Last week, the Labor Department’s Office of Federal Contract Compliance Programs (OFCCP) published a proposed new rule broadening the religious exemption to its equal employment opportunity regulations. The proposed rule is based on OFCCP’s stated perception that religious organizations are “reluctant to participate as federal contractors because of uncertainty regarding the scope of the religious exemption.” LGBTQ advocates are lambasting the move by the Trump Administration as a deliberate attempt to engage in taxpayer-funded discrimination.

The rule proposes the following noteworthy “clarifications”:

  • The exemption will apply not just to churches, but to “employers that are organized for a religious purpose, hold themselves out to the public as carrying out a religious purpose, and engage in exercise of religion consistent with, and in furtherance of, a religious purpose;”
  • Federal contractor religious entities can “condition employment on acceptance of or adherence to religious tenets without sanction by the federal government, provided that they do not discriminate based on other protected bases”
  • In assessing discrimination claims alleged by OFCCP against religious organizations based on protected traits other than religion, OFCCP must find by “a preponderance of the evidence that a protected characteristic was a but-for cause of the adverse action”

The proposed rule, however, does not exempt federal contractors from adhering to affirmative action requirements or to state and local laws that: 1) specifically include gender identity and sexual orientation as protected characteristics; and 2) do not have equally broad religious exemptions.

This OFCCP directive is the latest in a series of actions taken by the Trump administration to expand “religious freedom.”  In October, the United States Supreme Court will hear oral arguments in three cases – Bostock v. Clayton County, Georgia; Altitude Express, Inc. v. Zarda; and R.G. & G.R. Harris Funeral Homes Inc. v. EEOC – that will address whether Title VII bans sexual orientation discrimination and discrimination based on gender identity. The Trump administration is arguing in these cases that federal civil rights laws do not prohibit employers from discriminating against LGBTQ workers.

The OFCCP will accept public comments on the rule for 30 days, until September 16, 2019.  Many LGBTQ advocates have said they expect a slew of legal challenges if the rule is enacted.

Recently, a Federal District Court in the Middle District of Tennessee held, in Marie Hastings v. First Community Mortgage, that a female former Human Resource Director’s claim of sex discrimination was not established simply by the fact that she had been excluded from a social group of male executives, even though she alleged in her complaint that company decisions were made at these social meetings without any input from females.

According to the plaintiff, male executives of the company attended luncheons and socialized amongst themselves without her. She further alleged in the complaint that company business was discussed during these meetings and that this “club” was referred to throughout the company by the name of a male anatomical part.

The Court held that not being invited to lunch with male managers might be “dispiriting and frustrating” to her, but that fact alone could not support a claim of sex discrimination. According to the Court, such action did not rise to the level of “adverse employment action” ‒ a necessary element to prove sex discrimination.

In supporting its decision to dismiss the ex-employee’s claim of sex discrimination, the Court noted that the club was not a formal club with attributes like membership and meetings and that it was not a sanctioned club by the employer. The Court also noted that the ex-employee testified that she did not know how the group got its crude name or whether the male executives actually used that name.  Importantly, the Court also found that the ex-employee did not know, in fact, whether company business was ever discussed at its “meetings”.

In recent years, claims of unconscious bias have become more prevalent. Unconscious bias can occur when people gravitate to those with whom they have similar traits, characteristics and/or interests. In the First Community Mortgage case, male executives may have socialized with other male executives to the exclusion of the female Human Resource Director because of unconscious bias. This can open up employers to claims, which are costly to defend. As the First Community Mortgage case highlights, however, unconscious bias by itself will not support claims of discrimination but rather an employee must still show with admissible evidence that such bias resulted in some real adverse employment action.

As previously reported in the Labor & Employment Law Navigator, the Wage and Hour Division (WHD) of the Department of Labor reinstituted its practice of issuing opinion letters in April of last year. Recently issued opinion letters continue to provide helpful guidance for employers on a number of wage and hour issues.

