Employment Law

Following California, New York Toughens Equal Pay Law

Why it matters

Following in the recent footsteps of California, New York Governor Andrew Cuomo signed into law the Achieve Pay Equality Act, providing greater pay equity for women in the state. The bill—one of a package of eight laws that made up the Women's Equality Agenda—amended existing law from achieving pay from "any other factor other than sex" to "a bona fide factor other than sex, such as education, training, or experience." The bona fide factors must be job-related, consistent with business necessity, and cannot be based upon a sex-based differential in compensation. Further, the exception is not applicable when the employee can demonstrate that the practice causes a disparate impact on the basis of sex and that the employer rejected an alternative practice that would not have resulted in such an impact and still served the business purpose. The updated law—set to take effect January 19, 2016—also makes clear that employees are allowed to discuss wages with each other and bulked up the liquidated damages liability for employers to 300 percent of the total amount of wages found to be due. New York's measure appears to be even broader than California's recently enacted enhanced Fair Pay Act—touted as the toughest in the nation—given the increased damages and the potential for a disparate impact claim. Employers on both sides of the country should familiarize themselves with the new laws.

Detailed discussion

On October 21, Governor Andrew Cuomo signed into law a number of bills as part of his "Women's Equality Agenda." The eight new pieces of legislation ranged from protections against domestic violence and human trafficking to mandating reasonable accommodation for pregnant employees. "This State has a legacy of leading the way in advancing equal rights—and today, we are making New York a model of equality for women," Gov. Cuomo said in a statement.

Among the bills: an amendment to New York Labor Law Section 194 addressing pay equity. The new law made it tougher for employers to argue that different rates of pay are based on non-discriminatory reasons and established a disparate impact claim for employees, among other changes.

"No employee shall be paid a wage at a rate less than the rate at which an employee of the opposite sex in the same establishment is paid for equal work on a job the performance of which requires equal skill, effort and responsibility, and which is performed under similar working conditions," reads the law as amended.

The bill provided for limited exceptions for a seniority system, a merit system, a system which measures earnings by quantity or quality of production, and "a bona fide factor other than sex, such as education, training, or experience."

Previously, the law stated that employers could pay workers differently due to "any other factor other than sex." Section 194 was narrowed to include just "a bona fide factor," which may not be based upon a sex-based differential in compensation and must be job-related and consistent with business necessity.

In a major change, employers may also be liable under the statute if a plaintiff can demonstrate that the employer's differing pay rates causes a disparate impact on the basis of sex. Employees must show that the employer specifically rejected an alternative practice that would have served the business purpose without causing such an impact.

The amended law makes clear that employees are permitted to discuss wages with each other without employer retaliation. And it increased the liquidated damages liability for employers from 100 percent of the total amount of wages found to be due to 300 percent.

New York's new law takes effect January 19, 2016.

Just a few weeks prior, the state of California similarly enacted an updated equal pay law. While many of the provisions are alike—prohibitions on employers retaliating against workers discussing wages, limitations on the circumstances where an employer can show that wage disparity is based on a legitimate factor other than sex—the New York law seems to be even more employee-friendly than the California version.

To read A 6075, click here.

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Second Circuit "Likes" NLRB Ruling That Termination Based on Social Media Activity Was Unlawful

Why it matters

Affirming the National Labor Relations Board (NLRB), a panel of the Second Circuit Court of Appeals ruled that employees who "liked" a comment a former coworker made on social media criticizing the employer and posted a negative remark engaged in protected, concerted activity and their termination violated the National Labor Relations Act (NLRA). Triple Play Sports Bar and Grille had appealed the NLRB decision, arguing that the social media conversation between current and former workers was defamatory (one comment referred to a manager as an "asshole") and was likely viewed by customers. But in a non-precedential summary order, the Second Circuit said the social media interactions were just workers talking about labor issues. The panel wrote that the "discussion clearly disclosed the ongoing labor dispute over income tax withholdings, and thus anyone who saw [the cook's] 'like' or [the bartender's] statement could evaluate the message critically in light of that dispute." An opposite conclusion could chill virtually all employee speech online, the court added, while affirming the NLRB's decision "accords with the reality of modern-day social media use." The Second Circuit declined Triple Play's request to publish the decision or make it precedential, however.

Detailed discussion

What began as a conversation on social media between two current employees of Triple Play Sports Bar and Grille and a former employee led to years of litigation. Jamie LaFrance, a former employee at the bar, posted a status update that read: "Maybe someone should do the owners of Triple Play a favor and buy it from them. They can't even do the tax paperwork correctly!!! Now I OWE money … WTF!!!"

