potential, the law favors the employer. Since any selection algorithm anyone would use would almost always be programmed to select for traits or capabilities that are job related and consistent with business necessity, such as skill at sales, low likelihood of turnover, etc., the employer will prevail. There is a further step in the legal analysis, however, that is going to increasingly come into play as the potential for bias with such algorithms becomes better understood. Even if a defendant can show that their selection criteria are job related and consistent with business necessity, a plaintiff can still prevail by showing that the employer could have used different selection criteria that creates less of a disadvantage for minority applicants, but still achieves the employer’s job-related selection goals.  Indeed, the EEOC addresses this very point in its most recent guidance, explaining that failure to adopt a less discriminatory algorithm may give rise to liability. As tools that have been vetted for bias on the basis of race, gender, and national origin become available, and as those tools are proven to be at least as effective as other tools that have not been vetted for bias, employers will be obligated to select the vetted tools, or face potential liability. In the meantime, employers should avoid using unvetted AI tools to make important screening or hiring decisions that could improperly impact applicants on the basis of protected classes such as race or sex. Regulatory bodies such as the Equal Employment Opportunity Commission have already begun the process of regulating AI hiring tools. Just as several states have banned or limited the use of credit scores when making hiring decisions, agencies and legislatures will likely begin to pass legislation and adopt rules for how and when AI tools may be used how they ought to be vetted. Until the legal dust settles, employers would be wise to exercise caution.

Employers have frequently included confidentiality and non-disparagement terms in their separation and release agreements. Confidentiality terms help ensure that employees won’t brag to coworkers about large payouts and encourage them to seek similar payouts. Such payouts can also give the impression that a company is looking to avoid exposure for wrongdoing, and confidentiality terms can help maintain the privacy of such payouts. Non-disparagement terms can help companies deter departing employee from publically trashing their former employers on their way out the door. Employees don’t always leave on good terms and non-disparagement terms can help incent employees to keep their negative opinions to themselves. U.S. employers, however, must re-evaluate their use of confidentiality and non-disparagement terms in their separation and release agreements given a recent U.S. National Labor Relations Board (“NLRB”) decision and subsequent guidance. On February 21, 2023, the NLRB issued a ruling in the McLaren Macomb matter strictly limiting confidentiality and non-disparagement terms in separation and release agreements for most non-management private sector employees. On March 22, 2023, the NLRB General Counsel issued a memorandum answering questions that have arisen from the NLRB’s decision in McLaren. Companies with Employees in the U.S. should carefully review their separation and release agreements to make sure they comply with the NLRB’s decision in McLaren and subsequent memorandum. Confidentiality and non-disparagement have already been the subject of several laws at the state and local level designed to curb the abuses of such terms that came to light as part of the #metoo movement. Serial sexual harassers and sexual abusers would use such terms in the context of large settlements to buy the silence of victims. Many states have outlawed any terms in settlement or release agreements that restrict a victim’s right to discuss his or her underlying claims or any other conduct that they reasonably believe to be illegal harassment or assault. In McLaren, the NLRB ruled that confidentiality provisions must be narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period of time based upon legitimate business justifications to be considered lawful. Confidentiality provisions that could have the effect of precluding employees from assisting others about workplace issues or from communicating with the NLRB, a union, legal forums or the media are unlawful. The NRLB further ruled that non-disparagement terms that encompass all disputes, terms and conditions and issues are unlawful. Instead, non-disparagement terms must be limited to statements that meet the definition of defamation—that is, maliciously untrue, such that they are made with knowledge of their falsity or with disregard for their truth or falsity, may be lawful. The NLRB further ruled that savings clauses (i.e. clauses that state that nothing in the agreement is intended to impede the employee’s rights under the National Labor Relations Act) will not cure overly broad provisions. The NLRB also identified several other types of clauses that could be found to be illegal, including non-compete clauses, non-solicitation clauses, no poaching clauses, broad liability releases and covenants not to sue that go beyond the employer and/or may go beyond employment claims and matters as of the effective date of the agreement, cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that the employee assisted with filing an unfair labor practices charge. While these new restrictions may seem concerning at first blush, non-disparagement terms are frequently hard to enforce, even where legal as they often require employers to prove they were harmed by the statements in question, and the cost of litigating breaches of non-disclosure provisions is often substantial. Similarly, it is often not worth the legal expense for employers to enforce breach of confidentiality terms that don’t involve the disclosure of proprietary or trade secret information. Perhaps most importantly, employers have increasingly faced public relations backlash for including confidentiality provisions that prevent former employees from discussing the employer’s alleged wrongdoings. Conclusion Private sector employers with employees in the U.S. should carefully review their separation and release agreements with non-management employees to make sure they comply with the new requirements articulated by the NLRB. Employers can no longer rely on blanket confidentiality and non-disparagement provisions in their separation and release agreements to avoid reputational harm and information regarding severance payouts from becoming public.  

Several U.S. states have been adopting more complex pay transparency laws and stricter equal pay statutes that prohibit employers from paying two employees differently to perform the same role based on factors such as race or gender. While these two types of laws are different, they go hand in hand since pay transparency laws require employers to disclose the very information that tips off employees (and plaintiffs’ attorneys) to the facts necessary to bring equal pay claims. Companies looking to hire in the U.S. must become familiar with these laws or face substantial statutory penalties and civil liability. Equal Pay Laws Most U.S. states have some form of equal pay law. Many U.S. states have adopted equal pay laws that go beyond simply outlawing disparate treatment and that require employers to justify pay disparities according to a set (and sometimes quite short) list of allowable “bona fide” factors. In Washington State, for example, pay disparities must be justified by factors such as: differences in education, training or experience; seniority; merit/work performance; quantity or quality of production; regional differences in compensation; local minimum wage; or other factors that are job related and consistent with business need. While this last factor sounds like a helpful catchall that would allow any reasonable factor to apply, until a particular reason is tested in litigation, employers run a significant risk relying upon such untested reasons. In all cases, employers bear the burden of proof to justify why pay disparities exist. California, Colorado, Oregon, and several other states apply a similar list of allowable factors. In many states, employers are explicitly barred from using an applicant’s pay history to justify a pay disparity. The laws in these states recognize that historical discrimination has led to substantial pay gaps based upon sex and race and that allowing employers to use historical pay as a justification essentially enshrines historical discrimination on the bases of sex and race. Many states go a step further and prohibit employers from even asking about pay history at all. Pay Transparency Several U.S. states have adopted pay transparency laws that require employers to disclose the pay scale for a position for which an employer is advertising to all applicants and current employees. The first of these laws to make big waves was passed in Colorado and made headlines because it requires employers to disclose compensation and benefits information not just for positions open to outside candidates, but for internal promotions as well. As a consequence, an employer with a single employee in Colorado would have to provide pay scale and benefits information to current employees any time even an internal promotion could be filled by a current employee. Many U.S. employers responded to Colorado’s law by including a disclaimer in job postings stating that the position is not open to Colorado residents. Other U.S. states passing similar pay transparency laws have responded by including provisions that employers cannot avoid their pay transparency laws with such disclaimers. California, as it often does, has taken pay transparency to the next level—requiring employers with over 100 employees (including those outside of California) to file an annual report with the California Civil Rights Department that discloses pay information by race, ethnicity, and gender within each of ten job categories, such as sales workers, professionals and executives. For each of the ten categories, covered employers must disclose: the number of employees by race, ethnicity and gender; for each combination of race, ethnicity and gender, the mean and median hourly rate of pay; the number of employees by race, ethnicity and gender whose annual earning fall within each of the pay bands used by the U.S. Bureau of Labor and Statistics; the total number of hours worked by each employee in each pay band; and for covered employers with multiple establishments, there must be a separate report that covers all of the above for each separate establishment. Conclusion Employers looking to hire in the U.S. must navigate this new layer of complexity in the form of state pay transparency and equal pay laws. These laws vary significantly from state to state and not all of their requirements are intuitive. Employers face not only fines and suits by enforcement agencies for violating these laws, but private civil litigation as well. What is more, pay transparency requirements make it a lot easier for employees (and plaintiffs’ attorneys) to spot illegal pay disparities. Companies looking to hire in the U.S. should be sure to vet their job offers and pay scales with employment counsel to make sure they are compliant.

