Q. Are employers allowed to ask employees about their salary history in Philadelphia?

A. The U.S. Court of Appeals for the Third Circuit has ruled that a Philadelphia city ordinance that prohibits Philadelphia employers from asking applicants about their current or past pay rates is constitutional. In April 2018, a Philadelphia federal court judge held that the ban was unconstitutional because it violated the free speech clause of the First Amendment. However, this month, the Third Circuit vacated the lower court ruling and held that the ban is constitutional. As a result, Philadelphia employers must immediately begin complying with Philadelphia’s salary history ban.

For more information, click here.

Q. I heard that job postings which impose a maximum experience requirement for external applicants may not violate certain provisions of the ADEA, at least in certain Circuits. Is that true?

A. The United States Supreme Court recently declined to review an en banc Seventh Circuit decision in Kleber v. CareFusion Corporation, which ruled that the Age Discrimination in Employment Act (“ADEA”) does not apply to external job applicants who allege that a neutral hiring policy adversely impacted older workers.

Dale Kleber, then 58 years old, applied for an in-house Senior Counsel position in CareFusion’s legal department. The job description provided that applicants must have “3 to 7 years (no more than 7 years) of relevant legal experience.” At the time, Kleber had accrued more than seven years of relevant experience. The company ultimately did not offer Kleber the job and instead hired a 29-year-old applicant who met but did not exceed the job description’s experience requirement. Kleber filed a lawsuit against CareFusion under the ADEA, which prohibits discrimination against those age 40 or older. One of his main arguments was that, although the company’s maximum experience requirement may have appeared neutral on its face, such requirement had a disparate impact on him as an older attorney.

The Seventh Circuit held that the disparate impact provision of the ADEA only applies to “employees,” and not outside job applicants seeking employment such as Kleber. Section 4(a)(2) of the ADEA, which applies to disparate impact claims, makes it unlawful for an employer “to limit, segregate or classify employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” The court found that the plain language of this provision only protects those who have a “status as an employee,” and that Kleber did not have such status, since he was an outside applicant. The court also contrasted the disparate impact section with other portions of the ADEA which expressly cover both employees and job applicants, such as the provision which guides disparate treatment claims (i.e. a company intentionally refusing to hire an applicant because of his or her age). A final issue that the Seventh Circuit addressed was whether the ADEA’s text was similar enough to the text of Title VII that it should follow the same interpretation, as Title VII permits applicants to bring disparate impact claims. The court found that the two statutes are distinguishable.

Given the Supreme Court’s decision declining review, the Seventh Circuit’s ruling continues to remain enforceable and provides employers, at least in Indiana, Illinois and Wisconsin, with a sufficient defense to external applicants’ disparate impact claims under the ADEA. The Eleventh Circuit, which covers Alabama, Florida and Georgia, also has ruled in a manner consistent with the Seventh Circuit, refusing to extend the ADEA’s language on disparate impact to outside applicants. No other Circuit has addressed this issue yet.

One note: While employers may be able to successfully escape ADEA disparate impact claims from outside applicants, state and local anti-discrimination laws may extend to protections for outside applicants. In addition, the decisions of the Seventh and Eleventh Circuits have no effect on ADEA disparate impact claims brought by internal applicants already employed within the company. Furthermore, both internal and external job applicants remain protected under the disparate treatment sections of the ADEA. The Seventh and Eleventh Circuit decisions are therefore limited in nature, and employers across the country should continue to regularly monitor their job postings and hiring practices to comply with federal and state anti-discrimination laws.

At the end of last year, we reported that a federal district court had imposed a last-minute temporary restraining order to block California from enforcing its new law (AB 51), which would have imposed criminal penalties on California employers that use mandatory arbitration agreements. That court has now issued a preliminary injunction that continues to block AB 51 until the court decides the merits of the underlying lawsuit, which seeks to overturn AB 51 as preempted by federal law (United States v. Becerra, Case No. 2:19-cv-2456 KJM DB). For a recap of AB 51 and the procedural history leading up to this preliminary injunction, please refer to Troutman’s previous client advisory, “Court Temporarily Blocks California’s New Law (AB 51) That Prohibits Employers From Using Mandatory Arbitration Agreements.”

