As we have reported in earlier posts, the U.S. Equal Employment Opportunity Commission (“EEOC”) has previously taken the position that discrimination on the basis of “sexual orientation” is prohibited under Title VII of the Civil Rights Act of 1964.  Although not explicitly listed as a protected category under Title VII, the EEOC views sexual orientation discrimination as a form of “associational discrimination” on the basis of sex because it involves an employee being treated differently based on his or her association with a person of the same sex. The EEOC first asserted its position with respect to sexual orientation discrimination in April 2012, in Macy v. Holder, a case in which the Bureau of Tobacco, Firearms and Explosives withdrew an offer of employment after an applicant revealed that she was in the process of transitioning from male to female.  Later that same year, the EEOC issued its Strategic Enforcement Plan, in which the EEOC made “coverage of lesbian, gay, bisexual and transgender individuals under Title VII’s sex discrimination provisions” a top priority.  In July 2015, the EEOC issued another decision against the Federal Aviation Administration in which it held that discrimination based on sexual orientation constituted a form of sex discrimination. On March 1, 2016, the EEOC took its position one step further by filing lawsuits in the U.S. District Court for the Western District of Pennsylvania against Scott Medical Health Center and in the U.S. District Court for the District of Maryland against Pallet Companies, d/b/a IFCO Systems NA, alleging discrimination based on sexual orientation under Title VII. In the suit against Scott Medical Health Center, the EEOC alleges that a gay male employee allegedly suffered harassment in the workplace due to his sexual orientation.  The complaint alleges that the employee’s supervisor referred to him using anti-gay epithets and made offensive comments about his sexuality and sex life.  The complaint further alleges that although the employee complained of how he was treated, his manager refused to take any corrective action, forcing him to resign from his position. In the suit against IFCO Systems, the EEOC alleges that a supervisor harassed a gay female employee because of her sexual orientation.  The complaint alleges that the employee’s supervisor made comments about the employee’s orientation and appearance, and made sexually suggestive gestures toward her.  The complaint further alleges that the employee complained about the harassment but was terminated shortly after making the complaint. In a press release announcing the two lawsuits, the EEOC stated that these two suits “solidify its commitment to ensuring that individuals are not discriminated against in the workplace because of their sexual orientation.” Despite the EEOC’s continued assertions that Title VII encompasses sexual orientation as a protected category, there is no dispute that the plain language of Title VII does not expressly prohibit discrimination on the basis of sexual orientation.  Of course, employees in New York are nevertheless protected against discrimination based on sexual orientation, because the New York Human Rights Law already includes such protection.  If defense counsel challenges the EEOC’s interpretation, the federal district courts will have the opportunity to establish a precedent regarding whether this protection also exists under Title VII.

As we reported in a prior blog post, there is a case currently in front of the U.S. Supreme Court (Friedrichs v. California Teachers Association) in which the mandatory payment of union agency shop fees by public sector employees is being challenged as unconstitutional.  Oral argument in the case was heard by the Supreme Court on January 11, 2016.  On February 13, 2016, Supreme Court Justice Antonin Scalia passed away.  What is the likely impact of Justice Scalia's death on the outcome of this case? It was anticipated that based upon the questions posed during oral argument that the justices would likely find in favor of the petitioners by a ruling of 5-4, with Justice Scalia being one of the five justices holding that union agency shop fees in the public sector are unconstitutional.  Justice Scalia’s predicted opinion on the issue was evidenced by the following discussion with the petitioners' counsel during the oral argument regarding whether it would even be permissible to require someone to contribute to a cause that he or she does believe in, let alone a cause that he or she does not wish to support: Justice Scalia:  Mr. Carvin, is -- is it okay to force somebody to contribute to a cause that he does believe in? Mr. Carvin:  I wouldn’t think, Your Honor, that you could force Republicans to give contributions. Justice Scalia:  Yes.  That’s -- that's what I’m thinking.  Could you enact a law?  Let’s say the national political parties are in trouble so they enact a law that says all -- all members of the Republican party, if you want to be a member you have to contribute so much money. Mr. Carvin:  No. Justice Scalia:  Is that okay? Mr. Carvin:  No, it’s not, and that’s because the bedrock principle, as Harris made clear, is not whether or not you vividly oppose what they’re saying -- Justice Scalia:  Right. Mr. Carvin:  -- it's because you don't wish to subsidize it. Justice Scalia:  Exactly.  So I don't know why you're putting so much emphasis on the fact that your -- your clients oppose.  It really wouldn't matter, would it? Mr. Carvin:  No. The death of Justice Scalia leaves eight Supreme Court justices, which could result in a 4-4 tie in one of the closest cases of this term.  Many political commentators believe it is unlikely that another Supreme Court justice will be appointed before June decisions are published by the Court.  In the event that there is a 4-4 tie, the lower court decision stands.  In Friedrichs, the lower court decision of the Ninth Circuit affirmed the district court’s finding in favor of the union.  Therefore, a 4-4 tie would mean that union agency shop fees in the public sector would remain constitutional, at least for now.  If this occurs, the petitioners' counsel has already announced that they intend to seek a rehearing next term by the full Court.

