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Employment Law Monitor

Insights on Recent Developments in Federal and State Labor & Employment Matters

United States Supreme Court Tees Up Sequel to “Hobby Lobby” Decision

Posted in Employment Policies and Practices

As we previously reported, in June 2014, the U.S. Supreme Court confirmed in Burwell v. Hobby Lobby that closely-held corporations with religious owners could “opt out” from the Affordable Care Act’s (“ACA” or “Act”) requirement that they pay for insurance coverage of certain birth control when the particular contraception conflicts with the owners’ religious beliefs. Less than five (5) months later, the U.S. Supreme Court has agreed to review whether the process for opting out of the Act’s contraception mandate is permissible under the Religious Freedom Restoration Act (“RFRA”).

Under the “opt out” procedure currently in place, employers seeking an exemption from the contraception mandate must submit a form to their insurance plan or the U.S. Department of Health and Human Services concerning their objections. Typically, contraception coverage is then arranged for the employee at no cost to the employer. Some employers have objected to this process, arguing that this procedure violates the RFRA and the “opt-out” process renders the employer morally complicit in arranging contraception access for its employees.

District courts across the country have upheld the “opt-out” procedure, finding it permissible under the RFRA. Appeals have followed in several circuits, with the majority of the circuits rejecting arguments that the opt-out procedure substantially burdens religious freedom. The Eighth Circuit, however, took a different approach in September of this year, upholding orders from two lower courts finding that the opt-out procedure violated the RFRA and further finding that courts (and the government) must defer to employers’ “sincere religious belief that their participation in the accommodation process makes them morally and spiritually complicit in providing abortifacient coverage.”

This is the fourth time in five years that the Supreme Court will consider a legal challenge to the ACA.

Elizabeth Now the 10th City in New Jersey to Require Paid Sick Leave

Posted in Employment Policies and Practices

On November 3, 2015, voters in Elizabeth, New Jersey overwhelmingly approved a paid sick leave law that will require private employers to provide paid sick leave to employees. The law is anticipated to take effect on March 2, 2016. Elizabeth is New Jersey’s fourth largest city and joins Bloomfield, East Orange, Irvington, Jersey City, Montclair, Newark, Passaic, Paterson and Trenton, who have all adopted similar paid sick leave policies.

Elizabeth’s paid sick leave law will mirror those in other New Jersey municipalities.   Because Elizabeth has yet to post or publish a full copy of the new law, it is anticipated that the new law will allow employees who provide food service, child care or home health care services, or who work for employers with ten (10) or more employees, to accrue up to forty (40) hours of paid sick leave each calendar year. Employers in Elizabeth with fewer than ten (10) employees will be required to provide up to twenty-four (24) hours of paid sick leave each year. All employees will accrue one (1) hour of paid sick time for every thirty (30) hours worked. These paid sick days can be used by employees to care for themselves or other family members.

Employers with operations in Elizabeth should monitor the City of Elizabeth’s website for a full copy of the ordinance, and should thereafter undertake review of their current paid sick leave policies to determine compliance with the ordinance, including any notice and posting requirements. We will continue to monitor the paid sick leave law in Elizabeth for further developments.

New York Labor Law Wage Deduction Amendments Extended Through 2018

Posted in Employment Policies and Practices, Wage and Hour

On the eve of  November 6, 2015 expiration date, New York Governor Andrew Cuomo signed legislation earlier this week (Assembly Bill A07594/S05623) extending the effective date for the expanded list of permissible wage deductions that New York employers can make pursuant to New York Labor Law Section 193.  The current version of Section 193, which was amended in 2012, includes a wide range of categories of wage deductions that employers can withhold from employee wages, subject to employee approval.  Such permissible deductions include discounted parking passes, daycare expenses and gym membership dues, among others.  Potentially most useful for employers is their right under the amended Section 193 to recover for overpayments of wages to employees that resulted from mathematical or other clerical errors.

