In D.R. Horton, Inc., the National Labor Relations Board ("NLRB") held that a mandatory arbitration agreement between an employer and an employee that included a class action waiver was unlawful under Section 8(a)(1) of the National Labor Relations Act ("NLRA") because it prohibited the employee from engaging in concerted activity with other employees.  The NLRB's D.R. Horton ruling, which was the subject of a prior blog post, dealt a significant blow to employers who sought to manage their litigation risk by requiring employees to sign mandatory arbitration agreements and class action waivers as a condition of employment.  The Second Circuit Court of Appeals, in a separate case decided on August 9, 2013, expressly declined to follow the NLRB's D.R. Horton ruling and held that a class action waiver in an arbitration agreement was enforceable under the Fair Labor Standards Act ("FLSA").  Recently, the Fifth Circuit Court of Appeals rejected the NLRB's D.R. Horton ruling, holding that class action waivers contained in mandatory arbitration agreements do not violate the NLRA and are enforceable under the Federal Arbitration Act ("FAA"). The Fifth Circuit began its analysis by noting that the FAA requires arbitration agreements to be enforced according to their terms, with two exceptions:  (1) an arbitration agreement may be invalidated "upon such grounds as exist at law or in equity for the revocation of any contract" (commonly referred to as the FAA's "saving clause"); and (2) application of the FAA may be precluded by another statute's contrary congressional command.  The Court concluded that neither of these exceptions applied to preclude the enforceability of the class action waiver contained in the mandatory arbitration agreement. The Court stated that the saving clause "is not a basis for invalidating the waiver of class procedures in the arbitration agreement."  The Court then examined whether the NLRA contained a congressional command to override the provisions of the FAA, and found that it did not.  The Court found that the "NLRA does not explicitly provide for such a collective action, much less the procedures such an action would employ," and concluded that "there is no basis on which to find that the text of the NLRA supports a congressional command to override the FAA."  The Court also looked to the legislative history of the NLRA for evidence of a congressional command to override the FAA, and found no such evidence.  Finally, the Court determined that no congressional command to override the FAA could be inferred from the underlying purpose of the NLRA.  Accordingly, the Court held that the class action waiver in the mandatory arbitration agreement was valid and enforceable under the FAA. The Fifth Circuit recognized that every other Circuit Court of Appeals that considered the issue (including the Second Circuit, as noted above) either suggested or expressly stated that they would not defer to the NLRB's rationale, and held class action waivers in arbitration agreements to be enforceable.  The Court stated that it did not want to create a split among the Circuit Courts by enforcing the NLRB's D.R. Horton decision. Although the Court refused to enforce the NLRB's ruling that the class action waiver violated the NLRA, the Court agreed with the NLRB that the mandatory arbitration agreement violated the NLRA to the extent that it would lead an employee to believe that the filing of unfair labor practice charges was prohibited.  The employer argued that this was not the intent of the mandatory arbitration agreement, and that employees remained free to file unfair labor practice charges with the NLRB.  However, the Court nevertheless enforced the portion of the NLRB's order requiring the employer to clarify the language of the mandatory arbitration agreement to permit the filing of unfair labor practice charges. It remains to be seen whether the NLRB will ask the U.S. Supreme Court to review the Fifth Circuit's decision.  In the meantime, employers should consider whether arbitration agreements with employees containing class action waivers might be a useful tool to limit the risk and cost associated with employment-related litigation.

