The City of Rochester recently unanimously enacted a “Ban the Box” ordinance, which prohibits employers from asking applicants about criminal convictions at any time before the employer has conducted an initial employment interview or made a conditional offer of employment.  This new ordinance takes effect on November 18, 2014.  It applies to all public and private employers and employment agencies that employ individuals within the City of Rochester, as well as any vendors, contractors, or suppliers of goods or services to the City of Rochester (regardless of their location). There are some exceptions to this general prohibition on inquiries about criminal convictions.  For example, the ordinance allows inquiries where the conviction would legally bar employment in that position or where inquiries into convictions are specifically authorized by another applicable law or by a licensing authority for licensed trades or professions.  Additionally, employers with less than four employees are not covered by the ordinance.  The ordinance also does not apply to applicants for positions in the City of Rochester Police Department, the Fire Department, or any other positions as “police officers” or “peace officers.” The ordinance provides for a private right of action for an aggrieved party to seek injunctive relief, damages, costs, and reasonable attorneys’ fees.  The City of Rochester’s Corporation Counsel may also initiate a court action seeking penalties of $500 for the first violation of the ordinance and $1,000 for each subsequent violation. Although this new ordinance does not prohibit employers from considering a criminal conviction after the candidate submits an application and attends a first interview, employers must be aware that Article 23-A of the New York Corrections Law protects an applicant from discrimination based on a past criminal conviction unless:  (1) there is a “direct relationship” between the criminal offense and the position sought; or (2) granting employment would pose an “unreasonable risk” to property or to the safety or welfare of specific individuals or the general public.  This analysis requires an employer to consider all of the following eight factors:

1. The public policy of the state to encourage the employment of persons previously convicted of one or more criminal offenses.
2. The specific duties and responsibilities necessarily related to the employment sought or held by the person.
3. The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities.
4. The time which has elapsed since the occurrence of the criminal offense or offenses.
5. The age of the person at the time of the occurrence of the criminal offense or offenses.
6. The seriousness of the offense or offenses.
7. Any information produced by the person, or produced on his behalf, regarding his rehabilitation and good conduct.
8. The legitimate interest of the public agency or private employer in protecting property and the safety and welfare of specific individuals or the general public.

To ensure compliance, any employers who are covered by this new ordinance should revise their employment applications to omit any questions about criminal convictions.  Covered employers should also train their human resources personnel, managers, supervisors, and any other employees who have contact with job applicants regarding the requirements of this new ordinance, as well as the limitations contained in Article 23-A of the New York Corrections Law.

On May 6, 2014, in Santer v. Board of Education of East Meadow Union Free School District, the New York Court of Appeals held that a school district did not violate the First Amendment by disciplining teachers who participated in a picketing demonstration, because the teachers' right to engage in constitutionally protected speech was outweighed by the school district's legitimate interests in protecting the health and safety of students and in maintaining effective operations. The picketing activity that resulted in the discipline of the teachers occurred on March 2, 2007.  The teachers had, for over two years prior to that date, engaged in weekly protests (including picketing) to express their dissatisfaction with the lack of progress in reaching a new collective bargaining agreement with the school district.  On March 2, 2007, due to inclement weather, the teachers decided to park their cars on the two-way street in front of the middle school and place picketing signs in their car windows instead of walking along the middle school's sidewalk holding their signs.  Because of the manner in which the teachers were parked, parents dropping off their children to school were unable to pull directly up to the curb and instead had to stop their cars in the middle of the street to drop off their children.  As a result, traffic became congested in both directions and students had to cross through traffic in the rain to reach the school. On March 16, 2007, the school district commenced disciplinary proceedings under Education Law Section 3020-a against the teachers who had participated in the picketing activity on March 2, alleging that the teachers created a health and safety risk by purposely parking their cars in a manner that precluded students from being dropped off at the curb.  The teachers were found guilty of the alleged misconduct after their hearings and were assessed fines as disciplinary penalties. The teachers filed petitions in New York State Supreme Court to vacate the disciplinary decisions.  The Supreme Court denied the petitions.  The Appellate Division reversed the lower court's decision and vacated the disciplinary decisions on the ground that the school district failed to meet its burden of showing that the teachers' exercise of their First Amendment rights constituted such a threat to the school's effective operations that the imposition of discipline was justified.  The Appellate Division also held that the discipline imposed on the teachers would likely have a chilling effect on the teachers' speech regarding an important matter of public concern. The Court of Appeals reversed the Appellate Division, and reinstated the disciplinary penalties imposed on the teachers.  The Court of Appeals recognized that the teachers' picketing activity was a form of protected speech that related to a matter of public concern, but found that the school district had satisfied its burden of showing that the teachers' conduct posed a significant risk to the health and safety of students.  The Court of Appeals noted that the school district was not required to prove that a student was actually injured as a result of the teachers' picketing activity in order to justify its discipline of the teachers.  The potential risk to student safety was sufficient to justify the discipline.  The Court of Appeals also found it significant that the teachers had engaged in picketing activity prior to March 2, 2007, and after March 2, 2007, without being subjected to any discipline.  The Court of Appeals determined that this demonstrated that the school district's disciplinary actions were not motivated by the content of the teachers' protected speech. Despite the Court of Appeals' decision in the East Meadow case, school districts and other public employers should continue to proceed cautiously if they are considering disciplinary action against an employee for conduct that could constitute protected speech under the First Amendment.  Disciplinary proceedings should be commenced in such instances only if it can be demonstrated that the employee's conduct constituted such a threat to the employer's effective operations that the imposition of discipline is justified.

