The Labor and Employment Group at Hogan Lovells is proud to have contributed to the 2020 version of the firm’s Doing Business in the United States Guide. The Guide provides a high-level overview of the laws and practices important to foreign investors interested in operating in the United States, including recent legal developments. The Guide’s section on Labor and Employment covers a variety of topics including: establishing an employment relationship; equal employment opportunity laws; wages, safety, labor, and leave laws; as well as arbitration. Interested readers are encouraged to review the Guide and those with any additional questions should reach out to the authors of this post, or the Hogan Lovells lawyer with whom you usually work.
On March 11, 2020, the Centers for Disease Control and Prevention (“CDC”) (along with the White House Coronavirus Task Force) issued guidance for the next thirty (30) days for Santa Clara County, CA, and Seattle-King, Pierce, and Snohomish Counties, WA. This guidance specifically recommends that employers in these jurisdictions conduct “[r]egular health checks on arrival each day (e.g., temperature and respiratory symptom screening) of staff and visitors entering buildings.” This guidance supports the view that employers in those jurisdictions may without running afoul of the Americans with Disabilities Act (“ADA”) conduct such health checks—including temperature checks and respiratory symptom screening—of all employees and visitors on a daily basis.
As we noted in our earlier blog post, the ADA generally does not permit employers to make inquiries about a current employee’s medical information or status or ask employees to submit to medical examinations except in narrow circumstances. The EEOC has explained, however, in 2009 guidance relating to pandemic flu, that:
- “If an influenza pandemic becomes more severe or serious according to the assessment of local, state, or federal public health officials, ADA-covered employers may have sufficient objective information from public health advisories to reasonably conclude that employees will face a direct threat if they contract pandemic influenza.” In such a case, employers may “make disability-related inquiries or required medical examinations of asymptomatic employees to identify those at higher risk of influenza complications.”
- Furthermore on the specific point of temperature checks of employees, the EEOC has stated that “[i]f pandemic influenza symptoms become more severe than the seasonal flu or the H1N1 virus in the spring/summer of 2009, or if pandemic influenza becomes widespread in the community as assessed by state or local health authorities or the CDC, then employers may measure employees’ body temperature.”
Employers in locations where CDC is recommending health checks of employees and visitors should carefully review the CDC’s recommendations. Employers in healthcare settings should also review specific guidance for employers in healthcare settings for which additional and more detailed guidance has been provided, as well as the healthcare-specific recommendations contained in the March 11 guidance for the counties in California and Washington.
Employers in other high-risk geographic areas should carefully watch for further guidance from the CDC or other federal, state, or local health officials that may require or encourage similar health checks or inquiries that were otherwise potentially prohibited under the ADA as further developments may legally expand this leeway to other localities, or perhaps nationwide; for example, on March 11, 2020, the World Health Organization declared Coronavirus a pandemic, and U.S. agencies may follow suit.
This is a novel and constantly evolving event that requires vigilance and flexibility. The Hogan Lovells Employment Team is available to advise on all employment-related aspects of the Coronavirus response, from crafting company or office-wide policies, to handling concerns involving individual employees. Please contact one of the authors of this Alert or other Hogan Lovells employment attorneys with whom you regularly work for additional information related to the Coronavirus.
With the number of confirmed cases of the novel coronavirus (COVID-19) rising in California, the Department of Industrial Relations (DIR) and the Employment Development Department (EDD) have issued guidance and reminders on use of paid sick leave and other benefits for those forced off the job by COVID-19. The San Francisco Office of Labor Standards Enforcement (OLSE) has also rolled out guidance for employees in San Francisco on use of paid sick leave under the city’s law.
All California employers are required to provide paid sick leave and to allow workers to use at least 24 hours or three days per year of accrued sick leave time. (Time is accrued at a rate of one hour per 30 hours worked.) Numerous municipalities allow employees to use even more time (e.g., 48 hours per year in Los Angeles; no cap in San Francisco).
The DIR advises that employees must be permitted to use paid sick leave for their illness, that of a family member, or quarantine (as recommended by civil authorities) due to COVID-19. The issued guidance suggests, however, that paid sick leave may not be used by employees who choose to self-quarantine without the recommendation of civil authorities. San Francisco employees, on the other hand, are additionally permitted to take paid sick leave if recommended to do by healthcare providers or if the employee is part of a “vulnerable population ” (i.e., individuals aged 60 and older as well as individuals with heart disease, lung disease, diabetes, kidney disease, or a weakened immune system).
