On April 16, 2015, the New York City Council overwhelmingly passed an amendment to the New York City Human Rights Law that would bar most city employers from using credit checks as part of their hiring process.  Supporters of the bill argue that in most cases, an applicant’s consumer credit history has no direct correlation to their job performance, and an employer’s use of credit checks in hiring could have an adverse impact on minority job applicants, who are more likely to have poor credit histories. Similar to Article 23-A of the New York Correction Law, however, the bill does include exemptions for certain professions where there is, in fact, a direct relationship between a person’s credit history and his/her fitness or ability to perform the job.  Exempted professions include high-level executives who have financial authority over company or third-party funds or assets worth more than $10,000, elected officials, police officers, and workers who are required to have security clearance under federal or state law, such as those having access to intelligence, national security information, or trade secrets.  By focusing employer exemptions on particular job duties as opposed to excluding entire industries, such as banks, this bill has broader coverage than similar laws in other jurisdictions. If the amendment is signed into law by Mayor de Blasio, New York City would join 10 states and Chicago in barring employer credit checks in hiring.

On March 27, 2015, the U.S. District Court for the Southern District of New York granted the plaintiffs’ motion to compel disclosure of a report prepared by a Human Resources (“HR”) consultant in class action litigation under the Fair Labor Standards Act (“FLSA”) and state wage and hour laws. In Scott v. Chipotle Mexican Grill, Inc., Chipotle claimed that a number of documents sought by the plaintiffs during discovery were privileged communications that were protected from disclosure.  One such document was a report from an HR consultant examining the activities of four employees holding Chipotle’s apprentice position.  Chipotle claimed that the report was subject to the attorney-client privilege because one of its attorneys retained the HR consultant to help him assess whether the apprentice position should be classified as an exempt or non-exempt position.  The Court disagreed with Chipotle and ordered that the report be turned over to the plaintiffs. In general, the attorney-client privilege -- upon which Chipotle was relying -- applies to communications between an attorney and his/her client that were intended to be, and were in fact, kept confidential, and were made for the purpose of obtaining or providing legal advice.  In certain limited situations, however, communications can fall within this privilege even if not made between an attorney and a client.  The so-called “agent of attorney” doctrine acts to extend the attorney-client privilege to shield communications that are not between an attorney and client when the purpose of the communication is to assist the attorney in rendering legal advice to the client.  Such communication must be “necessary” or “highly useful” for effective consultation between the client and attorney.  This exception has been applied sparingly, in very limited circumstances. Here, the Court held that Chipotle failed to establish that the HR consultant did anything more than factual research to assist Chipotle in making a business decision, rather than to assist an attorney in rendering legal advice to Chipotle.  The Court explained that the report did not provide any specialized knowledge that the attorneys could not have acquired or understood on their own or directly through Chipotle (their client).  There was also no indication that the consultant was taking information that was incomprehensible to Chipotle’s attorneys and putting it into a “usable form,” rather than merely consolidating employee interviews and delivering a factual analysis.  The Court rejected Chipotle’s argument that the report should be considered privileged because the consultant was hired by a law firm and the report was specifically drafted for an attorney, because the agent-of-attorney doctrine does not consider form over substance.  The final nail in Chipotle’s coffin was the fact that no legal advice was actually provided by its attorneys following receipt of the HR consultant’s report, which indicated that the report was not created for the purpose of assisting the attorneys in providing legal advice. The Chipotle decision emphasizes the need for employers to exercise the utmost care when deciding whether to utilize the services of an HR consultant.  Although the Court ruled upon a situation where an attorney was involved, at least tangentially, with the HR consultant, employers must recognize that when an HR consultant is simply providing advice to an employer and there is no attorney involvement at all, such communications or resulting reports would undoubtedly not be privileged.  Even if an attorney is involved, however, the privilege still will not apply if the consultant’s investigation is merely factual, does not assist the employer’s attorney in rendering legal advice, and does not provide information outside of the attorney’s general expertise that is essential to effective consultation between the attorney and client.  In such situations, there is a risk that the employer will be required to disclose any communications and reports from the consultant during future litigation, which potentially could be devastating depending upon the content of those communications and reports.