In order to address income disparities and employer discrimination, a growing number of jurisdictions in the U.S. have implemented salary transparency laws that not only require disclosure of certain salary information during the hiring process upon request, but require public disclosure of salary ranges in all posted job advertisements.  Canadian companies with U.S. employees should familiarize themselves with such laws and consider implementing a uniform policy for salary transparency as more and more states start requiring affirmative wage disclosures. Most recently, Washington State amended its Equal Pay and Opportunity Act to require employers to affirmatively disclose in job postings a wage range, plus any other benefits or compensation to be offered, regardless of whether the applicant requests this information.  The law applies to all employers that do business in Washington with 15 or more employees.  Without the amendment, the law currently requires employers to provide applicants the minimum salary for the position, but only if the applicant requests such information after the job offer has been made.  A number of other states, such as California, Connecticut, Nevada, Maryland, and Rhode Island, similarly require disclosure of salary information to job applicants, but Washington takes it a step further by requiring the salary information to be publicly disclosed with any job posting. Washington’s new law takes effect on January 1, 2023, and is similar to laws in Colorado and New York City, which also require affirmative disclosure of wage information as part of the hiring process.  For violations of Washington’s revised law, an employer may not only be subject to civil penalties imposed by the Department of Labor and Industries, but an employee may bring a claim against the company and recover actual or statutory damages, whichever is greater, plus attorneys’ fees and costs. The Colorado transparency law applies broadly and covers Canadian companies that have at least one employee in Colorado.  The Colorado Department of Labor and Employment (CDLE) has clarified that compliance with its transparency rules is required in a job posting as long as the employer has at least one Colorado employee at the time of publication, and the job is tied to a location in Colorado or is advertised as being remote. The CDLE has further clarified that employers cannot get around the transparency rules by explicitly excluding from consideration applicants in Colorado.  For example, job postings cannot state that that the job can be performed remotely from anywhere other than Colorado.  If there is just one person living in Colorado and working for the employer, the salary range must be posted for remote jobs, regardless of the preference an employer might have as to the location of the employee.  Accordingly, Canadian companies that have at least one Colorado employee must publish compensation information about positions located in, or positions that could be performed remotely from, Colorado at the time of the job posting. The New York City pay transparency law, which goes into effect May 15, 2022, similarly requires all New York City employers to state the minimum and maximum salary associated with an advertised job, promotion, or transfer opportunity.  The law does not apply to advertisements for positions that are not required to be performed in New York City, so advertisements for remote positions or those for roles in other locations would not need to include salary information. Nonetheless, Canadian companies posting jobs online that are accessible by Colorado, New York City, or Washington residents may be required to include compensation and benefits information in the posting.  For example, even if a position is open to employees from anywhere in the U.S. and can be worked remotely, that position may potentially be filled by someone working in Colorado, so the employer must post the compensation range if it is a covered employer under the Colorado law (i.e., if the employer has at least one employee in Colorado). In other words, nearly all positions that could be filled by an employee working remotely are covered by the Colorado statute, even if there is a low chance that the position would be filled by a Colorado applicant. Accordingly, Canadian companies that advertise in the U.S. and allow positions to be worked remotely must ensure that they are complying with the applicable state pay transparency laws.  Canadian employers should assess which advertised positions would be covered by transparency laws, consider implementing a uniform policy that would comply with the strictest requirements, and make sure they have knowledgeable legal counsel to avoid civil penalties and damages for noncompliance.

On August 13, 2021, the United States Occupational Safety and Health Administration (“OSHA”) released updated guidance on mitigating and preventing the spread of COVID-19 in the workplace to reflect changes in the Centers for Disease Control and Prevention (“CDC”) guidance for fully vaccinated individuals in response to the spread of the Delta variant.  The guidance serves to update OSHA’s June 10, 2021 COVID-19 workplace safety rule, but is advisory in nature and does not create any legal obligations for employers.  OSHA emphasized that vaccination is “the most effective way” to protect workers from the transmission of COVID-19 in the workplace, but now also recommends that all workers wear masks in public indoor settings in areas of substantial or high transmission, regardless of vaccination status.  OSHA also recommends that employers consider requiring workers to get vaccinated or submit to regular COVID-19 testing. Canadian employers with operations in the U.S. should review OSHA’s guidance and implement COVID-19 safety measures for their U.S. worksites. CDC Guidance The CDC had previously advised that fully vaccinated people no longer needed to wear masks or physically distance, and could forego testing following exposure to COVID-19 under most circumstances.  However, in July, the CDC issued revised guidance for fully vaccinated individuals, recommending that they: Wear masks in public settings if they are in “an area of substantial or high transmission”; Get tested if experiencing symptoms of COVID-19; and Wear masks and get tested following exposure to a suspected or confirmed case of COVID-19 for 14 days or until they receive a negative test result. In response to preliminary evidence suggesting that fully vaccinated people can be infected by – and spread – the Delta variant, the CDC Guidance states that fully vaccinated individuals can help to stop the spread of COVID-19 by wearing masks. OSHA Guidance OSHA’s August guidance is “designed to help employers protect workers who are unvaccinated. . . or otherwise at risk” and to incorporate CDC guidance involving individuals who are fully vaccinated, but who are located in areas with substantial or high levels of community transmission.  To that end, OSHA recommends that employers adopt a multi-layered approach to protect workers and mitigate the spread of COVID-19. Mandatory Vaccination or Regular Testing.  OSHA encourages employers to adopt policies requiring workers to get vaccinated or submit to regular COVID testing.  In addition to suggesting that employers consider a mandatory vaccine program (or a testing regime), OSHA continues to encourage employers to provide paid leave for workers taking time off to get vaccinated or to recover from any side effects associated with the vaccine.  Employers requiring vaccination should comply with the reasonable accommodation requirements under the Americans with Disabilities Act and Title VII. Worker Mask Requirements.  Under the new OSHA guidance, employers should continue to provide appropriate personal protective equipment (“PPE”) for workers.  OSHA has adopted the CDC recommendation that all workers should wear masks or other face coverings in public indoor settings in areas with substantial or high transmission of COVID-19, regardless of vaccination status.  Where respirators, including N95 face masks, are necessary (e.g., for certain jobs such as in healthcare where surgical face masks are insufficient) to protect workers from exposure to COVID-19, employers must provide such respirators in accordance with the relevant OSHA standards, which would include the implementation of a Respiratory Protection Program. Visitor Mask Requirements.  OSHA encourages employers to suggest or require that unvaccinated customers, visitors, and guests over the age of two wear masks or other face coverings in public indoor settings in areas of substantial or high transmission of COVID-19. Physical Distancing.  OSHA recommends that employers implement physical distancing in all communal work areas for unvaccinated and at risk workers.  OSHA also recommends limiting the number of such workers in one place at any given time by offering flexible worksite policies and staggering worker shifts.  In workplaces where unvaccinated and other at-risk workers cannot maintain six feet of physical distancing, OSHA recommends that employers use solid physical barriers to separate workers. Other Recommendations.  OSHA also continues to recommend that employers mitigate the spread of COVID-19 in the workplace by: Educating workers on their COVID-19 policies in a manner that is easily understood; Maintaining adequate ventilation in the workplace; Performing regular cleaning and disinfection; Prohibiting discrimination and retaliation regarding reports of workplace safety and health concerns; Reporting work-related COVID-19 cases to OSHA in compliance with OSHA’s COVID-19 reporting guidance; and Complying with other applicable OSHA standards, including PPE requirements, sanitation, etc. Key Takeaways OSHA adopted recommendations for fully-vaccinated workers that align with the most recent CDC Guidance: Fully-vaccinated individuals should continue to wear masks in public indoor settings in areas of substantial or high transmission; Individuals may choose to mask, regardless of the level of transmission, particularly if they – or someone in their household – are at an increased risk of severe disease or are not fully-vaccinated; and Regardless of vaccination status, individuals who are exposed to someone with a suspected or confirmed case of COVID-19 should get tested and wear a mask in public indoor settings for 14 days, or until they receive a negative test result. Employers should consider adopting vaccine requirements. Employers should consider requiring workers who are unvaccinated to undergo regular COVID-19 testing, in addition to mandatory masking and physical distancing. Employers are encouraged to provide paid leave to workers for time spent getting vaccinated and recovering from any vaccine side effects.

On May 28, 2021, the United States Equal Employment Opportunity Commission (“EEOC”) released new guidance regarding COVID-19 vaccinations in the workplace.  The new guidance clarifies some significant issues, including whether employers may require U.S. employees to be vaccinated (at least as a matter of U.S. federal law) and the types of incentives they may provide to vaccinated employees.  Employers must also comply with the significant number of new state laws that address these same issues, and in many cases, contradict the EEOC’s positions. I.                   Mandatory Vaccinations The EEOC confirmed that employers may require all employees physically entering the workplace to be vaccinated for COVID-19, but with important caveats.  The guidance reiterates the requirement that employers comply with the reasonable accommodation requirements under the Americans With Disabilities Act (“ADA”) and Title VII of the Civil Rights Act of 1964 (“Title VII”).  The guidance also reminds employers to be mindful of whether certain groups of employees may face barriers to receiving vaccinations, and warns employers to ensure vaccination programs do not disparately impact any protected groups. II.                Reasonable Accommodations Employers requiring employee vaccinations must continue to comply with reasonable accommodation requirements under the ADA and Title VII.  Employees may seek accommodation in the form of exemption from a mandatory vaccination policy either because of a disability or a sincerely held religious belief. If an employee reports that they are unable to receive the vaccination due to a disability, employers should consider the request for accommodation (in the form of not requiring that employee to be vaccinated) and determine whether the unvaccinated employee would “pose a direct threat due to a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation” using the EEOC’s direct threat analysis.  If the unvaccinated employee poses an unacceptable direct threat to the health and safety of others, they must assess whether a reasonable accommodation may be made for the employee, such as allowing the employee to work remotely or otherwise in isolation from others. Likewise, employers must assess whether reasonable accommodations can be made for employees who report that they are unable to be vaccinated due to a sincerely held religious belief. III.             Vaccine Incentives Many employers hope to incentivize employee vaccination in lieu of a vaccine mandate.  The new EEOC guidance clarifies employers’ right to incentivize employee vaccinations. Employers who administer vaccines directly to employees may offer incentives, as long as they are not coercive.  Because employers administering vaccines to employees directly must ask certain medical screening questions, there is a concern that using large incentives could make employees feel pressured to disclose protected medical information. Meanwhile, employers providing incentives to employees for showing proof of vaccination by a third party, but who do not administer the vaccine directly, may provide larger incentives because they do not receive any disability-related information from employees, therefore reducing the risk of pressure to share protected medical information.  Employers offering incentives may require proof of vaccination by a third party, either by providing documentation or by certifying their vaccination status. As with all confidential medical information, employers should take special care to keep vaccination information confidential, including by keeping vaccination information separate from employees’ personnel files. IV.             State Law Considerations Employers should remember that the EEOC’s new guidance only covers federal equal employment opportunity laws, and that some state and local laws may restrict employers’ ability to mandate vaccinations in the workplace or provide vaccine incentives. On May 7, 2021, Montana’s governor signed House Bill 702, which made Montana the first jurisdiction to recognize an individual’s vaccination status as a protected classification.  Under the Montana law, employers are prohibited from mandating employee vaccinations or from requiring employees to disclose their vaccination status.  Other states are working rapidly to follow Montana’s lead. Likewise, Iowa’s legislature is considering legislation that would prohibit employers from mandating vaccination or “otherwise discriminating against” employees who decline the vaccination for any reason.  If passed, the law may prohibit employers from offering vaccine incentives as they may be considered discriminatory against unvaccinated employees. V.                Takeaways Employers may implement mandatory vaccination programs, as long as they provide reasonable accommodations as required by the ADA and Title VII, and no applicable state law prohibits it.  The legal landscape at the state level is changing rapidly so employers considering mandating COVID-19 vaccination should frequently check applicable state law and update their policies and programs appropriately. Employers who wish to incentivize, rather than mandate, vaccination may do so, though they should carefully consider whether to administer the vaccine themselves or encourage employees to seek vaccination by a third party. Employers should consult with a labor and employment attorney before introducing either a mandatory vaccine program or vaccination incentives to ensure that any program complies with applicable federal and state laws.