While employees must be allowed to use paid sick leave if they qualify, employers may not require them to use their accrued leave if they would prefer not to use the time.
Affected employees may have access to some other wage replacements if they exhaust their paid sick leave or are unable to work after having been exposed to COVID-19. If the employee is ill or unable to work, he or she may be eligible for short-term disability insurance, which is administered by the EDD. If the employee exhausts paid sick leave or decides not to use it to care for a sick family member affected by COVID-19, he or she can apply for paid family leave, which is a partial wage replacement administered by the EDD. In either case, the illness and/or need for quarantine must be certified by medical professional.
California law already protects employees against retaliation for use of paid sick leave or family leave, but with a state of emergency declared for COVID-19 in California, lawmakers may be looking at additional protections. Assemblywoman Lorena Gonzalez recently announced that she introduced a bill (Assembly Bill 3123) which would seek to expand the use of sick leave for when workers are unable to work during public health emergencies, even if the business is closed, and not be retaliated against for using sick leave in such a manner.
As the situation regarding COVID-19 is constantly developing, please contact the authors of this article or other Hogan Lovells employment attorneys with whom you regularly work for additional information.
Governor Cuomo is sending new legislation related to the Coronavirus to New York State lawmakers today. The legislation would protect employees who are required to stay home from work because they are being isolated or quarantined as a result of the COVID-19 Coronavirus.
Specifically, the law would prevent New York employers from terminating or otherwise penalizing employees who are unable to come to work due to the Coronavirus. It is presently unclear how the law would define being “unable” to come to work including whether it would protect employees who decide to self-quarantine without being required to by federal, state or local governments or required by the employer. Details are not final and the bill has not yet become a law.
As the situation continues to develop, New York employers must remain abreast of the evolving Coronavirus-related legal landscape. We have previously written on the practical and legal labor and employment considerations for US Employees responding to the Coronavirus, and now New York employers have an additional consideration to pay attention to.
We will update the blog as more information becomes available on this legislation.
The Coronavirus which causes the disease COVID-19 (“Coronavirus”) presents a plethora of challenging labor and employment issues for employers in the United States. As the virus spreads and experts’ understanding of it continues to evolve, employers find themselves asking what precautionary measures they can or should take in response to the outbreak and its risks, how to respond when problems arise, and what are the legal considerations surrounding these measures. Below is a summary of certain potential strategies for dealing with the Coronavirus and key legal risks that employers should consider in making judgments and formulating their Coronavirus response efforts.
Establish an Individual or Team to Serve as Key Point of Contact and Stay Up to Date
News and guidance about the Coronavirus is rapidly changing, and employers need to be prepared to understand (1) current facts about the virus, (2) the latest guidance from applicable agencies, and (3) how the Coronavirus is impacting their workforce. Just as importantly, employers must be able to adapt when these things change. Employers thus should identify who is responsible within the organization for establishing policies and, where applicable, making decisions relating to the Coronavirus in the workplace. Having a trusted individual or a core group of individuals of a manageable size will help ensure that decisions can be made quickly and in a consistent and even-handed manner. Managers and others should be instructed to consult with this group when Coronavirus issues arise, to alert this group of updates, and to follow their guidance.
A point person or team should have duties such as:
- For U.S. employers, remaining abreast of the latest guidance issued by the Centers for Disease Control (“CDC”). Employers worldwide should consider guidance from the World Health Organization (“WHO”), and employers abroad should consider the European Centre for Disease Prevention and Control (“ECDC”), or another applicable authority.
- Monitoring guidance from applicable state and local authorities, as well as guidance relevant to the employer’s specific industry. For example, the CDC has issued general interim guidance for businesses and employers, and has also issued guidance and resources for specific organizations such as laboratories, healthcare facilities, and schools. Following the guidance from these authorities may shield employers from legal claims. The EEOC, for example, encourages employers to follow CDC guidelines. You should also consult the OSHA website for any developments including how to report lost workdays resulting from Coronavirus.
- Being informed immediately of any developments within the workplace such as an infection.
- Leading efforts to establish or adjust policies in the workplace relating to the Coronavirus.
- Where appropriate, being responsible for consulting with other relevant constituencies, such as human resources, internal or external counsel, and unions.