The following article was first published in Employment Law 360 on February 24, 2016. Being both an employment law geek and a "Star Wars" geek, I can’t help but watch the "Star Wars" movies through the troublesome lenses of my employment lawyer glasses, nor can I practice employment law without various “Yodaisms” running through my mind (e.g., “Do or do not. There is no try.”).  Having watched all of the "Star Wars" movies, it occurred to me while watching "Star Wars:  The Force Awakens," that the most fundamental source of disturbances in the Force are key characters — employees, if you will, for the purposes of this article — joining competitor masters (employers) with catastrophic results.  Darth Vader, Count Dooku and Kylo Ren all started their careers with the Jedi before leaving to a competitor. But what if they couldn’t?  How would a New York court view a noncompete agreement in the context of the Jedi Order?  Below is my best estimate as to how it would play out, at least in the lower court. SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -----------------------------------------------------------------------X LUKE SKYWALKER’S JEDI ACADEMY, Plaintiff, -against-                                                                                                     Index No. 2016/R2D2 KYLO REN, THE FIRST ORDER AND SNOKE, Defendants. -----------------------------------------------------------------------X Miller, J. This case comes before the Court on Plaintiff’s motion for a preliminary injunction:  (1) enjoining defendant Kylo Ren from working for Defendants Snoke and the First Order; and (2) enjoining the Defendants from using Plaintiff’s trade secrets and usurping its customer relationships.  For the reasons stated below, subject to Plaintiff’s posting of a sufficient undertaking, the Court grants the motion for a preliminary injunction. Facts The Court assumes the parties’ familiarity with the facts and will state them only briefly here.  Plaintiff at all times relevant to this proceeding operates a Jedi Training Academy for the purpose of teaching its pupils (Padawans) how to use the “light-side” of the Force.  Defendant Kylo Ren is a former employee of the academy who was terminated for various alleged acts of misconduct (discussed, infra).  During the course of his employment, Ren signed a noncompete agreement in which he agreed not to compete against the academy for a period of one year following his separation. Notwithstanding the noncompete agreement, immediately upon his termination, Ren commenced employment with Snoke and the First Order.  The parties stipulate that Snoke and the First Order are direct competitors of the academy and the constituency it serves.  The present litigation ensued.  The parties agreed to venue this matter in New York County, as it is apparently the only venue in which individuals from the “bar scenes” from "Star Wars IV" and "Star Wars VII" can blend in without feeling self-conscious.  New York law controls this matter despite the choice of law provision regarding “Intergalactic Law” because that law is too employer-friendly.  See Brown & Brown Inc. v. Johnson, 25 N.Y.3d 364 (2015). Standard for Issuing an Injunction The standard for obtaining a preliminary injunction is well-known.  The moving party must show the following:  (1) the likelihood of ultimate success on the merits; (2) threat of irreparable injury absent the granting of the preliminary injunction; and (3) that the equities are balanced in its favor.  See McLaughlin, Pivin, Vogel Inc. v. W.J. Nolan & Company Inc., 114 A.D.2d 165, 172 (2d Dep’t 1986). Enforceability of the Noncompete The Court of Appeals has espoused a three-pronged test for determining whether a restrictive employment covenant will be enforced.  An agreement will be enforced if it:  (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.  BDO Seidman v. Hirshberg, 92 N.Y.2d 382, 388-89 (1999).  Legitimate employer interests include protection of trade secrets and customer relationships. Ren argues that, as a threshold matter, because he was terminated without cause, the noncompete cannot be enforced against him.  Post v. Merrill Lynch, Pierce, Fenner & Smith Inc., 48 N.Y.2d 84, 88 (1979).  There is currently a split in the appellate divisions on this issue.  The Second Department follows the rule against enforcement where an employee was terminated without cause.  Grassi & Co., CPAs PC v. Janover Rubinroit LLC, 82 A.D.3d 700, 702 (2d Dep’t 2011); Borne Chemical Co. Inc. v. Dictrow, 85 A.D.2d 646 (2d Dep’t 1981).  Conversely, the First Department is more wary in its application of the rule.  Bell & Co. PC v. Rosen, 2012 N.Y. Misc. LEXIS 6230 (N.Y. Cnty. Sup. Ct. Nov. 8, 2012), aff’d, 979 N.Y.S.2d 564 (1st Dep’t 2014). The Fourth Department has also held on numerous occasions that involuntary termination without cause will not necessarily preclude enforcement of a noncompete.  Eastman Kodak Co. v. Carmosino, 77 A.D.3d 1434, 1436 (4th Dep’t 2010); Wise v. Transco Inc., 425 N.Y.S.2d 434 (4th Dep’t 1980). This Court need not resolve this conflict because the Court finds that Ren has stolen trade secrets.  Consequently, the Court can and will issue a preliminary injunction on this issue irrespective of the existence of a valid noncompete.  