Last month, New York City Mayor Bill de Blasio signed a bill into law amending and expanding the NYC Earned Sick Time Act (ESTA). The law previously allowed full-time and part-time NYC employees who work more than 80 hours in a year to accrue up to 40 hours of paid sick leave per year to be used for:

  • an employee’s own mental or physical illness, injury or health condition
  • an employee’s need for medical diagnosis, care, or treatment of a mental or physical illness, injury or health condition
  • care of a family member who needs medical diagnosis, care, or treatment of an illness, injury, or health condition, or who needs preventative medical care
  • an employee’s need to care for a child whose school or child care provider is closed due to a public health emergency.

Under the current version of the law, family members were defined as children (biological, adopted, or foster children, legal wards, children of an employee standing in loco parentis), grandchildren, spouses, domestic partners, parents, grandparents, children or parents of an employee’s spouse or domestic partner, or siblings (including half, adopted, or step siblings).

How the Amendment Expands the Old Law:

The amendment, which will go into effect on May 5, 2018, renames the law to the “NYC Earned Sick and Safe Time Act” and provides employees with additional situations in which they can use accrued paid leave. It expands the law to allow employees to use accrued paid leave where an employee or an employee’s family member has been the victim of a family offense matter, sexual offense, stalking, or human trafficking.  For example, an employee may use accrued paid leave to:

  • obtain services from a domestic violence shelter, rape crisis center, or other shelter or services program for relief from a family offense matter, sexual offense, stalking, or human trafficking;
  • participate in safety planning, temporarily or permanently relocate, or take other actions to increase the safety of the employee or employee’s family members from future family offense matters, sexual offenses, stalking, or human trafficking;
  • file a complaint or domestic incident report with law enforcement;
  • meet with a district attorney’s office; and/or
  • enroll children in a new school.

Additionally, the amendment expands the definition of family member to include any other individual related by blood to the employee and any other individual whose close association with the employee is the equivalent of a family relationship.

What Employers Need to Know

Employers will be permitted to require employees to provide reasonable documentation of an employee’s request to use accrued paid time following an employee’s absence of more than three consecutive work days. This documentation can take many forms, such as a signed note from a victim’s organization, attorney, member of a clergy, or medical provider, a police or court record, or a notarized letter from an employee documenting the need for leave.  Employees supporting documentation must remain confidential, and employers are not permitted to seek additional information (beyond the reasonable documentation described above) relating to the domestic violence, sexual offenses, stalking or human trafficking.

Employers must notify their workforce of the new law by May 5, 2018.

Transgender and gender non-conforming employees now have added protections in California workplaces. On October 15, 2017, Governor Jerry Brown of California signed an amendment to California’s Fair Employment and Housing Act (“FEHA”) requiring certain California employers to provide additional sexual harassment prevention training. The original law, Government Code 12950.1, requires employers with at least 50 employees to train supervisors in sexual harassment and abuse prevention for at least two hours. The new amendment (SB 396) requires that the training include instruction on gender identity, expression and sexual orientation by an experienced and knowledgeable teacher.

What must employers do to comply? Besides providing the updated training, beginning on January 1, 2018 employers must display an informational poster on transgender rights in a central part of the workplace.

Your Hogan Lovells labor and employment team is available to assist you in complying with these new requirements, including updating your training modules and advising on any issues.

Employers generally assume, correctly, that an employee who fails to report for duty at the end of an FMLA leave with a specified end date can be terminated.  But it is important not to send out that termination letter too quickly, because employees sometimes need more leave than originally anticipated.  Federal regulations require employees to provide “reasonable notice (i.e., within two business days) of the changed circumstances where foreseeable.”  29 C.F.R. § 825.311.  This “reasonable notice” rule seems designed to benefit the employer.  However, a federal district court in Virginia recently interpreted it to permit an employee who learned from her doctor on the very last day of her FMLA leave that she needed additional leave to wait several days after her leave ended to tell her employer she needed a brief extension.  Because the employer fired the employee the day after her leave expired, before the end of the “reasonable notice” period, the court found an FMLA violation and awarded the employee liquidated damages and front pay totaling nearly $750,000.  Perry v. Isle of Wight County, No. 2:15-cv-204 (E.D. Va. Aug. 10, 2017), appeal docketed, No. 17-2054 (4th Cir. Sept. 11, 2017).

