While many are beginning to turn their thoughts to the holidays—looking forward to attending office parties, enjoying time with family, or eating too much— data privacy and information management professionals do not have that luxury. Instead of sugar plums, our heads are full of opt-out options, thirty party disclosures, and privacy notices. Yes, the California Consumer Privacy Act (“CCPA”) is arriving on January 1, 2020, and immediate action is required to get your business ready for it.

Despite amendments having only been signed by the Governor on October 11, 2019 and proposed regulations having only been issued by the Attorney General on October 10, 2019, the CCPA will take effect on January 1, 2020 and with it companies that do business with California residents must be prepared to implement a whole new set of personal data protections and rights. If you do business in California or even just with California residents, as all natural persons who are residents of California are considered consumers under the CCPA, there are several important questions that your company should answer before the new year to help ensure compliance

  1. What Type of CCPA Entity Are You?

The CCPA divides businesses into three categories: (1) covered businesses, (2) service providers, and (3) third parties.

Covered business are for-profit entities that do business with and collect the information of California residents (including employees and applicants). To be a covered business, your company must (1) have annual gross revenues in excess of $25 million, (2) receive personal information of more than 50,000 California consumers, households or devices, or (3) derive more than 50% of its revenue from selling consumer information.

Service providers are for-profit entities that process information on behalf of a covered business for an allowable business purpose and who receive consumers’ personal information from the covered business, which must be in accordance with a written contract that prohibits the use, disclosure or retention of personal information for any purpose other than the allowable business purpose.

Third parties are vendors or other organizations that do not fit into either the covered business or service provider definition. Third parties that receive California consumer personal information may be subject to the CCPA through contractual arrangements with their business partners.

Depending on the circumstances and contracts at issue, your company may fall into one, two or all three of the foregoing categories based on how you are receiving, disclosing, and using personal information in a given situation.

  1. Are you Selling Personal Data?

If you determine your company is a covered business, you must also decide whether your company is “selling personal data,” and thus subject to additional notice and compliance obligations. Selling information is not limited to circumstances in which money is directly paid by a third party for access or use of the personal information, but includes exchanges of personal information that are tied to any valuable consideration. For example, simply allowing another business with whom  you already have a contract for a separate service to use personal information for its own analytics purposes may constitute a “sale” because the information is exchanged in connection with consideration.

There is, however, an important exception to the “sale” of personal information for personal information communicated to a service provider according to a compliant service provider contract, discussed further below.

If your company is engaged in the sale of personal information, you will need to take several additional steps on January 1, including incorporating a “Do Not Sell My Personal Information” button or link on your company’s website. This button must link to a page that informs the consumer of how to opt out of the sale of his or her personal information and enables the consumer to do so. Your company must also ensure that the consumer’s election remains in force for at least 12 months before you make a new request to sell the consumer’s personal information.

  1. Have You Updated Your Privacy Notices?

The CCPA requires that privacy notices be made available at or before the time of collection, and such notices must describe the categories of personal information collected and purposes for which the information will be used. These notices will likely be more detailed and provide more information on your company’s use of personal information than your current notices. Covered businesses must disclose:

  • Descriptions of the consumer’s right to access and delete personal information, obtain information about disclosures, opt out of any sales, and not be discriminated against for exercising his or her CCPA rights;
  • The methods for submitting requests to exercise those rights and obtaining information, including a toll-free telephone number and web address;
  • The categories of personal information your company has collected in the past 12 months, the business or commercial purposes for collecting such information, and the categories of third parties with who such information is shared; and
  • Categories of personal information sold or disclosed for a business purpose in the last 12 months.

Additionally, it will be critical to review your privacy notice and policies to capture the broad definition of personal information under the CCPA. The CCPA defines personal information to include cookies, IP addresses, device identifiers, customer observations and inferences, and information that can reasonably be linked to a consumer or household. Your current policies may not capture all of these items  as “personal information.” It is necessary to both revise your privacy notices now, in light of the fast-approaching effective date, and be prepared to update them when regulations are finalized in April or May 2020.

