As we previously reported, New York City Mayor Bill de Blasio signed the “Stop Sexual Harassment in NYC Act” (the “Act”) into law earlier this year.  The New York City Commission on Human Rights (the “NYCCHR”) has now released additional guidance, including the mandatory fact sheet and notice referenced in the Act.

Effective September 6, 2018, all New York City employers must display the anti-sexual harassment notice in a conspicuous location. The notice provides examples of sexual harassment and how to report incidents within an employer’s organization or to the NYCCHR. Additionally, New York City employers must provide the fact sheet to all new hires.  Employers may comply with this requirement by placing the fact sheet in an employee handbook, as long as the handbook is distributed to new hires.

The NYCCHR posted the fact sheet and notice on its new website, which includes additional information on the Act.  As a reminder, beginning on April 1, 2019, New York City employers with at least 15 employees will be required to conduct annual anti-sexual harassment trainings.  These trainings must be “interactive” and explain what sexual harassment is, along with the process of reporting complaints internally and to the respective federal, state, and city administrative agencies.

The Labor and Employment Team at Hogan Lovells has extensive experience providing interactive anti-harassment training, developing anti-harassment policies and complaint procedures, and guiding companies on the best practices for complying with federal and state labor and employment laws. We will continue to keep you updated on the latest developments concerning recent legislation introduced to address sexual harassment in the workplace.

For more information or for any other employment matter impacting your business, please contact the authors of this article or the attorney you regularly work with at Hogan Lovells.

Late last month, California Governor Jerry Brown signed Assembly Bill 2282 (“AB 2282”) into law. The Bill attempts to provide California employers with answers to questions that remained after Assembly Bill 168 (the “Salary History Ban” bill) became law.  As a reminder, AB 168 (1) prohibits California employers from asking job “applicants” for salary history information (and relying on this information), (2) requires employers to provide to applicants a “pay scale” upon “reasonable request”, and (3) prohibits employers from paying individuals of different sexes, races, or ethnicities different rates for competing substantially similar work, without having a justification for the pay disparity.

After AB 168’s passage last October, California employers were often left wondering:

  • What if a current employee asks for a new position—is that current employee an “applicant” and subject to the salary history ban law?
  • What is a “pay scale” and what constitutes a “reasonable request” for one?
  • What questions can I ask an applicant?
  • What factors can I rely on that would justify a wage differential between a male and a female worker?

In response, AB 2282 provides clarification in the following ways:

  • The term “applicant” only refers to external job-seekers seeking a new job with the company, and does not extend to current employees seeking a new position. Therefore the company may seek and rely upon salary information of its current employees when considering the employee for a new position.
  • The term “pay scale” means a salary or hourly wage range and a “reasonable request” is one that has taken place after an initial interview has taken place. Therefore, an employer is not required to provide a bonus or equity range, and must only provide the salary or hourly wage range to an applicant after an initial interview is completed.
  • While employers may not ask about salary information, an employer may ask about an applicant’s salary expectations. Additionally, if an applicant voluntarily discloses his or her salary information, the employer may rely on this information when considering an offer of employment. Therefore, there is still much information that can be deduced about an applicant’s salary expectations, though the employer must be careful not to ask questions that are prohibited by law.
  • Factors to be considered when justifying a wage disparity are: (a) a seniority system (b) a merit system (c) a system that measures earnings by quantity or quality of production or (d) a bona fide reason other than sex, race or ethnicity, such as education, training or experience—so long as this factor is not derived from a sex-based, race-based, or ethnicity-based differential in compensation, is job related, and is consistent with a business necessity. Therefore, wage disparities are not per se invalid; though if challenged, employers must be able to show one of the above factors exist.

Salary history bans continue to appear all across the country. Hogan Lovells’ employment team is especially apt to help employers navigate through these muddy waters as these laws often take time to become clearer through legislative and judicial processes.

An economic development bill passed on August 1, 2018 at the close of the Massachusetts Legislature’s 2018 session sets limits on non-compete agreements after a nearly 10 year debate on non-compete reform. The bill, titled, “An Act relative to the judicial enforcement of non-compete agreements,” expected to be signed into law by the governor, will take effect on October 1, 2018.  The bill’s sponsor says it represents a “consensus” piece of legislation based on discussions with legislators, workers and businesses. The new law imposes new limits on non-competes and codifies existing common law, providing a consistent set of standards for enforcing non-competes and ending practices that overreach. The following are the highlights of the new requirements and restriction imposed on non-compete agreements in Massachusetts.