Employers can take measures to avoid being caught by surprise when an employee who has not exhausted her available FMLA leave time needs to extend her leave.  For example, employers should consider requiring periodic updates of the employee’s status and anticipated return date during the leave, particularly as the return-to-work date approaches.  In addition, employers should review their FMLA forms and policies to be sure that employees are clearly informed of their duty to provide reasonable notice of any changed circumstances.  Employers should also consider defining “reasonable notice” to mean two business days, rather than the four business days afforded by the employer in Perry.  Finally, when an employee, such as the Perry plaintiff, has a doctor’s appointment scheduled for the last day of leave, consider requesting same-day notice of any need for additional leave, while bearing in mind that the law may afford the employee a grace period in which to provide such notice.

New York employers may soon be subject to new scheduling and pay requirements pertaining to their non-exempt employees who work “on-call” shifts. New York Governor Andrew Cuomo recently announced that the New York State Department of Labor (NYDOL) is advancing regulations on “just-in-time” or “on demand” scheduling, which allows employers to schedule employees’ shifts shortly before they start.

As the law stands today under the Minimum Wage Order for Miscellaneous Industries, non-exempt employees who report to work for on-call shifts are entitled to a minimum of four hours of pay at the basic minimum hourly wage. According to prior NYDOL guidance, employers may offset these call-in payments with amounts paid above the minimum wage and overtime rates in a given workweek.  For example, if the amount paid to an employee for the workweek exceeds the minimum and overtime rate for the number of hours worked and the minimum rate for any call-in pay owed, no additional payment for call-in pay is required.

Under the newly-proposed regulations, employers will be subject to the following requirements:

  1. Employees who report to work for a shift not scheduled at least 14 days in advance will be entitled to an additional two hours of call-in pay.
  2. Employees whose shifts are cancelled within 72 hours of the scheduled start time will be entitled to at least four hours of call-in pay. Those four hours may be reduced to the number of hours that an employee typically works for a call-in shift if the employee’s total hours worked or scheduled to work are consistent on a week-to-week basis.
  3. Employees who are required to be on-call and available to report for any shift will be entitled to at least four hours of call-in pay.
  4. Employees who are required to contact their employer within 72 hours of the start of a shift to confirm whether to report or not will be entitled to four hours of call-in pay.

The call-in payments described above will be calculated at the minimum wage rate with no allowances for meals, lodging, and utilities. Such payments shall not be considered hours worked for purposes of calculating overtime pay.  Notably, the proposed requirements will not apply to employees who are covered by a collective bargaining agreement that expressly provides for call-in pay.

The proposed regulations appeared in the November 22, 2017 State Register and are subject to a 45-day comment period. We will continue to track the progress of these regulations and update our readers with any further developments.

Specialists have long touted certain significant advantages to employers that come along with maintaining ERISA severance plans, and a recent district court case highlights some of these advantages.

On November 9, 2017, in the unpublished opinion of Huddleston v. Scottsdale Healthcare Hospitals Inc, 2017 U.S. Dist. LEXIS 185985 (Nov. 9, 2017), an Arizona district court concluded that because a severance plan unambiguously stated it was a severance plan under ERISA, a former employee’s state-law claims for severance benefits were preempted by ERISA and the resulting claim for benefits under the employer’s severance plan were dismissed based on the employee’s failure to exhaust his administrative remedies under the plan.

The plaintiff had accepted an offer of employment with the defendant, and the offer letter stated that upon receipt of an executed non-compete agreement, the plaintiff would receive a nine-month severance package in the event of an involuntary termination of employment. The plaintiff signed the non-compete agreement. The offer letter included a copy of the applicable severance plan, which explicitly stated that it was intended to be a severance pay plan within the meaning of ERISA § 3(2)(B)(i). The plan also contained a claims procedure, which required a beneficiary to file any claim for severance pay with the Plan Administrator under Department of Labor regulations and using specified procedures.