Employee personal information is also within the scope of the CCPA. Each employer must extend the rights and protections of the CCPA to personal information it collects on job applicants, employees, owners, directors, officers, medical staff, or contractors, including informing its employees of the categories of personal information the employer will collect. Simply put, employees are consumers for purposes of the CCPA with some exceptions on enforcement discussed further below.

  1. Are Your Vendor Contracts CCPA Compliant?

All vendors with whom you share personal information must be classified as either service providers or third parties. This is critical for providing  the appropriate notices regarding the disclosure and sale of personal information as required by the law.

Service provider contracts should be updated to specify the business purpose for which personal information is processed, expressly prohibit the sale of personal information, and prohibit the use, disclosure or retention of personal information for any other purpose other than the contracted for business purpose.

Third party contracts should also be reviewed to ensure that third parties are prohibited from reselling personal information unless there has been explicit notice to the consumer and the right to opt out of such resales. Third party contracts will also likely constitute the sale of personal information unless your company can establish that it was directed by the consumer to intentionally disclose the personal information and intentionally interact with the third party. Properly documenting and updating these contracts will be key to ensuring that your company is not inadvertently selling personal information under the CCPA.

  1. Will You be Able to Respond to Consumer Access, Deletion, and Opt-Out Requests?

In addition to the opt-out rights for the sale of personal information discussed above, any covered business—even those not selling personal information—must ensure the right of access to and deletion of consumer personal information. Starting January 1, your company must both inform consumers of these rights and be ready to implement their requests.

This will include developing a process to verify the requestor’s identity prior to complying with the request, determining how such requests will be processed by your company, ensuring that data will be provided in a portable and usable format, and making sure that your service providers and third parties can implement such requests when directed.

Importantly, there is a year-long mortarium for offering these rights to employees for any personal information held in connection with their employment, but the data breach private right of action discussed below and the requirement to inform employees and applicants about categories of personal information and purposes for which it will be used still apply to this information during the moratorium. Now is a good time to develop employee and worker privacy notices.

Although the California Attorney General will delay enforcement until July 2020, the law has a 12-month lookback period built in. Thus, while the ink is still fresh on amendments and regulations, businesses have the remainder of the year to implement compliance mechanisms. The penalties for failing to do so are steep: the California Attorney General can bring a civil action for an injunction and a penalty of up to $7,500 for each intentional violation, and consumers have a private right of action for breaches of unencrypted sensitive-category information resulting from a business’s violation of its duty to “implement and maintain reasonable security procedures and practices.”

By answering these questions today, your company will be more ready for CCPA and you won’t have to spend your new year playing catch up.

And even if you are not covered by the CCPA, you should consider whether to voluntarily comply with some or all of the CCPA requirements.  As data breaches continue to occur, the pressure will mount on other state legislatures and Congress to take action to follow the lead of the European Union, with its GDPR regulations, or California, with the CCPA, to further protect personal identifiable information. CCPA like legislation is currently pending in multiple states, including Massachusetts, Maryland, and New York. Taking steps now to conduct data mapping of the personal information maintained by your company, update your privacy policies and analyze your data security processes will help you prepare for these new laws and regulations. In fact, Microsoft announced on November 11, 2019 that it will implement the requirements of CCPA nationwide. By recognizing that additional state laws are inevitable, Microsoft is looking to promote itself as industry leader on consumer privacy by extending the CCPA protections to all its customers across the United States. Similar steps can help your company be proactive instead of reactive to your clients and customers data privacy concerns and needs.

If you have any questions, or would like assistance with a review of your current data privacy policies, please contact Brad Reed, Mia Garcia, or the other data privacy attorneys at Frantz Ward for more information.

McDonald’s recent termination of its highly-regarded CEO Steve Easterbrook provides employers with another high-profile reminder of shifting attitudes regarding workplace romances, even voluntary ones.  As most are now aware, McDonald’s board of directors determined that their CEO had violated company policy and shown “poor judgment” by having a romantic relationship with a subordinate employee.