In a case dealing with the after-effects following the bankruptcy of clothing retailer Steve & Barry’s Industries, Inc., the Court of Appeals for the Second Circuit (which has jurisdiction over New York employers) has ruled, in Giuppone v. BH S&B Holdings LLC, on the analysis to be applied in determining whether nominally separate entities should be considered a single employer for purposes of coverage under the Worker Adjustment and Retraining Notification Act ("WARN"). The federal and state WARN laws generally require that employers provide employees with notice of employment losses due to a plant closing or mass layoff.  In Guippone, the Court resolved an open question in the Circuit concerning the test to be applied when analyzing the single employer issue.  The single employer issue is particularly important in the WARN context because an entity that is theoretically not the “employer” of the discharged employees – for example, an investment entity or corporate parent – may nevertheless become liable under WARN if a court determines that the “employer” and the related entity are a “single employer” for WARN purposes.  The “single employer” theory also may entangle a larger, related entity, where the employer of record is too small for purposes of coverage under WARN. In Guippone, the Court concluded that a five-factor test set forth in the regulations of the United States Department of Labor (“USDOL”) should be applied when analyzing the issue.  Those five factors are:  (1) common ownership; (2) common directors and/or officers; (3) de facto exercise of control; (4) unity of personnel policies emanating from a common source; and (5) the dependency of operations.  The Court held that the five factors are non-exclusive, with no one factor controlling and the absence of any factor not dispositive on the question of WARN liability. The Court largely affirmed the lower court’s ruling dismissing the case against certain related entities, based upon application of the USDOL factors.  However, it concluded that a question of fact existed with regard to the de facto exercise of control factor as applied to another related entity.  In particular, the Court focused on whether the evidence indicated that a related entity “was the decision-maker responsible for the employment practice giving rise to the litigation.”  Among the evidence cited by the Court was:

• the absence of a board of directors at the subsidiary;
• selection by the parent of the subsidiary’s management team;
• negotiation of the subsidiary’s financing by the parent’s board of directors; and
• a resolution passed by the parent’s board of directors “authorizing” the subsidiary “to effectuate the reduction in force.”

An employer considering any type of reduction in force should properly assess its potential obligations under the federal and state WARN statutes before implementing the reduction in force.  Furthermore, when assessing those obligations, an employer must consider whether it is a “single employer” along with other related entities to trigger coverage under WARN even if the employer by itself would not otherwise be covered under WARN.  Finally, an employer should pay particular attention to the degree of control exercised by a related entity over the reduction in force decision.

Employers should be advised that the New York State Department of Labor ("NYSDOL") adopted new Regulations last week, amending the state’s Minimum Wage Orders.  A Notice of Adoption of these changes was published in the State Register on December 11, 2013, and the corresponding amendments will take effect on December 31, 2013. These amendments follow enactment of recent state legislation to raise the minimum wage in New York to $8.00 per hour, also effective December 31, 2013.  Accordingly, the new Minimum Wage Orders reflect this change, as well as future scheduled raises in the state minimum wage to $8.75 per hour as of December 31, 2014, and to $9.00 per hour as of December 31, 2015. Notably, the new Minimum Wage Orders also increase the minimum salary basis amounts for employees to qualify for the executive and administrative exemptions to $600.00 per week (up from $543.75 per week), inclusive of board, lodging, and other allowances and facilities.  This amount is also slated to increase to $656.25 as of December 31, 2014, and to $675.00 as of December 31, 2015. Finally, employers should take note that the amended Minimum Wage Orders impose other pay-related changes for employees in certain industries, including changes to the amount of allowances that may be taken for the provision of meals, lodging, and (where applicable) tips.

The revised Regulations issued by the Department of Labor, Office of Federal Contract Compliance Programs (“OFCCP”), addressing affirmative action obligations applicable to disabled individuals under the Rehabilitation Act of 1973, as amended (“Section 503”), and to protected veterans pursuant to the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended (“VEVRAA”), become effective March 24, 2014.  Due to the numerous requirements in these new Regulations, contractors should start reviewing and implementing procedures to ensure compliance. Ten steps that covered contractors should implement by March 24, 2014 include:

1. Review current electronic systems and databases to determine if there is capacity to capture protected veteran and disability status for both applicants and employees.  If not, contractors will need to invest in new systems or methods to capture this required data.
2. Review current referral sources to determine if sources are providing qualified protected candidates; sources that are not should be eliminated and/or new ones should be added.  This is a key component for meeting the 8% hiring benchmark under VEVRAA and the 7% utilization goal under Section 503.
3. Ensure all required notices are posted.  Where notices are posted electronically, make sure they are accessible to all employees, including those with disabilities.  For contractors who use electronic or internet-based application processes, an electronic notice must be posted and stored with the electronic application to inform job applicants of their EEO rights.
4. Review collective bargaining agreements to determine if the agreements include notice of the contractor’s affirmative action and non-discrimination policies and request for cooperation.  If they do not, contractors should send annual letters to each union, notifying the union(s) of the policies and requesting cooperation.
5. Review and update the list of all existing subcontracts, including vendors and suppliers, who should be receiving the mandatory written notice to subcontractors of the contractor’s affirmative action efforts and request for cooperation.
6. Revise contracts and purchase orders to include the revised mandatory EEO language under both Section 503 and VEVRAA.
7. Make sure solicitations and advertisements include all the protected categories – minorities, females, disabled individuals, and veterans.  OFCCP has indicated in recent FAQs that just using “D” and “V” is not adequate since abbreviations must be commonly understood by jobseekers.
8. Update recordkeeping procedures to incorporate the three-year retention requirement for specific records under Section 503 (documentation and assessment of external outreach and data collection analysis) and VEVRAA (documentation and assessment of external outreach, data collection analysis, and benchmarking records).
9. Revise self-identification forms inviting applicants to self-identify at both the pre-offer and post-offer stage of the selection process.  All Section 503 invitations must use the new OFCCP form which will be posted on OFCCP’s website once approved.  Under the Section 503 Regulations, employees must be invited to self-identify again every five years and reminded on an annual basis that they can voluntarily update their status at any time.
10. Adopt written reasonable accommodation procedures to ensure uniformity in processing requests.  The OFCCP’s guidance for creating procedures (listed in Section 503 Regulations as Appendix B) can be used in developing such procedures.

On November 8, 2013, the Occupational Safety and Health Administration ("OSHA") released a proposed rule which would require many employers to submit injury and illness records -- such as the OSHA Forms 300, 300A, and 301 -- electronically.  The proposed rule, along with the commentary, can be accessed here. The proposed rule -- which would amend 29 C.F.R. Section 1904.41 -- entails three significant provisions:

1. Establishments with 250 or more employees would be required to submit the OSHA Forms 300 and 301 electronically on a quarterly basis and the OSHA Form 300A summary electronically on an annual basis.
2. Establishments with 20 or more employees in several specific industries would be required to submit the OSHA Form 300A summary electronically on an annual basis.  The specifically-referenced industries in the proposed rule include the following general NAICS classifications:  construction, manufacturing, agriculture, utilities, hospitals, and nursing homes.
3. Employers would have to submit electronic injury and illness records "upon notification" by the agency.

OSHA's stated reason for the proposal is that the agency presently has limited access to establishment-specific injury and illness records (i.e., the most common way it acquires this information is through inspections).  According to the agency, the on-line submission of the information will make it easier for OSHA to identify and address recurring health hazards in the workplace. The proposed rule provides that OSHA will be responsible for creating a secure website for affected employers to submit the required information, including log-in IDs and passwords.  While the agency has made it clear that it intends to make information submitted by employers public, the commentary to the rule makes it clear that no employee-specific information would be released (e.g., names, personal identifying information, etc.). Comments to the proposed rule must be received by February 6, 2014.

Next year, most employers with employees working in New York City will be required to provide reasonable accommodations for pregnant employees.  The new requirement is an amendment to the New York City Human Rights Law and takes effect on January 30, 2014. Under the new law, employers in New York City with four or more employees will be required to provide reasonable accommodations needed due to pregnancy, childbirth, or related medical conditions, provided that the pregnancy or condition “is known or should have been known” to the employer.  The law states that accommodations may include, “bathroom breaks, leave for a period of disability arising from childbirth, breaks to facilitate increased water intake, periodic rest for those who stand for long periods of time, and assistance with manual labor, among other things.” Accommodations need not be provided if they would pose an “undue hardship."  Factors in determining undue hardship include the nature and cost of the accommodation, the nature of the facility, and the finances of the business. The law also contains a notice requirement.  Covered employers must notify employees of the right to be free from pregnancy discrimination.  The notice must be given to all new employees and existing employees.  The New York City Commission on Human Rights is expected to issue more specific guidance on the notice requirements.  The new law allows employees to file complaints with the Commission or proceed directly to court. It is fair to say that the New York City law broadens protections for pregnant workers beyond the scope of the Pregnancy Discrimination Act, the Americans with Disabilities Act, and the New York Human Rights Law.  Typically, those other laws have not been interpreted to require that employers accommodate a normal, healthy pregnancy.  Instead, the right to an accommodation is usually triggered only upon the showing of a particularized need or complicating medical condition, or at the point when the pregnancy becomes disabling (e.g., immediately before and after the birth).  The effect of the New York City law is to put a normal, healthy pregnancy on par with a disability for the purpose of workplace accommodations. Employers with employees in New York City are advised to review their policies and procedures concerning pregnancy and to educate supervisors and managers regarding the scope of these new protections.

