Employers beware: New Jersey’s salary history ban, signed this past summer, takes effect on January 1, 2020.  On that date, New Jersey will join several other states (including New York and California) by prohibiting private employers from inquiring about an applicant’s compensation history, including salary, wages, commissions, benefits and other compensation.

The law provides for a private right of action as well as civil penalties.  Employers who violate the law can be fined up to $1,000 for a first offense, $5,000 for a second offense, and $10,000 for each subsequent violation and face additional risk under the New Jersey Law Against Discrimination.

Although the prohibition is broad, employers are permitted to consider and/or request salary history in certain limited circumstances:

  • If the applicant, without employer prompting or coercion, voluntarily reveals their salary history;
  • If the applicant is applying for an internal transfer or promotion;
  • If the employer knows an applicant’s compensation history through the applicant’s prior employment with the employer;
  • Pursuant to any federal law or regulation requiring the disclosure or verification of salary history for employment purposes, or requiring knowledge of salary history to determine an employee’s compensation;
  • If the applicant gives written consent to a headhunting agency to share salary history with prospective employers.

In addition, the law does not prohibit employers from:

  • Asking about an applicant’s previous experience with incentive and commission plans and the terms and conditions of those plans, provided (i) the employer does not seek or require the applicant to report information about the amount of earnings in connection with the plans and (ii) the employment opening includes an incentive or commission component as part of the total compensation package;
  • Asking applicants about their salary expectations;
  • Attempting to verify disclosure of non-salary related information when conducting a background check provided that the employer specifies that salary history information should not be disclosed (and if that information is disclosed, the employer may not consider it);
  • Requesting written confirmation of an applicant’s salary history after making an offer to the applicant that includes an overall compensation package. The employer cannot then alter the compensation package once it learns of the applicant’s salary history.

To prepare for Jan. 1, New Jersey employers should train all individuals involved in the hiring process on the new salary history prohibitions.  Employers should also review their employment applications to ensure there are no questions about compensation history, or that common applications for multi-locational employers clearly instruct New Jersey applicants not to answer questions about salary history.

 

The filing of class actions against California employers for meal and rest break violations remain as prevalent as ever, but the California Courts of Appeal have recently issued two rulings that may help employer-defendants.

Under California law, employers are required, under most circumstances, to provide employees duty-free meal periods of at least 30 minutes and rest breaks of at least 10 minutes at prescribed intervals.  If they fail to do so, they must pay employees for one additional hour at their “regular rate of compensation.”  See Cal. Labor Code section 226.7.

But in two recent separate decisions, the Courts of Appeal narrowed the scope of damages available against employers for these types of claims.

In Ferra v. Loews Hollywood Hotel, LLC (App. Case No. B283218), the Court addressed the definition of “regular rate of compensation.”  The definition matters because prior holdings by California courts defining “regular rate of pay” in the overtime context held that employers must include nondiscretionary payments (e.g., shift differentials and nondiscretionary bonuses) in addition to the regular hourly wages in calculating overtime.

The plaintiffs in Ferra argued that the “regular rate of compensation” owed for missed meal breaks was the same as the “regular rate of pay,” and as a result, the company’s payment of one hour of regular hourly wages (which did not include nondiscretionary quarterly bonuses) was insufficient.  The Court of Appeal disagreed, holding that meal premiums need only consist of an hour of regular pay.  The employer was not required to include the nondiscretionary bonus amount in the premium.

Moreover, in a separate opinion, Naranjo v. Spectrum Security Services, Inc. (App. Case No. B256232), the Court of Appeal found that failure to pay break premiums cannot be used to trigger waiting time penalties under Labor Code section 203 or wage statement penalties under Labor Code section 226.  The Naranjo plaintiffs contended that the owed meal premiums were “wages” and should entitle them to collect on derivative claims.  The Court disagreed, holding that break premiums are not “wages” and accordingly, plaintiffs could not collect derivative wage statement or waiting time penalties.