Two former employees of Cresco Labs have filed a collective and class action complaint in Illinois federal court, alleging that their employer failed to compensate its employees for time spent putting on and taking off personal protective equipment (“PPE”). Similarly, two employees of Walmart, Inc. filed a class and collective action complaint in California federal court alleging that the company failed to compensate employees for time spent completing pre-shift health screenings. Canadian employers with U.S.-based operations should take special care to compensate all non-exempt employees for time spent donning and doffing required PPE and participating in mandatory pre-shift health screenings. Under the Fair Labor Standards Act (“FLSA”) and state and hour laws, employees must be compensated for any activities that are integral to their principal work activities. Time spent putting on and taking off PPE and completing mandatory pre-shift health screenings is likely compensable, and employers should treat it as time worked. I.   Employers Must Compensate Employees for Time Spent Completing Donning and Doffing PPE and Mandatory Pre-Shift Health Screenings Like many employers facing the COVID-19 pandemic, both Cresco Labs and Walmart require employees to wear PPE during their shifts and complete pre-shift health screenings. While these safety precautions are appropriate to stop the spread of COVID-19 in the workplace, employees must be compensated for their time completing mandatory safety activities. According to the Cresco Labs complaint, employees had to report to work twelve to sixteen minutes early to complete mandatory health screenings and put on company-issued PPE. The complaint also alleges that employees spent three to five minutes after their shifts removing the PPE, including masks, hairnets, arm sleeves, gloves, scrubs, and protective shoes. While the company allowed employees to clock in five minutes early to complete the health screening and put on their PPE, the plaintiffs allege that it took longer than five minutes to complete the pre-shift activities. The complaint also alleges that the company rounds employee punches to their scheduled start times, effectively eliminating their pre-shift pay. Because employees were generally scheduled to work forty hours per week, the plaintiffs also allege failure to pay overtime as required by the FLSA. According to the complaint filed in the Walmart case, “employees are required to arrive at Walmart at least 30 minutes prior to the start of their scheduled shift so that they can complete the COVID-19 screening with enough time to clock in by the start of their scheduled shift.” The complaint alleges that employees lined up to have their temperatures taken and complete a symptom and exposure screening. Employees who passed the screening received stickers and PPE before being permitted to clock in at the other end of the store. Employees who failed the screening would be subject to a second examination before clocking in. According to the complaint, the whole process would take ten to fifteen minutes, or longer if there was a line. Generally, employers are required to compensate non-exempt employees for all compensable time, which includes time spent on all activities integral to their work activities. Employees who are required to complete pre-shift health screenings and put on company-issued PPE must be compensated for that time because these activities are necessary for the employee to begin their shift. Likewise, employees who are required to self-report symptoms before arriving to their worksite may be entitled to pay for the time between reporting and clocking in. II.   The Dangers of Non-Compliance Non-compliance with wage and hour laws can be dangerous for employers because it may lead to costly litigation. The FLSA contains a procedure for class certification by which a single aggrieved employee may seek to represent all similarly situated employees in a class action. Under the FLSA, employees may collect damages equal to their unpaid wages. In addition to back pay, employees are entitled to “liquidated damages” equal to the damages for unpaid wages if the employer’s violations are found to be willful. Essentially, employees can recover double damages for unpaid wages under the FLSA. The FLSA also includes a fee-shifting provision, which requires the employer to pay the prevailing plaintiff’s attorneys’ fees. Many state laws impose additional penalties for violation of wage and hour laws. Canadian employers with employees based in the U.S. should review their COVID-19 safety policies to confirm their compliance with the FLSA and applicable state laws. Specifically, employers should be certain that employees are compensated for all time spent complying with COVID-19 safety protocols before and after their scheduled shifts.

The workplace safety framework in the United States is difficult to navigate at its best.  Since the beginning of the COVID-19 global health emergency, employers have faced increasingly complex challenges involving inconsistent and conflicting guidance regarding workplace safety regulations and best practices.  Since taking office in January 2021, the Biden administration has initiated the process of clarifying rules and advice to employers regarding COVID-19 safety measures. Employers with operations in the U.S. should monitor these developments, with particular attention to the Occupational Safety and Health Administration (“OSHA”) and the feasibility of COVID-19 liability waivers. I.  Occupational Health & Safety On January 21, 2021, President Biden signed his Executive Order on Protecting Worker Health and Safety, which directed OSHA to issue revised COVID-19 guidance.  In response, OSHA issued its latest COVID-19 guidance, “Protecting Workers: Guidance on Mitigating the Spread of COVID-19 in the Workplace” on January 29, 2021.  This new guidance highlights the use of COVID-19 prevention programs as “the most effective way” to slow the spread of COVID-19 in the workplace and explains these programs should include the following elements: Assignment of a workplace coordinator who will be responsible for COVID-19 issues on the employer's behalf. Identification of where and how workers might be exposed to COVID-19 at work. Identification of a combination of measures that will limit the spread of COVID-19 in the workplace, in line with the principles of the hierarchy of controls. Consideration of protections for workers at higher risk for severe illness through supportive policies and practices. Establishment of a system for communicating effectively with workers and in a language they understand. Educate and train workers on your COVID-19 policies and procedures using accessible formats and in a language they understand. Instruct workers who are infected or potentially infected to stay home and isolate or quarantine to prevent or reduce the risk of transmission of COVID-19. Minimize the negative impact of quarantine and isolation on workers. Isolating workers who show symptoms at work. Performing enhanced cleaning and disinfection after people with suspected or confirmed COVID-19 have been in the facility. Providing guidance on screening and testing. Recording and reporting COVID-19 infections and deaths. Implementing protections from retaliation and setting up an anonymous process for workers to voice concerns about COVID-19-related hazards. Making a COVID-19 vaccine or vaccination series available at no cost to all eligible employees. Not distinguishing between workers who are vaccinated and those who are not. Application of other relevant OSHA Standards, including PPE requirements, respiratory protection, sanitation, protection from blood-borne pathogens, requirements for employee access to medical and exposure records, and OSHA’s General Duty Clause (requiring employers to provide a safe and healthful workplace free from recognized hazards that can cause serious physical harm or death). OSHA’s January 29 guidance also contains recommendations for employers to limit the spread of COVID-19 in the workplace, including: Isolating workers who have or likely have COVID-19 consistent with CDC guidelines; Quarantining workers who have been exposed to COVID-19 consistent with CDC guidelines; Implementing physical distancing and barriers in work areas; Using face coverings; Improving ventilation; Using PPE as necessary; Providing supplies for good hygiene practices; and Performing routine cleaning and disinfection. Employers who have been following OSHA and other federal and state agency COVID-19 safety guidance will find OSHA’s new guidance largely unsurprising, as it largely incorporates previous guidance and best practices. Notably, OSHA’s most recent guidance includes best practices surrounding vaccinations.  Besides providing vaccinations to workers at no cost, OSHA recommends that employers provide resources and information regarding the “benefits and safety of vaccinations” and advises that employees who have been vaccinated “must continue to follow protective measures.” II.  Employer Waivers of COVID-Related Liability For a number of reasons, including concern about the unequal bargaining power between employers and employees, many states limit or prohibit employer enforcement of waivers of claims related to workplace injuries.  These limitations and prohibitions also apply when workers are potentially exposed to COVID-19 in the workplace. Likewise, employers should remember that their duty to maintain a safe work environment cannot be waived by employees.  The Occupational Safety and Health Act of 1970 (“OSH Act”) requires employers to maintain working conditions free from known dangers.  OSHA has identified COVID-19 contracted in the workplace as a reportable injury.  Under OSHA’s guidelines, employers are required to make a reasonable and good faith inquiry to determine whether it is “more likely than not” that workplace exposure was causally related to cases of COVID-19.  This means that regardless of any waiver, an employer may have to take responsibility for cases of COVID-19 in the workplace. Generally, a state’s worker’s compensation laws provide employees’ exclusive remedy for injuries or illness arising from or occurring because of their employment, including injuries and illnesses that stem from an employer’s negligence.  Whether COVID-19 is considered an “occupational disease” subject to worker’s compensation varies by state, and individual state laws may make distinctions based on the date of contraction of COVID-19, the worker’s role and other factors.  Traditionally, state worker’s compensation agencies require workers to show that their injury or illness occurred within the course and scope of their employment and there was a particular risk based on the work conditions that exceeded the risk to the general public. However, in response to the COVID-19 public health emergency, several states have passed laws or issued guidance providing that certain types of employees (particularly essential workers) who contract COVID-19 within specific timeframes are presumed to have caught the illness through the course of their employment. Courts have also recently entertained claims alleging that employers intentionally failed to take steps to keep workers safe from COVID-19 and thus, the worker can sue the employer directly notwithstanding workers’ compensation laws. State and federal lawmakers have made efforts to shield employers from liability stemming from their employees or customers contracting COVID-19.  In 2020, Senate Republicans proposed a bill to shield employers from liability for COVID-19 exposure, unless the employee could prove “by clear and convincing evidence” that the employer was the source of the exposure, had not made reasonable efforts to comply with applicable laws or guidelines, and engaged in gross negligence or willful misconduct.  However, the proposed legislation would not preempt state worker’s compensation laws.  To date, the proposal has not been enacted.  Several states, including Georgia, Kansas, Louisiana, Mississippi, North Carolina, Ohio, Oklahoma, Tennessee, Utah and Wyoming, have enacted COVID-19 liability shields, which offer varying protections to employers. III.  Practical Considerations While the new OSHA guidance generally incorporates previous guidance and best practices, employers should take care to review and comply with the safety guidelines.  Given the addition of information related to vaccinations, employers should incorporate OSHA’s vaccine guidance into their COVID-19 response.  Employers should also review the U.S. Equal Employment Opportunity Commission’s guidance on vaccinations and confer with counsel before rolling out vaccination programs. OSHA guidance is not a standard or regulation, and does not directly create legal obligations for employers.  However, in the case of an OSHA investigation, OSHA’s inspectors will rely on this guidance when determining whether to issue an employer a citation.  Failure to follow OSHA guidance could also be used as evidence of wrong doing in a civil suit. Employers should also note that OSHA will likely issue new legal obligations related to COVID-19 soon.  President Biden’s executive order also ordered OSHA to “consider whether any emergency temporary standards on COVID-19, including with respect to masks in the workplace, are necessary, and if such standards are determined to be necessary, issue them by March 15, 2021.”  We expect OSHA to issue emergency temporary standards to this effect. Some employers have been asking workers to sign COVID-19 liability waivers as a deterrent to bringing claims.  However, given their doubtful enforceability, employers should consider the message sent to employees, regulators, and the public about the company’s priorities if such waivers are required.  Particularly given the remaining liability under worker’s compensation laws and the OSH Act, employers would be better served by foregoing COVID-19 liability waivers and focusing efforts on workplace safety compliance and messaging.

