Employer Express September 2014 Newsletter
September 2014

Key developments in the Employer Express September 2014 newsletter include:

Background Checks
Harassment of Employees by 3rd Parties
New York Legalizes Use of Medical Marijuana
Passaic, New Jersey Enacts Paid Sick Leave as State Considers New Bill
Los Angeles, CA Poised to Raise Minimum Wage to $13.25
Louisiana Ban on Same-Sex Marriage Upheld, While Other State Bans Remain on the Chopping Block
Facebook “Like” Legally Protected, Says NLRB
NLRB Strikes Confidentiality Policy of California Elementary School with “High Profile” Affiliations
Interns Launch Wage Action Against Oscar De La Renta
Indiana Court Finds Yet Another Reason To Disfavor Noncompetes
Settlement Negotiations Resume with Apple & Google Employees in No-Poach Suit While Tech Giants Appeal Rejection of $324.5 Million Settlement

EEOC UPDATE

Background Checks

In previous months, we’ve advised our readers of the EEOC’s increasing focus on employer use of background checks and this month the agency is at it again. On September 3, 2014, the U.S. Equal Employment Opportunity Commission (“EEOC”) argued that the 300-day limit should not apply to EEOC pattern or practice discrimination claims regarding the use of background checks by Freeman, an event services company.

The case, EEOC v. Freeman, currently pending in the Court of Appeals for the Fourth Circuit, was originally filed by the EEOC in September 2009 based on an applicant’s charge of racial discrimination. The applicant, Katrina Vaughn, claimed Freeman had discriminated against her on the basis of her race when it denied her a job after pulling her credit report. The action alleges race and gender discrimination via the alleged disparate impact of Freeman’s credit history and criminal background checks on applicants. The EEOC argued that Freeman’s use of credit history as a hiring criterion had a disparate impact on black applicants and that its use of criminal history had a disproportionate impact on blacks and men.

A Maryland federal judge, however, significantly trimmed the putative class action alleging race and gender discrimination, granting dismissal of all claims relating to hiring decisions made 300 days before Vaughn’s discrimination charge. The EEOC has appealed to the Fourth Circuit claiming the limitations window was erroneously imposed. The agency argues that section 706 of Title VII of the Civil Rights Act of 1964 (“Title VII”), which gives workers the right to take action within 300 days of an allegedly unlawful employment practice, does not apply when the EEOC sues over an alleged discriminatory pattern or practice under section 707, which contains no limitations window. Indeed, the EEOC claims that “the very nature of a pattern or practice of discrimination means that the discrimination did not occur on any particular day, negating the application of the 300-day limitation.” Indeed, in filing such suits the EEOC more often than not does not limit the timeframe of its claims, and sues for relief since the “inception” of the alleged discriminatory pattern or practice.

In the letter appeal to the Fourth Circuit, the EEOC cited two August decisions in support of their position – a ruling by a Missouri federal judge in EEOC v. New Prime Inc., applying no limitation period to the EEOC’s section 707 claim, and the EEOC v. PMT Corp. decision in which a Minnesota district court stated that the continuing violation doctrine allows courts to consider discrimination that took place more than 300 days prior to the filing of the charge.

The issue is one of great significance for employers who often face significant and unfettered financial exposure when accused of a discriminatory pattern or practice by the EEOC. Despite the agency’s arguments, courts have overwhelmingly refused to give the EEOC carte blanche to litigate discrimination claims at their leisure. 

Kelley Drye will continue to monitor the developments in Freeman and similar cases and update our readers, who may be happy to learn the success rate of a statute of limitations defense against the EEOC.

Harassment of Employees by 3rd Parties

Often employers focus on preventing harassment by one employee to another, but what happens when an employee is harassed by a third party, like a customer or patient? Recent court decisions have reaffirmed that, absent taking reasonable steps to address and rectify the situation, employers can be on the hook for third-party harassment of their employees.

The EEOC recently hit Costco Wholesale Corp. with a sexual harassment suit in Illinois federal court over its failure to protect a former female worker from being stalked by a customer. The agency argues that by failing to shield the employer from the unwelcomed advances of a customer, the wholesale giant violated Title VII. The EEOC investigation revealed that the employee, Dawn Suppo, repeatedly complained to her managers about being confronted and pursued by a male “warehouse member” at the Glenview, Illinois store where she worked. Despite her complaints, however, Costco managers failed to take any steps to resolve the situation. When the harassment persisted, the employee complained to the police, only to be reprimanded by Costco managers who told her to be friendly to the customer. 