While interoffice dating is not a new phenomenon and office romances remain prevalent, McDonald’s quick move to terminate Easterbrook illustrates how shifting attitudes related to power dynamics have caused many to reexamine workplace relationships.  High profile allegations against several powerful individuals, the advent of the #MeToo movement, and an increase in related litigation underscore the challenge of determining what is truly “voluntary” in the context of a workplace relationship.  This is particularly true when one of the participants holds a position of power or authority in the workplace.

Employers should take a proactive approach regarding workplace romances and the ultimate need to prevent sexual harassment.  Unfortunately, there is no “one size fits all” solution to the potential morale and legal issues that can result from workplace romances.  An employer’s unique history and culture may inform its position regarding these relationships.  At a minimum, however, employers should consider taking the following steps to avoid the practical and legal problems that may result from workplace romances:

  • Proactively address the issue of workplace romances. Because relationships are inevitable, employers should determine their position in advance.  Alternatives include – 1) prohibiting some (e.g., direct reports) or all romantic relationships by adopting a non-fraternization policy, or 2) acknowledging and addressing romantic relationships through the use of a “love contract,” essentially a written agreement between the employees that establishes the voluntary nature of their relationship and provides mechanisms to protect the employees (and the employer) in the event that the relationship ends badly.
  • Review and “modernize” workplace policies relating to all forms of unlawful harassment. Anti-harassment policies should be closely reviewed and made more approachable, stripping away decades-old legalese and other formulaic language.  Updates should include ensuring that employees are provided an effective and accessible reporting mechanism for complaints of harassment, as well as clearly illustrating behaviors that will not be tolerated, even if these behaviors do not rise to the level of unlawful harassment.
  • Regularly train employees, and particularly managers. All employees should receive training that covers both sexual harassment and other forms of workplace harassment on a regular basis.  Managers and supervisors should receive additional training, particularly on how to recognize harassment, how to handle a harassment complaint, and how to have a conversation about harassment.
  • Follow the policy and investigate promptly. All complaints should be taken seriously, regardless of the employer’s initial or personal belief as to the validity of a complaint.  Employers should be careful not to ignore rumors of sexual relationships, as this is often an indication of a situation which, at a minimum, warrants further investigation.  In all instances, complaints should be investigated immediately so that the employer can take appropriate remedial action based upon the results of the investigation.
  • Foster a culture that discourages sexual harassment. A workplace culture that does not tolerate sexual harassment must start at the top.  Management, including senior executives, must buy into the policy and voice their support for the policy.

 

 

The U.S. Department of Labor, in its continuing effort to simplify its wage and hour rules, has proposed changes to the fluctuating workweek method of paying salaried employees who work varying hours from week to week. Under this method, employers can pay salaried employees a set salary every week, to cover all their straight time hours, whether few or many. If there are hours worked over forty, the obligation to pay overtime is met by dividing the set salary by the number of hours worked to yield the regular rate and paying half of that as the overtime premium for each hour worked over forty. This is much less expensive than paying time and a half. It also results in a reduced premium the more hours that are worked. (Examples: I. Salary of $600 per week. If it is for a fixed 40 hours, the regular rate would be $15 per hour. Each overtime hour would be paid at $22.50. If the employee works 50 hours, he would be paid $225.00 for his 10 hours of overtime, plus the $600 salary, totaling $825. II. If the $600 salary is for all straight time hours, the $600 would be divided by the total number of hours worked, so if 50 hours are worked, the regular rate would be $12.00 and the hourly premium would be half that, or $6.00. The overtime total would be $60, and the total pay for the week would be $660.  That is a difference of $165. To see what happens when more hours are worked, assume a week of 60 hours: the regular rate become $10; the overtime premium goes down to $5; and the total overtime paid becomes $100.)

