On August 10, 2016, the Securities and Exchange Commission issued a cease and desist order against BlueLinx Holdings, Inc. that further demonstrates the scrutiny of various federal agencies with respect to severance agreements.

In BlueLinx, the SEC found a provision in a severance agreement that restricted employees from providing information to the SEC without company approval. This finding had a chilling effect on employees reporting suspected fraudulent activity. Such “whistleblowing” is specifically permitted and encouraged under the Dodd-Frank Act, which even offers financial incentives to employees to do so. While the severance agreement in issue did allow severed employees to file a charge with the SEC, it did not allow them to provide information to the SEC without company approval.

The SEC fined BlueLinx $265,000, and also ordered the company to modify its severance agreements to add language that advised employees they were not limited in their ability to file a charge or complaint with the SEC. The SEC did not stop there, however, as it also stated that BlueLinx must advise employees they were not limited in their ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, or any other federal, state or local agency or commission. Additionally, the SEC stated that the severance agreements must inform employees that they were not limited in their ability to communicate with any governmental agency, nor from participating in an investigation or action by such agencies, or from receiving any monies for providing information (i.e., the Dodd-Frank whistleblowing reward).

This last provision is particularly troubling, as the nature of the release is that the employee gives up a claim for potential future monetary recovery in exchange for a current payment. Almost every current, well-drafted release informs an employee that, although he or she may provide information for and assist in government investigations, there is no longer any right to share in monetary recoveries.

This decision parallels some recent decisions and guidance from the U.S. Equal Employment Opportunity Commission and the National Labor Relations Board wherein the agencies have scrutinized severance agreements and found certain language to have a chilling effect on the exercise of statutory rights, and it highlights the need for employers to review carefully the language that is included in severance and separation agreements.

In general, the Family and Medical Leave Act (“FMLA”) provides that eligible employees may take twelve weeks of unpaid leave in a twelve-month period for the serious health condition of the employee, the employee’s spouse, the employee’s parents or the employee’s children. Thus, if an employee normally works five, eight-hour days a week, and the employee misses one eight-hour day because of an FMLA event, the employee uses one-fifth of a week of FMLA leave. FMLA permits an employer to convert these fractions to their hourly equivalent so long as the conversion equitably reflects the employee’s total normally scheduled hours. Although calculating the twelve-week period is simple enough when the employee works a regular schedule and takes leave in full day increments, complications arise when the employee’s work hours vary, and the employee takes intermittent leave. An example of this problem occurs when an employee is required from time to time to work mandatory overtime and misses the overtime because of an FMLA event.

The issue of calculating mandatory overtime as part of an employee’s FMLA leave entitlement was recently addressed by the United States Court of Appeals for the Eighth Circuit in Hernandez v. Bridgestone Ams. Tire Operations, LLC, 822 F.3d 1001 (8th Cir. 2016). In that case, an employee who was required to work mandatory overtime missed several overtime shifts to care for the serious health condition of his child. The employer included the mandatory overtime as FMLA time but did not include the hours when calculating the employee’s leave entitlement. After the employee had exhausted all his FMLA leave, and took subsequent, unexcused absences to care for his child, he was discharged because of his attendance. The employee sued the employer alleging that it had interfered with his FMLA entitlement. The Court of Appeals concluded that the employer was correct in counting the missed overtime hours against his FMLA entitlement. Notwithstanding this finding, the Court held that employer still had improperly interfered with the employee’s FMLA rights because, in calculating the number of hours to which the employee was entitled under FMLA, the employer did not include mandatory overtime. In other words, the employer counted the missed mandatory overtime in calculating FMLA usage but did not count mandatory overtime in calculating the amount of FMLA leave to which the employee was entitled.

In a situation like Bridgestone, if an employee’s schedule varies from week to week because of mandatory overtime to such an extent that an employer is unable to determine with certainty how many hours the employee would otherwise have worked but for the taking of FMLA leave, a weekly average of hours scheduled over the twelve months prior to the beginning of the leave (including any hours for which the employee took leave of any type) are to be used in calculating the employee’s leave entitlement.  For example, if an employee regularly scheduled to work 50 hours per week takes an entire week of FMLA leave, the whole 50 hours can be counted as FMLA time used, but that may or may not convert to one week of leave depending on how many hours are considered to be in the employer’s “work week.”  If the employer’s average work week is 50 hours, the FMLA allotment would also be one week; if the average week is 55 hours, the allotment would be .91 weeks; if the average week is 40 hours, the allotment would be 1.25 weeks.