Approximately one year later, the defendant sent the plaintiff a notice that (i) it had amended its severance plan, which superseded the severance plan that existed at the time of the offer of employment, (ii) the plaintiff’s level of employment was no longer eligible to participate in the severance plan and, (iii) as a result, the non-compete agreement signed by the plaintiff when he accepted the job was null and void. A few months later, the plaintiff was terminated without cause, and the defendant refused to pay severance to the plaintiff.

The plaintiff filed suit, alleging various state law causes action, including breach of contract, breach of an implied covenant of good faith and fair dealing, promissory estoppel, treble wages and declaratory judgment. The defendant moved to dismiss all of the plaintiff’s claims on the grounds that they were preempted by ERISA and the plaintiff failed to exhaust his administrative remedies under the plan. The court agreed with the defendant, dismissing the case in its entirety. The court held that the defendant’s severance plan was clearly and unambiguously an ERISA severance plan and, accordingly, (i) the plaintiff’s state law claims were preempted by ERISA and (ii) in order to bring an action arising from the ERISA severance plan, the plaintiff was required to first exhaust the administrative remedies under the severance plan before filing suit.

This decision illustrates some of the significant advantages of ERISA severance plans, which may be well-worth the inconvenience of the documentary and reporting requirements that come along with maintaining an ERISA plan.

Employers subject to EEO-1 reporting were relieved to learn that the controversial new pay data reporting requirement for this year’s EEO-1 report was recently suspended.  The revisions would have required employers, for the first time, to report wage information and hours worked for all employees by race, ethnicity, and sex within 12 pay bands in their annual EEO-1 reports. The mandate was widely criticized for being administratively burdensome and ineffectual to achieve its stated purpose of identifying systemic pay discrimination.  On August 29, 2017, the White House Office of Management and Budget announced that the pay data reporting requirement would be immediately stayed pending review.

The longstanding requirement to report the race, ethnicity, and sex of employees by job category, however, remains in effect, as does the newly extended deadline of March 31, 2018 for the 2017 report. This means that employers subject to EEO-1 reporting—including employers with 100 or more employees, and employers with 50 or more employees and a federal contract or subcontract amounting to at least $50,000—must submit race, ethnicity, and sex data by the new deadline, using a “workforce snapshot period” between October 1 and December 31, 2017. EEO-1 data is typically submitted on the EEO-1 Survey portal, https://www.eeoc.gov/employers/eeo1survey/, which states that previous filers will receive notification letters approximately two months before the March 31, 2018 filing deadline. Relatedly, federal contractors required to file the VETS 4212 form should note that the deadline for that form has been extended to November 15, 2017, to accommodate employers impacted by Hurricanes Harvey and Irma.

Employers facing a determination by the OFCCP (Office of Federal Contract Compliance Programs) that they have violated the anti-discrimination laws applicable to federal contractors often confront a black box when trying to discern the basis for the agency’s claims against them.  OFCCP typically refuses to provide the backup statistical analyses and other data supporting its claims, asserting, among other defenses, the “deliberative process privilege” that protects executive officials’ pre-decisional deliberations.  In a noteworthy recent decision, the Administrative Law Judge presiding over OFCCP’s current enforcement action against computer tech giant Oracle Corporation ruled that OFCCP must provide Oracle with the facts supporting its claim that the company has engaged in widespread hiring and compensation discrimination against women and minorities—Including the evidentiary bases for its statistical findings.

Although the ruling is not binding in other administrative or judicial forums and may be modified, employers should rely on it to encourage the OFCCP—and also the EEOC, which is similarly protective of its statistical findings in systemic discrimination cases—to be more transparent with companies under investigation.  Early sharing of the agency’s findings during the audit or conciliation process, before any enforcement action is brought, would allow employers and their experts to evaluate the agency’s claims and facilitate early resolution of disputes or demonstrate compliance.