There has been an issue in the fluctuating workweek system with payment of bonuses and premiums in addition to the salary. For many years, the DOL did not oppose the inclusion of such extras. However, in 2011, in the preamble to a revision of the regulation, it took the position that such premiums were inconsistent with the notion of a “fixed” salary for the fluctuating workweeks. Courts added to the confusion by developing a concept of bonuses for “production” (permissible) vs. bonuses for “hours” (not O.K.) This lack of clarity for employers led some to opt to eliminate bonuses, or not use the fluctuating workweek method at all. Now, the Labor Department has revised its position and will permit employers to pay all types of bonuses and premiums in addition to the base salary. Such additional amounts must, however, be included in the regular rate calculation for each week, unless the payment is specifically excluded from the regular rate by regulation (such as the value of holiday turkeys).

The DOL has also provided several clarifying examples for applying the regulation. These should help employers understand the fluctuating workweek concept and avoid mistakes that could result in litigation. As a result, it is likely that many employers will strongly consider adopting this method for their salaried employees who work varying hours per week. With the eligibility for overtime being expanded in January due to the increase in the minimum compensation necessary for exemption from overtime, employers may find this method helpful both to pay overtime and to avoid quite as much cost as straight, conventional salaried overtime would entail.

Public support for cannabis reform – whether to legalize medical or adult use marijuana or hemp and hemp-derived products – is at an all-time high. While marijuana reform is moving slowly at the federal level, the federal government legalized hemp and its derivatives as part of the 2018 Farm Bill.

Now, companies from Martha Stewart to Walmart are seizing the opportunity to enter the hemp-derived CBD market. And, while CBD (Cannabidiol) may be the most well-known hemp derivative, this nascent, emerging industry still lacks consistent regulatory oversight, making it sometimes difficult for consumers to verify the contents of hemp-derived products.

Legalization of marijuana and hemp have also inevitably meant increased work-related issues for applicants and employees who use these products, as evidenced by the Western District of New York case Horn v. Medical Marijuana, Inc. One of the named Plaintiffs in the case, Douglas Horn, had been a professional over-the-road hazmat commercial truck driver for 29 years. As such, Horn has attested in court documents that he was acutely aware that he was subject to regular and random drug-test screenings, and that he could not smoke marijuana or take any product containing THC (the intoxicating compound in cannabis). After seeing an ad for the Defendant’s CBD oil, which represented the product had a 0% concentration of THC, Douglass bought and consumed the CBD oil. He was later summoned for a random Department of Transportation urinalysis drug test required by his employer, informed that he had tested positive for marijuana at almost double the concentration limit, and was terminated shortly thereafter.

Horn and his wife sued the seller of the CBD oil, asserting claims for deceptive business practices, fraudulent inducement, racketeering, products liability, negligence, and intentional infliction of emotional distress. The Court recently granted summary judgment to the defendants on most of Horn’s claims, but ordered both the fraudulent inducement and civil racketeering claims to proceed to trial.

Given the rapid and unpredictable developments in this area of the law and industry, employers should continue to act thoughtfully when making decisions regarding applicants and employees who use marijuana or CBD.

On Monday, October 7, 2019, the Department of Labor (DOL) issued new proposed rules regarding the circumstances in which employers may (1) apply a “tip credit” to satisfy their minimum-wage obligations under the Fair Labor Standards Act (“FLSA”) and (2) permit non-tipped employees to participate in mandatory tip-pooling arrangements.

1. The Proposed Rules abolish the 80/20 Rule.

Current “tip credit” rules allow employers to offset a portion of their minimum-wage obligations toward their “tipped employees” (i.e., those who customarily and regularly receive more than $30 per month in tips) by attributing a limited amount of tips that those employees receive from customers. There is an exception, however: if a tipped employee engages in work that does not generate tips (e.g., cleaning and setting tables, making coffee, and occasionally washing dishes or glasses) for more than 20 percent of the shift, the employer may not apply a tip credit for that employee. This is known as the “80/20” rule.