Who is covered: employees and independent contractors who are residents of Massachusetts or employed in Massachusetts least 30 days prior to termination.

Which agreements are covered: traditional non-competition agreements which prohibit competition after employment ends and “forfeiture for completion agreements” which impose financial penalties for post-employment competition such as forfeiture of benefits. The statute does not cover other types of restrictive covenant such as non-disclosure and non-solicitation agreements pertaining to employees, customers, vendors or clients.  Notably,  excluded from coverage are non-competition terms in separation agreements, provided employees are afforded a 7 day right of rescission (consistent with similar rights for persons over 40 in entering into a release of claims).

New Requirements:

  • Non-competition agreements are limited to 12 months (absent malfeasance such as theft of proprietary information or breach of fiduciary duties)
  • Non-competition agreements entered into at the commencement of employment, must be signed by both the employer and employee and state that the employee has the right to consult counsel prior to signing. The agreement must be provided by the earlier of the time of the formal offer or ten business days before commencement of employment.
  • Continued employment alone will not be sufficient consideration for a non-compete entered into after employment; “fair and reasonable consideration” is required. (The other requirements for non-competes entered into at the time of commencement of employment also apply, i.e., ten business days’ notice, signed by both parties, and notice of the right to obtain advice of counsel.) “Other mutually-agreed upon consideration” is not defined, but must be specified in the agreement.
  • Garden leave (the concept of paying someone during the period that they are restricted by the non-compete) or “other mutually-agreed upon consideration” is required for a non-compete. Garden leave requires at least 50% of the employee’s highest annualized base salary within the preceding two years to be paid on a pro rata basis during the restricted period
  • Non-competes are not enforceable against the following categories of employees:
    • Non-exempt employees under the Fair Labor Standards Act (FLSA);
    • Undergrads and grad students who are not working full time;
    • Employees who are terminated without cause or laid off; and
    • Anyone 18 or younger.

Common Law Principles Codified

The new law incorporates long-standing common law requirements, including that the agreement must be no broader than necessary to protect an employer’s trade secrets, confidential information and/or good will.  A non-compete is presumed to be necessary where these interests cannot be adequately protected through other restrictions.  In addition, the restriction must be reasonable in geographic scope.  If the scope is defined as the areas in which the employee “provided services or had a material presence or influence” during the past 2 years, it will be considered presumptively reasonable.  The agreement also must be reasonable in the scope of the prohibited activities in relation to the interests protected.  It will be presumptively reasonable if it is limited to only the specific types of services provided by the employee during the last 2 years of employment.

Jurisdiction

All actions to enforce a non-compete must be brought in Massachusetts in the employee’s county or Suffolk County’s Business Litigation Session.

Practice Tip

Massachusetts employers should review their existing noncompetition agreements, hiring documents and separation documents to ensure compliance with the new law before October 1, 2018.

On June 22, 2018, the Federal Official Gazette published the executive order issuing the Federal Law regarding Special Declaration of Absence for Missing Persons in which several legal provisions of the Federal Labor Law; Federal Law of Employees rendering services to the State, Social Security Law, Government Employees´ Security and Social Services Institute Law; General Law for Negotiable Instruments and Credit Operations; Financial Institutions Law, and Agrarian Law were amended. This amendment is effective as of June 23, 2018.

The creation of the Federal Law regarding Special Declaration of Absence for Missing Persons was enacted to set the guidelines, implications, procedures and rights as a result of missing persons, as well as the labor and social security implications of the declaration of absence.

It also establishes the procedure for the Special Declaration of Absence, which shall not delay more than 6 months. The Special Declaration of Absence may be requested after 3 months as of the report to authorities of the missing person or of the filing of the complaint before the National Commission of Human Rights. The request of the Special Declaration of Absence should include, among others, the activity performed by the missing person, as well as the name and address of the employer and information of his/her social security regime.

In terms of social security, the main effect of the Special Declaration of Absence is that the beneficiaries of the missing person continues to enjoy the rights and benefits applicable to the social security regime derived from the employment of the missing person.

On the other hand, the Special Declaration of Absence will protect the rights of the missing person in the following terms:

  • The missing person will be considered in an unpaid leave of absence during a specific term.
  • In the event that the victim is located alive, the employer shall reinstate the employee in his/her prior position and rights before disappearing.
  • Regarding social security, beneficiaries will be recognized and will maintain the applicable rights and benefits until the missing person is located death or alive.
  • Payments to the credit for the acquisition of homes will be suspended. This protection will be maintained until the missing person is located alive or not.