After several comments were made in response, current employee Vincent Spinella "liked" the initial status update. A second current employee, Jillian Sanzone, commented: "I owe too. Such an asshole." When the owners of the restaurant learned about the social media conversation, they discharged Sanzone, telling her that she was not loyal enough to be working at the restaurant because of her comment. As for Spinella, he was terminated because he liked the "disparaging and defamatory" comments and it was "apparent" that he wanted to work somewhere else.

Spinella and Sanzone filed a charge with the National Labor Relations Board (NLRB) and both an administrative law judge and a three-member panel sided with the employees, finding they were illegally discharged in violation of the National Labor Relations Act (NLRA).

The employer appealed. Triple Play first argued that the employees' social media activity removed itself from protection under the NLRA because the conversation contained obscenities that were viewed by customers, citing to a 2012 decision from the Second Circuit in NLRB v. Starbucks. In that case, comments made by employees were not subject to protection from the Act because obscenities were uttered in the presence of customers.

But the Second Circuit Court of Appeals said the logical extension of the employer's position "could lead to the undesirable result of chilling virtually all employee speech online. Almost all [social media] posts by employees have at least some potential to be viewed by customers. Although customers happened to see the [social media] discussion at issue in this case, the discussion was not directed toward customers and did not reflect the employer's brand. The Board's decision that the [social media] activity at issue here did not lose the protection of the Act simply because it contained obscenities viewed by customers accords with the reality of modern-day social media use."

Spinella's and Sanzone's communications—made to seek and provide mutual support looking toward group action—were not made to disparage Triple Play or to undermine its reputation, the panel added. "The [social media] discussion clearly disclosed the ongoing labor dispute over income tax withholdings, and thus anyone who saw Spinella's 'like' or Sanzone's statement could evaluate the message critically in light of that dispute."

The court rejected the employer's argument that Sanzone's comment was malicious and false because she knew that Triple Play had not made an error on her own tax withholding.

"Although Sanzone may not have believed that Triple Play erroneously withheld her taxes, that has no bearing on the truth of her statement 'I owe too' or her conceivable belief that Triple Play may have erroneously withheld other employees' taxes," the panel explained. "It is certainly plausible that Sanzone truly owed taxes, even if that was not the result of an error on Triple Play's part—and even if other employees' claims regarding erroneous tax withholdings later proved inaccurate, such inaccuracies by themselves do not remove the statement from the protection of the Act."

The panel also upheld the NLRB's conclusion that Triple Play's Internet and blogging policy violated Section 8(a)(1) of the NLRA by reasonably tending to chill employees in the exercise of their Section 7 rights under the statute.

To read the summary order in Three D v. National Labor Relations Board, click here.

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California Appellate Court: Gentry Not Abrogated, Motion to Compel Arbitration Denied

Why it matters

Finding that neither a California Supreme Court decision nor the Federal Arbitration Act (FAA) applied to the claims alleged in a wage class action filed by a truck driver, a California appellate panel denied a motion to compel arbitration and allowed the suit to move forward at the trial court. A truck driver sued his former employer seeking back wages for himself and other employees. Pursuant to an arbitration agreement, the employer moved to compel arbitration. But the appellate panel ruled that the FAA exempts transportation workers engaged in interstate commerce, a category the plaintiff clearly fell into. As the FAA didn't apply to the arbitration agreement, the court said neither did Iskanian v. CLS Transportation Los Angeles, a 2014 decision from the state's highest court that would have eliminated the truck driver's group claims. Instead, the court said that the 2007 opinion in Gentry v. Superior Court governed, where the California Supreme Court ruled that the state's interest in classwide resolution can take precedence over a class action waiver in an arbitration agreement. "In Iskanian, our Supreme Court had the opportunity to find Gentry comprehensively invalidated," the panel wrote. "It did not do so." The decision adds to the long and complicated history of arbitration and employment disputes in California and puts employers on notice that even after Iskanian, courts will not hesitate to reject arbitration agreements.

Detailed discussion

Mario Garrido was hired as a truck driver for Air Liquide in 2009, transporting the company's industrial gases to locations in California and neighboring states from a production and distribution center. When he was hired, Garrido entered into an Alternative Dispute Resolution (ADR) Agreement with the employer, which stated that all disputes arising out of his employment would be resolved through alternative dispute resolution, including arbitration. The agreement, governed by the Federal Arbitration Act (FAA), also prohibited arbitration on a class, collective, and representative basis.

Garrido was terminated in 2011 and filed suit against Air Liquide. Seeking class action status, he claimed the employer violated various provisions of the Labor Code and unfair business practices. Air Liquide responded with a motion to compel arbitration. Finding that the agreement's class waiver provision was improper under the four-part test laid out in a 2007 California Supreme Court decision, Gentry v. Superior Court, the trial court denied the motion.

