Labor & Employment

The Utah Legislature recently passed, and the Governor signed, The Vaccine and Immunity Passport Restrictions Act (“the Act”). This bill prohibits the use of vaccination or immunity status in public accommodations, governmental entities, and for employment decisions. Utah now follows Montana in prohibiting employment discrimination based on vaccine status. With such a small number of states taking this approach—and with an effective date of May 3, 2023—many employers are sure to have questions about what information is now “off-limits” and cannot be the basis of employment decisions under the Act. This article summarizes the issues employers operating in Utah should consider in light of Utah’s Act: Who is covered by the new law? The Act is broad and covers most private employers. There are no exceptions based on an employer’s size, so the Act applies to private employers large and small. The law also applies to all places of public accommodation and government entities of the State of Utah. What does the law prohibit, in simple terms? Simply put, the Act prohibits employers from making employment-based decisions on the basis of an individual’s possession of an immunity passport or based on their vaccination status. It also prohibits places of accommodation from discriminating on the basis of immunity status. Finally, government entities, like private employers, may not deny employment opportunities on the basis of vaccination status or possession of an immunity passport. Private employers operating in Utah may be affected by the provisions relating to employment discrimination and the law on public accommodations, if that employer operates a space that meets the definition of “public accommodation.” What is an “immunity passport,” and what would qualify as “vaccination status?” For employment purposes, an immunity passport is “a document, digital record, or software application indicating an individual is immune to a disease, whether through vaccination or infection and recovery.” Vaccination status means any information that would give “an indication of whether an individual has received one or more doses of a vaccine.” For practical purposes, medical records or vaccination cards could be considered “immunity passports.” Can employers enforce vaccination requirement policies? What is prohibited by the law? Generally, no. The Act states it is a discriminatory employment practice for an employer to refuse employment to an individual, bar an individual from employment, or otherwise discriminate against the individual in compensation or other terms and conditions of employment on the basis of vaccination status or immunity passport possession. However, some employers are excluded from this general rule. The Act states that certain child care programs may maintain vaccination requirements so long as the requirements are carried out in accordance with the law. Employers who are subject to regulations requiring vaccinations from the Centers for Medicare and Medicaid or the Centers for Disease Control and Prevention are also excluded from the general prohibition. Certain federal contractors may also be exempt from the Act, too. Finally, the Act provides an employer may make employment decisions on the basis of vaccination status or immunity passports if it can establish “a nexus between a vaccination requirement and the employee’s assigned duties and responsibilities,” or identify “an external requirement for vaccination that is not imposed by the employer and is related to the employee’s duties and responsibilities.” Can employers ask about vaccination status? Interestingly, the Act does not explicitly prohibit employers from requesting or inquiring into an individual’s vaccination status. Instead, employers cannot make employment decisions on the basis of that information (if they learn it). However, because any employment action taken on the basis of vaccination status is an unfair employment practice, employers should carefully consider before inquiring broadly into the vaccination status of its employees. Does this just apply to COVID-19 vaccinations? Nothing in the text of the Act limits its application only to COVID-19 vaccinations. What situations might require disclosure of vaccination or immunity information? Some employers may continue to require and enforce vaccine requirements under the exceptions listed in the law. For those employers—certain child care, health care, or others—requirements are likely the same after the passage of the Act. However, many employers who required vaccination records or vaccination may no longer be able to enforce those policies unless that employer can show “a nexus” between the employee’s job and the vaccination requirement. What are the penalties under this law? The Act will be officially codified under Utah’s antidiscrimination in employment statute, so penalties for violating the Act will be similar to penalties for other claims of unlawful discrimination on the basis of a protected trait. With respect to claims of discrimination on the basis of vaccination status in public accommodations, any person “denied the rights” in the Act may file a complaint with the Utah Attorney General. In summary, employers operating in Utah who require vaccination as a condition of employment should carefully determine whether their business fits within one of the exceptions to the Act or whether the requirement should be abandoned. Even employers who do not require vaccination as a term of employment should assess how and when employees might be asked to provide immunity-related information and ensure that information is not the basis for employment considerations. Employers—regardless of their employment policies on vaccination—should be aware the Act covers them as well if they operate a place of public accommodation. Importantly, the Act takes effect on May 3, 2023, so employers should move quickly to maintain compliance.

Employers using automated decision-making systems, including artificial intelligence, algorithms, machine learning, and other tools (collectively, “ADMs”), in connection with employment decisions are on the precipice of a drastically changed landscape concerning such use. The Equal Employment Opportunity Commission (“EEOC”) is preparing to issue its final strategic enforcement plan addressing the use of ADMs in employment. Additionally, states and localities are enacting or introducing their own legislation and regulation on the subject. New York City has announced that it will begin enforcing Local Law 144 of 2021 (“Local Law 144”) imminently, on April 15, 2023. Meanwhile, the EEOC and private litigants increasingly are commencing lawsuits alleging discrimination in the use of ADMs in employment. Considering the legal developments covering the use of ADMs in employment, employers should prepare for the coming changes and recognize how the ADMs they are using may leave them vulnerable to claims of employment discrimination. EEOC Enforcement and Guidance On January 10, 2023, the EEOC issued a Draft Strategic Enforcement Plan (“Draft SEP”), which places elimination of employment discrimination in the use of ADMs at the top of its strategic priorities list. The EEOC signaled that it will use investigations and litigation to “eliminat[e] barriers in recruitment and hiring” arising out of “the use of automated systems, including artificial intelligence or machine learning, to target job advertisements, recruit applicants, or make or assist in hiring decisions where such systems intentionally exclude or adversely impact protected groups.” The EEOC held a public hearing on January 31, 2023, addressing the use of ADMs in employment. Much of the testimony urged the EEOC to issue additional guidance establishing best practices for employers to ensure that their use of ADMs complies with employment discrimination laws. The EEOC is considering the public feedback it received and may issue the final strategic enforcement plan at any time. The EEOC previously issued guidance in May 2022 focusing on unique issues pertaining to the use of ADMs as to individuals with disabilities. The guidance identifies potential violations of the Americans with Disabilities Act (“ADA”) where: (1) an employer using ADMs does not provide reasonable accommodations to applicants and employees with disabilities to ensure fair assessment; (2) the employer’s ADMs—intentionally or unintentionally—screen out individuals with disabilities who could perform the essential functions of a job with reasonable accommodations; and (3) the employer’s ADMs violate ADA restrictions on disability-related inquiries and medical examinations. Litigants may seek to hold employers responsible for ADA violations resulting from the use of ADMs, even when third-party vendors develop and administer them. Local Law 144 Meanwhile, New York City enacted Local Law 144, effective January 1, 2023, the first law attempting directly and comprehensively to regulate the use of ADMs in the workplace. The ordinance provides that it is unlawful for employers and employment agencies to use an “automated employment decision tool” (“AEDT”) to “screen a candidate or employee for an employment decision” within the city—unless the tool has been subjected to a “bias audit” within one year before the tool’s use, information about the bias audit and tool are published, and required notices are given to employees and candidates residing in the city. N.Y.C. Admin. Code § 28-871. The ordinance defines a “bias audit” as “an impartial evaluation by an independent auditor” that includes testing of the disparate impact on component 1 categories (i.e., sex and race/ethnicity) required to be reported by employers covered by Title VII of the Civil Rights Act of 1964 (“Title VII”). Id. § 28-870. In December 2022, the New York City Department of Consumer and Worker Protection (“DCWP”) announced that it would not begin enforcing the ordinance until April 15, 2023, and issued a revised set of proposed regulations seeking to clarify the ordinance.[1] Among other things, the proposed rules would refine the ordinance’s requirement that an AEDT is a tool used “to substantially assist or replace discretionary decision making” to mean that the AEDT’s “simplified output” must be relied on solely to make an employment decision; given greater weight than other criteria when making an employment decision; or used to overrule conclusions derived from other factors, including human decision-making. The proposed rules also would clarify that an “independent auditor” must be “capable of exercising objective and impartial judgment” and must not have been involved in using, developing, or distributing the AEDT or have an employment relationship or financial interest with the employer, employment agency, or vendor whose AEDT is being audited. Further, the DCWP’s proposed rules specify the calculations required for the bias audit. Essentially, when an AEDT is used to select or score applicants (or employees for promotion), the bias audit must calculate the “selection rate” or “scoring rate” and “impact ratio” for sex and race/ethnicity categories and “intersectional categories” of sex, ethnicity, and race (as well as the median score for the full sample of applicants for a scoring rate calculation).[2] The proposed rules include exemplar calculations required for a bias audit. The DCWP received additional public comments and held a hearing on the revised proposed rules on January 23, 2023. The DCWP is finalizing the rules but has not provided a date by which the final rules will be issued or extended the enforcement timeline. Other States and Localities Employers should be aware of pending developments relevant to the use of ADMs in employment in other states and localities. For example, New York and New Jersey are considering new legislation regarding ADMs used in employment. New York 2023 Leg., 246th Sess. (Jan. 9, 2023); New Jersey 220th Leg., A.B. 4909 (Dec. 5, 2022). In California, legislation specific to the use of ADMs for employment decisions stalled out in 2022. But the California Privacy Rights Act (“CPRA”), which amended and expanded the California Consumer Privacy Act (“CCPA”), became operative on January 1, 2023, resulting in the expiration of previous exemptions pertaining to the collection and use of employment-related personal information—which may be collected and used by ADMs. The California Privacy Protection Agency is currently in the rulemaking process and considering regulations specific to ADMs. Enforcement is set to begin on July 1, 2023. A detailed discussion of these developments is beyond the scope of this article. Increasing Litigation Beyond the changing legislative landscape, employers using ADMs and vendors of ADMs are encountering increasing litigation from the EEOC and private litigants. On May 5, 2022, the EEOC filed its first lawsuit addressing employers’ use of ADMs. In Equal Employment Opportunity Commission v. iTutorGroup, Inc., et al., Case No. 1:22-cv-02565 (E.D.N.Y.), the EEOC alleges that the defendants provide English-language tutoring services and discriminated against more than 200 tutor applicants by programming their application software to reject female applicants over the age of 55 and male applicants over the age of 60. The charging party allegedly applied and was rejected because she was older than 55 but applied a second time the next day using a more recent date of birth and was offered an interview. The EEOC seeks injunctive and monetary relief. Recently, on February 21, 2023, an individual filed a putative class action against Workday, Inc., alleging that it provides an algorithm-based screening system that disproportionately denies employment opportunities to applicants based on race, age, and disability. Mobley v. Workday, Inc., Case No. 4:23-cv-00770 (N.D. Cal.). Specifically, Mr. Mobley alleges that Workday’s screening tools enable customers to select candidates based, at least in part, upon their protected classifications or lack thereof. Mr. Mobley seeks class certification and injunctive and monetary relief. Criticisms of ADMs ADMs offer great benefits to employers of cost and time savings in hiring and managing employees.  However, commentators have pointed out that ADMs may introduce into employment decisions unintended bias or discriminatory impact on members of protected classes. For instance, at the EEOC’s hearing on the Draft SEP, ReNika Moore (Director of the American Civil Liberty Union’s Racial Justice Program) testified[3] (among other things) that: Racial and ethnic minority groups are overrepresented in data containing negative information (such as criminal records, evictions, and poor credit records) that may be considered by ADMs and lead them to be disproportionately excluded from employment opportunities. ADMs may be trained with data drawn from pools of individuals who are not representative of the group to which the ADMs will be applied, rendering the tool “less accurate for people in the underrepresented group.” Algorithms used to assess whether employees are meeting or candidates are likely to meet performance targets are trained with historical data, which may cause the algorithm to carry forward discriminatory impact from the past. ADMs may use certain data as “proxies” for protected characteristics (such as zip codes, names, or educational institutions). ADMs that continually learn may experience a “feedback loop” and reinforce their own discriminatory impact. As one example of an ADM that may introduce bias into the process of recruiting employees, Ms. Moore testified that tools which target job advertisements based on individuals’ personal information can exclude members of protected classes from receiving the advertisements.  Such exclusion may occur, for example, where employers select the characteristics of their desired audience or where they upload individuals’ data to “lookalike” tools that target recipients by their similarities to such individuals.  Either process may select a group of recipients of job advertisements that is not representative of the applicable population. Practice Pointers In light of the evolving legal landscape focusing on bias in the use of ADMs, employers may wish to prepare for the patchwork laws that will soon apply to their use of ADMs. Among other things, employers may wish to ascertain whether they are using technology covered by new and pending laws on the subject. Further, even employers outside of New York City may wish to establish processes consistent with the requirements of Local Law 144 (or other new laws), such as conducting bias audits, publishing audit results, and issuing notices to candidates or employees of the use of ADMs. Of course, employers should always ensure their use of ADMs complies with existing employment discrimination laws, such as by providing reasonable accommodations to individuals with disabilities. Reprinted with permission from the April 4, 2023 edition of the NEW YORK LAW JOURNAL © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 – reprints@alm.com. [1] See https://rules.cityofnewyork.us/wp-content/uploads/2022/12/DCWP-NOH-AEDTs-1.pdf (last visited March 23, 2023). [2] The “selection rate” is equal to the number of employees or candidates in a given category who were selected divided by the total number of employees or candidates in such category. The “scoring rate” is the rate at which individuals in a category receive a score above the full sample’s median score. The “impact ratio” is equal to the selection rate or scoring rate for a category divided by the selection rate or scoring rate of the most selected or highest scoring category. [3] See https://www.eeoc.gov/meetings/meeting-january-31-2023-navigating-employment-discrimination-ai-and-automated-systems-new/moore#_ftnref48 (last visited March 23, 2023).

Employee reductions and terminations are an unfortunate result of economic downturns. Even during good economic times, many companies face the need to reduce their workforce or terminate the employment of individual employees. In such circumstances, employers may seek to offer severance pay in exchange for certain releases and promises by the departing employee requiring a severance agreement. The drafting of severance agreements can be complex, given that there are various federal and state laws that prohibit or narrow the provisions that can be included in the severance agreement. The use of confidentiality and non-disparagement provisions has recently come under scrutiny again.  This article summarizes the legal issues that an employer must consider when deciding whether to include such provisions in a severance agreement. What is the impact of the National Labor Relations Board’s decision in McLaren On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision, McLaren Macomb, 372 N.L.R.B. No. 58 (2023), finding that an employer violated Section 7 of the National Labor Relations Act (“NLRA”) by offering employees a severance agreement containing provisions stating that the terms of the agreement were confidential and prohibiting the employee from making any disparaging statements about the employer.  Even if the employee ultimately did not sign the agreement, the NLRB found that the mere proffer of these terms to the employees as part of a severance package could be a violation of the NLRA.  Communications by covered employees are protected by Section 7 even if they contain comments that would be considered “disparaging” towards the employer. Does McLaren apply to non-union workplaces? Yes.  Section 7 of the NLRA protects employees’ right to engage in concerted activity for “mutual aid and protection,” which includes discussing the terms and conditions of their employment.  Section 7 applies in union and non-union workplaces. Does McLaren apply to all severance or separation agreements?? No. Only individuals who meet the statutory definition of “employees” – which does not include executives, supervisors, and most managers – have rights under Section 7 of the NLRA. Does the NLRB’s decision mean confidentiality and non-disparagement provisions can no longer be included in severance agreements? Not necessarily.  Employers will now, however, have to engage in a risk assessment in determining whether to include such provisions. For example, in reductions in force (“RIFs”) where the severance is formula-based, the need to include a confidentiality provision is diminished by the fact that there will be many departing employees. Therefore, prohibiting the departing employees from discussing their severance agreements with fellow co-workers who were selected for the RIF adds very little value to the employer. In contrast, where a severance agreement is presented to an individual employee as a compromise, employers may include a confidentiality provision with a definition of “Confidential Information” that is tailored to avoid implicating the terms and conditions of employment that are the core protections of Section 7 of the NLRA. Similarly, following the McLaren decision, employers that want to continue to include non-disparagement provisions in severance agreements could  do so only with specific language. Non-disparagement provisions should, for example, be narrowly tailored to prohibit defamatory statements in accordance with the defamation laws in the applicable jurisdiction to be permissible under McLaren. Is this the first time a federal agency has taken action with regard to provisions in these types of agreements?   No.  The Equal Employment Opportunity Commission (“EEOC”) is another federal agency keeping an eye on confidentiality and non-disparagement provisions in severance agreements.  The EEOC has taken the position that no agreement between a departing employee and an employer can limit the departing employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC.  In addition, the EEOC has stated that limiting an individual’s ability to file a charge or participate in an investigation constitutes retaliation in violation of federal employment law.  Any confidentiality or non-disparagement provision in a severance agreement that attempts to waive these rights is subject to challenge by the EEOC. Similarly, the Securities and Exchange Commission (“SEC”) prohibits employers from taking any action that impinges upon an employee’s ability to bring complaints to the SEC.  SEC Rule 21F-17, enacted under the Dodd-Frank Act, prohibits any action that would “impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement. . .with respect to such communications.” Indeed, the SEC has fined employers for using language that prohibits employees from speaking with the SEC without prior approval from the employer. Thus, employers may not use severance agreements with departing employees that prohibit or discourage departing employees from reporting alleged violations to the SEC. It is important to include language in each severance agreement, even for employers that are not publically traded, that states that the departing employee may speak freely with federal agencies such as the SEC without first seeking approval from the employer. Aren’t there also restrictions related to settlements of claims involving sexual harassment? Yes.  In response to #metoo, various states introduced or enacted legislation restricting the use of confidentiality provisions in agreements settling sexual harassment-related claims.  Each piece of legislation has its own nuances regarding the types of language which are prohibited and the consequences of violating the restrictions. These are just a few of the key issues to consider when drafting a severance or settlement agreement. It is always best practice to speak with an employment attorney when drafting severance agreements to ensure compliance with federal, state, and local laws.