The finding is significant because potential exposure for derivative penalties under sections 203 and 226 often dwarf those owed for the missed breaks themselves.  Section 203 imposes penalties of up to 30 days’ wages for failure to pay “any wage” upon separation of employment.  Similarly, Section 226 imposes a penalty of up to $4,000 per employee for wage statements that omit gross and net “wages earned.”

Both the Ferra and Naranjo rulings provide some much welcomed respite to employers facing meal and rest break violation claims in a jurisdiction often known for its derivative and stacking penalties.

Consistent with its intent to relax scrutiny regarding the legality of employment policies (see here and here), the National Labor Relations Board (“NLRB” or “Board”) recently upheld, in LA Specialty Produce Co., two workplace rules: A confidentiality policy and a rule prohibiting employees from responding to media inquiries. Applying its existing two-part balancing test, the Board proceeded to evaluate the lawfulness of the policies in question from the perspective of a “reasonable employee.” Under this approach, the Board will consider “the perspective of an objectively reasonable employee who is ‘aware of his legal rights but who also interprets work rules as they apply to the everydayness of his job.’” As such, if a reasonable employee would interpret a policy as not interfering with his or her rights under Section 7 of the National Labor Relations Act (“NLRA”), then it will be found lawful.

The first policy at issue in LA Specialty Produce was a confidentiality policy, which read: “Every employee is responsible for protecting any and all information that is used, acquired or added to regarding matters that are confidential and proprietary of [the employer] including but not limited to client/vendor lists.” The union challenged the policy, arguing that the confidentiality provision can be reasonably construed to restrict employees’ right to contact third parties, including customers of their employer, for support in labor disputes. However, the Board upheld the confidentiality policy on the grounds that it was instead intended to protect confidential and proprietary records, such as customer lists, which “target the protection of business information a company has developed over time” and “do[es] not target information central to the exercise of Section 7 rights, such as employee salary or wage information. Nor do they prohibit employees from appealing to customers or vendors for support in a labor dispute, or from disclosing the names and locations of customers or vendors derived from sources other than the employer’s own confidential records.”

The second policy in LA Specialty Produce was a media contact rule stating: “Employees approached for interview and/or comments by the news media cannot provide them with any information. Our President . . . is the only person authorized and designated to comment on Company policies.” The union challenged the policy on the premise that it precluded employees from speaking with the media about working conditions, labor disputes, and other terms and conditions of employment. The Board upheld the rule because, it stated, a “reasonable employee” would understand that the rule does not infringe on his or her NLRA rights—while the rule prohibits employees from speaking when “approached” by the media, it does not restrict employees from taking concerns to the press.

LA Specialty Produce Co. contributes to a growing body of NLRB decisions upholding workplace rules. Nevertheless, employers should continue to review their employee handbooks and any other policies in effect to ensure that they do not infringe upon their employees’ Section 7 rights. Though the current NLRB will not reverse course, it continues to scrutinize the business justifications for rules that restrict employee rights on their face, or which may restrict such rights through their breadth. Employers must also keep in mind the various other state and federal requirements that pertain to workplace policies. For more information on these topics, or any other legal issues affecting the workplace, contact the authors of this article or the Hogan Lovells lawyer with whom you work.

California Governor Gavin Newsom recently signed into law 15 bills designed to provide greater employee protections in California.  Among those bills were Assembly Bill 9 (“AB 9”) and Assembly Bill 51 (“AB 51”), both of which are aimed at protecting employees’ rights to litigate harassment, discrimination, and retaliation claims.

As we previously blogged about here, AB 9 increases the time limit for individuals to file a discrimination, harassment, or retaliation claim with the California Department of Fair Employment and Housing, effectively extending the practical statute of limitations for filing a lawsuit under FEHA to four years.