The home health care industry has been buffeted in the past year by almost constant winds of change and conflicting guidance. Home health care agencies, which provide crucial live-in aides to New York’s most vulnerable, elderly and ill residents, had relied on the New York Department of Labor’s guidance to pay their workers for years. The NYDOL’s policy since 2010 was that “live-in” aides should be paid for 13 hours of a 24 hour shift, as long as those aides were allowed 8 hours of sleep, (5 of those hours must be uninterrupted), and 3 uninterrupted hours for meals. This policy, known in the industry as the “13 hour rule” meant that aides were compensated for hours worked, but agencies were not bankrupted by needing to pay for the full 24 hour shifts.

Since the spring, three New York State Appellate Division cases have ruled that non-residential home health care attendants must be paid for the entire 24 hour shift, even if they take the requisite sleep and rest periods. The three cases, Tokhtaman v. Human Care, LLC, 2017 NY Slip Op 02759 (1st Dept. Apr. 11, 2017); Andryeyeva v. New York Home Attendant Agency, 2017 NY Slip Op 06421 (2d Dept. Sept. 13, 2017) and Moreno v. Future Care, 2017 NY Slip Op 06439 (2d Dept. Apr. 11, 2017) rocked the home health care industry.[1] Violations of the New York Labor Law come with a six-year statute of limitations, so agencies that have been faithfully following the 13 hour rule for the past seven years would nonetheless be hit with lawsuits for enormous amounts of unpaid wages. The result? Many agencies would be bankrupted, many aides would be without employment and many needy New Yorkers would be without care.

After an understandable outcry, the NYDOL issued an amended emergency Wage Order on October 6, 2017. The Wage Order, §142.2.1(b) was amended to include the following clarification:

Notwithstanding the above, this subdivision shall not be construed to require that the minimum wage be paid for meal periods and sleep times that are excluded from hours worked under the Fair Labor Standards Act of 1938, as amended, in accordance with sections 785.19 and 785.22 of 29 C.F.R. for a home care aide who works a shift of 24 hours or more.

The amended Wage Order confirms the industry’s understanding that aides who work 24 hour shifts do not need to be paid for their meal and sleep periods. The federal regulations referenced in the amendments essentially state that employees do not need to be paid for “bona fide” meal and sleep periods (at 30 minutes “completely freed” from duties to eat and 8 hours to sleep, at least 5 of which must be uninterrupted).

What’s next? The Court of Appeals has yet to weigh in on Tokhtaman et. al., and it may clarify or overturn those decisions. At the very least, New York’s highest court will have to decide whether the Appellate Division decisions will apply retroactively, so agencies may still be liable for back pay prior to October 6. The amended Wage Order also does not appear to apply retroactively, so more guidance is required on that front.

We will keep you apprised of news on these fast-moving and high-stakes issues affecting New Yorkers.

[1]  Not all courts agree with this view. In Bonn-Wittingham v. Project O.H.R., Inc., 2017 WL 2178426 (E.D.N.Y. May 17, 2017), the court rejected the reasoning in Tokhtaman because the DOL guidance was not unreasonable such that it should not be given deference.

Beginning January 1, 2018 nearly all private employers in New York must prepare for what some say is the most comprehensive paid family leave program in the nation. The New York Paid Family Leave Program (NYPFL) will provide New Yorkers job-protected, paid leave to bond with a new child, care for a loved one with a serious health condition, or help relieve family pressures when someone is called to active military service.

What the NYPFL Does

The new law has three primary roles. First, it provides that parents may take time off to bond with their child during the first twelve months following the birth, adoption, or fostering of a child (including children born, adopted, or fostered within twelve months of when the law takes effect).  Second, it provides for paid time off if an employee’s family member (spouse, domestic partner, child, parent, parent-in-law, grandparent or grandchild) has a serious health condition.  Under the new law, such conditions are defined as an illness, injury, impairment or physical or mental condition that involves either inpatient care or continuing treatment or supervision by a health care provider.  Absent any complications, taking care of a family member with the common cold, flu, ear aches, upset stomach, minor ulcers, headaches other than migraines, routine dental or orthodontic problems do not meet the definition of a serious health condition.