Earlier this year, we wrote in detail about the interplay of Section 193 and an employer’s wholesale failure to pay wages, available here.  While multiple Courts have determined that a total failure to pay does not constitute a violation of Section 193, in any event, New York employers will continue to enjoy the increased flexibility afforded under the amended version of Section 193 through its new effective date of November 6, 2018.

Effective Immediately, The New York City Fair Chance Act Substantially Restricts Employers’ Use of Criminal Background Checks

Posted in Employment Policies and Practices

The New York City Fair Chance Act (FCA) goes into effect today, October 27, and applies to any employers in New York City with four or more employees. The FCA amends the New York City Human Rights Law and significantly limits how employers in New York City may use an applicant’s criminal history in making employment decisions.

As we previously posted, the FCA contains, among other things, the following pre-offer restrictions:

  • Employers are prohibited from, either directly or indirectly, indicating that there is any limitation for a position based on a person’s arrest or criminal conviction record; and
  • Employers cannot make any inquiry into an applicant’s arrest or criminal conviction record until after extending a conditional offer of employment.

The FCA also contains restrictions on an employer’s ability to revoke a conditional offer based upon the results of a criminal background check. New York State law already restricts the ability of an employer to revoke a conditional offer. Under New York State law, a conditional offer may be revoked only after the employer considers specific factors enumerated in the Correction Law § 753 and determines, based upon those factors, that:

  1. There is a direct relationship between one or more of the previous criminal offenses and the … employment sought or held by the individual; or
  2. The granting or continuation of employment would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public.

The FCA goes further than the existing state law and requires employers in New York City to provide an individual whose conditional offer is being revoked with the “analysis and factors used to make the decision” on a form created by the NYC Commission on Human Rights, which can be found here.

The FCA and the New York City Stop Discrimination in Employment Act (which prohibits most employers from considering an applicant’s credit history and was discussed in a previous post here) have significantly changed the ability of employers in New York City to use background checks in making employment decisions. New York City employers are well advised to seek legal counsel before making any adverse employment decisions based upon the results of a background check.

Most NYC Employers Required to Provide Transit Benefits in 2016

Posted in Employment Policies and Practices

The New York City Transit Act (the “Transit Act”) will go into effect on January 1, 2016. The Transit Act requires that employers with 20 or more full-time employees (those who work on average 30 or more hours a week) in New York City provide those employees with certain pre-tax transit benefits. Specifically, the Transit Act requires that employers subject to the Act provide pre-tax “qualified transportation fringe benefits[.]” Such benefits include transportation benefit plans covering mass transit passes, parking, and bicycle commuting. While employers may provide benefits for parking under the Transit Act, they are not required to do so.

The Transit Act contains limited exceptions for federal, state, and New York City governmental entities, employees subject to collective bargaining agreements, and employers that are not required to pay federal, state, and city payroll taxes. Also, employers who demonstrate a financial hardship in complying with the Transit Act may obtain a waiver from compliance with the Act. Failure to comply with the Transit Act could expose an employer to civil penalties.

The upcoming open enrollment periods for most employee benefit plans present the opportunity for employers with employees in New York City to review their benefit plans to ensure that they will be in compliance with the Transit Act starting in 2016.

NLRB Establishes New “Indirect Control” Standard to Define Joint Employer Status

Posted in Employment Policies and Practices

On August 27, 2015, in the case of Browning-Ferris Industries of California, Inc., et al. v. Sanitary Truck Drivers and Helpers Local 350, et al., the National Labor Relations Board (“NLRB”) adopted a new “indirect control” standard for determining joint employer status under the National Labor Relations Act (“NLRA”). By a narrow 3-2 decision, the NLRB ruled that Browning-Ferris Industries of California, Inc. (“BFI”) was a joint employer of workers at its recycling plant located in Milpitas, California, even though those employees were hired through an independent staffing agency, Leadpoint Business Services Inc. (“Leadpoint”). The NLRB concluded that, although Leadpoint was acting as an intermediary and had direct control over the employees at BFI’s recycling plant, BFI was still a joint employer because of its indirect, reserved contractual authority over the employment terms and conditions of those employees, such that BFI would be a meaningful party to any collective bargaining under the NLRA.