Ultimately, the Bridgestone decision is an important reminder that employers who count missed overtime for usage purposes must also count overtime to calculate FMLA entitlement.

Since 2014, Congress has maintained an appropriations rider prohibiting the Department of Justice (“DOJ”) from using funds in relation to 33 named states and territories “to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.” Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113-235, § 538, 128 Stat. 2130, 2217 (2014). DOJ has regarded this as preventing only efforts directed at those states, and not a bar to its prosecution of violations of federal law by individuals engaging in medical marijuana activities that would be permissible under state medical marijuana laws.

In accordance with that interpretation, DOJ brought criminal actions against a number of marijuana cultivators, processors and distributors in California and Washington. The defendants sought to have their cases dismissed and asked for an injunction against DOJ. Ten of those cases were consolidated for consideration by the United States Court of Appeals for the Ninth Circuit. The opinion, U.S. v. McIntosh, No. 15-10117 (9th Cir. Aug. 16, 2016), contained the following points:

  1. The Appeals Court had jurisdiction because the lower courts had denied injunctions sought by the defendants
  2. The defendants had standing to challenge DOJ’s allegedly improper use of funds
  3. DOJ’s interpretation of the rider was incorrect. Prosecuting individuals under the federal Controlled Substances Act, 21 U.S.C. §§ 801 et seq., for marijuana felonies would inevitably “interfere” with states’ efforts to implement their medical marijuana programs
  4. The DOJ is, however, entitled to prosecute individuals who are not acting in strict compliance with the programs of the listed states
  5. The cases should be remanded for evidentiary hearings on whether the defendants were actually acting in conformity with their states’ medical marijuana laws

For those interested in medical marijuana in Ohio, it is important to note that Ohio is not one of the listed states, so the current version of the appropriations rider does not protect Ohio or Ohio defendants. With the Ninth Circuit’s broad interpretation of the rider, it may be that passage of the rider for the 2017 fiscal year will not be as automatic as in prior years and will not be extended to additional jurisdictions.

 

The U.S. Drug Enforcement Agency (“DEA”) may issue a decision as soon as this summer regarding the potential downgrading of cannabis to allow for its medical use.

In response to a letter from seven U.S. Senators in December, 2015, the U.S. Drug Enforcement Agency issued a 26-page response in April, 2016, that many believe indicates a willingness to change the current illegal status of marijuana from a Schedule I substance to a Schedule II prescription drug.

While changing the status of a Schedule I drug is rare, it is not unprecedented, as the DEA has done so at least five times in the past.

If cannabis became a Schedule II prescription drug, it would legalize medical marijuana in all 50 states and the U.S. territories. It is uncertain whether such a change would force those states that have legalized marijuana for recreational use to revert to prescription-only marijuana use, or whether the DEA would allow states to decide whether and how to make legalized marijuana available for recreational use. This is an editorial that discusses the various options available to the DEA.

Employers in union settings know that they generally cannot make changes to their employees’ wages, hours and other terms and conditions of employment without first negotiating to impasse with the union. The exception to this rule has historically been that the employers could make changes, as long as they could show that their labor contract had a management rights clause that allowed certain changes to be made without bargaining. A recent decision from the National Labor Relations Board, however, will make it more difficult for employers to show that a management rights clause actually allows these types of changes to be made without bargaining.