Discrimination claims are expensive to defend and if they reach a jury, the results are often unpredictable.  The summary judgment motion, when utilized properly, is an effective risk and cost containment tool available to employers attempting to fend off such claims before they reach a jury.  Therefore, employers need to make sure that they do everything within their power to keep this tool available to them if a discrimination lawsuit is filed.  A recent New York Court of Appeals decision, Jacobsen v. New York City Health and Hospitals Corp., underscores this point.  In Jacobsen, the Court of Appeals held that an employer who does not participate in an interactive process regarding a disabled employee’s accommodation request is thereafter precluded from obtaining summary judgment with respect to any state or city disability discrimination claims related to that request. Both the trial court and the Appellate Division, First Department, held that summary judgment was appropriate because in their view, on the facts of the case, there was no reasonable accommodation available that would have enabled the terminated employee to perform the essential functions of his position.  However, there was one dissenting opinion in the Appellate Division’s decision.  The dissenter noted, among other things, that the record lacked any evidence that the employer had engaged in a good faith interactive process to determine the existence and feasibility of a reasonable accommodation.  Given such failure, the dissenter felt that summary judgment in favor of the employer was inappropriate. The Court of Appeals concurred with that aspect of the dissenter’s opinion, and reversed the decision granting summary judgment to the employer.  After examining the legislative history and intent of the statutes, particularly the provisions of the New York Human Rights Law, the Court of Appeals held that employers are required to “give individualized consideration” to a disabled employee’s accommodation request and that:

In light of the importance of the employer’s consideration of the employee’s proposed accommodation, the employer normally cannot obtain summary judgment on a State HRL claim unless the record demonstrates that there is no triable issue of fact as to whether the employer duly considered the requested accommodation.  And the employer cannot present such a record if the employer has not engaged in interactions with the employee revealing at least some deliberation upon the viability of the employee’s request.

Because of its broader coverage, the Court also held that the “City HRL unquestionably forecloses summary judgment where the employer has not engaged in a good faith interactive process regarding a specifically requested accommodation.” The Court of Appeals made clear that, despite its holding, a plaintiff’s burden at trial remains the same and that he/she still has to prove the existence of a reasonable accommodation that was requested and denied.  Moreover, the Court of Appeals rejected the even harsher notion that the failure to engage in a good faith interactive process compels a grant of summary judgment or a verdict in the employee’s favor. The lesson here is simple.  Prudent employers should always at least consider a disabled employee’s accommodation request, engage in a dialogue with the employee regarding the feasibility of the accommodation request, and suggest potential alternatives if the initial request is not feasible.  Employers should also document their interactions with a disabled employee and the resolution of the employee's accommodation request.  That way, employers can ensure that they have a fully equipped tool belt to employ in fending off any potential disability discrimination claims.