Buyers of all or parts of another business often seek to protect the value of their investments by entering into non-compete agreements with their sellers.  Courts typically favor enforcement of such sale-of-business non-compete agreements in order to protect buyers from unfair competition from sellers, and to protect the business’s goodwill for which the seller has paid as part of the purchase price.  Courts regularly enforce sale-of-business non-compete agreements, either as an exception to a general legal prohibition on agreements restraining trade or by applying a more lenient standard for enforceability.  The public policy favoring enforcement of sale-of-business non-compete agreements stands in stark contrast to non-competes between employers and their employees triggered by termination of employment.  Courts in most states generally will enforce narrowly drafted and reasonable post-employment non-competes in accordance with a patchwork of state laws.  However, courts in several states, notably California, North Dakota and Oklahoma, broadly refuse to enforce post-employment non-competes. Although California law prohibits post-employment non-compete agreements, California law allows parties to enter into non-compete agreements in the context of a sale of business in accordance with certain detailed statutory requirements. Because of the size of the California economy, and the willingness of California courts to enforce appropriate sale-of-business non-compete agreements, buyers of businesses both inside and outside of California frequently seek to maximize compliance with California law.  One of the key issues such buyers need to consider in drafting sale-of-business non-compete agreements is whether the ownership interest being sold will suffice to trigger California’s sale-of-business exception.  In this article, we discuss California law governing sale-of-business non-competes and the case law addressing the nature of the ownership interest that the seller must transfer for the sale-of-business rules to apply. We also analyze the Federal Trade Commission’s (FTC) recently published proposed rule banning post-employment non-competes.  Like the California prohibition on employment non-compete agreements, the FTC’s proposed rule also includes a sale-of-business exception which buyers should consider in structuring their transactions. California’s Sale-of-Business Exception California generally invalidates non-compete agreements by making “void” “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind.” Cal. Bus. & Prof. Code § 16600. However, Section 16601 of the Business and Professions Code carves out a limited exception for buyers and sellers of businesses.[1]  Under Section 16601, any of the following persons “may agree with the buyer to refrain from carrying on a similar business within a specified geographical area in which the business is sold, or that of the business entity, division, or subsidiary has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer carries on a like business therein”: (1) “any person who sells the goodwill of a business”; (2) “any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity”; or (3) “any owner of a business entity that sells (a) all or substantially all of its operating assets together with the goodwill of the business entity, (b) all or substantially all of the operating assets of a division or a subsidiary of the business entity together with the goodwill of that division or subsidiary, or (c) all of the ownership interest of any subsidiary.” Cal. Bus. & Prof. Code § 16601. Courts construe Section 16601 to protect the buyer’s purchase of the intangible goodwill from actions by the seller that would undermine the value of the goodwill acquired.  “Goodwill” is defined as the “expectation of continued public patronage.” Cal. Bus & Prof. Code § 14100; see also Alliant Ins. Services, Inc. v. Gaddy, 72 Cal. Rptr. 3rd 259, 277 (2008). In determining whether a party has transferred goodwill, “there must be a clear indication that in the sales transaction, the parties valued or considered goodwill as a component of the sales price.” Hill Medical Corp. v. Wycoff, 103 Cal. Rptr. 2d 779, 785 (2021). In the context of selling shares of company stock, the Court in Hill Medical Corp. recognized that “[s]imply selling shares to an individual vendee or back to the corporation does not necessarily demonstrate that goodwill is part of the agreement.” Id. All aspects of the sales arrangement must be evaluated, including the shares transferred and the fractional interest involved, the entire structure of the transaction and the sales price, such as whether fair market value is paid for the shares. Id. In Vacco Industries v. Van Den Berg, 6 Cal. Rptr. 2d 602, 609 (1992), a California court enforced a sale-of-business non-compete agreement against a shareholder who sold all of his stock in the company, which amounted to less than 3% of the company’s stock. Vacco, a machinery manufacturing company, entered into an agreement with Emerson Electric Co. in which Emerson agreed to purchase all of Vacco’s stock. In conjunction with the sale, Vacco entered into employment contracts and separate non-competition agreements with 12 major shareholders. Van Den Berg, an operations manager and officer of Vacco, was one of them. The non-compete agreement specified that he “would not carry on any business competitive with the business of Vacco for the lesser of (1) five years from the date of the agreement or (2) so long as Vacco conducts the Business within the territory.” Id. The court enforced the noncompete agreement because Van Den Berg was the 9th largest shareholder and held a substantial interest in the company. By contrast, in Bosley Medical Group v. Abramson, 207 Cal. Rptr. 477, 481 (1984), another California court refused to enforce a non-compete agreement contained in a stock purchase agreement based on a finding that the transaction was a “sham” to circumvent state policy prohibiting non-competes.  In Bosley, a medical group engaged a doctor in its practice of hair transplantation and male pattern reduction surgery.  As a condition to engaging the doctor in the practice, the medical group required the doctor to sign both an independent contractor agreement and a stock purchase agreement.  The stock purchase agreement required the doctor to purchase nine shares of the medical corporation for $10,000, which shares represented 9% of the shares of the corporation.  The agreement also allowed the medical group to repurchase the shares upon termination of the doctor’s engagement as an independent contractor by either party at an agreed upon amount equal to the purchase price plus 10% of such purchase price per year of the doctor’s ownership of the shares.  The doctor purchased the shares with the proceeds of a promissory note.  The purchase agreement contained a provision which prohibited him from engaging in a similar medical practice within certain counties for three years after leaving the medical group. The court concluded that the non-compete agreement was “a sham” because the doctor was required, not permitted, to purchase the shares and because he did not benefit from the value of the stock he purchased.  The court further observed that the doctor could not benefit from the payment of dividends or a capital gain on the value of the stock, because the interest he paid on the promissory note exceeded the dividend that was paid.  The court also referred to the small amount represented by the purchase price plus only 10% of the purchase price per year that he received under the stock purchase agreement when he left the group. The court concluded based on these facts that the real purpose of the stock purchase agreement was to prevent the doctor from leaving the medical group and opening a competitive practice.  The court also stated that Section 16601 applied “only in situations in which the transfer of ‘all’ of the owner’s shares involves a substantial interest in the corporation so that the owner, in transferring ‘all’ of his shares, can be said to transfer the goodwill of the corporation.”  Id. at 481. The FTC’s Proposed Rule The Federal Trade Commission recently proposed to ban most non-compete clauses for American workers based on its view that such clauses are an “unfair method of competition” and, therefore, prohibited under Section 5 of the Federal Trade Commission Act.  See FTC Proposed Rule, 88 Fed. Reg. 3482 (Jan. 19, 2023). The proposed rule carves out from this prohibition “a non-compete clause that is entered into by a person who is selling a business entity or otherwise disposing of all of the person's ownership interest in the business entity, or by a person who is selling all or substantially all of a business entity's operating assets, when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.”  Id. § 910.3.  The proposed rule defines “substantial owner, substantial member, and substantial partner” as “an owner, member, or partner holding at least a 25 percent ownership interest in a business entity.” Id. § 910.1(e). Therefore, if the person is an owner, member or a partner owning less than 25 percent of a business entity, the proposed rule would prohibit that person from entering into a non-compete agreement with a buyer. Takeaways Business buyers seeking to enter into non-compete covenants with their sellers that satisfy California’s sale-of-business exception should consider taking the following precautions: First, buyers should confirm that the purchase involves the seller’s transfer of a substantial interest in the business, and not appear to be a sham to avoid compliance with public policy prohibiting employment non-competes. Second, buyers should keep in mind that the business owner must sell “all of his or her ownership interest in the business entity.” Third, buyers should ensure that goodwill is a part of the consideration for the sale of business. Finally, buyers should be aware that the FTC is seeking to make sweeping changes to override the non-compete laws in all fifty states.  Accordingly, buyers should keep in mind the possibility that the sale-of-business non-competes previously viewed as lawful under state law may in the future be significantly restricted, and take these new realities into account in negotiating their purchase agreements. Reprinted with permission from the February 1, 2023 edition of the NEW YORK LAW JOURNAL © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 – reprints@alm.com. [1] This article does not address two other exceptions to California’s prohibition of non-compete agreements.  Section 16602 of the Business and Professions Code allows partnerships to enforce non-compete provisions against a partner upon dissolution of the partnership or the partner’s dissociation from the partnership.  Further, Section 16602.5 provides that any member in an LLC may agree in anticipation of the termination of his or her interest in the LLC that he or she will not carry on a similar business within a specified geographic area where the LLC business has been transacted, so long as any member or any person deriving title to the business or its goodwill from any other member carries on a like business.  Unlike the sale-of-business exception, there is no requirement under Sections 16602 or 16602.5 that the partnership or LLC repurchase the interest in the partnership or LLC upon termination for a price that includes a payment for goodwill.

Sweeping amendments to New York’s whistleblower law took effect in 2022.  The law was amended to provide significantly greater protection from retaliation for individuals who raise concerns of employer wrongdoing.  The amended New York Labor Law § 740 is now one of the broadest and most powerful whistleblower laws in the U.S. How has New York’s whistleblower law changed? New York’s whistleblower law was broadly expanded in 2022.  Prior to the 2022 amendment, employees were protected from retaliation only for reporting (internally or externally) actual violations of law involving (1) “a substantial and specific danger to the public health or safety;” or (2) healthcare fraud.  Now, whistleblower protections are available to both employees and independent contractors who raise concerns about any activity, policy or practice that they reasonably believe violates any law, rule or regulation.  Proof of an actual violation of law is no longer necessary, and violations need not relate to public health or safety.  All that is required is a reasonable belief that a violation of any law has occurred.  The amendment also expands the categories of protected individuals as well as the potential remedies available to litigants. Who is protected? The amendment expanded the definition of “employee” to include “former employees” and “natural persons employed as independent contractors . . . who are not themselves employers.” What qualifies as protected activity? Under the amended statute, employers may not take retaliatory action against an “employee” for: Disclosing or threatening to disclose to a supervisor or a public body an activity, policy or practice of the employer that the employee reasonably believes violates a law, rule or regulation (including executive orders and judicial and administrative decisions), or that the employee reasonably believes poses a substantial and specific danger to the public health or safety; Providing information to, or testifying before, any public body conducting an investigation, hearing or inquiry into any such activity, policy or practice by the employer; or Objecting to, or refusing to participate in, any such activity, policy or practice. Employees are protected from retaliation for taking such actions regardless of whether they are acting within the scope of their job duties. What constitutes retaliation? The definition of “retaliatory action” was also expanded.  It now encompasses adverse action taken by an employer to “discharge, threaten, penalize, or in any other manner discriminate against an employee” for exercising his or her rights under the statute, including: (i) adverse employment actions or threats to take such adverse employment actions against an employee in the terms or conditions of employment, including but not limited to discharge, suspension or demotion; (ii) actions or threats to take such action that would adversely impact a former employee’s current or future employment; or (iii) contacting or threatening to contact U.S. immigration authorities regarding the immigration or citizenship status of an employee or the employee’s family. Has the notification and cure requirement changed? The notification and cure requirement poses a significant limitation to whistleblower actions.  Prior to the amendment, before seeking whistleblower protection for providing information to or testifying before a public body conducting an investigation, hearing or inquiry, the employee must have made a good faith effort to notify a supervisor and afford the employer a reasonable opportunity to correct its actions.  The amendment adds numerous exceptions to the notification and cure requirement, including when: There is imminent and serious danger to the public health and safety; The employee reasonably believes that reporting the suspected violation would result in the destruction of evidence or concealment of the activity; The suspected violation could reasonably be expected to lead to endangering the welfare of a minor; The employee reasonably believes that reporting to a supervisor would result in physical injury to the employee or to others; or The employee reasonably believes that the supervisor is already aware of the activity and will not correct it. Notification is no longer required under any of the above circumstances. Is there a publication requirement? The New York State Department of Labor issued a model notice for employers.  Employers are required to post a notice of employee rights under the law in a conspicuous and well-lit area of the employer’s premises that is customarily frequented by employees and applicants.  For fully remote employees, this notice should be provided by email and included in remote employees’ standard onboarding documentation. Has the statute of limitations changed? Yes, the statute of limitations has been extended.  Employees and contractors may now institute civil litigation under the statute within two years of the alleged retaliatory action, up from one year prior to the amendment. What new remedies are available? The amendment provides a right to a jury trial and expands the potential remedies available under the statute by adding front pay, civil penalties and punitive damages.  The remedies currently available under the statute are: Injunctive relief to restrain continued violation of the statute; Reinstatement, or front pay in lieu thereof; Reinstatement of full fringe benefits and seniority rights; Compensation for lost wages, benefits and other remuneration (back pay); Reasonable costs, disbursements and attorneys’ fees (attorneys’ fees may be awarded to the employer as well, “if the court determines that an action was without basis in law or fact”); A civil penalty not to exceed $10,000; and Punitive damages for willful, malicious or wonton violations.    

