Michael Kinsley once said "A gaffe is when a politician tells the truth."  And one gaffe that has often been repeated is Speaker Pelosi's statement from 2010, saying about the Affordable Care Act, "we have to pass the bill so that you can find out what is in it."  There was great truth to that statement, as we are now in an age where the public only finds out what was contained in legislation after it has already been passed. Such as the new 144-page budget deal signed into law last week.  It was made public just before midnight on October 26, and with little debate, passed the House on October 28, the Senate on October 30, and was signed into law by the President on November 2.  And we are now coming to "find out what is in it." Such as a provision allowing OSHA to increase its penalties by up to 82%, to account for inflation since 1990.  OSHA's penalty amounts were previously fixed and not indexed to inflation.  However, the "Federal Civil Penalties Inflation Adjustment Act" tucked into the budget deal not only allows OSHA to begin increasing its penalties annually to account for inflation, but also allows it to implement a "catch up" increase for not raising its penalties for the past quarter century.  If OSHA elects to do so -- and as the sun rises in the east, OSHA will elect to do so -- it must implement an interim final rule by July 1 that will go into effect by August 1. OSHA's current maximum penalties are $7,000 (for other-than-serious and serious violations), and $70,000 (for repeat and willful violations).  Those amounts will likely increase to about $12,500 and $125,000 -- and then increase annually thereafter. For any employer subject to an inspection, whether due to a complaint, referral, emphasis program, or the site-specific-targeting program, the stakes are about to increase.

On October 19, 2015, the U.S. Department of Homeland Security (DHS) published a notice of proposed rulemaking in the Federal Register regarding optional practical training (OPT) extensions for F-1 students with U.S. degrees in science, technology, engineering or mathematics (STEM).  The proposed rule is essentially a response to an August 2015 decision of the U.S. District Court for the District of Columbia to vacate the present STEM OPT extension regulation for procedural deficiencies in its promulgation, effective February 12, 2016.  Under the proposed rule, the length of STEM OPT extension would be increased from 17 months to 24 months.  In addition, the rule requires employers to develop and implement mentoring and training programs to bolster students’ learning through practical experience and provides safeguards for U.S. workers seeking employment in related fields.  DHS is accepting comments on the proposed rule through November 18, 2015 and is making every effort to have the final rule take effect prior to the February 12, 2016 sunset of the present STEM OPT extension regulation. STEM OPT Extensions.  Under the proposed rule, the length of STEM OPT extensions would increase from 17 months to 24 months and F-1 students would be limited to two 24-month STEM OPT extensions (for example, one after earning U.S. master’s STEM degree and another after earning U.S. doctoral STEM degree).  The proposed rule extends the maximum period of unemployment for F-1 students to 150 days – 90 days during the initial 12-month period of post-completion OPT and 60 days during the 24-month STEM OPT extension.  If the DHS rule is implemented as proposed, the STEM OPT extension will be a benefit to F-1 students and U.S. employers alike, as students will be able to work in the U.S. for three full years before additional work authorization (e.g., H-1B, O-1, etc.) would be necessary, and employers will have a generous amount of time in which to assess F-1 employees’ performance before undertaking sponsorship for additional work authorization.  As with the present STEM OPT extension regulation, under the proposed rule, STEM OPT extensions are only available if the employer participates in the U.S. Citizenship and Immigration Services’ E-Verify employment eligibility verification program. New Employer Responsibilities.  The proposed rule establishes a couple of new responsibilities for employers seeking to employ F-1 nonimmigrants on the STEM OPT extension.  First, employers would be required to implement formal mentoring and training programs for STEM OPT students to enhance their practical skills.  The student would be required to prepare a Mentoring and Training Plan – including the training goals and a description of how those goals will be met -- with the employer and to submit the plan to the student’s designated school official (DSO) at his/her institution before the DSO could recommend and authorize a STEM OPT extension for the student.  Second, employers would be required to attest and provide assurances on a number of items including that they will not terminate, layoff or furlough a U.S. worker as a result of hiring an F-1 student on STEM OPT and that the duties, hours and compensation for the F-1 student employee are commensurate with similarly situated U.S. workers.  If an employer fails to comply with the new requirements, DSOs will be prohibited from recommending students for a STEM OPT extension. We will continue to monitor this proposed rule as the February 12, 2016 deadline approaches and provide updates so F-1 student employees and their employers can plan accordingly.