AB 51 may have even more significant ramifications.  AB 51 prohibits employers from requiring employees or potential employees to enter into arbitration agreements as a condition of employment.  More specifically, AB 51 provides that employees and applicants cannot be required to waive a right, forum, or procedure for a FEHA or Labor Code violation in exchange for employment or an employment-related benefit.  Additionally, employers may not threaten, retaliate, discriminate against, or terminate an applicant or an employee for refusal to consent to such waiver.

In 2018, Governor Jerry Brown previously vetoed a similar bill, Assembly Bill 3080 (“AB 3080”), stating that the bill “plainly violates federal law.”  While proponents of both AB 51 and AB 3080 promote the initiatives as bills consistent with and necessary in light of the #MeToo movement, opponents argue that the bills are preempted by the Federal Arbitration Act (“FAA”).  Specifically, several courts, including the United States Supreme Court, have confirmed on numerous occasions that the FAA preempts state laws when such laws contravene the FAA’s presumption in favor of enforcing arbitration agreements.

The authors of AB 51 likely anticipated this preemption argument by inserting a “savings clause”:  “Nothing in [AB 51] is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.”  Based on a plain reading, AB 51 would therefore not apply to any arbitration agreement enforceable and governed under the FAA, including arbitration agreements with class action waivers.  However, until AB 51 is challenged, there will exist some uncertainty as to how courts will interpret this provision.  As a result, employers should anticipate challenges to AB 51 almost immediately.

Irrespective of whether AB 51 is challenged and whether such challenges are successful, AB 51 will not invalidate existing arbitration agreements and will apply only to agreements entered into, modified, or extended as of January 1, 2020.  Employees who prevail under AB 51 may be awarded injunctive relief and, notably, attorneys’ fees, among other available remedies.

Employers should evaluate their arbitration agreements and internal policies in advance of January 1st, and continue to monitor developments in California’s most recent attempt to establish its own standards wholly different and apart from the rest of the United States.  The employment lawyers at Hogan Lovells are available to help navigate this change and others as the legal landscape continues to evolve.

The legal community paid close attention to the California Supreme Court’s 2018 Dynamex decision which adopted a strict test to curtail misclassification of workers as independent contractors. Now that the California legislature has codified and signed the Dynamex decision into law as Assembly Bill 5 (“AB 5”), both the national and legal press have sounded alarm bells about the law’s impact on the gig economy and its reliance on independent contractors.

Companies that conduct business in Massachusetts have long been familiar with the new California standard. Back in 2004, the Commonwealth amended the Massachusetts Independent Contractor Law (the “MICL”) to establish a presumption that workers are employees unless an employer demonstrates independent contractor status by satisfying each element of the following three-part ABC test:

  1. the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
  2. the service is performed outside the usual course of the business of the employer; and,
  3. the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. M.G.L. c. 149 §148A.

Failure by an employer to prove any one of these three prongs is enough to establish that a worker is an employee. For employers, meeting the second condition is the most difficult hurdle to climb to show that their workers should be classified as independent contractors.

Massachusetts maintains a less-strict version of the ABC test for unemployment insurance benefits. In this context, a broader second prong standard — “work performed outside the usual course of business of the employer” or work performed “outside of all of the places of businessapplies.

The stakes are high for businesses on the wrong end of misclassification litigation under Massachusetts’ wage and hour laws and the MICL. Penalties include lost wages and benefits that individuals should have received if a court determines they were improperly classified as independent contractors. Businesses in violation of Massachusetts’ wage and hour laws may be liable for treble damages for “any” lost wages and other benefits, attorneys’ fees, and other significant fines. Tax penalties can also quickly mount.

Just last year, Massachusetts’ Supreme Judicial Court Chief Justice called worker misclassification a “serious problem both in our Commonwealth and across the nation” and urged the Massachusetts legislature to adopt a uniform scheme for the classification of workers. Ives Camargo’s Case, 479 Mass. 492, 502 (2018). The Hogan Lovells employment team will continue to update employers as jurisdictions across the United States consider the applicable standards for classifying individuals as employees or independent contractors.

