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.

In a recent decision handed down by the 6th Circuit Court of Appeals, Mosby-Meachem v. Memphis Light, Gas & Water Division, No. 17-5483 (6th Cir. 2018), the Court held that in certain circumstances telecommuting may constitute a reasonable accommodation.

Andrea Mosby-Meachem was hired by Memphis Light in 2005 as an in-house labor, employment and workers’ compensation attorney. In 2011, the General Counsel for Memphis Light issued a written policy, which stated her expectations that her staff members were to work in the office. The Company, however, did not have a formal, written policy regarding telecommuting, some employees often telecommuted, and in 2012 Mosby-Meachem was allowed to work from home for two weeks while recovering from neck surgery.

In early January 2013, Mosby-Meachem was in her 23rd week of pregnancy when her doctor ordered her on 10-weeks of bed rest. She requested to work from home, but approximately three weeks later an ADA committee formed by Memphis Light denied her request on the basis that her physical presence in the office was an essential job function, and because of concerns regarding the confidentiality of her work. Significantly, Mosby-Meachem worked from home while her request was being considered and until it was denied, as no one from Memphis Light told her to stop working.

Mosby-Meachem brought claims of pregnancy discrimination under Tennessee law, and failure to accommodate and retaliation under the Americans with Disabilities Act. Memphis Light’s motion for summary judgment was denied and a jury subsequently awarded Mosby-Mecheam $92,000 in compensatory damages for disability discrimination, but it denied her claims of pregnancy discrimination and retaliation. The trial court also awarded her $18,184.32 in back pay.

On appeal, the 6th Circuit noted that determining essential job functions was highly fact specific, and that while Memphis Light had produced several pieces of evidence to support the need for in-person attendance, Mosby-Meachem had demonstrated that she could and had performed the essential functions of her job remotely, that Memphis Light’s job description was 20-years old and did not reflect changes in technology, and that Memphis Light had not engaged in the interactive process regarding Mosby-Meachem’s accommodation request. The 6th Circuit accordingly affirmed the jury’s verdict. In upholding the verdict, the 6th Circuit found that the case was distinguishable from prior precedent (Williams v. AT&T Mobility Services, LLC, No. 16-6078 (6th Cir. 2017) and EEOC v. Ford Motor Company, No. 12-2484 (6th Cir. 2014), where plaintiffs either had requested to telecommute indefinitely, they had not previously telecommuted, or being in the workplace truly was an essential job function given the plaintiff’s performance issues or the need to be logged into a computer at the work place in order to receive customer telephone calls.

Some takeaways from this decision are that an employer needs to:

  • Review every accommodation request on an individualized, case-by-case basis;
  • Engage in the interactive process with the employee making the request;
  • Analyze the essential functions of the position in issue to determine if they can be (or have been) performed with the requested accommodation; and
  • Review and update job descriptions on a regular basis.

On March 7, 2018, the U.S. Court of Appeals for the Sixth Circuit determined in a landmark ruling that federal law protects transgender individuals from employment discrimination. The Sixth Circuit also determined that private employers cannot use their religious beliefs to justify discrimination against transgender individuals.

The Sixth Circuit’s decision case in the case of EEOC v. R.G. &. G.R. Harris Funeral Homes involved Aimee Stephens, who was born biologically male, and who was working as a funeral director. After working for some time, Aimee told the company’s owner of plans to transition to female and to begin dressing as a woman at work due to a gender identity disorder. The owner then fired Aimee on the basis that “he was no longer going to represent himself as a man.” The owner further explained that he disapproved of gender transition as part of his sincerely held religious beliefs because it “violat[es] God’s commands.”

Aimee filed a complaint with the U.S. Equal Employment Opportunity Commission (EEOC) to challenge the termination on the basis that it amounted to unlawful sex discrimination under Title VII of the Civil Rights Act of 1964 (Title VII). The EEOC sued the company, and a district court in Michigan ruled that the company had engaged in sex discrimination against Aimee because the termination was based on unlawful sex stereotypes.  The district court further ruled that the company nonetheless legally terminated Aimee because a federal law called the Religious Freedom Restoration Act (RFRA) permits private employers to discriminate against workers when their personal religious beliefs compel them to do so.

The case went to the Sixth Circuit on appeal, where the Court held unequivocally that Title VII does protect transgender individuals from employment discrimination. As a result, the company’s decision to terminate Aimee due to Aimee’s transgender status and plans to transition did amount to illegal sex discrimination. The court explained that discrimination based on transgender status improperly punishes an employee based on sex stereotyping, or failing to confirm to gender norms. The court rejected the company’s argument that transgender discrimination is not sex-based discrimination and explained that it is analytically impossible to fire an employee based on transgender status without taking the employee’s sex into account.

After resolving the first issue, the Sixth Circuit turned to the issue of whether the company could justify its discrimination against Aimee by pointing to the owner’s religious beliefs. This was significant because the Sixth Circuit was the first federal court of appeals to address the religious defense in a case of this nature. The Sixth Circuit evaluated all of the issues and ruled that the owner’s religious beliefs did not provide a defense and therefore did not excuse Aimee’s discriminatory termination. The Sixth Circuit rejected the company’s argument that Aimee’s presence as a transgender individual would create a distraction for the company’s customers and explained that this argument was based on assumptions about the customers’ “presumed biases” and it was therefore inadequate. The Sixth Circuit also rejected the company’s argument that employing Aimee would substantially burden the owner’s religious practices, since merely employing Aimee was not tantamount to supporting Aimee’s sex or gender identity.