The suit alleges that Costco discriminated against Suppo by creating and tolerating a sexually hostile work environment consisting of offensive sexual comments, unwelcome touching and advances and the customer’s stalking and alleges that Suppo was ultimately “constructive discharged.”

“No employer gets a pass because it is a customer targeting its employee, rather than a manager or fellow employee,” said Chicago area EEOC Attorney John Hendrickson, employers have an obligation to protect workers even when the harassment comes from a patron.

Similarly, last month a federal court judge in Hawaii recently denied summary judgment of a hostile work environment claim brought by Martha Wilson, who worked as the Clinical Manager for the Community Dialysis Center of Lanai. While treating a dialysis patient, the patient became angry, yelled and cursed at her, and he and Wilson got into a verbal altercation. A second incident took place within the same week, resulting in a police report. In an effort to minimize her interactions with the patient, Wilson changed the patient’s treatment schedule to avoid being alone with him. The employer, despite being aware of the incidents, placed her on investigatory suspension and then terminated her. In denying the employer’s motion for summary judgment, the judge noted that an issue of fact existed as to whether the employer took adequate remedial measures to deal with the alleged harassment.

Employers are well-advised to remember that an employer may be liable for failing to take adequate remedial measures to end alleged harassment of an employee, regardless of who is the harasser. Reach out to Kelley Drye’s Labor and Employment Group for additional guidance in how to handle such situations at your workplace.

LEGISLATIVE UPDATE

New York Legalizes Use of Medical Marijuana

In the June issue of the Employer Express, we covered Minnesota’s legalization of medical marijuana. Joining the ranks of states permitting the use of marijuana for medical purposes, on July 7, 2014, New York enacted the Compassionate Care Act, effective immediately. New York employers, particularly those operating in multiple jurisdictions, are cautioned to stay apprised of the state medical marijuana laws and their impact on the use and consequences of drug tests in the workplace.

New York is now the 23rd state to adopt legislation legalizing the use of marijuana for medical use. Under the state’s new law, a patient who has been certified by a healthcare provider to use medical marijuana will register with the New York State Department of Health and receive a patient identification card, with which they can obtain medical marijuana from no more than five certified organizations licensed to operate dispensaries.

Unlike most state laws to this effect, however, the New York law specifically classifies individuals validly prescribed medical marijuana as “disabled” under the state human rights law, thus, presumably requiring New York employers to provide reasonable accommodations for medical marijuana users. To be covered, individuals must suffer from a “serious condition,” defined as having one of the enumerated “severe debilitating or life-threatening conditions.” It is too soon to tell just what courts will deem to be a reasonable accommodation for a medical marijuana user, but employers can expect relaxed enforcement of an employer’s drug testing policy to be on the table. Presumably, however, courts will take into account whether or not such an accommodation can be deemed reasonable in light of the particular job functions at issue and the potential for the use of marijuana to negatively impact an employee’s job performance or more significantly, workplace safety. The New York State Department of Health is expected to promulgate regulations over the next 18 months implementing the statute. 

Medical marijuana laws across the country vary greatly. Employers are well-advised to consult counsel in their jurisdictions prior to adopting, revising, or enforcing any drug test policy against an employee that tests positive for medical marijuana. Kelley Drye will continue to monitor this arena and keep you apprised of new developments.

Passaic, New Jersey Enacts Paid Sick Leave as State Considers New Bill

Last month’s newsletter reminded our readers that New York City’s Paid Sick Leave law is now in full effect. Continuing the trend, Passaic, New Jersey joined Newark and Jersey City as the third town in the state to pass legislation requiring paid sick leave for employees. New Jersey is also poised to potentially be the third state in the country to do the same.

The Passaic City Council unanimously passed an ordinance requiring employers to provide three to five paid sick days annually to workers working at least 80 hours in a calendar year. The law would take effect within 120 days after Mayor Alex Blanco’s expected signature. Modeled after the Newark law, the Passaic measure requires employers with 10 or more workers to provide 40 hours of paid sick time annually. Smaller employers would only have to provide up to 24 hours of paid sick leave. Employees in child care, home health care and food service industries, however, will be entitled to 40 hours of paid sick leave regardless of their employer’s size.

Like New York City’s Earned Sick Time Act (“ESTA”), the Passaic measure provides for accrual of one hour of paid sick leave for every 30 hours worked. While employees will begin accruing paid sick time from their first day on the job, they would have to wait 90 days to use it. 

The paid sick leave momentum continues, as New Jersey considers the passage of a state bill which would also provide for the accrual of one hour of paid sick leave for every 30 hours worked, providing much needed uniformity for employers across the state. The state measure will be particularly significant to those employers with multiple operations in different New Jersey municipalities. Under the state bill, employers with fewer than 10 employees would be required to provide up to 40 hours of earned sick leave, while employers with more than 10 employees would have to allow up to 72 hours. 

