Employment Law

State Voters Pass Paid Sick Leave, Wage Increases

Why it matters: The polls have closed and the votes are in: the midterm elections will have a significant impact on employers across the country as voters in multiple states embraced recent trends with regard to paid sick leave and increases in minimum wage. Massachusetts voters approved paid sick leave for workers in the state, joining a small but growing number of jurisdictions like California and cities including Portland, Newark, New York City, San Francisco, and Seattle. Following another trend in employment law, minimum wage workers in Arkansas, Alaska, Nebraska, Oakland, San Francisco, and South Dakota will soon see a rise in pay. State legislatures from Delaware to California have recently increased the minimum wage and even President Barack Obama jumped on the bandwagon, issuing an executive order earlier this year to raise the federal minimum wage to $10.10. Voters gave the nod to a record-breaking rate in San Francisco at $15 per hour, joining Seattle with the highest minimum wage rate in the country.

Detailed Discussion

Joining California, Connecticut, the District of Columbia, and several cities, Massachusetts will become the third state to enact paid sick leave after voters approved the measure by 60 percent. The new law, set to take effect July 1, 2015, applies to all employers with 11 or more employees.

Employees can accrue one hour of earned sick time for every 30 hours of work performed, regardless of whether the employee is a part-time worker. Each calendar year, an employee is entitled to use up to 40 hours of sick leave for three delineated reasons: to care for the employee’s immediate family member (defined as a child, spouse, parent, or parent-in-law) suffering from a physical or mental illness, injury, or medical condition; to attend a routine medical appointment for the employee or an immediate family member; or to deal with legal, physical, or psychological effects of domestic violence on the employee or a child.

The Massachusetts Paid Sick Leave Initiative provides that up to 40 hours of unused sick time may be rolled over into the following year but employers do not have to pay employees for unused earned sick time when their employment ends. Employers may require certification of the need to take earned sick time and when foreseeable, employees must provide advance notice of their need to take time. The law also contains several notice requirements.

All four states that placed the issue of a minimum wage increase on the ballot will see an increase as a result. In Alaska, the state’s wage will rise from $7.75 per hour to $9.75 by 2016, while Arkansas will jump from the current $6.25 to $8.50 by 2017. Nebraska will reach $9 per hour by 2016 (up from today’s $7.25), and South Dakota will see a $1.25 change from $7.25 to $8.50 next year, adjusted for inflation going forward.

Voters passed the measures by margins of 66 percent (Alaska), 65 percent (Arkansas), 59 percent (Nebraska) and 53 percent (South Dakota).

Illinois voters approved a bill that would raise the state’s minimum wage from $8.25 to $10. But the measure was nonbinding and will not change the law unless the state legislature acts upon it.

Municipalities also decided to raise local wages, led by San Francisco’s increase to $15 per hour. Currently set at $10.74 an hour, the increase will phase in by 2018. The city’s jump matches the record-high minimum wage recently set by Seattle, which will reach $15 per hour by 2017.

Other California cities considered a change in minimum wage with split results. Oakland voters approved an increase to $12.25, while Eureka’s attempt to jump to a $12 rate was rejected.

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Federal Court Rejects California Supreme Court’s Iskanian Ruling

Why it matters: Rejecting the California Supreme Court’s decision in Iskanian v. CLS Transportation, a federal district court in the state held that an employee could waive her rights to a Private Attorney General Act (PAGA) claim by virtue of an employment agreement. The suit involved a sales representative who sued her employer, alleging she was misclassified as an independent contractor, claiming various labor code violations and including a PAGA claim. The employer moved to compel arbitration based on an employment agreement that also waived class or representative actions. Relying on Iskanian, the employee argued she could not waive her rights to bring a representative PAGA claim. But joining two other federal courts to consider the issue, the judge wrote that Iskanian “disfavored” arbitration agreements in contravention of the Federal Arbitration Act (FAA) and U.S. Supreme Court precedent. The decision could increase the likelihood that the Supreme Court will consider Iskanian, which has been appealed to the nation’s highest court.

Detailed Discussion

In June, the California Supreme Court issued a split decision addressing an employment arbitration clause in Iskanian v. CLS Transportation. The majority upheld the general enforceability of class waivers in mandatory employment arbitration agreements but carved out an exception for employees to bring representative actions under PAGA, holding that “an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”

M’Bili Langston filed her lawsuit prior to the Iskanian decision but relied upon it in her efforts to dodge arbitration. Langston claimed that her employer, 20/20 Companies, Inc., misclassified her sales representative position as an independent contractor in violation of several provisions of the California labor code. On behalf of a putative class of workers, she also sought civil penalties pursuant to PAGA.