October saw a flurry of activity from workplace regulators in New York, and employers should take note of several recent legal developments. First, Governor Andrew Cuomo recently signed legislation extending a so-called “sunset” provision in prior amendments to New York’s wage deduction statute – Section 193 of the New York Labor Law.  Those amendments, enacted in 2012, broadened the scope of permissible wage deductions under state law, including deductions for certain overpayments and advances.  Absent legislative action, the amendments were set to expire this month, which would have caused Section 193 to revert to its prior, more restrictive form.  These amendments will now be extended for another 3-year period.  Notably, this recent legislative action serves to concurrently extend existing deduction-related regulations promulgated by the New York State Department of Labor (“NYSDOL”).  Among other things, the regulations set forth detailed requirements which employers must follow in order to lawfully deduct to recover overpayments and advances. Second, the NYSDOL proposed revised regulations on October 28, 2015, governing the payment of employee wages via payroll debit cards, direct deposit, and other means.  These revised regulations – which are not yet final or effective – would impose a number of new requirements regarding how employers pay their covered employees.  As we reported on this blog, the NYSDOL initially proposed regulations on this same subject earlier this year, which were open for an extended public comment period.  The recently-issued revised regulations contain several changes from what NYSDOL originally proposed, ostensibly in response to feedback it received during the prior public comment period.  On balance, the newly-revised version provides better clarity on certain requirements and may also render implementation of payroll debit card programs more feasible for employers.  As additional good news for employers, NYSDOL has indicated that there will be a six-month delay in the effective date once the revised regulations are adopted and published in final form.  The specific requirements proposed in the revised regulations can be accessed here, and are open for another 30-day public comment period. Third, the NYSDOL published proposed regulations on October 21, 2015, which would implement the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15 per hour.  NYSDOL’s Commissioner subsequently adopted this recommendation, which will now proceed through New York’s rulemaking process.  The proposed regulations are presently open for a 45-day public comment period.  Businesses and their advocates in New York have opposed this drastic change and have questioned the NYSDOL’s authority to enact such an industry-specific raise without legislative action.  It is expected that there will continue to be considerable opposition to this proposal, that there will be significant public commentary provided through the rulemaking process, and that opponents will, if necessary, assert a legal challenge to the proposed change. And fourth, the NYSDOL has proposed additional regulations which would – effective on and after December 31, 2015 – raise the minimum wage and reduce the maximum available “tip credit” for certain workers who fall under the existing Hospitality Industry Wage Order.  Specifically, the proposed regulations would raise the applicable minimum wage for covered “service employees” and “food service workers” to $7.50 per hour (from $5.65 and $5.00, respectively).  Concurrently, the maximum available “tip credit” for these workers would be reduced to $1.50 per hour (from $3.35 and $4.00, respectively).  The proposed regulations also contain similar changes for covered “service employees” working in resort hotels, and would also include new language governing the calculation of hourly tip rates.  These proposed regulations are currently open for a 45-day public comment period, which began on October 7, 2015. As a reminder, the NYSDOL proposed regulations referenced above remain pending and are not yet effective.  There is no specific timetable for further action on the part of NYSDOL.  Even so, it is conceivable that the regulations will be issued in final form and adopted at or near the end of this year.

New York employers take notice:  an amendment to New York’s equal pay law (S.1/A.6075) was signed by Governor Cuomo on October 21, 2015.  The law amends Labor Law Section 194, which prohibits pay differentials based on gender in jobs requiring “equal skill, effort and responsibility” which are “performed under similar working conditions.”  The bill was passed by the Assembly in April, and by the Senate in January, and the changes are significant. The amendment to Labor Law Section 194 is one of eight laws aimed at gender equality issues that Cuomo signed last week.  Of interest to employers, several of the other laws also touch on employment issues.  Those other laws:

• Extend the prohibition on sexual harassment to all employers, including those with less than four employees (S.2 / A.5360);
• Allow employees to obtain attorneys’ fees when they prevail in sex discrimination lawsuits (S.3 / A.7189);
• Add “familial status” to the list of protected traits under the New York State Human Rights Law (S.4 / A.7317); and
• Add a requirement to the Human Rights Law that employers must provide reasonable accommodations to all pregnant employees, not just those with a pregnancy-related disability (S.8 / A.4272).

