On September 10, 2012, the U.S. Court of Appeals for the Second Circuit reversed a 2010 District Court decision and rejected a claim by a terminated public school district employee that she was subjected to retaliation for engaging in protected speech under the First Amendment to the U.S. Constitution.  In Ross v. Lichtenfeld, the Second Circuit held that the employee's complaints upon which she based her retaliation claim were not protected by the First Amendment, and determined that the school district's superintendent was entitled to summary judgment.

Risa Ross was a payroll clerk typist for the Katonah-Lewisboro Union Free School District.  Her duties included processing the school district's payroll, transmitting direct deposits, mailing checks, and notifying appropriate personnel of payroll mistakes.  Between 2003 and 2006, Ross met with the school district's superintendent numerous times to express concern about payments that she believed to be improper.

In 2006, Ross was suspended with pay by the school district after it was discovered that Ross had failed to disclose on her employment application that she had been employed by three other school districts and had been discharged from her employment at each of those three school districts.  During her suspension, Ross wrote to members of the board of education regarding the concerns she had previously expressed to the school district's superintendent about financial malfeasance, and her belief that she had been suspended in retaliation for raising those concerns.  In those letters, Ross stated that, although she was an employee of the school district, she was writing on a "personal note" to express her frustration with the school district's administration.

The board initiated a disciplinary hearing.  The hearing officer found that Ross had knowingly made false statements on her employment application, and recommended that her employment be terminated.  The board then voted unanimously to terminate Ross' employment.

Ross filed four claims against the superintendent, including a claim that she was discharged in retaliation for exercising her First Amendment rights.  The District Court granted the superintendent's motion for summary judgment on every claim except the First Amendment retaliation claim, which it determined should proceed to trial.

The superintendent subsequently appealed the District Court's denial of summary judgment with respect to the First Amendment retaliation claim.  In its decision, the Second Circuit cited well-established precedent that a public employee speaking "as a citizen . . . on a matter of public concern" is entitled to First Amendment protection for that speech.  However, a public employee speaking pursuant to his or her official duties -- and not as a private citizen -- is not entitled to First Amendment protection for that speech, even if the employee's speech is a matter of public concern.  In determining whether a public employee's speech is pursuant to his or her official duties, courts examine the nature of the employee's job responsibilities, the nature of the speech, and the relationship between the two.

Ross argued, among other things, that her letters to board of education members were sent as a private citizen because she specifically stated in those letters that she was writing on a "personal note" rather than as an employee of the school district.  The Second Circuit rejected this argument, holding that "an employee's characterization of her own speech is not dispositive."  The Second Circuit also rejected Ross' other arguments, and held that Ross' concerns about improper payments and/or financial malfeasance were raised pursuant to her job duties as a payroll clerk typist.

Accordingly, the Second Circuit reversed the District Court's decision and determined that the superintendent was entitled to summary judgment on Ross' First Amendment retaliation claim.  In so holding, the Second Circuit reinforced well-established principles of what constitutes protected free speech by public employees.

As previously reported in this blog, on July 30, 2012, in the Banner Health System case, the National Labor Relations Board (“Board”), issued a 2-to-1 decision holding that a hospital violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”) by asking employees who make a complaint not to discuss the matter with co-workers while the investigation is pending.

Shortly after the Board issued that decision, the Buffalo, NY regional office of the United States Equal Employment Opportunity Commission (“EEOC”) took a similar position that a confidentiality instruction to an employee making a complaint of discrimination would, in that office’s view, constitute unlawful interference with the complaining employee’s efforts to oppose discrimination.

According to the EEOC's Buffalo office:

EEOC guidance states that complaining to anyone, including high management, union officials, other employees, newspapers, etc. about discrimination is protected opposition.  It also states that the most flagrant infringement of the rights that are conferred on an individual by Title VII’s retaliation provisions is the denial of the right to oppose discrimination.  So, discussing one’s complaints of sexual harassment with others is protected opposition.  An employer who tries to stop an employee from talking with others about alleged discrimination is violating Title VII rights, and the violation is “flagrant” not trivial.