As previously reported, the elimination of barriers in recruitment and hiring was identified as one of the Equal Employment Opportunity Commission’s six priorities in its 2013-2016 Strategic Enforcement Plan (“SEP”).  Accordingly, the EEOC is focusing its enforcement efforts and resources on eradicating both class-based intentional discrimination, as well as facially-neutral recruitment and hiring practices that have a discriminatory effect on particular groups.  To this end, the EEOC has been aggressively challenging employers’ use of criminal and credit background checks in recruitment and hiring, alleging that such practices have a disparate impact on certain applicants in protected classes.  However, in a significant victory for employers, the EEOC’s efforts were recently thwarted in a decision issued by the United States District Court for the District of Maryland. In EEOC v. Freeman, the EEOC challenged the defendant’s use of criminal background and credit checks, alleging that, although facially-neutral, the practice had a discriminatory effect on African-American and male applicants.  In granting the defendant’s summary judgment motion dismissing the complaint, the court held that the EEOC and their experts failed to identify a specific policy causing an alleged disparate impact and “something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks.”  The court further admonished the EEOC’s lack of factual support, stating that:

[b]y bringing actions of this nature, the EEOC has placed many employers in the "Hobson’s choice" of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.

To further underscore the importance of background checks to employers, the court pointed out that ironically, even the EEOC conducts criminal background investigations as a condition of employment for all employees, and conducts credit background checks on approximately 90% of its positions. The Freeman court explained that it is not the “mere use” of background checks that presents Title VII concerns, but rather “what specific information is used and how it is used.”  Here, Freeman’s use of criminal and credit checks were not used as automatic exclusions and were conducted only for specific types of jobs.  The Freeman court held that the use of these screening tools is a “rational and legitimate component of a reasonable hiring process.” Although this decision is an important victory for employers defending their right to refuse to hire applicants whose backgrounds call into question their character and qualifications for employment, it is unlikely to stop the EEOC’s enforcement efforts completely.  The SEP, together with the EEOC’s April 2012 Enforcement Guidance on criminal background checks, make clear that the EEOC is determined to seriously limit the use of background checks, if not prohibit their use altogether.  Therefore, employers should consult with legal counsel to ensure that any use of background checks is both job-related and consistent with business necessity, and that such use does not result in automatic exclusions.  Background checks should also be limited only to those positions where there is a direct correlation between the background check and the job involved.

After a brief hiatus prompted by the Federal Government shutdown, employers regained access to and use of the federal E-Verify system on October 17, 2013.  E-Verify is an Internet-based employment eligibility verification system administered by the U.S. Citizenship and Immigration Services (“USCIS”).  The E-Verify system does not serve as a replacement for the I-9 employment verification process, but rather serves as an additional method by which employers may confirm employee I-9 information against certain government databases (e.g., Department of Homeland Security and the Social Security Administration). Beginning on October 1, 2013, employers were denied access to the E-Verify system for the duration of the government shutdown.  Under normal circumstances, those employers enrolled in the E-Verify program – either voluntarily or involuntarily (e.g., mandatory for those federal contractors with a FAR E-Verify contract clause and employers in certain states such as Arizona and Mississippi) – are required to create a verification case in the E-Verify system for any newly-hired employee by no later than three business days after the employee starts to work for pay.  During the government shutdown, however, the USCIS suspended the “three-day rule” in which enrolled employers are mandated to create a case in the E-Verify system.  Now that E-Verify is once again operational, the USCIS has afforded employers a grace period in which to address E-Verify issues impacted by the government shutdown.  Specifically, the USCIS has issued guidance indicating that employers have until no later than November 5, 2013, to create E-Verify cases that could not be created for those employees due to the unavailability of the system. In its recent guidance, the USCIS also addressed how employers should properly enter a case in E-Verify now that access to the system has been restored.  Generally, when an E-Verify query is made more than three days after the date of hire, the E-Verify system will require the employer to provide an explanation for the delayed entry.  In its October 17 guidance, the USCIS advised that when an employer is prompted to provide a reason for a delayed case creation which was caused by the government shutdown, the employer should select “Other” from the drop-down list and enter the phrase “federal government shutdown" in the field. In addition, the USCIS noted in its October 17 guidance that federal contractors should follow the same instructions.  If a federal contractor was unable to comply with certain E-Verify deadlines due to the government shutdown, the federal contractor should contact its contracting officer and reference the instructions provided by the USCIS in its guidance. Additionally, the USCIS offered the following guidance on other tangential E-Verify issues that may have been impacted as a result of the government shutdown:

• Employees will be given an extension of 12 federal business days in order to contact the DHS or the SSA to resolve any Tentative Non-Confirmation (TNC) notice received or referred between September 17, 2013, and September 30, 2013, that the employee was unable to resolve due to the government shutdown.  Employers may add 12 business days to the date printed on either the Referral Letter or the Referral Date Confirmation.
• Employers are instructed to now initiate referral processing in E-Verify for employees who decide to contest any TNC issued during the unavailability period of E-Verify.
• Employers must close E-Verify cases for those employees who received a Final Nonconfirmation (FNC) or No Show due to the federal government shutdown by selecting one of the following options from the drop-down menu:  (1) “The employee continues to work for the employer after receiving a Final Non-Confirmation result”; or (2) “The employee continues to work for the employer after receiving a No Show result.”  The employer must then create a new E-Verify case for the employee.

Finally, employers should be aware that the USCIS’ suspension of the “three-day rule” during the government shutdown period did not extend or otherwise impact employers’ obligations regarding the timely completion of the Form I-9 or any other Form I-9 requirements.  Employers should also be mindful that the “three-day rule” for E-Verify cases is once again in effect for all newly-hired employees.

New York State has enacted several changes to the laws regarding unemployment insurance.  The changes are the result of the insolvency of the State’s Unemployment Insurance Trust Fund and the State’s need to repay the federal government $3.5 billion borrowed to cover increased costs incurred during the recession.  The New York State Department of Labor ("NYSDOL") has issued two fact sheets -- one directed toward employers and one directed toward claimants -- concerning these changes in the law.  Certain of the important revisions affecting employers are identified below.

1. Under the new law, the payment of severance to an employee, in an amount exceeding the maximum weekly benefit (which is currently $405 per week), will preclude an employee from receiving unemployment insurance benefits.  However, unemployment insurance benefits will be available if the severance is not paid out until thirty days after the employee’s last day of employment.
2. The law has been amended to provide that employers who submit incomplete or late submissions to NYSDOL regarding the agency’s request for information concerning a claim for benefits will not be relieved of any charge to its account, even where the agency later determines that the employee was ineligible for benefits or received an overpayment.  Employers must complete fully and return the agency’s request for information by the date specified by NYSDOL.
3. The new law increases an employer’s contributions based on the Federal Unemployment Tax Act.  Specifically, under current law, this employer tax is based upon the number of employees and the employer’s experience rating.  However, the tax is assessed only on the first $8,500 of each employee’s earnings.  Beginning January 1, 2014, the tax will be assessed on the first $10,300 of each employee’s earnings and this amount will rise gradually each year moving forward.
4. Finally, the law requires employees to be “actively seeking work” in order to be eligible for benefits.  Currently, the law eliminates benefits only for those who are not capable of work, or are not “ready, willing and able to work.”  The revised law defines “actively seeking work” as being “engaged in systematic and sustained efforts to find work."  The revised law also requires the agency to promulgate regulations on the issue and to set standards of proof necessary to establish these work efforts.

On October 16, our firm conducted a webinar, which provided a detailed explanation of the wage deduction regulations promulgated by the New York State Department of Labor ("NYSDOL") on October 9.  If you wish to view a recording of the webinar in its entirety and print out a copy of the PowerPoint slides from the webinar, you can click here.