In the face of recent reductions-in-force and predictions of a recession (Harriet Torry & Anthony DeBarros, Economists Now Expect a Recession, Job Losses by Next Year, Wall St. J., Oct. 16, 2022), employment lawyers are dusting off their research regarding the federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101 et seq., and similar state laws (the WARN Acts). These laws require employers to provide workers at least 60 days’ advance notice of plant closings or mass layoffs. Although the federal WARN Act has been in place for decades, only in recent years have courts addressed certain new theories for application of these laws to distressed companies considering the protections of the bankruptcy laws. In bankruptcy proceedings, employers have argued that WARN Act damages arising prior to filing of the bankruptcy petition constitute “general unsecured claims” subject to significant reduction in ultimate recoveries by workers. To avoid such reductions, plaintiffs have begun to assert, and courts have considered, a number of creative claims against officers and directors for their participation in the employer’s violation of the WARN Acts. At least two bankruptcy court decisions have allowed Chapter 7 trustees to assert certain state law claims for breach of fiduciary duty against officers and directors for causing the debtor to violate the WARN Act. In this article, we analyze one of these decisions and offer practical suggestions distressed employers should consider as they are contemplating compliance with the WARN Acts. Background The federal WARN Act allows for civil actions by employees for damages in the form of back pay for each day of violation and benefits under any employee benefit plan which would have been covered under an employee benefit plan if the employment loss had not occurred. 29 U.S.C. 2104(a)(1). Although the WARN Acts contain exceptions to the notice requirement for “unforeseeable business circumstances,” where the employer is a “faltering company” and for “natural disasters,” the existence of an employer’s financial distress or even a bankruptcy filing does not excuse liability under the WARN Acts. 29 U.S.C. §2102(b)(1)-(2); e.g., Ien v. TransCare (In re TransCare), 614 B.R. 187, 209-11 (Bankr. S.D.N.Y. 2020). Section 507(a) of the Bankruptcy Code lists and ranks ten categories of priority claims reflecting Congressional policy judgments for distribution of the debtor’s assets in the bankruptcy process. Applying the Code’s prioritization rules, courts have held that WARN Act back pay damages arising prior to the bankruptcy filing will be paid on a fourth or fifth level priority status. See, e.g., Henderson v. Powermate Holding (In re Powermate Holding), 394 B.R. 765, 772 (Bankr. D. Del. 2008); see also In re Hanlin Group, 176 B.R. 329, 333-34 (Bankr. D.N.J. 1995) (WARN Act back pay damages are deemed wages earned upon termination of employment). More specifically, 11 U.S.C. §507(a)(4)-(5) provide fourth priority status to unsecured claims for wages, salaries and commissions, vacation pay, severance pay, and sick leave pay earned by an individual, and fifth priority status to unsecured claims for contributions to an employee benefit plan. There is a maximum amount allowable per individual for such claims, and any amount exceeding that limit is a general unsecured claim, entitled to lower priority, which amount, therefore, will be paid at a lower level, and potentially at a fraction of its full value. Id. WARN Act damages arising after the filing of the bankruptcy petition are deemed administrative expenses and paid on a second priority basis. E.g., In re Hanlin Group, 176 B.R. at 333. Courts historically have refused to hold individuals liable for a company’s failure to provide timely WARN notices. E.g., Cruz v. Robert Abbey, 778 F. Supp. 605, 609 (E.D.N.Y. 1991). Against this backdrop, in 2015 the Delaware bankruptcy court refused to dismiss the Chapter 7 trustee’s claims against the sole manager and president of an insolvent corporation for breach of fiduciary duty based on these individuals’ failure to cause the employer to provide the requisite 60-day notice under the WARN Act. See Stanziale v. MILK072011 (In re Golden Guernsey Dairy), 548 B.R. 410 (Bankr. D. Del. 2015). More recently, a New York bankruptcy court similarly considered whether the individual owner of the debtor entity breached her fiduciary duties of loyalty and good faith owed to the company when she failed to cause the employer to follow the WARN Act requirements. See LaMonica v. Tilton, et al. (In re TransCare Corporation), No. 16-10407, 2020 WL 8021060 (Bankr. S.D.N.Y 2020). ‘In re TransCare’ In 2016, a network of paratransit and medical transit businesses commonly referred to as TransCare abruptly failed and commenced Chapter 7 bankruptcy proceedings. Ien v. TransCare (In re TransCare), 638 B.R. 691, 696 (Bankr. S.D.N.Y. 2022). More than 1,000 employees were terminated with essentially no notice. At least two litigations ensued, each arising out of TransCare’s alleged failure to give timely WARN Act notice. Shameeka Ien brought a class action against debtor TransCare Corporation and its wholly-owned subsidiary debtors, against non-debtor entities and their affiliates, as well as against Lynn Tilton, who owned and controlled the entity defendants. Id. Ien named Tilton as a defendant only on claims asserted under state wage payment law, not on the WARN Act claims. Id. The Chapter 7 trustee commenced a separate adversary proceeding on behalf of the estates of TransCare and its debtor-affiliates against Tilton, TransCare, and its debtor-affiliates, asserting certain claims for relief, including claims for breach of fiduciary duties of loyalty and good faith against Tilton. In re TransCare Corporation, 2020 WL 8021060, at *1. After conducting a trial, the court ruled that Tilton breached her fiduciary duties by failing to maximize the value of TransCare when she decided to sell the company, and by formulating and executing a plan to restructure the business’s affairs through a foreclosure by secured lenders she controlled of certain assets to be transferred to an affiliated entity that Tilton also controlled. Id. at *23. The trustee also claimed that Tilton breached her fiduciary duties to TransCare based on the failure of TransCare to give adequate notice of mass layoffs to its employees as required by the WARN Act. The trustee sought a declaratory judgment that Tilton was responsible for indemnifying the estate of TransCare for the WARN Act liability because (1) TransCare had no such liability prior to Tilton’s breach of loyalty and she must bear that liability in order to put TransCare back to where it was prior to the breach; (2) the WARN Act liability was a natural and foreseeable consequence of Tilton’s actions; and (3) under Delaware law, a corporate officer or director who knowingly causes the corporation to violate the law necessarily fails to act in good faith and thereby breaches her fiduciary duty of loyalty. Id. at *28. According to the trustee, Tilton purposely chose not to issue a WARN Act notice because she did not want TransCare’s employees to look for new jobs. Id. at *29. The claim is based on an email exchange, which Tilton noted that she did not want to inform employees about the bankruptcy prior to the foreclosure because she “didn’t want to mass exodus.” Id. The court concluded that the evidence relied on by the trustee did not support imposing an obligation on Tilton to indemnify the estate on the theory that she caused those violations in bad faith. Id. To establish bad faith, the court reasoned that the trustee had to demonstrate that Tilton’s conduct in failing to provide the WARN Act notice sooner was “qualitatively more culpable than gross negligence.” Id. (quoting Brehm v. Eisner (In re Walt Disney Co. Derivative Litig.), 906 A.2d 27, 66 (Del. 2006)). The court noted that while Tilton did not want to give the notice until the foreclosure was completed, evidence showed that she still subjectively believed that TransCare had adequate time to send the WARN Act notices. Id. The trustee failed to show that Tilton deliberately delayed the timing of the WARN Act notices because she did not care about the requirements of the WARN Act or that her actions were the product of calculated wrongdoing or intentional disregard of her responsibilities with TransCare. Id. Accordingly, while the court concluded that Tilton breached her fiduciary duties, as described above, the trustee did not submit sufficient evidence to prove that the breach was based on her causing TransCare to violate the WARN Act. Practice Pointers While the Chapter 7 trustee in TransCare was unable to prove that Tilton breached her fiduciary duty based on WARN Act violations, the court nonetheless considered the claim and evaluated whether the trustee submitted sufficient evidence of Tilton’s intentional disregard of her fiduciary duties. Future plaintiffs may be emboldened by TransCare to assert similar claims against officers and directors, in the hopes of proving a greater level of culpability than was shown in TransCare. In response, officers and directors may argue that such state law claims for breach of fiduciary duty are preempted by the WARN Act and are otherwise not permitted by applicable state law. For example, at least one state court has held that employees had no standing to assert derivatively on behalf of their employer claims for breach of fiduciary duty against company officers for failure to provide timely WARN Act notices. See Calixto v. Couglin, 113 N.E.3d 329, 335 (Mass. 2018). It remains to be seen how other courts will resolve these issues. Future employers in financial distress, like TransCare, similarly may be tempted to avoid or delay issuing a WARN Act notice because of concern for adverse consequences to the business. For example, employers may be concerned that providing WARN notice may cause customers to discontinue transacting business with the employer or negatively impact employee morale. However, in light of the In re TransCare and In re Golden Guernsey Dairy distressed employers also should consider the risk of claims by terminated employees against their officers and directors. Employers also should consider the impact of such litigation in the form of claims by officers and directors against the employer for indemnification under corporate governance documents or for coverage under the employer’s insurance policies. Obviously the easiest way for employers to avoid litigation resulting from violation of the WARN Acts is to arrange for sufficient notice to employees prior to plant closings or mass layoffs in compliance with those laws. Where such notice is impracticable, employers should consider the application of the exceptions to the notice requirements contained in the WARN Acts. But, even in cases where an exception applies, employers should be mindful of the requirement in the federal WARN Act that employers “shall give as much notice as is practicable and at that time shall give a brief statement of the basis for reducing the notification period.” 29 U.S.C. §2102(b)(3). Reprinted with permission from the December 7, 2022 edition of the NEW YORK LAW JOURNAL © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 - reprints@alm.com.

With the 2022 midterm elections fast approaching, and sky-high interest in voting this election cycle, more employers than ever may be considering their obligations to provide employees time off to vote.  As it stands, 29 states require employers to provide some kind of voting leave.  But with the rise in popularity of mail and early voting during the pandemic taking some of the attention off of Election Day itself, what is an employer’s obligation to accommodate an employee’s democratic participation when polls are open? Voting and election leave isn’t a blank check to take off Election Day completely, and employers aren’t obligated to provide a full day of leave. In many states, most employers won’t actually have to provide any leave at all. A majority of states require voting leave, however. In these states, employers must provide an employee leave to vote unless the employee has a certain minimum amount of time outside of the employee’s working hours when the polls are open.  In Arizona, for example, polling places are open on November 8 from 6 a.m. to 7 p.m.  Arizona law provides that employers must provide eligible employees time off to vote unless the employee has three consecutive hours before or after work to vote.  That means an employee with a 9-to-5 schedule wouldn’t be entitled to voting leave because they have three hours of polling time to vote before work, but an employee who is scheduled for a twelve hour shift of 7 a.m. to 7 p.m. would be entitled to leave.  Many states take a similar approach, and it is most common to see laws that require minimums of either two or three hours of non-working time required to be available before leave must be granted.  This is not a hard-and-fast rule, however, as some states like Arkansas require employers to schedule employees so that the employees are able to get to the polls on Election Day without the need to take leave at all. Does time off to vote have to be paid? Another question that employers frequently consider is whether the time must be paid or unpaid.  Of the 29 states with a voting leave law, 21 require the leave to be paid. The remainder of states either have no provision in their law—like all mail-voting Washington State—or explicitly do not require the leave to be paid, like Connecticut.  Illinois takes a third approach that doesn’t explicitly require paid election leave, but prohibits employers from imposing a penalty on employees—including a reduction in compensation—for taking voting leave.  In Oklahoma, an employee must present proof of voting for the leave to be paid at all. How much notice must employees give? Another wrinkle that employers must grapple with state-to-state is the amount of notice an employee is required to give.  Sometimes, whether an employee gives enough notice can have major consequences: Nebraska is one state that provides paid voting leave only if the employee applies at least the day before the election.  Other provisions in the states range from “reasonable notice,” to two working days, to the day before, to no notice required. What should employers do? Faced with dozens of different state laws, what’s an employer to do?  Companies with employees who work largely in one state only need to conform to one set of election leave laws. But for national employers, the question becomes arguably more difficult.  Time To Vote is a nonpartisan, business-led initiative to help ensure employees across America have adequate time and information about voting.  With more than 2,000 corporate signatories, Time To Vote provides resources to companies who pledge that they will allow their employees time to cast their ballots. National corporations can also choose to provide voting and election leave to employees that goes in excess of any one state’s law. On the other hand, some employers don’t want to talk about elections.  It’s understandable why employers may want to steer clear of voting discussions entirely.  But at its core, voting is an expression of commitment to a community, and whether employers talk about it or not, employees will be thinking about their vote and their community.  Employers can signal respect for those choices and embrace the community-building aspect of voting by affirmatively communicating nonpartisan and informative information about elections. The list of states that require voting leave, a summary of the requirement, and links for more information are set out below. Jurisdiction Summary of Requirements Alabama Up to one hour of unpaid leave with reasonable notice, unless the employee has either two hours of polling time before work or one hour after work. Alaska Paid leave for enough time to vote, unless the employee has two hours of polling time outside of work hours. Arizona Paid leave if requested the day before the election, unless the employee has three consecutive hours of polling time outside of work hours. Arkansas No leave provisions, but employers must schedule the work hours of employees on election day such that all employees have an opportunity to vote. California Up to two hours of paid leave if employee gives at least two days’ notice.  Employees with “sufficient time outside of working hours to vote” are not entitled to leave. Colorado Up to two hours of paid leave if employee gives at least one day notice, unless the employee has three or more hours of polling time outside of working hours. Connecticut Up to two hours of unpaid leave if employee gives at least two days’ notice. Delaware No voting leave requirements. District of Colombia Up to two hours of paid leave for an employee who gives reasonable advance notice. Florida No voting leave requirements. Georgia Up to two hours of unpaid leave for employees who give reasonable notice, unless the employee has at least two hours of polling time before or after work. Hawaii No voting leave requirements. Idaho No voting leave requirements. Illinois At least two hours of unpaid leave for employees who request leave at least the day prior to the election, unless the employee has two hours of polling time outside of work to vote. Indiana No voting leave requirements. Iowa Up to three hours of paid leave for employees who request leave in advance in writing, unless the employee has three consecutive hours of polling time outside of work hours. Kansas Up to two hours of paid leave for employees unless they have two consecutive hours of polling time either before or after work. Kentucky Employers must offer not less than four hours of unpaid leave for employees who request it at least one day prior to the election. Louisiana No voting leave requirements. Maine No voting leave requirements.  However, Maine’s paid leave law permits employees to take paid time off to vote. Maryland Up to two hours of paid leave for employees who can demonstrate proof of voting, unless the employee has two hours of continuous off-duty time in which they can vote. Massachusetts Employers may not deny an employee’s request for voting leave during the first two hours after the polls open if the employee is eligible to vote.  No requirement that leave be paid. Michigan No voting leave requirements. Minnesota Employers must offer paid leave for the time necessary to appear at a polling station, cast a ballot, and return to work. Mississippi No voting leave requirements. Montana No voting leave requirements. Nebraska Employees who request leave before election day are entitled to up to two hours of paid leave; employees who request leave the day of an election are only entitled to unpaid leave.  In either case, if the employee has two consecutive hours of polling time outside of work hours, they are not entitled to leave. Nevada Employers must provide paid leave to employees who apply for voting leave before the day of election if it would be “impracticable” for the employee to vote before or after work.  The amount of leave required varies based on how far an employee must physically travel to vote, up to three hours maximum. New Hampshire No voting leave requirements. New Jersey No voting leave requirements. New Mexico Up to two hours of paid leave, unless the employee has more than two hours after polls open or three hours before polls close in which to vote. New York Up to two hours of paid leave for employees who apply for leave between 10 and 2 days before the election, unless the employee has “sufficient time” outside of scheduled working hours to vote. North Carolina No voting leave requirements. North Dakota No voting leave requirements. Ohio Employers must provide a “reasonable amount” of leave to employees to vote.  No provision on pay in the statute. Oklahoma Up to two hours of paid leave for employees who apply for leave at least the day before an election and can provide proof of voting.  An employee is not eligible for leave if they have three or more hours before or after work to vote. Oregon No voting leave requirements. Pennsylvania No voting leave requirements. Rhode Island No voting leave requirements. South Carolina No voting leave requirements. South Dakota Up to two hours of paid leave for employees unless they have two consecutive hours of polling time to vote outside of work hours. Tennessee Up to three hours of paid leave for employees who apply for leave by noon the day before an election, unless the employee has three or more hours before or after work to vote. Texas Employers must offer paid leave for the time to attend the polls and vote in an election, unless the employee has two consecutive hours of polling time outside of work. Utah Up to two hours of paid leave for employees who apply at least the day before an election, unless the employee has three or more hours when polls are open during which the employee is not on the job. Vermont No voting leave requirements. Virginia No voting leave requirements. Washington No voting leave requirements. West Virginia Up to three hours of paid leave for an employee who makes a written demand for voting leave at least three days before the election and does not fail to vote.  Employees with three or more hours of free time during polling hours are not entitled to voting leave. Wisconsin Up to three hours of unpaid voting leave for employees who notify their employer the day before an election. Wyoming Up to one hour of paid voting leave for an employee who actually votes, unless the employee has three or more consecutive non-working hours while the polls are open. For more information, see Vote 411, a non-partisan election information clearinghouse founded by the League of Women Voters.

The EEO-1 report, commonly referred to as either “Equal Employment Opportunity Compliance Report” or simply “EEO”, is a reporting requirement for many U.S. employers. Mandated by the U.S. Equal Employment Opportunity Commission (EEOC), it aims to provide a demographic breakdown of the employer’s workforce by race/ethnicity, sex and job categories. The data submitted is kept confidential by the EEOC unless companies choose to voluntarily disclose it. Importance of EEO-1 Reporting Completing the EEO-1 report is mandated by law for employers that fall under its remit. There are penalties for not filing an EEO-1 report or filing an EEO-1 report inaccurately. It not only enables employers to self-audit and see how diverse/inclusive an organization is, but also take steps to address any inequities, like the lavender ceiling and pay equity. EEO-1 reporting can form part of a broader modern compliance ethos that prioritizes ethics and good governance. Who Needs to Complete an EEO-1 Report? Only certain employers need to submit an EEO-1 report to evidence the make-up of their workforce, including: private employers who are subject to Title VII of the Civil Rights Act of 1964, as amended, with 100 or more employees; private employers who are subject to Title VII who have fewer than 100 employees if the company is owned or affiliated with another company, or there is centralized control so that the group legally constitutes a single enterprise that employs a total of 100 or more employees; any federal government prime contractor or first-tier subcontractor with 50 or more employees and a contract/subcontract amounting to $50,000 or more; companies with 50 or more employees that serve as a depository of Government funds or as financial institutions which are issuing and paying agents for U.S. Savings Bonds and Savings Notes; and any company with fewer than 100 employees, but that is associated with other company(s) or any parent company where the entire enterprise employs 100 or more. Are Any Employers Excluded From Filing an EEO-1 Report? Any company that does not meet the criteria above does not have to file an EEO-1 report. However, every two years, certain State and local governments, public elementary and secondary school districts and certain local referral unions must file similar reports. Details of the organizations covered and the reports they need to file are on the EEOC website. What Are the Requirements for EEO-1 Reporting? The EEO-1 report categorizes employees into different job classifications and under a range of mandated ethnicity and race categories.  The EEOC has a FAQs document that explains how an employee’s race or ethnicity should be determined. All employees need to be included in an EEO-1 report, including employees who work remotely, or those based at client sites. Note that there are different filing requirements for organizations with single sites and organizations with multiple sites. By the EEOC’s definition, a single-establishment company is one that “does business at only one physical address” and a multi-establishment company is one that “does business at two or more physical addresses.” What Does the EEO-1 Report Look Like and How to Submit It? A sample of an EEO-1 report can be found at the EEOC website. The EEOC prefers online submission, either through the EEO-1 Component 1 Online Filing System or as an electronically transmitted data file (TEXT or CSV) through a data file upload. Either way, you will be provided with a company I.D. and password. What are the Penalties for Not Filing an EEO-1 Report? While there are no financial penalties for not filing an EEO-1 report, the EEOC can obtain a U.S. District Court order that compels companies to file an EEO-1 report, which could potentially lead to an employer being held in contempt.  Federal contractors or subcontractors could have their federal government contract terminated and may also be prohibited from being granted future federal contracts. Moreover, any employer that makes a willfully false statement on an EEO-1 report can face a fine, imprisonment up to five years, or both. Who Should Take Responsibility for Filing the EEO-1 Report? Typically, the nature of data included in an EEO-1 report falls within the confines of human resources systems and records. Therefore, company HR teams tend to be responsible for completing the report. However, because there are severe penalties for lack of filing or willfully inaccurate, an organization’s compliance team should also take an active interest in the completion of such reports and work with HR to ensure accurate and prompt filings. The company’s board and leadership team will want to be assured that the organization’s data is robust and their obligations around filing have been met. EEO-1 Reporting Checklist When evaluating your reporting obligations, we recommend the following steps: Eligibility. Determine whether you need to submit an EEO-1 report. Single or Multi-establishment determination. Determine which form is applicable to your organization. Register. If you haven’t filed an EEO-1 report before, register as a first-time filer online on the EEOC’s website and fill the form. Data identification. Familiarize yourself with the data that needs to be collected, which includes the number of employees, the sex and race/ethnicity of all employees, and the job categories of all employees. Identify your data sources. Determine which internal systems and data sources you will need to consult to find the data you need to include in the form. Delegate. Allocate responsibility for gathering the data and submitting the form – involve the compliance team, the HR team, the leadership team, and the like. Assemble. Gather data, check for accuracy, and submit before the deadline. Looking at an EEO-1 sample report will help to give insight into what your reporting should look like. Retain. Keep a copy of your reporting for at least one year for audit trail purposes. Upcoming Deadlines At this time, the 2021 EEO-1 Component 1 Data Collection is closed. No additional 2021 EEO-1 Component 1 Reports will be accepted. The 2022 EEO-1 Component 1 data collection is tentatively scheduled to open in April 2023. Updates regarding the 2022 EEO-1 Component 1 data collection, including the opening date, will be posted to www.eeocdata.org/eeo1 as updates become available. For assistance with the 2022 report, contact your Dorsey employment attorney.