Although this position taken by the Buffalo office has not officially been adopted by the EEOC as a whole, the fact that two federal authorities are attacking the validity of confidentiality instructions is cause for concern.  At a minimum, employers should take a step back and review their investigatory process to ensure that no undue restraint is being placed on employees.  We offer the following practical pointers employers should keep in mind in conducting this review:

• Preserving the integrity of an investigation by keeping harassment/discrimination complaints confidential is a laudable objective.  However, official EEOC guidance requires that employers maintain the confidentiality harassment/discrimination complaints to the extent possible.  Employers are not required or expected to, nor can they, guarantee that harassment/discrimination complaints will be kept strictly confidential.  The Board’s Banner Health System decision also states that a generalized desire to protect the integrity of an investigation will not justify a general policy that matters be kept confidential.
• It does not matter whether employees are unrepresented or unionized in determining whether their rights under the NLRA have been violated.  Regardless of whether covered employees are represented by a union, they are protected by the NLRA.  However, supervisors are not considered covered employees under the NLRA and therefore supervisors are not entitled to its protections.  Consequently, notwithstanding the Board’s Banner Health System decision, an employer could request a supervisor, as opposed to a non-supervisory employee, not to discuss matters with co-workers without fear of violating Section 8(a)(1).
• Consider only “asking” an employee to keep things confidential or “suggesting” the employee be “discreet” about the “sensitive issue,” rather than “instructing,” “ordering,” or “directing” an employee to maintain confidentiality.  Explain to the employee the benefits of confidentiality and how the employer does not want any information leaked that could potentially hinder its ability to complete a thorough investigation or to gather accurate, untainted evidence.  Confidentiality could also be suggested to the employee without an express directive by mentioning the “sensitive” nature of the matter and how he/she would not want allegations made against him/her to be publicly discussed.  By ultimately leaving some choice with the employee, the employer should still be able to argue it did not violate the employee’s rights under the NLRA or interfere with the employee’s Title VII rights to oppose discrimination.
• Employers should analyze each case on an individual basis before asking an employee not to discuss the matter with co-workers, specifically taking into account the factors enumerated by the Board in Banner Health System:  (1) Are there witnesses in need of protection? (2) Is evidence in danger of being destroyed? (3) Is testimony in danger of being fabricated? and (4) Is there a risk of a cover-up?  Although Banner Health System involved a “request,” not a directive, that the employee maintain confidentiality, the Board did not take issue with the request itself but rather with the employer’s blanket practice of requesting confidentiality of all employees without making an individualized assessment as to whether a request was appropriate in any given case.  The Board ultimately viewed this blanket practice as effectively prohibiting any discussion of investigations amongst employees and therefore violative of Section 8(a)(1).  Blanket requests or instructions to maintain confidentiality in all, or virtually all, investigations will likely not be upheld.
• Employers should also consider other intangible factors, such as whether the individual is likely not to discuss the matter on his/her own accord even without any request from the employer to keep it confidential.  If the employee would likely maintain confidentiality without any direction from the employer, why risk potential liability by issuing a request?
• If a decision is ultimately made to issue a confidentiality instruction or directive, notwithstanding the potential risk of liability in doing so, all of the reasons underlying this decision should be clearly and promptly documented, in writing, in case the decision is ever challenged in the future.
• Once the investigation is complete, consider affirmatively lifting any confidentiality instruction that was issued. Doing so could potentially limit the time period for which an employer could be held liable for the confidentiality instruction if it is ultimately held unlawful.

As we reported in a prior blog post, an amendment to New York's wage deduction statute -- New York Labor Law Section 193 -- was passed by the Senate and Assembly in June.  Governor Andrew Cuomo signed the legislation on September 7.  This amendment – effective on November 6, 2012 – will permit New York employers to make a wider range of payroll deductions than currently enumerated in Section 193 and will impose several new deduction-related requirements.

As many employers are aware, the New York State Department of Labor (“NYSDOL”) in recent years significantly narrowed its interpretation of Section 193.  To summarize, NYSDOL has taken the position that a wage deduction is not permissible unless it is very “similar” to those expressly recognized in the statute as lawful (e.g., deductions for “insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, [and] payments for dues or assessments to a labor organization”).  This interpretation varied from the NYSDOL’s historical focus on whether the deduction is for the “benefit of the employee.”

Diverging from this historical focus, NYSDOL more recently opined that the following types of employee wage deductions, among others, are unlawful:  (a) deductions for loans, wage overpayments, or wage advances owed to an employer; (b) deductions for the recoupment of tuition assistance monies owed to an employer; and (c) deductions for purchases from employers or employer-sponsored stores, cafeterias, and like establishments.  To reiterate, NYSDOL found these types of deductions to be unlawful (even with an employee’s voluntary agreement and written authorization) because they were not sufficiently “similar” to Section 193’s enumerated list of permissible payments.

Fortunately for New York employers and employees, the recent amendment to Section 193 will expand the enumerated list of permissible wage deductions to include deductions for:

• Prepaid legal plans;
• Purchases made at events sponsored by a bona fide charitable organization affiliated with the employer, where at least twenty percent of the profits from the event are contributed to a bona fide charitable organization;
• Discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle an employee to use mass transit;
• Fitness center, health club, and/or gym membership dues;
• Cafeteria and vending machine purchases made at the employer’s place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college or university;
• Pharmacy purchases made at the employer’s place of business;
• Tuition, room, board, and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions;
• Day care, before-school and after-school care expenses; and
• Payments for housing provided at no more than market rates by non-profit hospitals or affiliates.

