The Office of Federal Contract Compliance Programs ("OFCCP") issued its Final Rule last week implementing Executive Order 13665 (entitled Non-Retaliation for Disclosure of Compensation Information).  Executive Order 13665 amends 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 Final Rule was published in the Federal Register on September 11, 2015, and goes into effect on January 11, 2016.  The Final Rule affects covered federal contractors who enter into or modify existing covered federal contracts greater than $10,000, on or after January 11, 2016, and includes employees and job applicants who work for, or apply to work for, a company that has a covered contract with the Federal Government. The Final Rule implements Executive Order 13665 by:

• Revising the “equal opportunity clause” to include the new nondiscrimination provision, which is required in all qualifying federal contracts, federally assisted construction contracts, subcontracts, and purchase orders;
• Requiring federal contractors  to incorporate an OFCCP-prescribed nondiscrimination provision into existing employee manuals and handbooks; and
• Requiring federal contractors to disseminate the nondiscrimination provisions to employees and job applicants.

The Final Rule also provides federal contractors with two defenses to allegations of discrimination based upon discussing or disclosing compensation information.  First, a federal contractor may pursue any defense that is not based on a rule, policy, practice, agreement, or other instrument that prohibits employees or applicants from discussing or disclosing their compensation or the compensation of other employees.  For example, the contractor can demonstrate that an employee was discharged or disciplined for a violation of a consistently and uniformly applied company policy, and that the policy does not prohibit the discussion or disclosure of compensation information.  Second, if an employee has access to the compensation information of other employees or applicants as part of the employee's essential job functions and discloses such information to individuals who do not have access to such information, the discipline or discharge of the employee will not be deemed to be discriminatory, unless the disclosure:  (1) was in response to a formal complaint or charge; (2) was in furtherance of an investigation, proceeding, hearing, or action; or (3) was consistent with the contractor's legal duty to furnish information. OFCCP’s website includes a page containing more information and documents pertinent to the Final Rule, including the prescribed nondiscrimination provision language for handbooks/manuals, the supplement to the “EEO is the Law” Poster, and some Frequently Asked Questions. The Final Rule prohibits contractors from having policies that prohibit or restrict employees or applicants from discussing or disclosing compensation information.  Therefore, federal contractors should review their policies and procedures to ensure that they are consistent with the Final Rule.  In addition, all managers should be trained so that they do not make any comments or take any actions that could be considered discriminatory based on an employee's discussion or disclosure of compensation information.