Dear QQ: I am the HR Director for a technology company.  We have offices in three states and hire employees from all over the country.  Since 2020 we have let employees work remotely from the state of their choice.  I’ve been hearing a lot about pay equity, but am not clear on the different types of laws and where they apply.  Are they all basically the same thing?  Because of them, I’ve been advising senior management that we should conduct a pay equity study, but I’m not sure how to conduct one.  Pay equity is a hot topic for employers in 2022.  There have been high profile developments, such as the preliminary court approval of a $24 million settlement payment by U.S. Soccer to the U.S. Women’s players, as well as a number of new requirements issued by President Biden and state and local legislatures. The current push for new tools to achieve pay equity is in large part a response to inequities exposed by the COVID-19 pandemic and recent social movements including Black Lives Matter and #MeToo, because despite the non-discrimination requirements on the books, pay inequity persists. Women and people of color still earn less than white men do, and the disparity is even greater for women of color. New requirements aim to increase the likelihood that traditionally underpaid groups earn as much as their historically advantaged counterparts and to decrease historical power imbalances between employers and employees. These developments have occurred in three main areas: salary transparency requirements in the hiring process, protections for employees who discuss their—or their colleagues’—wages, and bans on asking applicants their salary histories. Pay transparency laws and protections for employee wage disclosures seek to reduce or eliminate secrecy surrounding compensation with the aim of putting all candidates on equal footing. Pay history bans help to equal the playing field in new hire salary negotiations and to support equitable pay for longer-term employees by forcing employers to set compensation based on the position rather than building on a candidate’s prior, potentially discriminatory, compensation. Many employers are conducting or plan to conduct pay equity studies to ensure pay fairness in their organization and to limit exposure to pay discrimination claims. New state and local laws of these types are being enacted with some frequency, so employers are advised to check on requirements prior to posting advertisements for positions. Salary Transparency Laws Colorado led the salary transparency charge in 2021. Its law requires, among other things, that any employer with at least one employee in the state, when posting for a position which could be potentially filled by a Colorado resident (whether working onsite or remotely), include compensation information in the job posting, notify existing employees of promotional opportunities, and maintain records of job descriptions and applicable wage rates. Connecticut; certain localities, for example, in New York State: Ithaca, Westchester County, and New York City (eff. Nov. 2022); Maryland; Nevada; Rhode Island (eff. 2023); and Washington also have salary transparency laws in effect. Among other requirements, the laws generally require employers to provide compensation information to job applicants either proactively or upon request. The state legislatures in California and New York recently passed similar broad-based salary transparency bills that await their respective governors’ signatures. State legislatures in Alaska, Massachusetts, Michigan, South Carolina, and Vermont have proposed comparable legislation. The laws vary as to which job postings are covered and the scope of requirements.  The Colorado law, for example, requires covered employers to list Colorado compensation ranges in ads for positions that are linked to a Colorado location or may be performed remotely from Colorado. The California bill does not appear to limit coverage to employees in California and so it would seem to apply to covered employers’ postings for remote positions. The New York bill would apply to covered employers’ postings for all jobs which “can or will be performed, at least in part, in the State of New York” and so would seem to also apply to remote positions. Requirements range from requiring employers to publish salary information in advertisements to notifying current employees of a new position’s salary range to providing pay scales upon request (as is already required of some California employers). Employers who will be subject to salary transparency laws should think carefully about how the required disclosures could affect current employees. Employers should make sure pay bands are current and positions are appropriately placed in them. Then they should analyze how current employees’ compensation stacks up to the disclosed compensation and how current employees may react when they see posted salary information.  Employees earning less than publicized rates may allege that the difference is based on discrimination unless employers are prepared to articulate legitimate reasons for the differences. Wage Disclosure Protections California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New York, Oregon, Puerto Rico, Rhode Island (eff. 2023), Vermont, Virginia, Washington, and the federal National Labor Relations Act provide employees with wage disclosure protections. The laws generally prohibit employers from limiting employees’ right to disclose their own wages and from taking adverse action against employees who disclose their own wages or discuss the voluntarily-disclosed wages of another employee. As with pay transparency laws, employers subject to wage disclosure laws should consider the potential impact of employee compensation becoming more widely known among employees. Salary History Bans Many of the states and localities noted above, and others, such as Alabama and Wisconsin, restrict employers from asking job applicants about their current and/or past compensation history and impose other limitations on the way applicants’ wage or salary history may be used.  Additionally, in March 2022, President Biden issued an executive order instructing the FAR Council to consider whether rules should limit or prohibit Federal contractors and subcontractors from seeking and considering information about job applicants’ and employees’ existing or past compensation when making employment decisions. The Office of Personnel Management anticipates issuing a proposed regulation that will bar the use of prior salary history in the hiring and pay-setting processes for federal employees. For example, New York’s law prohibits employers from: relying on applicants’ wage or salary history in deciding whether to offer employment or in determining wages; seeking, requesting, or requiring applicants or employees to provide their salary history as a condition of being interviewed, employed, or promoted; or refusing to interview, employ, or promote, or otherwise retaliating against applicants or employees based on their prior wage or salary history or their refusal to provide it. Pay Equity Studies With all of this in mind, many employers are conducting or considering pay equity studies.  Pay equity studies are a great way for employers to understand whether their employees are paid fairly and can be a strong defense against claims of system-wide or disparate impact discrimination.  But employers should proceed thoughtfully, because a poorly planned or executed pay equity study could end up causing more harm than good and open the door to discrimination claims. Best practices when conducting a pay equity study include the following: Obtain leadership buy-in before beginning the pay equity study. You don’t want to find problematic compensation and then have no tools to correct it. Evaluate position placement in pay bands, as well as rates in position, before you begin. You want to use good data. Conduct the study under attorney-client privilege. While the underlying salaries are not privileged, you want the study itself to be. Determine appropriate segmentation of positions. If these are not appropriately selected, you may end up comparing apples to oranges. Conduct a statistical analysis. Many employers hire consultants with this expertise to “do the math,” but there are also companies that provide software to allow employers to perform the comparisons in-house. Determine whether legitimate job differences or compensation philosophies and practices explain discrepancies. Determine salary adjustments to make, perhaps over time, and think through the best way to present any adjustments to employees. If you find structural pay disparities, identify and change pay practices that may create or continue them.

Workers’ compensation laws have been in effect in the United States for over a century providing benefits to employees injured on the job.  For many years, “on the job” meant injuries that occurred at an office, factory, store, or other site used exclusively for work-related purposes and over which the employer had a significant degree of control.  After COVID-19, with many workplaces adopting a hybrid office/remote model, workers’ compensation claims by remote employees has become an issue of concern for most employers. Generally, injuries that arise out of and occur in the course of employment are covered by workers’ compensation benefits.  Telecommuters are covered by the workers’ compensation system, but different factors associated with working from home – as well as the complex web of state-specific workers’ compensation laws – complicate the determination as to whether or not an injury is sufficiently work-related to qualify for coverage. For example, one employee who fell down a flight of stairs walking from her kitchen to her home office applied for workers’ compensation benefits to cover her injuries.  The employer argued that she was getting a drink, not working, so the injuries shouldn’t be covered.  The Pennsylvania court cited that state’s “personal comfort doctrine” in determining that the employee’s brief departure from work during her regular hours did not take her injury outside the realm of workers’ compensation coverage.  The court decided that the activity she was performing when she was injured was sufficiently job-related to qualify for coverage. Similarly, a New York court allowed a claim to proceed where the employee was injured while carrying boxed, unassembled furniture for his home office into his house on a lunch break. The furniture was neither provided nor required by his employer, and he was not eligible to be reimbursed for the cost of the new furniture under his employer’s business expense policy.  Nevertheless, the court determined that the Worker’s Compensation Board had been too quick to conclude that the activity leading to the employee’s injuries was purely personal. In contrast, a Florida employee (a workers’ compensation claims adjuster, of all things) brought a claim after she tripped over her dog while reaching for a coffee cup in her kitchen during a break from work.  The court determined that she was involved in a personal pursuit, so the injury was not sufficiently work-related to entitle the employee to benefits.  As the dissent in that case pointed out, the decision seemed to conflict with years of Florida precedent finding that trip-and-fall accidents occurring on short breaks were covered by workers’ compensation benefits. While the court later tried to distinguish those other cases on the grounds that it was unclear what caused the employees to trip, the location of the accident likely played a role in each case’s outcome. Another attempt to stretch the bounds of worker’s compensation coverage occurred in a case where, tragically, an employee suffered severe injuries from an assault that occurred while she was in her kitchen making lunch.  The assault was committed by a neighbor whom the employee had admitted to her home.  The court agreed with the employee that her injuries occurred during the course of her employment, meeting one half of the legal standard for coverage.  After a detailed legal analysis, however, it rejected her argument that she would not have been at home if not for her job and determined that she did not qualify for benefits because her injuries did not arise out of her employment. Somewhat confused?  You’re not alone.  So what’s an employer to do? The first important step is to review your existing workers’ compensation coverage.  What does it say, if anything, about remote workers?  Remember that each state has its own workers’ compensation system and governing law.  You need to ensure that your company has sufficient coverage to address potential risks in all locations where it has employees working remotely, whether full time or on a hybrid schedule.  Workers’ compensation provides monetary benefits to injured employees, but it also protects employers from costly lawsuits by establishing an exclusive remedy for employees to recover medical costs, lost wages, and other expenses incurred as a result of an on-the-job injury.  So while it’s sometimes in a company’s best interest to dispute a workers’ compensation claim, letting your insurance policy do what it’s designed to do can also make sense. You should also review your company’s policy on reporting work-related injuries and make sure it is easily accessible to remote workers.  Confirm that the policy includes specific instructions on how, when, and to whom employees are required to report injuries that occur at work. Also, protect your company from claims by having a robust remote work policy that sets standards for employees to maintain a safe work environment.  In particular, require an ergonomic review of home worksites to protect against cumulative injuries such as carpal tunnel and neck and back pain. And maybe consider a policy against pets in the kitchen. If you have questions about workers’ compensation coverage for remote employees (or on whether COVID-related illnesses are covered by workers’ compensation, which is a topic that could easily fill another article), don’t hesitate to contact your local Dorsey attorney for guidance.

The COVID-19 pandemic sparked an ongoing upheaval in the California (and greater U.S.) labor market. Extensive job losses early in the pandemic have led to a tight labor market, which arose in part due to the phenomenon now known as the Great Resignation. With employees resigning from positions at a record rate, employers are left scrambling to retain and recruit top talent by offering competitive pay and benefits. One benefit that has re-surfaced to the top of hiring managers’ minds is unlimited paid time off (“PTO”). In theory, unlimited PTO is viewed as a powerful recruiting tool that combats burnout and encourages flexibility in work hours. In practice, however, implementing an unlimited PTO policy presents a number of issues that should be evaluated before implementing unlimited PTO as a retention tool. California employers should consider the following: Do we have to provide PTO to employees? No.  PTO is not a mandated leave in California.  However, PTO policies can encompass leaves mandated by law (including California Paid Family Leave, California Paid Sick Leave, etc.) as well as vacation time. California law does not require employers to provide employees with paid vacation. However, if an employer chooses to provide paid vacation under a PTO policy, Section 227.3 of the California Labor Code requires the employer to pay any vested vacation time an employee has not used at the time employment ends, unless otherwise provided in a collective bargaining agreement. This payout is required because accrued vacation time is considered earned wages. The benefit of keeping mandated leave separate from PTO is that it does not have to be paid out on termination. Are there risks in providing unlimited PTO? Yes. There are two main risks involved in providing unlimited PTO. First, unlimited PTO policies only work if they are truly unlimited. A PTO policy is not “unlimited” if an employer provides an implicit or explicit cap, limitation, or “guidance” on the amount of PTO, such as stating, “We have an unlimited PTO policy, but an employee is expected to only take three weeks” or “Employer will approve a vacation request unless the employee takes an excessive amount.” A California appellate court decision illustrates this point: in McPherson v. EF Intercultural Foundation, Inc., the employer had an unlimited vacation policy in place, but did not communicate that the vacation policy was unlimited and expected employees to take vacations of between two to six weeks each year. The court found that the policy was not truly unlimited with these limitations in place. Because there is not a cap in place for unlimited PTO, bigger financial problems arise when the employee’s employment is terminated and a policy is found not to be a bona fide unlimited policy.  Many employers choose to provide unlimited PTO because they do not want to pay out any accrued balances at termination.  However, because unlimited PTO has no cap, the liability could be far greater than under their current vested vacation system. Second, implementing unlimited PTO policies requires evaluating any effect on the duty to accommodate disabilities and leaves mandated by law. These common questions arise: “If an employee can take unlimited vacations, how can the employer limit time off for a disability? Pregnancy? Illness?” Sometimes employers answer these questions by implementing unlimited vacation, and leaving in place state-mandated requirements in providing sick days, disability accommodations, pregnancy and leave. However, by making a distinction between vacation and leaves mandated by law, employee morale could be impacted and the distinction could give rise to discrimination complaints if the policy is not drafted and administered properly—and consistently. Are there alternative approaches to a “truly” unlimited PTO policy? Yes. In realizing the numerous risks involved in implementing an unlimited PTO policy, some employers adopt the following approaches as a way to set an objective standard. First, employers may provide time off by implementing a “shut down/unplugged dates” policy. These employers note when there is a lull in business (for example, in the summer time, during the week of Thanksgiving, and in the last two weeks of December into January), and “shut down” during those times. During the shutdown, employers use a skeleton crew for coverage, and the employees who are off during those time periods are truly off and unplugged – no email, no phone calls, no meetings. By implementing a “shut down/unplugged dates” policy, as opposed to unlimited PTO, there could be significant savings in operational costs because normal operating costs are reduced and the time does not have to be paid at termination. Second, employers may provide an “unlimited” PTO policy that rests on productivity. In examining law or accounting firms, unlimited PTO policies are easier to implement in these settings because, generally, if the employee reaches the required number of hours of work, then the employee is entitled to take an unlimited amount of PTO. Third, employers may provide an “unlimited” PTO policy that centers on a deliverable. In examining deliverables-based positions (such as positions focusing on launching a product or a movie, or those with specific sales targets, etc.), unlimited PTO policies can be implemented because, generally, the employee can take an unlimited amount of PTO outside of the designated production/launch time for the deliverable or so long as they are meeting the sales/ commissions expectations. We understand the risks and alternatives, but we still want to provide a “truly” unlimited PTO policy to our employees. How should we draft our unlimited PTO policy? First, the employer should consider whether the unlimited PTO policy only encompasses vacation, or covers both vacation and leaves mandated by law. Second, the employer should consider guidance from the McPherson case. In its opinion, the McPherson court provided helpful guidance for “truly unlimited time off policies.” The court explained that an unlimited PTO policy may not trigger Section 227.3 where, for example, in writing it: clearly provides that employees' ability to take paid time off is not a form of additional wages for services performed, but perhaps part of the employer's promise to provide a flexible work schedule—including employees' ability to decide when and how much time to take off; spells out the rights and obligations of both employee and employer and the consequences of failing to schedule time off; in practice allows sufficient opportunity for employees to take time off, or work fewer hours in lieu of taking time off; and is administered fairly so that it neither becomes a de facto “use it or lose it policy” nor results in inequities, such as where one employee works many hours, taking minimal time off, and another works fewer hours and takes more time off. The court explained that an unlimited PTO policy “depending on the facts of the case[,] very well may not constitute deferred compensation for past services requiring payment on termination under section 227.3.” How do we transition from an accrued PTO to unlimited PTO? Transitioning from accrued PTO to unlimited PTO involves careful consideration. Set a deadline for California employees to use up accrued vacation time before the company transitions to unlimited PTO. However, because accrued vacation time is considered earned wages, California employees cannot be forced to “use it or lose it.” The Company will have to monitor to ensure employees take the vacation or leave the accrual on the books until it is paid out, at the latest, upon termination of employment. To help with the transition, employers also should consider the following: Ensure all accrued vacation time is accurately tracked. Announce the change nine months in advance and assist employees with scheduling accrued vacation.  Schedule it for them if they have not done so after three months.  Cease accrual in the last three months before the change so that you can manage the accrued balances. Put unused vacation in a bank that can be used for extended illnesses/disabilities but will otherwise be paid at termination. Require employees transitioning to the unlimited PTO policy to sign documentation that outlines the number of days accrued and unused and the terms of PTO payout. Cash out the accrued PTO on a set date prior to the implementation of the unlimited PTO policy, if the company wants to avoid paying PTO at termination. As always, employers should consult legal counsel to assist in policies covering PTO, vacation and leaves mandated by law.