New York has enacted new legislation, which will have a significant impact on the state’s commercial transportation industry.  The legislation was initially made effective on March 11, 2014, but was subsequently amended to incorporate some “technical corrections” and to include a new, later effective date of April 10, 2014.  Known as the “Commercial Goods Transportation Industry Fair Play Act” (the “Act”), this new law is intended to curtail what New York government officials view as the “misclassification” of workers – as independent contractors, rather than employees – in the transportation industry.  As summarized below, the legislation will not only significantly restrict the use of such independent contractors, but will also impose other new requirements applicable to New York businesses in the commercial goods transportation industry. Why is New York Taking This Action? In addition to the Act, New York previously enacted similar legislation in the construction industry, and, more generally, has established a multi-agency “task force” designed to curb the purported misclassification of workers in New York.  Through these efforts, New York government officials are seeking to recoup “lost” revenue, e.g., employment-based tax withholdings not captured where there is a non-employment relationship between the business and individual service provider.  In contrast, where there is an employer-employee relationship – now presumed to be the case for commercial drivers and businesses covered by the Act – there is an affirmative obligation to withhold and pay these taxes to the state. The Act is therefore another step in the state’s effort to “crack down” on the use of independent contractors by New York businesses.  It should also be noted by management that organized labor, particularly the Teamsters union, has been strongly supportive of this legislation.  It can therefore be reasonably expected that the Teamsters and other unions will utilize this legislation as an aid to organizing workers in the transportation industry. Presumption of Employment Status for Covered Commercial Drivers The centerpiece of the new legislation is the establishment of a presumed employment relationship for certain drivers who provide “commercial goods transportation services for a commercial goods transportation contractor.”  (These underlined terms are explained below.) In other words, covered commercial drivers who provide these services are presumed to be employees under the law.  It is then left to the respective business receiving such services to “rebut” this presumption by proving the driver in question is a bona-fide “independent contractor” or constitutes a “separate business entity.”  As explained below, businesses seeking to disclaim an employment relationship with covered drivers must satisfy specific, multi-factor tests under either prong. Businesses failing to rebut the presumption of employment status through these tests will face significant penalties.  Additionally, the misclassification of workers can raise other significant legal issues, such as workers’ compensation insurance coverage failures, unemployment insurance contribution shortfalls, and improper income tax withholding and reporting. The Act applies to all “commercial goods transportation contractors.”  This term is broadly defined to include:

[A]ny sole proprietor, partnership, firm, corporation, limited liability company, association or other legal entity that compensates a driver who possesses a state-issued driver’s license, transports goods in the state of New York, and operates a commercial motor vehicle as defined in subdivision four-a section two of the transportation law.

The term “commercial goods transportation services” is defined as “the transportation of goods for compensation by a driver who possesses a state-issued driver’s license, transports goods in the state of New York, and operates a commercial motor vehicle as defined in subdivision four-a section two of the transportation law.”  In turn, the referenced section of New York’s transportation law defines a “commercial motor vehicle” as including a “motor vehicle used on a highway in intrastate, interstate or international commerce [that] has a gross vehicle weight rating or gross combination weight of ten thousand one pounds or more, whichever is greater.” Rebutting the Presumption of Employment Status A covered business can rebut the presumption of employment status in one of two ways. First, the business can show the driver is a bona-fide “independent contractor.”  To do so, all of the following criteria must be met under the Act’s so-called “A-B-C” test: A. the individual is free from control and direction in performing the job, both under his or her contract and in fact; B. the service must be performed outside the usual course of business for which the service is performed; and C. the individual is customarily engaged in an independently established trade, occupation, profession, or business that is similar to the service at issue. Second, the business can show the driver is a “separate business entity.”  To establish this alternative defense, the business must specifically show that each and every part of a detailed, eleven-factor test is met. Significantly, one of the “technical corrections” to the Act made explicit that even if one of the above tests is otherwise met, a person performing transportation services will be presumed to be an employee if his/her services are not reported on an IRS Form 1099. What are the Penalties for Non-Compliance? The Act imposes new, significant penalties for businesses failing to properly treat covered drivers as employees. Violations deemed to be “willful” are punishable by substantial civil and criminal penalties.  Willful violations are defined as violations where a party “knew or should have known that his or her conduct was prohibited.”  Civil remedies include a penalty of $2,500 per misclassified worker for a first violation, and a penalty of $5,000 per misclassified worker for subsequent violations.  Criminal penalties include up to 30 days imprisonment or a fine not to exceed $25,000 for the first violation, and up to 60 days imprisonment or a fine not to exceed $50,000 for subsequent violations. These civil and criminal penalties may also be imposed under certain circumstances against corporate officers and against shareholders who own or control at least ten percent of the corporation’s outstanding stock.  Further, non-compliant businesses, as well as certain corporate officers and shareholders, may be “debarred” from public works contracts in New York for a period of up to one year for a first violation and up to five years in the event of subsequent violations. Agency Information Sharing In the event of a violation, the Act additionally mandates prompt information sharing among the New York State Department of Labor (“NYSDOL”), Workers’ Compensation Board, and Department of Taxation and Finance.  Thus, a misclassification finding by one state agency will in all likelihood raise other significant legal issues before other state agencies. Other Requirements The Act imposes other additional requirements for New York businesses in the transportation industry, some of which appear to apply regardless of whether the respective business actually uses independent contractors. For example, the Act expressly prohibits employers and their agents from retaliating “through discharge or in any other manner against any person in the terms of conditions of his or her employment” for:

• making, or threatening to make, a complaint to an employer, co-worker or to a public body that rights guaranteed under [the Act] have been violated;
• causing to be instituted any proceeding under or related to [the Act]; or
• providing information to, or testifying before, any public body conducting an investigation, hearing or inquiry into any such violation of a law, rule or regulation by such employer.

Violations of this anti-retaliation provision are subject to the Act’s civil penalty scheme discussed above and to a private cause of action. Additionally, the Act requires all commercial goods transportation contractors to post a notice describing:

• the responsibility of independent contractors to pay taxes;
• the rights of employees to workers’ compensation, unemployment benefits, minimum wage, overtime and other protections; and
• the protections against retaliation.

According to the Act, this notice must also contain contact information for individuals to file complaints or inquire with the Commissioner of the NYSDOL about employment classification status, and must be provided in English, Spanish or other languages required by the Commissioner.  It is expected that the NYSDOL will soon publish a model notice on its website.  Businesses failing to comply with this posting requirement will face monetary penalties of up to $1,500 for a first violation and up to $5,000 for subsequent violations. Conclusion New York has significantly raised the stakes for covered businesses in the transportation industry and their use of independent contractors.  These businesses should carefully consider the potential implications of such use, as well as the other requirements imposed by the Act. Although the Act permits covered businesses to rebut the new presumption of employment status under certain, limited circumstances, management should carefully consider whether the necessary factors can indeed be met in the event of a legal challenge.  Given that this legislation is brand new, it remains to be seen how the NYSDOL and other state regulators will interpret and apply these new tests. That said, one point is clear:  New York state regulators will have their “sights set” on the classification of workers as independent contractors within the commercial transportation industry.  Be prepared!

As expected, on Monday, April 7, 2014, the U.S. Citizenship and Immigration Services (“USCIS”) announced that a sufficient number of H-1B petitions had been received from April 1, 2014, through April 7, 2014, to meet the statutory cap for fiscal year 2015.  The statutory cap was reached in both the general Bachelor’s category, as well as the U.S. advanced-degree category.  In short, more H-1B petitions were filed than the USCIS is authorized to approve for fiscal year 2015, which begins on October 1, 2014.  Consequently, for the second year in a row, USCIS will conduct a random selection process (i.e., lottery) to determine which filed H-1B petitions will be selected for processing/adjudication.  The USCIS has not yet announced the date when the lottery will be held. As background, the USCIS is only authorized to issue 85,000 H-1B approvals for each fiscal year, which includes 20,000 visas under the advanced-degree category and another 65,000 visas under the general category.  The 65,000 H-1B visas are available for beneficiaries who possess at least a Bachelor’s degree, with 6,800 of those available visas allocated as H-1B1 visas for qualifying nationals from Chile and Singapore.  An additional 20,000 approvals are available under the U.S. advanced-degree exemption for beneficiaries with a Master’s or higher degree obtained from a U.S. college or university. Consistent with USCIS practice, the USCIS will first utilize the lottery for petitions that qualify for the advanced-degree category under which 20,000 visas are available.  Eligible petitions that are not selected for processing in this category will be submitted for the general lottery under which 65,000 visas are available.  Any petitions not selected in the H-1B lottery will be returned to the employer, together with any applicable filing fees. Although the H-1B season for fiscal year 2015 appears to be complete, certain H-1B petitions are exempt from the numerical statutory cap.  Therefore, employers may continue to file H-1B petitions with the USCIS for new H-1B employment with a college or university, or a nonprofit research or governmental research organization – often referred to as “cap-exempt institutions.”  In addition, employers may continue to submit H-1B petitions for current workers who have previously been counted against the H-1B cap. Finally, employers seeking to employ foreign nationals in the United States should note that there may be other non-immigrant visa categories that could be a viable alternative to the H-1B category, including (but not limited to) the TN (NAFTA Professionals), the L (Intra-Company Transferee), the E (Investor), and the O (Extraordinary Ability) categories.