Third, paid family leave is available when a spouse, child, domestic partner or parent of the employee is on active military duty abroad or has been notified of an impending call of active duty abroad. In this situation, the employee may request leave to help out with obligations arising out of the call to duty, such as making child care arrangements, attending certain ceremonies, or making financial or legal arrangements to address the military member’s absence. Of note, paid family leave may not be used for an employee’s own serious health condition or qualifying military event.

In each of the above scenarios, an eligible employee must receive 50% of their average weekly wage (AWW) up to and not to exceed 50% of the New York State Average Weekly Wage (SAWW) ($1305.92 per week, so 50% of this is a $652.96 benefit) for up to 8 weeks. The benefit amounts will be paid by the state through a fund that is financed through payroll deductions.  The benefit schedule gradually increases year to year as follows:

2018: 8 weeks, 50% of employee’s AWW, up to 50% of SAWW

 2019: 10 weeks, 55% of employee’s AWW, up to 55% of SAWW

 2020: 10 weeks, 60% of employee’s AWW, up to 60% of SAWW

 2021: 12 weeks, 67% of employee’s AWW, up to 67% of SAWW

In addition, an eligible employee must be provided with continuation of health insurance while on PFL and job protection.

Who the NYPFL Covers

Eligible employees are employees who at the time they apply for PFL have a regular work schedule of 20 or more hours per week who have been working for 26 weeks, and employees with a regular work schedule of less than 20 hours per week who have been working for at least 175 days. This includes non-US citizens and undocumented workers as well, though it does not expand to independent contractors or freelance workers.  Additionally, while spouses may concurrently take PFL, if both spouses work for the same employer, the employer may deny PFL to one of the spouses.

Coverage of this law is extremely broad for employers. Any New York private employer who employs at least one individual for thirty consecutive days falls within the purview of the law, and must prepare accordingly.

More information to come.

The new draft tax bill, unveiled last week by the Trump administration has many provisions which would significantly affect many businesses in the United States. This post does not focus on all of the implications for the draft tax bill for companies, but highlights two provisions, which, if enacted, will turn the world of executive compensation for both public and private companies upside down.

Repeal of 409A/Replacement with 409B (Title III, Subtitle I, Sec.3801)

Section 409A would be repealed and replaced by 409B, which effectively would end most deferred compensation.  Under 409B, an employee would be taxed on non-qualified compensation as soon as there is no substantial risk of forfeiture with regard to that compensation.  The only substantial risk of forfeiture would be performance of services (i.e., time-based vesting).  Performance vesting and covenants not to compete would not be considered a substantial risk of forfeiture.  It also would apply to equity compensation such as RSUs, PSUs, SARs and stock options as well as to severance payments.  Section 409B would be effective for amounts attributable to services performed after 2017. Current law would apply to existing non-qualified deferred compensation arrangements until the last tax year beginning before 2026, when such arrangements would become subject to the new provision.

Changes to 162(m) (Title III, Subtitle I, Sec.3802)

Section 162(m) would be amended in two important ways.  First, the exceptions to the $1 million deduction limitation under 162(m) for commissions and performance-based compensation would be repealed. Thus, performance based compensation and options/SARs no longer would be exempt.  Second, the definition of “covered employee” would be revised to include the CEO, the CFO and the three other highest paid employees (instead of the CEO and the next four highest compensated officers).  Once an individual qualifies under the definition, the deduction limitation would apply for federal tax purposes so long as the corporation pays remuneration to that person or his or her beneficiaries. These changes would be effective for tax years beginning after 2017.

While of course this is proposed legislation, and one doesn’t know where this will go or if it will be revised along the way, it is important for employers to understand the possible impact of these provisions. As was the case when 409A was first enacted, there will likely be frustration and confusion along the way. Employers should keep an eye on this draft bill, and, if the bill becomes law, it would be prudent to seek out executive compensation and employment lawyers for guidance. Stay tuned, this could get very interesting…