See, e.g., Churchill Communications Corp. v. Demyanovich, 668 F. Supp. 207, 211 (S.D.N.Y. 1987) ("Of course, an employee’s use of an employer’s trade secrets or confidential customer information can be enjoined even in the absence of a restrictive covenant when such conduct violates a fiduciary duty owed by the former employee to his former employer."). Trade Secrets A trade secret is defined as "any formula, pattern, device or compilation of information which is used in one's business, and which gives [the owner] an opportunity to obtain an advantage over competitors who do not know or use it."  North Atlantic Instruments Inc. v. Haber, 188 F.3d 38, 49 (2d Cir. 1999); see also Ashland Management Inc. v. Janien, 82 N.Y.2d 395, 407 (1993) (discussing six-factor test).  Plaintiff argues that as an employee of the academy, Ren was entrusted with access to all manner of trade secrets, including how to use various mind tricks, construct a lightsaber and turn into a “force ghost.”  Further, Ren was provided with lists of individuals sympathetic to the cause of the rebellion (customer lists). Ren argues that despite the mystique of the Jedi, nothing they do rises to the level of a trade secret.  According to Ren, a cursory Google search will reveal how to do mind tricks and any elementary school student with a computer and a basement can construct their own lightsaber (albeit poorly shaped).  We disagree with this analysis. While Ren is correct that an employer has the burden of demonstrating that "it took substantial measures to protect the secret nature of its information," (see Geritrex Corp. v. Dermarite Industries LLC, 910 F. Supp. 955, 961 (S.D.N.Y. 1996)), Plaintiff has met its burden.  Only a select few are provided with its secrets, its secrets are only revealed in secure locations, and any computerized lists are password-protected, encrypted and stored in the vaults of droids.  Further, the trade secrets cannot, as Ren contends, be so easily learned or reverse engineered.  Ren’s own incomplete lightsaber reveals that guarded secrets are still needed to complete it. In any event, the record is clear that Ren took physical copies of the academy’s confidential information, namely sympathizer lists, a partially working lightsaber, and force ghost manuals. It is well-settled that "an employee’s illegal physical taking or copying of an employer’s files or confidential information constitutes actionable unfair competition."  Advance Magnification Instruments Ltd. v. Minuteman Optical Corp., 135 A.D.2d 889 (3d Dep’t 1987). Further, "if there has been a physical taking or studied copying of confidential information, the court may in the proper case grant injunctive relief, not necessarily as a violation of a trade secret, but as an egregious breach of trust and confidence while in plaintiff’s service."  Garbor GuyButler Corporation v. Cowen & Co., 155 Misc.2d 39 (N.Y. Cnty. Sup. Ct. 1992); see also Ecolab Inc. v. Paolo, 753 F. Supp. 1100, 1112 (E.D.N.Y. 1991) ("Moreover, even if this information did not independently rise to the level of a trade secret, [the former employees’] wrongful retention of the customer information would justify treating it as a trade secret."); Marcone APW LLC v. Servall Co., 85 A.D.3d 1693, 1696 (4th Dep’t 2011) (“In any event, even assuming, arguendo, that the misappropriated information is not entitled to trade secret protection, we conclude that the court properly determined that injunctive relief is warranted on the alternative ground of breach of trust by the individual defendants in misappropriating plaintiff’s proprietary information.”) Irreparable Harm "It is clear that irreparable harm is presumed where a trade secret has been misappropriated."  Lumex v. Highsmith, 919 F. Supp. 624, 628 (E.D.N.Y. 1996).  This is because a trade secret, once lost, is lost forever; its loss cannot be measured in money damages.  North Atlantic Instruments Inc. v. Haber, 188 F.3d 38, 49 (2d Cir. 1999) (quoting FMC Corp. v. Taiwan Tainan Giant Industrial Co., 730 F.2d 61, 63 (2d Cir. 1984). Scope of the Injunction Ren is directed to return all hard copies of any trade secrets he has taken from the academy and destroy any electronic version of any trade secret in his possession.  For a period of one year, Ren may work for Snoke and the First Order, but not in any capacity that requires the use of the Force.  Plaintiff argues that under the Inevitable Disclosure Doctrine, Ren should be barred from working for the First Order in any capacity.  The Court will address this argument after further briefing in the context of summary judgment on Plaintiff’s request for a permanent injunction.  Ren may discuss joining the First Order with individuals and entities who are his own relatives, personal friends and/or “who, without solicitation, approach [him],” (Eastern Business Systems Inc. v. Specialty Business Solutions LLC, 292 A.D.2d 336, 338 (2d Dep’t 2002); see also Frank Crystal & Co. v. Dillmann, 84 A.D.3d 704 (1st Dep’t 2011); Weiser LLP v. Coopersmith, 74 A.D.3d 465 (1st Dep’t 2010)), or who wanted to leave the academy on their own accord.  Data Systems Computer Centre Inc. v. Tempesta, 171 A.D.2d 724 (2d Dep't 1991). The foregoing shall constitute the Order of this Court.