The 80/20 rule has proven administratively burdensome and confusing for employers and employees alike, resulting in substantial litigation. Fortunately, a welcomed changed is on the horizon. Under the proposed rules, an employer may apply a tip credit regardless of the amount of time that a tipped employee performs non-tip generating work, so long as the work is performed “contemporaneously with” the employee’s tipped duties, “or for a reasonable time immediately before or after performing the tipped duties.”

2. The Proposed Rules permit back-of-house employees (but not supervisors and managers) to share in tip pools.

The proposed rules also confirm the eligibility of back-of-the-house employees (such as kitchen workers, cooks, dishwashers, and other non-tipped employees) to participate in an employer’s mandatory tip pool.

The new rule only applies to employers who do not take a tip credit for their tipped employees’ wages. Employers who do take a tip credit may maintain a tip pool only among tipped employees (and may not include back-of-the-house employees). Additionally, the proposed rules do not change existing prohibitions on supervisors and managers participating in tip pools, regardless of whether a tip credit is take

3. The Proposed Rules (or some modified version) will likely take effect next year.

The proposed rules will be available for public review and comment until December 9, 2019. A final rule will be implemented sometime thereafter.

No later than September 30, 2019, employers with 100 or more employees must file EEO-1 Component 2 to report workforce pay data for the years 2017 and 2018.  In light of the approaching deadline, we want to update employers briefly on the status of the reporting obligation, offer some key tips for compliance, and finally, explain why this reporting obligation may be a one-time deal.

The Component-2 reporting requirement stems from an Obama-era rule that added the collection of pay data to the demographic data currently required by Form EEO-1 (Component-1).  In 2017, the U.S. Office of Management and Budget (OMB) stayed this requirement indefinitely, but earlier this year, a federal district court ruled that the stay was improper. The court ruled that the revised EEO-1 form  must take effect in 2019, and that the EEOC must collect the required pay data. OMB has appealed the district court’s decision, and some employers initially delayed compliance based on speculation that the appeal might void the reporting obligation. However,  briefing on the appeal is not scheduled to be completed until October 9, and so unfortunately, any relief from the appeal will not arrive  until after the reporting deadline has passed.

To help employers meet their Component-2 reporting obligation, we offer the following summary of key points:

  1. Employers must submit Component-2 pay data for one “workforce snapshot” period for 2017 and one workforce snapshot period for 2018. The data includes W-2 wage information and hours worked, broken out by gender, race/ethnicity, and job category.
  2. Employers are covered by the Component-2 reporting requirement if they employed 100 or more employees during the applicable workforce snapshot period for the  relevant reporting year. Thus, an employer could be required to submit Component-2 data for 2017 and 2018, for both years, or for neither year.
  3. The workforce snapshot period is any employer-selected pay period between October 1 and December 31 of the reporting year.  The snapshot period need not be same period as that chosen for the Component-1 data. Moreover, the snapshot periods for 2017 and 2018 need not match each other. In other words, if you employed fewer than 100 employees for any pay period during this timeframe (even if you employed more than 100 employees at other times during the year), then you are not required to submit Component-2 pay data for that  year.
  4. The employer should report pay data for employees who are employed during the respective snapshot period, and only those employees. This is true regardless of whether the employee worked the entire year or not, and also regardless of whether or not the employer employed different employees at different times during the year.
  5. The compensation data in the Component-2 report has two components: pay data and hours-worked data: The pay data that the employer should report is W-2 Box 1 income only. Again, this applies regardless of whether the employee worked the entire year. For example, if  an employee is hired at an annual salary of $100k but only works 6 months that year, the employer still must report total W-2 wages for the year (even though that number will not accurately reflect the employee’s annualized salary).
  6. Component 2 also requires reporting of hours-worked data. For each non-exempt employee employed in the snapshot period, the employer should report the hours the employee actually worked for the entire reporting year. For exempt employees, employers have the option to report actual hours worked or to  report a proxy of 40 hours per week for  each full-time employee (20 hours for part-time employees), multiplied by the number of workweeks for which the employee was employed during the reporting year. This rule applies unless the exempt employee was given a different standard workweek (e.g., employee was given a standard 30 hour workweek), in which case the employer may use that proxy number for that employee instead.  Additionally, please note that hours worked includes only hours actually worked, and does not include paid time off, such as vacation, sick leave, and holidays.
  7. Employers doing business at only one establishment in one location must complete a single Component 2 report. Multi-establishment employers must submit a report for their headquarters and all of their establishments, and they also must submit individual reports for each establishment with 50 or more employees. For establishments with fewer than 50 employees, the employer must file an establishment list or establishment report (similar to Component 1).