The following article was published in Employment Law 360 on September 15, 2015. Turn down the lights and roll the film on the recent district court decision to vacate the four game suspension of New England Patriots' quarterback Tom Brady.  The much ballyhooed proceeding known as "Deflategate" holds valuable lessons for all labor practitioners, regardless of whether they cheer for or against the Patriots. The Deflategate Litigation This disciplinary proceeding arose out of allegations that during the first half of the AFC Championship game on January 18, 2015, the New England Patriots used footballs that did not meet the minimum air pressure inflation standards under NFL rules.  The League conducted an investigation, led by outside counsel, Ted Wells of Paul, Weiss, Rifkind, Wharton & Garrison LLP.  As a result of the investigation, Tom Brady was found to have been “generally aware” of the actions of other Patriots’ employees in the deflation of footballs and to have failed to cooperate with the investigation.  For his misconduct, Mr. Brady was suspended without pay for four games. The National Football League Players Association appealed Mr. Brady’s suspension.  Under the parties’ collective bargaining agreement, NFL Commissioner Roger Goodell served as the arbitrator.  After the arbitration hearing, Commissioner Goodell denied the appeal and sustained the four game suspension. In an action in the U.S. District Court in New York, the NFL sought to confirm the arbitration award and the Players Association sought to vacate it.  On September 3, 2015, District Court Judge Richard Berman denied the motion to confirm, granted the motion to vacate, and vacated the four game suspension.  The NFL has subsequently appealed. It is not the intention of this article to analyze the court's decision under the Federal Arbitration Act and the jurisprudence generally limiting judicial review of labor arbitration awards, nor to evaluate the merits of the case for and against Mr. Brady’s suspension.  Rather, we will “break down the film” of the proceeding and the court’s decision, as every good coaching staff does on Monday morning, and identify four critical lessons for labor practitioners to incorporate into their game plans. Four Critical Lessons Learned 1.  Everyone on the Team Needs the Playbook. One of the principal reasons that the district court vacated the arbitration award was the court’s conclusion that Mr. Brady did not have notice of the prohibited conduct and the potential discipline. The concept of notice is fundamental to effective management of employees.  In the discipline context, the first question that is regularly asked in any review (arbitral, administrative or judicial) is whether the employee had adequate notice of the work rule or performance standard at issue and the possible consequences of the failure to meet the expectation of the rule or standard.  Establishing and disseminating clear work rules and performance expectations from the first day a player laces up his cleats is on page one of the HR playbook. The Deflategate proceeding highlights three common sub-issues on this topic.  First, the issue of notice should be analyzed from the player/employee’s point of view.  An employer that provides a handbook to its employees, but also maintains a separate policy manual with distribution limited to management staff, may have difficulty enforcing discipline against employees for violations of policies in the management manual.  We turn to Deflategate for an example.  Each year, the NFL issues to all players the “League Policies for Players,” which not surprisingly contains a rule regarding uniform and equipment violations.  The NFL also maintains a “Competitive Integrity Policy,” but that policy is only issued to team chief executives, presidents, general managers and head coaches.  At the appeal hearing, NFL Executive Vice President Troy Vincent, the author of Mr. Brady’s suspension letter, acknowledged that the investigative report was based on, and the policy against tampering with footballs was contained in, the Competitive Integrity Policy.  The Players Association argued forcefully that the Competitive Integrity Policy, which was not issued to Mr. Brady, could not properly provide a basis for discipline and the district court agreed. Second, the nature of the alleged misconduct here – tampering with equipment in a championship game and obstruction of an investigation – raises the question:  are there circumstances in which no pre-existing rule is necessary because the conduct is so obviously impermissible that proof of wrongdoing can support discipline even in the absence of a specific rule?  Of course, the answer is yes, but the application of this principle can be difficult. In Mr. Brady’s case, the application of the patently obvious misconduct principle was complicated by several factors.  For example, as to tampering, the investigation only concluded “[Mr. Brady was] at least generally aware of the actions of the Patriots’ employees involved in the deflation of the footballs and that it was unlikely that their actions were done without [his] knowledge.”  The League relied on this conclusion when issuing the initial suspension, but the Judge was underwhelmed, asserting “I am not sure I understand what in the world that means, that phrase [generally aware of the inappropriate activities of other Patriot employees].” So we must recognize that reliance on the obvious misconduct principle requires proof of such misconduct.  And, in the absence of clear proof, there is a risk that, on review, the discipline could be overturned because of ambiguities in the application of such principles. Third, the requirement of notice extends not only to the conduct at issue, but the likely consequence or discipline as well.  Some work rules lend themselves to precise discipline.  A point system for attendance violations with a progressive discipline structure based on points accrued is a classic example.  Similarly, Article 42 of the NFL’s CBA contains an extensive list of infractions and maximum penalties that a team may impose on its players. Other employers opt for a more open-ended description of the potential discipline for any violation (e.g., “up to and including termination of employment”).  In those settings, the level of discipline tends to be established over time and with experience.  Arbitrators and reviewing courts look for comparators to judge whether the employee was on notice of the potential consequences and whether the discipline imposed was consistent with prior, similar situations. Again, two aspects of the NFL’s rules and disciplinary practices were problematic for the district court.  The rule in the Players’ Policies relating to equipment and uniform violations stated:  “First offenses will result in fines.”  There was also evidence that obstruction of league investigations was an offense that warranted a fine.  In fact, in one recent arbitration, former Commissioner Paul Tagliabue, serving as the Commissioner’s designated arbitrator, stated in his award that the NFL’s practice was to fine but not suspend players for such misconduct.  In 40 years with the League, there was no record of any player being suspended for obstructing an investigation. 2.  Consistent Treatment of All Players Matters. This last point on notice reinforces another lesson:  the importance of consistent treatment for similar misconduct.  Both the Players Association and the NFL identified prior disciplinary actions and arbitration decisions to support their respective positions on the appropriateness of a four game suspension.  Judge Berman was persuaded by the Players Association’s precedent that a fine, and not a suspension, was the appropriate discipline for the asserted violations.  Former Commissioner Tagliabue’s arbitration award citing 40 years of such history was compelling to the court. So what can a new commissioner, coach, CEO or HR Vice President do to make a change -- to enforce more rigorous discipline, change priorities or enhance performance standards?  Clearly, on a prospective basis, work rules and performance standards can be modified to reflect new priorities and initiatives.  Often, collective bargaining agreements provide management with the right to establish reasonable rules with proper notice to the union and employees.  In the absence of a contractual right, such rule changes would be a subject for negotiations. When faced with a particular incident, and the opportunity to set a new precedent, the new decision maker may seek to make a subtle change based on nuanced circumstances that differentiate the present case from prior incidents.  There is also a school of thought that endorses making a substantial change to the status quo, for example a significant suspension for conduct that previously gave rise to a fine, recognizing that the action may be challenged in arbitration or on judicial review.  Even if it is overturned or reduced on review, the new management has remained true to its espoused principles.  It is also possible that such a significant change in precedent is the opening position in an anticipated negotiated resolution, which may well include a new, more rigorous standard for future cases in exchange for a compromised penalty in the present case.  Certainly, Judge Berman in the weeks before his decision, created opportunities for such a negotiated resolution of Mr. Brady's suspension, but to no avail. 3.  Calling an Audible During an Employment Proceeding Can Leave the Team Exposed. One of the uncommon elements of the player discipline procedure under the NFL’s CBA is the provision that allows the Commissioner to serve as the final and binding arbiter of discipline disputes.  Typically in a discipline arbitration, the parties select a neutral arbitrator and the employer bears the burden of proving “just cause” for the discipline based on the facts the employer had obtained through its investigation prior to imposing the discipline.  By contrast, in the NFL’s discipline appeal procedure, following the initial assessment of discipline, there is an evidentiary hearing, after which the Commissioner (or his selected designee) renders a final decision based on a preponderance of the evidence – new and old – under a standard described in the CBA as discipline “for conduct detrimental to the integrity of, or public confidence in, the game of professional football.” As a result, the specific rationale for the discipline may change based on the evidence presented at the appeal hearing.  Such was the case with Mr. Brady’s suspension.  The Commissioner relied heavily on the evidence, newly revealed at the appeal hearing, that Mr. Brady had “destroyed” his cell phone on or about the day he was interviewed by Investigator Wells and as a consequence the 10,000 text messages on that phone were no longer available.  This information was not contained in the investigative report and was not known at the time of the initial discipline.  The Commissioner found this information “very troubling” and concluded:  “there was an affirmative effort by Mr. Brady to conceal potentially relevant evidence and to undermine the investigation” and that he “willfully obstructed the investigation.”  The Commissioner also re-assessed Mr. Brady’s culpability for the tampering of the footballs by the equipment staff, based on the hearing evidence and his assessment of credibility.  He found that Mr. Brady “knew about, approved of, consented to, and provided inducements and rewards in support of” a scheme to tamper with the footballs, which constituted conduct detrimental to the integrity of the game. These changes in the rationale for Mr. Brady’s suspension, although sanctioned by the NFL’s CBA, were ruled incomplete by Judge Berman.  The District Court recognized that the Commissioner’s finding of Mr. Brady’s culpability for tampering went “far beyond” the finding of “general awareness” of others’ misconduct contained in the investigative report and the initial suspension letter.  In addressing the Commissioner’s rationale, Judge Berman held that reliance on the “broad CBA ‘conduct detrimental’ policy – as opposed to specific Player Policies regarding equipment violations – to impose discipline on Brady is legally misplaced” (emphasis supplied).  In other words, the broad authority negotiated in the CBA for the Commissioner to discipline players for conduct detrimental to the game is now, as a matter of law, reduced to sanctioning players for violations of specific player policies.  This holding of the Deflategate decision, if it stands, may prove particularly problematic for the NFL. While not directly on point, these facts should remind employers that presenting alternative, more robust explanations for their employment decisions in arbitration, or administrative or judicial proceedings can be risky.  As the Seventh Circuit has explained in the employment discrimination context:  "If at the time of the adverse employment decision the decision maker gave one reason, but at the time of trial gave another reason which was unsupported by the documentary evidence the jury could reasonably conclude that the new reason was a pretextual after-the-fact justification."  Perfetti v. First Nat'l Bank of Chicago, 950 F.2d 449, 456 (7th Cir. 1991), cert. denied, 505 U.S. 1205 (1992). 4.  Teams Can Be Penalized for Unnecessary Roughness. One final observation arises in part from a specific holding in Judge Berman’s decision and in part from its tone.  To support the suspension, Commissioner Goodell had largely looked past the precedents involving equipment tampering and obstruction of investigations, and instead had clearly and forcefully relied on the discipline imposed for a violation of the performance enhancing drug policy.  He described a steroid use violation as the “closest parallel” to Mr. Brady’s misconduct, both warranting a four game unpaid suspension – 25% of the regular season.  It plainly appears that Commissioner Goodell was making a statement to Mr. Brady and the League about the seriousness of the misconduct, which he described as an effort “to secure an improper competitive advantage” and “to cover up the underlying violation.”  It bears noting, in evaluating the appropriateness of the discipline, that there were no allegations of prior misconduct by Mr. Brady, he was the starting quarterback on the Super Bowl winning franchise, and has been described in the public press as the “Golden Boy” and, by some, as one of the 5 best quarterbacks in League history. Judge Berman flatly rejected the Commissioner’s comparison.  He described the negotiated steroid use policy as “sui generis” and opined that he could not “perceive” any comparability between steroid use and Mr. Brady’s conduct.  He quoted Commissioner Tagliabue’s arbitration decision again to the effect that a sharp change in discipline can be arbitrary and an impediment to, rather than an instrument of, change.  He also noted that Mr. Brady’s performance in the Championship game improved in the second half after the footballs were properly inflated.  While the legal issues on appeal will address whether or not Judge Berman overstepped his authority in limiting the Commissioner’s discretion to issue discipline under the CBA, the clear lesson for employers is that a wide array of circumstances matter in the evaluation of employment decisions.  An employer that acts without fair consideration of all relevant factors is like a team running a naked bootleg, both do so knowing there are significant risks. The Deflategate decision presents a strong cautionary tale for employers.  Managers who conduct workplace investigations and make employment decisions must be well-trained and thoughtful in effectuating their game plans.  They need to understand and evaluate the short run and potential long run implications before they speak or write the first time about those decisions.  Employers must also recognize that even the best game plans cannot always anticipate the reaction of arbitrators, judges and juries – the ball can take an unexpected bounce.