The amendment will also expressly permit deductions made in conjunction with an employer-sponsored pre-tax contribution plan approved by the Internal Revenue Service or other local taxing authority.  As the above list indicates, some of the new enumerated deductions will only be permitted for certain types of employers (e.g., hospitals, colleges and universities).  It is not apparent why legislative drafters included these limitations.

Importantly, the amendment will additionally permit employers to recover inadvertent wage overpayments and wage advances by payroll deductions under certain circumstances and subject to future NYSDOL rulemaking.  According to the amendment, these forthcoming rules must include provisions governing the terms and conditions under which employers may deduct for wage overpayments and advances and must also include provisions relating to employee notice and dispute resolution procedures.

The amendment also imposes new deduction-related requirements, which New York employers must follow.  For example, the amendment provides that “all terms and conditions of the payment and/or its benefits and the details of the manner in which the deductions will be made” must be provided to employees in advance.  Additionally, employers must give advanced notice to employees if there is a “substantial change” in the terms or conditions of the payment (e.g., a change in the amount of the deduction, or in the corresponding benefits).  The amendment also establishes limitations on the total amount of deductions that may be made for certain purposes each pay period, and requires that employees have access to real-time information regarding certain deduction-related expenses.

Employers must now also keep any “written authorization” required under Section 193 for the respective employee’s entire period of employment and, then, for an additional six (6) years after the end of that employment.  For employers with union-represented workers, the amended Section 193 clarifies that the requisite “written authorization” may be provided pursuant to the terms of a collective bargaining agreement.  Except where a deduction is “required or authorized” in such a current collective bargaining agreement, the amendment further provides that employees are free to revoke their authorization at any time.  In such an event, employers must then cease the wage deduction in question “as soon as practicable” and not later than four pay periods or eight weeks after the employee’s revocation, whichever occurs sooner.

Finally, New York employers should take note that the amendment has a three-year “sunset” provision, and, therefore, would require additional legislation to make the corresponding changes to Section 193 permanent.  As with any new legislation, employers should carefully review the amendment to Section 193 and should prepare accordingly in advance of the pending effective date.

On July 6, 2012, the Fourth Department Appellate Division held that the 2008 amendments to the Wicks Law, including a requirement that contractors and subcontractors participate in apprentice training programs approved by the Department of Labor in order for a project labor agreement ("PLA") to qualify for an exemption from the Wicks Law, are valid and constitutional.

The Wicks Law requires that governmental entities in New York prepare separate bid specifications and award separate contracts for the plumbing, heating and ventilation, and electrical components of those publicly-funded construction projects that exceed their monetary cost threshold.  This requirement is often fiscally and administratively burdensome to the public entity.

In 2008, to alleviate some of that stress, the formerly uniform monetary threshold was modified to a three-tier system with trigger amounts of $3,000,000 for the five New York City counties, $1,500,000 for Nassau, Suffolk and Westchester, and $500,000 for all other counties.  Labor Law Section 222 was adopted at the same time, providing for a full exemption from the Wicks Law requirements where the project is covered by a qualifying PLA.  The statute defines a PLA as:

a pre-hire collective bargaining agreement between a contractor and a bona fide building and construction trade labor organization establishing the labor organization as the collective bargaining representative for all persons who will perform work on a public project, and which provides that only contractors and subcontractors who sign a pre-negotiated agreement with the labor organization can perform project work.

In order for the PLA to qualify the project for exemption, it must provide that each contractor and subcontractor participate in apprentice training programs approved by the Department of Labor.

In Empire State Chapter of Associated Builders and Contractors v. M. Patricia Smith, both the three-tier threshold and the apprentice training program requirement were challenged as unconstitutional.  The three-tier threshold was attacked, in part, upon the premise that it was enacted with procedural deficiencies that violated the home rule provisions of the New York State Constitution.  However, the Court held that the enactment bore a direct and reasonable relationship to a substantial State concern, and was a valid exercise of legislative power under Article IX of the Constitution.

The apprentice training program requirement was challenged as exclusionary.  According to the plaintiffs, it unfairly burdened contractors and subcontractors by requiring them to maintain apprentice training programs of their own, for all public projects meeting the new thresholds.  They argued that the legislation served to disqualify out-of-state contractors from large public construction projects, and inhibited a disproportionate number of minority-owned and women-owned businesses from qualifying for work on such projects.  The Court disagreed with the plaintiffs' interpretation of Labor Law Section 222.  The Court held that the apprentice training requirement is not universal, and applies only to those projects where the government entity has elected to utilize a PLA.  Further, the Court also held that any contractor or subcontractor entering into a qualifying PLA is deemed to be participating in an apprentice training program.  The individual contractors and subcontractors need not maintain an apprentice training program of their own.

