Forms-2It’s no secret that Donald Trump is fulfilling his signature campaign promise to address immigration reform. So far, most of the media attention has been on the U.S.-Mexico border wall and the travel/refugee ban. For employers, however, other issues require attention.

One major issue requiring employers’ attention is I-9 compliance. In an Executive Order issued on January 25, 2017, titled “Enhancing Public Safety in the Interior of the United States,” President Trump directed all executive agencies to prioritize the enforcement of U.S. immigration laws. Such enforcement will very likely include more frequent and significant  audits and investigations of employers’ I-9 compliance.

A few days earlier, on January 21, 2017, the United States Citizenship and Immigration Services began requiring employers to use a new version of the I-9 form for all new hires. Employers who fail to use the proper form can be subject to civil penalties exceeding $2,000 for every improper form used. Thus, hiring 10 employees with the expired I-9 form can trigger 10 separate penalties.

Here is a link to the new form and instructions for completing it: https://www.uscis.gov/i-9. Note that unlike prior versions, the instructions are now contained in a separate document and are more detailed.

Otherwise, the new form itself contains only a few minor changes (for example, permitting the use of a P.O. Box for an address). However, there is now an “electronic” version available that includes drop-down menus and informational pop-up boxes to facilitate correct completion. This version is not mandatory, so employers can still print and complete the I-9 by hand.

While the I-9 form has been around for a number of years, its requirements are technical and proper completion requires solid training. Particularly with the new administration’s heavy immigration focus, we strongly recommend that  employers audit their I-9 processes, ensuring that all forms are properly completed and that all employees are authorized for employment in the U.S.

If you have any questions about I-9 compliance, please contact us.

Earlier this week, Missouri’s Governor Eric Greitens signed legislation making Missouri the 28th state to pass Right to Work legislation. New Hampshire is considering legislation that, if passed, will be signed by its Republican governor, Chris Sununu, making it the 29th state. Right to Work is, of course, legislation permitted under the Labor Management Relations Act that prohibits unions from requiring bargaining unit employees to pay union dues or dues equivalents. Under current law, employees in states without right to work laws may be required either to join and remain members of the union representing them (paying the normal dues), or to pay the union what are called “Fair Share Fees”. These Fair Share Fees are calculated to be the union’s cost of representing employees in the bargaining unit, without inclusion of extraneous amounts included in the dues amount, such as political donations to candidates. Unions obviously prefer to have all employees contributing to their operations and political endeavors, and the number of employees opting out in non-RTW states is generally far less than the percentage opting out in RTW areas. Unions must represent all bargaining unit members fairly, even without receiving any payments from those in RTW states who chose not to pay. Employers generally support RTW efforts, since unions receive less funding and are weaker than otherwise. Employees prefer RTW since they have the choice of joining the union if they want, or staying out of it, even if there is a union present in the workplace. They can be “free-riders”—benefitting from any results of union bargaining but without paying anything to the union.

States have been the focus of RTW legislation in recent years, with Kentucky, Indiana, Michigan and Wisconsin all passing laws in the heartland. Wisconsin’s law has encountered still-pending challenges from unions on the basis that it forces unions into a position of involuntary servitude by having to represent dissenters. It survived a federal district court decision, now appealed to the U.S. Court of Appeals for the Seventh Circuit (which upheld Indiana’s RTW law), and was found unconstitutional under Wisconsin’s Constitution by a local county judge, whose decision is now on appeal at the district level.

An additional front is being opened in the RTW war. U.S. Representatives Joe Wilson (R-SC) and Steve King (R-IA) have introduced the National Right to Work Act, HR 785, which would make Right to Work the uniform law in the U.S. The law faces opposition from the labor movement, and would almost certainly encounter a filibuster in the Senate. Given the number of Democratic senators in states that have adopted RTW laws, it is likely that the House will pass the bill and send it to the Senate. This would force RTW state Democrats up for re-election in 2018 to take a position on the bill. Then, depending upon how the midterm elections turn out, the opportunity for Senate passage might increase, or passage could be foreclosed for at least another two years.

President Donald Trump has nominated Tenth Circuit Court of Appeals Judge Neil Gorsuch to fill the U.S. Supreme Court vacancy caused by the death of Justice Antonin Scalia nearly one year ago. Known for his classical constructionist approach, Gorsuch is expected to restore the ideological balance that existed before Justice Scalia’s passing, with four conservatives, four liberals and Justice Anthony Kennedy (for whom Judge Gorsuch worked as a law clerk) serving as a swing vote.