Following the trend, efforts to enact similar legislation is underway in other New Jersey municipalities, including Trenton, Paterson, Irvington, Montclair, and East Orange. On the national stage, the California legislature also recently passed a bill earlier this month that would provide three days of paid sick leave annually to employees in the state. If signed into law by Governor Jerry Brown, the measure would take effect on July 1, 2015.

Kelley Drye will continue to monitor the New Jersey bill as is runs its course through the legislative process, likely enduring significant changes before becoming legislation.

Los Angeles, CA Poised to Raise Minimum Wage to $13.25

On Labor Day, September 1, 2014, Los Angeles Mayor Eric Garcetti proposed the gradual increase of the city’s minimum wage from the current $9 to the $13.25 per hour over the course of the next three years.

The Mayor argued that raising the minimum wage to $13.25 by 2017 would bring approximately 567,000 workers in the city out from under the poverty line. The plan provides for raising the city’s minimum wage to $10.25 by 2015, $11.75 in 2016 and $13.25 in 2017. Following that, the minimum wage would increase with the Consumer Price Index, a measure of inflation. Tips and service charges would not be included in the minimum-wage calculation.

The measure is presently being considered by the Los Angeles City Council and, if approved, would make Los Angeles the latest city to jump aboard the higher minimum wage bandwagon in municipalities across the country. Similar efforts are already underway in Seattle, Washington and San Francisco, California. California state minimum wage rose to $9 this past July and will rise to $10 on January 1, 2016. The state Assembly is also considering a proposal that would raise the minimum wage to $13 in 2017, after the proposal was approved by the California Senate this past May.

Chicago Mayor Rahm Emanuel signed an Executive Order raising minimum wage to $13 per hour for employees of city contractors. By contrast, the federal minimum wage has remained stagnant at $7.25 an hour since 2009 - President Obama’s efforts to raise it have fallen flat. This February, however, President Obama did successfully sign an Executive Order raising the minimum wage for federal contractors to $10.10 for contracts solicited on or after January 1, 2015

Kelley Drye will continue to track this developing national trend and update you on any changes.

Louisiana Ban on Same-Sex Marriage Upheld, While Other State Bans Remain on the Chopping Block

In the aftermath of U.S. v. Windsor, a series of cases have largely overturned state bans on gay marriage as violating the equal protection rights under the 14th amendment. Most recently, on September 4, 2014, a unanimous three-judge panel on the Seventh Circuit affirmed the invalidation of Indiana’s and Wisconsin’s bans on same-sex marriage, finding the states had not provided reasonable basis for their “discriminatory policies.”

In defending their respective bans, the states asserted their interests in encouraging straight people to marry to reduce the number of “accidental births.” Indiana argued that straight people must be pressured to marry because they produce “unwanted children by the carload.” The court, however, disagreed, countering that many “abandoned children” adopted by gay couples would be better off financially and emotionally if their adoptive parents were married. 

Absent plausible grounds for barring gay marriage, the court ruled that Indiana and Wisconsin could not overcome a presumption that the bans amount to a denial of equal protection. Both states will likely seek review of the decision by the Supreme Court. Virginia and Oklahoma state bans have also appealed rulings invalidating their respective state-bans on same-sex marriage.

Not all federal courts have followed the trend however, with a federal district judge in the Fifth Circuit opting to uphold Louisiana’s ban on same-sex marriage after finding the state interests behind the statute to be legitimate. Judge Feldman’s decision, however, has been widely criticized as applying inaccurate standards of law, as he is the only federal judge to uphold a marriage-equality ban since the Supreme Court’s Windsor decision.

The Ninth Circuit also heard oral arguments in three separate cases challenging the same-sex marriage bans in Idaho, Nevada and Hawaii. Texas’ ban on same-sex marriage is also being contested, with the Fifth Circuit considering whether to uphold a district court’s decision to block enforcement of the ban after two Texas couples claimed the state’s prohibition against same-sex marriage served no purpose but to deprive them of their constitutional rights.

Kelley Drye will continue to monitor the fast-changing legal landscape of same-sex marriage. In the meantime, employers, particularly those with multi-state operations, should consult with counsel when making policy decisions implicating the rights and benefits of employees in same-sex marriages.