Paid sick leave, additional family and medical leave, disability and parental leave – the number of leave entitlements at the state and local level keep proliferating. Compliance with this new legal landscape is tricky, and particularly so for employers with multi-jurisdictional workforces. The Hogan Lovells Employment team is here to help. On November 7 at 1 p.m. Eastern, we are hosting a one-hour live webinar to discuss the new laws and how employers can ensure compliance.

Our webinar – geared to in-house counsel and human resources staff but open to anyone – will unpack the common features of the new laws and highlight key differences across jurisdictions. We will provide tips for compliance with the patchwork of laws already on the books or pending, including the interplay of state paid leave benefits with employers’ own benefits plans and established unpaid leave rights under the Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA), and how to update policies and handbooks. Our panel of employment lawyers in California, New York, Massachusetts, and the D.C. region will prepare employers to avoid running afoul of this “new normal” and to correctly guide employees who approach their manager or Human Resources with the following scenarios:

  • I need a few days off because I am ill or injured.
  • I need time off to care for a family member in a medical crisis.
  • I need time off to deal with my own medical crisis.
  • I’m having a baby, how much time can I take?
  • Can I get additional time off under the FMLA or ADA?

We hope you will join us.

Link: https://ehoganlovells.com/s/a20f4b2a5f13b9bc8fda7ef2844fac27f70a3b66

Later this week, on October 11, 2019, several important changes are coming to the New York Human Rights Law (“NYHRL”).

As you may recall, last year the New York legislature enacted legislation prohibiting employers from requiring nondisclosure sexual harassment claims in Nondisclosure Agreements (“NDA”) unless the employee requests confidentiality.  As of next week, that prohibition is strengthened to include all claims of discrimination, harassment and/or retaliation in “any settlement, agreement or other resolution of any claim, the factual foundation for which involves discrimination … that would prevent the disclosure of the underlying facts and circumstances … unless the condition of confidentiality is the complainant’s preference.”  If the employee requests confidentiality, then the Agreement may contain this provision.

Notably, the law does not prohibit the confidentiality of the settlement amount or of the NDA itself.

NDAs now must also be written in plain English and in the primary language of the employee.  In addition, they must give the employee at least 21 days to consider the NDA and contain a 7 day revocation period if the employee wishes to revoke their consent.

Additionally, as of January 1, 2020, NDAs must include that employees are not prohibited from “speaking with law enforcement, the Equal Employment Opportunity Commission, the state Division of Human Rights, a local commission on human rights, or an attorney retained by the employee or potential employee.”

As New York State and New York City have strengthened their stances on sexual harassment and discrimination, New York employers must remain vigilant and stay abreast of all of the changes in the law and adapt accordingly.  If NDAs do not abide by the above requirements, they will not be enforceable.

Hogan Lovells’ Employment team is experienced, well versed, and apt to advise on any issue of New York employment law, especially those regarding discrimination and harassment.

Following in the wake of the #MeToo movement, two new bills adopted by the California Legislature will expand the temporal scope of state-law harassment, discrimination, retaliation, and sexual assault claims. The first of these two, Assembly Bill 9 (“AB 9”), increases the time limit for individuals to file a discrimination, harassment, or retaliation claim with the California Department of Fair Employment and Housing. Filing such a claim is an administrative prerequisite to suing under California’s Fair Employment and Housing Act. AB 9 will raise the current one-year time limit on filing this administrative claim to three-years, extending the practical statute of limitations for filing a lawsuit under FEHA to four years (e.g. three years to file the administrative claim, and then one year thereafter to file a civil lawsuit).