If confirmed, Judge Gorsuch’s presence on the High Court will invariably impact the judicial landscape of labor and employment law. More than three dozen petitions are currently pending before the Court, seeking interpretation of laws such as the Fair Labor Standards Act (FLSA), the Employee Retirement Income Security Act (ERISA), Title VII of the 1964 Civil Rights Act (Title VII), the NLRA, the ADA and others.

Here are a few issues to watch:

Agency Fees

On March 29, 2016, the Supreme Court issued a 4-4 opinion in Friedrichs v. California Teachers Association, in which the Court summarily upheld the Ninth Circuit Court of Appeals’ decision allowing public sector unions to tax employees who decline union membership with “agency” or “fair share” fees similar to the cost of union dues. Justice Scalia, who engaged in lively questioning during oral argument in this case but died before the opinion was issued, was expected to cast the fifth vote in favor of the employees, who argued that the agency fees violated their First Amendment right to freedom of speech and association. But with Scalia’s absence, the Court was deadlocked. 

The Friedrichs case was expected to have critical implications on the continued viability of public sector unions. While the plaintiff’s petition for rehearing has been denied, more cases like this are bubbling up through the courts. Changes also have been made through legislative action, with “right to work” laws having been enacted in 27 states and Guam. Under the right to work laws, employees in union shops may maintain employment without having to pay union dues or other fees.

Arbitration Agreements and Class Wide Waivers of NLRB Claims

After several requests, the Supreme Court has agreed to review the ruling in D.R. Horton, Inc., 357 NLRB No. 184 (2012), in which a 3-2 majority of the National Labor Relations Board (NLRB) found that class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act. On January 13, 2017, the Supreme Court granted certiorari in three cases involving the validity of the D.R. Horton rule. One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.

The Supreme Court has historically favored arbitration agreements in other settings, and these concepts have been extended to the employment setting. With certain delineated exceptions, employers are generally able to implement arbitration agreements with class wide waivers to mitigate their litigation risk.

Now that the D.R. Horton issue has been accepted for review, Judge Gorsuch’s confirmation may provide employers with hope that the Court will extend the FAA’s footprint, honoring arbitration agreements in the union setting.

Joint Employers

Another recent NLRB ruling set for review this year is the board’s August 2015 decision in Browning-Ferris Industries of California, Inc., in which the Board found that a California waste management company (Browning-Ferris) jointly employed its staffing agency workers. The decision effectively rewrote the NLRB’s test for deciding whether two affiliated companies are joint employers that share bargaining responsibilities when workers organize and legal liability when they file suit. Before the decision, the joint employer standard rested on a business having “direct and immediate” control over terms and conditions of employment. The Browning-Ferris Board revised the standard to include “indirect control,” or even the “ability to exert” such control. When Browning-Ferris thereafter refused to recognize and bargain with the newly elected union, an unfair labor practice charge was filed, and the Board found another violation of the Act.

The Browning-Ferris cases are part of a growing body of litigation over joint employer liability that is anticipated to take a significant toll on employers in coming years. Employees have sought to apply the new joint employer standard outside of the NLRA, including in cases involving alleged violations of OSHA, the FLSA, the FMLA and other statutes.

The Browning-Ferris, currently on review before the D.C Circuit Court of Appeals, warrants close monitoring. Judge Gorsuch’s confirmation would restore hope that employers will regain some clarity into the now amorphous and overly expansive definition of joint employer liability.

Discrimination Based Upon Sexual Orientation

A final issue poised for review is whether Title VII bars employers from discriminating against employees because of their sexual orientation. Courts have long held that it does not. However, the Seventh Circuit may go against the status quo following a recent en banc rehearing of Hively v. Ivy Tech Community College. In that case, the plaintiff-employee claimed that the employer violated Title VII by failing to award her a full time position because of her sexual orientation. The issue is squarely one of statutory construction, and the en banc court has been tasked with determining whether Title VII can be interpreted as recognizing a discrimination claim based upon sexual orientation as a sub-segment of prohibited gender bias. During the en banc hearing, the Court challenged the notion of strict construction, pointing to other acts, such as the Sherman Act, that are interpreted far differently now than when they first were enacted. If the Seventh Circuit rules in favor of the employee, the resulting split in circuits may signify a need for High Court intervention, provided the legislature doesn’t get there first.

Conclusion

Judge Gorsuch has a reputation as someone who would follow the general judicial philosophy of Justice Scalia, but without some of the more acerbic oral argument commentary for which Justice Scalia was known. For an enlightening insight into Judge Gorsuch’s personal views on Justice Scalia and his legacy, this 2016 Canary Lectureship article by Judge Gorsuch is well worth reading.