The employer moved to compel individual arbitration based upon a Mutual Arbitration Agreement requiring all disputes between the parties to be resolved via arbitration as well as prohibiting class or representative actions.

Pointing to Iskanian, Langston told the court that representative PAGA claims could not be waived through an arbitration agreement, asserting that the claims must be litigated in federal court.

U.S. District Court Judge Jesus G. Bernal soundly rejected application of the California Supreme Court opinion, holding that arbitration of the plaintiff’s claim was mandated by the FAA.

“Although California courts control the interpretation of California statutes, such as PAGA, the role of interpreting federal statutes, like the FAA, is left to federal court,” he wrote. “Thus this court need not defer to the California Supreme Court’s conclusion that the FAA does not preempt its rule that arbitration agreements are unconscionable if they waive an employee’s right to bring a representative PAGA claim.”

Iskanian “treats arbitration agreements disfavorably,” the court added, and the California Supreme Court further displayed its prejudice against arbitration by inconsistently applying its rationale.

“While concluding that an employee’s agreement not to bring a representative PAGA action is contrary to public policy if it takes place before any dispute arises, the court nevertheless explained that, after a labor dispute arises, an employee is free to choose not to bring a representative PAGA claim. Moreover, after a dispute arises, an employee may agree to ‘resolve a representative PAGA claim through arbitration,’ ” Judge Bernal wrote. “Thus, although the court asserts that the basis for holding representative PAGA claim waivers unconscionable is that an employee cannot waive a right that properly belongs to the government, the court nevertheless acknowledges that an employee may actually sometimes waive the government’s right to bring a PAGA claim. That inconsistency illuminates the fact that, it is not an individual’s ability to waive the government’s right that drives the court’s rule, but rather the court’s general disfavor for pre-existing agreements to arbitrate such claims individually.”

The court added that two other California federal courts have similarly concluded that the FAA preempts the holding in Iskanian.

After determining that the arbitration agreement at issue was valid and clearly encompassed each of the plaintiff’s claims, the court granted 20/20’s motion to compel individual arbitration.

To read the order in Langston v. 20/20 Companies, Inc., click here.

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Employee’s Facebook Comments Trigger Possible Liability for Employer

Why it matters: Social networking continues to pose serious challenges for employers, particularly in light of a recent decision from a federal court in Hawaii. A judge denied an employer’s motion to dismiss a customer’s suit for negligent supervision, training, and retention based on disparaging Facebook comments made by an employee (including that his credit card “declines all the time”). The suit also claimed the inappropriate posts were made on the employer’s premises and using an employer’s computer. By alleging that the employer was aware that the employee had made similar off-color comments about a customer in the past, the court said the plaintiff sufficiently stated a claim for training and/or a duty to suspend or terminate the employee. Allowing the suit to move forward sends a message to employers to establish a social media policy – and enforce it.

Detailed Discussion

A customer of the Hertz Corporation, Maurice Howard, filed suit against the company after employees posted comments on Facebook he described as “an attack on [his] race, sexual orientation, and financial state and condition.”

The instigator, Shawn Akina, allegedly wrote, “I seen Maurice’s bougie ass walking Kahului beach road … n*** please!” Three other Hertz employees chimed in on the post with derogatory comments about Howard, calling him “a broke ass faka” and writing that “it’s too bad his CC declines all the time.”

Howard also alleged that Hertz was aware of earlier posts made by Akina about a different customer as well as a supervisor, and that Akina used Hertz property to post the comments.

Hertz moved to dismiss the suit. While Howard agreed to the dismissal of certain claims (including vicarious liability and intentional infliction of emotional distress), he stood behind claims for negligent supervision, negligent training, and negligent retention.

U.S. District Court Judge Susan Oki Mollway denied the motion to dismiss the remaining claims, finding that Howard sufficiently alleged facts to support each of the three causes of action.

Hertz was put on notice of the need to exercise a greater degree of control or supervision over Akina, the court said, based on his alleged prior inappropriate Facebook comments. “Howard has alleged that Akina used a Hertz computer to make at least some of the Facebook posts, and that Hertz knew of Akina’s history and propensity for posting ‘hostile statements and information’ about customers,” Judge Mollway wrote.