Certain Paralegals May Be Properly Classified As Exempt

In Opinion Letter FLSA 2019-8, the WHD addressed the issue of whether paralegals employed by a trade organization and paid an annual salary of more than $100,000 can be properly classified as exempt from the FLSA’s minimum wage and overtime requirements. The WHD determined that the paralegals were, in fact, exempt under the lesser-known “highly compensated” employee exemption. The exemption requires that:

  1. The employee earns total annual compensation of at least $100,000, which includes at least $455 per week paid on a salary basis
  2. The employee’s primary duty includes performing office or non-manual work
  3. The employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee (the so-called “white collar” exemptions).

29 C.F.R. § 541.601. The WHD explained that, unlike the other white-collar exemptions, the highly compensated worker exemption does not require as detailed of an analysis of an employee’s job duties, as their high level of compensation provides a “strong indicator” of exempt status.

Here, the WHD noted that the paralegals “customarily and regularly” performed at least one of the duties of an administrative exempt employee. Because the employees were highly compensated, however, they did not need to meet the administrative exemption’s more stringent duties test, requiring that an employee “primarily” perform such duties involving the exercise of discretion and independent judgment.

The Opinion Letter provides a helpful reminder for employers to consider the highly compensated worker exemption for all employees earning more than $100,000 annually.  Use of this exemption will allow the application of the relaxed duties test.

Permissible Rounding Practices For Hours Of Work

In Opinion Letter FLSA 2019-9, the WHD addressed a non-profit organization’s question regarding its payroll software’s rounding practices for nonexempt employees under the Service Contract Act, which follows the principles of the FLSA. The WHD explained that it is acceptable for employers to round employees’ hours, so long as calculations “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” In other words, an employer’s rounding practices cannot have the effect of working to the employer’s advantage financially or to the employees’ disadvantage (e.g., always rounding down).  The WHD noted that it has been its practice to allow rounding “as long as the rounding averages out so that the employees are compensated for all the time they actually worked.” In this instance, the WHD approved the employer’s computer rounding practice because it was neutral on its face, and effectively averaged out so that employees were paid for all the time that they worked.

The Opinion Letter provides important guidance for employers that round their non-exempt employees’ reported time.  Rounding practices should be reviewed to ensure that they are neutral and do not, over a period time, favor the employer. Unfair rounding practices that deprive employees of compensation expose employers to significant liability, whether through a DOL investigation or a collective/class action lawsuit.

Certain Time Spent By Truckers In Truck’s Sleeper Berth Not Compensable

In Opinion Letter FLSA 2019-10, the WHD addressed whether time spent by over-the-road truck drivers in their trucks’ sleeper berths constitutes compensable working time. In the example considered by the WHD, long-haul truck drivers spent considerable time over the course of multi-day trips in their trucks’ sleeper berths. The time spent in the sleeper berths did not, however, involve driving, inspecting, cleaning, fueling, completing paperwork, or other responsibilities of the drivers’ jobs.

In analyzing the issue, the WHD noted that its prior interpretations were “unnecessarily burdensome for employers” and complicated the issue. The WHD explained that it would adopt a “straightforward” approach, in which time that drivers are relieved of all duties and permitted to sleep in a berth is “presumptively” non-working time and not compensable. In finding the truckers’ time to be non-compensable here, the WHD focused upon the fact that they were relieved of all duties, even if the time was spent confined in the truck’s sleeper berth. The WHD noted that there could be a different result in situations where drivers are not completely off-duty and relieved of work responsibilities.

While the Opinion Letter addressed the working time of truck drivers, it provides guidance for determining hours worked for employees generally. In determining whether an employee’s time is compensable, employers must consider whether an employee is truly off-duty, and thus able to effectively use the time for his or her own purposes. If not, or if the employees perform tasks for the benefit of the employer, the time may be compensable. This issue can arise in many contexts, including when employees report to work early, spend their lunch breaks at their desks, or are required by the employer to be “on call.”

As many of our readers know, the employment realm is comprised of various state and federal laws, each with their own time limitations (or “statute of limitations”) within which a plaintiff must bring a claim. For many types of claims, however, the statute of limitations is not absolute: it can be shortened by a signed agreement from the employee, in an employment contract, an arbitration agreement, or even an employment application.