The employer appealed and while the case was pending, the California Supreme Court decided Iskanian v. CLS Transportation Los Angeles, holding that Gentry's rule against employment class waivers was preempted by the FAA.

Despite the Iskanian decision, the appellate panel affirmed the trial court, finding that Gentry's holding was not overturned under California law in situations where the FAA does not apply. "We accordingly find that the agreement's class waiver provision is unenforceable," the court said.

The panel first determined that the FAA did not apply to the dispute. Section 1 of the FAA exempts from coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce," which has been interpreted by the U.S. Supreme Court to include "transportation workers."

Just because an employment agreement declares that it is subject to the FAA does not mean a transportation worker's agreement is therefore subject to the statute, the court said. "By stating that it is subject to and governed by the FAA, the agreement necessarily incorporates Section 1 of the FAA, which includes the exemption for transportation workers," the court said. "Accordingly, courts have found transportation workers' employment agreements exempt from the FAA, even when the agreements purport to be governed by the FAA."

As Garrido worked as a truck driver transporting Air Liquide gases across state lines, he was clearly a "transportation worker" under Section 1 of the FAA, the panel determined, rejecting the employer's contention that its primary business did not involve the transportation of third parties' goods. "A significant portion of Air Liquide's business involves the transportation of its gases across state lines," the court said. "Thus, it must be said that Air Liquide is at least somewhat involved in the transportation industry," and "Garrido's duty as a truck driver was the transportation of goods."

With the FAA out of play, the court said the California Arbitration Act (CAA) applied. Nothing in the state law requires that an arbitration agreement explicitly reference the CAA to be enforceable under California law and the state has a strong public policy in favor of arbitration, the panel said.

But what about Iskanian? The California Supreme Court declared, among other holdings, that the prior rule laid out in Gentry was preempted by the FAA. "In light of Iskanian, if this matter were governed by the FAA, arbitration (on an individual basis) would likely be required," the court said. But since the CAA applied instead, the Gentry rule remained in effect.

The Iskanian court found that Gentry's holding was abrogated by the U.S. Supreme Court decision in AT&T Mobility LLC v. Concepcion. "Iskanian's focus, however was whether the FAA preempted the Gentry rule," the court said. "Iskanian did not discuss whether Gentry could apply in a case not governed by the FAA."

Gentry's holding was based on public policy grounds, the panel noted, adding that it was unaware of any post-Gentry authority determining that public policy no longer remains a valid defense to enforcement of an arbitration agreement governed by the CAA.

"We believe that the Gentry rule … may be asserted in matters governed by the CAA and not the FAA," the court explained. "In Iskanian, our Supreme Court had the opportunity to find Gentry comprehensively invalidated. It did not do so. While Iskanian made clear that the Gentry rule is preempted by the FAA, it did not go beyond that finding. Therefore, the Gentry rule remains valid under the CAA."

The court then applied the four factors of Gentry's test to the ADR agreement at issue. Considering "(1) the modest size of the potential individual recovery, (2) the potential for retaliation against members of the class, (3) the fact that absent members of the class may be ill informed about their rights, and (4) other real world obstacles to the vindication of class members' rights to overtime pay through individual arbitration," the trial court invalidated the class arbitration waiver.

Finding that the trial court's determinations were supported by substantial evidence, the appellate panel affirmed. Garrido's likely recovery was approximately $11,000 and he submitted evidence about the risk of retaliation that Air Liquide made its truck drivers frequently feel as if their jobs were in jeopardy. Garrido was unaware of his rights under the Labor Code, the trial court found, and he faced real world obstacles to the vindication of his rights if forced to conduct individual arbitration.

"In light of these determinations, the trial court correctly found that a class proceeding here would be a significantly more effective way of allowing employees to vindicate their statutory rights," the panel concluded. "Air Liquide moved exclusively for individual, not class arbitration, and neither party has indicated an intent or willingness to engage in class arbitration. For these reasons, based on its finding that the class waiver constituted an unlawful exculpatory clause, the trial court properly denied the motion to compel arbitration."

To read the decision in Garrido v. Air Liquide Industrial, click here.