The laws are slated to take effect on Tuesday, January 19, 2016. The premise of the pay equity amendment is simple and appealing:  the same day’s pay for the same day’s work.  At first glance, this is not big news.  The state labor law and federal law already require equal pay without regard to gender.  However, this law tightens and strengthens Section 194 in ways that will undoubtedly impact many New York workplaces. First, under existing law, an employer can defend a pay discrimination claim by showing that the difference in pay is justified by a seniority system, a merit system, a system measuring earnings based on quantity or quality of work, or “any other factor other than sex.”  This catch-all was viewed by many as a loophole and hindered the success of many pay discrimination claims.  The new law replaces the “any other” defense with the following:  "a bona fide factor other than sex, such as education, training, or experience."  This bona fide factor must be job-related and consistent with business necessity.  Notably, the burden is on the employer to prove the existence of this bona fide factor; it is not on the complaining employee to prove discriminatory motive (as in other types of employment discrimination litigation). As any employer can attest, many factors other than sex go into compensation decisions.  Under the old law (and still under federal law), these other factors typically held up to the test of “any other factor other than sex.”  It is not clear which factors will hold up under the new law.  For example, are market forces still a defense?  In a competitive market for talent, an employer might pay a new hire more than employees currently performing the same job simply because the market demands it.  Perhaps the candidate has an offer from a competitor that the employer must match to attract the candidate.  Often, internal compensation lags behind external market.  Whether market forces will be considered “a bona fide factor other than sex, such as education, training, or experience” remains to be seen. Moreover, even if an employer establishes a “bona fide factor” to justify a gender pay difference, an employee can still prevail under the new law by showing that:  (a) the bona fide factor has a disparate impact on one sex; (b) alternative employment practices exist that would serve the same business purpose and not produce the pay differential; and (c) the employer refused to adopt the alternative practice.  The lack of clarity over what will be considered a “bona fide factor” will undoubtedly result in a wave of litigation. Second, the Pay Equity Act gives employees the right to openly inquire about, disclose and discuss their wages.  Employers cannot prohibit these conversations.  Rather, the employer may only establish and distribute a written policy containing “reasonable workplace and workday limitations on the time, place and manner” for pay discussions.  The law states that an example of a reasonable limitation would be a rule that an employee may not disclose a co-worker’s pay without the co-worker’s permission.  The law contains some recognition that certain employees must still maintain confidentiality of pay information:  an employer may prohibit an employee with access to other employees’ pay information as part of their job from disseminating that information to others who do not have the same access. This right to openly discuss pay is new to New York law, but it is consistent with the National Labor Relations Board’s position that an employee’s right to openly discuss wages is protected by the National Labor Relations Act. Third, the law contains dramatically higher penalties than other state employment discrimination and wage/hour laws.  Employers who are found to have willfully violated the Equal Pay Act are subject to liquidated damages in the amount of 300% of the wages owed.  In other words, in addition to making the employee whole for any unlawful difference in pay, there is an additional potential penalty of three times those wages.  Other provisions of the New York Labor Law provide for liquidated damages of “only” 100%. As stated above, the law takes effect on January 19, 2016.  Therefore, employers should act quickly to evaluate any potential exposure.  Now is the time to review pay rates to ensure any gender differences can be justified based on the factors in the statute.  Consider whether these factors are job-related and consistent with business necessity.  Additionally, employers should review their written policies, particularly confidentiality policies, to ensure they do not contain restrictions on the right to share or discuss compensation information, and revise as necessary.  Similarly, supervisors should be made aware that they may not prohibit conversations about pay.  Finally, consider the pros and cons of adopting a new policy setting reasonable limits on the time, place and manner of pay discussions.

Recently, the United States Supreme Court commenced a new session with a docket full of interesting cases.  One case, Friedrichs v. California Teachers Association, is of particular significance to those in the field of public sector labor law.  A decision in favor of the plaintiffs has the potential to affect the implementation and regulation of union agency shop fees nationwide. The case was originally brought by a California public school teacher, Rebecca Friedrichs, who argued that the mandatory payment of agency shop fees violated her First Amendment right to free association and free speech.  Currently, public sector employees in New York who choose not to join the union that has been certified as their collective bargaining representative are required under the Taylor Law to pay fees associated with the union’s collective bargaining and contract administration costs.  These fees are called “agency shop fees.” Agency shop fees may not include any political costs associated with running the union.  However, the plaintiffs in Friedrichs argue that it is difficult to separate the political costs associated with public employee unions from the collective bargaining and contract administration costs.  In their Petition for a Writ of Certiorari to the Supreme Court, the plaintiffs wrote:  “In this era of broken municipal budgets and a national crisis in public education, it is difficult to imagine more politically charged issues than how much money cash-strapped local governments should devote to public employees . . . .” Similar to the issues presented in some of the other cases on the docket this session, the issue of agency shop fees in the public sector has recently been before the Supreme Court.  In the 2014 case of Harris v. Quinn, the Court addressed the issue of whether the First Amendment prohibits the collection of agency shop fees from Rehabilitation Program Personal Assistants employed by the State of Illinois who choose not to join or support the union.  The facts in Harris led to a narrow opinion by the Court that the First Amendment rights of the Personal Assistants would be violated by the collection of agency shop fees because the customers (recipients of home care services), rather than the State of Illinois, controlled most aspects of the employment relationship and the scope of the collective bargaining provided by the union on behalf of the Personal Assistants was extremely limited.  The Court also noted that the traditional “free-rider” argument that had previously supported agency shop fees in the past was weakening in light of First Amendment scrutiny. The defendants in Harris and in Friedrichs both rely on the Supreme Court’s 1977 decision in Abood v. Detroit Board of Education.  In Abood, the Supreme Court held that although it was unconstitutional to collect fees from non-member employees to support political or ideological causes, unions have the right to require employees within the bargaining unit who choose not to become union members to contribute to the cost of collective bargaining activities.  Notably, unions are also required to provide some sort of notice to all members of the bargaining unit as to what the fees are being used for, in an effort to allow time for any objections by non-member employees to their agency shop fees being contributed to political causes. What does this mean for public sector employers in New York?  The plaintiffs in Friedrichs are seeking to overrule the precedent set in Abood by either abolishing agency shop fees, or, in the alternative, by creating a system whereby non-member employees must opt in (rather than opt out) of the payment of such fees.  Section 208.3 of the Taylor Law provides that each public employee union in New York is entitled to have deducted from the wage or salary of non-member employees within the bargaining unit the amount equivalent to the dues levied by the union against member employees.  Section 208.3 also requires, as a condition of this agency shop fee deduction, that the union must establish and maintain “a procedure providing for the refund for any employee demanding the return of any part of an agency shop fee deduction which represents the employee’s pro rata share of expenditures by the organization in aid of activities or causes of a political or ideological nature only incidentally related to terms and conditions of employment.”  If the Supreme Court rules in favor of the plaintiffs, the constitutionality of this provision of the Taylor Law could also be subject to challenge. In the meantime, stay tuned for further developments regarding this case, and be on the lookout for oral arguments in the next few months.