On April 6, the National Labor Relations Board ("NLRB") General Counsel issued a guidance memorandum to explain the changes in the procedures for processing union representation petitions under the NLRB's final rule on "quickie" elections that was adopted on December 15, 2014.  Although a resolution was passed by Congress to block the NLRB from implementing the quickie election rule, President Obama vetoed the resolution, paving the way for the NLRB's final rule to take effect on April 14, 2015. Although the practical effect of the NLRB's final rule will likely be a shorter time period between the date when a representation petition is filed and the date when the election is held, the General Counsel noted in the guidance memorandum that "neither the final rule, nor this memorandum, establishes new timeframes for conducting elections or issuing decisions."  The guidance memorandum supersedes any provisions contained in the NLRB's manuals and other guidance to the extent that those provisions are inconsistent with the guidance memorandum. For a summary of the NLRB's final rule, see our December 15, 2014 blog post.

As the social media phenomenon continues to dominate our culture and its use has become second-nature, it is worthwhile to revisit some of the issues presented by an employer's use of social media, particularly in the context of hiring. Social media presents a unique workplace conundrum.  On one hand, employees generally believe that their use of social media outside of work is none of their employer’s business.  However, employers need to make employment decisions based on the best available information, which sometimes includes information an employee or potential employee shares on social media.  In the context of hiring, a candidate’s social media page can provide invaluable insight into the candidate’s character.  Generally, people tend to be much more candid on social media than they would be during a job interview, and, as the saying goes, “a picture is worth a thousand words.” While there are currently no laws prohibiting New York employers from accessing an applicant’s social media information during the hiring process, there are potential legal pitfalls depending on how a candidate’s social media information is accessed, what information is obtained, and what information is considered when making a hiring decision.  Social media sites contain a lot of information that employers are legally prohibited from considering during the hiring process (e.g., age, sexual orientation, race, religion, ethnicity, etc.).  Simply possessing this type of knowledge about a candidate could ruin an otherwise well-based decision not to hire an individual, because it could create an inference that this information was part of the basis for the decision.  Thus, employers that use social media as a hiring tool must exercise caution and take the appropriate steps to address these concerns. At the outset, an employer should determine whether a social media search will be conducted as part of the hiring process, and if so, develop a policy regarding the use of social media in hiring.  The policy should address what positions the search will be used for, the scope of the search, and when the search will occur, which is ideally later in the process to limit the number of candidates who are affected.  The policy should also clearly identify what information will not be looked at or considered (i.e., protected characteristics), and what will be reported to those involved in hiring.  Employers must ensure that this policy is distributed and communicated to hiring managers, and that they understand the purpose of the policy.  As with any other policy, it is important that it is followed and applied consistently. With respect to implementation of the policy, it is imperative that direct hiring managers do not access social media as part of the hiring process.  A non-decision-maker should conduct the search and report only relevant, non-protected information to the decision-maker.  To ensure this process is effective, the non-decision-maker conducting the search must understand what information the employer is legally prohibited from using when making a hiring decision. An employer should never access any site that they have not been authorized to access, nor should employers require a candidate to provide them with access to their personal social media accounts.  As reported in our April 28, 2012 blog post, legislation was introduced in the New York State Senate that was intended to prohibit employers from failing to hire an applicant based on his/her refusal to provide login information to the employer.  Although this bill has not been passed, it is still the best practice to refrain from requiring candidates to provide access to their social media accounts as part of the application process, or as a condition of an offer of employment.  In fact, multistate employers should be aware that at least 18 states, including Arkansas, California, Colorado, Delaware, Illinois, Louisiana, Maryland, Michigan, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Vermont, and Washington, have enacted legislation regulating an employer’s social media activity, most of which contain prohibitions against requiring applicants or employees to provide the employer with his/her personal login information.  Further, employers should not falsify information or impersonate an individual to gain access to the page.  In other words, an employer must not ask an employee who is “friends” with a candidate to access his/her page.  As a rule of thumb, only view information that is open to the public. Employers should attempt to verify information before relying on it.  Employers should also document and retain the information obtained in the search, including the search criteria and the information considered as a basis for their hiring decisions.