With the preliminary injunction in place, California employers may continue to use mandatory arbitration agreements as a condition of employment without fear of criminal prosecution. The preliminary injunction is expected to remain in effect until resolution of the underlying case, which could take at least a year. California employers should use this time to consider and review their employment dispute resolution goals, including any existing or desired arbitration agreements and practices, and consult with their legal counsel about best practices in drafting, updating, and distributing these agreements.

Q. Are there new laws that New Jersey employers needs to be aware of?

A. January 2020 was a busy month for New Jersey’s executive branch. Governor Phil Murphy signed into law at least five workplace-related bills, one of which revised the New Jersey mini-WARN Act, one granting state regulators authority to issue stop-work orders for workplace violations, and three affecting worker misclassification.

To read further, click here.

Q: I operate a hotel in New Jersey and heard New Jersey law now requires me to provide panic devices to certain hotel employees. What do I need to know?

A: New Jersey recently enacted legislation that requires hotel employers to provide a “panic button” to individuals “performing housekeeping or room service duties at a hotel” and is employed by a hotel or subcontractor of a hotel. The new law only applies to hotels and other similar establishments containing at least 100 guest rooms. The law became effective on January 1, 2020.

The state legislature found that because of “the unique nature of hotel work, hotel employees are particularly vulnerable when working alone in hotel guest rooms” placing them at increased risk of assault, sexual assault, and sexual harassment. The legislature also found that many hotel employees are “ marginalized members of society with limited means to support themselves and their families, and without adequate support, may feel intimidated to report inappropriate and criminal conduct for fear of repercussions or retaliation from their employers.”

Under the law, a “panic device” is defined as a “two-way radio or other electronic device which is kept on an employee’s person when the employee is in a guest room, and that permits an employee to communicate with or otherwise effectively summon immediate on-scene assistance from a security officer, manager or supervisor, or other appropriate hotel staff member.”

Hoteliers must provide a free panic device to employees assigned to work in a guest room without any other employees present and permit the employee to use the panic device if the employee believes there is an ongoing crime, immediate threat or assault, harassment, or other emergency. Upon activation of a panic device, an appropriate hotel staff member must “respond promptly to the location of the hotel employee” and no adverse action may be taken against an employee who utilizes their panic device.

In addition, hoteliers must:

  1. Keep a record of accusations it receives that a guest has committed an act of violence, harassment, or other inappropriate conduct against a hotel employee and maintain that name on a list for five years; and
  2. Notify employees assigned to work in rooms occupied by guests on the list referenced above and provide employees with the option of servicing that room with a co-worker or not servicing the room at all; and
  3. Report any incident involving alleged criminal conduct to law enforcement.

Hoteliers also must educate their employees about the panic device program and their rights under this new statute. Furthermore, hotel guests must be advise of the panic device program. Hoteliers who fail to provide panic devices are subject to fines of up to $5,000 for first time violations and $10,000 for subsequent violations.

Q: I heard New York is changing its rules around tip credits for some types of employees. What do I need to know?

A:  A tip credit is a concept permitted under the Fair Labor Standards Act (“FLSA”) and many state laws.  A tip credit allows employers to pay employees a cash wage of less than the minimum wage and take a tip credit up to a set amount.  For example, under the FLSA, employers can pay tipped employees a minimum cash wage of $2.13 per hour, and take a tip credit of $5.12 per hour.  If employees receive less than $5.12 an hour in tips, the employer must pay the employee the difference so that an employee always earns at least $7.25 (the minimum wage) per hour.  Regardless of whether an employer takes a tip credit, all tips are the property of the employee.  So, if an employer takes a tip credit and the employee makes more than $5.12 per hour in tips, the additional amount belongs to the tipped employee. Continue Reading New York State To Eliminate Tip Credit For Many Employees Beginning June 2020

We are pleased to announce that Troutman Sanders and Pepper Hamilton have agreed to merge effective April 1, 2020. The new law firm, Troutman Pepper Hamilton Sanders LLP, or “Troutman Pepper,” will have more than 1,100 attorneys in 23 offices across the country.