Assuming no surprises, it is likely that Judge Gorsuch will be confirmed over strenuous Democratic opposition and will impact the Court for many years.

The time between “legalization” and implementation seems to have caused confusion about the current use of medical marijuana in Ohio. HB 523 became “law” on September 28, 2016. Regulations for cultivators are set to be finalized by May 6, 2017. Regulations for physicians, testing laboratories, processors, patients, caregivers, employees, and dispensaries are scheduled to be finalized on September 8, 2017.

There is at least one medical center where a physician or physicians issue “recommendations” for medical marijuana to patients who are found to have a “qualifying condition” under H.B. 523. This center also issues an “affirmative defense card.” Since none of the procedures are in effect at this time, this practice presents several issues.

One issue is whether a physician can recommend marijuana to patients before he/she has a certificate to recommend. Currently, there are no final regulations in place for physicians to obtain a certificate to recommend medical marijuana. Additionally, according to H.B. 523, a patient can only legally obtain medical marijuana after receiving a written recommendation from his or her doctor that certifies a certain number of criteria are met. There are currently no regulations in place that would enable a physician to issue such a recommendation. Thus, it would seem to be currently impossible for a “certificated” physician to lawfully “recommend” the current use of medical marijuana in Ohio.

Under these circumstances, no individual can currently possess an “affirmative defense card” that would be valid in Ohio. Perhaps the “affirmative defense card” issued by this medical center is effective in states that have reciprocity with other medical marijuana states? The closest of these states to Ohio is Michigan. In Michigan, a visiting qualifying patient can only obtain medical marijuana if that patient has an ID card or its equivalent “issued under the laws of another state, district, territory, commonwealth, or insular possession of the United States.” Since the affirmative defense card is not issued by the State of Ohio, as that program is not yet operational, it is doubtful that Michigan dispensaries can legally dispense marijuana to patients who have been issued an ID card by a private Ohio medical center.

If Michigan dispensaries do dispense medical marijuana to Ohio patients with a private “affirmative defense card,” another related issue is whether patients are violating federal law by bringing marijuana across state lines to Ohio. Former Deputy Attorney General, James Cole, issued a memorandum to all United States Attorneys on August 29, 2013 to provide guidance on the proper prioritization of marijuana enforcement. One enforcement priority, where the Department of Justice may prosecute, is if there is diversion of marijuana from states where it is legal to other states.

Ohio has enacted a law that set forth a process that will make medical marijuana legal, but the details of that legalization are being phased in over a two-year period. This seems to have resulted in marijuana being recommended and dispensed to, and consumed by, citizens of the State of Ohio before these practices are lawful. We are not aware of any criminal prosecutions arising out of this situation, however, and we do know that individuals are acting as if they believe it is legal to consume medical marijuana in Ohio. We would say it is not.

In Ohio, the default rule governing employment relationships is employment at-will. Absent a legally recognized exception, an employer can terminate the employment of an at-will employee for any lawful reason, without cause or notice, and not incur liability. One of the lesser-known exceptions to the rule of employment at-will relates to the termination of minority shareholders of close corporations who are also employees.

The Ohio Supreme Court has defined a “close corporation” as a corporation with few shareholders and whose shares are not generally traded on a national securities exchange or regularly quoted on an over-the-counter market. [1] Ohio courts have recognized that, given the nature of a close corporation, majority shareholders can easily abuse their corporate control to the disadvantage of the minority shareholders. Minority shareholders are not only vulnerable because they are small in number, but also because they have no readily available market for their stock.

To lessen the risk of abuse, Ohio courts have held that majority shareholders of a close corporation owe a heightened fiduciary duty (i.e., utmost good faith and loyalty) to their minority shareholders. A majority shareholder breaches this fiduciary duty when control of the close corporation is utilized to prevent the minority shareholder from having an equal opportunity in the corporation. In other words, control of a close corporation cannot be used to give the majority benefits that are not shared by the minority.

What if the minority shareholder is also an employee of the close corporation? Ohio courts have recognized that a minority shareholder’s employment “often constitutes the major return on the shareholder’s investment,” without which “the minority shareholder is denied an equal return on the investment.” [2] As a result, a majority shareholder in a close corporation cannot terminate the employment of a minority shareholder without “a legitimate business purpose.” [3]

As Aesop noted at the conclusion of “The Fox and the Lion,” familiarity can breed contempt. In the context of close corporations, contempt can lead majority shareholders, mistakenly relying on the rule of employment at-will, to terminate a minority shareholder without a legitimate business purpose. In doing so, the majority shareholder violates the heightened fiduciary duty owed to the close corporation’s minority shareholder.