As the public comment period closed on the U.S. Department of Labor's proposed revisions to the "white collar" exemptions under the Fair Labor Standards Act ("FLSA"), the Wage & Hour Defense Institute ("WHDI"), a national organization comprised of wage and hour attorneys from across the United States, submitted comments pointing out the seriously flawed aspects of the proposed changes and warning of the unintended hidden costs and burdens that will likely result.  Bond’s John Ho, a member in Bond’s New York City office, is a member of the WHDI and contributed to the preparation of the formal comments submitted.  The door slammed shut on the comment period on September 4, 2015, but apparently not before more than 50,000 additional comments streamed in during the final days before the midnight deadline. The WHDI's comments take the position that the newly proposed rules do not simplify the interpretation of the FLSA, and will lead to more (not less) litigation.  In its analysis, the WHDI asserts that the proposed rules will create significant hidden administrative and employee morale costs and, contrary to the impression created in the press, do not obligate employers to increase an employee's total compensation under the FLSA when converting from exempt to non-exempt status.  A copy of the WHDI's comments can be found here. With the closing of the 60-day public comment period on the proposed regulations, DOL still has a great deal of work ahead.  It must now review the nearly 250,000 comments received, which gives credence to the fact that a sharp divide exists as to the pros and cons of the proposal. If you would like further information on how employers should prepare for the implementation of the proposed regulations, contact your Bond attorney.