The United States is currently experiencing the largest surge in COVID-19 cases since the global health emergency began.  In the past several weeks, the United States Food and Drug Administration (“FDA”) granted emergency-use authorization to the Pfizer and Moderna COVID-19 vaccines, prompting employers to ask whether they may require employees to be vaccinated. It is imperative that Canadian employers understand their rights and responsibilities with regard to the vaccination of U.S.-based employees. A.  Can Employers Require Employees to Receive the Vaccination? Generally speaking, employers may disallow employees from entering the workplace if they have not been vaccinated, though employers must accommodate employees with disabilities or religious objections.  On December 16, 2020, the Equal Employment Opportunity Commission (“EEOC”) published guidance addressing the topic of COVID-19 vaccinations in the workplace.  This guidance confirms that employers may lawfully require employee vaccinations as a condition of entry to the workplace, absent a disability or religious objection that would prevent the employee from being vaccinated.  The EEOC also warns employers who seek to require vaccinations to be conscious of confidentiality requirements under the ADA, which would apply to any pre-screening questions asked prior to the vaccine being administered. Employees may be protected from adverse employment actions by the Americans with Disabilities Act (“ADA”) if they have a disability that would make vaccination dangerous or by Title VII of the Civil Rights Act of 1964 (“Title VII”) if they have a religious objection to vaccination.  Employers are prohibited from mandating employee vaccination as a condition of employment when an employee indicates that they are unable to receive the vaccine due to a disability (including an allergy to the vaccine or its ingredients) or because of a sincerely held religious practice or belief. If an employee reports that they are unable to receive the vaccination due to a disability, the EEOC has stated that employers should consider the request for accommodation (in the form of not requiring that employee to be vaccinated) and determine whether the unvaccinated employee would “pose a direct threat due to a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation” using the EEOC’s direct threat analysis.  If the unvaccinated employee poses an unacceptable direct threat to the health and safety of others, they must assess whether a reasonable accommodation may be made for the employee, such as allowing the employee to work remotely or otherwise in isolation from others.  Likewise, employers must assess whether reasonable accommodations can be made for employees who report that they are unable to be vaccinated due to a sincerely held religious belief. Employers that decide to make vaccination a condition of employment should be prepared for requests for accommodation based on disability and religious beliefs, and update their accommodation procedures accordingly. B.  Should Employers Require Employees to Receive the Vaccination? There are several factors for employers to consider in determining whether they should make vaccination a condition of employment, including vaccine availability, the cost of vaccination, whether their employees are unionized, and how the employer would respond to employees refusing to be vaccinated. 1.  Vaccine Availability Although the FDA has granted emergency-use authorization for two vaccines, supply is severely limited, with the first doses being distributed to health care providers and high risk individuals.  As a practical matter, it is highly unlikely that companies will have access to sufficient doses of the vaccine to inoculate their entire workforce for quite some time.  In the meantime, employers should consider alternatives to vaccination, such as continued remote work, social distancing, and mask requirements to address safety concerns in the workplace.  If these measures are adequate, employers should consider delaying any plans to mandate employee vaccination until doses of the vaccine are more widely available. 2.  Cost of Vaccination Employers considering a mandatory vaccination program should also consider the practical burdens for the employer and employees.  Specifically, employers should determine whether they will cover some or all of cost of vaccination.  Likewise, employers should consider whether employees will be provided time to be vaccinated during their workday or whether vaccines will be provided on-site.  Providing answers to these questions at the outset will ease some employee concerns and facilitate the smooth roll-out of a vaccination program. 3.  Employer Response to Employee Refusal of the Vaccine The COVID-19 pandemic is an increasingly polarizing and political issue in the United States, including stay-at-home orders, mask mandates, and most recently, vaccination.  Some employees may see vaccination as in infringement on their individual liberties or a safety concerns given the vaccine’s accelerated development and approval.  Despite statements by public health officials, many Americans feel that the risk of adverse side effects outweighs the vaccine’s benefits, or that the vaccine may not be effective at all. Employers hoping to implement a mandatory vaccine program should consider how they will respond to an employee’s refusal to be vaccinated.  Employers may have to decide whether they are prepared to terminate employees who refuse the vaccine.  Employers should reflect on the impact that terminating employees may have on their workplaces, including increased turnover, decreased employee morale, difficulty hiring amidst an ongoing pandemic, and other staffing issues.  Employers requiring COVID-19 vaccination should clearly communicate their policies in advance of implementation, emphasizing their necessity and describing how they will be enforced. 4.  Unionized Workforces Employers with unionized workforces face additional considerations.  If a collective bargaining agreement is silent on the topic of vaccinations and the agreement’s Management’s Rights clause does not afford the company discretion to mandate employee vaccination, employers are likely required to bargain with the union over a mandatory vaccination program.  Additionally, employers must decide whether an employee’s refusal to be vaccinated (subject to the exceptions discussed above) would constitute “just cause” for termination in anticipation for union grievances. C.  Takeaways Absent a disability or religious objection issue with particular employees, U.S. employers will generally be able to make vaccination a condition of employment. However, employers should carefully consider whether doing so makes practical sense.  Employers who make the vaccine a condition of employment before it is widely available or fail to take into account employee concerns regarding costs and safety may face a significant backlash from their workforce, even if that workforce does not have a basis for bringing legal claims.  Likewise, employers hoping to implement a mandatory vaccination program should be conscious of the effect of any collective bargaining agreements in their workplaces.  Most importantly, employers must determine how to enforce a mandatory vaccination program prior to implementation. The best route for many employers will be to strongly encourage employees to get the vaccine once it becomes available and to lower barriers to vaccination by paying associated costs, rather than to make vaccination a strict requirement for continued employment.