In a number of cases, employers have included in their employment applications language requiring employees to bring all claims arising out of the employment relationship within a certain time period—in some cases, as short as six months. Courts have repeatedly enforced these agreements. Thus, for example, while the statute of limitations for race and sex discrimination claims in Ohio is six years, employees who agree to bring such claims within six months may be barred from bringing certain discrimination lawsuits at a later time.

Notably, these contractual statute of limitations agreements are not enforceable as to all types of claims or in all jurisdictions. For example, courts generally have declined to enforce agreements to shorten limitations periods for claims under the Family and Medical Leave Act, the Fair Labor Standards Act, and the Equal Pay Act. Courts have also refused to shorten the 300-day period for filing EEOC charges. And outside of Ohio and the Sixth Circuit, some courts (such as the New Jersey Supreme Court) have refused on public policy grounds to enforce these agreements even as to discrimination claims.

Nevertheless, at least in Ohio, well-drafted agreements can provide employers with an important layer of added protection against many types of employment claims. To increase the likelihood of enforcement, these agreements should be written clearly and as simply as possible. They should also be placed in the applicable document in a conspicuous location. Finally, employers who operate in multiple jurisdictions should consider the extent to which the applicable courts would likely enforce the agreement.

 

Employers who pay for health benefits for their employees are painfully aware of the impact rising drug prices and drug utilization have on their plan costs. In May, the Trump Administration, through the Centers for Medicare and Medicaid Services (“CMS”), issued a new rule requiring drug companies, effective on July 9, 2019, to include wholesale or list prices in all ads for drugs where the monthly cost is likely to exceed $35.00. Although based upon the Medicare program, the rule would have affected all drug advertising, because it would have been impossible to avoid advertising to Medicare beneficiaries along with private plan participants. Thus, many employers looked favorably upon the rule as one step to rein in drug costs. Also supportive of the Trump Administration in this effort were the AARP, and Democrats in both Houses of Congress, along with many Republicans. Almost immediately, however, the rule was challenged by major drug companies, Amgen, Merck and Eli Lilly, plus the largest advertising association in the nation, the National Association of Advertisers.

The challenge was based on two major points: that the rule was an unconstitutional violation of the free speech rights of the advertisers; and that the rule was an unauthorized exercise of authority not delegated to CMS. On the eve of the rule’s effective date, Judge Amit Mehta of the D.C. Federal District Court blocked the rule, granting the plaintiffs an injunction. In doing so, he declined to use the constitutional issue as the basis for his ruling, instead finding that the Social Security Act had not given the administration the right to regulate television direct-to-consumer advertising. He pointed out that the rule might be a good one and might help control rising drug costs, but he could find nothing in the congressional delegation of authority that was broad enough to encompass mandating content in TV ads.

The department stated that it will be in consultation with the Justice Department as to next steps. For the immediate future, however, employers should not anticipate any additional transparency as to drug prices, and hence no optimism for knowledge-based reduction in demand for high-cost, minimally advantageous drugs from plan participants. Continued use of more blunt-force drug demand measures, such as use of formularies and pre-approvals will be necessary, even if they are not popular with plan participants. The other noteworthy upshot of this case is that, so far at least, bipartisan support of a Trump Administration initiative does not guarantee its survival in court. Judge Mehta’s reasoning seems consistent with both D.C Circuit and Supreme Court approaches to limits upon administrative agency authority. It remains to be seen whether Congress will be able to translate bipartisan support of the concept of mandated pricing advertising into legislation.

In Fort Bend County v. Davis, the U.S. Supreme Court ruled that the EEOC charge filing requirement under Title VII of the Civil Rights Act of 1964 is not a “jurisdictional” bar to litigation, but instead is a claim-processing rule subject to waiver if the defendant-employer fails to raise an affirmative defense at the appropriate point in the pleadings.