President Obama signed an Executive Order on September 7, 2015, requiring that Federal contractors provide at least seven days of paid sick leave per year to employees working on Federal contracts and subcontracts that are solicited or awarded on or after January 1, 2017.  According to a White House Fact Sheet summarizing and explaining the rationale behind the Executive Order, an estimated 44 million private sector workers (approximately 40%) do not have access to paid sick leave.  Along with issuing the Executive Order, President Obama also urged Congress to pass the Healthy Families Act, which would require all businesses with 15 or more employees to offer up to seven days of paid sick leave annually. The Executive Order applies to the following types of contracts or contract-like instruments:  (1) procurement contracts for services or construction; (2) contracts for services covered by the Service Contract Act; (3) contracts for concessions; and (4) contracts entered into in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.  All Federal contracts falling within one of these categories will be subject to the Executive Order if the solicitation for the contract is issued on or after January 1, 2017, or if the contract is awarded outside the solicitation process on or after January 1, 2017. The Executive Order requires covered Federal contracts and subcontracts to contain a clause “specifying, as a condition of payment, that all employees, in the performance of the contract or any subcontract thereunder, shall earn not less than 1 hour of paid sick leave for every 30 hours worked."  The Executive Order also provides that a contractor may not cap the total annual accrual of paid sick leave at less than 56 hours (seven days).  Paid sick leave earned under the Executive Order may be used by an employee for an absence resulting from:  (1) physical or mental illness, injury, or medical condition; (2) obtaining diagnosis, care, or preventive care from a health care provider; (3) caring for family members, domestic partners, and other individuals whose close association with the employee is the equivalent of a family relationship; and (4) domestic violence, sexual assault, or stalking.  The use of paid sick leave cannot be made contingent upon the employee finding a replacement. Accrued unused sick leave earned under the Executive Order must be carried over from one year to the next.  In addition, although Federal contractors are not required to pay employees for accrued unused sick leave upon separation from employment, Federal contractors are required to reinstate any accrued unused sick leave that an employee had upon separation from employment if that employee is rehired within 12 months. The paid sick leave required by the Executive Order is in addition to a Federal contractor's obligations under the Service Contract Act and the Davis-Bacon Act.  Federal contractors may not receive credit toward their prevailing wage or fringe benefit obligations for any paid sick leave provided in satisfaction of the requirements of the Executive Order. The Secretary of Labor has been directed to issue regulations by September 30, 2016, to carry out the terms of the Executive Order.

Perhaps it is the end of racing season in Saratoga, but the federal employment agencies are certainly looking to hit the trifecta against independent contractors, franchisors, parent companies, and similar entities under the guise of expanding the definitions of employer and employment. First, a little background:  on April 28, 2014, the U.S. Senate confirmed David Weil as the new head of the U.S. Department of Labor’s Wage and Hour Division.  Before he was confirmed, Weil had published a book entitled The Fissured Workplace, a dense lament on the perceived evils of independent contracting and franchising, and companies that Weil claims attempt to "have it both ways" by not bearing responsibility for the workers from whom they ultimately benefit by virtue of the work performed.  It was thus not unexpected that Weil would seek to remedy those perceived evils during his tenure; however, the extent to which this philosophy has reached other agencies is surprising. Fast-forward to July 2015, during which Administrator Weil issued an Interpretation turning the classic test for independent contractor status on its head.  The central tenet used to be control -- does the company set the worker's hours, have the power to discipline the worker, supervise and direct the worker, etc., or instead does the company simply give the worker the contours of the job, and pay contingent on the acceptability of the work?  The new Administrator’s Interpretation, however, focuses on the "economic realities" of the work arrangement, and whether the worker is "economically dependent" on the company.  Most workers have some dependence on the source of the income, and therefore unless a worker has multiple sources of income to demonstrate that he or she is truly in business for himself or herself, many people who currently consider themselves to be independent contractors are now employees in the eyes of the Wage and Hour Division.  As Weil puts it in his interpretation:  "Thus, applying the economic realities test in view of the expansive definition of 'employ' under the Act, most workers are employees under the FLSA." But the Wage and Hour Division is not the only agency to get into the act.  On August 27, the National Labor Relations Board issued a controversial decision in the Browning-Ferris case, basically holding that a staffing agency, franchisor, or contractor that reserves the right to make decisions affecting a worker’s employment, even if the entity does not actually exercise that right, will likely be considered a joint employer.  In short, the NLRB is also seeking to follow Weil’s lead and fuse “the fissured workplace” to hold contractors and other types of entities responsible for possible employment violations under the guise of joint employment. Not to be outdone, OSHA is going for the trifecta.  Late last month, the International Franchise Association disclosed that it is receiving reports from its members that OSHA investigators are seeking information and documents during inspections to tie franchisors into those inspections in order to cite them as employers along with franchisees.  The IFA is concerned that OSHA is (at the behest of unions such as SEIU) looking to simply treat franchisors as employers regardless of the details of a franchisor-franchisee relationship.  Indeed, the IFA obtained a copy of an internal OSHA memo that shows that OSHA is looking to follow the WHD and NLRB’s lead.  The memo states, in part: "Issue Presented for OSHA: Whether for purposes of the OSH Act, a joint employment relationship can be found between the franchisor (corporate entity) and the franchisee so that both entities are liable as employers under the OSH Act. Ultimate determination will be reached based on factual information about the relationship between the franchisor and franchisee over the terms and conditions of employment.  While the franchisor and the franchisee may appear to be separate and independent employers, a joint employer standard may apply where the corporate entity exercises direct or indirect control over working conditions, has the unexercised potential to control working conditions or based on the economic realities.  As a general matter, two entities will be determined to be joint employers when they share or codetermine those matters governing the essential terms and conditions of employment and the putative joint employer meaningfully affects the matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction." The IFA is seeking more information from OSHA via the Freedom of Information Act, and its full statement can be found here. In short, any entity with franchisees, independent contractors, or other vendors should be well aware that any investigation or inspection by the federal agencies tasked with enforcement of labor and employment laws -- the National Labor Relations Board, the U.S. Department of Labor’s Wage and Hour Division, and now, OSHA -- may seek to expand the investigation or inspection well beyond just the franchisee or contractor inspected, to any franchisor, parent company, or beneficiary of a contract for services.