On March 25, the U.S. Supreme Court issued its much anticipated decision in Young v. United Parcel Service, Inc., which centered on whether UPS unlawfully discriminated against a pregnant employee by denying her a light-duty accommodation for her lifting restriction.  The Court vacated a Fourth Circuit Court of Appeals decision, which granted summary judgment in favor of UPS. Peggy Young, the plaintiff, was a part-time driver for UPS.  UPS policy required drivers to be able to lift up to 70 pounds.  When Young became pregnant, her doctors advised her that she should not lift more than 20 pounds during the first 20 weeks of her pregnancy.  Based on its internal policy, UPS advised Young that she could not work under the lifting restriction. Young sued UPS, claiming that it had discriminated against her by refusing to accommodate her pregnancy-related lifting restriction.  Young alleged that UPS had provided other drivers who had similar restrictions with light-duty accommodations, but UPS argued that it only provided light-duty work to a limited number of employees, including those who:  (1) were injured on the job; (2) had lost their Department of Transportation certification; or (3) had an ADA-covered disability. Young argued that under the Pregnancy Discrimination Act ("PDA"), which amended the definitions subsection of Title VII to include pregnancy discrimination as a form of sex discrimination, if an employer accommodates only a subset of workers with disabling conditions, pregnant workers who are similar in their ability or inability to work must be treated the same regardless of whether there are other non-pregnant employees who do not receive the same accommodations.  Unpersuaded by this broad approach, the Court stated that it doubted Congress “intended to grant pregnant workers an unconditional most-favored-nation status.” However, the Court also refused to accept UPS’ interpretation of the PDA.  UPS argued that the second provision of the PDA (which requires employers to treat "women affected by pregnancy . . . the same for all employment-related purposes . . . as other persons not so affected but similar in their ability or inability to work") means that an employer is not required to accommodate a pregnant employee if there are other non-pregnant employees who also are not eligible for such accommodations.  UPS argued that pregnant employees such as Young were treated exactly the same as non-pregnant employees who had temporary lifting restrictions due to off-the-job injuries, and that its refusal to provide an accommodation for Young was therefore lawful. The Court also refused to “rely significantly” on the EEOC guidance which was issued in July of 2014 -- less than two weeks after the Supreme Court decided to hear the case.  The EEOC guidance provided that "an employer may not refuse to treat a pregnant worker the same as other employees who are similar in their ability or inability to work by relying on a policy that makes distinctions based on the source of an employee's limitations (e.g., a policy of providing light duty only to workers injured on the job)."  The Court reasoned that the EEOC’s position was inconsistent with previous positions and the EEOC failed to explain the basis of its guidance. Instead, the Court announced its own interpretation.  It held that a pregnant employee attempting to establish a claim of disparate treatment based on pregnancy may do so through the same general framework applicable to other types of employment discrimination claims (known as the McDonnell Douglas framework).  An employee who alleges that an employer’s denial of a pregnancy accommodation constitutes disparate treatment under the PDA must establish a prima facie case that:  (1) she belongs to the protected class; (2) she sought an accommodation; (3) the employer did not accommodate her; and (4) the employer did accommodate others “similar in their ability or inability to work.” Once the employee establishes her prima facie case, the burden shifts to the employer to offer a legitimate, nondiscriminatory reason to justify its refusal to accommodate the employee.  The Court advised, however, that the employer cannot merely claim that accommodating pregnant women is “more expensive or less convenient.” If the employer articulates a legitimate, nondiscriminatory reason, the employee must show the employer’s reason is a pretext for pregnancy discrimination.  The Court held that the employee may satisfy her burden at this stage by providing “sufficient evidence that the employer’s policies impose a significant burden on pregnant workers, and that the employer’s ‘legitimate, nondiscriminatory’ reasons are not sufficiently strong to justify the burden, but rather -- when considered along with the burden imposed -- give rise to an inference of intentional discrimination.”  For the claim to survive summary judgment, the employee can provide evidence that although the employer accommodates a large percentage of non-pregnant workers, it does not accommodate a large percentage of pregnant workers. Applying this standard, the Court explained that Young may be able to show that UPS provides light-duty accommodations to most non-pregnant employees with lifting restrictions, while “categorically failing” to accommodate pregnant employees with similar lifting restrictions.  Accordingly, the Court vacated the Fourth Circuit’s grant of summary judgment in favor of UPS, as there was a genuine dispute as to whether UPS treated employees whose situation “cannot reasonably be distinguished from Young’s” more favorably. For employers, this case may create more confusion than clarification on the issue of what obligation it may have to provide light duty assignments to pregnant employees.  However, given the Court’s articulation of the applicable legal standard, employers should:

• review their light duty policies and determine whether such policies should also apply to pregnant employees;
• review all other workplace accommodation policies to ensure compliance with the PDA and Americans with Disabilities Act;
• establish a policy for addressing requests for an accommodation, and in particular, requests from pregnant employees; and
• train supervisors and managers with regard to pregnant employees’ requests for an accommodation.

Employers are likely well aware of the conditions that must be satisfied before an employee can be deemed eligible for leave pursuant to the Family and Medical Leave Act (“FMLA”):

• the employee has worked for the employer for at least 12 months;
• the employee has worked 1,250 hours in the 12 months preceding the leave request; and
• the employer has 50 or more employees at, or within 75 miles of, the employee’s workplace -- the so-called “50/75” requirement

If one of these conditions is not satisfied, an employer cannot later be held liable for any FMLA-related claims brought by an employee, right?  Not so fast!  Although determining whether these conditions are met is typically the simplest step in the FMLA certification process, the United States Court of Appeals for the Sixth Circuit recently reminded employers of the headaches they may face if they are not careful in notifying their employees of these conditions. On January 26, 2015, the Sixth Circuit decided Tilley v. Kalamazoo County Road Commission.  Tilley was employed by the Road Commission, which did not meet the 50/75 requirement.  The Road Commission’s personnel manual contained the following statement regarding an employee’s eligibility to apply for FMLA benefits:  "Employees covered under the Family and Medical Leave Act are full-time employees who have worked for the Road Commission and accumulated 1,250 work hours in the previous 12 months." On August 1, 2011, Tilley began experiencing symptoms that made him fear that he was suffering a heart attack.  He was taken to the hospital, admitted for observation, and discharged the next day.  After his discharge, Tilley’s wife informed the Road Commission that Tilley would not be able to return to work until at least August 5. On August 9, a Road Commission representative sent Tilley FMLA paperwork that informed him that he was “eligible for FMLA leave.”  At no time was Tilley informed that the Road Commission did not meet the 50/75 requirement, or that such a requirement even existed.  On August 12, the Road Commission terminated Tilley’s employment, claiming that the reason for his termination was his failure to timely submit certain work assignments. Tilley filed suit, claiming that the Road Commission interfered with his right to FMLA leave and retaliated against him for taking such leave.  The Sixth Circuit agreed with the Road Commission that Tilley was not technically an “eligible employee” under FMLA, but concluded that Tilley’s case could continue because there was a dispute as to whether the Road Commission was “equitably estopped” from denying that Tilley was an eligible employee. The Court explained that “in certain circumstances equitable estoppel applies to employer statements regarding an employee’s FMLA eligibility, preventing the employer from raising non-eligibility as a defense.”  In order to prevail on such an “equitable estoppel” argument, an employee must show a definite misrepresentation by the employer, a reasonable reliance on the misrepresentation, and a resulting detriment to the employee who reasonably relied on the misrepresentation.  The Court found that Tilley presented sufficient evidence on all three elements to allow his case to continue. As to the first element, the Court held that the Road Commission’s personnel manual contained a “clear misrepresentation” as to Tilley’s eligibility to apply for FMLA benefits.  Specifically, the manual contained an “unambiguous and unqualified statement” that Tilley was covered by FMLA and was eligible to apply for FMLA benefits if he worked 1,250 hours in the previous 12 months, but it failed to note that the 50/75 requirement must also be satisfied.  Next, the Court found that there was sufficient evidence that Tilley relied upon the eligibility statement in the manual, which was sufficient to satisfy the second element.  Finally, as to the third element, the Court held that Tilley suffered a detriment as a result of his reliance on the eligibility statement in the manual since he was fired in part because he missed a deadline that he claims he would not have missed but for his reliance on the manual.  Therefore, because Tilley raised questions of fact regarding all elements of an equitable estoppel claim, the Court permitted Tilley’s FMLA claims to move forward. The takeaway from this decision is straightforward:  employers should immediately review their personnel manuals and/or FMLA policies to ensure that they are well-drafted and that all eligibility conditions for FMLA leave are adequately explained.  A poorly drafted or incomplete FMLA policy could result in an employer being in a situation similar to the Road Commission -- potentially being liable for an FMLA claim even when the employee making the claim is not even technically eligible for FMLA leave!