While Title VII requires individuals to file a charge with the EEOC (or the applicable state agency) and receive a right-to-sue letter before heading to federal court, the Court found that this is not a jurisdictional requirement to initiating a lawsuit. The result is that Federal Courts are not prohibited from hearing Title VII claims that did not begin at the EEOC. Rather, the pre-suit EEOC filing requirement is only a procedural requirement, a mandatory claim processing rule. This distinction is critical because procedural defenses, unlike jurisdictional defenses, must be raised early in the lawsuit – or they are waived. As such, Fort Bend tells us that Title VII claims filed in court, and not initially at EEOC, do not need to be outright dismissed on a jurisdictional basis anytime the court learns of the failure, even if late in the trial process. However, such cases may be dismissed at the early stages of the litigation if the defendant properly raises the procedural defense.

The major take-away from Fort Bend is that Employers looking to raise a failure to exhaust administrative remedies defense must do so timely, meaning almost always right at the start of the litigation, or risk waiving the defense. Employers should be sure to raise the defense of failure to file with the appropriate agency or failure to receive a right-to-sue letter whenever justified.

Several high-profile U.S. Senators have stepped forward in recent days to express their support for the expansion of federal anti-discrimination laws to provide protection from discrimination based on sexual orientation and gender identity. These supporters include Senators Cory Booker (D-N.J.), Bernie Sanders (I-Vt.), Kamala Harris (D-Calif.) and Kirsten Gillibrand (D-N.Y.).

This issue has been debated for years, but it took on increased significance just a few weeks ago when the U.S. House of Representatives passed the Equality Act by a significant, and predictably partisan, margin. The Equality Act is designed in part to amend several civil rights laws, including the Civil Rights Act of 1964, to protect individuals from workplace discrimination and harassment based on their sexual orientation and gender identity.

Some proponents of the Equality Act describe it as a common-sense way to further the ability of all persons to enjoy a workplace free from harassment and discrimination. In contrast, some opponents of the Equality Act argue that it would infringe on the First Amendment rights of employers to the free exercise of religion and of expression.

While the Equality Act is expected to face a significant challenge getting through the Republican-controlled Senate, it has the support of the U.S. Chamber of Commerce and numerous other politically powerful organizations. To move toward becoming a federal law, the Equality Act will first need to get out of the Senate Judiciary Committee, where it currently sits.

Even if the Equality Act does not become federal law under the current administration, the growing tide of similar state and local laws suggests that broader statutory protection from discrimination based on sexual orientation and gender identity is certainly on the horizon.

We will continue to monitor this issue closely.  If you have questions about this or other Labor and Employment issues, contact Brian Kelly or another member of the Frantz Ward Labor and Employment Practice Group.

If you have ever questioned why there are so many regulations pertaining to certification as a minority, woman and/or veteran owned small business or why the applications are so extensive and complicated, here is your answer.  Per a June 3rd press release from the U.S. Attorney’s Office for the Western District of Missouri, Topeka, Kansas based contractor, Matthew C. McPherson, has pled guilty to defrauding the federal government by bidding on and accepting payment for construction contracts set aside for small businesses and service-disabled veterans and minorities.

McPherson and his co-conspirators were accused of setting up what is referred to as a Rent-A-Vet, Rent-A-Minority or Small Business fraud scheme in order to abuse federal programs promulgated under the Veteran Entrepreneurship and Small Business Development Act of 1999 (the “SDVOSB” program) and Section 8(a) of the Small Business Act (the “8(a)” program) intended to provide opportunities to service-disabled veterans and certified minorities in federal government contracting.

Per the complaint, between September 2009 to March 2018, McPherson and his co-conspirators set up two separate construction companies, which they fraudulently represented to the federal government were owned and controlled by individuals who met the qualifications of the SDVOSB and/or 8(a) programs. These strawman owners, however, did not control the day-to-day operations or the long-term decision making of the companies. Rather, McPherson and his co-conspirators actually controlled and operated the companies and received most of the profits earned by the respective business entities.

Through this scheme, McPherson and his co-conspirators received a total of $346 million of contract proceeds through more than 200 federal set-aside construction contracts that were earmarked for service-disabled veterans and certified minorities. McPherson, who is neither a service-disabled veteran nor certified minority, was not entitled to compete for any of those contracts.

Under the governing federal sentencing statue, McPherson is subject to a sentence of up to five years in federal prison without parole and will have to forfeit more than $5.5 million in fraud proceeds. Thus, this contractor will be spending the next several years in prison because he let greed get the better of him.