When an employee or former employee files a discrimination charge with the Equal Employment Opportunity Commission ("EEOC"), the first step in the investigation is generally the EEOC's request for a position statement from the employer in response to the charge.  Although many employers depend on their labor and employment counsel to gather the necessary information and submit the position statement on their behalf, some employers choose to handle the submission of the position statement themselves.  Employers that submit their own responses should be aware that the EEOC has published new procedures for how it will handle the release of information contained in employer position statements to the charging party.  The EEOC's new procedures and a Q&A for employers can be found on the EEOC's web site here. According to these new procedures, the EEOC will begin releasing employer position statements and “non-confidential attachments” to the position statements to a charging party upon request during the EEOC’s investigation.  The charging party will be permitted to submit a response to the EEOC investigator.  Notably, the EEOC procedures advise charging parties that they can submit this response in writing or they can simply call the investigator to discuss their response.  Employers will not be able to receive a copy of the charging party’s response, even if it is submitted in writing. Historically, a charging party’s ability to obtain the employer’s position statement and/or exhibits varied depending upon the individual procedures of each EEOC District Office.  These new nationwide procedures are intended to make the EEOC’s approach uniform across all offices. Under these new procedures, an employer that submits a position statement is directed to refer to, but not identify, the information it considers “confidential” and to provide that information in a separate attachment that will not be shared with the charging party.  Justification must be included to explain the segregation of this information.  This “confidential” information includes, and must be labeled as, one of the following:

• sensitive medical information (except for the charging party’s medical information);
• social security numbers;
• confidential commercial or financial information;
• trade secret information;
• non-relevant personally identifiable information of witnesses, comparators, or third parties, such as social security numbers, dates of birth in non-age cases, home addresses, phone numbers, etc.; or
• any references to charges filed against the employer by other charging parties.

These new procedures apply to all EEOC requests for employer position statements on or after January 1, 2016.

As we reported in a previous blog post, the Office of Federal Contract Compliance Programs (“OFCCP”) Final Rule implementing Executive Order 13665 (titled Non-Retaliation for Disclosure of Compensation Information) took effect on January 11, 2016.  This Executive Order amended Executive Order 11246 by prohibiting Federal contractors from discharging or discriminating against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. The new Rule applies to Federal contractors who enter into or modify existing covered Federal contracts greater than $10,000, on or after January 11, 2016.  The new Rule also requires Federal contractors to:  (1) revise the “equal opportunity clause” to include the new non-discrimination provision in contracts, subcontracts, and purchase orders; (2) incorporate an OFCCP-prescribed non-discrimination provision into existing employee manuals and handbooks; and (3) disseminate the non-discrimination provisions to employees and job applicants. The OFCCP has created two versions of the mandatory non-discrimination provision:

• One formatted with the OFCCP’s logo and contact information to be posted electronically or printed and posted on an employer’s premises.
• A second version which includes only the required language.  At a minimum, Federal contractors must use this prescribed language.

With the Final Rule already in effect, contractors should ensure their policies are in compliance with the non-discrimination provisions, make sure the OFCCP non-discrimination provision is included in handbooks or manuals and disseminated to employees and applicants, and ensure their “equal opportunity clause” in contracts, subcontracts and purchase orders is in compliance.

Employers face claims of retaliation at an increasingly alarming rate.  Nearly 43% of all charges filed with the U.S. Equal Employment Opportunity Commission (EEOC) in FY 2014 included some allegation of retaliatory conduct.  While retaliation is by no means a new concern for the EEOC, the Proposed Enforcement Guidance on Retaliation and Related Issues issued on January 21, 2016 shows very clearly that the agency intends to take an even more aggressive approach to address what it perceives as an epidemic of retaliation affecting the workplace. The EEOC last issued guidance on the topic of retaliation in 1998.  Since then, the percentage of retaliation charges has almost doubled and the U.S. Supreme Court has issued several significant decisions concerning the scope of the anti-retaliation protections under federal employment statutes, as discussed here.  Citing this backdrop, the EEOC chose to issue the proposed guidance to make known the agency’s current position on several key topics relating to retaliation.  Although not carrying the weight of law or regulation, the enforcement guidance, once adopted, will establish the various standards EEOC staff can be expected to apply while investigating charges or litigating cases. Perhaps not surprisingly, the EEOC’s proposed guidance advances a broader, claimant-friendly application of federal anti-retaliation statutes.  For instance, the EEOC’s classification of conduct as either “participation activity” or “opposition activity” – the two types of activities protected by most federal employment laws – differs sharply from the standard applied almost universally by courts.  Whereas nearly all courts hold that participation activity requires some connection to the administrative or litigation process (such as filing a charge or serving as a witness), the EEOC takes the position that even making an internal complaint with an employer constitutes participation activity.  This is significant because, unlike with opposition activity – which filing an internal complaint unquestionably is – an employee need not reasonably believe that unlawful discrimination actually occurred for participation activity to be cloaked with statutory protection.  In other words, according to the EEOC, an employee should be able to lodge a knowingly baseless internal complaint of discrimination without any potential for repercussion.  This is a dramatic departure from the current state of the law. Also, while the EEOC acknowledges that opposition activity is only protected if the manner of opposition is reasonable, the proposed guidance would make it extremely difficult for an employer to ever establish that an employee’s conduct was so outrageous that it loses the protection of federal anti-retaliation laws.  For example, the EEOC states that protected opposition activity may include engaging in a production slow-down, writing critical letters to customers, or protesting against discrimination in an industry or society in general – without any connection to a specific workplace – even if that conduct causes the employer financial harm. The proposed guidance shows that the EEOC intends to push the limits of federal anti-retaliation laws to expand the scope of employee protections.  To prepare for this, employers should re-evaluate their policies and procedures to ensure that the appropriate mechanisms are in place to minimize even the specter of retaliation.  In this regard, the proposed guidance lists several “best practices” that the EEOC believes employers should follow, including:

• Maintaining written policies which provide examples of prohibited retaliation, a complaint procedure, and a clear explanation that engaging in retaliation can result in discipline, up to and including termination;
• Training all managers, supervisors and employees on the employer’s written anti-retaliation policy and emphasizing to all employees that the employer will not tolerate retaliation;
• Establishing a protocol to remind managers or supervisors who are accused of discrimination of the employer’s anti-retaliation policy, and to provide tips to help managers and supervisors avoid engaging in conduct which might constitute unlawful retaliation or be perceived as such;
• Following up with employees, managers and witnesses while an EEO matter is pending to ask if they have any concerns about potential or perceived retaliation; and
• Reviewing proposed employment actions, ideally by designating a management or human resources representative who can ensure that employees or witnesses involved in an EEO matter are not subjected to unlawful retaliation.

The EEOC’s proposed guidance is open for public comment until February 24, 2016.

As reported in our November 9, 2015 blog post, the present STEM OPT rule which allows F-1 students with U.S. degrees in science, technology, engineering or mathematics (STEM) to extend their optional practical training (OPT) by 17 months was to expire on February 12, 2016, unless the U.S. Department of Homeland Security (DHS) could publish and promulgate a new rule.  The present STEM OPT extension rule had been vacated by the U.S. District Court for the District of Columbia in August 2015 for procedural deficiencies in its promulgation, but the court’s ruling was stayed until February 12, 2016, so DHS could publish a new rule for public comment and prevent hardship to the thousands of F-1 students employed in the U.S. on STEM OPT and the companies that employ those individuals. Our November 9, 2015 blog post detailed some of the highlights of DHS’ proposed STEM OPT extension rule which was published for comment in the Federal Register on October 19, 2015.  The DHS received an overwhelming 50,000 plus comments to the proposed rule and, a few days before the Christmas holiday, asked the court for a 90-day extension of the existing STEM OPT rule so it could address the comments and begin to train DHS officers on the intended changes to the STEM OPT program.  Following additional pleadings by DHS and Washington Alliance of Technology Workers (WashTech) — the plaintiff in the case that was before the U.S. District Court for the District of Columbia — the court, last Saturday, delayed its order terminating the STEM OPT rule as of February 12, 2016, and granted the DHS an additional 90 days to revise its proposed STEM OPT rule.  The court extended the sunset date of the STEM OPT extension rule to May 10, 2016, and warned DHS that no further extensions would be granted. As a result of this determination, those F-1 student employees with STEM OPT remain authorized to work in the U.S., at least through May 10, 2016.  However, WashTech’s counsel has indicated that an appeal of the decision to extend the sunset date by 90 days would be filed with the D.C. Circuit immediately. We will continue to keep you informed of further developments in this matter so you and your employees can plan accordingly.

As we reported in a blog post last month, although neither the federal nor state law expressly prohibits discrimination on the basis of gender identity or expression, Governor Cuomo bypassed the legislative process and urged the New York State Division of Human Rights to issue regulations that will interpret the state’s anti-discrimination prohibitions to cover transgender individuals.  Just this week, the New York State Division of Human Rights adopted those regulations.  The regulations, which became effective on Wednesday, make discrimination or harassment against transgender applicants and employees unlawful, and require employers to accommodate transgender individuals who have been diagnosed with a medical condition referred to as “gender dysphoria” – a medical condition related to an individual having a gender identity different from the sex assigned to him or her at birth. In addition, the New York City Commission on Human Rights recently issued a guidance document on what constitutes discrimination against transgender people under the New York City Human Rights Law.  The Commission’s guidance provides numerous examples of employer actions that violate the NYCHRL, including failure to use an individual’s preferred name, pronoun or title, denying transgender employees the use of restrooms consistent with their gender identity, and even enforcing dress codes that make differentiations based on sex or gender.  The Commission’s recent guidance also announces much more strict penalties for transgender discrimination.  Under the NYCHRL, civil penalties can range from $125,000 to $250,000 for violations that are deemed to be “willful, wanton or malicious.”  The Commission announced that, among other factors, it will consider the lack of an adequate discrimination policy as a factor in assessing penalties. Employers should review and revise their EEO and anti-harassment policies in light of these recent changes.  Employers should also consider taking steps to educate and train their employees regarding these new requirements.