In the aftermath of the Fourth Department's decision, it would be economically prudent for governmental entities to examine the feasibility of a PLA that complies with Labor Law Section 222 for their next public construction project.

A recent decision by New York’s highest court highlights the value to employers of initially setting forth the terms of employment in a written offer letter.  In Ryan v. Kellogg Partners Institutional Services, the New York Court of Appeals upheld an award of $380,000 for an unpaid wage claim and attorneys’ fees, principally because the jury believed the plaintiff’s testimony that he was promised a $175,000 bonus by the defendant’s managing partner, and notwithstanding the managing partner’s testimony that he made no such promise.

Neither the employer’s employment-at-will policy and disclaimers, nor the Statute of Frauds provided a defense to the claim, but a properly drafted employment offer letter, which was missing here, would have made all the difference in the result.

The plaintiff testified that he was recruited to work for the defendant, which at the time was a fledgling securities brokerage firm.  He testified that he sought an annual salary of $350,000 to change jobs, and, to meet his demand, the managing partner offered him compensation consisting of a salary of $175,000 and a guaranteed bonus of $175,000 payable within the first year of his employment.  After accepting the position, but before starting, plaintiff completed an employment application with an employment-at-will acknowledgment.  He also signed off on the employer’s handbook that confirmed his “at will” status, and specifically provided that:

[no] representative of the company . . . has the authority to enter into any agreement for employment for any specified period of time or to make any agreement contrary to [the employee’s at-will status].  [N]othing contained in the handbook may be construed as creating a promise of future benefits or a binding contract with [the employer] for benefits or any other purpose.

The new business started slowly and, according to the plaintiff, within the first year, the managing partner asked him to postpone the bonus for a year.  Plaintiff claimed to reluctantly agree.  There was, apparently, no documentation of this discussion or agreement.  The plaintiff also testified that he discussed the bonus “many times” with the managing partner who, according to the plaintiff, “put him off.”  Ultimately, plaintiff was offered a $20,000 bonus, which he refused to accept, and subsequently was terminated.

At trial, the managing partner contradicted the plaintiff’s testimony in “every conceivable way” on the topic of bonuses.  He told the jury that the subject of a $175,000 bonus was never discussed before or after plaintiff was hired, and that bonuses were entirely discretionary.

The jury credited the plaintiff’s testimony and awarded the $175,000 bonus.  The court found the failure to pay the bonus to be a violation of the wage payment provisions of the New York Labor Law and awarded attorneys’ fees of $205,000.

The Court of Appeals affirmed in all respects.  In particular, the Court reasoned that the employment-at-will policy and acknowledgments did not provide a defense to this claim because, while the employment-at-will policy established that the plaintiff was not guaranteed employment for any period of time, and that his employment, compensation, and benefits were subject to termination, that policy did not establish that bonuses were discretionary, or that the plaintiff was not entitled to payment of compensation that he claimed was promised at the outset of his employment.  According to the Court, the at-will disclaimers did not preclude an employee from recovering remuneration earned before his employment ended.  It was for the jury to decide what agreement the parties had reached on the plaintiff’s bonus compensation.

The Statute of Frauds (New York General Obligations Law §§ 5-701 et seq.), which limits the enforceability of oral contracts by requiring a writing in certain enumerated circumstances, was not a defense here because there was adequate consideration for the alleged promise, and the bonus was scheduled to be paid within one year.

The Court of Appeals also approved the award of attorneys’ fees to the plaintiff on the theory that the failure to pay the bonus constituted a failure to pay wages under New York Labor Law.  The Court noted that, subsequent to trial, the relevant Labor Law provision, Section 198(1-a), had been amended to increase the potential recovery to include liquidated damages of 100% of the wages found due (i.e., double damages plus attorneys’ fees).

The facts in Ryan v. Kellogg Partners illustrate the significant risk that employers take in not confirming the terms of employment through a written offer letter.  Such an offer letter can incorporate at-will employment principles before the employee accepts a position.  In addition, important terms of employment, including salary, benefits, bonus and incentive opportunities, can be clearly identified and not left to the vagaries of jury deliberations.  The warning of Ryan v. Kellogg Partners is that substantial jury verdicts can rest on the testimony of a former employee.  Employers who heed that warning will have thorough employment documentation -- beginning with a well-crafted offer of employment.