The United States Department of Labor (DOL) has issued a proposed rule addressing the definition of “independent contractor” in the context of the Fair Labor Standards Act (FLSA). Canadian companies with a presence in the United States should monitor the proposed rule and its impacts on their American operations.  If adopted, the proposed rule would loosen restrictions on classifying workers as independent contractors for purposes of the FLSA and provide more flexibility for Canadian organizations. While some states have adopted the DOL’s approach to independent contractor classification, others, such as Washington and California, have adopted more restrictive rules.  Employers should be sure to confirm the laws regarding independent contractor classification in the states in which they wish to hire independent contractors to ensure compliance.  Some state laws require different classification analyses for various state laws, including state wage and hour laws, workers’ compensation, and unemployment insurance benefits. Likewise, Canadian employers should be aware that the proposed rule only addresses the independent contractor classification for purposes of the FLSA and should also be aware of the Internal Revenue Service (IRS) rules regarding classification of independent contractors for tax purposes. The DOL’s proposed rule outlines a multi-factor test for classifying independent contractors.  It includes two “core” factors and three “guidepost” factors, all of which are intended to determine the economic dependence or independence of the individual. The proposed rule focuses on whether a worker is economically independent and in business for themselves, or if the worker is economically dependent on the company for work.  Workers found to be economically dependent on the company for work are properly classified as employees.  Workers found to be economically independent and in business for themselves are properly classified as independent contractors. I.                “Core” Factors The factors in the proposed rule are not exhaustive and no single factor is considered dispositive.  However, under the proposed rule, the core factors are considered the most probative and carry the most weight.  If both core factors support the same worker classification, there is a substantial likelihood that the status indicated by the core factors is the appropriate classification. A.             The “Control” Factor The Control Factor focuses on whether the worker exercises substantial control over the key aspects of the performance of the work.  Considerations include whether the worker sets their own schedule, chooses assignments, works without supervision, and/or is able to work for others. The proposed rule clarifies that a company’s requirement that a worker comply with certain legal obligations, quality control, health and safety standards, and/or meet deadlines does not constitute the type of control that would necessitate the classification of a worker as an employee instead of an independent contractor. B.             The “Profit and Loss” Factor The Profit and Loss Factor focuses on the worker’s opportunity for profit or loss based on their initiative or investment in the work.  The Profit and Loss analysis addresses the worker’s personal initiative or management of expenditures. It is important to note that under the proposed rule, whether investments made by a worker are similar to those made by the company is irrelevant.  In this regard, the proposed rule favors independent contractor classification. II.            Secondary Factors The proposed rule includes three secondary factors for determining the appropriate classification for workers: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the worker and the potential employer; and (3) whether the work performed is part of an integrated unit of production. Under the proposed rule, the “skill” factor is intended to focus on skill alone, and should not consider initiative and other factors, which are to be analyzed as part of the “core” factors.  The “permanence” factor addresses the continuity and duration of the relationship between the worker and the company.  Under the proposed rule, work of a sporadic or definite duration favors independent contractor status.  The “integrated unit” factor considers whether the work was part of the integrated unit of production.  The proposed rule would assign limited probative value to the question of whether a worker’s work is important to the business. III.          Opportunity for Public Comment The DOL has foregone the traditional 60-90 day notice period in favor of a 30 day notice period, signaling the administration’s attempt to finalize the proposed rule before the Biden administration is seated in January. While seeking comments on all aspects of the proposed rule, the DOL is specifically interested in comment on its theory that employers will increase utilization of independent contractors if the rule is finalized and whether the rule will entice companies to reclassify workers currently classified as employees as independent contractors.  It also seeks feedback regarding how companies’ use of independent contractors may change as a result of the proposed rule, particularly in light of the ongoing COVID-19 public health emergency. IV.          Takeaways for Employers If the proposed rule is finalized, employers will have a clear and business-friendly test to use when classifying workers as independent contractors.  It is important to note that the DOL’s rules have no bearing on state laws that use different, and potentially more worker-friendly, analyses.  Employers should carefully review existing independent contractor and employee classifications. Canadian companies with American operations should address worker classifications with their American counsel.  If and when the DOL adopts the proposed rule, Canadian companies may choose to reclassify some workers as independent contractors while maintaining compliance with the FLSA.

A recent trend in U.S. employment law has been the adoption of stricter and stricter tests for when a worker may be classified as an independent contractor rather than an employee. Independent contractor relationships are often less expensive and easier for employers to administer since employers are not responsible for providing healthcare benefits to independent contractors and do not have to pay employment taxes for their independent contractors. Many workers also prefer to be classified as independent contractors because they believe that they will have more freedom to work on behalf of multiple customers as independent contractors.[1] The actual legal test for whether a worker may be classified as an independent contractor varies significantly from state to state. While some states apply what is referred to as the “Control and Direction Test,” which, as the name suggests, puts a significant emphasis on the degree to which the company controls the manner in which the putative contractor’s work is performed, many U.S. states apply what is called the “ABC Test,” which is far stricter. States applying some version of the ABC test include California, Connecticut, Delaware, Illinois, Indiana, Massachusetts, Nebraska, Nevada, New Hampshire, New Jersey, Vermont, Washington, and West Virginia. The first part of the ABC test begins with the same concept as the “Direction and Control Test,” but applied more strictly. The worker must be free from control or direction by the company, both under the terms of the parties’ contract and as a matter of reality. U.S. courts repeatedly emphasize that it is the reality of the worker’s work for the company that matters, not just what the parties’ contract says. If the parties’ contract prohibits the company from exercising direction or control over the worker, but the company’s agents and employees in fact exercise such control, the worker will be deemed an employee not an independent contractor. The second part of the ABC test requires that the worker perform work that is outside the usual course of the hiring entity’s business. Put another way, the work the worker is performing for the company cannot be the same work that the company is primarily engaged in for its customers. For example, a company in the business of installing cable windows could not hire a worker to install windows as an independent contractor. However, a company in the financial services industry could hire a window installer as an independent contractor to install windows in buildings it owns or leases. The third part of the ABC test requires that the worker be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company. Put another way, the worker needs to have his or her own ongoing business with multiple customers and the work done for the company has to be the same kind of work the worker’s own separate business engages in on behalf of other customers. To refer back to the example in the second part of the test, the window installer needs to have his or her own separate business installing windows for other customers. The consequences for misclassifying workers as independent contractors can be dire. Many misclassified workers work long hours and can rack up substantial overtime. That computer programmer you retained as an independent contractor for $5,000 a week to assist with a project at crunch time and who worked 70 hours a week for 10 weeks could be owed an additional $32,000 over the $50,000 you already paid. What is worse, if you did not track the worker’s hours, a U.S. court will presume that the number of hours the worker claims to have worked is accurate. You could end up paying for 80 hours of work a week even if the worker only worked 60. In addition, companies will be held liable for unpaid employment taxes and, if the IRS thinks you intentionally misclassified workers, criminal penalties of up to a year in jail and up to a $500,000 fine. Companies that are required to comply with the Affordable Care Act will have to pay additional penalties for failing to provide health care coverage to employees where required. The independent contractor test in the United States is often significantly more strict than that in Canada. Canadian companies looking to retain independent contractors for their U.S. operations should take care to familiarize themselves with the increasingly strict independent contractor test in the United States. Those that ignore their independent contractor ABCs could face substantial liability. [1] This belief is actually erroneous. An employer and an employee can agree that the employee is free to work for other employers.

Employers sometimes include fixed terms of employment in their employment agreement. Sometimes a fixed term is meant to prompt the parties to renegotiate at the end of the term. Sometimes a fixed term is meant to document the point in time where the parties have, in fact, agreed that the employment will end. Sometimes a fixed term is designed to create a point in time where the employer can end the employment without having to pay severance. But sometimes employers include a fixed term in an employment agreement without carefully considering the legal consequences. Under U.S. law, those consequences can be significant. One fundamental difference between employment law in Canada and employment law in the United States is the concept of “at-will” employment. Unlike Canada, where an employer must generally have cause to terminate an employee without having to pay damages, in the United States, an employer may generally terminate an employee for any non-discriminatory and non-retaliatory reason, so long as the employer and the employee have not entered into an employment agreement that says otherwise (with the exception of Montana, where employment is not “at-will”). Put another way, as long as the employer is not terminating the employee’s employment for a reason related to the employee’s age, race, gender, sexual orientation, etc., and so long as the employer is not terminating the employee’s employment because the employee engaged in protected activity (such as taking pregnancy leave, whistleblowing, reporting harassment, etc.), the employer can terminate the employee’s employment without paying damages. In the absence of an agreement to the contrary, U.S. law presumes that employees are employed “at will.” Employers and high-level employees in the United States frequently enter into employment agreements that they intend to supersede the presumed at-will relationship. They do so by including provisions in the employment agreement that provide for severance to the employee if the employer terminates the employee’s employment without “Cause” (as defined in the employment agreement), or if the employee quits for “Good Reason” (also as defined in the employment agreement). Employers, however, can sometimes unintentionally destroy the at-will employment relationship by including provisions that U.S. law interprets as incompatible with at-will employment. One way this can happen is if the parties include a provision stating the duration or “term” of the employment agreement. Where an employment agreement states that the employment shall continue for a certain period of time, U.S. courts may interpret that provision as giving the employee the right to employment for the term of the contract. This means that if the employer terminates the agreement before the end of the term and the employee has not breached the agreement, the employer will be liable for the pay and benefits the employer would have paid the employee had the agreement continued through the end of the term. What is worse, the employee’s mere poor performance may not constitute a sufficient breach of the employment agreement to excuse the employer from paying what the employee would have earned through the end of the term. Even where the employment agreement gives the employee a right to severance if the employer terminates the employee without cause, including a fixed term of employment in the employment agreement can potentially entitle the employee to pay through the end of the term in addition to the severance upon which the parties agreed if the employee is terminated without cause. Again, this is because a fixed term can create a right to employment for the duration of that fixed term. If an employer subject to U.S. law intends to employ someone at-will, the employer should simply not include a fixed term of employment, but instead include an “at-will” disclaimer. If an employer subject to U.S. law intends to offer an employee severance if the employee is terminated without cause and has no plans to otherwise limit the duration of employment, that employer should also not include a fixed term of employment. Where an employer does intend to hire an employee for a fixed duration but wants to retain the ability to terminate the employee without paying the employee through the end of the fixed term, the employer must include terms in the employment agreement that make that intent clear. For example, the agreement could specifically state that the parties anticipate the agreement ending on a certain date, but that the employee’s sole entitlement should employment end sooner is the severance package described elsewhere in the agreement. Employers must take care when including fixed terms of employment in their employment agreements. Otherwise, they might be on the hook for a lot more than they bargained for.