Consider Establishing Action Plans and Policies
Employers should consider developing a written action plan or policy tailored to their own company’s needs and a system for communicating internal policies related to the Coronavirus to employees. Employers may also want to communicate such documents (or summaries of such documents) to customers or third parties to assure them that they are taking the issue of Coronavirus seriously. Likewise, employers should consider whether to make temporary adjustments to preexisting policies, such as those involving travel/meetings, access to company offices by third parties, and telework (some of these issues are discussed below).
The advantage of establishing an action plan or policy (or modifying preexisting policies) is that it can improve the likelihood of consistent treatment of similar situations. However, employees must understand that these plans or policies are subject to change at any time with changing circumstances.
Address Issues of Workplace Safety
Under the Occupational Safety and Health Act (“OSHA”), employers with facilities in the U.S. or U.S. territories are required to furnish a place of employment that is “free from recognized hazards that are causing or are likely to cause death or serious physical harm.” While OSHA has not issued standards specific to the Coronavirus, OSHA has a webpage with information for workers and employers about the situation that identifies the existing OSHA standards that will apply to Coronavirus risks, as does the National Institute for Occupational Safety and Health (NIOSH), an arm within the CDC. OSHA’s webpage also provides links to current information from the CDC on issues that should inform employers’ response, such as information on how the Coronavirus spreads and recommendations for common-sense precautionary measures that employers should take to prevent the spread of infection.
According to the most recent guidance from the CDC, the Coronavirus is thought to spread mainly person-to-person in close contact situations (up to 6 feet), through respiratory droplets produced when an infected person coughs or sneezes, which can land in the mouths or noses of people who are nearby or possibly be inhaled into the lungs. According to the CDC, it is currently unknown whether the Coronavirus can be contracted by touching a surface or object that has the virus on it and then touching one’s own mouth, nose, or possibly eyes, although that may be possible. The CDC’s current recommendations for precautionary measures to prevent transmission of the Coronavirus in the workplace provide that employers should adopt include, among other measures:
- Actively encourage sick employees to stay home and seek prompt medical attention.
- Send employees home immediately if they exhibit signs of acute respiratory illness such as cough or shortness of breath.
- Educate employees about the employer’s sick leave policy as well as respiratory and hand hygiene.
- Provide tissues and no-touch disposal receptacles for use by employees.
- Instruct employees to clean their hands often with an alcohol-based hand sanitizer that contains at least 60-95% alcohol, or wash their hands with soap and water for at least 20 seconds. Soap and water should be used preferentially if hands are visibly dirty. Provide soap and water and alcohol-based hand rubs in the workplace, and place hand rubs in multiple locations or conference rooms.
- Perform environmental cleaning such as routinely cleaning all frequently touched surfaces such as workstations, countertops, and doorknobs and provide disposable wipes for employees’ use. At this time the CDC does not recommend any enhanced cleaning methods.
- The CDC currently does not recommend that people who are well wear a facemask, however, it does recommend that the following persons wear masks: (1) those who are infected with Coronavirus or showing symptoms; (2) those who are caring for someone who is infected with Coronavirus; (3) health workers; or (4) those who are recommended to do so by a healthcare professional.
In taking any actions, unionized employers should consider whether they have any obligation to notify or bargain with their unions over their planned actions.
Note also that, unlike the common cold and flu, OSHA has determined that the Coronavirus is a recordable illness when a worker is infected on the job, and OSHA recordkeeping requirements apply. Many states and localities impose similar or additional safety requirements that may also apply to the Coronavirus.
If an employee contracts the Coronavirus at work or during a work-related activity (such as business travel), the employer should notify its workers’ compensation carrier immediately. Workers’ compensation may provide coverage for employees, but bear in mind that unpaid interns, volunteers, independent contractors, and third-party vendors are typically not covered by workers’ compensation and may present greater liability risks.
Consider Travel and Event Restrictions
Employers should consider implementing business travel restrictions to high-risk areas. As the areas of concern evolve, employers should continue to monitor the travel guidance issued by the United States and various national governments and follow the government recommendations to prohibit business travel to high-risk areas for non-essential purposes. As of March 5, the CDC has advised travelers to avoid all non-essential travel to China, Italy, South Korea and Iran (“high-risk countries”) and indicated that older individuals and those with chronic medical conditions consider postponing travel to Japan. Of course, the list of “high-risk” countries is subject to change.
The CDC has stated that travelers returning from high-risk countries should stay home for 14 days and avoid contact with others. The CDC also advises that employees who are well but who have a family member at home with the Coronavirus should contact their supervisor and refer to the CDC’s guidance on how to conduct a risk assessment of their potential exposure.