In August of 2011, a former employee of DISH Network filed a complaint with OSHA that DISH had “blacklisted” him.  Specifically, the complainant alleged that DISH had given him a negative job reference, and had refused to do business with the complainant’s subsequent employers.  What was the alleged reason for the “blacklisting”?  The employee, who worked in the marketing department in New York, had reported possible financial fraud to his superior in 2008, and the employee contended the actions against him by DISH -- a publicly traded company -- amounted to retaliation for his reporting the fraud, in violation of the Sarbanes-Oxley Act.  Earlier this month, OSHA completed its investigation, finding merit to the employee’s complaint, and ordering hefty fines of over $250,000 against DISH:  $157,024 in back wages, $100,000 in compensatory damages, and attorneys’ fees.  DISH has 30 days to file an appeal before an Administrative Law Judge. We highlight this recent decision because it is not widely known that OSHA is the agency tasked with investigating whistleblower provisions in twenty-two different laws, ranging from the Occupational Safety and Health Act itself, to the Surface Transportation Assistance Act and even the Affordable Care Act.  Thus, for example, an employer can be subject to a whistleblower investigation and an order from OSHA if it retaliates against an employee for participating in activities protected by these laws, such as complaining about workplace safety, reporting driving a commercial motor vehicle longer than allowed by law, or receiving a subsidy under the Affordable Care Act.  When OSHA completes a whistleblower investigation in which it finds merit or after which it files suit in federal court, it has historically issued a corresponding press release as it did regarding the DISH decision.  For an example of a press release announcing a lawsuit, see this link. A complete list of laws with whistleblower provisions subject to enforcement by OSHA is available here.  Employers are well advised to review the list and their policies, and to provide training to their managers and supervisors who make employment decisions, in order to ensure compliance with any applicable whistleblower provisions.

In a stunning and potential landmark decision, a Regional Director of the National Labor Relations Board has found that football players receiving grant-in-aid scholarships from Northwestern University (the “University”) are “employees” under the National Labor Relations Act.  In his decision released Wednesday afternoon, the Regional Director determined that “players receiving scholarships to perform football-related services for [the University] under a contract for hire in return for compensation are subject to [the University]’s control and are therefore employees within the meaning of the Act.”  Accordingly, the Regional Director ordered that an election be conducted among all football players receiving grant-in-aid scholarships who have not exhausted their playing eligibility for the University. In support of his decision, the Regional Director found that the players receive compensation for the athletic services they perform in the form of scholarships, which pay for the players’ tuition, fees, room, board, and books and can total as much as $76,000 per calendar year for up to five years.  Furthermore, the Regional Director found that the players are under the strict control of the University throughout the year.  The coaches determine the location, duration, and manner in which the players carry out their football-related activities; they monitor the players’ adherence to NCAA and team rules; and they control “nearly every aspect of the players’ private lives,” including their living arrangements, applications for outside employment, off-campus travel, social media posts, and communications with the media.  In contrast, the Regional Director held that “walk-ons do not meet the definition of ‘employee’ for the fundamental reason that they do not receive compensation for the athletic services that they perform.” The University has confirmed that it plans to appeal the decision to the full National Labor Relations Board in Washington, D.C.  If upheld, the decision has the potential to dramatically alter the world of big-time athletics in higher education as it would open the door for scholarship athletes at all private universities to unionize.  Indeed, the decision could have implications for scholarship students in a number of areas beyond athletics. The Union, College Athletes Players Association (“CAPA”), which has the financial backing of the United Steelworkers, is seeking, among other demands, financial coverage for former players with sports-related medical expenses and the creation of an educational trust fund to help former players graduate.