Likewise, the Federal Labor Law as well as the Social Security Law were amended, the most relevant modifications are:

  • The disappearance derived from a criminal act, produced suddenly while working or related to work activities, will be considered as a work-related accident.
  • The employer has the obligation to grant an unpaid leave of absence to the missing employee with a Special Declaration of Absence.
  • The employer is prohibited to terminate an employment relationship, if the employee has the status of missing person and has a Special Declaration of Absence.
  • In the case of disappearance derived from a criminal act, the employee´s beneficiaries will be entitled to receive compensation.
  • In the case of a missing person who has Special Declaration of Absence, the employee´s beneficiaries will maintain the right to receive medical and maternity assistance, surgical, pharmaceutical and hospital care.
  • When the employee is a missing person and a Special Declaration of Absence was issued, the resources of his/her individual social security account will be available to the beneficiaries.

Derived from the aforementioned amendments, there is no certainty about the labor and social security implications that could exist in different circumstances therefore we suggest that each situation is analyzed in a case-to-case basis.

Our Hogan Lovells team will be glad to assist with any doubts or comments regarding this matter.

Maryland recently enacted the Disclosing Sexual Harassment in the Workplace Act of 2018 (the “Act”) with an effective date of October 1, 2018. The Act places two types of obligations on Maryland employers. First, Maryland employers with at least 50 employees will be required to submit survey responses to the Maryland Commission on Civil Rights (“MCCR”) with the following data by July 1, 2020 and again by July 1, 2022: (1) the number of settlements made by or on behalf of the employer after an allegation of sexual harassment by an employee; (2) the number of times the employer has paid a settlement to resolve a sexual harassment allegation against the same employee over the past 10 years of employment (and whether the employer took personnel action against said employee); and (3) the number of settlements made after an allegation of sexual harassment that included a provision requiring both parties to keep the terms of the settlement confidential.

The Act directs the MCCR to publish aggregate employer survey data on its website and allow public inspection of certain data upon request. The MCCR will report employer responses to the Governor and select committees, but the Act is silent on how they will in turn use the information. This section of the Act requiring employers to report data will automatically expire on June 30, 2023.

Second, all Maryland employers, regardless of size, are prohibited from including in an employment agreement, contract, or policy, any provision that waives an employee’s substantive or procedural rights or remedies to a claim that accrues in the future for sexual harassment or retaliation for reporting sexual harassment. An employer may not take adverse action against employees for refusing to agree to a prohibited waiver, and employers will be liable to employees for reasonable attorney’s fees and costs if they enforce or attempt to enforce a prohibited waiver. The Act provides that this first obligation applies “except as prohibited by federal law,” and the effect, if any, of the new law on arbitration agreements will need to be determined.

To prepare for October 1, employers should review employment agreements and relevant policies to ensure they do not contain a waiver of substantive or procedural rights or remedies regarding future-accruing claims of sexual harassment or retaliation for reporting sexual harassment.  Additionally, Maryland employers covered under the Act’s reporting obligations will need to be prepared by 2020 to complete the mandatory survey.

As we previously reported, Congress and several states have responded to the #MeToo movement by introducing legislation that addresses sexual harassment in the workplace.

For more information or for any other employment matter impacting your business, please contact the authors of this article or the attorney you regularly work with at Hogan Lovells.

Congrats to Hogan Lovells’ appellate team for securing one of the most important employer-friendly SCOTUS decisions in decades regarding the enforceability of class action waivers in arbitration agreements.  Please read about it at http://www.hoganlovells.com/en/news/hogan-lovells-scores-major-win-for-employers-in-us-supreme-court-case-epic-systems-corp-v-lewis.

Over the past several weeks, New York has gotten serious in its attempt to end sexual harassment. Earlier this month, Mayor Bill de Blasio signed the “Stop Sexual Harassment in NYC Act” (“New York City Act” or “Act”) into law, bringing about sweeping changes that will affect all New York City employers.

  • Specifically and effective immediately, the New York City Human Rights Law (“NYCHRL”) will consider sexual harassment to be a distinct form of discrimination, and will cover all employers, regardless of the number of employees, with respect to claims of sexual harassment. Further, the Act increases the statute of limitations for gender-based harassment to three years. Previously, the NYCHRL only applied to employers with four or more employees and had a statute of limitations for gender-based harassment of only one year.
  • Effective September 6, 2018, all New York City employers will be required to display a new anti-sexual harassment poster in a conspicuous location, which will be created by the NYC Commission on Human Rights. The poster will define sexual harassment and how to report it. It must be displayed in both English and Spanish.
  • On April 1, 2019, New York City employers with 15 or more employees will be required to conduct annual sexual harassment trainings. These trainings must be “interactive” and explain what sexual harassment is, along with the process of reporting complaints internally and to the respective federal, state and city administrative agencies. Employers must keep records verifying that employees have completed the training.

