Employment Law

In This Issue

In NYC It Pays To Be Sick

Beginning next year, employees in New York City will be entitled to paid sick leave pursuant to a new, somewhat complex statutory scheme.

Although Mayor Michael Bloomberg vetoed the legislation, the New York City Council had enough votes to override him and pass the Earned Sick Time Act, which requires all private-sector employers in the city (with the exception of those in the manufacturing industry) to provide paid sick time to employees.

Employers with at least 15 employees or at least one domestic worker are covered by the new law and must provide one hour of sick time for every 30 hours worked, to a maximum of 40 hours per calendar year. Time begins to accrue on an employee’s start date or the effective date of the legislation. Use of the time may begin on or after the employee’s 120th calendar day of employment.

Leave can legally be used for a mental or physical illness, injury or health condition or need for medical diagnosis; care of a family member for the same list of needs; or reasons related to a public health emergency. Employees must be allowed to carry over accrued unused time from one year to the next (although employers can cap usage at 40 hours each calendar year), but employers do not have to pay out accrued time when an employee’s tenure ends. Employees are also allowed – with the agreement of an employer – to work additional hours instead of taking leave, subject to specific requirements.

In another twist, employers not covered by the paid requirements must still provide the same time to employees for sick leave, although it may be unpaid.

The legislation grants employers some controls, however. Businesses can set a requirement for a minimum-increment use of up to four hours and request reasonable notice prior to the use of paid sick leave, up to seven days for foreseeable usage. Documentation to support the reason for leave after more than three consecutive work days may be requested by the employer. Covered employers already offering paid leave sufficient to meet the law’s requirements are not required to provide additional time off.

Exceptions are provided under the Act for employers in the manufacturing sector (such as factories and mills, some bakeries, candy stores, and custom tailors), as well as federal, state, and local governmental employers. Specific rules also apply to domestic workers and union employees covered by a collective bargaining agreement.

Records documenting an employer’s compliance with the law must be maintained for two years and notice of an employee’s rights under the law must be provided at the time of hire. Although the law does not include a private right of action, employees alleging a violation (including retaliation for making use of their leave) can file a complaint with the Department of Consumer Affairs. The agency is responsible for enforcement of the law, with penalties ranging from payment of lost wages to reinstatement of a terminated employee to civil penalties.

To read the Earned Sick Time Act, click here.

Why it matters: The law is set to take effect on a staggered basis beginning next year, beginning April 1, 2014, for employers with at least 20 employees and Oct. 1, 2015, for employers with 15-19 employees (although these employers must provide unpaid sick leave as of the April 1, 2014, date). One possible complication: The City must be in the same economic position it was in January 2012 (or better), as measured by a financial index maintained by the Federal Reserve Bank of New York. If the economy has dropped below the January 2012 level, implementation of the law will be delayed. With passage of the bill, New York City joins a growing number of jurisdictions, including Connecticut and cities like Portland, Ore., San Francisco, and Seattle, in mandating paid sick leave for employees.

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Jealous Wife Defense Wins Again In Iowa Supreme Court

Can a female employee terminated because her employer’s wife was threatened by her relationship with the male employer sue for sex discrimination?

Answering the question for the second time, the Iowa Supreme Court unanimously said “no.”

Melissa Nelson was 20 years old when Dr. James Knight, a dentist, hired her to be a dental assistant in his practice. Over the next 10 years the two built a personal relationship that occasionally crossed the line of propriety but was not sexual. Both married with children, Nelson and Knight would text each other about family issues.

But Knight also sent questionable texts, wondering how often Nelson had orgasms. In the office he occasionally complained that her clothing was too tight and “distracting,” noting that if she saw his pants bulging, she would know her clothing was too revealing. When Nelson made a statement about her infrequent sex life, Knight responded, “[T]hat’s like having a Lamborghini in the garage and never driving it.”

When Knight’s wife – who also worked in the dental office – discovered the two texted after hours, she insisted that Nelson be terminated, calling her “a big threat to our marriage.” Although Knight acknowledged that Nelson was the best assistant he ever had, he fired her, admitting that he feared he would try to have an affair with her if she kept working in the office.

She filed suit, alleging sex discrimination in violation of Iowa state law. Had she been male, Nelson claimed, she would never have been seen as a threat by Knight’s wife and terminated. Importantly, she did not allege that Knight committed sexual harassment or that she was subject to a hostile work environment.