Under U.S. law, large employers have an obligation to notify their employees at least 60 days before a “plant closing” or “mass layoff.” This requirement can have serious implications for Canadian companies engaged in M&A deals with U.S. companies. The U.S. Federal Worker Adjustment and Retraining Notification Act (“WARN Act”) requires employers with 100 or more employees to give at least 60 days’ notice before a “plant closing” or “mass layoff” to employees affected by the action. Part-time employees who work less than 20 hours per week and employees who work fewer than 6 of the 12 months preceding the date when notice would be required do not count toward the 100 employee threshold. A “plant closing” is any “permanent or temporary shutdown of a single site of employment, or one or more facilities or operating units within a single site of employment” that results in an “employment loss” of 50 or more full-time employees during any 30-day period. A mass layoff is any layoff at a single work site which results in an “employment loss,” during any 30-day period, for: (a) at least 33% or more of the workforce and at least 50 full-time employees, or (b) at least 500 employees at the site. An “employment loss” is any loss in employment that lasts longer than six months. It is important to note that to constitute a “mass layoff,” both the 50 full-time employee threshold and the 33% of the workforce thresholds must be met. If fewer than 50 employees lose their jobs, it is not a “plant closing” or a “mass layoff” under the WARN Act. The penalties for failing to give the required notice under the WARN Act can be substantial. Employers must pay each employee to whom they failed to give notice a full day’s pay and benefits for every day of notice the employer failed to provide—that is, up to 60 days’ worth of back pay and benefits per affected employee. Employers are additionally liable for a penalty of up to $500 for each day the employer is in violation of the WARN Act’s notice requirements, up to a $30,000 maximum. In an M&A transaction, the seller is responsible for providing the WARN Act notice for any layoffs that meet the requirements of the statute and occur before the close of the transaction, and the buyer is responsible for providing the notice for any layoffs that meet the requirements of the statute and occur after the close of the transaction. This rule, unfortunately, can give buyers a false sense of security, especially in asset sale transactions. While the buyer is ordinarily not liable for the debts of the seller in an asset sale transaction, the buyer can be deemed a successor to the selling entity and liable for the seller’s failure to give WARN Act notice. Where the buyer purchases the seller’s assets intending to continue the seller’s business essentially intact, courts may deem the buyer responsible for the seller’s liabilities to its employees, including the seller’s liability to its employees for failure to provide the required WARN Act notice. U.S. courts will consider several factors when determining whether the buyer is a successor employer, including: (a) whether the work force is substantially the same; (b) whether there is a substantial continuity of the business operation; (c) whether the work is being performed in the same plant; (d) whether the buyer uses the same supervisors, machinery, and equipment that the seller used; and (e) whether the buyer makes the same products or offers the same services that the seller used to make or sell. While the sale of a business results in a technical termination of employment for all of the seller’s employees (the seller’s employees no longer work for the seller), the WARN Act does not treat such a technical termination of employment as a “loss of employment” if the employees are immediately employed by the buyer after closing. However, where the seller’s business is not sold as a going concern, the seller will be liable for failing to provide WARN Act notice to employees who suffer an employment loss on or prior to the close of the transaction, even if the seller thought the buyer would be hiring its employees if the buyer does not, in fact, do so. To complicate things even further, many states have their own “Mini-WARN” statutes, many of which are stricter than the Federal WARN Act. For example, the California WARN Act applies to employers who employ only 75 or more people, rather than the 100 employee threshold under the Federal WARN Act. The California WARN Act also defines a “mass layoff” as one involving 50 or more employees, regardless of the percentage of employees laid off. The New York WARN Act applies to employers who employ only 50 or more employees and requires employers to provide 90 days’ notice, rather than the 60 days’ notice required under the Federal WARN Act. The Federal WARN Act and its state law counterparts create many traps for the unwary M&A participant. Buyers and sellers alike should be aware and make sure they have knowledgeable legal counsel to avoid these pitfalls.

When one thinks of the law, one often thinks of hard and fast rules. Employers cannot fire employees for a discriminatory or a retaliatory reason. Employees must be paid at least minimum wage. And so on. The law governing hostile work environment claims in the United States, however, is not so easily defined and applied. At first glance, the elements of a hostile work environment sexual harassment claim seem definite enough. In order to prove a claim for hostile work environment sexual harassment, a plaintiff has to prove that he or she has been subject to behavior that is: Sexual in nature or directed at an individual solely because of his or her gender; Uninvited or unwelcome; Offensive to a reasonable person; and Severe or pervasive enough to adversely affect a person’s work environment. The first two elements are clear enough conceptually. Was the conduct sexual or about the plaintiff’s gender and was the plaintiff a willing participant in the conduct? Like anything in the law, there are tough cases. For example, what about someone who participates in the conduct at first, but stops participating later? The last two elements, however, are based entirely on the subjective feelings of the jurors in any given case. What exactly is offensive to a reasonable person? Who is this reasonable person and what is she or he like? When exactly would any particular conduct affect that person’s ability to do her or his job? When a judge instructs a jury in a hostile work environment case, she or he will tell the jury that, in order to find for the plaintiff, you must find that the conduct complained of is offensive to a reasonable person. When assessing this issue, the vast majority of jurors will ask themselves, “do I find the conduct offensive?” The reason for this is simple—most people consider themselves reasonable. If I find conduct highly offensive, then it is offensive to a reasonable person because I myself am reasonable. The difficulty with this standard is that it makes hostile work environment claims a moving target. What is offensive in a small rural town may not be offensive in a big city. What is offensive in a very socially liberal area may not be offensive in a conservative area, or vice versa. What is more, standards for what is or isn’t offensive change over time and across generations. A recent survey by The Economist/YouGov found that almost 25% of millennial men in the United States believe that asking someone out for a drink is sexual harassment. This statistic is, to say the least, surprising to many in older generations. What does this mean for companies looking to employ workers in the United States? First, it means you cannot be too careful. Even if you think that certain behavior is just harmless flirtation or joking around, you need to ask yourself, how confident are you that 12 strangers in the city where your employees live would agree with you? Sexual harassment verdicts frequently reach into the six and seven figures range when attorney fees and emotional distress damages are added to an employee’s lost wages. Are you willing to bet that kind of money on your ability to tell whether a sexually charged joke at work crossed the line? Furthermore, as a practical matter, it is not enough to have a case that will win a trial. Between document discovery, depositions, motion practice, trial preparation, and the actual trial, “winning” a sexual harassment case at trial will cost a company hundreds of thousands of dollars. To really win, your case has to be so good that a court will dismiss it as a matter of law. Recently such victories have become harder to come by. In early 2017, the Ninth Circuit Court of Appeals, which hears cases from Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington, overturned a trial court’s order dismissing a harassment case where the plaintiff claimed she was hugged too much by her boss, but never complained of the hugging to her boss or human resources. Courts are increasingly unwilling to say what is or isn’t offensive to a reasonable person as a matter of law. As an employer, it is important to set policies that keep employees from coming close to what they consider to be “the line” and to address employees’ concerns regarding possible harassment quickly and thoroughly. You might think the behavior was harmless, but how much are you willing to bet that 12 strangers will agree with you? Well-crafted policies written in consultation with your employment lawyer can make it clear to your employees that your company has zero tolerance for inappropriate behavior. Wherever your employees think the line is, they shouldn’t even come close.