These issues are sure to spark further debate and litigation, especially in light of statements made by Attorney General Jeff Sessions and others in the administration and the legislature. We will continue to monitor the developments.

Thanks to a recent federal appellate court decision, OSHA now has even more leeway to issue costly repeat citations to employers. As many employers know, there are different classifications for civil violations of OSHA regulations, including other-than-serious, serious, repeat, and willful. Penalties, both monetary and non-monetary, increase with higher classification levels. OSHA recently increased the maximum penalty for repeat violations to $129,336, and additional increases to the maximum penalty are expected. Click here to read the full client alert.

On Monday, the NLRB unanimously vacated its December 2017 Hy-Brand Industrial Contractors decision, marking yet another abrupt reversal in the method for determining whether two employers can be held jointly liable for violations of labor and employment laws committed by either employer. In doing so, the Board effectively reinstated its 2015 Browning-Ferris Industries (“BFI”) decision, meaning that two businesses are joint employers when one has “indirect” or “reserved’ control over the other’s workers. Click here to read the full client alert.

Employers should take note that on April 1, 2018 more rigorous Department of Labor (“DOL”) regulations take effect governing the administration of benefit claims and ensuing appeals under ERISA plans providing disability benefits. (“ERISA” refers to the Employee Retirement Income Security Act of 1974, the federal law governing private sector employee benefit plans). These regulatory changes will have their most significant impact on private sector long-term disability plans. However, they will also affect those retirement plans (including 401(k) plans) that provide benefits upon disability. Short-term disability plans are generally not subject to these rules because they are typically exempt from ERISA as “payroll practices”. Click here to read the full client alert.

On January 4, 2018 the Department of Justice rescinded Obama-era guidance to United States Attorneys, including the 2013 memorandum issued by then-Deputy Attorney General James Cole, calling previous guidance “unnecessary” in light of general principles governing federal prosecutorial discretion. Up until this point, the 2013 Cole Memo was widely viewed as the biggest reason state-legal marijuana programs to flourished over the past 5 years, as it directed United States Attorneys to consider distinct federal enforcement priorities when deciding whether to utilize finite government resources to prosecute state-legal marijuana businesses or whether to rely on state and local law enforcement to address those concerns. Click here to read the full client alert.

The Employee Benefits Security Administration of the Department of Labor has just released for public consideration, and published for comment, a significant new interpretation of the term “employer” under ERISA. Under the proposal, small businesses and sole proprietors would have more freedom to band together to provide health coverage for employees in what are referred to as “Small Business Health Plans” or “Association Health Plans”.  The proposal would allow employers to form a Small Business Health Plan on the basis of geography or industry. A plan could serve employers in a state, city, county, or a multi-state metro area, or it could serve all the businesses in a particular industry nationwide.

Up until now, most association arrangements, such as Multiple Employer Welfare Arrangements (MEWAs), have been considered as a collection of individual employer plans, rather than a single plan. This meant that the plans were treated as being in the small employer group market or the large employer group market based on the number of participants in each employer’s workforce. The effect of the new interpretation would be to put all the employer populations together, so they would all be in (most commonly) either the large group market or, if the association decides to be self-insured, in the self-insured market.

In addition, the new interpretation would permit sole proprietors and partners to be treated as both employers, for certain purposes, and employees for the purpose of being able to participate in the Association Health Plan. In the past, “employee-less” groups were treated as not covered by ERISA. Now, entrepreneurs with zero employees can obtain coverage through the association, and business owners who are active in the business can obtain coverage alongside their employees.

A third major part of the new interpretation is a non-discrimination requirement. As currently envisioned, an association cannot discriminate against employers based upon any health characteristic of the employer’s workforce. Nor can the plan discriminate within an employer group based on health characteristics of any participant. However, the association can establish different rates for “non-health” characteristics, such as bargaining unit membership, beneficiary vs. participant status, retiree vs active status, full- vs. part-time status, and occupation. The specifics of what associations can do to “police” member employer conduct and how the association can encourage wellness initiatives will require additional interpretation.

The fourth major change from current interpretative guidance is that associations may be formed specifically for the purpose of having a benefit plan. Until now, an association had to have had a reason to exist apart from providing benefits, such as promoting the industry in which its members operate. The limitation is now that the association may be formed specifically to offer health plans if it offers them (1) within a state or (2) within a metropolitan area, even if the metropolitan area covers more than one state. The definition of the metropolitan area is one of the points as to which the DOL is seeking input.

As with all things ERISA, the new interpretation is complex and raises significant issues for small- and medium-sized employers who are not already self-insured. Interested parties now have 60 days to submit comments. Because the initiative for the new interpretation was an Executive Order, it is anticipated that the time from the close of comments to issuance of a final rule will be short. Employers would be well-advised to follow developments closely, submitting comments where appropriate and encouraging any associations to which they belong to weigh in.

Last week the National Labor Relations Board (“NLRB” or the “Board”) continued to correct its course to a more even balance between union and employer interests. It overturned four controversial decisions that had created a great deal of consternation and uncertainty in the employer community. Click here to read the full client alert.