The NLRB’s recent decision (Graymont, PA, Inc. and Local Lodge D92, 364 NLRB No. 37) involved a situation that is common in unionized workplaces. The employer and the union had a collective bargaining agreement in place with a management rights clause which provided that the employer:

[R]etains the sole and exclusive rights to manage; to direct its employees; . . . to evaluate performance, . . . to discipline and discharge for just cause, to adopt and enforce rules and regulations and policies and procedures; [and] to set and establish standards of performance for employees…

The employer relied on this clause to announce changes to the work rules and the attendance and progressive discipline policies. The union objected to this move and requested a meeting with the employer. The union also requested that the employer provide information about the changes. The employer met with the union, but took the position that it was not required to bargain over the changes (due to the management rights clause). The employer also took the position that it was not required to respond in any way to the request for information. After a single meeting with the union, the employer implemented the revised policies.

Click here to read the full client alert.

maxresdefaultAlthough the Republican National Convention is now behind us in Cleveland, we still have several months of campaigning to endure prior to the presidential election. During this time of year, the issue of expressing political beliefs in the workplace is especially poignant.

In the midst of all of this political activity, employers may ask—how much political activity must I allow or tolerate in the workplace? When regulating employees’ political speech and expression in the workplace, there are several laws that private-sector employers need to remember.

U.S. Constitution:  Contrary to popular belief, the First Amendment does not permit free speech everywhere. In fact, it protects only against attempts by the government to limit speech and expression. Although private-sector employers cannot violate the First Amendment by restricting political speech or expression in the workplace, they can run afoul of other laws.

National Labor Relations Act:  Under the NLRA, employees may engage in concerted, protected activity, which includes discussions related to employees’ mutual aid and protection, and terms and conditions of employment. Sometimes, discussions on these topics can spill over into political speech. For example, employers generally must permit employees to wear and display buttons or other insignia that may be political in nature but also include union messages. Also, employers cannot penalize employees for advocating for political issue campaigns (e.g., opposing right to work legislation), as long as the advocacy and any solicitation takes place in non-working areas during non-working time.

Equal Employment Opportunity Laws:  Some workplace political discussions will necessarily touch on sensitive subjects related to certain protected characteristics, such as gender, ethnicity, national origin, race, and religion. If employers permit political speech or expression in the workplace, then they must be careful that these activities do not imply that they condone or sponsor discrimination or harassment.

Given the numerous problems that political speech and expression can cause for employers, the most prudent course of action is to consider establishing reasonable restrictions on employees’ participation in these types of activities within the workplace.

In a future posting, we will address legal issues surrounding political activity in the workplace that is initiated by employers (as compared to employee-initiated activity, which is addressed here).

By now most employers are (hopefully) aware that the U.S. Department of Labor has significantly changed some of the rules governing exemptions from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”). The revised regulations will go into effect on December 1, 2016, and they will principally do the following:

  • Immediately double the minimum salary threshold for the “white collar” exemptions to $913 per week ($47,476 annualized)
  • Adjust the minimum salary threshold for inflation every three years
  • Change the way the minimum salary threshold is calculated so that employers can count certain bonuses and commissions toward as much as 10% of the threshold
  • Set the total annual compensation requirement for the highly-compensated employee exemption to the annual equivalent of the 90th percentile of full-time salaried workers nationally (i.e., $134,004)

Needless to say, these unprecedented changes present significant challenges for employers. Given the potential consequences of noncompliance it is essential that employers act immediately to ensure they have taken all necessary steps to comply with the new regulations prior to December 1st. While each workplace will be different, some general suggestions that employers should consider include the following:

  • Immediately identify exempt positions that fall below the new minimum salary threshold and consider
    • Who will get a pay raise to maintain the exemption
    • Who will be reclassified as non-exempt
  • For reclassified employees, study the employees’ average hours worked for purposes of setting new pay rates
  • Given the likelihood of increased litigation and stepped up DOL enforcement, consider reclassifying other “vulnerable” positions
  • Ensure accurate timekeeping of all hours worked
    • Train reclassified employees, many of whom will be uncomfortable with or resistant to tracking their hours worked
    • Train managers
    • Address “bring your own device” issues (e.g., after-hours e-mails, texts, and phone calls)
  • Review and update policies and procedures
    • Policies related to overtime
    • Policies related to recording hours worked
  • Communicate the changes to your workforce
  • Plan for future inflation-driven adjustments to the minimum salary threshold to the extent possible

The new age of the smartphone has resurrected the Pokémon craze from the 1990s in a completely new version of the once popular handheld Gameboy Nintendo game. With the help of the smartphone’s GPS, Pokémon Go requires individuals to physically enter the real world to chase Pokémon located on the phone’s map. The game randomly places the miniature monsters around the world, and the user must physically track them down.