In Browning-Ferris Industries of California, Inc., the National Labor Relations Board (“NLRB” or “Board”), in a 3-2 decision, expanded who may be considered a joint employer under the National Labor Relations Act (“NLRA” or the “Act”).  The Board’s decision significantly lowers the threshold for joint employer status, making it more likely that entities such as staffing agencies, franchisors, and contractors will be considered joint employers under the Act. A joint employer finding is significant because this means that an entity may be subjected to joint bargaining obligations and potential joint liability for unfair labor practices or breaches of collective bargaining agreements. Joint Employer Analysis Before Browning-Ferris Prior to the Board’s decision in Browning-Ferris, the standard for establishing joint employment was that both entities in question had to share the ability to control or co-determine essential terms and conditions of employment.  Hiring, firing, supervising, and directing employees were generally considered to be the essential terms and conditions of employment.  Board decisions further clarified that the type of control over the essential terms must be direct and immediate, and the alleged employer must have actually exercised that control -- it was not enough that it may have reserved some level of control through a contract.  Rather, the control had to be exercised in practice. Joint Employer Analysis After Browning-Ferris The Board significantly modified this approach in Browning-Ferris.  The Board’s stated new test, which sounds similar to the old test in words, but not in application, is that:

The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.

The application of this test is where the Board makes sweeping changes.  The Board will now evaluate the evidence to determine whether an alleged employer affects the means or manner of employees’ work and terms of employment, either directly or indirectly.  In other words, the control no longer needs to be direct or immediate.  Additionally, the Board found that it is not critical that the entity actually exercise such authority so long as it possesses or reserves the right to do so. The Board also expanded on those items found to be “essential terms and conditions” beyond just hiring, terminating, supervising, and directing employees.  The Board included such things as dictating the number of workers to be supplied, setting work hours, controlling seniority and approving overtime, and assigning work and determining the manner and method of work performance. In short, the new test makes widespread changes by finding indirect control significant in establishing an employment relationship, not requiring that such control actually be exercised, and including more terms and conditions of employment as relevant in this analysis that were previously not considered to be “essential.” Applying the New Test in Browning-Ferris The issue before the Board in Browning-Ferris was whether Browning-Ferris, which operated a recycling facility, was a joint employer with LeadPoint, a staffing company that supplied employees to perform various work functions at the facility.  Under the Board’s old test, it is almost certain there would have been no joint employer finding.  LeadPoint set its employees’ schedules, engaged its own human resources manager to work at the Browning-Ferris facility, and had the sole responsibility to discipline, review, evaluate, and terminate its own employees.  In addition, LeadPoint employed an Acting On-Site Manager, three shift supervisors, and seven line leads to manage and supervise LeadPoint employees working at the facility. Nonetheless, applying the new test, the Board found sufficient evidence of direct and indirect control (relying on control both exercised and reserved by contract) to support its joint employer finding.  The Board relied on the following facts in making its determination:  Browning-Ferris gave LeadPoint supervisors fairly detailed directives concerning employee performance that the LeadPoint supervisors then communicated to their employees; Browning-Ferris set some conditions on hiring that LeadPoint was contractually bound to follow (must have appropriate qualifications and meet or exceed Browning’s own standard selection procedures and tests); Browning-Ferris had the authority to discontinue the use of LeadPoint employees; Browning-Ferris determined when overtime was necessary; and Browning-Ferris' contract with Leadpoint prohibited LeadPoint from paying its employees more than Browning-Ferris paid its own employees who performed comparable work. Takeaways and Potential Implications The primary change resulting from Browning-Ferris is that indirect control over terms and conditions of employment may now be enough to create a joint employment relationship.  Unfortunately, the Board’s decision fails to provide any real clarity on just how much indirect control may be sufficient to create such a relationship.  The two dissenting members take issue with how broad the majority’s decision appears to be, stating that “the number of contractual relationships now potentially encompassed within the majority’s new standard appears to be virtually unlimited.”  The dissent then lists the following examples:

• Insurance companies that require employers to take certain actions with employees in order to comply with policy requirements for safety, security, health, etc.;
• Franchisors;
• Banks or other lenders whose financing terms may require certain performance measurements;
• Any company that negotiates specific quality or product requirements;
• Any company that grants access to its facilities for a contractor to perform services there, and then continuously regulates the contractor’s access to the property for the duration of the contract;
• Any company that is concerned about the quality of the contracted services; and
• Consumers or small businesses who dictate times, manner, and some methods of performance of contractors.

The dissent’s list showcases the potential reach of the Board’s new test and the potential to significantly alter the landscape of how employment is understood under the NLRA. While employers wait for the Board to issue more decisions further delineating the scope of this test, there are some practical steps employers can take.  Employers can revise their contracts to clarify that control over terms and conditions of employment rests with the contractor, use as little detail as possible in directing the work of the contractor, and stay out of all hiring, firing, and wage-related decisions.  Alternatively, some employers may choose to wait to make any changes until this decision is eventually challenged in federal court.  Employers should discuss with counsel how to best respond to this change. Ultimately, because of the wide array of factual arrangements involving contingent workers, franchisees, and independent contractors, and the reality of business relationships, there will certainly be some situations where letting go of some level of operational control is not a practical option.  This must be weighed against the risk of being found to be a joint employer, and carefully evaluated when entering into and reassessing all business relationships.