Taking the allegations as true, the court said Howard’s claim of negligent supervision could move forward.

Similarly, Hertz’s knowledge of Akina’s prior posts triggered a duty to suspend or terminate him, providing support for Howard’s claim of negligent retention, the court found.

As for the negligent training claim, “Howard sufficiently alleges that Hertz knew or should have known of the need to exercise greater control over Akina,” the judge said. “Howard alleges that Akina posted ‘hostile and harassing content’ on Facebook about a Hertz customer and Hertz manager in the past. It is therefore at least plausible that similar conduct in the future may have been foreseeable.”

Hertz may have also breached a duty to train employees about the issue of posting information about customers online, the court added, allowing the suit to move forward on all three causes of actions.

To read the opinion in Howard v. The Hertz Corporation, click here.

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NLRB Upholds Dismissal Based on Facebook Posts

Why it matters: A three-member panel of the National Labor Relations Board (NLRB) determined that two employees terminated because of an exchange on Facebook were not fired in violation of the National Labor Relations Act (NLRA) because of the “magnitude and detail of insubordinate acts advocated in the posts.” Two employees of a social service agency engaged in a lengthy discussion on the social networking site, agreeing they would not be their supervisor’s “bitch” in the future and making plans to “raise hell,” host “crazy events” without permission, and take field trips with the students “all the time to wherever the f*** we want!” The employees were fired because of their comments. Although the Board noted that the conversation would normally have constituted protected activity, the employees lost the protection of the NLRA because they advocated insubordination as well as the intent to undermine the leadership of the employer and neglect their duties. The NLRB has taken a decidedly pro-employee stance in prior decisions addressing social media – most recently finding that an employer illegally terminated an employee over a Facebook “like” – so the decision provides a welcome ruling for employers from the agency.

Detailed Discussion

Ian Callaghan and Kenya Moore both worked for the Beacon Teen Center at San Francisco’s George Washington High School, providing afterschool activities to the students. During the 2011-2012 school year, Callaghan was an activity leader and Moore worked as a program leader.

At a year-end staff meeting, the center’s supervisor asked the employees to anonymously write down the pros and cons of working at Beacon. The staff listed 8 pros and 23 cons and felt they were given the “cold shoulder” from the administration for the remainder of the year.

Callaghan and Moore both received rehire letters for the 2012-2013 school year, although Moore was demoted to an activity leader. Prior to the start of the school year, the two engaged in an exchange on Callaghan’s Facebook page beginning with Moore asking if Callaghan planned to return.

His response: “I’ll be back, but only if you and I are going to be ordering sh**, having crazy events at the Beacon all the time. I don’t want to ask permission, I just want it to be LIVE. You down?” The conversation continued, featuring other comments like, “I don’t feel like bein their bitch” and “Let’s f*** it up.”

Management received screenshots of the conversation the next day and rescinded the rehire offers.

Although the employees contended the action violated their NLRA rights, a three-judge panel unanimously upheld the termination, concluding that the employees forfeited the protection of the Act.

“Callaghan and Moore’s Facebook exchange contains numerous statements advocating insubordination,” the panel wrote. The comments referenced refusing to obtain permission as required by the employer’s policies before organizing youth activities, disregarding specific school district rules, undermining leadership, neglecting their duties, and jeopardizing the future of the Beacon. Even setting aside the profanity and the disparaging comments about the administration, the employees stepped outside the bounds of NLRA protection, the panel added.

“We find the pervasive advocacy of insubordination in the Facebook posts, comprised of numerous detailed descriptions of specific insubordinate acts, constituted conduct objectively so egregious as to lose the Act’s protection and render Callaghan and Moore unfit for service,” the Board said.

Although the employees argued that the Facebook comments should be viewed against the backdrop of the complaints from the meeting the previous May and in light of Moore’s demotion, the panel found the exchange too serious and detailed for such an explanation.

“We are not presented here with brief comments that might be more easily explained away as a joke, or hyperbole divorced from any likelihood of implementation,” the panel wrote. “The magnitude and detail of insubordinate acts advocated in the posts reasonably gave the [employer] concern that Callaghan and Moore would act on their plans, a risk a reasonable employer would refuse to take.”

The employer was not obliged to wait for the employees to follow through on the misconduct they advocated, the NLRB said, dismissing the unfair labor practices complaint.

