With the position of its director finally filled (by Arthur F. Rosenfeld), the U.S. Department of Labor’s Office of Labor Management Standards (OLMS) is able to turn its attention to reviewing its rules and interpretations. While the main focus of attention at OLMS during the years of the Obama Administration was the “Persuader Rule” that would have imposed onerous reporting requirements upon both employers and law firms that advised employers about their legal rights during union organizing campaigns, OLMS also made other, less well-known changes. The Competitive Enterprise Institute, a free market think tank, has identified three items that it believes OLMS should address.

The first is the status of “Worker Centers” as labor organizations. In many cases, Worker Centers are set up and financed, and sometimes staffed, by recognized unions. The reason for doing so is to avoid various requirements or restrictions that are imposed upon unions. These Worker Centers are set up as not for profit organizations and engage in picketing, pro-union educational campaigns, advocacy and other forms of pressure upon employers and public officials. By avoiding characterization as labor organizations, they escape the reporting and disclosure requirements of the Labor Management Reporting and Disclosure Act of 1959, as amended (the LMDRA).  As described in an analysis by the U.S. Chamber of Commerce, the Obama Administration took a very narrow view of the definition of “labor organization” which has allowed these Worker Centers to operate without regulation or disclosure of their funding and expenditures. CEI has recommended clarifying that Worker Centers existing to deal with employers in the interest of employees are subject to the LMDRA’s requirements.

Second, OLMS changed the LM-30 form, which unions must file, to eliminate a number of financial disclosures, including union work paid by employers, credit union transactions, and payments to union officials from union benefit trusts. CEI recommends reinstating the 2007 version of the LM-30 form.

Third, in 2010, OLMS issued a rule rescinding the requirement that unions file form T-1, the Trust Annual Report, which disclosed what union trusts spent their money on. These trusts are set up to funds things like apprenticeship training programs. Sometimes, they are used to fund improper activities, such as payments for personal expenses of union officials. Form T-1 is a tool that could protect union members from having their benefit trust funds used for improper purposes, so CEI recommends its reinstatement.

Whether OLMS will act on these recommendations remains to be seen. The Worker Center issue can be handled as a matter of guidance, which would not require formal rulemaking. Additionally, Worker Centers are extremely irritating to many business organizations, such as those in the restaurant industry and the cleaning/janitorial industry, so correction of the Obama interpretation may be an early focus.

In one of the most significant labor decisions in decades, the Supreme Court today held in Janus v. AFSCME that public sector workers cannot be forced, over their first amendment objections, to pay dues or fees to a union as a condition of employment. The implications for organized labor, in both the public sector and private sector, are significant. For example, the HR Policy Association reported that a recent survey by AFSCME of its 1.6 million members found that only 35% of those members would definitely pay dues if not required to do so. There is little question that union treasuries will be negatively impacted by this decision. This, in turn, may impact the ability of unions to continue to organize and represent employees in both the public and private sector.

Public sector union dues and agency fees are currently a major source of political contributions to candidates who favor union positions. If Janus forces unions to spend their funds on representation activities instead of political donations, the power of unions in Washington, state capitals and city halls will be diminished.

Several international unions, including the Service Employees International Union and AFSCME, have been active in both their public and private sector negotiations in trying to plan for a future that would involve the decision rendered by the Supreme Court today. The SEIU, for example, has proposed in numerous negotiations that work previously done on-site by paid union representatives would now be coordinated and centralized out of the International Union’s offices to eliminate the need for SEIU representation to attend meetings on site at each of their organized facilities. Both unions also have preemptively sought “recommitments” from their membership related to their financial support for their union.

The Janus decision could allow for an estimated 5 million government workers in twenty-two states to stop paying agency fees, the portion of union revenue that funds collective bargaining. Twenty-eight states previously passed “right to work” laws, which allow workers to avoid paying even the agency fees. It is certainly possible that the Janus decision will further embolden efforts in the non-right to work states to propose legislation to further limit the ability of unions to require union security provisions that would provide for the payment of dues or agency fees.