On March 4, 2014, the U.S. Supreme Court significantly expanded the Sarbanes-Oxley anti-retaliation law to cover employees of private contractors who perform services for publicly-traded companies.  Passed in 2002 in the wake of the Enron scandal, the Sarbanes-Oxley Act (“SOX”) establishes strict standards for financial behavior by publicly-traded companies and protects “employees” from retaliation for blowing the whistle on a number of specific types of violations.  In Lawson v. FMR LLC, the Court concluded in a 6-3 decision that not only are employees of the publicly-traded company protected from retaliation, but employees of contractors and subcontractors of the company are also similarly protected. Although it is not clear how wide the net will be expanded, millions of workers who provide almost any type of service to a publicly-traded company (e.g., cleaning, daycare, lawn service, as well as tax and audit and many others) will likely have the right to file a complaint with the Department of Labor and proceed to court if they suffer an adverse employment action after they have filed a complaint involving the publicly-traded company. What does the Lawson decision mean for most employers?  First, employers need to take inventory of whether they provide services to publicly-traded companies in order to determine if SOX’s whistleblower provision applies to their employees.  Second, employers must be sure to establish properly worded anti-retaliation policies that are broad enough in scope to cover reports of alleged fraudulent activity, including reports of alleged Securities and Exchange Act violations.  Third, even well-written policies will not be sufficient if managers and supervisors are not properly trained to deal with employee complaints covered by the policy.  Managers must be aware that adverse actions against whistleblowers (not only terminations, but also lesser actions such as job reassignments, shift changes, and below-average merit increases) can create serious liability for their employer. A well-publicized internal complaint procedure is crucial; otherwise, employees will likely turn to a private attorney or a government agency to raise their complaints.  All complaints must be taken seriously, followed by reassurance to the complaining employee that he/she will not be retaliated against in any manner.  If an internal complaint of retaliation is made, the employer must conduct a thorough and comprehensive investigation, and take corrective action if necessary.  The investigation and corrective action must be properly documented.  Solid documentation will help the company assess whether the complaint falls under SOX and will lock in the scope of the employee’s complaint.  A well-documented investigation, followed by an appropriate response to the facts uncovered, will also show a court that the company took the complaint seriously, and may help to avoid unnecessary litigation.