Positives: This new interactive platform encourages kids to move around in an effort to find the little alien monsters. People are walking miles to track them down. Since its release on July 6, Pokémon Go has quickly grown to become the biggest mobile game in U.S. history, according to SurveyMonkey. Nintendo added over $7 billion to its market value in a single week.

The Not So Good: The Pokémon are everywhere. As a result, individuals are traveling everywhere to catch them, including on to private property, into hospitals, and even in Simba’s den. We used to think texting and driving was dangerous; now you should be aware of individuals hunting and driving. Additionally, please refrain from the hunt while you are on the clock. Employers may now be less concerned about Candy Crush distractions, and more concerned about team hunts in the office.

Employers have to be concerned about the safety of potential hunting visitors and trespassers. For example, individuals have been known to catch critters in electrical substations. Hopefully Pikachu and Electrike (two electric harnessing Pokémon) can be found elsewhere.

In an effort to catch ‘em all, employees on the hunt lose attentiveness to their surroundings, which can lead to injuries. An obvious employer concern is lost productivity. One other issue is that Pokémon Go has access to the phone’s GPS and camera, creating a more than theoretical risk of security breaches.

In a win for organized labor, the National Labor Relations Board (“NLRB”) reinstated a union-friendly standard under which both temporary and permanent employees may collectively bargain as a single unit without employer consent. On July 11, 2016, the NLRB’s 3-1 decision in Miller & Anderson, Inc., 364 NLRB No. 39 (2016), made it easier to combine workers who are temporarily employed by a staffing agency’s client company with workers permanently employed by that client company to form a union.

Under the new standard, if a staffing agency and its client company are deemed to be joint employers of the temporary workers, the temporary workers may join forces with the client company’s permanent workers, provided that they satisfy the “community of interest” factors demonstrating that it is appropriate to treat them as a single unit. Some of the factors used to determine whether a proposed unit of workers share a community of interest are whether the employees are subject to the same working conditions, are subject to common supervision, and have similar wages and benefit packages.

Click here to read the full client alert.

 

On July 13, 2016, the United States Equal Employment Opportunity Commission (“EEOC”) released a proposed revised Employer Information Report (EEO-1) (“Proposed Revision”). This slightly changes the original EEOC proposal to add compensation and hours worked data to the EEO-1 Report. An example of the proposed EEO-1 report can be found here. The EEOC has always required employers with more than 100 employees (more than 50 employees for federal contractors) to file EEO-1 Reports yearly identifying employees into 15 categories of race/ethnicity and sex and 10 job categories. Employers will now have to include employee hours worked and employee compensation information by pay band, utilizing the same twelve bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey:

$19,239 and under;
$19,240 – $24,439;
$24,440 – $30,679;
$30,680 – $38,999;
$39,000 – $49,919;
$49,920 – $62,919;
$62,920 – $80,079;
$80,080 – $101,919;
$101,920 – $128,959;
$128,960 – $163,799;
$163,800 – $207,999; and
$208,000 and over.

Compared to the original proposal, the Proposed Revision changes the due date for the “new style” EEO-1 reports from September 30, 2017, to March 31, 2018, to allow employers to utilize calendar year W-2 pay reports. Hours for salaried employees will have to be reported, either by using actual hours worked, if tracked, or by assuming a 40-hour work week.

The Proposed Revision comes after an initial comment period from February 1, 2016, to April 1, 2016. In drafting the Proposed Revision, the EEOC considered oral and written comments from employers, individuals, trade groups, civil rights organizations, and labor unions. The Proposed Revision will only become final after another 30-day comment period. Individuals have until August 15, 2016, to submit written comments to the United States Office of Management and Budget for consideration. Written comments may be submitted to: Joseph B. Nye, Policy Analyst, Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW, Washington, DC, 20503, e-mail oira_submission@omb.eop.gov. More information can be found in the Federal eRulemaking Portal here.