While implications of the decision will play out over the next several years, it is certainly a body blow to organized labor that will impact not only the public sector but private sector as well.  Employers should expect immediate complications in all negotiations, as unions seek to deal with a significant loss of revenues.

In a memorandum issued last week, NLRB General Counsel Peter Robb offered important guidance on how his office plans to prosecute claims of unlawful workplace rules in the wake of the Board’s restorative Boeing decision (365 NLRB No. 154 (Dec. 14, 2017)). As we discussed here last December, the Boeing decision created a sensible standard for determining the lawfulness of work rules. This was a welcome change for employers, given the flurry of handbook-related activity under the Obama-era Board. Unfortunately, though, Boeing gave little guidance on how to actually implement the new standard. Mr. Robb’s memo adds some clarity. Recall that Boeing established three different categories for evaluating employer work rules:  (1) rules that are generally lawful (known as “Category 1” rules); 2) rules that merit a case-by-case determination (“Category 2” rules); and (3) rules that are plainly unlawful (“Category 3” rules). Click here to read the full client alert.

On June 8th, New Hampshire Governor Christopher Sununu signed into law H.B. 1319, which prohibits discrimination based on gender identity in employment, housing, and public accommodations. H.B. 1319 defines gender identity as “a person’s gender-related identity, appearance, or behavior, whether or not that gender-related identity, appearance, or behavior is different from that traditionally associated with the person’s physiology or assigned sex at birth.” The bill amends the state’s anti-discrimination law to add gender identity to the already existing protections against discrimination based on age, sex, race, religion, color, marital status, familial status, physical or mental disability, or national origin. The law will take effect July 8.

Although the statutory language in Ohio law and Title VII does not expressly prohibit gender identity employment discrimination, employers should be aware of the changing legal landscape regarding gender identity as a protected class. New Hampshire has joined California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, and Washington, and Washington, D.C., in protecting gender identity.  Additionally, the Sixth Circuit has interpreted Title VII to protect transgender individuals from employment discrimination. Based on the increasing protections for transgender employees nationwide, employers should consider reviewing and updating their anti-discrimination and anti-harassment policies.

In a 7-2 decision yesterday, the U.S. Supreme Court issued a ruling in favor of a Colorado baker who refused to bake a custom wedding cake for a same-sex couple based on his devout Christian beliefs. Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission, No. 16-111 (June 4, 2018). Although the case received heightened media coverage because of potential equal protection and public accommodation repercussions, the Court’s decision largely avoided the constitutional question of whether the First Amendment’s free exercise and free expression clauses protected the baker’s right to deny services to same-sex couples. The majority (comprised of Justices Roberts, Kennedy, Breyer, Alito, Kagan and Gorsuch) focused, instead, on the Colorado Civil Rights Commission’s failure to provide the baker with religious neutrality and due process during its adjudication process.

The dispute began when Charlie Craig and David Mullins, a same-sex couple, came into Jack Phillips’ cake shop with Craig’s mother Deb to order a wedding cake. Phillips refused to create a custom cake for the couple, citing his religious beliefs. The couple filed a Complaint with the Colorado Civil Rights Commission, which concluded that Phillips violated the Colorado Anti-Discrimination Act and that the First Amended did not permit Phillips to refuse his services to the couple. Phillips argued that the Commissions’ decision, as well as the subsequent state court Order affirming the ruling, violated Phillips’ First Amendment protections.