For additional instruction, the EEOC has developed helpful materials such an instruction booklet for filing, a user’s guide, sample form, and other reference documents. These materials can be accessed via this link: https://eeoccomp2.norc.org/info

Fortunately, the Component-2 reporting obligation may be short-lived. On September 11, 2019, the EEOC issued a statement declaring that it will not renew the Component-2 requirement next year. In the statement, the EEOC cited the “unproven utility [of the data collection] to its enforcement program” and the “burden imposed on employers” to comply (an estimated $53.5 million in each of 2017 and 2018). The EEOC concluded that further examination is needed before imposing further pay reporting obligations.

So, for those imaginary folks who are enjoying their Component-2 gathering experience, savor it while it lasts! For everyone else, remember to submit your reports by the September 30 deadline, and keep your fingers crossed that the obligation does not renew.

The Ohio Supreme Court today issued a knockout punch to public authorities seeking to enforce local-hiring requirements on public-construction projects.

In 2003, the Cleveland City Council enacted what is generally known as the “Fannie Lewis Law.” The much-disputed law required public-construction contracts valued at $100,000 or more to include a provision mandating that Cleveland residents perform 20 percent of total construction labor hours on the contract. Contractors awarded projects but who failed to comply would be subject to monetary penalties and, potentially, contract termination and disqualification from future public work.

In 2016, the Ohio General Assembly enacted Ohio Revised Code § 9.49 (later renumbered O.R.C. § 9.75) prohibiting public authorities from requiring contractors to employ a certain percentage of regional or local residents, or providing bid incentives or preferences to contractors who do.

The City of Cleveland challenged the state law, arguing that it violated home-rule authority (essentially, the city’s right to govern local matters). The Cuyahoga County Court of Common Pleas sided with the City of Cleveland, and Ohio’s 8th District Court of Appeals (covering Cuyahoga County) affirmed the Common Pleas Court’s injunction against state law – this set up the fight in the Ohio Supreme Court.

This dispute over the Fannie Lewis Law and local-hiring requirements pitted Article XVIII, Section 3 of the Ohio Constitution (the “Home Rule Amendment”) against Article II, Section 34 of the Ohio Constitution (allowing the Ohio General Assembly to pass laws for employees’ comfort and general welfare). The City of Cleveland, among other local governments, take the position that the Fannie Lewis Law (and the like) do not provide for residency requirements but rather address the terms on which local governments may contract for public improvements in the exercise of self-governments and how local governments spend their money. Proponents argue that the Home Rule Amendment authorizes local governments—not the State—to dictate such contractual terms. The Ohio General Assembly, on the other hand, recognizes the “inalienable and fundamental right of an individual to choose where to live.” The State argues that “it is a matter of statewide concern to generally allow the employees working on Ohio’s public improvement projects to choose where to live, and that it is necessary in order to provide for the comfort, health, safety, and general welfare of those employees to generally prohibit public authorities from requiring contractors, as a condition of accepting contracts for public improvement projects, to employ a certain number or percentage of individuals who reside in any specific area of the state.”

Ultimately, the Ohio Supreme Court held the broad constitutional authority granted the State to legislate for the general welfare trumps home-rule authority. The Court wrote, “Because every resident of a political subdivision is affected by the residency restrictions imposed by another political subdivision, the statute [R.C. § 9.75] provides for the comfort and general welfare of all Ohio construction employees and therefore supersedes conflicting local ordinances.”