The New York State Department of Labor (“NYSDOL”) just published final regulations on its website, governing employee wage deductions under Section 193 of the Labor Law.  According to NYSDOL, the final Section 193 regulations are effective today – October 9, 2013 – and will be codified at and replace the existing 12 N.Y.C.R.R. Part 195.  As we previously reported, these regulations were published in draft form earlier this year and made available for public comment.  The final regulations contain only minimal changes from this earlier draft version. Most notably, the final Section 193 regulations retain and set forth detailed procedures which employers must follow when seeking to recover wage overpayments and advances by payroll deduction.  As the Section 193 regulations are now in force and effective, it is imperative that employers establish and implement the correct procedures before attempting to recover overpayments and advances by payroll deduction.  An employer’s failure to follow these mandatory procedures will create a presumption that the deductions were illegal. Among other things, the final regulations also list specific prohibited deductions, impose precise requirements for obtaining proper “authorization” from employees, and provide guidance on what types of deductions may be deemed permissible “similar payments for the benefit of the employee.” We will be following up soon with more detailed guidance on these and other issues under the final Section 193 regulations, and encourage you to check back for an updated post.

A recent decision issued by the Appellate Division, Second Department, in Matter of Board of Education of Hauppauge Union Free School District v. Hogan, provides a valuable reminder to school districts and other public employers that an arbitrator’s interlocutory ruling in a disciplinary proceeding against an employee may not really be an interlocutory ruling at all, and in some circumstances, may be subject to immediate judicial review.  The decision makes clear, at least under the circumstances of that case, that a court has authority to review an “interlocutory award” which dismisses a misconduct charge in a disciplinary proceeding commenced pursuant to Education Law Section 3020-a.  In justifying its review, the Court distinguished between an arbitrator’s interlocutory ruling on a procedural matter, which is generally not reviewable, and the dismissal of a misconduct charge, which it deemed to be “a final determination subject to review under CPLR 7511.” In 2006, Hogan (the individual who was the subject of the disciplinary proceeding) submitted an application to the school district seeking employment as a physical education teacher.  In 2010, more than three years after he submitted the application, the school district preferred charges against him alleging that Hogan had knowingly failed to disclose on his application that he had resigned from a previous probationary teaching position after being confronted with allegations that he had engaged in corporal punishment and being advised that he would not receive tenure. The first disciplinary charge, which formed the subject matter of the litigation, alleged misconduct in the knowing presentation for filing of a false and incomplete application.  The school district alleged that such conduct was in violation of Penal Law Section 175.30 -- Offering a False Instrument for Filing in the Second Degree.  Hogan filed a pre-hearing motion to dismiss the first charge, maintaining that it was time barred by the three-year limitations period contained in Education Law Section 3020-a.  The arbitrator granted the motion and dismissed the charge, finding that the school district had not pled sufficient facts to establish that Hogan had violated the Penal Law, and thus, could not invoke the exception to the three-year limitations period applicable when the charged misconduct constitutes a crime. The school district immediately commenced a proceeding in New York State Supreme Court pursuant to CPLR Article 75 and Education Law Section 3020-a, seeking to vacate the arbitrator’s decision to dismiss the disciplinary charge as arbitrary and capricious.  Hogan argued that the arbitrator's decision was an "interlocutory award" that was not subject to immediate appeal.  The Supreme Court rejected Hogan's argument, granted the petition, and restored the disciplinary charge. The Second Department affirmed.  It held that the disciplinary charge at issue was the only one preferred which constituted misconduct, and if dismissed, would prevent the school district from “adducing evidence in support of the alleged misconduct at the hearing.”  As such, the arbitrator’s award was deemed to be final and reviewable. In addition to finding the arbitrator's decision reviewable, the Court affirmed reinstatement of the disciplinary charge.  It noted that an arbitrator’s determination is subject to greater judicial scrutiny when the obligation to arbitrate arises by statute, and that an award in a compulsory arbitration such as an Education Law Section 3020-a hearing must have evidentiary support.  The Court held that the arbitrator’s determination was arbitrary and capricious, and that the facts alleged by the school district, if proven, would constitute the crime of offering a false instrument for filing in the second degree.