Union Organizing Limited by Proactive Employee Engagement and Education

In advance of Labor Day in the U.S. and Labour Day in Canada, the Employment Law Alliance (ELA), the world’s largest network of management-side labor, employment and immigration lawyers, has released the results of its latest “Employer Pulse” survey on traditional labor issues. Bond, Schoeneck & King PLLC is a member of the Employment Law Alliance. The poll, conducted from mid-July to mid-August, surveyed ELA attorneys across the U.S. and Canada and yielded nearly 400 responses from all 50 U.S. states and each of the 10 Canadian provinces. Respondents were asked to identify both the stated reasons employees opt to join unions, and what they have found to be the “least accurate” claims unions have made to encourage membership. “Higher wages and/or benefits” and “Enhanced job security, including protection from layoffs” made the top five in both employee reasoning and inaccurate union representations, suggesting a significant gap between what workers perceive to be a benefit of unionization and the reality as witnessed by a set of highly experienced labor and employment attorneys. According to respondents, the top two reasons employees reject union membership are: 1) “Cost of dues exceeds value of membership, including objection to use of dues to support and promote union political agenda;” and 2) “Distrust of union leadership and recognition of unrealistic campaign promises.” One member commented, “I believe the real number one reason (that employees reject union membership) is that employees know and trust that their employer cares about them and runs the business looking out for both the employees' and owners’ long-term interests. An employer ‘runs on its record,’ and that means it cannot start ‘caring’ or ‘showing that it cares’ only when the union shows up.” Turning to specific issues, definitive answers emerged on the following:

• 83 percent of respondents noted that “quickie” or “ambush” election rules issued by the National Labor Relations Board (NLRB) will either “Greatly assist” or “Moderately assist” unions in their efforts to represent employees.

Regarding “quickie” or “ambush” elections, New Hampshire attorney Charles S. Einsiedler, Jr. of Pierce Atwood LLP offered, “Employers must proactively educate their workforce concerning what unions really can and cannot do, because the board’s new election rules leave insufficient time for employers to provide meaningful employee education once an election is scheduled.” Given that the poll’s data broadly indicates employees often choose unionization based on misrepresentations concerning enhanced wages, job security and elimination of unpopular supervisors, one respondent noted that inaccurate promises, combined with the natural reluctance of non-union employers to communicate with their workforce about unions and an “ambush” or “quickie” election, have the potential to greatly assist unionization efforts. They added that there is a genuine, economically material onus on companies to consider and prepare for this dynamic.

• 85 percent of respondents answered that NLRB rulings allowing unions to organize small or micro units of employees will either “Greatly assist” or “Moderately assist” unions in their efforts to represent employees.

• 76.5 percent of respondents answered that attempts, if successful, by the NLRB to expand and extend the joint employer test – particularly among franchisors and franchisees – will either “Greatly assist” or “Moderately assist” unions in their efforts to represent employees.

• 94.11 percent of Canadian respondents answered that, based on their experience and feedback received from clients and colleagues, the recent change from card-based certification to vote-based certification under the federal Canada Labour Code “Will greatly reduce” or “Will moderately reduce” the success rate of unions in Applications for Certification.

The group was somewhat split on the potential impact of the expansion of overtime eligibility recently announced by the U.S. Department of Labor, with 45 percent of respondents believing that the broadening “Will have limited impact” in terms of assisting unions in their organizing efforts and 38.5 percent answering that it will “Greatly assist” or “Moderately assist” unionization efforts. Overall, the importance of identifying and dealing with “unpopular,” “rogue” and – at times – unreasonable supervisors was stressed as one key ways to ensure a harmonious, union-free workplace. As one member put it, “Unfair treatment by management – or indifferent treatment – is the overwhelming reason why employees seek to unionize their workplace.” Having an engaged, educated and committed workforce was consistently cited as central to keeping unionization efforts at bay. One respondent noted, “Happy and engaged workers don't usually join unions.” Another offered a simple equation, “Poor management plus a lack of information about unions can often lead to a unionized company.” About The Employment Law Alliance: The Employment Law Alliance is the world's largest network of labor, employment and immigration lawyers. With specialists in more than 135 countries, all 50 states and each Canadian province, the ELA provides multi-state and multi-national companies with seamless and cost-effective services worldwide. On the web at: http://www.employmentlawalliance.com.

On August 21, the United States Court of Appeals for the District of Columbia Circuit upheld the U.S. Department of Labor’s revisions to the “companionship exemption” under the Fair Labor Standards Act, and reversed two decisions issued by the U.S. District Court for the District of Columbia that struck down those revisions.  The USDOL’s revised regulations eliminate the companionship exemption for home care workers who are employed by a third-party instead of by the patient or household, and greatly narrow the definition of “companionship services” for purposes of applying the exemption.  According to estimates provided by the USDOL, nearly two million formerly exempt home care workers will now be covered by the FLSA’s minimum wage and overtime requirements. In 2013, the USDOL significantly revised its FLSA regulations regarding the “companionship exemption,” which renders the minimum wage and overtime requirements inapplicable to “any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.”  As revised, the regulations prohibit third-party employers, such as home care agencies, from claiming that their employees are exempt from the federal minimum wage and overtime requirements, even if the employees are providing companionship services.  In addition, the revised rule greatly narrows the definition of “companionship services,” so that if an employee spends more than twenty percent of his or her time on the “provision of care,” the employee will be deemed not to be providing “companionship services,” regardless of whether the employee is directly employed by the family or by a third-party employer.  Under the regulations, “provision of care” means assistance with the activities of daily living. The Home Care Association of America challenged the revised regulations in federal court, contending that the USDOL had exceeded its authority in adopting the revised regulations.  The District Court agreed, and invalidated the regulations.  On appeal, the D.C. Circuit Court of Appeals reversed the District Court, holding that the USDOL had the authority under the FLSA to revise the regulations.  The Court further found that the USDOL’s decision to revise the regulations was “grounded in a reasonable interpretation of the statute” and was “neither arbitrary nor capricious.” Assuming that this decision stands and the USDOL’s revised regulations take effect, home care agencies will lose the benefit of the companionship exemption.  Direct care workers who provide services in a patient’s home must be paid at least the federal minimum wage (and in New York, the current higher minimum wage of $8.75 per hour).  In addition, home care agencies must pay home care workers overtime at one and one-half times the regular rate for hours worked in excess of 40 in a work week, unless the employee falls within one of the other FLSA exemptions.  The time spent traveling from one patient to another is considered to be compensable hours worked, and will count toward the 40-hour threshold.