Also, consider whether in-person conferences or similar events in all locations should be postponed or conducted via teleconference or videoconference. Employers are increasingly postponing such events since attendees may be reluctant to travel in the current environment, and to avoid risks associated with potential Coronavirus exposures.
Although employers can restrict work-related travel, note that prohibiting personal travel or other personal activities may be problematic. For example, certain states prohibit taking adverse action against an employee for some types of an employee’s lawful, off-duty conduct, although the scope of these laws varies. Employers should also bear in mind that for-cause termination provisions in union or other contracts or policies may be implicated if an employee is terminated for not following a personal travel restriction.
Consider Adjusting Telework Policies
Employers should review their flexible work arrangements and modify them as needed in their judgment. In addition to allowing any quarantined workers to telecommute when feasible, an employer should prepare for potential office closures by ensuring that all employees whose jobs can be performed remotely have remote access capabilities and consider requiring them to take their electronic devices home each day. If an employer decides to permit non-exempt employees to telework, it should ensure that it has a system in place, as well as clear instructions to employees, for accurately keeping track of non-exempt employees’ time during telework periods. Likewise, an employer should consider if or how it will compensate employees whose jobs cannot be performed remotely in the event the employer imposes a work-stoppage (see the discussion on pay considerations below).
Consider Wages, Leave Policies and Benefits
How will employees be compensated during a Coronavirus outbreak if they are not working? The answer to this question will depend on, among other things, whether employees are considered exempt or non-exempt under the Fair Labor Standards Act (“FLSA”), applicable state or local laws, and employer policies or contracts (including collective bargaining agreements).
Under the FLSA,
- Nonexempt employees generally need not be paid for time not worked for Coronavirus-related or other absences.
- Exempt employees generally must receive their full weekly pay for any week in which they perform more than a de minimis amount of work (although depending on the specific facts, state laws, and employment policies, it may be permissible to deduct paid time off for days not worked), however, they need not be paid for full week absences.
In addition to the FLSA, employers need to follow any policies, contracts (including collective bargaining agreements) and state and local laws that may apply. Also, some employers may—for good reason—choose to go beyond legal and normal policy standards regarding the continuation of pay for Coronavirus-related absences, at least for some time.
Employers should take this opportunity to remind employees of their current policies related to paid and unpaid leave. Coronavirus-related absences, both for employees who are sick and employees caring for sick family members, may qualify as “serious health conditions” triggering the FMLA and similar state or local laws guaranteeing unpaid leave, as well as government-paid family and medical leave benefits available in jurisdictions such as California, New York, and (starting in July 2020) the District of Columbia. State paid sick leave laws may cover absences for the illness of an employee or family member, and may also cover absences due to closures of an employee’s child’s school or daycare facility.
If nonexempt employees are permitted to telework, special care should be taken to ensure that they are accurately tracking their hours worked, are paid for all hours worked, are complying with the employer’s policies including meal and rest break policies, and understand whether they need to seek authorization before working overtime.
The ADA, Medical Inquiries, and Privacy
A Coronavirus infection itself may not itself constitute a disability under the Americans with Disabilities Act (“ADA”) or similar state or local laws, but the ADA also protects employees who are “regarded as” disabled, which may come into play based on perceptions of employees who have been exposed to the Coronavirus or are thought to have been exposed, or as discussed below, who have disabling conditions that make them more vulnerable to the Coronavirus. Thus, employers must be careful and should seek legal advice before taking any adverse action against an employee who the employer believes has been exposed to or contracted the Coronavirus.
A common question is whether employers must “accommodate” employees who do not want to report to work because they are concerned about contracting the Coronavirus. The answer: it depends. In considering such requests, the employer should focus on, among other things, whether the employee is seeking accommodation for some other condition that makes them particularly vulnerable to COVID-19, or because of a diagnosed anxiety or other mental or emotional issue triggered by concern over the Coronavirus. Such preexisting conditions may themselves be disabilities for which potential accommodation may be required. If the request is not due to some other underlying condition, the employer should treat the request within the parameters of its existing policies, including any new policies developed especially for addressing the Coronavirus, taking care to ensure that those policies are enforced uniformly.