The United States isn’t the only country addressing its history of gender inequality, sexual abuse, and sexual harassment. However, the United States is having its own unique experience in doing so. For U.S. employers, the current focus on these issues poses challenges, but also opportunities to address problems of diversity and harassment in the workplace. Non-U.S. companies looking to hire employees in the United States should be aware of the issues facing U.S. employers and be prepared to address them. One major change in the U.S. workplace resulting from the #MeToo movement is that employees who allege sexual harassment are far more likely to be believed. According to a November 2017 Quinnipiac University poll, 60% of U.S. women report that they have been sexually harassed, but according to the Equal Employment Opportunity Commission (the U.S. Federal Agency charged with investigating claims of sexual harassment in the workplace), 90% of women who have been sexually harassed never formally report it. That second statistic is changing rapidly. The deluge of credible allegations of sexual harassment against previously well-regarded public figures such as Bill Cosby, Matt Lauer, and Charlie Rose has eroded the view that “nice guys” aren’t capable of such behavior and that sexual harassment is relatively rare. In the post #MeToo era, the presumption favors the accuser, and the burden is on the accused to prove that the harassment didn’t occur. Since the #MeToo movement began, the standard for what constitutes sexual harassment has changed as well. Sexually harassing behavior is legally defined, in part, as behavior that is “offensive to a reasonable person.” This definition is fluid and depends upon prevailing social norms. In the post #MeToo era, behavior that used to be considered merely crude or boorish can now qualify as sexual harassment. In early 2017, the Ninth Circuit Court of Appeals, which hears cases from Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington, held that excessive hugging in the workplace could constitute sexual harassment. Companies with U.S. customers also face public relations challenges over and above any legal liability resulting from sexual harassment allegations. U.S. customers are voting with their dollars, and if a company is perceived as turning a blind eye to sexual harassment in the workplace—or, worse, actively concealing it—many U.S. consumers and advertisers will cease doing business with the company. After numerous sexual harassment claims surfaced against then Fox News host Bill O’Reilly, more than a dozen marketers withdrew their ads from Mr. O’Reilly’s show, The O’Reilly Factor. Fox News had paid roughly $13 million to settle harassment claims against Mr. O’Reilly over the years, but it was the withdrawal of ad revenue that eventually led the company to fire Mr. O’Reilly. How can companies with U.S. employees adapt to this new reality? First, the bad news. As discussed above, what constitutes sexual harassment depends on prevailing social norms and those norms are rapidly changing in the United States. Employers cannot simply give employees a list of behaviors to avoid. Traditional anti-harassment training, which often focuses on such lists of bad behaviors, is not enough. Instead, employers must train their employees to be mindful of their impact on others and to be alert to signs that their behavior is unwanted or unwelcome. Employers should also establish strong anti-harassment policies and procedures for reporting workplace harassment. U.S. law provides employers with a defense to certain types of harassment claims where the employer has established an anti-harassment policy and procedure for employees to report harassment in the workplace, but the employee fails to do so. When employees do report harassment, employers should thoroughly investigate and make sure that the reporting employee is not subject to any retaliation—even if the employer determines that the harassment complaint is meritless. Finally, the revelations of the #MeToo movement—that sexual harassment and assault is pervasive and often goes unreported—have been deeply upsetting to many employees. Consider creating forums for discussion, such as pre-scheduled and moderated company meetings, where employees can express their concerns regarding these revelations without distracting co-workers from their jobs. The #MeToo movement has raised important issues regarding pervasive sexual harassment in the workplace. Companies that do not take this opportunity to assess their own practices are likely to face increased scrutiny and liability.

Like Canada, the United States has federal legislation protecting employees with disabilities. While Canada has the Canadian Charter of Rights and Freedoms and the Canadian Human Rights Act, the United States has the Americans with Disabilities Act (“ADA”). While both Canadian and U.S. laws protect disabled employees from discrimination, the ADA has very specific procedures and requirements for accommodating employees with disabilities that even sophisticated U.S. employers frequently get wrong. Below is a discussion of several key concepts under the ADA that employers in the United States should know about. An employer has a duty to provide an employee with a “disability” with “reasonable accommodations” that will allow the employee to perform the “essential functions” of his or her job. The definition of each of these terms is essential to complying with the ADA. While the definition of a “disability” is complex, a rule of thumb is that a disability is any condition that interferes with a person’s life, except for the most minor interference. Basically, if an employee has any sort of health condition and either asks for help or the employer is put on notice that the employee needs help, the employer’s duty to accommodate is triggered. When in doubt, it’s a disability. An “essential function” is one where the reason the position exists is to perform the function. This can be tricky to define in edge cases; however, some easy examples are a data entry specialist’s ability to enter data into a spreadsheet, a manual laborer’s ability to lift a minimum amount of weight, or a receptionist’s ability to communicate with people visiting the employer’s premises. Examples of non-essential functions include a receptionist’s ability to lift heavy objects or a secretary’s ability to do data entry. These are abilities that are nice to have, but are not central to the job. Accurate and detailed job descriptions are important for defining a job’s essential functions. If a certain ability or function is not listed in an employee’s job description, it is much harder for the employer to claim that function is essential. Just because a function is described as essential in a job description does not mean that a court will agree, however. Employers must make sure that functions described as essential are in fact essential. A “reasonable accommodation” is an accommodation that allows an employee to perform his or her essential functions, and which does not pose an undue burden on the employer. What constitutes an undue burden depends upon the size and financial resources of the employer. A small company might not be required to buy an expensive piece of speech-to-text software to allow an employee who cannot type to work on a computer, but a large company with significant resources might be required to do so. Similarly, a large employer might be required to give an employee recovering from surgery several months of unpaid leave with job projection, while a small employer might be allowed to hire a replacement sooner if the small employer cannot function without someone in the role. Employers determine what accommodations to provide through the “interactive process.” When an employer is put on notice that an employee has a disability and may require an accommodation, the employer is obligated to start a dialogue with the employee and the employee’s healthcare provider regarding what accommodations, if any, would allow the employee to perform his or her essential job functions. Much of the art of ADA compliance lies in appropriately communicating with employees and their healthcare providers through the interactive process. Employers cannot simply tell the employee what accommodations they are willing to make upfront on a “take it or leave it” basis. Rather, employers must engage in a back-and-forth dialogue with the employee and his or her healthcare provider and at least consider accommodations suggested by the healthcare provider. Employers should never reject any but the most outrageous accommodation requests out of hand. An employer’s duty to accommodate under the ADA is one of the most difficult aspects of employment law in the United States. Even sophisticated employers can run into trouble, and employer’s new to U.S. law should line up outside legal support in advance to help them navigate.

The default rule in most U.S. states is at-will employment. This means that either the employee or the employer may terminate the employment relationship at any time, without notice, for any reason—other than a discriminatory or retaliatory reason. A reason is discriminatory if it is based upon an individual’s status as a member of a protected class, such as race, gender, national origin, or religion. A reason is retaliatory if it relates to an individual’s protected activity, such as whistleblowing or raising concerns regarding the terms and conditions of employment. Parties can opt out of the default at-will rule by entering into an employment agreement that provides the employee with severance unless the employee is terminated for “cause” or quits without “good reason.” Unlike Canada, which has a rich body of law explaining what does and does not constitute “cause,” it is completely up to the parties in the United States to decide what constitutes cause and put that definition into the employment agreement. Getting this definition right is extremely important, and Canadian companies with employees in the United States that do not pay close attention to such language might be stuck paying substantial severance to employees whom they would have a right to terminate for cause under Canadian law. Most U.S. employment agreements for high-level employees provide for severance benefits ranging from a few months to a few years of pay upon the termination of employment if the company terminates the employee without “cause” or the employee quits for “good reason” as defined in the employment agreement. The definition of “cause” can vary widely from agreement to agreement and is often the subject of intense negotiation between the company and the employee. Many agreements only allow the company to terminate for cause if the employee engages in extreme misconduct, such as a felony or an act of dishonesty that has a substantial negative impact on the company. Other agreements allow the company to terminate for cause if the employee fails to competently perform the employee’s job duties. Often times, the agreement will require that the employee be given notice and an opportunity to cure any failure that would otherwise constitute cause for termination. Some but not all agreements also allow the employee to quit and receive severance if the employee quits for “good reason” as defined in the employment agreement. “Good reason” is often defined to include a material reduction in the employee’s duties or compensation, or a requirement that the employee relocate. Good reason may also be tied to a change in control over the company, such that the employee’s right to quit for good reason and receive severance only arises if the company changes ownership. Canadian companies purchasing U.S. businesses can find themselves hamstrung by definitions of “cause” and “good reason” that make it very difficult to fire or even control wayward executives that were brought along as part of the deal. Cause definitions that require extreme misconduct by the executive tie the company’s hands in situations where the executive is merely performing poorly or not following the board’s directives. Good reason definitions that allow an executive to quit if the executive’s duties are changed or curtailed make it difficult to put new management in place where the executive and the board fail to see eye-to-eye on how the company should be run. U.S. courts tend to give the benefit of the doubt to the employee when assessing whether cause or good reason exists under an employment agreement, and companies that want to retain the right to terminate an employee for poor performance without paying severance should make sure that poor performance is explicitly included in the definition of cause. Alternatively, if a company is agreeing to a very employee-friendly definition of cause, it should be prepared to pay out the severance provided for in the employment agreement in all but the most extreme cases of employee misconduct. Business acquisitions usually start with the best of intentions and goodwill between the parties. No one goes into such a deal expecting it to go sideways. However, it is very important that Canadian companies looking to take on U.S. employees know what they are getting into in terms of severance obligations—and negotiate definitions of “cause” and “good reason” that reflect the company’s expectations.