An overwhelming majority of states have adopted what is widely known as “ban-the-box” laws or policies that generally prohibit employers from inquiring about an applicant’s criminal background until later in the hiring process. The laws are intended to allow an employer to evaluate an applicant’s job qualifications first, without a criminal record overshadowing their candidacy.  Here’s what employers need to know to make sure they are complying with ban-the-box laws. What is banned? For a long time, many employers included a “box” on their employment applications. If the applicant had been arrested for or convicted of a crime, then they had to check the box. Today, fifteen states and at least twenty-three localities have adopted ban-the-box laws or policies applicable to private-sector employment. Thirty-seven states have adopted statewide laws or policies applicable to public employers. Many of these jurisdictions do more than simply eliminate the box. For example, some laws incorporate the best practices set forth by the EEOC. And still others prohibit employers from even considering certain records when reviewing applications. The EEOC issued guidance on the use of arrest and conviction records in employment decisions in 2012, as part of the Commission’s efforts to eliminate unlawful discrimination in employment decisions. As the EEOC warned, “[a]n employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964, as amended.” There are two ways that employers get into trouble under Title VII by using criminal records: (1) if an employer treats job applicants or employees with the same criminal records differently because of their race, national origin, or another protected characteristic; and (2) if an employer’s neutral policy of excluding applicants with criminal records has the effect of disproportionately screening out a protected group and the employer fails to demonstrate that the policy is job-related and consistent with business necessity. The EEOC’s guidance calls on employers to conduct an individualized assessment of job applicants by evaluating three factors: the nature and gravity of the offense; the time elapsed since the offense or completion of the sentence; and the nature of the job. As part of the individualized assessment, the employer would notify the individual that they have been screened out because of their criminal record, and provide the individual an opportunity to demonstrate that the exclusion should not be applied due to their particular circumstances. What does the future look like for ban the box laws? A recent employer to “ban the box” is the U.S. government, thanks to the enactment of the Fair Chance to Compete for Jobs Act of 2019. The Act went into effect on December 20, 2021, and it prohibits federal agencies and contractors from inquiring about an applicant’s criminal history before extending a conditional job offer, with some carve-outs. But as the Office of Congressional Workplace Rights announced: “The purpose of the FCA is not to remove access to criminal history information about an applicant for government employment; rather, the purpose is to move that information to the end of the process to give those with a criminal history a fair chance to compete for a Federal job.” Because a number of states and localities prohibit employers from requiring applicants to disclose a criminal record before a job offer has been extended, the federal law is unlikely to require significant changes for many contractors who are already subject to some form of state or local ban-the-box law. Nevertheless, with ban-the-box laws operating in a growing number of jurisdictions, employers should take the time to review and, if necessary, revise their hiring policies and provide regular training to individuals involved in the hiring stages. Multistate employers should consider how this legal patchwork may effect their policies—including whether to have multiple policies based on the states in which they operate or a universal policy based on the strictest laws. Moreover, even if an employer does not have a physical office in a certain state, the state’s laws likely apply to remote employees who live or work there. If you have any questions, do not hesitate to contact us to help ensure your policies are in compliance with these laws.

What is the current Minnesota law regarding edible products containing THC? An inconsistency in two amended provisions of  Minnesota Statute § 151.72 has resulted in what some have deemed the legislature “accidentally” legalizing edible products containing certain amounts of hemp-derived tetrahydrocannabinol (THC) for purchasers 21 years of age and older. When did the new law take effect? The new law went into effect on July 1, 2022. And in simplest terms, most edibles and beverages containing THC are now legal in the state of Minnesota. Did the new law change drug testing requirements for employers? It doesn’t appear so.  Minnesota employers are not required to perform drug testing on employees, but when employers choose to have a drug testing program, it must be carried out within the strict parameters of Minnesota Statute § 181.951.  Minnesota’s drug testing law was not amended to interact with the legalization of edibles and beverages containing THC in the state. Under the Minnesota drug testing law, employers may take certain actions against an employee that tests positive for a controlled substance as defined in Minnesota Statute § 152.02, Subd. 2 through 6.  Included within those sections is cannabinoids, including dronabinol [(-)-delta-9-trans-tetrahydrocannabinol (delta-9-THC)], the THC legalized in edible form under Minnesota’s new law. Many states that have legalized some form of recreational marijuana have also updated their employment drug testing laws.  For example: In Alaska, persons over the age of 21 may use and possess small amount of marijuana. While the recreational marijuana law does not address employee drug testing, it specifically allows employers to prohibit or restrict the use, possession, transfer, or cultivation of marijuana in the workplace; implement policies restricting the use of marijuana by employees; and prohibit or restrict the use, possession, transfer, or cultivation of marijuana on any property owned or controlled by the employer. In Colorado, employers are permitted to have policies that restrict employee’s use of marijuana. In Connecticut, employers may still conduct drug tests for applicants and employees, but cannot take action for a positive result for 11- or -9-carboxy-delta-9-THC unless certain circumstances exist. In New Mexico, even though the recreational use of cannabis is legal, employers may still adopt zero tolerance policies which can include discipline or termination of an employee based on a positive drug test that indicates any amount of delta-9-THC or delta-9-THC metabolite. At least for now, employers in Minnesota may continue to take employment actions—in compliance with Minnesota’s drug testing law—against employees or applicants that test positive for now-legal substances. Should employers continue to drug test? Minnesota’s law is lengthy, arguably onerous, and can be a minefield for unsuspecting employers trying to manage a drug testing program.  Unless an employer has a really good reason for doing so – such as a safety sensitive work environment or industry requirements and regulations – we understand why employers may choose not to drug test employees.  Some federal contractors must comply with the Drug Free Workplace Act as a condition of their contract.  That law requires covered employers to have a drug-free workplace policy statement, establish a drug-free awareness program, ensure that employees understand their reporting requirements under the Act, report any violations to the federal contracting agency, and take action against employees engage in a workplace drug violation. Noticeably absent is a requirement that employers conduct drug testing of employees. As a compromise, an employer would be well-advised to include in their employee handbook a policy that prohibits the use of drugs and alcohol while at work, and advises employees to immediately alert their employer if they are taking any legal drugs that could limit their ability to safely do their job.

When the subject of the National Labor Relations Act (the “NLRA,” or, more succinctly, the “Act”) is broached, employment lawyers often hear a familiar refrain: “The Act doesn’t apply to me because my employees are not unionized.” This widespread belief is incorrect. In actuality, all employers in the United States are subject to the Act in an important way that carries even greater significance when political and polarized societal issues find their way into the workplace. For those of you who may not have paid much attention to the NLRA before receiving this surprising news, Section 7 of the Act protects an employee’s right to self-organization, including to join a labor organization. Section 7 also shields an employee’s right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  Concerted activity (activity involving two or more employees or by one on behalf of others) that is for “mutual aid or protection” is interpreted broadly. It can range from an employee strike to potentially more nuanced instances, such as where employees post complaints on social media relating to their employment benefits, a conversation involving one speaker and one listener on a subject that relates to group action in the interest of employees, or even where multiple employees individually refuse to work overtime for the same reasons without group discussion, where their actions imply a common goal.  In tandem with Section 7, it is an unfair labor practice under Section 8(a)(1) for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act. In other words, an employer violates the Act if it interferes with an employee’s ability to exercise their Section 7 rights, even if that employee is not currently a member of a labor union. But the question remains: What does it mean for an employer to impermissibly interfere with an employee’s Section 7 rights? The applicable legal standard is complicated and was formed in a long string of cases by the National Labor Relations Board (“NLRB”) dating back nearly two decades. Beginning in 2004, the NLRB applied the standard set forth in Lutheran Heritage, under which an employer’s policy is unlawful if an employee would “reasonably construe” the policy as restrictive of their Section 7 rights or if the policy would “reasonably tend to chill” Section 7’s protected activities. Examples of where an employer may infringe on protected activities include, but are not limited to, threatening employees if they support a union or engage in concerted activity enforcing work rules that reasonably tend to inhibit employees from exercising their rights under the Act, and retaliating or taking adverse actions against employees who engage in protected or concerted activities. In 2017, under the Trump Administration, the NLRB articulated a more employer-friendly standard in Boeing Company. The Boeing Co. standard requires not only assessing the legality under Section 7, but also evaluating the employer’s justification for the policy or conduct. Now, the Biden Administration is poised to revert the NLRB to the pre-Boeing Co. standard. The NLRB’s General Counsel, Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases to her office for consideration relating to certain issues, notably including cases addressing the Boeing Co. standard. And in early 2022, Abruzzo filed a brief in the Stericycle, Inc. case before the NLRB in which she advocated for a return to the Lutheran Heritage standard. This issue often rears its head in two contexts. First, employers should be careful when drafting or enforcing policies or handbooks that constrain an employee’s ability to discuss the terms and conditions of their employment. For example, if an employer adopts a social media policy that contains content-based restrictions, or a policy that prohibits employees from making negative or disparaging statements about the company, those actions may be seen by the NLRB as prohibited by the Act. Second, employers should take Section 8 of the Act into account when considering whether and how to discipline an employee for verbal comments, violation of the company dress code, or other conduct related to an employee’s exercise of Section 7 rights. Since workplaces have existed, employees have been making statements that cause offense or discomfort to other employees. It can be hard to distinguish between statements that may implicate Section 7 rights and those that do not. As a recent example, although an employee’s comment to a co-worker about their personal views on abortion or the recent Supreme Court decision in Dobbs may not raise Section 7 rights, that employee’s comment about the company’s policy related to reimbursement of abortion-related expenses post-Dobbs is likely protected. Other topics, such as co-worker pay, are so closely related to the terms and conditions of employment that any action by the employer to restrict discussion may be considered by the NLRB to reasonably tend to chill concerted activity. If you are learning for the first time that you may be subject to the NLRA, or if you have policies in place that limit an employee’s speech or conduct in the office, now is the time to consult with your local Dorsey attorney. The NLRB has identified this as an enforcement priority, and employers would be wise to anticipate and fix any issues before the NLRB becomes involved.

On March 18, 2022, the U.S. House of Representatives passed the Creating a Respectful and Open World for Natural Hair (CROWN) Act by way of a party line vote of 235-189. In general, the federal CROWN Act and similar state acts explicitly prohibit discrimination on the basis of a person’s natural hair.  More specifically, the proposed federal legislation prohibits “discrimination based on a person’s hair texture or hairstyle if that style or texture is commonly associated with a particular race or national origin” and seeks to ban race-based hair discrimination in the workplace, federal programs, and public accommodations.  The U.S. Senate has not yet voted on the Act. If enacted into law, the federal law would be treated as incorporated into Title VII of the Civil Rights Act of 1964 which, among other things, already bans discrimination on the basis of race and national origin. While the fate of the bill at the Senate is unknown, several states have already passed similar CROWN Acts and several others have introduced CROWN Acts in the hopes of making it law. Given the national attention the CROWN Act has received, employers are smart to ask which states already have these laws in effect and what they need to know about these laws so they can prepare. Do any states have their own CROWN Acts? Yes.  California was the first state to pass a CROWN Act in 2019 and, as of the date of this post, 16 states have passed similar legislation.  To date, the following states have passed similar state or territory-level hair discrimination laws: California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Nebraska, Nevada, New Jersey, New Mexico, New York, Oregon, Tennessee, Virginia, Washington, and the U.S. Virgin Islands. Localities in various states including Arizona, Colorado, Florida, Georgia, Kentucky, Louisiana, Maryland, Michigan, Missouri, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Texas, Washington, West Virginia, and Wisconsin have also instituted ordinances or other directives prohibiting hairstyle and texture-based discrimination. State hair discrimination laws are similar to the federal law, but consulting an experienced labor and employment attorney as to your state’s CROWN Act is recommended. Why are CROWN Acts passed? Proponents of these laws view the legislation as way to address systemic racism and to prohibit the removal from—or denial of—employment due to an individual’s natural hairstyle.  For a long time, courts declined to recognize that discrimination on the basis of someone’s appearance could be discrimination on the basis of that person’s race or national origin.  Advocates of CROWN Acts say this historical lack of protection from hair discrimination is largely due to a lack of understanding about how a person’s hair choices are connected to their race or national origin.  The hair discrimination laws being introduced and passed are an attempt to address this issue. What do courts have to say about the issue? This issue played out between disagreeing appellate judges in EEOC v. Catastrophe Mgmt. Sols., 876 F.3d 1273, 1274 (11th Cir. 2017).  In that case, an employer refused to hire any applicant who had an “excessive hairstyle” and ultimately relied upon that policy in declining to hire a Black woman who wore her hair in dreadlocks.  The Eleventh Circuit held that “dreadlocks are not, according to the EEOC’s proposed amended complaint, an immutable characteristic of black individuals.”  The majority’s rationale was that a person does not have to wear their hair in dreadlocks, therefore dreadlocks are not immutable and not protected under Title VII.   The EEOC argued that “dreadlocks are protected under Title VII because they are culturally and physiologically associated with individuals of African descent,” the exact sentiment underlying CROWN Acts. One judge wrote a scathing dissent, stating: The discriminatory animus that motivates an employer to ban dreadlocks offends the antidiscrimination principle embodied in Title VII just as much as the discriminatory animus motivating a ban on Afros. Both are distinctly African-American racial traits. . . . In other words, when an aspect of a person’s appearance marks her as a member of a protected class and her employer then cites that racial marker as the reason for taking action against her, the employee’s race probably had something to do with it. Whether that racialized aspect of her appearance is ‘immutable’ such as skin color or ‘mutable’ such as hair is beside the point. Either way, the employer’s action based on a racial identifier is an action based on the employee's race. Legal disputes asserting claims of hair-based discrimination continue to be filed, including a lawsuit filed by a Black man who applied for re-employment following furlough. The plaintiff’s lawsuit asserts that he was told by the hiring manager that he would have to conform his appearance to company policy, which meant that he would need to cut his locs. See Thornton v. Encore Group USA LLC, No. 37-2021-00049996 (Cal. Super. Nov. 29, 2021) This and other disputes centering around alleged hairstyle or texture discrimination appear to be here to stay, particularly with the increasing number of state laws providing an avenue for workers to seek redress. What does the CROWN Act momentum mean for employers? Hair discrimination laws seek to expand the scope of characteristics that may give rise to actionable claims of discrimination, including in the workplace.  Given the current momentum behind this movement and legislative trends, employers operating in states or localities with hair discrimination laws should be mindful of these new protections for workers.  Employers should also consider revisiting dress and/or grooming policies to ensure that they do not prohibit employees from wearing particular hairstyles commonly connected to racial, ethnic, and religious identity.  Additional training for management personnel and those with interviewing or hiring responsibilities—including implicit bias training—may also be beneficial to ensure that hiring decisions are based upon proper grounds, and do not implicate potential hair-based discrimination. If you are an employer in one of these states seeking guidance on your state’s new CROWN Act, or if you are an employer seeking guidance on how you can guard against hair discrimination in the workplace regardless of your state’s laws, you should contact an experienced labor and employment attorney.

Agricultural employers are often at the mercy of nature which causes constant fluctuations in labor needs. Given the unique nature of the agricultural industry, their workers have historically been exempt from minimum wage and overtime requirements. These requirements differ from state to state, and employers are noting a change in the agricultural exemption. Some states have removed, or are considering removing, the exemption for agricultural workers from their wage and hour laws. This generates legitimate concerns from employers faced with new compliance issues and increased labor costs. Many employers may be wondering: Are my agricultural employees still exempt from wage and hour laws, to what extent, and will my state’s exemption be the next to go? The Fair Labor Standards Act (FLSA) establishes federal regulations regarding wages, hours, and child labor within interstate commerce. These regulations set the federal minimum wage and provide that employees must be paid time and one-half of their regular rate for any hours worked in excess of forty hours a week. However, the FLSA exempts certain employees from the minimum wage provisions, the overtime provisions, or both. One of those exemptions applies to agricultural workers. Who is exempt from the FLSA and from which provisions? To fall within the agricultural exemption, an individual must be “employed in agriculture.” This includes individuals who: are employed by a farmer, work on a farm, or who are otherwise engaged in agriculture. The FLSA defines agriculture to “include farming in all its branches and among other things includes the cultivation and tillage of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities, the raising of livestock, bees, fur-bearing animals, or poultry, and any practices performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market.” To determine whether a particular activity is considered agricultural work, it must be carried on as a part of the agricultural function rather than an independent productive activity. Any employer who did not engage more than 500 person-days of agricultural labor during any calendar quarter during the preceding calendar year is exempt from both the minimum wage and overtime provisions. Additionally, employees who are immediate family members of the employer and certain hand harvest laborers are also exempt from both provisions. Exempt from only the overtime provision are employees who are employed in agriculture, as defined above, or in irrigation. While there are some limitations and additional exemptions provided by the FLSA, generally, employees who are employed in agriculture will be exempt from the federal overtime requirements and may also be exempt from the minimum wage requirements. eCFR :: 29 CFR Part 780 -- Exemptions Applicable to Agriculture, Processing of Agricultural Commodities, and Related Subjects Under the Fair Labor Standards Act. However, just because employees fall under an exemption to federal wage and hour regulations, does not mean that employers do not have to comply with state wage and hour laws. But what about the States? Should I be concerned? And how do I prepare? States may adopt their own versions of the FLSA so long as their regulations are equally protective or greater than those defined federally – and most have done so. Following the FLSA’s example, many states have included an agricultural exemption to their wage and overtime provisions. Some of these exemptions completely exempt agricultural workers from either or both the state minimum wage and overtime provisions or provide standards more protective than the federal regulations but less stringent than those that apply to other types of workers within the state. A full list of state overtime and minimum wage provisions for agricultural workers can be found at Overtime & Minimum Wage Compilation - National Agricultural Law Center (nationalaglawcenter.org). It is important to note that a recent trend has emerged in which states are removing the agricultural exemption from their wage and hour laws. So far, seven states have removed their agricultural exemption to some degree including California, Colorado, Hawaii, Maryland, Minnesota, New York, and Washington. These removals have been prompted by legislation, as in California, or through case law invalidating the agricultural exemption itself, as in Washington. Generally, once the exemption is removed, the changes in requirements are implemented in phases. This allows employers time to adjust to new scheduling and pay practices. However, many employers are still finding it difficult to comply with the new requirements. Whether employers are located in a state which is considering removing its exemption, such as Massachusetts, or are worried about how much longer their exemption will be in place, there are a few things that can be done in preparation of a change. Review pay practices. Employers should periodically review their pay practices to ensure compliance with both the FLSA and current state wage and hour laws. While an exemption may apply to one type of employees, it may not apply to another. Employers should review compliance by type of employee as well as consider how state regulations may differ if they employ agricultural workers in multiple states. Additionally, farmers utilizing the services of farm labor contractors should ensure that the contractor’s pay practices are also compliant given the potential for joint employer liability. Plan for the possibility of removal. A removal of the agricultural exemption brings with it increased labor costs. Therefore, employers may consider preparing for a change in scheduling practices to avoid overtime or invest in mechanized agriculture to offset the added labor costs. This includes obtaining time and attendance software, gathering pay information, and updating policies. Remain up to date. Now more than ever, it is imperative that agricultural employers are in the know regarding their state’s agricultural exemption and the risk of its removal. Subscribe to the Quirky Questions blog to receive updates regarding changes in labor and employment law or contact your Dorsey employment attorney for guidance.