In the coming weeks, many employers may notice that Form I-9 – which employers are required to complete for newly-hired employees – is set to expire on August 31, 2012.  Employers should be aware that the U.S. Citizenship and Immigration Services (“USCIS”) has advised continued use of the current Form I-9 past this looming expiration date.

As for developments on a new Form I-9, the USCIS published notice of the revised Form I-9 on March 27, 2012, followed by a public comment period, which ended on May 29, 2012.  Until further notice from the USCIS, employers should continue to use the current Form I-9.

As background, employers are required to complete the Form I-9 to verify and/or re-verify an employee’s identity to confirm the individual is (or remains) authorized to accept employment in the United States.  For recordkeeping purposes, an employer must retain completed I-9 forms for the later of three (3) years after an individual’s date of hire or one (1) year after the employment relationship ends.

The Bond Immigration Practice Group will continue to monitor the availability and issuance of the new Form I-9 and will provide additional details on this blog when further information becomes available.

One would think that an elected official would be free, if not obligated, to express his/her opinions on a matter of public interest without fear of financial repercussion.  Sometimes, though, as the decision in Matter of Lancaster v. Incorporated Village of Freeport teaches us, the exercise of such freedom may come with a cost.

The case arose when a municipality’s statutory obligation to defend and indemnify its elected and appointed officials clashed with the desire of a minority of those officials to voice opinions critical of a settlement made on their behalf and on behalf of the municipality that they represented.

The municipality’s duty, which arises under the Public Officers Law, is analogous to an insurance company’s contractual obligation to defend its insured.  The duty is conditioned upon an official’s cooperation in the defense of the claim, and a failure to cooperate could result in a disclaimer of coverage.  Like the insurance company, the municipality seeking to disclaim coverage would have to demonstrate that it:  (1) acted diligently in seeking to bring about the official’s cooperation; (2) its efforts were reasonably calculated to bring about the official’s cooperation; and (3) the attitude of the official, after cooperation was sought, was one of willful and avowed obstruction.

That brings us to Lancaster, where a majority of the Village Board wished to resolve a costly and controversial claim, but a potentially vocal minority did not.  Not surprisingly, the approval vote was split along political lines.  When it came time to execute the stipulation of settlement, however, that voting minority chafed at the requirement that they consent to a non-disparagement clause which served to prevent public criticism of the resolution.  Their refusal jeopardized the entire settlement.

The majority of the Board responded by voting to terminate the dissenting officials’ defense and indemnification.  How does that action hold up against existing precedent?

In Bond v. Floyd, 385 U.S. 116 (1966), the United States Supreme Court explained that:

Legislators have an obligation to take positions on controversial political questions so that their constituents can be fully informed by them, and be better able to assess their qualifications for office; also so they may be represented in governmental debates by the person they have elected to represent them.  We therefore hold that the disqualification of Bond from membership in the Georgia House because of his statements violated Bond’s right of free expression under the First Amendment.

The Supreme Court also recently made clear in Nevada Commission on Ethics v. Carrigan, 131 S.Ct. 2343 (2011), however, that an elected official’s First Amendment rights are not unfettered.  At issue there was an ethics law requiring public officials to recuse themselves from voting on or advocating for the passage or failure of a matter in which he/she had a conflict.  The Court gave the law its blessing.  The act of voting was not protected speech, and the advocacy preclusion was deemed a reasonable time, place, and manner restriction.

So how much protection did the First Amendment provide to the dissenting officials in Lancaster?  Not much.  The Village resolution was upheld, both at the trial court level and on appeal.

The lower court upheld the resolution after employing a balancing test.  It found that consent to a non-disparagement clause was a reasonable concession when considered against the “benefits achieved by the petitioners from the settlement.”

The Second Department made no reference to a balancing test or to any risk-benefit analysis.  It simply held that the refusal to execute the non-disparagement clause constituted willful and avowed obstruction and justified the disclaimer, and that the clause, in and of itself, did not constitute a prior restraint on speech.

Lancaster was limited to the circumstances of the case, thus leaving open the question as to whether a non-disparagement clause within the context of a municipal settlement can ever constitute an unlawful prior restraint of an elected official's speech.  However, Lancaster serves as a cautionary flag for elected officials, who if confronted with such a clause (for example, in an agreement to settle an employment discrimination case or an employee discipline case), must seriously consider if rejecting it to voice a dissenting opinion is worth the risk of personal financial exposure.

On July 30, 2012, the National Labor Relations Board (“Board”), in a 2 to 1 decision, held that a hospital violated Section 8(a)(1) of the National Labor Relations Act ("NLRA") by asking employees who make a complaint not to discuss the matter with co-workers while the investigation is pending.  Section 8(a)(1) of the NLRA forbids employers from interfering with the exercise of an employee's Section 7 rights, such as the right to organize, form, join, or assist a labor union, to bargain collectively, or to engage in other concerted activities for mutual aid or protection.