NLRB UPDATE

Facebook “Like” Legally Protected, Says NLRB

The National Labor Relations Board (“NLRB”) has now issued the first labor ruling on whether Facebook “likes” can be legally protected. On August 22nd, the National Labor Relations Board ruled that a Connecticut bar and restaurant violated the National Labor Relations Act (“NLRA”) when it dismissed two employees participating in a Facebook discussion that was critical of their employer, engaging in what the Board deemed to be “protected, concerted activity.”

The case involved two employees at the Triple Play Sports Bar and Grille, a bartender and waitress, Jillian Sanzone, and cook, Vincent Spinella. The pair was promptly fired after engaging in a series of allegedly defamatory and disparaging posts and “likes” on Facebook. The Facebook discussion itself involved several employees but started with a status update by a former Triple Play employee, Jamie LaFrance, who claimed that the bar and restaurant owners “couldn’t even do the tax paperwork correctly” and someone should do the owners “a favor” and buy the business from them. While Sanzone commented on the status update, but more significantly, Spinella, for his part, merely “liked” LaFrance’s status update, which the Board acknowledged was “more ambiguous.”

The Board nevertheless opted to treat the “like” as Spinella’s expression of his approval of LaFrance’s original complaint in his status update. The Board however, limited its interpretation of Spinella’s like, finding it only supported the original status update and holding that in order to be interpreted as supporting the entire threat, Spinella would have had to “liked” each and every subsequent post in response to LaFrance’s original status update.

Going a step further, the Board also found the bar and restaurant’s “Internet/blogging” policy, which prohibited “inappropriate discussions” about the company, management or other workers, to be unlawful and in violation of the NLRA. The Board found the policy could be reasonably interpreted as barring employees from engaging in protected activities under the NLRA.

This unprecedented decision by the NLRB offers employers some insight into the Board’s stance towards employers that discipline or terminate employees over social media activity. Employers should take heed of this ruling in evaluating how to structure its policies and conduct discipline for misconduct on social media, and reach out to Kelley Drye for additional guidance. 

NLRB Strikes Confidentiality Policy of California Elementary School with “High Profile” Affiliations

On September 8, 2014, a National Labor Relations Board (“NLRB”) administrative judge struck down a confidentiality policy of a California elementary school for being overly broad and in violation of the National Labor Relations Act as tending to chill protected activity under the Act.

After resigning, Trudy Perry, a teacher at the Muse School CA of Calabasas, funded by Hollywood director James Cameron and his wife, received a letter from the school’s counsel threatening legal action for her supposed violation of the policy by making negative and allegedly slanderous statements about the school to current students’ parents.

Back in July of 2013, Perry filed a charge with the NLRB accusing the school of unfair labor practices for threatening to enforce its written confidentiality policy prohibiting employees from disclosing confidential information about Muse, its owners, students, and employees. Among other things included under the policy was confidential information about employee compensation and budgets. The policy went further, prohibiting employees from making disparaging remarks about anyone associated with the school in a way that would harm the school’s reputation.

After Perry’s charge, the school revised the policy to include additional categories of confidential information. The revised policy also purported to prevent employees from sharing confidential information with anyone, including their own spouses and families. Administrative Law Judge Lisa D. Thompson, however, found both the original and revised policies in violation of the NLRA. She found that “both agreements explicitly prohibit and could reasonably be interpreted as prohibiting employees” from discussing issues related to working conditions, as is their right under Section 7 of the NLRA.

While the school argued that the policy was necessary to protect the confidentiality of the celebrity founding couple, along with other “notable celebrity individuals and families” with “high profile status,” Judge Thompson disagreed, finding that the policies broad prohibitions could reasonable be construed as prohibiting employee’s protected discussion of wages. The Judge focused on the policy’s failure to clearly define the particularly prohibited conduct it sought to restrict, its failure to clarify what communication would be permissible, and the school’s failure to cite to any authority suggesting the confidentiality of the “high profile” individuals affiliated with the school superseded the rights of its employees under the NLRA. Notably, the Judge also dismissed the school’s argument that its inclusion of a clause stating the policy was not to be construed as prohibiting protected activity, finding it irrelevant that the revised policy had never been adopted since the mere maintenance of the policy was sufficient to violate the NLRA.

Employers would be well-advised to review the language of all confidentiality policies on file, regardless of whether the file has been expressly adopted or enforced. Any policies that can be reasonably construed as prohibiting protected activity should be revised to clearly provide for the specific conduct it seeks to restrict and eliminate any language that could be read by employees to mean that they are prohibited from discussing employment-related issues.

WAGE AND HOUR UPDATE

Interns Launch Wage Action Against Oscar De La Renta

Following recent New York State and City legislation protecting unpaid interns from discrimination and harassment, intern wage and hour issues and lawsuits continue to rise. Most recently, unpaid interns hit Oscar de la Renta with a proposed class action in New York state court, claiming the fashion label wrongly classified them as exempt from receiving minimum wage payments.