Each firm brings a breadth and depth of experience serving clients in a multitude of areas as well as a complementary industry sector focus, spanning most of the industries critical to the U.S. economy. The Troutman Pepper Labor & Employment team has the depth of knowledge to handle virtually any labor or employment issue, including the following:

  • Class and Collective Actions Litigation
  • Employment Counseling
  • Government Claims and Investigations
  • Immigration
  • Litigation and Dispute Resolution
  • Traditional Labor
  • Employee Benefits and Executive Compensation

Most significantly, the combined firm will offer increased benefits and services to our clients, while retaining the same higher commitment to client care that has been a hallmark of both firms. Benefits for Troutman Pepper clients include:

  • Quality – Each firm prides itself on providing legal services of the highest quality. The combined firm brings together complementary strengths so we can best serve our clients.
  • Value – Clients will enjoy a deeper bench and broader capabilities in key areas — without service disruptions — as we continue to focus on delivering the most value.
  • Innovation – Clients will benefit from innovations in technology and service delivery models, as the combined firm will commit even more resources to improve client services.
  • Reach – With offices in 23 U.S. cities, including eight of the ten top U.S. markets, clients will benefit from increased access to key legal markets.
  • Service – A combined firm means deeper industry ties and experience, which leads to more collaboration and better client service.

We look forward to introducing you to Troutman Pepper.

A few months ago, we covered the news that the federal Department of Labor announced a new final overtime rule, which went into effect January 1, 2020. But the DOL was not quite finished! The DOL stayed busy over the holiday break and has continued this trend in the new year. Below, we summarize these recent updates from the DOL, including updates to the “regular rate” regulations applicable to the Fair Labor Standards Act (“FLSA”); new opinion letters on the FLSA and the Family and Medical Leave Act (“FMLA”) and a new final rule addressing joint employer regulations to help you keep up with the DOL as you begin 2020.

DOL announces new “regular rate” rule

First,  right before the Christmas holidays, the DOL announced a new rule revising the regulations that govern how employers compute overtime payments for salaried, non-exempt employees under the FLSA. The FLSA requires overtime pay of at least one and one half times the “regular rate” for time worked in excess of 40 hours per workweek. The previous regulation did not provide much certainty to employers regarding when benefits and perks had to be included when calculating the “regular rate.” The new rule clarifies which perks and benefits must be (and do not have to be) included in the regular rate of pay, and it comes at a great time, as the DOL reports that the revision is the first significant change to these regulations in nearly fifty years.

The rule goes into effect January 15, 2020.  What do employers need to know? The new final rule clarifies that employers may offer the following perks and benefits to employees without risk of additional overtime liability:

  • the cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;
  • payments for unused paid leave, including paid sick leave or paid time off;
  • payments of certain penalties required under state and local scheduling laws;
  • reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;
  • certain sign-on bonuses and certain longevity bonuses;
  • the cost of office coffee and snacks to employees as gifts;
  • discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples; and
  • contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.

You can find the full text of the new rule here.

DOL issues three new opinion letters

Next, on January 7, the DOL issued three new opinion letters, two of which deal with additional questions under the FLSA. (The third addresses employee counting requirements for a public entity employer for purposes of satisfying one of the eligibility requirements for the FMLA).