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Mach Mining in Action: Court Dismisses EEOC Suit for Notice, Conciliation Failures

Why it matters

The ramifications of the U.S. Supreme Court's decision in Mach Mining v. EEOC are now being felt in the federal district courts, with a judge tossing out an Equal Employment Opportunity Commission (EEOC) suit last week for notice and conciliation failures. Last term, the justices ruled that courts may consider the sufficiency of the EEOC's conciliation efforts prior to bringing suit against an employer. The agency sued CollegeAmerica Denver Inc. last year, alleging that the employer violated the Age Discrimination in Employment Act (ADEA). Prior to Mach Mining, the court dismissed the lawsuit based on the EEOC's failure to satisfy the pre-suit requirements of notice and conciliation. After the Supreme Court issued its decision, the agency moved for reconsideration—and the court affirmed dismissal. Even under the "limited review" provided for in Mach Mining, the agency's efforts were insufficient, the court said, with no evidence from the EEOC that the employer was notified that its separation agreements were at issue or that they were part of the parties' discussions to give CollegeAmerica the chance to voluntarily revise them. While the justices in Mach Mining suggested that a stay of the proceedings was the typical route when a court found a failure to conciliate, the judge found dismissal the appropriate remedy.

Detailed discussion

In April, the U.S. Supreme Court ruled that courts may consider the sufficiency of the Equal Employment Opportunity Commission's (EEOC) conciliation efforts prior to bringing suit against an employer. The unanimous Court acknowledged that the federal agency has discretion on "how to conduct conciliation efforts and when to end them," but the justices in Mach Mining v. EEOC said courts could still review the process.

Although the Court rejected the agency's position that its conciliation efforts were not subject to judicial oversight, the justices emphasized that such review was "narrow" in order to respect the EEOC's discretion in enforcing the statute as well as the confidentiality imbued in the conciliation process, the Court said.

In what was believed to be the first decision interpreting Mach Mining, a federal court judge in Ohio sided with an employer and stayed a lawsuit because the EEOC failed in its effort to conciliate prior to filing suit. The employer argued that the agency presented it with a "take it or leave it" demand and then said conciliation had failed, without engaging in actual negotiations. Given the conflicting facts—including that the agency never presented the employer with a dollar amount for a settlement, despite promising to—the court stayed the case and ordered the EEOC to engage in the conciliation process.

Taking a different approach, a federal court judge in Colorado affirmed dismissal of an EEOC complaint after finding the agency failed in its conciliation efforts.

Debbi Potts filed a charge of discrimination against CollegeAmerica Denver with the agency, alleging that the employer violated the Age Discrimination in Employment Act (ADEA). The EEOC filed suit in 2014, asserting that Separation Agreements provided to the agency in the course of its investigation of Potts' charge denied other employees their rights under the statute.

In December 2014, U.S. District Court Judge Lewis T. Babcock dismissed the suit on CollegeAmerica's motion. He agreed with the employer that the EEOC failed to satisfy the ADEA requirements of notice and conciliation. Three months after the Mach Mining decision was issued—a total of eight months after the court initially dismissed the lawsuit—the EEOC filed a motion for reconsideration based on the U.S. Supreme Court opinion.

Judge Babcock first addressed the timeliness of the EEOC's motion—or the lack thereof. "Not only is the EEOC's wholly unexplained delay in filing its motion to reconsider unreasonable in and of itself, but it has also placed CollegeAmerica in the untenable position of potentially having to start the discovery process which is nearing completion all over again," he wrote, denying the agency's motion as untimely.

However, he continued with his analysis.

In its Letter of Determination to CollegeAmerica, the EEOC specifically referenced Potts as the charging party and her three charges of discrimination against the employer, advising it that the agency had determined that CollegeAmerica discriminated against Potts in violation of the ADEA. "Although the Letter of Determination goes on to request that CollegeAmerica, among other things, revise its form severance agreement to comply with the ADEA and make it clear that employees retain the right to file charges and cooperate with the EEOC, it does not reference the Separation Agreements in the section stating its findings of unlawful practices by CollegeAmerica," the court said.

CollegeAmerica responded to the letter with its own missive that explained the agreement Potts signed was different than its form Separation Agreements. "Thus, not only did the Letter of Determination fail, on its face, to provide CollegeAmerica with clear notice that the Separation Agreements were part of the EEOC's investigation, but it is apparent from CollegeAmerica's subsequent communications that it did not understand that to be the case," the judge added.

Even after receiving the employer's correspondence, no evidence existed that the agency revised or supplemented the Letter of Determination or otherwise notified CollegeAmerica that the scope of its investigation had expanded beyond Potts' charges of discrimination to include the Separation Agreements, the court said.

"[T]he EEOC's conciliation efforts with respect to the Separation Agreements remain inadequate under the standards set forth in Mach Mining," Judge Babcock wrote. "Specifically … the EEOC failed to provide adequate notice to CollegeAmerica that the Separation Agreements were part of the EEOC investigation and findings of unlawful practices by CollegeAmerica. There is likewise no evidence that the Separation Agreements were part of the parties' discussions so as to give CollegeAmerica an opportunity to voluntarily revise them."