To read the decision in Richmond District Neighborhood Center, click here.

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EEOC Files Third Suit Challenging Employer Wellness Program

Why it matters: The Equal Employment Opportunity Commission (EEOC) has filed its third lawsuit challenging the legality of an employer wellness program, this time targeting Honeywell Corporation. The complaint, filed in Minnesota federal court, claims that the company launched a biometric testing program for employees and their spouses that is not job-related or a business necessity that imposes a financial penalty on those who elect not to participate. Honeywell immediately responded with a statement denying liability and adding that the agency is “woefully out of step with the health care marketplace.” Last year, the Departments of Labor (DOL) and Health and Human Services (HHS) as well as the Treasury Department issued guidance to employers offering workplace wellness programs. But because the EEOC did not participate, questions remained about the application of federal law to the guidance. The Honeywell complaint – following two other lawsuits in recent months – demonstrates that at the very least, the EEOC believes the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and Title VII apply to wellness programs, putting employers on notice to ensure their programs are compliant with the regs and federal law or face an action from the EEOC.

Detailed Discussion

In May 2013, the DOL, HHS, and the Treasury Department issued guidance to employers offering workplace wellness programs that incentivize employees to improve their health. While praising the value of such programs, the regulations set forth several requirements for employers, including that the program be reasonably designed to promote health or disease prevention, not be overly burdensome for employees, with “reasonable alternative standards” provided for outcome-based programs, where a reward is offered to employees who reach a specified target (such as achieving a certain blood pressure goal or body mass index).

The regulations took effect January 1, 2014.

However, employment attorneys remained unclear about the application of federal laws like the ADA (which has a general prohibition on asking disability-related questions unrelated to a job) and GINA (under which employers are forbidden from asking about an employee’s family medical history) to their wellness programs as the EEOC declined to participate in the regulations.

The agency has now answered the question in the affirmative, filing three lawsuits challenging wellness programs. Most recently, the EEOC filed a complaint in Minnesota federal court seeking an injunction to halt Honeywell from engaging in the biometric testing of its employees.

Honeywell announced the new plan at the end of the summer, informing employees that they (and their spouses if they had family coverage) would undergo biometric testing by a vendor for the 2015 health benefit year, the EEOC said. The biometric testing includes a blood draw with the results evaluated for nicotine as well as testing for blood pressure, HDL and total cholesterol, glucose, and height, weight, and waist circumference.

The EEOC alleged that employees will be penalized for failing to participate, losing up to $4,000 in surcharges and lost Health Savings Account (HSA) contributions.

Specifically, employees that do not undergo the testing will lose HSA contributions from Honeywell, which range up to $1,500 depending on the employee’s annual base wage and type of coverage. In addition, a $500 surcharge will be added to the 2015 medical plan costs plus a $1,000 tobacco surcharge for the employee and his or her spouse if they do not submit to the testing, the agency told the court.

According to the complaint, Honeywell initially told employees that the results of the biometric testing would be used to form the basis for goals to help them reduce risk factors like blood pressure in order to receive their HSA contributions.

Although the EEOC requested that Honeywell agree not to impose any penalty or cost upon employees that decline to participate in the biometric testing or reduce any contributions to HSAs or impose any surcharges, the company refused.

The agency responded with a federal complaint seeking an injunction halting the biometric testing. “[B]ased on the EEOC’s review of available information, it appears that Honeywell’s threat to withhold inducements or to impose penalties on employees who did not participate in Honeywell’s biometric testing violates the ADA and GINA,” the EEOC alleged.

The testing violates the ADA because it is not job-related or consistent with business necessity, imposes a penalty upon employees to make them participate, and is not voluntary, the agency said. Honeywell also ran afoul of GINA, the agency claimed, by offering an inducement to obtain the medical information of employees’ spouses.

Preliminary relief is necessary because once an employee takes the test, it cannot “unring the bell.”

“There is no adequate remedy at law for unwarranted, unwanted, and unlawful medical examinations,” the EEOC argued in its complaint. “Once the test is taken, the violation of the statutes cannot be adequately remedied through monetary relief.”

The agency requested that the court issue a temporary restraining order enjoining Honeywell from imposing any penalty or cost, reducing any contribution to an HSA, or imposing any surcharges on employees (or their spouses) for declining the biometric testing, as well as advising employees of the change of plans.

To read the complaint in EEOC v. Honeywell International Corp., click here.

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