Justine Kennedy, once again a critical voice and vote in what could have been a politically fractured outcome, wrote for the majority, focusing largely on the religious bias demonstrated by the Commission against Phillips: “The Commission’s hostility was inconsistent with the First Amendment’s guarantee that our laws be applied in a manner that is neutral toward religions. Phillips was entitled to a neutral decision-maker who would give full and fair consideration to his religious objection as he sought to assert it in all of the circumstances in which this case was presented, considered, and decided.” Justice Kennedy also reiterated, however, that “Our society has come to the recognition that gay persons and gay couples cannot be treated as social outcasts or as inferior in dignity and worth. For that reason the laws and the Constitution can, and in some instances must, protect them in the exercise of their civil rights. The exercise of their freedom on terms equal to others must be given great weight and respect by the courts.” The Court underscored the delicate and balanced approach that must be taken by future courts in deciding these core constitutional questions: “The outcome of cases like this in other circumstances must await further elaboration in the courts, all in the context of recognizing that these disputes must be resolved with tolerance, without undue disrespect to sincere religious beliefs, and without subjecting gay persons to indignities when they seek goods and services in an open market.”

The takeaway for employers, whether places of public accommodation or not, is that non-discrimination obligations remain intact after this decision.

The Board of the Ohio Bureau of Workers Compensation at its meeting today approved an 85% premium rebate of the workers compensation premiums paid for the year ending June 30, 2017 for private sector employers and calendar year 2016 for public employers. Checks should go out to the eligible employers over several weeks in July, 2018. There may be some steps employers should take to ensure that they are eligible for the checks. Employers must pay any overdue premium amounts and send in outstanding payroll reports before June 8, 2018. Current contact information should be verified, so the checks go to the proper location. The justification for the rebate is good investment returns, falling claims, and prudent fiscal management. Once again, this demonstrates the concrete benefits to employers’ pocketbooks of controlling injuries and defending claims.

An Ohio court of appeals last week confirmed that a primary benefit of using staffing companies – the staffing company’s payment of workers’ compensation premiums covering the loaned employees – shields both the staffing company and its customer from workplace negligence claims.

Ohio’s Eighth District Court of Appeals, in Thomas v. PSC Metals, 2018-Ohio-1630 (8th Dist. Ct. App., Apr. 26, 2018), found that an employee who was on loan to PSC Metals from a staffing company could not sue PSC for negligence because the employee was covered by the workers’ compensation insurance policy obtained by the staffing company. (The employee had originally sued the staffing company as well, but dismissed those claims.) The employee argued that because he was an employee of the staffing company, and the staffing company (not PSC) had paid the premiums for the workers’ compensation insurance policy, only the staffing company was shielded from negligence claims under Ohio’s workers’ compensation immunity statute. The court of appeals disagreed, affirming summary judgment in favor of PSC.

The court first found that, even though the employee was on the staffing company’s payroll, he was also an employee of PSC because an “employee may have more than one employer for purposes of workers’ compensation immunity.” Even though the staffing contract specified that PSC was not the employer, PSC’s right of control over the manner and means of the employee’s work made it an employer for purposes of immunity.

Second, the court found that PSC had complied with its obligations to provide workers’ compensation coverage to the employee by virtue of the policy purchased by the staffing company. The court rejected the employee’s argument that only the staffing company had immunity because it – not PSC – had paid the policy premiums. It found that, for purposes of immunity, it does not matter whether the staffing company or customer pays the premiums, as long as someone does so. Further, it noted that PSC did pay the premiums, indirectly, through the fees it paid to the staffing company.

This case highlights the advantages provided by the increased use of staffing companies, and the importance of ensuring that the contract between the staffing company and its customer adequately manages the risks and potential liability of the parties. For more information on how to manage these issues, please contact one of Frantz Ward LLP’s Staffing Industry attorneys.

On April 12, 2018, the Wage and Hour Division (WHD) of the Department of Labor reinstituted its practice of issuing opinion letters, providing the Agency’s interpretation of discrete issues under the Fair Labor Standards Act. The Obama administration had suspended the longstanding practice nearly a decade ago. Two of the opinion letters issued on April 12 address issues of compensability, including the compensability of short work breaks taken by employees for health-related reasons under the FMLA, and for certain time spent traveling for work.