The General Counsel for the National Labor Relations Board (“NLRB”) recently published a guidance memorandum that provides specific examples of lawful and unlawful employee handbook rules in the areas of confidentiality, professionalism and employee conduct, use of company logos, copyrights and trademarks, conflicts of interest, photography and recording, and interaction with the media and other third parties.  The memorandum also includes General Counsel-approved handbook rules that were adopted as part of an unfair labor practice settlement with the fast-food chain, Wendy’s. Over the past few years, the NLRB and its General Counsel have aggressively scrutinized many frequently used employee handbook provisions.  The basis for this scrutiny is the alleged infringement of the right of employees to engage in protected concerted activity under Section 7 of the National Labor Relations Act (“NLRA”).  Section 7 activity includes the right to discuss, challenge, question, and advocate changes in wages, hours, and other terms and conditions of employment in both unionized and non-unionized work environments.  Of course, it also includes the right to engage in union organizing.  A majority of the current NLRB will deem an employee handbook provision to violate the NLRA if it specifically prohibits Section 7 activity or if “employees would reasonably construe” the rule as prohibiting such activity.  It is this “reasonably construe” language that has resulted in many common employee handbook provisions being declared unlawful by the majority of the current NLRB. While one could editorialize at length regarding the razor-thin distinctions drawn between the provisions found lawful and unlawful, the usefulness of the guidance for employers lies in its concrete examples, some of which are highlighted below. Confidentiality Rules A confidentiality policy will be deemed by the current NLRB to violate the NLRA if it specifically prohibits employee discussions regarding terms and conditions of employment, such as wages or workplace conditions, or if employees would reasonably construe the policy to prohibit such discussions. Unlawful

• Do not discuss customer or employee information outside of work, including phone numbers and addresses.
• Never publish or disclose the employer’s or another’s confidential or other proprietary information.  Never publish or report on conversations that are meant to be private or internal to the employer.

Lawful

• No unauthorized disclosure of business secrets or other confidential information.
• Do not disclose confidential financial data, or other non-public proprietary company information.  Do not share confidential information regarding business partners, vendors, or customers.

Employee Conduct/Professionalism Rules The memorandum reinforces that employees have the right to criticize their employer’s policies and actions toward its employees, and therefore, any policies prohibiting disrespectful, inappropriate, or rude conduct toward the employer have been deemed unlawfully overbroad.  In contrast, rules requiring employees to be respectful to co-workers, clients, and customers have generally been found to be lawful. Unlawful

• Be respectful of the company, other employees, customers, partners, and competitors.
• No defamatory, libelous, slanderous, or discriminatory comments about the company, its customers and/or competitors, its employees, or management.

Lawful

• No rudeness or unprofessional behavior toward a customer or anyone in contact with the company.
• Being insubordinate, threatening, intimidating, disrespectful, or assaulting a manager/supervisor, co-worker, customer, or vendor will result in discipline.

Use of Company Logos, Copyrights, and Trademarks The NLRB has found that a broad ban on use of an employer’s name, logo, or other trademark is unlawful because it may restrict the use of the company name and logo on picket signs, leaflets, and other protest material. Unlawful

• Do not use any company logos, trademarks, graphics, or advertising materials in social media.

Lawful

• Respect all copyright and other intellectual property laws.  For the employer’s protection as well as your own, it is critical that you show proper respect for the laws governing copyright, fair use of copyrighted material owned by others, trademarks, and other intellectual property, including the employer’s own copyrights, trademarks, and brands.