Raise your hand if you are a human resources professional who has had it up to the proverbial HERE with sifting through state law requirements for remote workers? This post is for you! Today we are taking a closer look at Colorado’s Equal Pay for Equal Work Act and how its pay transparency provisions apply to multi-state employers. Here’s the scenario: My company is based in Minnesota (or some other state that isn’t Colorado). We are posting a position online (e.g. Indeed, LinkedIn). The position will be 100% remote and we will accept applicants from all 50 states, including Colorado. Does my posting have to comply with Colorado law? The answer depends on a couple of factors. First, does the company currently have at least one employee in Colorado? If yes, then the company is a covered employer as defined by the Act. If the company does not have any employees in Colorado, the company is not covered by the statute. Next ask, could the position potentially be filled by a Colorado resident? Employers should take a broad read of this question. In other words, unless it is an absolute certainty that the company will not hire a Colorado resident, the answer to this second question is probably “yes.” Did you answer “yes” to both of these questions? If so, then your company is a covered employer and any job posting accessible by Colorado residents that could potentially be filled by a Colorado resident must comply with the Act. So what is a compliant posting? Job postings must include: (1) the rate of compensation (e.g. salary or hourly rate), but a range of the lowest to the highest pay the company actually believes it might pay is acceptable; (2) a general description of bonuses, commissions, or other compensation, if any; and (3) a general description of all benefits offered with the position (e.g. health insurance, retirement plan, paid time off). Regarding the third point, the description of benefits may be general, but must be complete. What does that mean? Employers cannot use terms like “etc.” or “and more.” “All benefits” means all benefits. But wait, we aren’t done yet! What about the Act’s provisions requiring covered employers to post promotional opportunities to existing employees? If the company is a covered employer, then the company is required to notify its Colorado employee(s) of all promotional opportunities, including for positions to be performed outside Colorado. However, notices of promotional opportunities for jobs to be performed entirely outside Colorado need not include compensation and benefits information. Likewise, multi-state employers are not required to notify their non-Colorado employees of promotional opportunities in Colorado (or elsewhere, unless required by state law). Bottom line: If an employer has even one employee in Colorado, and is posting a new position or promotional opportunity that can be performed from anywhere (including Colorado), the posting needs to include the requisite compensation and benefits information. As a parting note, keep in mind there are other states and localities that require some form of pay transparency including California, Connecticut, Maryland, Nevada, New York City, Rhode Island, and Washington. Contact your favorite outside employment counsel with questions on pay transparency laws and any other remote worker compliance issues.

As most human resources professionals know, the Immigration Reform and Control Act requires all employers to verify the identity and employment authorization of each person working in the United States who was hired after Nov. 6, 1986. This verification process is documented by completing and retaining USCIS Form I-9, Employment Eligibility Verification, for each employee who is hired to work in the United States. The form can be complicated to complete, and it is important for employers to follow the guidelines published by USCIS, which can be found at: https://www.uscis.gov/i-9-central/handbook-employers-m-274. The new employee completes Section 1 of the form, and the employer inspects furnished identification documents and completes Section 2 of the form. The completed form is then retained in the company’s records. Although employees are responsible for completing Section 1, it is the employer’s responsibility to ensure all required fields are properly completed. How does an employee properly complete Section 1 and what common mistakes should I look out for? The employee must complete all required fields in Section 1: Name, including other names used; Address; and Date of birth. The following fields in Section 1 are optional: Social Security number: this field is voluntary unless the employer participates in the E-verify program. If the employer participates in the E-verify program, the employee must provide their number but does not need to produce the social security card, unless the employee is using the card as a List C document; Email address; and Telephone number. Section 1 must be completed no later than the employee’s first day of employment. Before the employer completes Section 2, the employer should review Section 1 to ensure the employee completed it properly. If the employer finds any errors in Section 1, the employer should have the employee make any necessary corrections and initial and date the corrections. Common errors that employers should be aware of include: Failure to include other names used; Failure to include date of birth; and Requiring the employee to provide the SSN when the employer is not enrolled in the E-verify program. How does an employer properly complete Section 2? The employer is responsible for completing Section 2, and must physically inspect the documents presented by the employee. Unless the employer participates in E-verify, there is no requirement to keep photocopies of the documents presented. However, if the employer does decide to make copies of the documents, it must do so for all employees, regardless of national origin or citizenship status, or it may be in violation of anti-discrimination laws. The employee gets to choose which documents they will present. The employee must present either: One document from List A; OR A combination of one selection from List B and one selection from List C. The employer manual linked above contains a helpful list of acceptable documents and photographs of each type. If an employee presents a List A document, do not ask or require the employee to present List B or List C documents. If an employee presents List B and List C documents, do not ask or require the employee to present a List A document. This is a common mistake and can create an inference of “Unfair Documentary Practices” as explained below. In some cases, the employee will attempt to present a receipt in lieu of the actual identification or work authorization document. Although generally, receipts are not acceptable, in three (3) limited instances, the employer may accept a receipt (and follow up later to revise and update the Form I-9 when the actual document is issued): A receipt showing that the employee has applied to replace a List A, B, or C document that was lost, stolen, or damaged. The arrival portion of Form I-94/I-94A (Arrival-Departure Record) with a temporary Form I-551 stamp and a photograph of the individual. Departure portion of Form I-94/I-94A with a refugee admission stamp or computer-generated printout of Form I-94 with admission code “RE”. See Receipts | USCIS for more information. Is there anything different about the I-9 process for remote workers? As noted earlier, one of the core requirements of the I-9 process is that the employer (or its agent) must physically inspect the identification documents furnished by the employee to prove he or she is authorized to work in the United States. This requirement for physical inspection was always difficult for employers with remote workers, but it became nearly impossible at the beginning of the COVID-19 pandemic. Fortunately, Immigration and Customs Enforcement (ICE) – the agency charged with I-9 enforcement – issued certain relaxations to this strict physical inspection requirement. Although the relaxed ICE policy was intended to be temporary, it has been extended several times and now expires on October 31, 2022. See ICE announces extension to I-9 compliance flexibility | ICE The policy permits deferral of the physical inspection requirement for 60 days, or until 3 days after the termination of the current National Emergency declaration, whichever ends first (which is now October 31, 2022). Under this new inspection deferral policy, employers may remain compliant with the I-9 identification verification rules by following these steps: No later than the first day of employment (but not before accepting the job offer), the new employee completes and signs Section 1 of the Form I-9 and returns the form to the employer. No later than 3 days after the new employee’s first day of work, the employer will, through remote means: “Inspect” identification documents furnished by the new employee; and “Obtain, inspect, and retain” copies of the furnished documents; and Complete and sign Section 2 of the I-9. Once normal operations resume at the workplace, the new employee must report within 3 business days and present the identification documents for inspection. The employer must physically inspect these identification documents and annotate the Section 2 “Additional Information” box with the reason for the delay, an endorsement that the identification documents were physically inspected, and the date of the inspection. We suggest using the language “COVID-19 delay; documents physically inspected on [DATE].” Note that while the new guidance contains separate requirements for the employer to “inspect” and to “obtain, inspect, and retain” the identification documents (2.a and 2.b above), the precise language of the order suggests that these requirements could be accomplished in a single step: by obtaining scanned copies of the documents via email. To be especially rigorous, an employer could decide to both request emailed copies and conduct a remote, virtual inspection of the actual documents via video call. One additional requirement is that employers who exercise this deferred physical inspection option must provide written documentation of their remote onboarding and telework policy for each employee. Are there any limitations to remote verification? It is very important to note that ICE is permitting this remote verification option only for work locations where there are no employees physically present. If a company has any employees continuing to physically work at a specific worksite, then the normal I-9 requirement for physical inspections apply. However, companies may consider the remote status of their different worksites separately. If a company has employees continuing to work onsite and is thus ineligible for the deferred physical inspection option, the “normal” I-9 rules apply and the company may designate an authorized representative to complete the physical inspection requirement. This authorized representative can be a business partner of the employer or any third party willing to conduct the in-person inspection and complete Section 2 for the employer. The company remains liable for any violations on the form or violations committed during the verification process. What are Unfair Documentary Practices? The Immigration Nationality Act prohibits discriminatory documentary practices related to verifying the employment authorization and identity of employees during the employment eligibility verification process. Generally, when completing the Form I-9 or when re-verifying, employers may not specify which documents (from the full acceptable list) an employee should provide. Further, the employer may not request different documents than what the employee presents (so long as the documents presented appear to be genuine and meet the rules regarding acceptable documents). Importantly, employers may not reject reasonably genuine-looking documents. There are four broad categories of unfair documentary practices, with the most common listed first: Requesting that an individual produce more or different documents than are required by Form I-9 to establish the individual’s identity and employment authorization; Requesting that individuals present a particular document, such as a “Green Card,” to establish identity and/or employment authorization; Rejecting documents that reasonably appear to be genuine and to relate to the individuals presenting them; and Treating groups of individuals differently when verifying employment eligibility, such as requiring certain groups of individuals who look or sound “foreign” to present particular documents the employer does not require other individuals to present. The best way to avoid these problems is to permit the employee to choose which documents to use. If the employee “over-complies” by providing more documents than are necessary, explain to the employee what is needed and allow the employee to select which documents to use. Do not pick for the employee. What if we find mistakes? Can we correct the form? Generally, yes. USCIS and ICE encourage employers to conduct internal audits of their Forms I-9 and to correct mistakes when discovered. This will help avoid penalties if the employer is subject to an ICE audit. Below are the dos and don’ts for correcting I-9s: Don’t conceal changes or back-date forms. Enter missing information and date and initial it. Use a different color pen or font if online for any modifications or additions. If information needs to be removed or corrected, cross it out with a single line and date and initial it. Do NOT use white-out or other redaction. Attach a written explanation for any additions or revisions. Leave an audit trail (showing you discovered and corrected errors). Employees must make any necessary revisions to Section 1. Employers must make any necessary revisions to Sections 2 and 3. If necessary, a new I-9 may be completed for a particular individual (if there are many errors). In that case, the old form should be stapled to the new form and a note explaining why a new form was completed should be attached. For more information, you may contact Rebecca J. Bernhard at 612-492-6186 or bernhard.rebecca@dorsey.com.

The New York Times article detailing the accounts of survivors of Harvey Weinstein’s sexual misconduct sparked a wave of revelations and stories from survivors of sexual harassment and abuse in multiple industries throughout the United States. The deluge of stories was dubbed the #MeToo Movement, and it led to a reckoning in American society about how to address claims of sexual misconduct. Five years later, Congress has passed a new piece of federal legislation to address this issue, and President Biden signed it into law on March 3, 2022. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”), colloquially known as the #MeToo law, demonstrates how the cultural shift in attitudes towards survivors of sexual misconduct in the workplace has moved into the legislative sphere. In light of this new law, many employers may be wondering: What does that mean for our current arbitration agreements? What steps do we need to take to make sure we are complying with this new law? Are we saying farewell to arbitrations in the future? The Act amends the Federal Arbitration Act (“FAA”) by prohibiting mandatory arbitration agreements between employers and employees for both “sexual assault disputes” and “sexual harassment disputes.” These types of binding arbitration agreements were criticized during the #MeToo movement because arbitration proceedings are not usually open to the public. Commentators noted that this feature prevented survivors from sharing their stories publicly, which contributed to the continuation of abuse. Under the Act, a “sexual assault dispute” is “a dispute involving a nonconsensual sexual act or sexual contact.” And a “sexual harassment dispute” is “a dispute relating to conduct that is alleged to constitute sexual harassment.” While employers may no longer be able to mandate arbitration claims of sexual assault or sexual harassment, employees can still voluntarily opt in to arbitration on these claims if he or she chooses; employees will always have the option to go to court to pursue these claims as well. The Act applies retroactively, so even if an employee signed a mandatory arbitration agreement years ago, he or she can bring any claims that arise after March 3, 2022 in court. Some states have passed similar statutes already, but the new legislation applies to employers that are subject to the FAA, apart from certain exceptions such as employers with collective bargaining agreements. It is unclear what effect the Act will have on other employment claims. Employees often bring multiple claims, and courts will eventually have to confront cases with claims that can be subject to mandatory arbitration and claims that cannot be subject to mandatory arbitration. At this point, it is safe to assume the new law will result in an uptick in sexual harassment and abuse claims and make them more complicated and expensive to resolve. Employers should be prepared to face potential claims in arbitration and court simultaneously if courts regularly sever arbitrable and non-arbitrable claims. We’ve put together a to-do-list for employers in light of this new federal law. Each of the following items are actions to take to ensure compliance with the law and prepare for any potential claims of sexual harassment or abuse: Review your arbitration agreements. You should revise the language of all future mandatory arbitration agreements to either exclude claims of sexual harassment or abuse, or include clear language stating that the employee signatory has the choice to bring their sexual harassment or assault claims in court and that they are not required to individually arbitrate claims. Revisit your sexual harassment policies. Adopt a policy, included in your handbook, informing employees that they are no longer required to arbitrate sexual harassment or sexual assault claims, even if those are covered in an agreement that the employee may have entered into in the past. As the law applies retroactively to arbitration agreements that have already been entered into containing mandatory provisions, we recommend focusing on future mandatory arbitration agreements as having all employees who have already signed an agreement to re-sign can be burdensome. Remind employees of appropriate conduct and refocus on training. Many states require sexual harassment prevention training, but now is a good time to revisit that. Make sure that managers and supervisors are equipped with the tools to address and prevent sexual harassment. If you have a remote or hybrid workforce, remind your employees of appropriate remote work conduct, as remote work can present new ways in which employees may be exposed to harassment such as inappropriate material or comments during virtual meetings. Determine whether you have the tools to handle sexual harassment claims. These include channels at your organization for employees to report instances of potential sexual harassment and setting up processes for investigating sexual harassment claims. If you are not equipped with these tools, now is a good time to revisit your organization’s policies and procedures to ensure you are prepared to address any potential sexual harassment claims. Additionally, you should make sure that these processes are clearly communicated to employees. This is especially important as many workplaces are moving to a hybrid environment in which employees may not be in the office every day. Make sure it is clear to employees that there are still people within your organization that they can communicate with if they are experiencing harassment, even if they have not had the opportunity to meet these people in person.