In Banner Health System, the hospital’s human resources consultant routinely asked employees who made a complaint not to discuss the matter with co-workers while the investigation was ongoing.  It is common for employers to make this type of request to ensure confidentiality and to protect the integrity of their investigation.  What is troubling about this case is that the Board found that an employer’s legitimate interest in protecting the integrity of its investigation is generally insufficient to outweigh an employee’s Section 7 right to discuss workplace concerns with co-workers.  The Board held that before an employer prohibits an employee from discussing an ongoing investigation, the employer must make an individualized assessment and be able to demonstrate that it has a legitimate business reason that outweighs the particular employee’s Section 7 rights.  In undertaking this analysis, the employer must consider whether:  (1) there are witnesses in need of protection; (2) evidence is in danger of being destroyed; (3) testimony is in danger of being fabricated; or (4) there is a need to prevent a cover-up.  An employer’s blanket rule prohibiting employees from discussing ongoing investigations without considering these factors would not meet this requirement.

In light of this recent decision by the Board, employers should be cautious about their communications to employees during the course of a workplace investigation.  In particular, it would be prudent for employers to make an individualized assessment in each case before deciding whether to ask an employee not discuss a matter with co-workers.  In undertaking this analysis, it would be wise to consider the four factors identified by the Board.  If, after considering these factors or any other compelling factors, an employer ultimately decides to ask an employee not to discuss matters under investigation, the employer should document its rationale for making the decision in the event that the decision is later challenged.  In addition, rather than “prohibiting” or “requiring” an employee to maintain confidentiality, it may be wise to express that it is the employer’s “preference” that an employee not discuss the matter with co-workers while the investigation is pending.

On April 25, 2012, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued its Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.  The guidance follows prior statements by the EEOC concerning employers’ use of arrest and conviction information when making employment decisions, including whether to hire, retain, or promote individuals.  The EEOC has also published additional information concerning its new enforcement guidance in a Question and Answer-form summary.

Effect of the EEOC's Guidance

Employers can rest assured that the EEOC’s guidance does not make it a per se violation of Title VII to consider criminal history information.  It does, however, send a clear signal that the agency intends to scrutinize employment decisions that are based on an individual’s criminal past.  The EEOC stresses that criminal history information may be relevant to both “disparate treatment” claims (where people with the same criminal history are treated differently because of a legally protected characteristic) and “disparate impact” claims (where an employer’s facially neutral policy has a disproportionately adverse impact on a specific protected group).

In the disparate impact context, an employer can avoid liability by showing that the policy at issue is job related for the position and consistent with business necessity.  Under the new EEOC guidance, however, an employer will not typically satisfy this showing by merely tying its policy of considering prior criminal backgrounds to its general concern for property or safety.  Rather, employers are now expected to conduct a multi-factor analysis to confirm that the underlying policy is appropriately applied to a specific individual.

"Targeted Screens" and "Individualized Assessments"

In its guidance, the EEOC makes clear its position that a policy excluding everyone with a criminal background from employment will violate Title VII because it is not job related and consistent with business necessity.  The EEOC states that, at the very least, a policy must be rooted in a genuine nexus between a position and a particular crime.  To be valid, such a “targeted screen” must take into account the nature of the crime, the time elapsed, and the nature of the job in question.  The EEOC also emphasizes, however, that a targeted screen alone may be inadequate to avoid a disparate impact claim in many situations.  It therefore suggests that employers also conduct what it terms an “individualized assessment.”

To complete an individualized assessment in accordance with the new EEOC guidance, an employer must:  (1) notify the individual that he or she has been targeted for exclusion because of past criminal conduct; (2) give the individual an opportunity to explain why he or she should not be excluded; and (3) consider any information supplied by the individual to assess whether the practice or policy, as applied, is job related and consistent with business necessity.  The EEOC lists several examples of potentially relevant information that should be considered during the individualized assessment, including:  possible inaccuracies in the criminal history report; the applicant/employee’s age at the time of the offense; the number of offenses committed; whether similar work has been performed without incident; the applicant/employee’s employment history; rehabilitation efforts; and employment or character references.

Looking Ahead

Although the EEOC’s new guidance does not go so far as to prohibit employers from considering an individual’s criminal history when making employment decisions, it should serve as a reminder that this screening method is rife with potential legal pitfalls.  The EEOC’s emphasis on the national conviction rates for certain minority groups suggests that it is predisposed to litigating claims under a disparate impact theory.  The EEOC will consider whether the employer followed the several steps described in the new guidance to assess whether a screening policy is truly job related for a particular position and consistent with business necessity.