The release of this guidance suggests the NLRB will continue to aggressively enforce and scrutinize the employment policies of union and non-union employers.  An unlawful policy is itself a violation of the NLRA, and if an employee is disciplined or terminated for violating an unlawful policy, the discipline could be rescinded and the employer could be ordered to restore the employee to his/her position with back pay. As seen in the examples above, tweaking one or two words or adding additional context and clarification to what would be an otherwise overbroad policy can mean the difference between an unlawful or lawful policy.  Employers should, therefore, use this memorandum as a guide in reviewing and revising their handbooks and other employee rules.

In prior blog articles, we’ve visited the battle field with Sun Tzu to learn the art of defending employment litigation, Santa’s Workshop for a holiday reminder that we can be sued for just about anything, and the major league baseball diamond with A-Rod for a lesson in swinging for the fences with the faithless servant doctrine.  Our next stop on the Employment Law Express is to confer with one of the foremost Zen-masters on a more peaceful approach to our day-to-day employment matters.  That master is none other than the venerable Winnie the Pooh. Often thought of only as a cuddly focal point in children’s fiction, Pooh Corner offers a host of spiritual wisdom that has broad applications as to how we can best manage our day-to-day strife in the world of human resources.  So let’s take a careful look at some of the more astute Pooh-isms and what they tell us about how best to minimize the agita in our work. "It's more fun to talk with someone who doesn't use long difficult words but rather short easy words like, 'What about lunch?'" Indeed, though apparently Winnie the Pooh has never had lunch with a lawyer.  Not using (I thought about using the word “Eschewing”) long difficult words is not only wise but an absolute necessity in the world of employment law.  Take, for example, company handbooks and policies.  Their whole purpose is to provide clear notice to employees of the rules governing their employment.  The use of “long difficult words” defeats this purpose.  Ambiguity and uncertainty breed escape hatches for employees which, in turn, disrupt the tranquility of human resources operations. The use of “long difficult words” also becomes a serious problem when trying to enforce a non-compete agreement.  Some courts will hold that ambiguous non-compete clauses are either not enforceable at all or require a full-blown trial to enforce them.  Consequently, it is “more fun” to enforce a non-compete clause that is worded using short easy words that make the employee’s obligations crystal clear.  This holds true with any type of employment, separation or severance agreement -- they should contain short, easy language that even a bear who forgets to wear pants can understand. "People say nothing is impossible, but I do nothing every day!" While most of our employees are dedicated and hard-working, there are always a few exceptions who put a great deal of effort into doing nothing.  Think George Costanza.  The problems with these type of employees are many and include lost productivity and loss of morale among other employees who do not have the luxury of doing nothing all day.  So we need to make doing nothing all day impossible.  The caveat here is that nothing-doers tend to sue for discrimination when their reign of nothingness is put to an end.  To avoid such claims, or make them easily dismissible, ironically requires hard work on our part.  This means well-written (short easy words) counseling and disciplinary memos documenting the lack of performance and failure to follow specific directives. This played out in the interesting case of Sanzo v. Uniondale Union Free School District.  The plaintiff school custodian sued his former employer claiming that he was unlawfully terminated on the basis of his disability, narcolepsy, which caused him to occasionally fall asleep on the job.  The well-documented personnel file, however, demonstrated that discrimination was not at all at play.  The plaintiff was not fired because he fell asleep, but rather he was fired because he declined to do his job when he was awake. In the end, what Pooh is telling us is that some people will find it possible to do nothing at least until such time as someone with supervisory authority affirmatively makes it impossible. "You can't stay in your corner of the forest, waiting for others to come to you; you have to go to them sometimes." There are certainly days when sanity dictates that we stay in our own corner of the proverbial forest.  Staying too long, however, is like saying “open sesame” to the door of liability.  This often comes up in the context of workplace harassment and bullying investigations.  We’ve all gotten much better at the initial response to complaints and we conduct our investigations promptly and fairly.  The problem arises, however, when the harassment, if established, is not sufficiently severe to warrant terminating the alleged harasser so some other resolution is formulated (e.g., the harasser is separated from the complainant).  With such a remedial measure, our job is done, right?  Actually, the seeming completion of a workplace investigation is precisely not the time to retreat to our corner of the forest.  Rather, that is the time to periodically go out to see the complainant to make sure that no further harassment is taking place.  Our anti-harassment policies become viable defenses when they are not just initially followed but continually followed to stop any ongoing harassment.  Getting out of our corner of the forest means being proactive and being proactive defeats lawsuits. Although we all continue to get older and more experienced, the answers to many of our day-to-day problems nonetheless can still often be found in the pages of books long left unopened on our children’s bookshelves (or Kindles, I-Pads, etc.). Note:  All of the Pooh-isms in this blog article can be found in A.A. Milne's Winnie the Pooh and Pooh's Little Instruction Book.