In the United States, employers are required to pay employees overtime (1.5 times the employee’s hourly rate) for hours worked over 40 per week. In some states, such as California, employers are required to pay overtime if employees work more than 8 hours in a day. Like Canada, U.S. employees may be exempt from overtime requirements if they meet certain criteria. However, such exemptions under U.S. law are frequently more complicated than their Canadian counterparts, and even sophisticated U.S. employers frequently get them wrong. In 2016, U.S. employers spent nearly $700 million on class-action settlements of wage and hour claims. This does not include amounts U.S. employers spent paying judgments and attorneys’ fees. The three major categories of exempt employees under the U.S. Fair Labor Standards Act (which governs overtime pay) are the so-called “executive,” “administrative,” and “professional” exemptions: Similar to the Canadian exemption for managers, U.S. law exempts so-called “executive” employees from overtime. Employees must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent to qualify for the executive exemption. Such employees must also have the authority to hire or fire other employees, or the employee’s recommendations as to the hiring, firing, advancement, or promotion of other employees must be given particular weight. To qualify for the “administrative” exemption, an employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. The employee’s duties must be separate from the production of goods or rendition of services that the employer is in the business of providing. Accountants and human resources professionals can fall into this category. To qualify for the “professional” exemption, the employee must perform work requiring advanced knowledge that is intellectual in character and that usually requires some sort of prolonged course of study. Doctors, attorneys, and accountants with advanced degrees are good examples. For each of these exemptions, the employee’s job must require the exercise of discretion and judgment regarding matters of significance to the company. The authority to commit the company to large contracts or to spend significant amounts of the company’s money are good examples. Also, to qualify for any of these exemptions, employees must be paid a salary of at least $455 per week. There are additional exemptions for so-called “creative professionals,” “computer employees,” and “outside sales employees” as well. U.S. employers frequently misapply these exemptions. To qualify for the “creative professional” exemption, the employee’s primary duty must involve invention, imagination, and originality in a field of artists or creative endeavor. The key to this exemption is the distinction between creativity and technical skill. An employee that makes technical drawings or reproductions would not qualify, but an employee that creates original works of art would. The “computer employees” exemption is often a trap for employers. The mere fact that an employee uses a computer or is technically proficient with computer hardware or software is not enough. The employee must design, develop, analyze, or create computer software or hardware systems on behalf of the employer. Low-level tech support does not qualify, but computer programmers and systems designers do. Another frequently misapplied exemption is the “outside sales employees” exemption. Many U.S. employers mistakenly classify their in-house sales staff as exempt. However, to qualify for this exemption, a salesperson has to work primarily on the road, traveling to customers. Employees that primarily work a phone, either at home or at the employer’s office, do not qualify. All of these exemptions often sound clear on paper. The Vice President of Sales, the head of accounting, and the company’s in-house lawyer are all clearly exempt. But what about the assistant manager at a retail location? What about a mid-level accounting professional? Many employees fall into a gray area. The consequences of misclassifying employees can be severe. An employer that misclassifies its force of 50 salespeople could easily end up owing over a million dollars in overtime in a class action suit. These claims are also very expensive to research and litigate. If a company fails to record the hours worked of a misclassified employee, a U.S. Court will start with the presumption that the employee’s own testimony regarding his or her hours worked is accurate, and the employer will have the burden of proving otherwise. Canadian companies looking to operate or acquire businesses in the United States should carefully assess their own and their targets’ wage and hour practices and make sure they are consistent with U.S. law.

Harassment has been in the news a lot lately in the United States, with several high-profile terminations at well-known companies. Companies are losing millions of dollars, not just in settlements and verdicts, but in lost customers and bad publicity. The Equal Employment Opportunity Commission, or EEOC, is the administrative agency responsible for enforcing laws prohibiting workplace harassment in the United States. The EEOC has issued new guidance suggesting that conventional anti-harassment training isn’t enough. So what is an employer to do? Maintaining an effective harassment reporting procedure is simple, but not always easy. Often, it means a willingness by the company to put its money where its mouth is. This involves taking the time and spending the money to educate employees about harassment in the workplace, adopting procedures for employees to report harassment, and educating employees about those procedures. First, the company needs to demonstrate that it takes reports of harassment seriously. This means immediately investigating all complaints and taking swift remedial action where there is evidence of harassment. A track record of taking complaints seriously and dealing with wrongdoers promptly gives other employees confidence that their own concerns will be heard and acted upon. This means taking action against harassers, even if they are rock star performers. Second, the company needs to make its employees aware of its harassment reporting procedures. The best way to do this is during mandatory anti-harassment training and by having employees acknowledge in writing that they have received and reviewed a copy of the company’s anti-harassment policies, which should contain the reporting procedure. Training takes time and money, but it gets the word out and demonstrates the company’s commitment to its anti-harassment policies. In addition to the moral and morale benefits likely to result, an effective reporting procedure can also be part of a legal defense to a harassment claim. Employers can avoid liability if they have an effective reporting procedure that the accusing employee failed to utilize. Courts look at the same issues discussed above when assessing this defense. Does the company have a robust anti-harassment policy? How has the company handled prior complaints? What steps has the company taken to inform employees about its anti-harassment policy and reporting procedure? A hotline is meaningless if a company has a history of ignoring complaints or has failed to inform employees about it. A hotline is really just one tool in the anti-harassment toolbox. Employers should train employees to recognize and report harassment in the workplace, swiftly investigate and respond to complaints, and make sure that employees know how to report harassment. If these other components are not established, an anti-harassment hotline is just a dial-in circular file.

Canadian employment law is, in many ways, far more employee favorable than U.S. employment law. With the exception of a few states, employment in the United States is “at-will.” This generally means that either the employer or the employee may terminate the employment relationship without cause and without notice, so long as the reason for the termination is not discriminatory (e.g., based on age, race or gender) or retaliatory (e.g., in retaliation for the employee engaging in whistleblowing activity). U.S. employees also have far fewer privacy rights in the workplace. Employees generally have no expectation of privacy in any computers or other electronic devices provided by the employer. However, there is one aspect of employment law that is far more treacherous and unpredictable in the United States—that is, the monetary damages available to employees who successfully sue their employers. Under U.S. law, an employee alleging that he or she was terminated for a discriminatory reason may seek lost wages including both “back pay” and “front pay.” Back pay consists of all of the wages the employee would have earned, from the date of termination through the date when the court issues an award, had the employee not been terminated. If the employee has not found a new job by that time, this can amount can be well over a year’s pay and includes not just base salary, but any bonus, overtime, and fringe benefits the employee would have earned. Front pay consists of all the wages the employee would have earned going forward from the award. Juries can award lost wages all the way through the employee’s expected date of retirement. A 40-year-old employee could be awarded 25 years of lost wages (through the typical retirement age of 65) where the jury believes that the employee is unlikely to find another job. Even where the employee finds a new job, the former employer can be on the hook for the difference between what the employee is making at the new job and what the employee expected to make at the old job. For example, a 35-year-old employee who is making $20,000 a year less could seek an award of $600,000 in lost wages (through age 65). In addition to lost wages, employees may seek emotional distress and punitive damages. Juries have broad discretion to award employees emotional distress damages resulting from an improper termination. These emotional distress awards can rise well into the six-figures. In 2009, a federal appellate court upheld a $1 million emotional distress award. Employees may be entitled to punitive damages where a jury finds that the employer discriminated against the employee “with malice or reckless indifference.” While punitive damages are limited by statute in certain cases, they are not capped in others. Where punitive damages are uncapped, they can easily reach six figures and can sometimes exceed $1 million where the employer’s conduct is found to be particularly heinous. Finally, employees are usually entitled to recover their attorney fees, even if they recover only a fraction of the damages they are seeking at trial. What is more, employees are rarely required to pay their former employer’s attorney fees if they lose. While employees may appear to have fewer rights under U.S. employment law, the consequences for the employer if those rights are violated can be extreme. Canadian companies who are taking on employees in the United States should take care to consult with experienced employment counsel to assess their employment practices and avoid the substantial liability that can result under U.S. law.

It is generally a good idea for companies not to disclose biographical information about their employees, such as marital status, religion, or age. Good HR professionals counsel managers not to ask for such information during interviews, for example, in order to avoid claims of discrimination in hiring. Under U.S. law, however, there is an important exception to this well-advised general rule. Under the Older Workers Benefit Protection Act (“OWBPA”), employers terminating two or more employees as part of a layoff and offering severance in exchange for a release must disclose the following information to each employee over 40 who is being terminated and offered severance: 1) a description of the class of employees considered for termination (e.g., all sales people in the state of Washington); 2) the age and title of each employee in the class considered for termination; and 3) whether or not each of the employees in the class considered for termination is in fact being terminated and offered severance. The employer must give these employees 45 days in which to consider the release agreement and must specifically advise the employees in writing to seek legal counsel. Canadian employers are often shocked to discover that such disclosures are not only allowed, but required under U.S. law. These disclosures allow each employee over 40 who is being offered severance to quickly assess whether the layoff will have a “disparate impact” against employees over 40 and thus to bring a suit for age discrimination. Whether a layoff has such a “disparate impact” involves some moderately complex math. However, it basically boils down to whether employees over 40 (or other protected classes) are disproportionately chosen for termination out of the pool of employees considered for layoff. When Canadian companies acquire businesses in the United States, they often engage in reductions in force post merger. It is important for these companies to not only comply with the disclosure requirements of the OWBPA, but also to vet the contemplated layoff for possible disparate impacts upon protected classes such as age, gender, religion, race and national origin. It is particularly important to assess whether the layoff has a disparate impact upon employees over 40, given the disclosures required by the OWBPA. Canadian companies laying off U.S. employees should make sure they have knowledgeable counsel regarding the requirements of the OWBPA to avoid setting themselves up for costly litigation.