Various justices joined in concurring and dissenting opinions raising concern over the breadth of the Court’s majority opinion and its reasoning. Unless the General Assembly changes the law or a future Ohio Supreme Court opinion reverses course, however, local-hiring requirements have seen their end in public contracts throughout Ohio.

Today, the Department of Labor (“DOL”) announced its final rule to increase overtime pay for salaried employees. The new rule lifts the annual salary threshold from $455 per week ($23,600 annually) to $684 per week ($35,568 annually). The rule also raises the annual compensation requirement for highly compensated employees (“HCE”) from $100,000 per year to $107,432 per year. This is a significant change from the proposed rule, which set the annual HCE compensation at $147,414. Although the rule changes the “compensation test” for overtime exemption, the “salaried test” and the “duties test” for the executive, administrative, professional, and HCE exemptions remain the same.

Additionally, the rule allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the salary threshold. The payments must be made on at least an annual basis in order for employers to credit such payments toward the salary threshold.

The final rule will take effect January 1, 2020, and the DOL estimates that the updated salary thresholds will make 1.3 million more American workers eligible for overtime pay. Accordingly, employers must begin preparing now to comply with the new regulations when they become effective in 2020. Although each workplace is different, consider implementing the following suggestions in the upcoming weeks:

  • Identify exempt positions that fall below the new minimum salary threshold. Consider which positions will receive a pay raise to maintain the exemption and which positions will be reclassified as non-exempt.
  • Consider whether your bonus and incentive pay arrangements qualify for meeting the salary threshold, or whether they could be tweaked to qualify.
  • Train reclassified non-exempt employees in accurate timekeeping and address expectations regarding responding to emails, text messages, and phone calls after work hours.
  • Review and update your overtime and timekeeping policies.
  • Communicate all policy changes to your employees.

The National Labor Relations Board (the “Board” or “NLRB”) has issued notice that it will propose a new rule establishing that students who perform any services for compensation, including, but not limited to, teaching or research, at a private college or university in connection with their studies are not “employees” within the meaning of Section 2(3) of the National Labor Relations Act (the “Act”). The Board’s decision has potential for significant impact on the status of graduate student unions currently recognized at multiple private universities, as well groups seeking to organize. The Board’s new rule hopes to bring stability to a particular approach that has been reversed three times since 2000, while seeking to clarify that the Act only extends to relationships which are primarily economic in nature, and does not cover relationships which are essentially educational.

Student collective bargaining rights have been heavily debated for the past two decades, continually changing with the tides of each presidential administration. In 2000, the Board initially granted student workers at private universities the right to collectively bargain, ruling that those students were “employees” for purposes of the Act. In 2004, the Bush Administration Board changed course, stripping private university student workers of that right, indicating that student workers were not employees. In 2016 the Board changed course once again, ruling that graduate research students did have the right the collectively bargain. The 2016 ruling gave rise to several graduate student unions at private universities across the country. The new proposed rule will change the Board’s stance once again, but will make yet another reversal more difficult, since rule making will be required, rather than a decision in a case.

It is unclear whether this might presage future developments in other areas, particularly in regards to student athletes. In the past few years the Northwestern Football team attempted to organize; however, the Board rejected their petition holding they are not employees for purposes of the Act. We will keep you posted of any significant developments during the rule making phase.

Under a new rule being advanced by the U.S. Department of Labor, applicants for unemployment benefits may soon have to pass a drug test in order to receive benefits. The rule, which has been a source of significant controversy, recently moved closer to becoming a reality when the DOL sent it to the federal budget oversight office for final approval.

President Trump has expressed support for the DOL’s proposed rule, which would allow states to deny unemployment benefits to applicants who test positive for the use of controlled substances. The rule would not apply to all applicants, but instead just to applicants whose only suitable work is in an occupation that regularly conducts drug testing.

Opponents of the rule cite privacy issues and argue that the rule is not necessary and will disproportionately impact historically disadvantaged groups. Opponents have promised to pursue legal challenges if the rule is implemented.