But the court concluded that Knight’s conduct did not amount to unlawful sex discrimination.

“Title VII and the Iowa Civil Rights Act are not general fairness laws, and an employer does not violate them by treating an employee unfairly so long as the employer does not engage in discrimination based upon the employee’s protected status,” the court said.

The court distinguished between “an isolated employment decision based on personal relations (assuming no coercion or quid pro quo) even if the relations would not have existed if the employee had been of the opposite gender and a decision based on gender itself. In the former case, the decision is driven entirely by individual feelings and emotions regarding a specific person. Such a decision is not gender-based, nor is it based on factors that might be a proxy for gender.”

Knight’s decision to terminate Nelson was exactly that, the court said: a decision driven entirely by individual feelings and emotions regarding a specific person.

Allowing Nelson to pursue her claim would open the floodgates to sex discrimination suits, the court noted, by allowing “any termination decision related to a consensual relationship to be challenged as a discriminatory action because the employee could argue the relationship would not have existed but for her or his gender.”

Nelson contended that Knight’s position would allow employers to justify adverse employment actions by simply pointing the finger at their spouses. But pretext would be uncovered, the court said, and in this case, it was undisputed that Nelson lost her job because of the parties’ relationship and the wife’s demand.

It would also be ironic to allow Knight to avoid liability by terminating her out of fear that he might commit sexual harassment, Nelson pointed out. But the court said that “an isolated decision to terminate an employee before such an environment arises, even if the reasons for termination are unjust, by definition does not bring about that atmosphere.”

“[T]he issue before us is not whether a jury could find that Dr. Knight treated Nelson badly. We are asked to decide only if a genuine fact issue exists as to whether Dr. Knight engaged in unlawful gender discrimination when he fired Nelson at the request of his wife,” the court said. “[W]e believe this conduct did not amount to unlawful discrimination.”

To read the decision in Nelson v. James H. Knight DDS, click here.

Why it matters: The court had reached a similar conclusion in December 2012, but granted Nelson’s motion for rehearing and vacated its original opinion. The court’s original decision received a great deal of publicity, mainly negative, with critics noting that an all-male panel of judges agreed that a woman could be an “irresistible temptation” in the workplace. The new opinion takes great pains to emphasize the personal relationship between the parties, as well as the limits of the decision, noting that Nelson’s suit made no allegations of sexual harassment or a hostile work environment claim. “Also, when an employer takes an adverse employment action against a person or persons because of a gender-specific characteristic, that can violate the civil rights law,” the court cautioned. “The record in this case, however, does not support such an allegation.”

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Lawmakers Focus On Service Members, Veterans

Federal and state lawmakers have turned their attention recently to employment-related issues for service members and veterans.

Legislators in both the House and Senate introduced the Veterans and Service Members Employment Rights and Housing Act, a bill that would add veterans to the list of protected categories under the federal Civil Rights Act. “If you fight for our country, you shouldn’t have to fight for a job when you come home,” Rep. Derek Kilmer (D-Wash.), who sponsored the bill in the House of Representatives, said in a statement.

Under the law, employers would be prohibited from discriminating against job applicants or existing employees based on their military status, and employees could file charges of discrimination with the Equal Employment Opportunity Commission against employers.

Specifically, the bill would make it unlawful for an employer “(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to the individual’s compensation, terms, conditions, or privileges of employment, because of such individual’s military service; or (2) to limit, segregate, or classify the employer’s employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect the individual’s status as an employee, because of such individual’s military service.”

The Title VII amendment would complement and add to the protections offered by the Uniformed Services Employment and Reemployment Rights Act, or USERRA. The bill would also update the Fair Housing Act to protect veterans and service members.

The proposed law would apply to both public and private employers and would allow claims based on intentional discrimination and disparate impact. Causation for an intentional discrimination claim would require a plaintiff only to establish military service as a “motivating factor” and not the “but for” cause of an adverse action.

In the states, new legislation will soon take effect in Louisiana and Maryland impacting employers and service members.

Effective August 1, employers in Louisiana will be prohibited from “discharging, disciplining, or otherwise discriminating” against veterans who take time off from work related to medical appointments necessary to obtain veterans’ benefits. Employers may require verification by the medical provider from the employee (like a bill or receipt); the law also includes a private right of action for veterans alleging a violation.