A. Short Breaks Under the FMLA Are Not Compensable

In Opinion Letter FLSA 2018-19, the WHD addressed the question of whether a non-exempt employee’s 15-minute rest breaks, certified by a physician as necessary under the FMLA for a serious health condition, are compensable. The factual scenario considered by the WHD involved an employee who required a 15-minute break every hour, resulting in the employee’s only working six hours during an eight hour shift.

The Opinion Letter explained that the U.S. Supreme Court previously has ruled that the compensability of an employee’s time depends on “[w]hether [it] is spent predominantly for the employer’s benefit or for the employee’s.” Generally, courts applying this rule have found that short rest breaks of up to 20 minutes are compensable, as they primarily benefit the employer by providing a more efficient and re-energized employee.

The WHD explained that the breaks in question here differed, however, as they were provided to accommodate the employee’s serious health condition. Accordingly, the Opinion Letter concluded that the FMLA-protected breaks predominantly benefited the employee and, therefore, were not compensable.

Finally, the WHD warned that employers should be careful to provide employees who take FMLA-protected breaks with as many compensable rest breaks as their co-workers. In other words, employers should not penalize employees who utilize breaks for FMLA-related reasons with fewer paid breaks.

B. The Compensability of Travel Time Depends on the Circumstances

In Opinion Letter FLSA 2018-18, the WHD examined three separate scenarios involving the travel time of hourly technicians who do not work set schedules or at fixed locations, but rather work varying hours and at different customer locations each day.

In Scenario 1, the WHD addressed the compensability of a technician’s travel by plane on a Sunday from his home state to a different state in order to attend a training class beginning at 8:00 a.m. on Monday at his employer’s corporate office. The WHD explained that such travel away from the employee’s home community constitutes worktime when it cuts across the employee’s regular working hours, even on a non-work day like Sunday. Thus a “9 to 5” employee would need to be paid for any such travel time on Sunday between those hours. Because the scenario presented involved an employee with an irregular schedule, however, the WHD provided various alternative methods for calculating the “normal” work hours for employees who do not work a regular, set schedule. These included: reviewing the employee’s time records during the most recent month to determine if they reveal “typical work hours” during that month; calculating average start and end times during the most recent month; and, in rare cases in which an employee truly has no normal work hours, negotiating with the employee to determine a reasonable amount of compensable time for travel away from the employee’s home community.

Scenarios 2 and 3 addressed travel by technicians: 1) from home to the office in order to get job itineraries, followed by subsequent travel to customer locations; and 2) directly from home to multiple different customer locations. The WHD explained that both scenarios dealt largely with ordinary commutes to and from work. In both instances, whether traveling from home to the office or from home to the first customer location, “compensable work time generally does not include time spent commuting between home and work, even when the employee works at different job sites.” Of course, once the employee has arrived at his or her first job site, all subsequent travel between job sites is compensable.

The issuance of these opinion letters is a promising development for employers. It would appear to indicate that the WHD is seeking to provide employers with clarity regarding difficult issues under the FLSA and proactively assist them in complying with the law.

On Friday, Target agreed to pay $3.74 million and review its policies for screening job applicants to settle Carnella Times et al. v. Target Corp., a class action in the Southern District of New York challenging the company’s use of background checks. The suit claimed that Target’s use of criminal background checks violated Title VII by disproportionally excluding Black and Hispanic applicants from obtaining employment.

Data demonstrates that certain minority populations—principally, Black and Hispanic males—are arrested and convicted at higher rates than their representation in society. The EEOC’s Enforcement Guidance on the issue states that an employer’s facially neutral policy or practice excluding applicants from employment that adversely affects a disproportionate number of members of a protected class, without a substantial business justification may give rise to a disparate impact discrimination claim under Title VII.

Target has been praised over recent years as being one of the largest national employers to take a proactive approach to “Ban the Box,” a legislative movement designed to provide greater employment opportunities to job applicants with criminal histories by delaying inquiries into an employee’s criminal history until later in the hiring process. In 2013 Target removed questions about applicant criminal history from all of its employment applications.