The NLRB’s “indirect control” test is a sharp departure from the previous standard, which provided that companies, for purposes of the NLRA, were only responsible for those employees under their direct control. Absent the power to set hours, wages or job responsibilities, those companies would not typically be liable for unfair labor practices or other violations of the NLRA or required to collectively bargain. Under the NLRB’s new, broader test, two or more entities will be deemed “joint employers” if they (1) are both “employers” under common law, and (2) they share in matters governing the essential terms and conditions of employment, or, at a minimum, have the reserved authority to do so. The Browning-Ferris decision will greatly impact companies’ labor relations policies and collective bargaining requirements, particularly in restaurant and other franchise-heavy industries where national companies often use local franchisees and contractors for their operations.

Second Circuit Holds That Parties May Not Voluntarily Settle Claims Under the Fair Labor Standards Act With Prejudice Without Judicial or Department of Labor Approval

Posted in Wage and Hour, Wage and Hour and Executive Compensation

In Cheeks v. Freeport Pancake House, Inc. et als., the United States Court of Appeals for the Second Circuit held that parties may not privately settle claims arising under the Fair Labor Standards Act (“FLSA”) with prejudice (which forecloses a future lawsuit), without court approval or United States Department of Labor (“DOL”) supervision.  With this ruling, employers facing an FLSA suit in the Second Circuit must be prepared for a public filing and judicial approval of any settlement.

In Cheeks, Mr. Cheeks worked at the Freeport Pancake House as a server and manager.  In August 2012, he sued for unpaid overtime wages, liquidated damages and attorneys’ fees under both the FLSA and the New York Labor Law.  Mr. Cheeks also claimed damages for his demotion and ultimate termination.

The parties agreed to a private settlement of Mr. Cheeks’ action and attempted to file a Joint Stipulation and Order of Dismissal pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii), which allows for a voluntary dismissal without court order, unless there is an “applicable federal statute” providing otherwise.  The District Court refused to accept the Stipulation, however, concluding that the parties could not agree to a private settlement of the FLSA claims without either District Court or DOL approval.  The parties certified the question to the United States Court of Appeals for the Second Circuit, which affirmed the District Court.

In deciding this issue, the Second Circuit settled a split among the District Courts.  In Cheeks, the Court was called upon to answer the open issue of whether parties could voluntarily dismiss an FLSA action, with prejudice, and without court approval.  In holding that the FLSA presents an exception to Rule 41, the Court cited the purpose and policy behind the FLSA, a “uniquely protective statute,” which seeks to prevent the “potential for abuse” in wage and hour settlements.  On balance, the court found the burdens of requiring judicial review of often small FLSA actions are outweighed by the remedial purpose of the FLSA.

Employers should now understand that they may not secure “with prejudice” dismissals of wage and hour disputes without court or DOL approval.  In order to secure a complete release of an employee’s claims filed in court under the FLSA, including liquidated damages and attorneys’ fees, as well as the dismissal of putative class or collective actions, the parties must submit the settlement to the court or DOL for approval.


United States Department of Labor Issues Memorandum Indicating Agency’s View that Most Workers Are “Employees” Covered by the Fair Labor Standards Act

Posted in Employment Policies and Practices, Wage and Hour

Confirming what many employment law practitioners already know, on Wednesday July 15, 2015, the United States Department of Labor, Wage and Hour Division (“USDOL” or the “Agency”) confirmed that the Agency takes a very expansive view of “employment” under the federal Fair Labor Standards Act (“FLSA”). The USDOL issued a 15 page “Administrator’s Interpretation” in which the USDOL pointed out the importance of properly classifying workers as “employees” so that they do not lose critical legal protections important for such workers, particularly those in low paying jobs. The noted protections include minimum wage, overtime compensation, unemployment insurance and workers compensation. The Interpretation also noted the need to provide an even playing field for employers who properly classify their workers. The Interpretation can be accessed here.