The second bill, AB 1510, amends last year’s Assembly Bill 1619 (“AB 1619”). AB 1619 expanded the statute of limitations for adult victims of sexual assault to the greater of ten years after the last incident of assault or three years after discovery of the assault. However, AB 1619 only acted prospectively, applying only to claims brought on or after January 1, 2019. Assembly Bill 1510 (“AB 1510”) amends the scope of AB 1619 so that it revives certain, otherwise time-barred civil claims where those claims:

  • (1) Arise out of sexual assault or other inappropriate conduct by a physician at a student health center from Jan. 1, 1988 to Jan. 1, 2017;
  • (2) Seek damages of greater than $250,000; and
  • (3) Would otherwise have been time barred prior to Jan. 1, 2020.

Taken together, these two bills have been framed as part of California’s continued response to the #MeToo movement. However, as Hogan Lovells attorney Tao Leung writes in a recent article, the true impact of these bills, if signed by Gov. Newsom, may be much greater than advertised. The employment lawyers at Hogan Lovells are experienced in helping employers navigate the changing landscape of labor and employment law. Anyone with questions is encouraged to reach out to the authors of this article, or the attorney with whom they normally work at Hogan Lovells.

On September 20, 2019 the National Labor Relations Board (“NLRB” or “Board”) proposed a rule which, if approved, would exclude graduate and undergraduate student workers, who perform services in connection with their studies, from the definition of “employee” under the National Labor Relations Act (“NLRA”), thus precluding them from forming unions or engaging in collective bargaining activities at private colleges and universities.

The proposed Board rule comes amid a seesaw of NLRB decisions on the issue of student workers. In a 2016 Board decision addressing whether student assistants at Columbia University are employees, the Board held that such student workers were employees with collective bargaining rights under the NLRA. Applying the common-law agency doctrine, the Board explained that because the student assistants “perform work, at the direction of the university, for which they are compensated,” they are “employees” under Section 2(3) of the NLRA, notwithstanding their additional educational relationship with Columbia University. In response, graduate students at other institutions, such as New York University, American University, and Brandeis University, organized and negotiated collective bargaining agreements with their universities. The 2016 Columbia University decision reversed a 2004 Brown University decision, whereby the Board held that graduate assistants have a primarily academic, not economic, relationship with their school, and therefore they should not qualify as statutory employees.

The recently proposed Board rule has taken a similar approach to the Brown University decision, thereby holding students who perform services at a private college or university related to their studies to be primarily students with a primarily educational relationship with their university, and therefore not statutory employees. The Board has explained that its proposed standard is more consistent with the purposes and policies of the NLRA, which governs economic relationships, as opposed to those “primarily educational in nature.”

Public comments are invited on all aspects of the proposed rule and should be submitted by November 22, 2019. The NLRB has also solicited public comments on whether students who work at a private college or university in a capacity unrelated to their studies qualify as an “employee” under the NLRA. If adopted in its proposed form, the rule would undercut a growing number of student unionization efforts. Though it would not impact existing contracts between student worker unions and universities, it would nevertheless give private institutions a clear basis to refuse to recognize student unions.

For more information on the proposed rule or developments at the National Labor Relations Board, please contact an author of this blog post or the Hogan Lovells lawyer with whom you work.

Employers with employees—and, in some cases, 1099-MISC contractors —in Massachusetts have obligations starting next week under Massachusetts’ new Paid Family and Medical Leave Law (“MPFML”), which will entitle most Massachusetts workers to paid family and medical leave. Although benefits will not be available until 2021, employers must do two things now: provide notice to workers of their rights and obligations under MPFML by September 30, 2019, and implement required payroll deductions starting October 1, 2019.

A newly created state agency, the Department of Family and Medical Leave (the “Department”), will administer the paid leave program. The new law also creates the Family and Employment Security Trust Fund (the “Trust Fund”), from which paid leave benefits will be paid to eligible individuals who apply for them. The Trust Fund will be funded by employer and employee tax contributions. Below is a quick recap of the law’s key provisions and important upcoming deadlines.