As many states progress through different phases of reopening, companies are preparing for their employees to return to work. Employers are also noting, however, that some states are seeing COVID-19 cases surge.  This has generated some concerns from employees who do not want to return to the work place. Can employers require employees to return to work if the employees are not comfortable returning based on fear of exposure to COVID-19 in the workplace? Often, the answer is yes.  Employers generally can require a non-high risk employee to return to work where there hasn’t been any cases in the employee’s particular workplace. But as with many broad employment questions, there is no universal answer that covers all cases and employers must look to both federal and state law, and in some instances, local law, to determine whether a particular employee can be required to return to work. For example, under federal law, employees can refuse to work under certain, narrow circumstances. In these situations, employers must proceed with caution or they risk retaliation claims. It is important to note, however, that a generalized fear of infection alone is usually not enough to permit an employee to refuse to return to work. Employers must be aware of COVID-19 related protections existing for employees and understand what rights they have in the face of an employee’s refusal to return to work. This post does not cover alternative avenues such as local, state, and federal law governing protected leave, including the Families First Coronavirus Response Act. These rights and protections vary with each state, so employers should review the most recent return-to-work orders. Americans with Disabilities Act Per EEOC guidance, the Americans with Disabilities Act (“ADA”) requires an employer to work with employees at high risk of serious health complications related to COVID-19 (as determined by guidance from the Centers for Disease Control and Prevention (“CDC”)) to provide reasonable accommodations like teleworking or taking leave. To avoid the risk of discrimination claims, employers should communicate alternative options to all employees, rather than directly reaching out to employees who have not yet requested an accommodation. As a general matter, employers should work with employees and offer alternative work arrangements where possible. Occupational Safety and Health Act Employers who are following current guidelines for safe workplaces – under the CDC or state health departments – would generally be able to require non-high risk employees to return to work without running afoul of safety standards, especially where there have not been any cases of COVID-19 in the employee’s workplace. The Occupational Safety and Health Act (“OSHA”) creates a general duty for employers to maintain safe workplaces and mitigate any health or safety hazards but as of the date of this posting has not issued any regulations specifically covering COVID-19 safety requirements.  Importantly, for “medium risk” employers (such as retailers and other workplaces open to the public) OSHA’s Interim Enforcement Response Plan for Coronavirus Disease 2019 focuses on incidences of actual exposure rather than the general risk that someone might catch COVID-19 in the workplace because the disease is spreading in the community. https://www.osha.gov/memos/2020-05-19/updated-interim-enforcement-response-plan-coronavirus-disease-2019-covid-19. However, it is important for employers to understand that under certain narrow situations, OSHA also permits an employee to refuse to perform unsafe work. The employee may refuse to perform a specific task when all of the following conditions are met: (1) the employee “asked the employer to eliminate the danger, and the employer failed to do so”; (2) the employee “genuinely believe[s] that an imminent danger exists”; (3) “a reasonable person would agree that there is a real danger of death or serious injury”; and (4) the urgency of the hazard does not allow correction through “regular enforcement channels, such as requesting an OSHA inspection.” National Labor Relations Act Employers must also be on the lookout for employee conduct that constitutes protected concerted activity under the National Labor Relations Act (NLRA). Section 7 of the NLRA guarantees unionized and non-unionized employees the right to engage in concerted activities for the purpose of “mutual aid or protection.” In the context of COVID-19, protected concerted activity could occur when two or more employees (or one employee acting on behalf of others) address issues such as safe working conditions and the steps their employers are taking to prevent the spread of the virus. State Guidance and Return-to-Work Orders In Minnesota, all critical and non-critical sector employees who are able to work from home must continue to do so. (Stay Safe Minnesota). Emergency Executive Order 20-54 protects employees for raising concerns about unsafe conditions related to COVID-19. The order extends existing state law protections to COVID-19: employers cannot discriminate or retaliate against an employee for exercising any right under the Minnesota Occupational Safety and Health Act. In contrast, California workers are protected by the state’s Resilience Roadmap because the stay-at-home order is still in effect. If an employer does not provide essential services or is not in an industry allowed to reopen in Stage 2 (or the current stage of the plan), an employee would have good cause to refuse to return to the workplace. Employers should also consult local public health ordinances. Some localities, like the City of Los Angeles, require employers to provide face coverings for all employees. Some states mandate additional protections for employees at high risk for severe COVID-19 complications. Washington Governor Jay Inslee issued Proclamation 20-46.1, in effect through August 1, amending Proclamation 20-05 to require employers to offer high-risk employees alternative accommodations. If alternative options are not feasible, the employee must be allowed to use accrued leave or seek unemployment relief while the employer maintains health insurance benefits. The order also prohibits employers from permanently replacing high-risk employees and requires employers to maintain high risk employees’ health benefits. Other states mandate employer responsibility for providing protective equipment to its employees. In New York, Executive Order 202.16 requires essential employers to provide face coverings to employees in direct contact with members of the public. Empire State Development also released guidance for determining whether a particular enterprise is subject to workforce reductions under relevant executive orders. If an employee works for a non-essential New York business that is not encompassed by its region’s current phase of reopening, they cannot be forced to come into work. Employers are encouraged to work with employees who have concerns about working safely under applicable state orders and federal guidance. Although an employee may bring safety or retaliation concerns directly to their local OSHA office or to the state department of labor, proactive efforts to discuss a safe workplace can help minimize this risk. Finally, it may behoove employers to understand when an employee could secure unemployment benefits for refusing to return to work.  Generally, a refusal to work disqualifies an individual from unemployment benefits.  But in the current COVID-19 pandemic, many states have relaxed the criteria to allow for continued benefits when the refusal to work is because of a personal situation exacerbated by COVID-19. Unemployment Insurance Benefits Minnesota The Minnesota Department of Employment and Economic Development (“DEED”) says that employees offered a suitable opportunity to return to work, and who are not subject to an exemption under Executive Order 20-05 or state law, may not continue receiving unemployment benefits. If an employee refuses a suitable offer of employment, they can be held overpaid for unemployment insurance benefits received. DEED clarified that if an employer cannot provide reasonable accommodations upon an employee’s request, they might still be eligible for unemployment benefits. Additionally, Executive Order 20-54 provides that the failure of an employer to implement a COVID-19 Preparedness Plan constitutes an adverse work environment that could qualify a complaining employee to receive unemployment benefits. Washington The Employment Security Department (“ESD”) released guidance stating that individuals receiving unemployment benefits must be available for “suitable work,” including any offer to return to previous employment after a layoff caused by COVID-19. Individuals must have good cause to refuse an offer to return to work and continue receiving unemployment benefits. Good cause may apply to those considered high risk by the CDC and those living in a household with a person at high risk. School or daycare closures, providing care for a family member, employer noncompliance with worksite safety guidelines, or a substantial change to the job may also be accepted as good cause. Employees may not refuse work and retain unemployment benefits because they make more on unemployment or because of a fear of returning to work without having good cause to refuse. California The Employment Development Department (“EDD”) released guidance emphasizing that employees that refuse to accept “suitable” employment when offered are ineligible for unemployment benefits. The EDD considers factors such as the degree of risk involved to the individual’s health and safety when determining if particular work is “suitable.” If an employer has complied with state requirements and safety regulations for reopening, an employee may not have good cause to refuse to return to work. If an employee indicates on their certification for continued benefits that they refused work, the EDD will investigate accordingly. New York If an employee refuses an offer to return to their previous position, they will likely lose eligibility for unemployment benefits unless they have good cause as defined by Section 593.2 of the Unemployment Insurance Law. Employees may not turn down offers of employment based on a general fear of exposure to COVID-19 and still receive unemployment benefits. (Returning to Work). However, in some circumstances an employee could continue receiving benefits if the employee’s situation meets Pandemic Unemployment Assistance (PUA) eligibility criteria. Employers that are following CDC and state and local guidelines regarding social distancing and other precautions in the workplace will often be allowed to require non-high risk employees to return to work when there are no cases of COVID-19 in the employer’s workplace. However, like so many employment related legal issues, the devil is in the details and exceptions abound. When employees refuse to return to work and challenge their employer’s ability to compel them to do so employers should consult with knowledgeable counsel to make sure they are on solid ground.

On September 18, 2019, Governor Gavin Newsom signed into law Assembly Bill 5, which clarifies when workers should be considered “employees” under the California Labor Code and the California Unemployment Insurance Code, thereby entitling them to the protections afforded by those laws. The bill codifies the standard set out in last year’s California Supreme Court decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which narrowed the circumstances under which a worker can properly be classified as an independent contractor. Specifically, under the new law, in order for a worker to properly be classified an independent contractor, the employer has the burden of establishing the following three elements (commonly referred to as the “ABC” test): (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) The person performs work that is outside the usual course of the hiring entity’s business; (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Most of the provisions of AB 5 become effective on January 1, 2020. Below are some answers to frequently asked questions to help employers navigate this significant development. Is the law under AB 5 any different than the Dynamex ruling? Under Dynamex, the “ABC” test was limited to the resolution of the employee or independent contractor question in claims arising under California’s Wage Orders—for example, claims for failure to pay minimum wage, overtime, or failure to provide adequate meal and rest periods. AB 5 codifies the decision in the Dynamex case and expands the application of the “ABC” test not only for purposes of the Wage Orders, but also the Labor Code and Unemployment Insurance Code as well.  This means that the “ABC” test will apply to more claims, including failure to reimburse necessary business expenses, failure to provide accurate and complete wage statements, claims for waiting time penalties under Labor Code section 203, potential recovery of Private Attorney General Act (PAGA) penalties, and failure to provide workers’ compensation insurance.AB 5 also empowers the California Attorney General and specified local prosecuting agencies to pursue injunctions against putative employers suspected of misclassifying their workers. Are there any exceptions to the application of the new standard in AB 5? AB 5 provides an exemption for a number of industries and occupations, subject to licensing and other requirements, including: Insurance brokers Physicians, surgeons, dentists, podiatrists, psychologists or veterinarians Lawyers, architects, engineers, private investigators and accountants Registered securities broker-dealer or investment adviser and their agents and representatives Direct sales salespersons (if they meet certain factors) Commercial fishermen working on an American vessel (until January 1, 2023) Contracts for “professional services” such as marketing, human resources administration, travel agents, graphic designers, grant writers, fine artists (if they meet certain factors) Photographers, photojournalists, freelance writers, editors, or newspaper cartoonists (if they meet certain factors) Licensed estheticians, electrologists, manicurists (until January 1, 2022), barbers, or cosmetologists (if they meet certain factors) Real estate agents Licensed repossession agencies Bona fide business-to-business contracting relationships (under certain conditions) Construction subcontractors (for work performed after January 1, 2020, under certain conditions) Construction trucking services (until January 1, 2022) Tutors (if they meet certain factors) Motor club services For these occupations, the determination of employee or independent contractor status will be governed by the more flexible, multi-factor test outlined in the California Supreme Court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations. What effect does AB 5 have on an employer’s obligation to provide workers’ compensation insurance? The California Labor Code, at sections 3200 et. seq., requires employers to have workers’ compensation insurance covering their employees. AB 5 amends section 3351 of the Labor Code so that, for the purposes of determining the obligation to provide workers’ compensation coverage, the “ABC” test governs. Accordingly, workers who fall within the “ABC” test (and are not covered by an exception), should be covered by workers’ compensation insurance. Note that the narrowed definition of employee does not become effective until July 1, 2020 (with respect to the workers’ compensation provisions specifically). Will AB 5 affect an employer’s obligation to pay payroll taxes? The Unemployment Insurance Code imposes obligations on employers to pay certain amounts of Unemployment Insurance Tax and Employment Training Tax for its employees. Because AB 5 changes the definition of “employee” in the Unemployment Insurance Code, employers will have to pay these payroll taxes for workers who meet the definition of “employee” under the new test. Does AB 5 affect how much employers will have to withhold from employee’s paychecks? The Unemployment Insurance Code also imposes obligations on employers to withhold a portion of employees’ wages for State Disability Insurance and for California personal income tax. Accordingly, employers will have to make these withholdings for workers who meet the definition of “employee” under the new test. Does AB 5 affect an employer’s obligation to provide health insurance? Prior to AB 5, neither the California Labor Code nor the Unemployment Insurance Code imposed an obligation to provide health insurance to employees.  The amendments to these statutes pursuant to AB 5 do not add a requirement to provide health insurance to employees.  The federal Affordable Care Act sets up a scheme whereby “large” employers must either provide health insurance to a certain percentage of their employees, or pay specified penalties.  We have not yet seen any developments indicating whether the change in the definition of “employee” under California law will affect the determination of whether a worker is considered an “employee” under the federal ACA.  However, we are monitoring this issue closely.Note, however, that some jurisdictions in California, such as San Francisco, require certain employers to satisfy health care spending requirements for employees. The amount of required spending is based on the number of the employer’s employees, with small employers potentially exempt from the requirement. AB 5 could have an impact on how these requirements apply to employers. Can employers continue to pay workers who were formerly classified as independent contractors on a piece rate or project basis? AB 5 does not impact an employer’s ability to pay workers on a piece rate basis.   In order to properly do so, however, the employer must satisfy all requirements for paying employees by the piece or unit produced.   Namely, among other things, the employer must pay the employee not less than the applicable minimum wage for all hours worked in the payroll period, compensate employees for rest and recovery periods and for other nonproductive time separate from any piece-rate compensation, and ensure that piece-rate workers are paid overtime for hours worked in excess of eight in a day or forty in a week. What effect does AB 5 have on employers who hire temporary workers through a staffing agency? AB 5 does not have a direct effect on employers who hire temporary workers through a staffing agency, assuming the staffing agency categorizes those workers as employees of the staffing agency, and not independent contractors. If the staffing agency categorized those workers as independent contractors, and placed the workers at the contracting company’s site, arguably working subject to the control of the contracting company, there is a risk that the workers could make a claim of misclassification based on the “ABC” test against both the staffing agency and the contracting company. We recommend companies retaining temporary workers through a staffing agency confirm that the staffing agency classifies the workers placed as employees, unless they clearly meet the definition of an independent contractor. The decision as to whether to reclassify workers, and the changes to payroll and other benefits that may come along with it, continues to be nuanced. If you have independent contractors within your workforce, contact your Dorsey employment attorney for guidance.

Many U.S. employers have recently experienced frustration over legal obstacles to keeping high quality foreign-national employees. These valuable employees have often been with the company since finishing a degree and sometimes even interning with the employer. Other employers experience delays in hiring foreign nationals needed for specialized positions despite the obvious qualifications of the candidate. These employers’ frustrations reflect the current climate of immigration law and policy. The standards applied by the U.S. Citizenship and Immigration Service (USCIS) in adjudicating H‑1B temporary work visa petitions have been shifting, both formally and informally, to the detriment of businesses seeking to hire or retain noncitizen professionals in specialty occupations—as well as those they would seek to employ. This, along with other similar trends in how the executive branch enforces immigration laws, requires that employers and their legal advocates test new strategies on behalf of their clients. If USCIS denies your H-1B petition and your awesome employee may have to leave the country, what options do you have? Immigration lawyers, who typically fight their battles within administrative agencies, are increasingly looking to federal courts for judicial review of agency actions. One recent case highlights that strategic litigation can have a powerful impact, and suggests that specialized litigators may be a vital addition to the legal toolbox for businesses that depend on international hiring. See RELX, Inc. (d/b/a LexisNexis USA) v. Baran, 2019 U.S. Dist. LEXIS 130286. Subhasree Chatterjee earned her bachelor’s degree in computer science and engineering in her home country of India in 2011, and her master’s degree in business administration and analytics in the United States, from the University of Ohio, in 2016. She also has several years of professional experience in data analytics in both India and the United States. Chatterjee began working as a data analyst for LexisNexis at its Raleigh, North Carolina Center for Excellence in 2017, at which time she was authorized to work in the United States because of the Optional Practical Training (OPT) associated with her F-1 student visa. But Chatterjee’s student visa and OPT was set to expire on August 3, 2019. Lexis filed a petition for Chatterjee to remain in the United States through the H-1B nonimmigrant visa program so that she could continue in her role as data analyst supporting the company’s “flagship” product, LexisAdvance. The government denied the petition on the grounds that the data analyst position was not a “specialty occupation.” By statute, a specialty occupation is “an occupation that requires theoretical and practical application of a body of highly specialized knowledge; and attainment of a bachelor’s or higher degree in the specific specialty (or its equivalent) as a minimum for entry into the occupation in the United States.” 8 U.S.C. § 1184(i)(1).   And by regulation, the position must meet at least one of four criteria to qualify as a specialty occupation: (1) a baccalaureate or higher degree is normally the minimum requirement for entry into the particular position; (2) the degree requirement is common to the industry in parallel positions among similar organizations or the position is so unique or complex that only an individual with a degree can perform it; (3) the employer normally requires a degree or its equivalent for the position; or (4) the nature of the specific duties are so specialized and complex that the knowledge required to perform the duties is usually associated with attainment of a baccalaureate degree or higher.  8 C.F.R. § 214.2(h)(4)(iii)(A). In support of the H-1B petition, Lexis and Chatterjee submitted what the court would later call a “mountain of evidence” on three out of these four regulatory grounds, any one of which would have been sufficient to qualify the data analyst position as a specialty occupation. They responded to a request for redundant evidence and, following an initial denial, pursued administrative reconsideration. These efforts were unsuccessful. To justify its denial, the government asserted, contrary to its regulations and past practices, that a specialty occupation is one requiring a degree from a particular academic discipline. In other words, for example, if the position could be filled by someone with a degree in computer science or engineering, then it could not be a specialty occupation. Exactly one month before Chatterjee’s work authorization would expire, she and Lexis filed a lawsuit in federal district court in Washington D.C., serving USCIS, the Department of Homeland Security, and leaders of each, challenging the denial as a violation of the federal Administrative Procedure Act (APA) and seeking a preliminary injunction. Given the extremely short timeline before Chatterjee’s status would expire, the court placed the case on an expedited schedule to resolve the matter on its merits, skipping over the motion for preliminary injunction. Plaintiffs moved for summary judgment. The government spontaneously reopened the H-1B petition and then moved to dismiss the lawsuit, arguing that the reopening deprived the court of jurisdiction because plaintiffs’ claims were no longer ripe. On August 1-2 (the two days immediately preceding the expiration date of Chatterjee’s work authorization), the court held a hearing on both motions. The government’s motion was denied from the bench. In a subsequent memorandum, District Judge Emmet Sullivan concluded that the government’s “position [was] untenable,” that the “decision was not based on a consideration of the relevant factors and was a clear error of judgment,” and that “USCIS acted arbitrarily, capriciously, and abused its discretion.” RELX, Inc., 2019 U.S. Dist. LEXIS 130286, *28, 31 (quotations omitted). At the same time, plaintiffs’ summary judgment motion for an order directing USCIS to grant Lexis’s petition and place Chatterjee on H-1B status was granted—and just in time. Chatterjee was able to keep her job and remain in the United States, and Lexis continued business as usual with its data analytics team at full strength. In the current market, employers and their legal counsel need to use all avenues available under the law to help hire and retain top talent. Litigation is not only an option, but may be a necessary addition to the overall toolbox of talent management strategies, especially when it comes to international hiring.