It is not uncommon for employers to present restrictive covenants, such as non-competition, non-solicitation, or confidentiality agreements, to new employees in a stack of orientation paperwork.  A recent case from New York’s highest court reminds employers not only that it is important to narrowly tailor restrictive covenants, but also that it is worthwhile to take the time to explain the meaning of those agreements to new employees, and even provide new employees with some time to review them. In 2014, we posted a blog article on a New York Appellate Division (Fourth Department) case regarding the partial enforcement of an overbroad non-solicitation provision in an employment agreement.  In Brown & Brown, Inc. v. Johnson, the appellate court deemed the non-solicitation provision overbroad and unenforceable because it prohibited the former employee from soliciting any client of the firm, not just those with whom she developed a relationship while employed by the firm.  The firm sought to have the non-solicitation agreement partially enforced.  In other words, the firm asked the court to modify or “blue pencil” the covenant to make it enforceable. Significantly, the appellate court refused to blue pencil the overbroad agreement, citing the unequal balance of power between the employee and employer at the time the agreement was signed.  Thus, the entire non-solicitation provision was deemed unenforceable, allowing the former employee to solicit any former clients.  Given this decision, we cautioned employers to be wary of overreaching in a restrictive covenant, as it could result in a court refusing to enforce even a pared down version of the agreement. In June 2015, the Court of Appeals reversed the Appellate Division on the partial enforcement issue and sent the case back to the trial court to review the circumstances of the case.  According to the Court, the lower court should have taken a closer look at the facts and circumstances surrounding the signing of the non-solicitation agreement before deciding whether to simply strike the overbroad agreement.  The Court noted that the fact that the agreement was not presented to the employee, Johnson, until after she left her prior employment “could have caused her to feel pressure to sign the agreement, rather than risk being unemployed.”  Nevertheless, the mere fact that the agreement was a requirement of the job, and that the employee was not presented with the agreement until the first day of work was not enough alone to deny partial enforcement.  The Court cited other factors that would be considered to determine the partial enforcement issue:  whether the employee understood the agreement, whether it was discussed or explained to her, and whether she was coerced into signing it on the first day or could have sought advice from counsel or negotiated the terms. The latest lesson on restrictive covenants from New York’s highest court is clear:  they must be presented to employees in a non-coercive fashion.  If your restriction on an employee could be construed as overbroad, courts will consider the circumstances under which the agreement was provided to the employee when determining whether to modify or “blue pencil” it to make it enforceable.  To convince a court to do so, there must be facts showing that the employer took steps to minimize the inherent inequality in bargaining power between the employer and the employee.  While employers may be reluctant to negotiate the terms of these agreements, employers should consider sitting down to explain the meaning of a non-compete or non-solicitation agreement, leaving some time for the new employee to think over and review the agreement, and allowing the employee to seek counsel before signing it.

In a long-awaited decision issued on August 17, 2015, the five-member National Labor Relations Board (“Board”) unanimously shut down an attempt by Northwestern University’s scholarship football players to become the first group of college athletes to form a labor union.  This Board holding vacates the direction of election issued by an NLRB Regional Director in March 2014 and dismisses the representation petition filed by the College Athletes Players Association (“CAPA”), but does not address the fundamental issue of whether the players are “employees” under the National Labor Relations Act (“Act”).  Instead of deciding this issue, the Board declined to assert jurisdiction over this case based on its conclusion that it “would not promote stability in labor relations” and therefore would not effectuate the policies of the Act. The Board noted that it had never been asked to assert jurisdiction in a case involving college athletes, nor had there ever been a petition for representation of a unit of a single college team, or even a group of college teams.  The Board also pointed out that the players in this case did not “fit into any analytical framework” the Board had used in other cases involving college students (such as graduate student assistants or student janitors and cafeteria workers) because this case involved student athletes who receive scholarships to participate in what traditionally has been regarded as an extracurricular activity.  The Board also distinguished these scholarship players from professional athletes, because the scholarship players are required to be enrolled full time as students and meet various academic requirements.  The Board further observed that bargaining units in professional sports have never been limited to a single team’s players – they have always included the players of all teams in the entire league.  Therefore, the Board concluded that there was no precedent that required it to assert jurisdiction, and that it was free to exercise its discretion to decline jurisdiction over this case. In justifying its decision to decline jurisdiction, the Board explained that Northwestern is a member of the National Collegiate Athletic Association (“NCAA”), which has a “substantial degree of control over the operations of individual member teams, including many of the terms and conditions under which the scholarship players (as well as walk-on players) practice and play the game.”  Under these circumstances, the Board determined that its assertion of jurisdiction over only Northwestern and its scholarship football players would not promote stability in labor relations across the NCAA.  The Board further explained that Northwestern competes in the NCAA Football Bowl Subdivision (“FBS”), where 108 of the 125 member schools are public institutions that are not covered by the Act.  As a result, the Board does not have jurisdiction over the vast majority of the FBS teams.  In fact, the Board pointed out that because Northwestern is the only private school in the 14-member Big Ten Conference, it “cannot assert jurisdiction over any of Northwestern’s primary competitors.”  The Board cited this as an additional reason why its assertion of jurisdiction over only Northwestern and its scholarship football players would not promote stability and uniformity in labor relations. Although the Board’s exercise in restraint in this decision comes as somewhat of a surprise given this Board’s activism in expanding the reach of the Act, the Board made clear that its decision does not “preclude a reconsideration of this issue in the future,” and should be interpreted narrowly.  In fact, the Board seemingly opened the door for consideration of a broader proposed bargaining unit than scholarship football players at one university by stating that its decision is not intended to “address what the Board’s approach might be to a petition for all FBS scholarship football players (or at least those at private colleges and universities).”  So, the landscape of collegiate athletics will remain the same for now, but this may not be the last unionizing effort of student athletes that we see.