In Maryland, a law is set to take effect on October 1 that requires that employers provide one day of unpaid leave for employees to be used on the day an “immediate family member” leaves or returns from active military duty outside the country. An “immediate family member” is defined as a spouse (including a same-sex spouse), parent, stepparent, child, stepchild, or sibling.

Employees must have worked at least 1,250 hours for the employer over the preceding 12 months to be eligible for the leave. The law is also limited to employers with 50 or more employees. Documentation may be requested to support the leave, but employers cannot require employees to use paid leave for this reason (although if covered by the federal Family and Medical Leave Act, the employer could designate the leave under the relevant provisions).

To read the Veterans and Service Members Employment Rights and Housing Act, click here.
To read Maryland’s new law, click here.

Why it matters: According to studies cited by the federal legislators in support of their bill, employers may view veterans or active service members as a liability to the workforce, concerned about an individual’s lack of on-the-job experience, transition into civilian life, or being called back to active duty. Given the focus on both the state and federal levels, employers should be cognizant of the relevant law in their jurisdiction regarding service members and veterans.

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Social Media Policy Violates Employee Rights, Says NLRB

A recently released Advice Memorandum reveals yet another employment policy struck down by the National Labor Relations Board.

Last March, Barry Kearney, associate general counsel of the Board, opined on two issues relating to a social media policy implemented by Giant Food LLC. First, he determined that Giant Food breached its collective bargaining agreements with multiple unions by unilaterally implementing the policy. Second, multiple portions of the policy violated the National Labor Relations Act, he concluded.

Two sections of the policy caught the eye of the NLRB. First, the guidelines stated that employees “have an obligation to protect confidential, non-public information to which you have access in the course of your work. Do not disclose, either externally or to any unauthorized associate any confidential information about the Company or any related companies.”

The Board also expressed concern about a second provision, which stated: “Do not use any Company logo, trademark, or graphics, which are proprietary to the Company, or photographs or video of the Company’s premises, processes, operations, or products, which includes confidential information owned by the Company.”

While the rules did not expressly restrict the exercise of Section 7 rights, the Board said employees would reasonably construe the language to restrict protected activities.

The “non-public information” provision “is so vague that employees would reasonably construe it to include subjects that involve their working conditions,” Kearney wrote. Similarly, without limiting language, the term “confidential information” would “reasonably be interpreted to include information concerning terms and conditions of employment. Thus, employees would reasonably construe these prohibitions to restrict their Section 7 right to discuss terms and conditions of employment.”

Turning to the use of trademarks and logos, the Memorandum said employees would believe the language prohibited the use of such images for Section 7 communications like electronic leaflets, cartoons, or even photos of picket signs containing the employer’s logo. “Although the Employer has a proprietary interest in its trademarks, including its logo if trademarked, employees’ use of its name, logo, or other trademark while engaging in Section 7 activity would not infringe on that interest,” the Board said.

The interests protected by trademark law – like not misleading the public about the source of products offered for sale – “are not remotely implicated by employees’ non-commercial use of a name, logo, or other trademark to identify the Employer in the course of engaging in Section 7 activity related to their working conditions,” according to the Memorandum.

The prohibition on photographing or videotaping the employer’s premises was also unlawful, the Board wrote, because employees could reasonably believe they would not be allowed to communicate and share information about protected activity like pictures or videos of employees engaged in picketing.

However, the Memorandum found some portions of the policy were properly limited.

A provision that instructed employees not to “defame or otherwise discredit the Company’s products or services” was lawful because such conduct is not protected under Section 7. And a section encouraging employees to “Speak up if you believe that anyone is violating these guidelines or misusing a Company-sponsored site” would also pass muster absent the other, unlawful provisions.

The Advice Memorandum concluded by recommending that the NLRB Regional Director should issue a complaint against Giant Food. Although the policy contained a savings clause, it did not cure the otherwise unlawful policy provisions, the Board determined. “An employer may not prohibit specific employee activity protected by the Act and then escape the consequences of the prohibition by a general reference to rights protected by the Act,” Kearney wrote. “[W]ith regard to overbroad prohibitions that reasonably would be interpreted to prohibit protected activities, a general disclaimer is insufficient where employees would not understand from the disclaimer that protected activities are in fact permitted.”

To read the NLRB’s Advice Memorandum to Giant Food LLC, click here.