What you should take away from this sad situation is that government entities are monitoring and policing these type of state and federal programs. Do not think that you are going to be able to wrongfully take advantage of these programs without consequences. Further, the statutory frameworks for minority, woman and/or service-veteran owned small business certification on the state or federal level are complex. Thus, it is in your best interest to consult an attorney familiar with these requirements while completing your applications to avoid violations.

Last week, the Ohio House of Representatives passed the proposed workers’ compensation budget for the next two years, but not before a controversial amendment was added at the last minute. The budget bill, or House Bill 80, was amended to require injured workers to identify themselves as either a U.S. citizen, non-citizen authorized worker, or an illegal or unauthorized alien when filing a workers’ compensation claim in Ohio. While the amendment does not go so far as to expressly prohibit illegal aliens from receiving workers’ compensation benefits, it does state that claimants who provide false information, including regarding their citizenship status, will be ineligible to receive such benefits and may be prosecuted for workers’ compensation fraud under Ohio law.

Support for the amendment is premised on the State’s interest in knowing who is using workers’ compensation benefits and how many undocumented illegal aliens are working here.  Proponents believe the collected data will be useful in making future law and policy decisions going forward.

Critics of the amendment, however, worry that its obvious chilling effect in discouraging injury claims from undocumented immigrants will result in other problematic and unintended consequences for Ohio citizens. Critics argue that the amendment actually creates incentive for employers to hire undocumented workers, as those workers will be less likely to file claims for any injuries at work out of fear of getting deported. Some opponents of the amendment have also taken that argument a step further, adding that it then allows employers who actually seek out undocumented workers to save money by cutting corners on safety measures. Another common concern for critics is the potential for undocumented injured workers to seek out medical treatment in emergency rooms without either health insurance or, due to this amendment, workers’ compensation coverage, resulting in unpaid medical bills and costs getting passed along to Ohio taxpayers and people with health insurance.

The amendment passed by a vote of 58 to 36 and the bill itself then passed by a vote of 56 to 38. The bill has now been introduced to the Ohio Senate, where it will go through a similar process as it did in the House of Representatives. The bill must be signed by June 30, 2019 in order to take effect for the new fiscal year.

On May 30, 2019, the Office of Labor-Management Standards (“OLMS”) within the U.S. Department of Labor issued a notice seeking comments on a proposed rule that would require labor organizations to submit annual financial reports for trusts in which the labor organization has an interest.

The OLMS oversees the financial disclosure statements required of labor organizations and employers under the Labor-Management Reporting and Disclosure Act (“LMRDA”), as well as investigates alleged wrongdoing.  As described in the recent notice, the purpose of the various reports required of labor unions is to, “empower labor organization members by providing them the means to maintain democratic control over their labor organizations and ensure a proper accounting of labor organization funds… By reviewing a labor organization’s financial reports, a member may ascertain the labor organization’s priorities and whether they are in accord with the member’s own priorities and those of fellow members.”

The proposed new rule is designed to provide union members and others with information relating to trust funds that unions have historically used for a variety of purposes, such as to fund apprenticeship programs, credit unions, strike funds, redevelopment or investment groups, training funds, building funds and educational funds.  The OLMS noted in its May 30 notice that, “While these trust funds can serve valid purposes, they can also be used to circumvent the reporting requirements for labor organizations.”

Accordingly, the proposed rule would establish a “Form T-1”, which a labor organization would have to complete if a majority of the trust’s governing board were selected or appointed by the labor organization, or if the labor organization contributed more than 50% of the trust’s funds.  Information required by the T-1 includes loans made to officers or employees, details about disbursements, and the identification of people receiving more than $10,000 from the trust.

A similar rule was previously proposed on two prior occasions, and each time the rule was challenged by the AFL-CIO.  In the first instance, which occurred in 2005 during the administration of President George W. Bush, the D.C court of appeals found the rule overly broad, and a year later the same court vacated a revised rule on the basis that it had not been published and the public had not been given an opportunity to submit comments to the proposed rule.  It remains to be seen whether the AFL-CIO will challenge this newly proposed rule.

The public has until July 29, 2019 to submit comments to the proposed rule.