On December 12, 2013, the New York Court of Appeals issued a decision in Kolbe v. Tibbetts, in which the Court addressed whether the Newfane Central School District could unilaterally alter the health insurance benefits of certain retirees of the District.  The Court held that the retirees had a vested right to the same health insurance coverage until they turned 70 years of age that was in place under the collective bargaining agreements ("CBAs") that were in effect at the time of their retirement.  The Court also rejected the District's contention that it was entitled to change retiree health insurance benefits under the New York Insurance Moratorium Law, holding that the Insurance Moratorium Law does not apply to health insurance benefits that have vested under CBAs. While they were employed by the District, the plaintiffs were part of a non-instructional bargaining unit represented by the CSEA.  The CBAs in effect at the time of their retirement provided for certain health insurance benefits, including a two-tiered prescription drug coverage co-pay system and an option to participate in a flexible spending benefit program.  Each of the plaintiffs’ CBAs contained an identical section related to health insurance benefits for retirees, stating that “[t]he coverage provided shall be the coverage which is in effect for the unit at such time as the employee retires” and “full-time employees who retire . . . shall be entitled to receive credit toward group health insurance premiums” until they reach age 70.  In January 2010, after each of the plaintiffs had retired, the District executed a successor CBA which implemented changes to the co-pay system and flexible spending benefit program, and the District informed the retirees that those changes for current bargaining unit employees would also be applied to the retirees. The plaintiffs commenced an action against the District alleging breach of contract and seeking declaratory relief.  The plaintiffs moved for summary judgment on their claims and the District cross-moved for summary judgment, arguing, in part, that its modification to the retirees’ health insurance benefits was permitted under the Insurance Moratorium Law.  The Supreme Court granted the plaintiffs’ motion for summary judgment.  The Appellate Division reversed the Supreme Court's decision (with two judges dissenting), and granted the District's cross-motion for summary judgment. The Court of Appeals reversed the decision of the Appellate Division.  Although the Court recognized that contractual obligations do not ordinarily survive beyond the termination of a collective bargaining agreement, the Court held that “[r]ights which accrued or vested under the agreement will, as a general rule, survive termination of the agreement.”  In considering the specific language set forth in the CBAs, the Court held that the plaintiffs had a vested right “to the ‘same coverage’ during retirement as they had when they retired, until they reach 70.” The District argued that it was permitted under the Insurance Moratorium Law to modify the retirees' health insurance benefits because a corresponding modification was made to the health insurance benefits for active employees.  The Insurance Moratorium Law provides, in relevant part, that a school district is prohibited from “diminishing the health insurance benefits provided to retirees . . . unless a corresponding diminution of benefits or contributions is effected . . . from the corresponding group of active employees for such retirees.”  The Court held that the Insurance Moratorium Law only applies in those instances where a school district attempts to change health insurance benefits that were voluntarily conferred, not where the benefits were “negotiated in the collective bargaining context.”  Accordingly, the Court held that the Insurance Moratorium Law did not permit the District to reduce retiree health insurance benefits simply because it negotiated a corresponding change to the health insurance benefits of active employees. In light of the Court’s decision in Kolbe v. Tibbetts, school districts and municipalities should make sure to review the retiree health insurance provisions in their CBAs before making a decision that could impact the health insurance benefits of retirees, and should consult with their legal counsel before implementing changes to retiree health insurance benefits.

On March 13, 2014, President Obama issued a memorandum directing the Secretary of Labor to update and streamline the Fair Labor Standards Act (“FLSA”) overtime regulations.  In the memorandum, President Obama noted that the regulations regarding exemptions from the FLSA’s overtime requirements, particularly for executive, administrative and professional employees (the white-collar exemptions), are outdated and should be updated to address the changing nature of the workplace.  President Obama also stated that the regulations should be simplified so that they are easier for employers and employees to understand and apply. Although the memorandum does not provide specific guidance, it is expected that the Department of Labor’s revised regulations will include an increase in the salary threshold necessary to qualify for the white-collar exemptions (currently $455.00 per week).  If such an increase is proposed, it could bring the federal regulations in line with the salary threshold necessary for employees in New York to qualify for the executive and administrative exemptions.  The salary threshold for employees in New York to qualify for the executive and administrative exemptions was recently increased to $600.00 per week on December 31, 2013 (up from $543.75 per week), and is scheduled to increase annually on December 31, 2014 ($656.25 per week) and December 31, 2015 ($675.00 per week). Any changes to the FLSA regulations that the Department of Labor proposes are subject to the normal rulemaking process, which includes a notice and comment period.  We will post updates on this blog throughout the rulemaking process.

As discussed in a previous blog post, the Fair Credit Reporting Act ("FCRA") expressly requires employers to provide applicants with a stand-alone disclosure and authorization form prior to obtaining a background check.  This form must be separate from the employment application, and cannot include any type of language attempting to release the employer from liability associated with obtaining the background check.  Unfortunately, many employers still fail to comply with this law by relying solely on a disclosure located on an employment application to inform applicants that they will be subject to a background check, or by attempting to include additional language on the disclosure.  A recent proposed class action lawsuit against Whole Foods Market California provides a reminder to employers to review their disclosure and authorization forms for FCRA compliance. The lawsuit accuses the employer of using an invalid form to obtain consent to conduct background checks during the employment application process.  Specifically, it is alleged that the employer relied on a background check consent that was included alongside several other consent paragraphs on an online employment application, and that the online consent form included a release of claims related to obtaining the background check.  If the employer is found to have used an invalid form, the consequences are significant, including invalidation of the consent, statutory damages in the amount of up to $1,000 for each applicant, costs and attorneys’ fees, and potential punitive damages. This lawsuit is a reminder that FCRA compliance makes good business sense, and that employers should periodically review their application and hiring forms and processes to ensure strict compliance.