As a general rule, employers are permitted to send home employees who come to work visibly sick, whether from Coronavirus or any other contagious illness, and the CDC recommends that they do so. However, when sending an employee home, employers should keep in mind state laws which require paying non-exempt employees reporting time pay—a minimum amount of pay that must be paid to an employee when they report to work but is provided less than their usual amount of work, or no work, by the employer. It may be useful to train supervisors on how to detect the illness and deal with sending an employee home. Notably, employers should remember that the ADA generally does not permit employers to make inquiries about a current employee’s medical information or status or ask employees to submit to medical examinations except in narrow circumstances, such as when an employer has a reasonable belief, based on objective evidence, that the employee poses a “direct threat due to a medical condition” to themselves or others. According to pandemic preparedness guidelines issued by the Equal Employment Opportunity Commission (“EEOC”) in 2009 following an outbreak of the H1N1 influenza virus, such a “direct threat” might exist if the Coronavirus is officially declared to be a pandemic and is deemed severe by federal, state, or local authorities. In that event, the EEOC’s guidance states that employers may make certain medical inquiries or take employees’ temperatures to determine if they have fevers.
Any information that an employer does obtain from an employee or the employee’s health provider about an employee being infected with the Coronavirus must be kept confidential and apart from the employee’s personnel file, and the employer should not distribute information beyond those on a need-to-know basis (and only to the extent such individuals have a need to know). Employers may tell other employees that they may have been exposed to the Coronavirus and thus should seek medical attention, but may not reveal the name of the employee who has already contracted the virus. Likewise, it is not unlawful to tell an employee that he or she may voluntarily reveal to others in the workplace that he or she has contracted Coronavirus.
Avoiding Discrimination, Retaliation, and Whistleblower Claims
Although an employer may send an employee home based on a reasonable belief that the employee has been in contact with the Coronavirus, it is important to treat all similarly-situated employees equally. For example, employers must not treat individuals of a particular national origin (or who are associated with someone of a particular natural origin) any differently than other employees. Employers should also take care to follow existing policies when employees request leave or report workplace safety issues related to the Coronavirus to reduce exposure to potential retaliation claims under OSHA, the FMLA, or other applicable laws. In fact, employers should consider proactively reminding its workforce, and, in particular, its supervisors, about obligations to refrain from Coronavirus-related discrimination or harassment, and to report instances of same.
What to do if a Vaccine is Released?
At this time, no vaccine has been developed for the Coronavirus. However, if one is developed, employers may consider whether to develop mandatory vaccination policies. The EEOC has explained that an employer that adopts a mandatory vaccination policy may have to exempt employees based on either a disability under the ADA, or based on a sincerely-held religious belief under Title VII of the Civil Rights Act. In other words, from an employment law perspective, adopting a mandatory vaccination policy may be appropriate, but it would make sense to include a carve-out that the policy would yield to specific employees where required by applicable law. Employers should confirm that such a policy is acceptable under state and local law, as well as any applicable collective bargaining agreement.
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Employers should understand that there is no one approach that is best, and addressing issues related to the Coronavirus will require considering circumstances specific to the industry, the location(s) where the employer operates, the nature of its workforce, any contractual obligations, and the employer’s own risk/benefit analysis, among other considerations.
The issues raised in this alert are not exhaustive. This is a novel and constantly evolving event that requires vigilance and flexibility. The Hogan Lovells Employment Team is available to advise on all employment-related aspects of the Coronavirus response, from crafting company or office-wide policies, to handling concerns involving individual employees. Please contact one of the authors of this Alert or other Hogan Lovells employment attorneys with whom you regularly work for additional information related to the Coronavirus.
The Ninth Circuit recently ruled that salary history is no defense to a claim of sex discrimination under the federal Equal Pay Act, effectively expanding from the West Coast to the entire circuit a ban on a previously common hiring practice.
California, Oregon, Washington, and Hawaii have statutory bans on inquiring about job applicants’ salary history and/or using it to set a new hire’s pay under state laws. But the Ninth Circuit, after hearing Rizo v. Yovino, held that federal law prohibits using prior salary as an affirmative defense to claims of sex discrimination under the Equal Pay Act.
The Equal Pay Act, in simple terms, is supposed to ensure equal wages for equal work. If an employee can establish a sex-based wage differential, the employer is required to show that the differential is unrelated to gender. It can do so using four affirmative defenses: (1) seniority, (2) merit, (3) some measure of quantity or quality, or (4) “any other factor other than sex.” 29 U.S.C. § 206(d)(1).
The question in Rizo was whether salary history qualified as “any other factor.” The Court said “no.” It reasoned that relying on past pay effectively permitted “deeply rooted” pay discrimination between male and female employees to continue.