Why it matters: The Board noted that employers should avoid rules that are ambiguous as to their application to Section 7 activity and lack limiting language or context. “In contrast, rules that clarify and restrict their scope by including examples of clearly illegal or unprotected conduct, such that they could not reasonably be construed to cover protected activity, are not unlawful,” according to the Memorandum. Employers hoping to avoid the Board’s increasing scrutiny of employment policies should take the hint and craft a policy that addresses Section 7 activity, accompanied by clear examples.

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5th Circuit Adopts Narrow Reading Of Whistleblower Under Dodd-Frank

In a decision creating a split among federal courts, the 5th U.S. Circuit Court of Appeals held that an employee was not entitled to whistleblower protection under the Dodd-Frank Wall Street Reform and Consumer Protection Act because he reported a possible securities violation internally and not to the Securities and Exchange Commission.

While employed by GE Energy in Jordan, Khaled Asadi learned that Iraqi officials were concerned that the company had hired a woman “closely associated” with a senior official in an attempt to curry favor while negotiating a lucrative joint venture agreement. Asadi, believing the company’s conduct violated the Foreign Corrupt Practices Act, reported the issue to his supervisor and the GE ombudsperson.

But according to Asadi, he then received a “surprisingly negative” performance review and the company began pressuring him to step down from his position. He was terminated one year later.

Asadi filed suit pursuant to the whistleblower-protection provision of Dodd-Frank. GE moved to dismiss the suit, arguing that because Asadi did not report his concerns to the SEC, he did not meet the statutory definition of a “whistleblower.”

The court agreed. “[T]he plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC,” the 5th Circuit concluded. “Because Asadi failed to do so, his whistleblower-protection claim fails.”

The three-judge panel examined two interrelated provisions of the statute. First, § 78u-6(a)(6) defines a whistleblower as “any individual who provides or two or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”

Separately, § 78u-6(h)(1)(A) provides whistleblowers with a private right of action against employers who take retaliatory actions against the whistleblower for taking certain protected actions, delineated in three subsections. Asadi pointed to § 78u-6(h)(1)(A)(iii), which covers employees that make disclosures that are required or protected under the Sarbanes-Oxley Act, the Securities Exchange Act, and other rules and regulations of the SEC.

Asadi acknowledged that by reporting his concerns internally, he failed to meet the statutory definition of a whistleblower. But he contended that because he made a disclosure pursuant to § 78u-6(h)(1)(A)(iii), he was still entitled to protection under the statute, pointing to decisions from other jurisdictions and an SEC regulation for support.

Relying solely on the statutory language, the court rejected an alternative interpretation. “Under Dodd-Frank’s plain language and structure, there is only one category of whistleblowers: individuals who provide information relating to a securities law violation to the SEC. The three categories listed in § 78u-6(h)(1)(A) represent the protected activity in a whistleblower-protection claim,” the court said. “They do not, however, define which individuals qualify as whistleblowers.”

The statute is clear and unambiguous, the court added, and the third category of protected activity relied upon by Asadi does not conflict or provide alternative definitions of whistleblowers – the subsections merely describe other protected activity that employees may engage in.

Although the court recognized that employees prefer to file claims under the Dodd-Frank whistleblower provisions when they report violations of Sarbanes-Oxley because they provide greater protections than SOX (recovery of two times back pay under Dodd-Frank versus just back pay under SOX), siding with Asadi would render the SOX anti-retaliation provision moot.

The panel also refused to defer to a final rule adopted by the SEC accepting Asadi’s construction of the Dodd-Frank whistleblower-protection provision. “Simply put, this regulation, instead of using the statute’s definition of ‘whistleblower,’ redefines ‘whistleblower’ more broadly,” the court wrote. “The plain language of § 78u-6 does not support this position. … Because Congress has directly addressed the precise question at issue, we must reject the SEC’s expansive interpretation of the term ‘whistleblower’ for purposes of the whistleblower-protection provisions.”

To read the decision in Asadi v. G.E. Energy, click here.

Why it matters: The 5th Circuit’s decision is a positive development for employers facing the possibility of whistleblower suits, although it sets up a split among the federal courts. U.S. District Courts in Connecticut, New York, and Tennessee all previously ruled for plaintiffs making arguments similar to Asadi’s, supported by the SEC rule. Employees favor filing suit under the Dodd-Frank Act whistleblower provisions, which offer great reward (twice as much potential damages) and fewer hurdles (a longer statute of limitations period). The Asadi decision could result in a decrease in Dodd-Frank suits or a rise in employees reporting their concerns to the SEC.

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