In addition, it is important for employers to remember that several states and municipalities have passed laws to prohibit discrimination on the basis of an individual’s criminal history.  For instance, the New York Human Rights Law and Corrections Law make it unlawful to base employment decisions on prior arrests or criminal convictions.  An exception exists that allows an employer to deny employment when the underlying conviction directly relates to the job or when employment would pose an unreasonable risk to property or the safety or welfare of specific individuals or the general public.  Before relying on this exception, however, employers must consider a variety of factors, including:

• the public policy of New York State to encourage employment of persons with criminal records;
• the specific duties and responsibilities of the position;
• the bearing the underlying offense will have on the person's fitness or ability to perform those duties and responsibilities;
• the time elapsed;
• the age of the person when the offense was committed;
• the seriousness of the offense;
• any information concerning the person's rehabilitation and good conduct; and
• the legitimate interest of the employer in protecting property or safety or welfare of individuals or the public.

By conducting this analysis, New York employers will also very likely be able to satisfy the EEOC’s expectations as stated in its new guidance.  To better insure compliance, however, it is strongly recommended that employers contact labor and employment counsel when assessing internal policies relating to the use of criminal history information in connection with employment decisions.

On June 28, 2012, the United States Supreme Court issued its landmark decision on the constitutionality of the Patient Protection and Affordable Care Act (“Act”), and ruled that all of the challenged health care reform provisions in the Act are constitutional other than a portion of a Medicaid expansion provision.  Although future challenges to the implementation of some or all of the Act will occur through the electoral process, additional litigation, and the legislative process, those challenges are unlikely to result in any significant changes in the requirements of the Act before the end of this year at the earliest.  In the meantime, there are a number of new requirements in the Act that covered employers will need to comply with in the near future, including:

• finalizing the Summary of Benefits and Coverage that most employers will be required to provide on the first day of open enrollment this fall;
• taking the steps necessary to comply with the $2,500 annual limit that will apply to health flexible spending accounts beginning in 2013, including making sure that open enrollment materials that will be distributed to eligible employees prior to the beginning of the 2013 plan year accurately describe the new limit;
• implementing any procedures necessary to track and record health coverage costs in 2012 to prepare for the new Form W-2 reporting requirement for group health plan coverage costs that will apply to Forms W-2 that will be issued by certain employers in January of 2013; and
• coordinating with any applicable insurer or administrator to make sure that the research fees that will be imposed by the Act on specified issuers of health insurance policies and plan sponsors of self-insured health plans starting with the first plan or policy year ending on or after October 1, 2012 are timely paid in 2013.

In addition to these requirements, the Act will impose numerous other requirements on covered employers in the next few years that should be planned for in advance of the applicable deadlines. Some of the more important of those requirements are described below:

• preventive care requirements for women that certain health plans will have to implement starting with plan years that begin on or after August 1, 2012;
• medical loss ratio rebate requirements that will apply to certain insured health plans starting in August of 2012 (certain insurers that fail to spend a specified percentage of premiums received on covered medical claims and quality improvement-expenses will have to provide rebates to the applicable health plans starting in August of 2012, and employers that have such plans will have to decide how to handle such rebates);
• 2013 increases in Medicare payroll taxes and FICA taxes for certain highly compensated individuals;
• certain employers will be required to provide a notice to their employees in March of 2013 about the health insurance exchanges that will become operational in 2014 (in addition to this notice requirement, certain employers will want to do an analysis in 2013 about how the health insurance exchanges might impact the health coverage they provide);
• the employer mandate requirement (commonly referred to as the “pay or play” requirement) that will apply in 2014 to certain employers having at least 50 full-time equivalent employees, which will require those employers to decide whether they will provide minimum essential health coverage to their full-time equivalent employees in 2014 or pay a financial penalty;
• nondiscrimination requirements for certain insured group health plans that will apply after the applicable regulations are issued; and
• numerous other requirements that will apply to many group health plans in 2014 or later, including expanded dependent coverage rules for “grandfathered” health plans, new preexisting condition exclusion requirements, a restriction on eligibility waiting periods that exceed 90 days, a requirement to eliminate all annual dollar limits for covered group health plans, new incentive/penalty requirements for wellness incentives, new minimum essential coverage requirements, new clinical trial coverage requirements, new provisions regarding guaranteed availability and renewability of insured health coverages, changes to Medicare Part D coverage, new automatic enrollment requirements that will apply to certain employers after the applicable regulations are issued, and a new “Cadillac” plan excise tax that will apply in 2018 if the aggregate value of certain health coverages exceed a specified amount.