In making the ruling, the Court joined a circuit split on the question. Currently, the Second, Fourth, Ninth, and Tenth hold that salary history cannot be used as a defense. The Seventh Circuit has held that it may be, while the Eighth Circuit has held that the question requires case-by-case analysis.
The split makes the issue ripe for review by the U.S. Supreme Court, but in the meantime, an increasing number of state legislatures are taking matters into their own hands. Sixteen states have enacted some form of salary history restriction, and multiple other cities and counties have their own. Other states have taken the opposite approach, essentially “banning the ban.” Michigan and Wisconsin, for example, have passed laws prohibiting local governmental bodies from enacting laws which would prevent an employer from inquiring about an applicant’s prior salary.
Hiring managers should be aware of the restrictions in their jurisdictions, and all employers should be mindful that they must be able to articulate pay differentials between employees performing equal work.
In January 2020, Judge John Tran of the Fairfax County Circuit Court in Virginia held unenforceable non-competition and non-solicitation provisions in a government contractor’s consulting agreements entered into with independent contractors. The Metis Grp., Inc. v. Stephanie P. Allison, et al., Case No. CL 2019-10757. This case is a reminder that, particularly for Virginia employers, restrictive covenants should not be drafted as broader than necessary to protect an employer’s legitimate business interests.
The Metis Group engaged two defendant doctors in 2017 as independent contractors to help service a blanket purchase agreement (BPA) awarded to the Metis Group and others by the United States Army for the provision of psychological services. That BPA authorized the Army to purchase psychological services through task orders issued to any company awarded the BPA. As a condition of their engagement as independent contractors, the Metis Group required the doctors to agree in their consulting agreements not to perform any “professional psychological services” for the Army except through the Metis Group during the term of the consulting agreement (which was indefinite until terminated by either party upon written notice). Although the foregoing provision was referred to as a “non-solicitation” provision in the consulting agreement, the court found that it was effectively a non-competition provision and reviewed it as such.
The consulting agreements also prohibited the independent contractors from soliciting any Metis employee or contractor to, among other things, terminate their employment or other contractual relationship with Metis during the term of the consulting agreements and for two years thereafter.
By late 2019, both doctors had left the Metis Group and were performing professional psychological services for the Army, but through Preting, LLC, a competitor of the Metis Group. The Metis Group filed suit, alleging breach of contract against the doctors and tortious interference with contract by Preting. The defendants filed a plea–in-bar*, asserting that the restrictive covenants were unenforceable.
The Court held that the restrictive covenants were unenforceable because they were overbroad and contrary to public policy.
As for the non-competition provision, it prevented the doctors from providing any professional psychological services for the Army anywhere in the world, for any purpose, and whether or not the purpose competes with the Metis Group. As the Court noted, this would have prohibited the defendant doctors from practicing for the Army on a completely different project on the other side of the world, regardless of whether the Metis Group had ever performed work in that region or on a similar project. The court rejected Metis’ attempt to analogize its non-compete to that in Preferred Systems Solutions, Inc. v. GP Consulting, LLC, 732 S.E.2d 676 (Va. 2012), which it explained enforced a twelve-month post-termination employment non-compete which was “limited to the support of a particular program run under a particular government agency and limited to the same or similar type of information technology support offered by the employer.” By contrast, “[h]ere, the restriction . . . applies to the U.S. Army for whatever programs for which it may need support regardless of the program involved or place of performance.”
The Court also noted that preventing the defendant doctors from providing any professional psychological services to the Army anywhere in the world would have had the effect of helping to perpetuate a monopoly over those doctors’ in-demand services. Such an outcome would violate the public policy of Virginia. As a result, the non-compete was unenforceable on that basis as well.
Likewise, the Court found the non-solicitation of employees and contractors provision to be unenforceable, criticizing this provision for not being limited to solicitation of employees or independent contractors working under the same task order, and also restricting solicitations by non-competitors.
Interestingly, the Court offered some pointers for the Metis Group to implement in future non-competion and non-solicitation agreements involving analogous factual circumstances. Those tips included (i) narrowing the definition of covered clients for whom psychological services could not be provided from “the entire U.S. Army” to something more limited, like “the specific client serviced under the particular task order” (e.g., “the 1st Capabilities Integration Group at Fort Belvoir”); (ii) narrowing the applicable services from “all psychological services” to only those “same or similar” services provided under a task order; (iii) specifying a specific time upon which the non-compete expired, rather than leaving it indefinite, and specifically not continuing a noncompete against these independent contractors when the task order had ended; and (iv) as for the non-solicitation of employees or independent contractors, the court would have limited that to those employees or independent contractors “working under the same Task Order to work on behalf of another competitor under the same task order” and would not have extended this provision beyond the end of the task order.