Before terminating a minority shareholder, a majority shareholder should carefully scrutinize the business purpose behind the termination and consistently document the existence and legitimacy of that business purpose.

If you would like help evaluating minority shareholder issues facing your business, please contact Frantz Ward partner Tim Richards.


[1] Crosby v. Beam, 47 Ohio St.3d 105, 107 (Ohio 1989).
[2] Kirila v. Kirila Contrs., Inc., 2016-Ohio-5469, ¶33 (Ohio 11th Dist. Ct. App. 2016).
[3] Tablack v. Wellman, 2006-Ohio-4688, ¶122 (Ohio 7th Dist. Ct. App. 2006).

Orange Safety SignsOn January 13, 2017, the Occupational Safety and Health Administration issued Recommended Practices for Anti-Retaliation Programs, which are intended to allow employees to raise safety issues arising in the workplace without fear of retaliation. The 12-page document sets forth recommendations that apply to private and public employees protected by the more than twenty (20) whistleblower laws enforced by OSHA.

Some of the key items recommended by OSHA for an effective anti-retaliation program are:

  1. Management leadership, commitment, and accountability.
  2. System for listening to and resolving employees’ safety and compliance concerns.
  3. System for receiving and responding to reports of retaliation.
  4. Anti-retaliation training for employees and managers.
  5. Program oversight.

Further discussion of these key items may be found in the Recommended Practices. Employers should review these recommendations and the discussion surrounding them, as we anticipate that OSHA will review the items as part of any investigation or inspection.

There is much in the OSHA Guidance that is common sense, but there are several items included that employers will want to consider. They are reflected in the following quotes from the Guidance (emphasis supplied):

Employer policies must not discourage employees from reporting concerns to a government agency, delay employee reports to government, or require employees to report concerns to the employer first.

[Employers should…] Eliminate or restructure formal and informal workplace incentives that may encourage or allow retaliation or discourage reporting. Examples of incentives that may discourage reporting or encourage retaliation include rewarding employee work units with prizes for low injury rates or directly linking supervisors’ bonuses to lower reported injury rates.

Ensure that any employment agreement or policy that requires employees to keep employer information confidential does not prohibit or discourage employees from reporting or taking the steps necessary to report information reasonably related to concerns about hazards or violations of the law to any government agency. Steps that may be necessary include conferring with legal counsel, union or other worker representatives, or with medical professionals regarding the employee’s concerns. Employers should not use confidentiality or non-disclosure agreements to penalize, through lawsuits or otherwise, employees who report suspected violations of the law or take steps necessary to make such reports.

If possible, make the anti-retaliation investigation completely independent from the corporation’s legal counsel, who is obligated to protect the employer’s interests. If the employer’s legal representative is involved in conducting the investigation, fully inform the whistleblower that the investigator represents the employer’s interests and that any attorney-client privilege will only extend to the employer.”

To the degree that OSHA applies this Guidance in connection with investigations of alleged retaliation, employers should have a record that they considered and, to the degree applicable to their circumstances, adopted recommendations from it.

FirefighterSince 1993, the Ohio Workers’ Compensation Act (O.R.C. §4123), has provided firefighters and police officers additional workers’ compensation benefits. Specifically, it is presumed that firefighters and police officers who suffer from cardiovascular, pulmonary, or respiratory disease after being exposed to heat, smoke, toxic gases, chemical fumes and other toxic substances during the course of their employment, obtained it through the course of and arising out of their employment. Additionally, this section expands the traditional two year workers’ compensation statute of limitations to eight years.

On January 4, 2017, Ohio Governor John Kasich signed the Michael Louis Palumbo, Jr. Act (Ohio Senate Bill 47), renamed after Michael Palumbo, a captain with the Willowick Fire Department who battled with brain cancer after 25 years of service. The Act expands the protections given to firefighters under O.R.C. §4123.68 by adding certain cancers to the list of presumed occupational diseases to firefighters – thus a firefighter who is disabled due to certain cancers will be presumed to have contracted that disease during the course of and arising out of his or her employment as a firefighter.