Under the FLSA, to “employ” means to “suffer or permit to work.” The Agency reads the phrase broadly, concluding that Congress intended the FLSA to have broader application than the common law control test. To assess employment under the FLSA, the Interpretation confirms the six (6) part “economic realities test” long analyzed by courts. In so doing the Agency notes that the “ultimate inquiry” in the analysis of a worker’s status is whether the worker is in business for him/herself (making the worker an independent contractor) or dependent on the employer, which indicates employment. The Interpretation outlines the six (6) factors to be considered in conducting this analysis as follows: the nature and degree of the employer’s control, whether the work is integral to the business, whether the worker has an opportunity for profit or loss, how the worker’s relative investment compares to the employer’s investment, whether the work performed requires special skill and initiative, and whether the relationship between the worker and the employer is permanent or indefinite. The Agency notes that the factors are “tools” and “guides” to aide in the ultimate question of determining economic independence, which should be assessed “in totality.”

The Interpretation should be viewed in conjunction with the USDOL’s recent issuance of proposed regulations regarding changes to the number of employees eligible for exclusion from overtime under the FLSA. In light of the Agency’s focus on this issue, this is an excellent time for companies to take note of the USDOL’s conclusion that “most workers are employees under the FLSA’s broad definitions” in closely assessing their classification of workers.

United States Supreme Court Upholds the Affordable Care Act Subsidies

Posted in Employment Policies and Practices

As we previously reported, one of the greatest challenges to the Affordable Care Act (“ACA” or “Act”) came in King v. Burwell, otherwise known as the Obamacare subsidy lawsuit, where the plaintiffs challenged the ACA subsidies issued by the IRS in States that use the federal exchange (www.HealthCare.gov) to offer health insurance rather than their own State-run exchanges. A ruling in the challengers’ favor would have dismantled the ACA by essentially causing its financial collapse. This near-collapse of the Act was avoided yesterday when the Supreme Court issued its opinion, upholding the subsidies and finding that Americans are entitled to keep the tax subsidies that help defray the cost of insurance.

In a 6-3 opinion, the Supreme Court agreed that subsidies were always meant to be distributed through both Federal and State channels, and that the goal of the law was to cover all Americans. The decision comes after the Court found, in National Federation of Independent Business v. Seleblius, that the individual mandate (the portion of the Act that requires Americans to buy health insurance or pay a penalty) was constitutional.


NYC Becomes The Latest Major City To Pass “Ban the Box” Legislation

Posted in Employment Policies and Practices

New York City passed the Fair Chance Act last week, making it the latest of a growing number of states, counties and cities across the country to bar employers from inquiring about job applicants’ criminal histories during the early stages of the job application process. This law, known more commonly as “Ban the Box” legislation, makes it a violation of the New York City Human Rights Law for New York City private employers to question job applicants about their criminal backgrounds until after making them a conditional employment offer. The legislation is designed to provide capable, qualified individuals with criminal backgrounds the opportunity to apply for jobs without being rejected at the outset based solely upon their troubled histories. However, it does not mandate that employers ultimately hire individuals with criminal histories.

As noted, under the Fair Chance Act, prospective employers are permitted to inquire about an applicant’s criminal history after extending a conditional job offer. If the employer so decides it may withdraw the offer after learning about the person’s criminal background, the employer must keep the position open for a three-day period and provide the applicant with a written explanation as to why the offer is being rescinded. The applicant may utilize the three-day window to interact with the employer and address the employer’s stated concerns, such as correcting any inaccuracies and/or submitting proof of rehabilitation. As with other Ban the Box legislation, exemptions are made for jobs where criminal backgrounds would present an automatic bar to employment, including law enforcement and other sensitive, security-related positions.

Former Mayor Michael Bloomberg passed a similar law back in 2011 that applied to New York City public sector job applicants. Mayor Bill de Blasio is expected to sign the pending legislation in the upcoming weeks.