Covered Employers: The law applies to virtually all private Massachusetts employers, regardless of their size or number of employees. Out-of-state employers with even one Massachusetts worker are generally covered.

Covered Workers: All W-2 employees (full-time, part-time and seasonal workers) who meet the financial eligibility requirements for unemployment benefits under Massachusetts law are covered by MPFML and must be counted for purposes of tax contributions. In other words, if you are required to report the employee’s wages to the Massachusetts Department of Unemployment Assistance (“DUA”), the employee is covered.

In addition, 1099-MISC contractors are covered if they constitute more than 50% of the employer’s total workforce and they:

  1. perform services as an individual entity;
  2. live in Massachusetts;
  3. perform the services in Massachusetts; and,
  4. do NOT qualify as an independent contractor under Massachusetts’ unemployment statute, M.G.L. c. 151A—meaning that the individual must perform services within the usual course of the employer’s business.

 

Qualifying Uses and Maximum Benefits per Benefit Year

Benefits will be available to eligible individuals for the following purposes:

  • to bond with a child within the first 12 months of the child’s birth or placement through adoption or foster care—12 weeks paid leave, which may be taken intermittently or on a reduced schedule upon mutual agreement of the employer and covered individual;
  • because of a qualifying exigency arising out of the fact that a family member is on or has been called to active duty in the Armed Forces—12 weeks, which may be taken intermittently or on a reduced schedule;
  • to care for a family member who is a covered service member (as defined by the law) with a serious health condition—26 weeks, which may be taken intermittently or on reduced schedule if medically necessary;
  • medical leave for an employee’s own serious health condition—20 weeks, which may be taken intermittently or on a reduced schedule if medically necessary; and
  • to care for a family member (as defined by the law) with a serious health condition—12 weeks, which may be taken intermittently or on a reduced schedule if medically necessary.

Benefits will be available beginning January 1, 2021, except that benefits to care for a family member with a serious health condition become available July 1, 2021. Eligible individuals may take up to 26 total weeks of combined paid family and medical leave per benefit year.  Employees (but not contractors) who take paid family or medical leave are generally entitled to reinstatement to the same or an equivalent position upon their return from leave. Benefits will be based on the worker’s average weekly earnings, subject to a maximum weekly benefit amount of $850 per week for 2021 (this amount will be adjusted annually based on the state average weekly wage).

Tax Contributions: Paid leave will be funded by a .75% payroll tax contribution (to be adjusted annually), which will be paid into the Trust Fund. Employers with 25 or more employees in Massachusetts will be required to pay the full contribution but may deduct from employees’ wages up to 100% of the contribution for family leave and up to 40% of the contribution for medical leave. Employers with fewer than 25 employees in Massachusetts will not be required to pay the employer portion of the contribution but will still need to deduct the employee portion from employees’ wages and remit it to the Trust Fund.

Withholding is required beginning October 1, 2019. More information about calculating the required contribution is available on the Department’s website at https://www.mass.gov/guides/employers-guide-to-paid-family-and-medical-leave. Employers must remit contributions quarterly through the Massachusetts Department of Revenue’s MassTaxConnect system. Contributions for the October-December 2019 quarter are due January 31, 2020.

Required Notice to Workers: Employers are required to display a workplace poster about MPFML, which is available here. Additionally, on or before September 30, 2019, employers must provide written notice to their Massachusetts workforce about certain aspects of MPFML, together with an opportunity to acknowledge or decline to acknowledge receipt. Sample notices are available from the Department here. Note that there are separate notices for W-2 employees and 1099-MISC contractors, as well as for employers with 25 or more covered individuals and those with fewer than 25 covered individuals.

Exemptions: Employers with private paid benefits plans may apply for an exemption from MPFML if their plans provide benefits and protections equal to or greater than those provided under the statute. Private plan exemptions for the first quarter of contributions are due December 20, 2019. See the Department’s website for additional details.