The first letter deals with the question of calculating overtime when an employer offers a nondiscretionary, lump-sum bonus earned over a multi-week period (rather than during a specific pay period). The DOL opined that in the hypothetical scenario presented, a $3,000.00 bonus offered to employees who finish a 10-week training program and agree to sign up for an additional 8 weeks, the employer needed to include the bonus amount in the regular rate of pay for employees working a fluctuating amount of overtime during the 10-week training program as a “stay” bonus. The letter also explained that the employer could divide up the bonus equally for each of the 10 weeks for this purpose.

The second letter addressed whether per-project payments could satisfy the salary basis test for purposes of employees classified under the administrative and professional exemptions from the FLSA’s minimum wage and overtime requirements. The letter addressed two different hypothetical per-project payment options and ultimately found both would satisfy the salary-basis requirement – as long as the payments are regular and predetermined.

You can find the full versions of all three letters here (filter to “2020”).

DOL issues final rule updating joint employer regulations

Finally, just this past Sunday, January 12, the DOL announced yet another new rule, this time addressing the regulations applicable to determining joint employer status under the FLSA.

Sometimes, an individual employee performs work that benefits multiple entities. The final rule addresses when such entities may be considered “joint” employers of that individual for purposes of the FLSA – meaning that they may be jointly and severally liable for the employee’s wages or overtime pay. The biggest change to note? The DOL has adopted a new four-factor balancing test to determine joint employer status, and will now weigh the following factors to make the joint employment determination, considering whether a possible joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Determines the employee’s rate and method of payment; and
  • Maintains the employee’s employment records.

The DOL has noted that no one factor (including the last factor) is alone enough to make an entity a joint employer – instead, it is a case-by-case and fact-specific analysis.

The DOL reports that, like the regular rate rule, revisions to these regulations were a long time coming – as these represent the first substantive revisions to these regulations in over sixty years.

The rule, which applies only to joint employer status under the FLSA (and not any other federal employment laws), will go into effect March 16, 2020. You can find the full text of the new rule (which will be published on the Federal Register January 16, 2020) here.

Curious about how the DOL’s new rulings might impact your business? Please contact a Troutman Sanders employment attorney for personalized guidance and advice.

The start of a new year is a great time for employers to look ahead for changes in the law that will affect their organizations. In this blog post, we will lay out some of the key issues that employers can expect to encounter in the year ahead.

  1. Exempt Salary Increases: On January 1, 2020, the Department of Labor’s updated “white collar” overtime exemption rule went into effect, increasing the minimum salary level for overtime exemption to $684 per week, or $35,568 per year. In addition, some states have minimum exempt salary levels that exceed the federal threshold. California, New York, Colorado, Maine, and Alaska are raising their state minimum threshold this year.
  2. Minimum Wage Increases: While Congress still has not enacted a federal minimum wage increase, states and localities across the country continue to implement new minimum wages in 2020. For example, the minimum wage is now $13/hour for California employers with 25 employees or more (and higher in some California cities); in New York City, the new minimum wage is $15/hour for employers with 11 employees or more.
  3. Independent Contractors: Independent contractor classification continues to be a hot topic in employment law across the country, with many states adopting the stringent “ABC Test” for independent contractors.
  4. Arbitration Agreements: Mandatory arbitration agreements are also seeing new challenges: California’s new law banning arbitration agreements in the employment setting was put on hold by a court at the last minute, but we can expect to see further developments in California and other states in the new year.
  5. Discrimination Laws: New discrimination and harassment laws targeting discrimination based on hairstyle (California), pregnancy (Oregon), and other characteristics will go into effect this year as well.
  6. Pay Equity: New laws in New York and New Jersey both go into effect in January 2020 that will prohibit employers from asking job candidates about their salary history. Other states (Washington state, Alabama, Maine, and Illinois) passed similar legislation last year, and more (Colorado, Georgia, Pennsylvania, and South Carolina) are looking to follow suit soon.
  7. Training Requirements: A variety of states, including New York, Delaware and Maine have already adopted sexual harassment training requirements, and others have adopted new sexual harassment training requirements with deadlines in 2020. In particular, Illinois’ new law requiring most employers to complete annual training went into effect January 1, 2020, and Connecticut now requires employers with three or more employees to provide sexual harassment training to all employees by October 1, 2020. California requires sexual harassment training for all employers but has extended the time for employers with five or more employees to provide training to January 1, 2021.
  8. Leave Laws: States and localities continue to pass generous paid family and medical leave laws. Eligible employees in Washington state will soon be entitled to take up to 18 weeks of paid family and medical leave per year. The District of Columbia is set to follow suit later this year. California, Connecticut, Massachusetts, New Jersey, New York, Oregon, and Rhode Island also have paid family leave laws.
  9. Marijuana and the Workplace: New Mexico and Oklahoma have become the latest to pass legislation prohibiting employers from discriminating against employees because of their status as registered marijuana users; and Nevada and New Jersey each have new laws preventing discrimination based on marijuana use. Meanwhile, New York City has passed an ordinance preventing most employers from conducting any pre-employment testing for marijuana or THC.
  10. Extra Payday Year: 2020 will be a 27-payday year for some organizations. Employers who pay bi-weekly on Fridays and had a payday on January 3, 2020, will have 27 paydays this year instead of the standard 26. 27-payday years occur once every 11 or 12 years for all bi-weekly payrolls, when the one-or two-day shortage of the standard 26 payday shortage catches up, causing a 27th payday to fall within the same calendar year. Employers with a 27th payday in their 2020 calendar should plan for how the extra payday will impact payroll deductions for health benefits, flexible spending accounts, and the cash flow impact the extra payday will have on their year.

