While not in the employment field, the latest attack on arbitration as a sensible, fair and comparatively inexpensive and fast dispute resolution mechanism comes from the federal government. Until now, the federal level has been a primary supporter of arbitration, through the Federal Arbitration Act, which protects arbitration clauses in contracts affecting commerce from interference by states and local governments, and policies of agencies. Now, the Consumer Finance Protection Bureau has taken a provocative step hostile to the institution of arbitration. On Monday, July 10, it issued a Final Rule prohibiting banks and other financial institutions under the jurisdiction of the CFPB from using contracts that require individuals with disputes to arbitrate those disputes individually.

In addition, the Rule would require financial institutions to provide broad information about the number of arbitration cases filed, and the outcomes.

Characterizing arbitration provisions as “Contract Gotcha’s”, the CFPB relied upon a controversial study completed in 2015. The study reviewed available records of class actions, small claims actions and arbitration cases in 2010—2012, plus a survey. Many cases covered in the survey’s time period were not completed by the cut-off date, so their results were not included. There are substantial disagreements over the validity of the study and the “lessons” from the data it assembled. The CFPB, however, believes the study supports its conclusion that individual arbitration is unfair and abusive to consumers.

The CFPB’s effort to prevent financial institutions from prohibiting court-based class actions by consumers instead of arbitration is likely to draw a response from Congress. Employer and business groups have already urged Congress to begin the process of using the Congressional Review Act to overturn the Rule. The CRA process, if successful, would not only void this rule, but would also prevent the agency from issuing a similar rule in the future without authorization. In addition, the CFPB is currently subject to scrutiny from Congress and the Trump Administration due to its possibly unconstitutional independence from Congressional or Presidential oversight. See the Trump Administration’s Brief asserting unconstitutionality here. This new rulemaking effort may well result in a response from the Administration consisting of an attempt to remove the head of the CFPB, Richard Cordray (who is rumored to be considering a run for the office of Governor of Ohio in 2018 as a Democrat).

The new Rule from the CFPB may represent the first of many efforts to roll back the ability of businesses to manage their dispute resolution processes through arbitration, among other tools. It could, on the other hand, represent a last gasp of those who prefer the current system of class action litigation, where businesses and lawyers resolve cases with consumers receiving little or no real relief. https://cei.org/issues/class-action-fairness

Dangerous precedent with respect to the State’s use of Ohio employers’ money has just been set with the passing of House Bill 49, the state’s Biannual Appropriation Bill. Specifically, House Bill 49 contains a provision authorizing the Office of Budget and Management (OBM) to “raid” BWC and Industrial Commission budgets, transferring up to two percent of those budgets to the General Revenue Fund. This is despite the fact that the BWC and Industrial Commission budgets are funded entirely by employers’ premiums and assessments, not state taxes. On June 30, 2017, despite virtually unanimous opposition to the proposed change amongst employers and business groups in Ohio, House Bill 49 passed with this budget change intact.

In the short term, this measure essentially forces Ohio employers to subsidize, at least in part, any and all state operations through their BWC premiums rather than state taxes. In the long term, this change creates a dangerous precedent in authorizing the raiding of funds collected for one specific purpose to be used to cover budget shortfalls elsewhere, completely unrelated to that intended purpose. It makes future premium rebates less likely and creates an additional burden on Ohio’s “State Fund” employers. In addition, this change presents an issue of constitutionality – Ohio’s Constitution reserves these BWC and Industrial Commission funds for the treatment of injured workers and the promotion of safer workplaces.

Employers and business groups will continue to oppose this measure, possibly through litigation. Frantz Ward will follow this issue closely.

BN-KB504_edp082_GR_20150828194637Last week, the U.S. Department of Justice (DOJ) made a significant reversal in its position regarding the critical class action waiver cases pending before the Supreme Court. In January, the Supreme Court granted certiorari in three consolidated cases: NLRB v. Murphy Oil USA, Inc.; Epic Systems Corp. v. Lewis; and Ernst & Young LLP v. Morris. The cases address whether employer arbitration agreements prohibiting employees from bringing or participating in class action litigation violate the National Labor Relations Act (NLRA). The Supreme Court’s decision will resolve the current circuit split on the issue.

The National Labor Relations Board (NLRB) in D.R. Horton, Inc., 357 NLRB No. 184 (2012), held that class action waivers violate the NLRA and has consistently adhered to this position, despite setbacks in some Circuits. The Sixth, Seventh, and Ninth Circuits agree with the NLRB’s position, while the Second, Fifth, and Eighth Circuits have upheld the waivers.