Although the court offered these pointers, it declined to “blue pencil” or “reform” these provisions. Instead, consistent with the longstanding rule in Virginia which is not to fix an invalid restrictive covenant by revising it, the court struck them down altogether.
Thoughts for Employers
This case is a reminder that it is important for Virginia employers to be careful and thoughtful about the specific language used in their non-compete, non-solicit, and other restrictive covenant agreements, and to ensure that language is no broader than necessary to protect legitimate business interests. To be sure, this case involved independent contractors and not employees. Had the defendants been employees who were involved in more than just the discrete tasks set forth in their consulting agreements, it is possible the court would have tolerated a broader non-competition provision. Nonetheless, employers should take care to draft restrictive covenants in exacting language that cannot be hypothetically interpreted in an overbroad manner. For example, in Virginia and in a growing number of states, if a non-competition agreement could be used to prohibit someone from working in any capacity for another business, even if that capacity is not competitive against the prior employer or does not relate to the employee’s work for the prior employer, it may be vulnerable to challenge. Virginia employers should take this opportunity to review their restrictive covenants to evaluate their reasonableness and enforceability.
For more information about this case or about drafting, enforcing, or challenging restrictive covenants, please contact one of the authors of this post or a Hogan Lovells lawyer with whom you work.
* A plea-in-bar is a procedural defense that may be asserted under Virginia law. It “asserts a single issue, which if proved creates a bar to a plaintiff’s recovery.” Hawthorne v. VanMarter, 692 S.E.2d 226 (Va. 2010).
The National Labor Relations Board (“NLRB”) announced that it is releasing a final rule (the “Rule”) on February 26, 2020 revising the prior joint-employer standard used to hold franchisors or businesses that use employees hired by third parties jointly liable for violations of federal labor law. The NLRB stated that this change in the Rule would allow “greater precision, clarity, and detail” in interpreting the joint-employer standard and incorporated the nearly 29,000 comments it received on the Rule which was initially proposed in 2018.
Under the prior Browning-Ferris standard, a company could be required to bargain with another employer’s union and/or face liability under the National Labor Relations Act if the company merely reserved the right to exert control over those employees’ terms and conditions of employment, however attenuated or indirect the right may be. Such ruling often exposed employers, such as franchisors or parent companies, to lawsuits due in part to the uncertain nature of what constituted “indirect” control.
Effective April 27, 2020, the Rule clarifies that joint employment will only be found in scenarios where a company exercises “substantial direct and immediate control” over the “essential terms and conditions” of employees.
Specifically, the Rule:
- Specifies that a business is a joint employer of another employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment;
- Clarifies the list of “essential terms and conditions” as: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction;
- Provides that to be a joint employer, a business must possess and exercise such substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees as would warrant a finding that the business meaningfully affects matters relating to the employment relationship;
- Specifies that evidence of indirect and contractually reserved but never exercised control over essential terms and conditions, and of control over mandatory subjects of bargaining other than essential terms and conditions, is probative of joint-employer status, but only to the extent that it supplements and reinforces evidence of direct and immediate control;
- Defines the key terms used in the final rule, including what does and does not constitute “substantial direct and immediate control” of each essential employment term;
- Makes clear that joint-employer status cannot be based solely on indirect influence or a contractual reservation of a right to control that has never been exercised.
The Hogan Lovells Employment Team will continue to monitor the Rule and provide further updates as they develop. For further information related to the Rule, or any other employment matter impacting your business, please contact the authors of this article or the attorney you regularly work with at Hogan Lovells.
Pay equity continues to be a complex and evolving issue for employers. Although the Equal Employment Opportunity Commission (“EEOC”) recently ended its Component 2 pay data collection, employers still face substantial challenges and developments relating to pay equity, including state law developments, public pressure, and litigation. This article briefly summarizes some of the recent developments.