Be sure to subscribe to HR Law Matters to stay up to date on these and other employment developments in the new year. As always, if you have any questions about the new developments in employment law and how they affect your organization, Troutman Sanders’ labor and employment attorneys are happy to assist you. Happy New Year!

Our Cannabis Practice provides advice on issues related to applicable state law. Cannabis remains an illegal controlled substance under federal law.

Q: What is the current rule on whether an employee can use our company’s email system to distribute union material? Also, are we permitted to require employees to keep workplace investigations confidential without running afoul of the National Labor Relations Act?

A: There are actually two issues that arise from your question, and both were recently addressed by the National Labor Relations Board in its reversal of two Obama-era decisions. Essentially, employers may now beef up restrictions on their employees’ use of company-owned email and other communications systems, subject to certain exceptions. Furthermore, employers may now implement rules requiring confidentiality during the course of workplace investigations, and depending on the circumstances, even beyond the close of the investigation.

In the first case, Caesars Entertainment d/b/a/ Rio All-suites Hotel and Casino, the Board found that an employer’s right to control the use of its email systems supersedes the right of employees to use such systems for union-related communications. This decision overturns Purple Communications, Inc., a much-maligned 2014 decision in which the Board held that workplace rules prohibiting employees from using employer-owned email systems for union business were presumptively invalid. According to the current Board, Purple Communications “impermissibly discounted employers’ property rights in their IT resources while overstating the importance of those resources to Section 7 activity.”

The Caesars Entertainment dispute arose when the union, representing approximately 3,000 employees at a Las Vegas hotel and casino, filed a charge alleging that the employer’s handbook rules violated Purple Communications by prohibiting employees from using the employer’s email system to “send chain letters or other forms of non-business information,” which presumably included union-related emails and other communications. After an administrative law judge rejected the employer’s handbook rule under the Purple standard, the Board issued a call for the parties and interested amici to address several questions, including whether Purple should be overturned, and if so, what standard should replace it. The Board suggested the possibility of returning to the standard introduced in 2007 in Register Guard, where the Board held that employees have no statutory right to use employer equipment.