However, it seems that simply removing criminal history inquiries from its job applications was not enough to insulate Target’s hiring process from a disparate impact claim. The complaint alleged that after Target extends a conditional offer of employment to an applicant a third-party vendor conducts a criminal background check on the applicant. The results of the criminal background check are then compared to Target’s hiring guidelines, which screen out applicants who have been convicted of certain crimes involving violence, theft, or controlled substances in the seven years prior to the application.  Although Target followed several best practices, such as conducting a background check after a conditional offer of employment and utilizing a neutral third-party vendor, the Complaint alleged that Target’s hiring guidelines are not job-related or consistent with business necessity for hourly, entry level jobs such as food service workers, stockers, cashiers, and cart attendants.

Under the settlement agreement, Target will provide class members with hourly, entry level jobs at Target stores through a priority hiring process. Class members not eligible for priority hiring may be eligible to receive a monetary award in lieu of employment. Second, Target will engage independent consultants to revise and validate Target’s hiring guidelines to remedy the hiring practices at issue in the suit. Finally, Target also agreed to make a financial contribution to nonprofits that provide re-entry support to individuals with criminal history records.

Target’s settlement illustrates that removing criminal history inquiries from applications may not be enough to protect employers from litigation. The settlement is a reminder to all employers to reevaluate hiring practices to stay in line with the EEOC’s guidance. Although the EEOC does not prohibit consideration of criminal history, employers who have a policy that excludes applicants based on criminal history should evaluate whether the exclusion is appropriate for all job positions. According to the EEOC, in order for an employer to demonstrate that its criminal history exclusion is job related and consistent with business necessity, the employer must “show that the policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position.”

Accordingly, employers should look at each position’s job duties, work environment, and potential exposure to certain types of customers to determine whether the applicant’s criminal history is really an issue.  A simple evaluation of job positions can ensure compliance with Title VII and EEOC guidance and keep the focus on hiring good employees, not fighting unnecessary litigation.

In a 5-4 decision, the Supreme Court on Monday held in Encino Motorcars, LLC v. Navarro, et al., that current and former service advisors in a car dealership were not entitled to overtime under the Fair Labor Standards Act. The Court ruled that the service advisors were exempt from overtime under 29 U.S.C. §2113(b)(10)(A), which applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements. . .”

The service advisors claimed that while their job description required them to attempt to sell additional services beyond what prompted the customers’ visits, they did not sell cars or perform repairs. The majority of the Supreme Court disagreed with the service advisors and stated that the question is whether service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles.”  The Court concluded that they were. Much of the majority opinion and the dissent focused on the grammatical interpretation of the use of “or” to disjoin three types of employees doing two types of work on three kinds of products. The majority found that the language meant that a salesman primarily engaged in servicing automobiles was exempt, while the dissent argued that a salesman had to be engaged only in selling automobiles to qualify.

The service advisors also argued that the FLSA exemptions should be construed narrowly. The Supreme Court also rejected this argument because, according to the majority, the FLSA gives no “textual indication” that its exemptions should be construed narrowly and that there was no reason to give them “anything other than a fair (rather than a ‘narrow’) interpretation.” Notably, the Court stated that exemptions contained in the FLSA are to be construed just the same as the basic protections in the Act, noting that exceptions are often the price paid to have the law passed in the first place.

This is the second time this case has been before the Supreme Court.  In 2011, the Department of Labor issued a rule that interpreted “salesmen” to exclude service advisors, and the Ninth Circuit deferred to that administrative determination. In 2016, the Supreme Court, in its prior Encino Motorcars’ decision, held that courts should not defer to that rule because it was procedurally defective. The Supreme Court remanded the case back to the Ninth Circuit Court of Appeals to address whether service advisors are exempt. The Court of Appeals for the Ninth Circuit held on remand that service advisors were exempt without regard to the 2011 interpretation and that decision was reversed by the Supreme Court on April 2.