Under the Obama Administration, the DOJ filed a petition for a writ of certiorari on behalf of the NLRB defending the Board’s position that class action waivers are unenforceable. After the change in administration, the DOJ stated it has “reconsidered the issue and has reached the opposite conclusion.”

The DOJ’s changed stance combined with the appointment of Justice Gorsuch makes it more likely that the Supreme Court will uphold class action waivers. However, no one will know for sure until a decision is announced in late 2017 or early 2018.

The full amicus brief is available here.

The uncertainty as to how the Trump administration will proceed in the current environment of marijuana being illegal under federal law while legal, to some extent, in 29 states, has not yet caused significant angst within the $6 billion marijuana industry. Attorney General Sessions’ most recent statements on the issue may change that.

On Monday, June 12, 2017, Massroots.com published a letter it was able to obtain, that Sessions sent to Senators McConnell and Schumer, and Speaker Ryan and Representative Pelosi on May 1, 2017. In this letter, AG Sessions renewed the DOJ’s opposition to the Rohrabacher-Farr amendment. (The law which prohibits the DOJ from spending funds to interfere with the implementation of state marijuana laws.)  He asked that Congress not include such restrictions in DOJ appropriations. Sessions cites “an historic drug epidemic,” “potentially long-term uptick in violent crime,” and that smoking marijuana “has significant health effects,” to support his position in this letter. Sessions also states that drug traffickers and criminal organizations cultivate and distribute marijuana and do so “under the guise of medical marijuana laws.”

It is not yet clear what effect, if any, this letter will have. Nonetheless, it seems to signal a change in the Trump Administration’s stance on marijuana that could turn a $6 Billion industry on its head.

A copy of the letter can be obtained at:  https://www.scribd.com/document/351079834/Sessions-Asks-Congress-To-Undo-Medical-Marijuana-Protections.

183809648-57a54ae55f9b58974ab92602As my colleague Keith Ashmus recently noted, most employers currently ask job applicants for their salary histories. This is a reasonable question, and one that employers find useful to help attract and retain talented employees. Given recent legislative initiatives and judicial decisions on this topic, however, employers should tread carefully.

In the past few weeks, both the state of Oregon and New York City have joined a growing list of jurisdictions that restrict employer inquiries into job applicants’ salary histories. Other states include California and Massachusetts, while other notable cities include Philadelphia, New Orleans, and Pittsburgh. At least 20 other states and many other cities are considering similar legislation. Several of these laws impose fines on employers for violations, and some even include potential jail time.

By way of example, the New York City law, which took effect last month, makes it an “unlawful discriminatory practice” for employers: (1) “to inquire about the salary history of an applicant for employment;” or (2) “to rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process, including the negotiation of a contract.”

“Salary history” is broadly defined to include an applicant’s “current or prior wage, benefits or other compensation.” This concept does not, include, however, any “objective measure of the applicant’s productivity, such as revenue, sales or other production reports.” “Inquiry” is likewise broadly defined as “any question or statement to an applicant, an applicant’s current or prior employer, or a current or former employee or agent of the applicant’s current or prior employer, in writing or otherwise, for the purpose of obtaining an applicant’s salary history.” The inquiry restriction includes searching publicly available records.

Even for employers who operate in jurisdictions that do not prohibit salary-history inquiries—such as Ohio—other laws may limit the extent to which such information may be used in determining compensation. According to the  Sixth Circuit Court of Appeals (which includes Ohio, Michigan, Kentucky, and Tennessee), for example, the federal Equal Pay Act prohibits employers from relying on salary history as the sole justification for paying two otherwise-equal employees differently, particularly if those employees are different genders.

With these issues in mind, multi-state employers should ensure that they do not run afoul of any state or local laws regarding the procurement or use of salary history. Additionally, all employers should also be cautious when considering salary history as a lone or significant factor in setting compensation, particularly in light of the potential for perpetuating gender pay disparities. Employers should, at a minimum:

  • Avoid relying on salary history as the lone determination of starting pay;
  • Periodically review compensation practices to ensure non-discriminatory and equitable treatment;
  • Document market factors that contribute to any discretionary determination of starting pay, including the individual’s education, prior experience, special skills, and expertise, individual negotiations by the candidate, market factors, and other job-related factors; and
  • Comply with state and local laws regarding salary history inquiries and use of prior salaries in making compensation determinations (and stay abreast of increasing changes).