As we reported in an earlier blog post, the National Labor Relations Board issued the American Baptist Homes of the West (“Piedmont Gardens”) decision in December 2012, overturning more than 30 years of precedent shielding witness statements from disclosure.  In June 2014, however, the Supreme Court handed down the Noel Canning decision, in which it found that President Obama’s January 2012 Board appointments were invalid and thus the Board lacked the necessary quorum of three members to issue valid decisions from that date until August 2013 (when a full five-member Board was properly appointed).  As Piedmont Gardens was one of the Board decisions invalidated by the Noel Canning ruling, the Board issued an order setting aside the decision but retained the case on its docket. After reconsidering the case, the Board issued a decision on June 26, 2015, reaffirming its earlier decision.  In doing so, the Board overruled the blanket exemption -- first established by the Board’s 1978 Anheuser Busch decision -- that allowed employers to withhold witness statements in response to pre-arbitration requests for information.  Arguing that the Anheuser Busch rationale was “flawed,” the Board held that such statements are now subject to the same standard applicable to all other union requests for information:  an employer must furnish “relevant” information that is “necessary” to the union’s proper performance of its duties as collective bargaining representative. Under this new standard, an employer that seeks to withhold the production of witness statements on “confidentiality” grounds must first establish that:  (i) witnesses need protection; (ii) evidence is in danger of being destroyed; (iii) testimony is in danger of being fabricated; and (iv) there is a need to prevent a cover-up.  As the Board took pains to point out, “a legitimate and substantial confidentiality interest requires more than a generalized desire to protect the integrity of employment investigations.” If the required confidentiality showing can be made, the Board would then weigh the employer’s interest in confidentiality against the union’s need for the information.  Even if the Board finds that the confidentiality interest outweighs the union’s need, the employer cannot simply refuse to provide the information but “must seek an accommodation that would allow the [union] to obtain the information it needs while protecting the [employer]’s interest in confidentiality.” This decision places yet another unnecessary burden upon employers.  The Board cites no evidence that the old standard hamstrung unions in performing their collective bargaining duties.  Under Anheuser Busch, unions were still entitled to witness names and could conduct their own investigations.  Now employers can offer no assurance of confidentiality to employees, who will likely be more hesitant than ever to provide truthful accounts against their union brethren for fear of reprisal. In the wake of this decision, employers should reassess their investigatory methods, including best practices for preserving confidentiality, and avoid blanket rejections of union requests for witness statements.

There are many protected categories under the federal employment discrimination laws, but none of those laws mentions "sexual orientation" as a protected category.  Versions of the Employment Non-Discrimination Act ("ENDA"), which would explicitly prohibit employment discrimination on the basis of sexual orientation, have been introduced in almost every session of Congress since about 1994.  However, the legislation has never made it to the President’s desk. According to the Equal Employment Opportunity Commission ("EEOC"), federal legislation explicitly prohibiting employment discrimination based on sexual orientation is unnecessary because such discrimination is already prohibited under Title VII of the Civil Rights Act ("Title VII").  In a December 2, 2014 blog post, we wrote about a decision issued by the EEOC against a federal agency (the Bureau of Tobacco, Firearms and Explosives) holding that transgender discrimination is a form of sex discrimination prohibited by Title VII.  Therefore, it should come as no surprise that the EEOC has now also issued a decision against another federal agency (the Federal Aviation Administration) on July 16, 2015, holding that sexual orientation discrimination is also a form of sex discrimination prohibited by Title VII. In the case, an employee who worked for the Federal Aviation Administration alleged that he was passed over for a permanent position as a Front Line Manager because of his sexual orientation.  The EEOC determined that it had jurisdiction over the claim even though sexual orientation is not listed as one of the protected categories under Title VII, because “sexual orientation is inseparable from and inescapably linked to sex."  The EEOC further stated:  "A complainant alleging that an agency took his or her sexual orientation into account in an employment action necessarily alleged that the agency took his or her sex into account." The EEOC discussed a number of ways in which discrimination based on sexual orientation could be considered sex discrimination.  For example, the EEOC theorized that sexual orientation discrimination is 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 also opined that sexual orientation discrimination is sex discrimination because it “necessarily involves discrimination based on gender stereotypes" and is often motivated by a desire to enforce heterosexually defined gender norms. This recent EEOC decision was issued in the context of an appeal from a federal agency's decision, and is not binding on employers in the private sector.  However, the reasoning used by the EEOC in its decision suggests that it will likely exercise jurisdiction over discrimination charges filed against private sector employers alleging sexual orientation discrimination and could commence enforcement proceedings against private sector employers in sexual orientation discrimination cases.  As the EEOC noted in its decision, many federal courts (including the Second Circuit Court of Appeals, which is the federal appellate court that hears appeals from cases decided in the U.S. District Courts in New York) have already rejected claims that Title VII prohibits sexual orientation discrimination.  It remains to be seen whether any federal courts will be persuaded by the EEOC's interpretation of Title VII's sex discrimination provision and whether the Supreme Court will eventually address the issue. The EEOC's decision will also likely have less of an impact on employers in New York than on employers in some other states, because sexual orientation discrimination is already prohibited by the New York Human Rights Law ("NYHRL").  However, because Title VII includes punitive damages and recovery of attorneys' fees as potential remedies (and the NYHRL does not), it is possible that plaintiffs' lawyers may start asserting sexual orientation discrimination claims under both Title VII and the NYHRL in order to obtain federal court jurisdiction and to take advantage of the additional remedies under Title VII that are not available under the NYHRL. Employers in New York should periodically review their equal employment opportunity, anti-discrimination, and anti-harassment policies to make sure that they are in compliance with all applicable federal, state, and local laws.  Employers should also make sure that all employees -- especially managers who make hiring and other employment decisions -- are regularly trained regarding those policies.