In prior blog articles, we've sought wisdom from Sun Tzu, an audit of Santa's Workshop, a theoretical application of the faithless servant doctrine to A-Rod, and Pooh Corner for some Zen advice on day-to-day employment matters.  Our next stop on the Employment Law Express is a seasonal walk through the Pumpkin Patch with the Peanuts gang. As only he could, Linus explained the criteria for a visit from the Great Pumpkin: Each year, the Great Pumpkin rises out of the pumpkin patch that he thinks is the most sincere.  He's gotta pick this one. . . .  You can look all around and there's not a sign of hypocrisy. Alas, like other astute philosophers of historical significance, Linus is likely keenly aware that the importance of sincerity is not limited to the pumpkin patch, but has broad application, even reaching into the black box of the jury room in an employment discrimination case.  For those plaintiffs hoping for a bag of treats from the Great Pumpkin (in the form of cash), they need to be mindful for signs of hypocrisy -- a lesson painfully learned by the plaintiff in Housley v. Spirit Aerosystems, Inc., which was just recently decided by the Tenth Circuit Court of Appeals on October 9, 2015. The plaintiff was a Boeing employee who was not hired by Spirit Aerosystems when Spirit acquired the facilities where she worked.  She sued for age discrimination, hoping to lure a bounty of treats from the proverbial Great Pumpkin (a federal jury, to be precise), in part by relying on secretly recorded conversations with her supervisors during which she was asked if she was old enough to retire.  On the surface, the plaintiff had found a perfect patch from which to receive her treats (i.e., "He's gotta pick this one" -- just listen to the tape).  But, was the patch sincere and free of hypocrisy?  The jury thought not, and rendered a verdict in favor of Spirit.  During the trial, Spirit exposed the plaintiff's hypocrisy by using the fact that she had secretly recorded conversations with her supervisors as after-acquired evidence of wrongdoing that negated any alleged damages. On appeal, the Tenth Circuit refused to find that the lower court committed any reversible error in allowing Spirit to use the recordings for this purpose.  In sage, Linusesque prose, the Court reasoned:  "The recordings in this case turned out to be a double-edged sword.  Housley wanted the jury to know about them for obvious reasons and considering her active promotion of their admission she is not now in a position to complain about getting what she wanted.  Spirit turned the tables on her by promoting their use for a different, albeit limited, purpose -- after-acquired evidence of wrongdoing.  In the end Housley was obliged to take the bitter with the sweet." Halloween, like a suit for employment discrimination, is goal-oriented -- a pursuit in reaching for "the sweet."  Sometimes this goal seems easily obtainable, as noted by the Peanuts characters: Lucy:  All you have to do is walk up to a house, ring the doorbell, and say "tricks or treats." Sally:  Are you sure it's legal? Yes, in many jurisdictions (including New York), secretly recording a supervisor in a conversation to which the employee is a party is just as legal as knocking on a door and asking for candy.  And, on the surface, the recording (depending on its content) should result in the receipt of treats with no more effort than knocking on a door.  But not everyone gets a treat.  Tricksters may find themselves walking away with nothing but a bag of rocks. So, the lesson for this Halloween season is that employers defending against employment discrimination claims, like Spirit, should always be on the lookout for a smoking gun that, on closer inspection, is nothing more than a Halloween prop ready to backfire if just given enough room to do so.

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.