The Act was enacted on the heels of New York State-wide legislation signed into law by Governor Andrew Cuomo in April. Some of the highlights of the new State-wide laws include:

  • Effective immediately, the New York State Executive law is amended to impose liability upon all employers for gender-based harassment experienced by non-employees, such as contractors, vendors, or consultants.
  • Effective July 11, 2018, New York employers are prohibited from including a non-disclosure agreement in any settlement of a sexual harassment claim unless the complainant specifically requests confidentiality.
  • Effective July 11, 2018, New York employers are prohibited from including mandatory arbitration provisions for allegations or claims of sexual harassment “except where inconsistent with federal law.”
  • Effective October 9, 2018, all New York employers must either adopt or create a policy that equals or exceeds the model policy and training program which will be developed by the New York Department of Labor in collaboration with the Division of Human Rights.

In light of these new laws, New York employers should: (a) review and revise as necessary their sexual harassment training policies and practices to ensure compliance with City and State laws; (b) as soon as the anti-sexual harassment posters become available, New York City employers should be prepared to post the posters in a conspicuous setting in the workplace; (c) review their standard settlement agreements to make sure that they are in compliance with New York’s new laws on the prohibition of non-disclosure agreements in harassment-based settlements; and (d) assess any mandatory arbitration provisions in their contracts or policies to comply with these new laws. This aspect of the law will likely be challenged in court and could take several years before a final conclusion is reached, but companies would be wise to consider the potential impact that the law has on pre-existing and future agreements.

The Labor and Employment Team at Hogan Lovells has extensive experience providing interactive anti-harassment training, developing anti-harassment policies and complaint procedures, and guiding companies on the best practices for complying with Federal and State labor and employment laws.

 

 

On April 30, 2018, a Philadelphia federal judge issued an opinion striking down a portion of Philadelphia’s salary history ban. Salary history bans have become increasingly common tools used by various cities and states around the country attempting to combat wage disparities that exist across genders, races, and ethnicities.  The Philadelphia law consists of two parts: (i) an inquiry provision, which addresses employers asking candidates about their salary history; and (ii) a reliance provision, which makes it illegal for companies to rely on salary history in making hiring decisions. The law, like many others around the country, provides punitive penalties for employers who violate the law, and harsher penalties for repeat offenders.

Judge Goldberg’s ruling struck down the inquiry provision on First Amendment grounds, but upheld the reliance provision. As a result, employers face an interesting dilemma.  Philadelphia employers are permitted to ask about an applicant’s salary history, but they are prohibited from relying on that information when determining wages or offering employment.

Even though the decision struck down part of the law, it may still be prudent for Philadelphia employers to refrain from asking applicants about their salary history. Any employer that asks candidates about their prior salary history during the hiring process might have a more difficult time proving that (i) it did not consider the salary history information during the hiring process, and (ii) any wage disparity that exists between protected classes was the result of permissible reasons, not due to past salary information.

Although this decision only affects Philadelphia employers, as more of these laws become enacted across the country, more will face challenges in court. Many of the decisions will turn on different factors, but other judges may look to Judge Goldberg’s ruling for guidance.  We’ll be sure to keep you up to date on the legal trends of the salary history bans, as well as any appeal that may result from this immediate decision.

Everyone knows that employers covered by the Age Discrimination in Employment Act (ADEA) cannot intentionally refuse to hire job applicants because they are 40 years old or older, and that it is generally unlawful to post a job advertisement that says “people over the age of 40 need not apply.” Such practices constitute impermissible “disparate treatment” under the statute.  But what about age-neutral hiring practices that may have a “disparate impact” on older applicants, such as posting advertisements for candidates with only “one to three years of experience,” or recruiting for entry-level professional positions exclusively on university campuses?  These and other common practices may also be unlawful, according to a recent decision by the U.S. Court of Appeals for the Seventh Circuit.