The complaint asserts that Oscar de la Renta misclassified the interns and failed to compensate them for all hours worked from August 2008 to present, during which interns made necklaces that retailed for up to $400, ordered coffee and food for direct supervisors, and delivered fabric and accessories to vendors and dressing models for fashion shows.

But the fashion industry isn’t the only industry under the wrath of unpaid interns. On September 4, 2014, a former intern for The Late Show with David Letterman filed suit, claiming she was illegally classified as exempt from wage laws and not compensated for the time she worked on the show. While the intern worked more than 40 hours weeks during her time on the show, she was not paid minimum wage nor paid for overtime.

The two suits are the latest in a series of class actions against media, entertainment, and fashion companies accused of misclassifying employees as interns to avoid having to compensate them for their work. In August, a New York federal judge granted class certification to current and former Gawker Media LLC interns claiming the company violated federal and state minimum wage laws by not fairly compensating them for their work writing, researching and editing blog posts and other content. Coach Inc., Def Jam/Universal Music Group, Inc., and Sirius XM Radio Inc. have all been hit with class actions in the last few months.

Kelley Drye will continue to monitor the wage and hour climate as interns across multiple industries will likely continue to file suits. Reach out to Kelley Drye to ensure your employees are properly classified, before it is too late.

NON-COMPETE UPDATE

Indiana Court Finds Yet Another Reason To Disfavor Noncompetes

A recent Indiana Court of Appeals decision, now adds to the existing landscape disfavoring non-competes, barring the enforcement of a two year non-compete against a former in-home health care company’s employee because the clock began ticking over three years prior, when the employee was fired for the first time.

In October of 2009, Nightingale Home Healthcare, Inc. employee, Carey Helmuth, was terminated for his allegedly “substandard work” and “violation of company policies.” The company promptly rehired Helmuth 10 days later. Fast forward three years, and Nightingale again terminated Helmuth’s employment in March of 2012. Shortly thereafter, Helmuth began doing similar “patient advocate” work for Physiocare Home Healthcare LLC, a competitor of Nightingale. Nightingale filed suit, claiming Helmuth had breached the terms of his non-compete agreement. The trial court however, found in favor of Helmuth, finding his non-compete obligations had already expired.

On appeal, Nightingale relied on their contention that Helmuth had only been terminated for 10 days and was quickly reinstated, such that his non-compete, originally signed in 2008, remained in full effect. The court, however, was unpersuaded, finding that absent execution of a new non-compete following Helmuth’s rehiring, the original agreement expired in 2011. Thus, Helmuth was free to work for Physiocare in May 2012.

While the recent decision is not surprising, employers should take the opportunity to assess the validity of all non-competes on file for current and former employees. Employment decisions can sometimes be fluid, but employers are warned that rehired employees, regardless of how short the time frame of their non-employment, should be treated as new hires for all intents and purposes. This is particularly so with regards to non-compete agreements, since the enforceability of such agreements are inextricably tied to the time elapsed since a given employee’s termination. 

For any assistance in drafting or evaluating non-compete agreements, reach out to Kelley Drye’s Labor & Employment Group.

ANTI-TRUST UPDATE

Settlement Negotiations Resume with Apple & Google Employees in No-Poach Suit While Tech Giants Appeal Rejection of $324.5 Million Settlement

Last month we reported a California federal judge rejected Apple and Google’s $324 million anti-poaching settlement deal for being too low. The tech companies have now resumed mediation discussions while simultaneously urging the Ninth Circuit to vacate the rejection of the settlement deal.

The proposed deal would have ended the high-profile antitrust class action against the conglomerates, which alleges that the companies secretly conspired to refrain from recruiting software engineers employed by their rivals and agreed to cap pay packages in order to prevent bidding wars. However, Judge Lucy Koh found the companies should have offered at least $55 million more to enable the class members to recover amounts proportionate to comparable settlement deals struck last year by the companies initially named in the lawsuit. 

Meanwhile, the four technology companies involved in the suit, which also includes Adobe and Intel, urged the Ninth Circuit to vacate the decision rejecting the proposed settlement. The tech giants claim Judge Koh committed a clear legal error by using “a benchmark formula that impermissibly substituted the court’s assessment of the value of the case for that of the parties who litigated the matter for more than three years.”

With the trial date set for April 9, 2015 and expected to last 17 days, this is definitely the antitrust case to watch. Kelley Drye will continue to follow the case and keep you updated on any developments.