On December 28, 2015, Governor Cuomo signed a bill repealing Civil Service Law § 75-b(2)(b).  This has a significant effect on the anti-retaliation provisions of New York’s “whistle blower” protection statute for public employees who report to a governmental body either (a) violations of a law, rule or regulation, or (b) something which an employee reasonably believes to be “improper governmental action." Civil Service Law § 75-b protects public employees who are whistle blowers against retaliation by public employers (which includes the State of New York, counties, cities, towns, villages, and school districts).  As originally enacted, § 75-b(2)(b) (now repealed) required that a public employee, in order to invoke the anti-retaliation protection, first “shall have made a good faith effort to provide the appointing authority or his or her designee the information to be disclosed and shall provide the appointing authority or designee a reasonable time to take appropriate action unless there is imminent and serious danger to public health or safety.” With the repeal, there now appears to be no requirement that the employee report the issue internally before taking it to another governmental body.  While no doubt well-intentioned, the repeal may very well empower disgruntled employees to pepper regulatory and criminal authorities with complaints of alleged misconduct. In addition to the fact that public employers should generally be aware of this change, public employers should also examine and review their existing whistle blower policies to determine if any revisions should be made.

In Whole Foods Market, Inc., the National Labor Relations Board, in a 2-1 decision, held that Whole Foods' rules prohibiting the recording of conversations in the workplace violated Section 8(a)(1) of the National Labor Relations Act.  The two rules that were found to be unlawful were nearly identical.  Both appeared in the company's General Information Guide, a guide that applied to all employees. The first rule prohibited the recording of company meetings without prior approval from store management, and the second rule prohibited all recording in the workplace without similar prior approval.  The stated purpose of both rules (as set forth in the Guide) was to encourage open conversation and dialogue, and to eliminate the chilling effect that may exist when someone is concerned a conversation is being secretly recorded. Contrary to the stated purpose of the rules (to encourage open and honest communication), the Board majority instead found that such rules would reasonably be interpreted by employees to prohibit them from engaging in protected Section 7 activity.  The Board majority reasoned that such rules would unlawfully prohibit employees from engaging in Section 7 activity such as (1) recording images of protected picketing, (2) documenting hazardous working conditions, or (3) documenting and publicizing various issues relating to terms and conditions of employment.  The Board majority rejected the employer’s (and the dissent’s) contention that the stated intent of the rules (to encourage open and honest communications in the workplace without fear of surreptitious recordings) constituted a valid overriding employer interest to justify the rules. So, it is clear that the current Board will likely find no-recording rules in the workplace to be a violation of the NLRA unless the employer can establish a valid overriding interest to justify such rules.  Considering the current pro-union makeup of the Board, establishing such an overriding interest will likely be difficult, and such rules will be aggressively scrutinized.  Nonetheless, certain narrowly tailored restrictions supported by valid business justifications may be upheld by the Board.  For example, a rule prohibiting the recording of meetings in which confidential information or trade secrets are discussed, or a rule prohibiting the recording of conversations involving private client or patient information, may be found to be lawful.  However, at this point, employers should be wary of imposing broad no-recording rules in the workplace. Employers may require employees to follow applicable state or federal laws regarding secret recordings.  The impact of an employer's ability to impose this restriction is limited in New York, where an individual may lawfully record a conversation as long as the individual doing the recording is a party to the conversation.  However, an employer's ability to impose this restriction would have a significant impact in states such as Massachusetts and California, where the law requires that all parties to a conversation must consent to the recording of the conversation. The Board's decision in the Whole Foods case may not necessarily be the last word on this issue, because the company has appealed the decision to the Second Circuit Court of Appeals, which may be more sympathetic to the valid business justification for the company's no-recording rules.  However, it may be worthwhile for employers to consider whether they currently have policies in their employee handbooks that prohibit recordings in the workplace, and if so, whether those policies should be revised.  Employers should consult with legal counsel to assess the potential valid business justifications for the policies and to review any recording laws that may be applicable to employees in particular locations.  Both the valid business justifications and any legal restrictions on recordings in the workplace should be expressly stated in the policies.