EEO-1 Component 2 Pay Collection Over. In 2019, employers scrambled to comply with a surprising court order resurrecting a requirement to submit employee pay data to the EEOC for calendar years 2017 and 2018, known as “EEO-1 Component 2.” Please see our prior client alerts for more details on what employers were required to submit. On February 10, 2020, the U.S. District Court for the District of Columbia approved the EEOC’s request to deem this collection completed. The February 10 order ends, for now, the federal government’s first-ever broad-based collection of pay data. While this collection is complete (for now), the EEOC and the Office of Federal Contract Compliance Programs (“OFCCP”) (which covers federal contractors), still place a high priority on compensation discrimination in compliance activities directed to individual employers. In fact, the EEOC continues to pursue compensation discrimination claims, including settling an EEOC lawsuit as recently as January of this year. The OFCCP, in its 2018 Directive, explicitly states that OFCCP’s priority is eliminating pay discrimination.
New Legislative, Litigation, and Public Pressure on Employers. Even without Component 2 pay data collection, employers face increasing legislative, litigation, and public pressure regarding pay equity. On the legislative side, state and local jurisdictions have been active. For example, New York recently amended its law which previously required equal pay for women and men performing “equal work.” The new law now extends to “substantially similar” work and to protected classes beyond sex, such as age, race, or sexual orientation. Colorado became the first state to pass legislation requiring employers to include a compensation range in every job posting. And Alabama passed its first pay equity law.
Several state and localities have also banned asking applicants about salary history, believing that consideration of past pay perpetuates disparities among women and minorities. California, Massachusetts, New Jersey, and New York, among others, have some form of salary history inquiry ban in effect. On February 6th, the U.S. Court for Appeals for the Third Circuit reversed a lower court injunction that prohibited the City of Philadelphia from enforcing its salary history inquiry ban. In doing so, the court reasoned that the ban advanced a substantial government interest in closing wage gaps, and rejected an argument that this interest should yield to an employer’s asserted right, under the First Amendment, to discuss the issue of pay.
Employees have also continued to bring wage discrimination claims against an array of industries, including well-known technology, media, legal services, manufacturing and retail companies, as well as universities.
Likewise, following the #MeToo and Time’s Up movements, which have not lost their strength, activism on gender and diversity has driven many public companies to report their gender pay gap. To date, companies such as Amazon, Apple, Bank of America, Citigroup, Goldman Sachs, Intel, Microsoft, UnitedHealth Group, and Wells Fargo, among many others, have shared their pay equity numbers. Such disclosures serve as a reminder that amid growing pressure from various constituencies, including investors, employees, boards and the public, pay equity issues are in the forefront.
Conclusion. Addressing pay equity is an important objective, but not a simple exercise. It involves judgments concerning company pay structures, processes and policies, whether, when and how to conduct pay equity analyses, how to use the results, and whether any analyses are conducted under attorney-client privilege for the purpose of legal advice. And the answers to these questions may be different from case to case, depending on the location(s) where the employer operates, changes in the law, as well as practical goals and considerations. Internal management, counsel, statisticians, and compensation consultants all have a role concerning the issue, and their roles should be carefully considered and integrated as appropriate.
For more information on pay equity or other employment law issues, please contact one of the authors of this article or the Hogan Lovells lawyer with whom you work.
Last week, New Jersey Governor Phil Murphy signed an amendment to the New Jersey WARN Act, dramatically expanding the Act’s reach. Effective July 19, 2020, the amendment makes the Act one of the most stringent state WARN acts in the country.
Here are the key changes:
- WARN is now triggered by any termination of 50 or more full-time or part-time employees in New Jersey, whether at a single or multiple sites. Previously, the Act was triggered only if at least 33% of the workforce was affected at a single site of employment or 500 full-time employees are terminated in total. The Act also previously applied only to the termination of full time employees. And the kicker: An out-of-state transfer or a transfer to a site in New Jersey beyond 50 miles now qualifies as a “termination of employment” under the Act.
- Notice period increased from 60 days to 90 days. New Jersey employers covered by the Act now must provide 90 days’ notice of a termination.
- Severance mandated for all employees. Employees terminated as part of a WARN-covered event are now entitled not just to 90 days’ notice, but also to severance of 1 week for every year of employment. Employers cannot condition this severance on a release. If employers want a release, they will need additional consideration.
- Additional penalty for failure to comply. Employers who fail to comply with the required notice period are still required to issue back pay for the time the period of non-compliance. However, NJ employers now also must pay an additional 4 weeks of severance to each terminated employee if they fail to meet the notice period.
These are big changes that will affect how layoffs are conducted in New Jersey. New Jersey employers should consult counsel if there is a potential layoff on the horizon.