On March 20, 2017, the United States District Court for the Central District of California granted Defendant Domino’s Pizza LLC’s (“Domino’s”) motion to dismiss an Americans with Disabilities Act (“ADA”) claim related to the accessibility of Domino’s website and mobile application. See Robles v. Domino’s Pizza, LLC, Case 2:16-cv-06599. The District Court ruled that it would violate Domino’s due process rights to allow the claim to proceed, since the Department of Justice (“DOJ”) had failed to promulgate any accessibility regulations governing websites or mobile applications. Click here to read the full client alert.

Stillwater PlaceThe annual Frantz Ward Labor & Employment Seminar is consistently a great learning experience for both clients and guests and for the presenters from our Labor & Employment Practice Group. This year’s program, at the new Stillwater Place facility at the Cleveland Metroparks Zoo, was no exception. Our audience of HR professionals, business owners, and attorneys heard not only from our lawyers, but also from experts in fields such as medical marijuana and managing a premier metropolitan park system. The participants also provided feedback on some important current issues in the human resources world. We asked formal questions to the over 300 guests and received responses through Poll Everywhere software. While the invitations were not based upon a scientific selection of the HR universe, the number of responses was valid as reflective of the group that was in attendance.

The subjects of the polling were pre-employment background checks under the Fair Credit Reporting Act (“FCRA”), inquiries on past criminal history, and pre-employment questions on prior salary history. It may be interesting to know what the responses were.

Pre-Employment Background Checks

The FCRA has a number of non-intuitive requirements that may create problems for employers who fail to follow the requirements exactly. For example, the FCRA requires that subjects of background checks be provided with a disclosure that consists of the disclosure and nothing else (except in some cases the permission from the applicant may be in the same document.) Permissions contained in the general application forms, for example, may not be proper. Waivers of claims against the prospective employer included within disclosure forms have created liability for a number of businesses. The polling revealed that many employers do include authorizations for background checks within their application forms.

Many employers also include waivers within their permission forms.

Criminal History

With many more working age individuals having some criminal history, the general approach of employers is to ask about relevant criminal conviction history and then make individualized judgments about the suitability of the employee in the particular circumstances of the employer.

Employer experience with hiring people having felonies on their records is much the same as with people with “clean” records.

Salary History

Philadelphia, New York City, and other jurisdictions are attempting to prohibit employers from even asking about salary history. The theory is that females generally have had lower pay in the past, and if their salary at hire is based on that lower prior pay rate, they will start out behind and likely stay there. If employers are prohibited from asking for the information, they will not be able to justify lower pay for females upon their previous pay. The vast majority of employers ask about prior pay rates and find the information very useful.

Despite asking for and using the data on pay rates, most employers recognize that paying new employees based upon prior rates (plus an increase) does perpetuate inequality in pay between men and women.

Conclusion

The takeaways from this brief survey are:

  1. Employers do not have sufficient awareness of the specific, non-intuitive and unnecessary requirements of the FCRA.
  2. Employers are very willing to hire felons who demonstrate rehabilitation and qualifications for the job, but they do want to have the ability to know about the past criminal history.
  3. Employers use, and want to continue to use, prior pay history in setting initial pay for new employees, but are aware of the potential impact on pay equity. They are therefore willing to be flexible.

Embattled House Republicans were able to muster enough votes on May 4, 2017 to push their health care reform bill, known as the American Health Care Act (H.R. 1628), to the Senate. The passage marks a recovery for party leaders after they jettisoned a previous bill to repeal and replace the Affordable Care Act for lack of support. Click here to read the full client alert

imagesRepresentative Tom MacArthur (R-NJ), a leader of the so-called “Tuesday Group” of moderate Republicans, introduced an amendment to the American Health Care Act (“AHCA”) (Kaiser Family Foundation summary) after negotiations with the Freedom Caucus, the group of conservative House Republicans. The MacArthur Amendment does several things designed to obtain conservative support for the AHCA. Because some of these measures would impact employers, it is worth discussing them briefly.

More State Flexibility.  The MacArthur Amendment allows states, with permission from the Department of Health and Human Services, to go without certain of the “essential health benefits” provided for under the Affordable Care Act (“ACA”). To obtain the waiver, a state will have to show that it will lower premiums and encourage more individuals to become insured. States could also provide greater leeway for charging higher premiums for those with pre-existing health conditions who do not maintain continuous coverage, as discussed in more detail below. Employers in the small group market or who obtain coverage in the individual market in waiver states may need to check more carefully to ensure that desired benefits are part of their plans.