On March 9, 2015, the United States Supreme Court ruled unanimously in two consolidated cases that a federal agency does not have to go through the formal rulemaking process, which includes providing public notice and an opportunity for comment, “when it wishes to issue a new interpretation of a regulation that deviates significantly from one the agency has previously adopted.” The underlying issue in the two cases -- Perez v. Mortgage Bankers Association and Nickols et al. v. Mortgage Bankers Association -- began when the United States Department of Labor (“DOL”) changed its opinion regarding whether mortgage-loan officers are covered by the so-called “administrative exemption” of the Fair Labor Standards Act.  Prior to 2004, DOL's Wage and Hour Division issued written advisory opinions that mortgage-loan officers are not eligible for the administrative exemption, and are entitled to payment of overtime for hours worked over 40 in a work week.  In 2004, DOL revised its white collar exemption regulations, but there was some ambiguity regarding whether mortgage-loan officers fell within the revised administrative exemption.  In 2006, DOL's Wage and Hour Division issued a written advisory opinion that mortgage-loan officers qualify for the administrative exemption as revised in 2004.  However, in 2010, DOL's Wage and Hour Division changed its mind and issued a written advisory opinion that mortgage-loan officers do not qualify for the administrative exemption. The Mortgage Bankers Association challenged this 2010 administrative interpretation in federal court, alleging, among other things, that DOL’s interpretation was procedurally invalid in light of a previous decision by the U.S. Court of Appeals for the D.C. Circuit (Paralyzed Veterans v. D.C. Arena L.P.).  Under the so-called “Paralyzed Veterans doctrine,” an agency may not significantly revise its interpretation of a regulation without providing public notice and an opportunity for comment pursuant to the Administrative Procedure Act ("APA").  The D.C. Circuit re-affirmed the doctrine in the Mortgage Bankers Association cases, holding that the 2010 administrative interpretation had to be vacated because DOL did not hold a notice-and-comment period. The Supreme Court reversed the D.C. Circuit's decision.  In an opinion penned by Justice Sonia Sotomayor, the Court held that the “Paralyzed Veterans doctrine" is contrary to the clear text of the APA’s rulemaking provisions, and it improperly imposes on agencies an obligation beyond the ‘maximum procedural requirements’ specified in the APA.”  Justice Sotomayor stated that although the D.C. Circuit was correct that the APA requires agencies to follow the notice-and-comment requirements when amending or repealing a substantive rule -- in the same manner as issuing a substantive rule in the first instance -- the D.C. Circuit “went wrong” when it applied the same reasoning to interpretations of rules.  In sum, “[b]ecause an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures when it amends or repeals that interpretive rule,” unless “notice or hearing is required by statute.” The implications of the Supreme Court's decision reach far beyond the FLSA status of mortgage-loan officers.  The Supreme Court’s ruling paves the way for federal agencies to make significant changes to its interpretations of rules without notice to the public and an opportunity for public comment.  Although employers can still look to administrative interpretations (such as opinion letters issued by DOL's Wage and Hour Division) for some guidance in complying with employment laws and regulations, employers should be diligent about keeping up with any changes to those administrative interpretations.