On February 7, 2014, the Appellate Division, Fourth Department, issued a significant decision regarding restrictive covenants.  In Brown & Brown, Inc. v. Johnson, the plaintiffs terminated the defendant-employee and then sued her for violating non-competition and non-solicitation provisions in her employment agreement, which contained a provision stating that Florida law would govern.  The Fourth Department considered several issues, including:  (1) whether to enforce the Florida choice-of-law provision for the restrictive covenants; (2) whether employers can enforce restrictive covenants against employees who were involuntary terminated; and (3) whether the court must partially enforce an overbroad restrictive covenant where the agreement expressly provides for such partial enforcement. First, the Fourth Department considered the issue of whether the Florida choice-of-law provision in the agreement was enforceable.  The court noted that choice-of-law provisions are generally enforceable in New York as long as the chosen law:  (1) bears a reasonable relationship to the parties or the transaction; and (2) is not “obnoxious” to New York public policy.  The Fourth Department concluded that while Florida law met the first prong of this test, it failed the second prong.  The court explained that under New York law, restrictive covenants are enforceable if they are no greater than necessary to protect a legitimate interest of the employer, are not unduly harsh or burdensome to the employee, and do not injure or harm the public.  In contrast, Florida law does not permit courts to consider the hardship to the employee in determining whether to enforce a restrictive covenant.  Based on this difference, the Fourth Department ruled that the choice-of-law provision in the employment agreement was unenforceable, and proceeded to apply New York law to the dispute.  Significantly, the Fourth Department’s ruling did not depend on the specific facts of this case, so it is unlikely that the Fourth Department would enforce a Florida choice-of-law provision in any employer-employee restrictive covenants. Second, the Fourth Department considered defendants’ argument that plaintiffs could not enforce the restrictive covenants because they terminated the defendant-employee.  Defendants relied on a Court of Appeals decision which involved an agreement that employees would forfeit their benefits under pension and profit-sharing plans if they competed with their employer after the end of their employment.  The Court of Appeals held that the employer could not enforce the forfeiture-for-competition clause because the employees were involuntarily terminated without cause.  In Brown & Brown, the Fourth Department refused to apply the Court of Appeals decision to create a per se rule that an involuntary termination without cause always renders a restrictive covenant unenforceable. Third, the Fourth Department ruled that the non-solicitation covenant was overbroad and unenforceable because it prohibited solicitation of any clients of plaintiffs’ New York offices, regardless of whether the employee developed a relationship with those clients during her employment.  Plaintiffs argued that the court should partially enforce the covenant because plaintiffs only sought to prevent the defendant-employee from soliciting clients with whom she developed a relationship during her employment.  The Fourth Department disagreed and explained that partial enforcement is not justified where the covenant is imposed in connection with hiring or continued enforcement or where the employer knew the covenant was overbroad.  The court ruled that several factors weighed against partial enforcement in this case.  Specifically, the employee received the covenant upon hire and did not receive any benefit for signing the agreement other than continued employment.  In addition, the Fourth Department held that the employer was on notice that the covenant was overbroad based on existing case law.  Plaintiffs argued that partial enforcement was required because the employment agreement expressly provided for partial enforcement in the event that a court found the restrictive covenant unenforceable.  The Fourth Department disagreed and found that plaintiffs’ position would permit employers to use their superior bargaining position to impose unreasonable restrictive covenants without any real risk that courts would deem them unenforceable in their entirety. In light of this decision, New York employers should review any choice-of-law provisions governing their restrictive covenants.  If these provisions select Florida law or any other state laws that vary substantially from New York law, they may not be enforceable in the Fourth Department or other New York courts.  Employers should also review the scope of their restrictive covenants to determine whether they are overbroad under New York law.  Based on the reasoning set forth in the Brown & Brown decision, New York courts may sever any overbroad restrictive covenants in their entirety from agreements, even if there is a provision for partial enforcement.