Human resource officers and managers are often asked to chair or sit on a retirement plan committee responsible for administrative tasks.  In this role, a committee member takes on fiduciary responsibilities to plan participants and beneficiaries, and can be held personally liable for fiduciary breaches under Federal law.  As legal counsel, we endeavor to manage this risk for our clients through guidance on good governance, indemnification protection, and the adoption of effective policies.  Effective management of employee benefit plans will meet this fiduciary duty to participants while at the same time improving results for employees and minimizing potential liability exposure of plan managers. We are sometimes asked to review a proposed investment policy statement or IPS related to a 401(k) or 403(b) retirement plan.  Although these plans are not required to have an IPS, we recommend having one as a guide for prudent plan administration.  Most plan service providers and record keepers will have a standard form or model available for use by the employer adopting the plan.  Models can be useful, but any model should not be adopted without discussion and agreement with its terms.  Because an IPS is a policy of the employer in its role as plan administrator, and not one of the outside record-keeper or financial consultant, it’s important for a plan committee to discuss and “own” its policies.  Furthermore, a carefully-designed policy will not create additional responsibilities for a plan committee or officer beyond those imposed by law. An effective IPS will describe the roles and duties of a plan committee, other responsible officers, or plan service providers.  It provides a framework and process for investment decisions as well as indemnification for employees who are charged with fiduciary duties.  In many cases, there may be a financial advisor or consultant who is engaged to carry out the policy in some capacity.  Once a policy has been discussed and adopted, it is an aid in running efficient committee meetings and in working effectively with outside service providers.  Adopting a well-crafted IPS is an important element of prudent plan administration. An IPS should not dictate how many investment choices will be available for participants or the asset categories to be covered by plan options.  Using factors described in the policy, a plan committee can handle the tasks of monitoring current options, assessing their potential for future performance, and making changes in a plan’s fund options.  By creating and following a disciplined investment policy, a plan committee greatly reduces its risk of fiduciary liability when investment markets become volatile. There is a downside in adopting an IPS and then ignoring it.  Our experience has been, however, that once discussed and adopted, an IPS brings better focus and engagement by committee members, more efficient meetings, and a higher level of fiduciary performance on behalf of plan participants.  We have developed model policies that, together with proposals from plan service providers, can form the basis for your own policy.

Under the heading of “better late than never,” the IRS has recognized that “some employers, insurers, and other providers of minimum essential [i.e., health] coverage need additional time to adapt and implement systems and procedures to gather, analyze, and report” the information required on Forms 1094-B, 1095-B, 1094-C, and 1095-C for the 2015 calendar year.  It has delayed the due dates for providing the required forms to both individuals and the IRS as follows:

• The due date for providing forms to individuals on 1095-B and 1095-C is extended from February 1, 2016 to March 31, 2016.
• The due date for filing with the IRS is extended from:
  • February 29, 2016 to May 31, 2016 if not filing electronically (for employers who filed fewer than 250 W-2s in the prior year), and
  • March 31, 2016 to June 30, 2016 if filing electronically.

Employers or other coverage providers who do not comply with the extended due dates are subject to penalties, which may be abated for reasonable cause based on facts and circumstances. Because of the delay, individuals who file tax returns based on other information from their employers about their offers of coverage for purpose of determining whether they are eligible for a premium tax credit for health insurance marketplace coverage will not be required to file amended tax returns once they receive their Forms 1095-C or any corrected 1095-C.