Jennifer Brand, Associate Solicitor of Labor, spoke at the American Bar Association Federal Labor Standards Legislation Committee’s Mid-Winter Meeting on February 26.  Ms. Brand provided an update on important USDOL initiatives and activities.  Ms. Brand discussed recent litigation involving interns and confirmed that the USDOL still believes the six factors outlined in its Fact Sheet #71 is the proper test to determine whether an unpaid internship is lawful.  Ms. Brand did acknowledge that as the workplace evolves, it may, in unusual situations, be appropriate to consider other factors. Ms. Brand also discussed the USDOL's appeal of the U.S. District Court for the District of Columbia’s order vacating two major provisions in the USDOL’s Home Care Rule originally intended to be effective January 1, 2015.  The new rule would have excluded third-party employers from relying on the companionship and live-in domestic worker exemptions and would have significantly narrowed the definition of companionship services.  It is anticipated the case will be heard in the May term. Finally, Ms. Brand acknowledged that the highly anticipated proposed changes to the white-collar exemptions would not be published this month as the USDOL had previously suggested.  She further stated that they are “not imminent.”  Although she would not comment on specifics, she stated that the USDOL is examining the appropriate salary level test and whether the duties test needs to be revised.  Practitioners believe that the proposals will include, among other things, raising the salary level test and narrowing the duties test of the exemptions to make it more difficult to classify employees as exempt.  Some of the expected changes may include implementing a strict percentage of exempt and non-exempt duties and the possible elimination of the “concurrent” duties test whereby an employee may perform exempt and non-exempt duties at the same time.

New York State's Acting Commissioner of Labor, Mario Musolino, issued an Order today, accepting most of the recommendations made by the Hospitality Industry Wage Board, including the recommendation to increase the minimum wage for all tipped employees in the Hospitality Industry to $7.50 per hour effective December 31, 2015.  The one recommendation that the Acting Commissioner rejected was the one that would have provided certain employers with some relief from this significant increase in labor costs -- namely, the recommendation to allow employers to take $1.00 off the hourly minimum wage for tipped employees if the weekly average earnings of their employees (wages paid plus tips received) equals or exceeds 150% of the regular minimum wage in New York City or 120% of the regular minimum wage in the rest of the state. So, to summarize, the Acting Commissioner's Order will:  (1) increase the minimum wage for all tipped employees in the Hospitality Industry (regardless of whether they are classified as food service workers, service employees, or resort hotel service employees) to $7.50 per hour effective December 31, 2015; and (2) implement a $1.00 increase in the minimum wage for tipped employees in the Hospitality Industry who work in New York City, which would take effect if and when the legislature enacts a higher minimum wage rate for New York City.  The Acting Commissioner also accepted the Wage Board's recommendation to review whether the current system of cash wages and tip credits should be eliminated. The Acting Commissioner's Order will be effective 30 days after notice of its filing is published in at least 10 newspapers of general circulation in the state.  Employers in the hospitality industry should begin to consider how this significant increase in labor costs attributable to the employment of food service workers and service employees will impact their businesses in 2016 and beyond.

The U.S. Department of Labor ("DOL") today announced a change to the definition of spouse under the Family and Medical Leave Act ("FMLA").  Under this new rule, which will be published later this week (on February 25, 2015), an employee in a legal same-sex marriage will be entitled to use FMLA leave to care for a same-sex spouse regardless of where the employee lives.  The DOL initially proposed the rule on June 20, 2014. This change was triggered by the U.S. Supreme Court’s 2013 decision in U.S. v. Windsor.  In Windsor, the Court ruled that the federal Defense of Marriage Act ("DOMA") was unconstitutional.  Prior to Windsor, and consistent with DOMA, the FMLA defined spouse as a marriage between a man and a woman.  This meant that same-sex married couples could not use FMLA leave to care for each other.  Immediately following Windsor, the DOL announced that an employee could take FMLA leave to care for a same-sex spouse, but only if the employee resided in a state that recognized same-sex marriage (i.e., a “state of residence” approach).  This interpretation meant that a category of same-sex spouses were still unable to use the protections of the FMLA:  those who married in a state recognizing same-sex marriage, but who lived in a state that did not. This latest rule change, which takes effect on March 27, 2015, shifts to a “place of celebration" approach and ensures that same-sex spouses have the same rights as all spouses to exercise FMLA rights.  In other words, as long as the employee is legally married, and regardless of the legal status of same-sex marriage in the state the employee now resides, the employee can take FMLA leave:

• to care for a same-sex spouse with a serious health condition;
• to care for a stepchild who is the child of a same-sex spouse;
• to care for a stepparent who is the same-sex spouse of the employee’s parent;
• due to a qualifying exigency related to the same-sex spouse’s covered military service; or
• to care for a covered servicemember who is a same-sex spouse.