Many employers have offices in multiple states, but want to have one form of employee agreement prohibiting solicitation of employees and customers. Since some state laws, namely California, may be too different to reconcile with other states, what sort of non-solicitation agreements work in California? In California, non-solicitation agreements are reviewed as contracts which prevent a person from engaging in a profession, trade or occupation which, with limited exceptions, are void under Business and Professions Code section 16600. Thus, recent cases have held that an agreement between an employer and employee prohibiting the solicitation of customers is not enforceable unless tied to the employee’s use of trade secrets or some other legal duty owed by the employee. Employers have tried to draft enforceable non-solicitation clauses by characterizing customer and employee information as trade secrets. In late 2018, in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. the Court of Appeal upheld summary judgment in favor of the former employee defendants and their new employer. The former and new employer were competitors providing temporary travel nurses to medical facilities across the U.S. The employee defendants were recruiters who signed agreements that “during employee’s employment with the Company and for a period of one year after the termination employee shall not directly or indirectly solicit or induce, or cause others to solicitor or induce, any employee of the Company . . . to leave the service of the Company.” AMN claimed that the travel nurses names and contact information were trade secrets. The court concluded that the nurses had applied to AMN years before and that the information was already in AMN’s possession or could have been obtained from other sources such as a public media group network, the Gypsy Nurse Group. For this reason, and because the employee’s profession was the recruitment of other employees, the Court found the non-solicitation agreement unenforceable. Employers in California must therefore normally tailor any non-solicitation agreements and carefully consider if the employee truly possesses confidential/trade secret information that could be used to solicit customers. To the extent the information the employee would use to solicit is a trade secret, courts have considered the agreement to be valid. Other states may allow broader non-solicitation agreements, therefore you should use different forms to receive the maximum protection in those states.

While portions of California’s Immigrant Worker Protection Act have been enjoined, employers remain subject to notice obligations. California passed a statute limiting the extent to which employers could cooperate with federal immigration officials. Litigation quickly ensued, and a recent decision enjoined enforcement of part of the law, while leaving other provisions unaffected. With the speed of the news cycle, employers may understandably require clarification as to which immigration policies are actually in effect. What portions of the sanctuary state law were enjoined, and what parts remain effective? The Immigration Worker Protection Act (AB 450), which went into effect in January 2018, imposed three primary obligations on employers: A prohibition against allowing or consenting to a federal immigration enforcement agent’s request to enter nonpublic areas in the workplace, or to access employee records, without a judicial warrant; A prohibition against re-verifying the employment eligibility of a current employee outside the time and manner required by federal law; and A requirement to provide notice to employees upon receipt of a Notice of Inspection of Form I-9, and after the inspection, provide notice regarding the results of the inspection. Almost immediately, the law was challenged in court, in a case called United States v. California. On July 5, 2018, John A. Mendez of the United States District Court for the Eastern District of California issued a preliminary injunction blocking the enforcement of the first two of the above obligations, but not the third obligation concerning notice. The court reasoned that the first prohibition on cooperation with federal immigration officials likely “impermissibly discriminates against those who choose to deal with the Federal Government,” and therefore violates the intergovernmental immunity doctrine. The court also found that the second prohibition on early re-verifications likely violates the Supremacy Clause. The notice obligation, on the other hand, regulates the employer’s “failure to communicate with its employees,” and is therefore likely a permissible exercise of state power. Accordingly, as it currently stands, the notice provisions are in effect. Under the statute, employers must notify employees and labor union representatives within 72 hours of receiving a Notice of Inspection of Form I-9. Employers must include the name of the federal agency conducting the inspection, the nature of the inspection, the date the employer received the inspection notice, and a copy of the inspection notice. Additionally, within 72 hours after the inspection takes place, employers must also provide affected employees and their labor union representatives with the results of the inspection, a timeframe for correcting any deficiencies found, the date and time of any meetings with the employer to correct any deficiencies found, and a notice to the employees about their rights to representation during any meeting with the employer. It is important to note that at this point the court entered a preliminary injunction; the ultimate enforcement of the statute may change when the case reaches completion, and even then, an appeal to the Ninth Circuit (and perhaps ultimately to the Supreme Court) is likely.

As the #MeToo movement was changing the conversation around sexual harassment nationwide, both New York State and New York City passed laws aimed at changing the way New York employers handle sexual harassment in the workplace. The changes include mandatory sexual harassment training and policies, enhanced protections for employees and non-employees and additional reporting and certification requirements for City and State contractors. Some of the new requirements are already in effect, while others must be implemented by employers over the next year.   With laws changing at both the state and local level over the course of the next year, what do New York employers need to know? We have provided a detailed review of the new laws below. New York State The On April 12, 2018, New York Governor Andrew Cuomo signed into law budget legislation that included significant anti-sex harassment measures. Most notably, this legislation: (1) requires mandatory sexual harassment training and written anti-harassment policies; (2) expands sexual harassment protections to non-employees; (3) prohibits certain non-disclosure provisions in settlement agreements; (4) prohibits mandatory arbitration of sexual harassment claims; and (5) requires bidders on state contracts to certify compliance with policy and training requirements. Annual Sexual Harassment Training and Written Anti-Harassment Policy. Beginning October 9, 2018, New York State employers will be required to distribute a written anti-harassment policy and provide annual anti-sexual harassment training to all New York employees. All employees must receive training by January 1, 2019. New York State has developed a model training program (available here) and a model sexual harassment policy (available here) for employers to use. These models are currently subject to revision following a public comment period, which is scheduled to end September 12, 2018. An employer may develop its own policy and training program as long as they meet all of the requirements of the new law. Trainings must be interactive and include: (i) an explanation of sexual harassment consistent with Department of Labor guidance; (ii) examples of prohibited conduct; (iii) information concerning federal and state law related to sexual harassment and the remedies available under these laws; (iv) notice to employees of their rights of redress and all available administrative and judicial forums for adjudicating sexual harassment claims; and (v) information addressing conduct by supervisors and any additional supervisor responsibilities. Anti-harassment policies must include a complaint form for use by employees. A model complaint form has been published for employer use, and is available here. Expansion of Sexual Harassment Protections to Non-Employees. The New York State Human Rights Law has been expanded to cover non-employees. Employers may now be held liable for sexual harassment of non-employees such as contractors, vendors, and consultants, if the employer knew or should have known that the individual was subjected to sexual harassment at the employer’s workplace and failed to take appropriate corrective action. Non-Disclosure Provisions in Settlement Agreements Prohibited. Beginning July 11, 2018, contract terms that prevented the disclosure of the underlying facts and circumstances related to a sexual harassment claim became unlawful—unless the non-disclosure provision was the complaining party’s preference. The complainant must be given 21 days to consider whether to accept the proposed confidentiality language, and then seven days to revoke his or her acceptance of it. Any agreed-upon non-disclosure provisions only become effective after the seven-day revocation period has expired. Furthermore, any such agreed upon non-disclosure provisions must apply to all parties to the agreement. The new law does not prohibit provisions that prevent disclosure of the terms of the agreement. Mandatory Arbitration Clauses for Sexual Harassment Claims Prohibited. Also beginning July 11, 2018, mandatory arbitration clauses that purported to apply to sexual harassment claims became prohibited (and rendered null and void), except where inconsistent with federal law. The Federal Arbitration Act (FAA) preempts any state rule that discriminates on its face against arbitration. Thus, this provision may be not be enforceable with respect to arbitration agreements governed by the FAA. New Requirements for State Contract Bidders. Beginning January 1, 2019, every bidder on a New York State contract must certify that it complies with the above requirements concerning written harassment policies and annual anti-harassment training. A bid that fails to include the required language will not be considered. New York City In May 2018, New York City passed the Stop Sexual Harassment in NYC Act (“the Act”). The Act requires: (1) annual sexual harassment training of employees; (2) a poster in the workplace advising employees of their rights and a similar written notice to every new employee; and (3) enhanced reporting by bidders on New York City contracts. The Act also expands the protections of the New York City Human Rights Law to all employers, regardless of size. Annual Sexual Harassment Training for Employers with 15+ Employees. As of April 1, 2019, New York City employers with 15 or more employees (including interns) will be required to conduct annual anti-sexual harassment training for all employees, including supervisory and managerial employees. The Act requires that training be interactive (though it need not be live or conducted in-person) and must: provide an explanation of sexual harassment as a form of unlawful discrimination under NYC law; state that sexual harassment is a form of unlawful discrimination under federal and New York state law; include a description of what sexual harassment is; describe the employer’s internal complaint process; state the complaint process available through the NYC Commission on Human Rights, the New York State Division of Human Rights and the Equal Employment Opportunity Commission, including contact information; explain the prohibition against retaliation; include information concerning bystander intervention (i.e., such as suggestions on how to confront a harasser); and provide the specific responsibilities of supervisory and managerial employees in the prevention of sexual harassment and retaliation, and measures such employees should take to appropriately address sexual harassment complaints. The training must be conducted on an annual basis for incumbent employees, and new employees who work 80 or more hours per year on a full or part-time basis in New York City must receive the training after 90 days of initial hire. If an employee has received training at one employer within the training cycle, he or she would not be required to receive additional training at a different employer until the next annual cycle. The Act also clarifies that if an employer is subject to training requirements in multiple jurisdictions, it will comply with the Act so long as any annual training that is provided to employees addresses, at a minimum, the substantive requirements of the Act. Thus, for practical purposes, NYC employers with 15 or more employees, who are required to provide training under New York State law by no later than January 1, 2019, should make sure such training satisfies the New York City requirements as well. The City will also require employers to generate and retain records of all trainings, including signed acknowledgements. The New York City Commission on Human Rights will develop publicly available online sexual harassment training modules for employers’ use, which will satisfy the requirements of the Act so long as the employer supplements the module with information about the employer’s own internal complaint process to address sexual harassment claims. Mandatory Sexual Harassment Poster and Fact Sheet Distribution. Effective September 6, 2018, all New York City employers are required to conspicuously display an anti-sexual harassment rights and responsibilities poster and to distribute an information sheet on sexual harassment to new hires, both of which were issued by the City August 2018. A copy of the poster can be found here (and available here in Spanish), and the corresponding fact sheet for distribution can be found here. The required poster must be “conspicuously display[ed] . . . in employee breakrooms or other common areas employees gather.” The Act requires that all employers display the poster in both English and Spanish. The notice must be at least 8.5 x 14 inches with a minimum 12 point font. Employers may distribute the information sheet to new employees as a standalone document or incorporate the factsheet into their employee handbook. Expansion of Applicability to All Employers. The New York City Human Rights Law was amended to permit claims of gender-based harassment by all employees, regardless of the size of the employer. Previously, the NYCHRL’s anti-discrimination provisions were only applicable to employers with four or more employees. The statute of limitations for filing complaints with the NYC Commission on Human Rights for gender-based harassment claims was also extended from one year to three years following occurrence of the alleged harassment. New Requirements for City Contract Bidders. As of July 8, 2018, city contractors are now required to include their practices, policies, and procedures “relating to preventing and addressing sexual harassment” as part of an existing report required for certain contracts under the City Charter and corresponding rules.

Today’s workforce is more mobile than in past generations. Long gone are the days when an employee started and ended a career at the same company. Knowing how to protect your company’s confidential information when a trusted employee leaves can have a lasting impact on your ability to compete. So, what can you do when a former employee goes to work for a competitor? Is having an irreparable injury provision in your non-compete agreement enough to obtain a court order prohibiting that individual from working at his/her new job? In Minnesota, courts want to see more than just words in a contract before they will grant injunctive relief against a former employee. This week, the Supreme Court of Minnesota issued a decision in St. Jude Medical, Inc. v. Carter. The case arose after Heath Carter left his employer to work for a competitor. The employer filed suit against Mr. Carter and the competitor, alleging violations of Mr. Carter’s non-compete agreement. The employer did not seek money damages but asked the court for injunctive relief; specifically, an order enforcing the terms of the non-compete agreement and prohibiting Mr. Carter from working for a competitor in his then-current position. The case went to a jury, which ultimately found that Mr. Carter had breached his non-compete agreement. But the court refused to enter an injunction, finding that the employer failed to establish that it had been harmed. The case made its way to the Supreme Court, where the question became what to do about specific language in the non-compete agreement that addressed the issue of whether and how the former employer was harmed. The language at issue is commonly included in many non-compete agreements: In the event Employee breaches the covenants contained in this Agreement, Employee recognizes that irreparable injury will result . . . that [the Employer’s] remedy at law for damages will be inadequate, and that [the Employer] shall be entitled to an injunction to restrain the continuing breach by Employee. At first glance, the provision appeared to resolve the issue of whether the employer suffered irreparable harm—Mr. Carter agreed that it had. But the Supreme Court disagreed. The court noted that “[a] private agreement is just that: private,” and concluded that such contractual language does not, by itself, entitle an employer to an injunction after proving the breach of a non-compete. The court emphasized that regardless of what the parties agree to, the burden will always fall on the employer to show that: (1) legal remedies (i.e., money damages) are inadequate; and (2) “great and irreparable injury” will result without an injunction. Because the employer did not offer proof of an irreparable injury, the court held that the employer was not entitled to an injunction. So what now? Are provisions like those quoted above meaningless? Should employers scramble to re-write their non-compete agreements? The short answer is “probably not.” Minnesota aligns with a number of states in which mere contractual language about irreparable harm is not enough to win injunctive relief. Nevertheless, these provisions are still worth including in non-compete agreements because courts can consider them as one of many factors that bear on whether an employer has suffered irreparable harm. Other factors will usually be more persuasive, often including evidence of some or all of the following: The departing employee took confidential information when he or she left (e.g., client lists, marketing plans, and pricing information). The departing employee disclosed confidential information to the competitor or put confidential information to use in the new job. The departing employee solicited business from former clients or customers and used confidential information to solicit such business. The former employer lost client or customer goodwill because of the departing employee’s breach of the non-compete agreement. Ultimately, Carter serves as a useful reminder to employers on both sides of an employee’s job change. Former employers should carefully consider how they have been harmed by an employee’s departure (and what evidence they anticipate being able to present as proof of that harm). Hiring employers should understand and reinforce to their new employees the importance of complying with prior non-compete agreements. And for employers on both sides, consulting with experienced employment attorneys even before these types of cases go to litigation can be the key to a successful outcome.

It’s a situation any Human Resources professional might find themselves in – circumstances require you to effectuate a termination in short order and you have to scramble to calculate the employees’ correct final pay and prepare a paycheck. But what if the wage statement is not ready? Does the law require employers to provide a wage statement to a terminated employee simultaneously with their final paycheck? Thanks to a recent decision from the California Court of Appeal, you have a little breathing room. In Canales v. Wells Fargo Bank, 23 Cal. App. 5th 1262 (2018), Wells Fargo had a practice of paying certain terminated employees final wages via cashier’s checks – which were prepared in the bank branch – and then mailing the wage statements to the employees from another location, either that same day, or the following day. The plaintiff complained that the wage statements should have been provided simultaneously with the paychecks, and that Wells Fargo’s practice of mailing them constituted a violation of California Labor Code section 226, which provides: “…[e]very employer should semimonthly or at the time of each payment of wages, furnish each of his or her employees, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately when wages are paid by personal check or cash, an accurate itemized statement in writing…” Wells Fargo responded that it was in compliance with the statute because: 1) The statute does not require simultaneous delivery of wage statements and specifically allows employers the option to provide wage statements “semimonthly;” and 2) It was permitted to mail the wage statements, because the statute provides that wage statements can be delivered “separately” in the case of a cashier’s check, which is analogous to cash. The court agreed, holding, “…if an employer furnishes an employee’s wage statement before or by the semimonthly deadline, the employer is in compliance.” The court explained that it interpreted the phrase ‘“semimonthly or at the time of each payment of wages’ as representing the outermost deadlines by which an employer is required to furnish the wage statement.” The court provided the following example: [S]uppose an employer furnishes wage statements on the first and 15th of each month. The employer discharges an employee on the second of the month. Per the statute’s plain language, if an employer pays the final wages by personal check or cash, it has the option of furnishing the discharged employee with the wage statement. We find it illogical to conclude an employer violated section 226 by furnishing a wage statement before the semimonthly date has been reached. If the employer furnishes the wage statement to the discharged employee of the fifth of the month, the employer has complied with the requirement that it furnish the wage statement to the employee “semimonthly” because the employee would have ostensibly been furnished with the wage statement by the semimonthly date. The court also rejected the plaintiff’s reliance on the California DLSE (Division of Labor Standards Enforcement) Enforcement Policies and Interpretations Manual, which provides, “[a] California employer must furnish a statement showing the following information to each employee at the time of payment of wages (or at least semi-monthly, whichever occurs first),” holding that the Manual is not entitled to deference as an agency regulation because it was not promulgated in accordance with the Administrative Procedure Act. The court also did not find the agency’s interpretation persuasive, finding that the term “whichever occurs first” appears nowhere in the statute, and simply does not make sense given that the statute specifically provides employers a choice of two separate timeframes to issue wage statements: 1) “semimonthly” or 2)“at the time of each payment of wages.” The Canales decision is certainly one where common sense prevailed. Keep it in mind next time next time you have the final pay, but not the wage statement, ready at the time of termination.