The court recognized that Mach Mining included a dictum stating that when a court finds in favor of an employer on the issue of whether the requisite conciliation occurred, the appropriate remedy is to order the EEOC to undertake the mandated efforts to obtain voluntary compliance, but reached a different result.

"This course of action, however, is not mandated under the circumstances of this case," the judge said, as he concluded that the EEOC failed to satisfy both the notice and conciliation requirements of the ADEA, not simply the Title VII requirement of conciliation considered in Mach Mining.

"A stay pending further conciliation efforts is also ill-suited to this case because, as a result of the EEOC's protracted delay in filing the current motion, the parties have proceeded with discovery relating to the remaining claim of retaliation against Potts and set deadlines according," the court said. "Allowing the EEOC to pursue its Second Claim for Relief after fulfilling the requirements of notice and conciliation would require additional discovery and could significantly delay resolution of the pending retaliation claim. I therefore conclude that dismissal of the EEOC's Second Claim for Relief is the appropriate remedy for the EEOC's failure to satisfy the ADEA's requirements of notice and conciliation with respect to this claim."

To read the opinion in EEOC v. CollegeAmerica Denver, click here.

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EEOC Proposes Rules Under GINA for Wellness Programs

Why it matters

The wait is over: the Equal Employment Opportunity Commission (EEOC) has released a notice of proposed rulemaking (NPRM) for regulations under the Genetic Information Nondiscrimination Act (GINA) that would permit employers to offer incentives under a wellness program. The long-awaited rule would create a narrow exception permitting employers to entice workers' spouses with money or paid time off for sharing information without running afoul of GINA, the Affordable Care Act (ACA), or the agency's regulations on the Americans with Disabilities Act (ADA) and wellness programs. "Our goal in developing this proposed rule is to provide clarity for employees and employers," Chair of the EEOC Jenny R. Yang said in a statement, adding that "the agency has interpreted the exception as narrowly as possible" by capping the total inducement at 30 percent and now allowing inducements for the participation of children. While employers may be less than thrilled about the limited exception, the regulations at least have the benefit of providing some clarity to the uncertainty surrounding wellness programs, particularly in the wake of multiple lawsuits filed by the EEOC over the last few years challenging the legality of employer programs. The NPRM is open for comment until December 29.

Detailed discussion

The Genetic Information Nondiscrimination Act (GINA) prohibits employers from requesting, requiring, or purchasing genetic information about an applicant or employee. However, the statute does include six exceptions to this general rule, including allowing employers to request information as part of a voluntary wellness program.

In regulations implementing GINA, the Equal Employment Opportunity Commission (EEOC) prohibited the use of inducements to provide genetic information. Employers were uncertain on how to reconcile the statute with the regulations, particularly after the EEOC filed suit against multiple employers alleging their wellness programs violated GINA.

In the hope of providing some clarity, the EEOC released proposed regulations for public comment. The notice of proposed rulemaking (NPRM) explains that employers may request, require, or purchase genetic information as part of a health or genetic service only when the service is "reasonably designed to promote health or prevent disease." The agency defined this standard as a program that has "a reasonable chance of improving the health of, or preventing disease in, participating individuals, and must not be overly burdensome, a subterfuge for violating Title II of GINA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease."

Examples of programs that would not meet this standard include the collection of information on a health questionnaire without providing follow-up advice or information as well as programs that create "an overly burdensome amount of time for participation, requires unreasonably intrusive procedures, or places significant costs related to medical examinations on employees."

In addition to employees, the NPRM would permit employers to offer an inducement to the spouse of an employee if certain conditions are met, including if the spouse is covered under the applicable health plan, receives health or genetic services offered by the employer (including the wellness program), and provides information about his or her current or past health status as part of a health risk assessment (HRA). All other requirements for employee HRAs would apply to spouse HRAs, the EEOC said, such as the need to obtain prior, knowing, voluntary, and written authorization.

Pursuant to the proposed rules, the total inducement to the employee and his or her spouse would be limited to 30 percent of the total annual cost of coverage for the plan in which they are enrolled. This cap parallels the limits found in the Affordable Care Act (ACA), the agency said, making compliance with both statutes easier for employers.

The NPRM also clarified that an inducement can be more than just monetary, removing the term "financial" as a modifier. Instead, an "inducement" under the regulations includes financial and in-kind inducements such as time off, prizes, or other things of value, either in the form of rewards or penalties.

To read the EEOC's proposed rule, click here.

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