In a sense, the Board’s rationale for returning to the Register Guard standard is a product of the changes to society at large brought on by technology. As the Board in Caesars explained, employees have other options for union-related communications, given that “in modern workplaces employees also have access to smartphones, personal email accounts, and social media, which provide additional avenues of communication, including for Section 7–related purposes.” As such, the Board found “no basis for concluding that a prohibition on the use of an employer’s email system for non-work purposes in the typical work-place creates an ‘unreasonable impediment’” to employee Section 7 rights. However, the Board recognized that, in certain circumstances, an employer’s email system might be the only viable means of communication among employees. In that case, “an employer’s property rights may be required to yield in such circumstances to ensure that employees have adequate avenues of communication.” The Board declined to clarify the scope of this exception, instead leaving it “to be fleshed out on a case-by-case basis.”

In another case affecting employee Section 7 rights, Apogee Retail LLC, the Board held that a workplace rule requiring employees to maintain confidentiality in the context of an ongoing workplace investigation is presumptively lawful. After the Board’s 2015 decision in Banner Estrella Medical Center, employers were obligated to make a case-by-case determination about whether imposing a particular confidentiality rule during an internal investigation would infringe upon an employee’s Section 7 rights. Reversing that decision, the Apogee Retail Board explained that such confidentiality rules would now be subject to the analysis introduced by the Board in 2017 in Boeing Co., which provided a new standard for determining whether the maintenance of a facially neutral workplace rule is unlawful.

Under Boeing, when analyzing a facially neutral rule that might interfere with the exercise of employee Section 7 rights, the Board considers (1) the nature and extent of the potential impact of the rule on NLRA rights, and (2) the employer’s legitimate justifications for deploying the rule. Following this analysis, the Board places the rule in question in one of three categories—either lawful or unlawful, or somewhere in between. For those rules that present a close call, the Board balances the rule’s effect on employee rights with the employer’s business justifications for the rule.

In Apogee Retail, the workplace rule in question required employees who reported misconduct or otherwise participated in an investigation of such misconduct to maintain confidentiality with respect to the investigation. Employees were warned that violations of the rule could result in disciplinary action. In analyzing the rule, the Board first determined that it, “when reasonably interpreted, would potentially interfere with employees’ exercise of their Section 7 rights” to discuss employee discipline in the workplace “where doing so is not mere griping but rather looks towards group action.” However, when balancing the potential impact on Section 7 rights with the employer’s business justifications, the Board found the employer’s interests outweighed the interests of its employees. Specifically, the employer’s interest in preventing theft and responding quickly to misconduct, as well as in maintaining employee privacy and the integrity of its investigations, benefitted both employers and employees and therefore carried the day.

In addition to finding that it is presumptively lawful for an employer to impose a confidentiality rule during the course of an ongoing investigation, the Board in Apogee Retail took the further step of holding that an employer can impose confidentiality even after an investigation is complete without violating labor laws if its legitimate reasons for requiring confidentiality outweigh the impact on an employee’s Section 7 rights. In other words, rules that extend confidentiality beyond the close of an investigation will be subject to the Boeing analysis.

These two decisions represent a distinct shift away from the Obama-era Board’s positions on these issues. Following Purple Communications, many employers scrambled to rewrite their policies regarding employee email use. Now, after Caesars Entertainment, employers can implement rules that prohibit employees from engaging in any non-work-related use of company technology, unless the use of an employer’s communication systems is the only reasonable means for employees to communicate about union matters. Employers may now require confidentiality during ongoing investigations, although rules that extend confidentiality beyond the close of the investigation will be scrutinized on a case-by-case basis.

In any event, while the more-relaxed standards announced in these two decisions will provide some relief for employers, given the politically mercurial nature of the NLRB, employers may want to file away their Purple and Banner Estrella-compliant policies for future use. As Caesars Entertainment and Apogee Retail illustrate, the Board’s views on any given issue are subject to change with the political winds. As always, it is prudent to consult with a qualified attorney before changing any workplace rules that could impact employee rights under the National Labor Relations Act.