The Supreme Court held in Smith v. City of Jackson, 544 U.S. 228 (2005), that the ADEA prohibits employment practices that have a disparate impact on existing employees, unless the employer can prove that the practice is based on a “reasonable factor other than age.”  But whether the ADEA similarly protects job applicants from disparate impact remains unsettled.  The ADEA’s disparate impact provision (29 U.S.C. § 623(a)(2)) refers to “employees,” unlike the statute’s disparate treatment provision (29 U.S.C. § 623(a)(1)), which refers more broadly to “individuals.”  This difference led the Eleventh Circuit, sitting en banc, to conclude in Villareal v. R.J. Reynolds Tobacco Co., 839 F.3d 958 (11th Cir. 2016) (en banc), cert. denied, 137 S. Ct. 2292 (2017), that age-neutral recruiting practices that merely disparately impact older applicants do not violate the ADEA.

Parsing the statutory language differently, the Seventh Circuit on April 26, 2018, became the first federal court of appeals to hold that job applicants can, in fact, bring disparate impact claims under the ADEA. In Kleber v. CareFusion Corp., No. 17-1206 (7th Cir. Apr. 26, 2018), a divided panel reinstated the claim of a 58-year-old attorney with extensive experience who applied and was not selected for an in-house job advertised as requiring “3 to 7 years (no more than 7 years) of relevant legal experience.”

The Seventh Circuit’s ruling is potentially far-reaching, since other common hiring practices, including internship programs for recent graduates, and recruiting at colleges and universities, also have a tendency to disadvantage older workers. Whether these practices, or “experience caps” such as the one at issue in Kleber, can be justified by a “reasonable factor other than age” (RFOA) remains to be seen.  Under the EEOC’s regulations, the RFOA defense requires proof that a practice is “both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose,” in light of all the circumstances, including the potential harm to older workers. 29 C.F.R. § 1625.7(e).

Kleber generated a lengthy majority opinion as well as a dissent, and CareFusion has petitioned the full Seventh Circuit for en banc review. Villareal produced no less than four separate opinions at the en banc stage.  Although the Supreme Court denied certiorari in Villareal, the circuit split created by Kleber, if it persists, makes it more likely that the Court will take up the question of disparate impact protections for older applicants under the ADEA in the future.

Kleber applies only within the Seventh Circuit (Illinois, Indiana, and Wisconsin).  However, one California district court has also held that job applicants can bring  disparate impact claims under the ADEA, see Rabin v. PricewaterhouseCoopers LLP, 236 F. Supp. 3d 1126 (N.D. Cal. 2017), and  the Equal Employment Opportunity Commission (EEOC), which has nationwide jurisdiction, has taken the same position.  Employers throughout the country should therefore examine their hiring practices to determine whether practices that tend to disadvantage older workers are supported by a legitimate business purpose and are otherwise reasonable.

California is the birthplace of many of the best-known apps credited – or blamed, depending on your point of view – with fueling the gig economy. But the California Supreme Court issued a ruling on April 30, 2018 that will make it extremely difficult for gig entities and others to treat workers as independent contractors.

The Court issued a lengthy opinion in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (Case No. S222732).  After describing the history and way in which “employees” and “employers” have been defined in California, the Court adopted a simplified test that tilts toward treating workers as “employees.”  The so-called “ABC test” presumes all workers are employees unless the business can demonstrate all of the following: (a) the “worker is free from the control and direction of the hirer in connection with the performance of the work” under the contract and in fact; (b) the “worker performs work that is outside the usual course of the hiring entity’s business;” and (c) the worker is “customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

The test will effectively keep an independent plumber (and presumably, your outside counsel) from being considered an employee. But, in light of this decision, workers who perform tasks that are part of the company’s usual business operation will now mostly likely be considered an employee – obligating the company to comply with wage-and-hour requirements, unemployment insurance and workman’s compensation obligations, and employer-side taxes.

Prior to Dynamex, there had been disagreement in California over the proper test, but California courts (and federal courts sitting in diversity) generally applied a multifactor test that was broader than but similar to the federal economic realities standard.  All potentially relevant factors could be considered, in light of the totality of the circumstances, on a case-by-case basis.  The Supreme Court concluded that a more bright-line rule was in order, and so, California joins New Jersey and Massachusetts in creating a presumptive rule against independent contractor status.

The change means that thousands of California workers may now bring claims that they have been misclassified as independent contractors. And the economy that may take the biggest hit is California’s gig economy because it relies heavily on workers that are classified as independent contractors.

Whether in the gig economy or not, all California employers should take a hard look at the independent contractors currently providing services and determine whether they should be reclassified as employees in light of this groundbreaking decision.

A full copy of the Dynamex opinion can be found at: http://www.courts.ca.gov/opinions/documents/S222732.PDF