Easing of Pre-Existing Condition Restrictions on Insurers.  The essential bargain of the ACA was that everyone could get insurance no matter how sick they were or expensive their care was, but everyone would have to buy insurance no matter how healthy they were. The individual mandate was the means to enforce that second part of the bargain. It turned out to be very ineffective. Sick people got their coverage at community rates and healthy people stayed uninsured unless or until something bad happened. The predictable result has been rising community rates and insurers exiting markets. The AHCA would eliminate the individual mandate, making the adverse selection problem even worse. The MacArthur Amendment addresses this issue by allowing insurers to charge higher premiums for those with pre-existing conditions who do not maintain continuous coverage or who, upon losing coverage, do not obtain new insurance within sixty days.

In order for this to occur in a state, though, that state would have to provide some protection of the sick individuals who might otherwise be priced out of the “market.” This can be done by the creation of a high risk pool where individuals with expensive conditions can be covered with government subsidies, or by a so-called “invisible high risk pool,” which protects the carriers. This can be thought of as similar to a reinsurance program.

The MacArthur Amendment would not prevent individuals with expensive health conditions from obtaining or keeping coverage. Such persons would not be locked into their employer’s coverage if they preferred to go to another employer or start their own business.

Implications of the MacArthur Amendment.  It is difficult to see how the MacArthur Amendment would reduce premiums, unless the high risk pool provisions work much better than anticipated. It is also hard to think of a way that selling across state lines (a concept embraced by many business groups) would work if the states are operating under a patchwork of waivers and conditions agreed upon to obtain those waivers.

Politically, the Freedom Caucus has indicated that its members will now support the AHCA. Some moderates may drop their support. No Democrats are likely to vote for the amended AHCA, so its fate rests with the Republican majority holding itself together to repeal the ACA and replace it with the AHCA. Once through the House, the AHCA faces strong headwinds in the Senate. Even under the filibuster-proof procedures of budget reconciliation, the AHCA currently lacks support of fifty Republican Senators, and the MacArthur Amendment is unlikely to change that.

Yes, federal law prohibits employers from discriminating against employees and applicants based on their sexual orientation. Yes, employers who allow discrimination or harassment based on sexual orientation can be forced to pay a full range of damages, including punitive damages.

Employment and civil rights lawyers have struggled to find clear answers to these questions for years, and until last week, no federal court of appeals had ever answered them in the affirmative. That all changed, however, when the U.S Court of Appeals for the Seventh Circuit issued its decision on April 4 in Hively v. Ivy Tech Community College of Indiana.

Although the Hively decision is 69 pages long and discusses a number of important legal issues, the key holding is a simple one – Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on sexual orientation. The decision is being lauded as a “gamechanger” by civil rights and LGBT advocates, and is being characterized as judicial overreach by others. Regardless of which side is correct, the underlying issue will almost certainly end up before the U.S Supreme Court sometime in the foreseeable future due to the fact that two other federal appeals courts have ruled against Title VII coverage for sexual orientation discrimination.

Although some media commentators have been quick to attack the Seventh Circuit’s decision because its author, Chief Circuit Judge Diane Wood, was appointed by President Clinton, the decision was supported by strongly worded concurring opinions written by Circuit Judge Richard Posner and Circuit Judge Joel Flaum, both President Reagan appointees. In fact, Judge Posner went so far as to write that “The position of a woman discriminated against on account of being a lesbian is thus analogous to a woman’s being discriminated against on account of being a woman. That woman didn’t choose to be a woman; the lesbian didn’t choose to be a lesbian.”

The Hively decision technically only applies to employers within the Seventh Circuit, which covers Indiana, Illinois and Wisconsin. Nonetheless, employers elsewhere will be wise to take steps to protect their employees from discrimination on the basis of sexual orientation because the EEOC has made it clear that it will use the Hively decision to support its long-standing position that sexual orientation discrimination is a form of sex discrimination and is therefore illegal. Employers in many jurisdictions are also covered by state and local laws that already prohibit sexual orientation discrimination.

The Hively decision provides a good reminder to employers that they should review and update their anti-discrimination and anti-harassment policies with the employment counsel on a regular basis.