However, this Act includes specific parameters that must be met to fall under this presumption:

  • The firefighter must be disabled as a result of cancer
  • The firefighter must have had at least six years on hazardous duty (as defined in 5 C.F.R. 550.902: a “duty performed under circumstances in which an accident could result in serious injury or death, such as duty performed on a high structure where protective facilities are not used or on an open structure where adverse conditions such as darkness, lightning, steady rain, or high wind velocity exist”)

As this is a presumption, it may be rebutted with evidence showing the firefighter:

  • Contracted this type of cancer before joining the fire department
  • Has exposure, outside of the scope of their official duties, to tobacco products, or other conditions that would indicate an extremely high risk of that cancer, and that was probably a significant factor in the cause or progression of the cancer
  • Was not exposed to a qualifying cancer
  • Is over 70 years old
  • Has not been assigned to hazardous duty in more than twenty years

Theoretically, a firefighter who has not worked in 20 years could possibly bring a workers’ compensation claim as long as they had at least six years of hazardous duty. It is important for employers to thoroughly document all workplace related injuries and exposure to harmful chemicals or toxins.

Workplace AccommodationOn Monday, December 12, the Equal Employment Opportunity Commission (EEOC) issued a resource document concerning workplace rights for individuals with mental health conditions under the Americans with Disabilities Act (ADA), entitled “Depression, PTSD, & Other Mental Health Conditions in the Workplace: Your Legal Rights.” This resource document is part of a series of resource documents issued by the EEOC explaining workplace rights for individuals with disabilities. Earlier in 2016 the EEOC released resource documents addressing the rights of employees with HIV infection and employees who are pregnant.

Through the document, the EEOC aims to educate employers, job applicants, and employees that mental health conditions are no different from physical health conditions under the ADA. Moreover, EEOC charge data shows that claims of workplace discrimination based on mental health conditions are on the rise, with preliminary 2016 data estimating 5,000 mental health discrimination charges within the fiscal year.

Individuals suffering from depression, PTSD, and other mental health conditions are protected from workplace discrimination based on their mental health condition. Thus, employers must be prudent not to rely on stereotypes or jump to conclusions regarding mental health. However, employers are not required to hire or keep employees in jobs they cannot perform or employ individuals who pose a “direct threat” to safety.

The document explains that generally employees with a mental health condition are able to keep their condition private in the workplace. Employers are permitted to ask questions about mental health in only four situations:

  • When an employee with a mental health condition asks for a reasonable accommodation.
  • After the employer has made a job offer, but before employment begins, if everyone entering the same job category is asked the same questions, and the questions are job-related in some way.
  • When the employer is engaging in affirmative action for people with disabilities, in which case the employee may choose whether to respond.
  • On the job, when there is objective evidence that the employee may be unable to perform the job or that an employee may pose a safety risk because of his or her condition.

Moreover, employees with mental health conditions have a right to reasonable accommodations at work. The document provides some examples of acceptable reasonable accommodations for employees with mental health conditions:

  • Altered break and work schedules to work around therapy appointments.
  • Quiet office space or devices that create a less stressful work environment.
  • Changes in supervisory methods, such as written instructions instead of oral.
  • Specific shift assignments.
  • Permission to work from home.

Employers are not required to provide a reasonable accommodation unless an employee requests one. However, if a reasonable accommodation will enable the employee to fulfill his or her job responsibilities, employers are advised by the EEOC to provide one, unless the accommodation involves significant difficulty or expense. Employers may also choose between reasonable accommodations if more than one accommodation is feasible.

Given the complex issues with mental health issues and accommodations for individuals suffering with them, employers should act prudently and engage in the interactive process with affected employees. Experienced employment lawyers can be of great help in this effort.

On December 19, the United States Department of Labor issued comprehensive new guidance making it clear that it intends to continue to aggressively pursue employers who misclassify employees as independent contractors. The transmittal message for the new guidance, entitled “Misclassification Affects Everyone,” states the DOL’s position that “The misclassification of employees as independent contractors is a huge problem for workers, employers who play by the rules and our economy.” Although the document states that the DOL supports valid independent contractor arrangements, the definite direction of the DOL is to limit many common ways businesses use independent contractors rather than employees.

The DOL’s new guidance is accessible through a web page and provides quotes from misclassified workers, including one who compares his job as a taxi driver to “modern day slavery.” Although the approach may seem overly dramatic, the web site does provide a variety of useful tools, such as a section entitled “Myths About Misclassification,” which addresses twelve commonly held misconceptions about independent contractor arrangements.

The DOL’s overall direction under the incoming presidential administration cannot be predicted with complete certainty, but employers can safely predict that their classification of workers as independent contractors will continue to be closely scrutinized—not just by the DOL, but also by state and local taxing authorities. Employers should therefore consider auditing their independent contractor arrangements by using the DOL’s new guidance and by consulting with their employment counsel.