Considerable guidance is going to be issued by the applicable governmental agencies to help employers implement the requirements described above, and that guidance should be monitored carefully to help ensure timely compliance with those requirements.

On June 8, 2012, the U.S. Court of Appeals for the D.C. Circuit refused to enforce a decision and order of the National Labor Relations Board ("Board") on the ground that the Board had "departed, without giving a reasoned justification, from its precedent . . . ."  Prior to the Board's 2010 decision and order in E.I. Du Pont de Nemours v. NLRB, Board law had, for almost a decade, allowed an employer to make certain unilateral changes in terms and conditions of employment, both during the term of a collective bargaining agreement and after expiration of a collective bargaining agreement, provided that the changes are consistent with an established past practice.  However, in its 2010 Du Pont decision, the Board held that Du Pont's unilateral changes to its health plan constituted unfair labor practices in violation of the National Labor Relations Act ("Act"), despite the undisputed existence of a past practice permitting such changes.  The D.C. Circuit Court of Appeals rejected the Board's change of direction on this subject.

In the Du Pont case, the Board acknowledged that Du Pont had annually and consistently revised the terms of its health plan -- which applied both to union and non-union employees -- each year during an annual enrollment period, under the terms of the plan.  These changes typically included revised coverage terms, changed options, and increased premiums.  The management rights clause in the collective bargaining agreement with the union also encapsulated the employer's right to make these changes.

When Du Pont continued this annual practice of revising its health plan in 2004 following expiration of the collective bargaining agreement, the union filed an unfair labor practice charge, and the Board found that Du Pont had violated Sections 8(a)(5) and 8(a)(1) of the Act by making impermissible unilateral changes in the terms and conditions of employment.  The Board distinguished the employer's past practice of similar annual revisions to the health plan, noting that those prior occasions had occurred during the term of the collective bargaining agreement, not after the expiration of the collective bargaining agreement.  The Board also held that Du Pont could not rely on the expired management rights clause to justify the post-expiration unilateral changes.

In rejecting the Board's holding, the D.C. Circuit Court of Appeals observed that, under the Board's existing precedent, the undisputed existence of a past practice permitting similar changes served to immunize those changes from scrutiny under the Act, regardless of whether the changes were made during the term of a collective bargaining agreement or after the expiration of a collective bargaining agreement.  The Court also noted that this immunity did not turn on the existence of a management rights clause in an unexpired collective bargaining agreement.  The Court stated:

Under the Board's precedent, therefore, Du Pont's making annual changes to [its health plan] became a term and condition of employment the Company could lawfully continue during the annual enrollment period, irrespective of whether negotiations for successor contracts were then on-going.

The Court's refusal to enforce the Board's Du Pont decision signals some judicial impatience with the Board's deviation from existing precedent without providing a well-reasoned justification for the sudden change in policy.

On or about June 20, 2012, the U.S. Department of Labor, Wage and Hour Division, released a 16-page guide to the Family and Medical Leave Act (“FMLA”) in an effort to inform employees about the FMLA and to make the law more accessible to them.  This publication, entitled “Need Time? The Employee’s Guide to The Family and Medical Leave Act” (“Guide”), provides a basic overview of the FMLA.  Through a combination of text, flow-charts, and examples, it answers common questions that employees may have about their rights under the FMLA.

So what does this new publication mean for employers?

Although the Guide is specifically geared toward employees, it may also be useful to employers for the reasons set forth below.

• The Guide is written in plain English. For this reason, the document serves as a useful reference to refresh employers’ understanding regarding the basic rights and protections afforded to employees under the FMLA, as well as the obligations that the statute places on employers themselves.  For example, the Guide contains a flowchart which employers may find useful when determining whether an employee is eligible for FMLA leave.
• The Guide also reminds employees of their own responsibilities under the FMLA.  For instance, it notifies employees of their obligation to provide an employer with appropriate notice of the need for leave.  In addition, the Guide reminds employees that they are responsible, at their own expense, for ensuring that their employer receives a timely, compete, and sufficient medical certification form.  The Guide also reminds employees that their request for FMLA leave may be denied if they fail to provide employers with requested medical certification(s).  Finally, as a practical matter, the Guide stresses the need for employees to communicate with their employers.

A word of caution . . .

Many employers who are well-versed in the FMLA may not be inclined to utilize or familiar themselves with the Guide.  However, it is important for all employers to understand that this Guide also advises employees, in specific detail, regarding an employer’s obligations to the employee under the FMLA.  For example, the Guide states that employers must notify employees of their eligibility and rights and responsibilities within 5 business days, and must also notify employees within 5 business days if a leave request has, in fact, been designated as FMLA leave.  In addition, the Guide informs employees of their right to continued health benefits while on leave, as well as their right to be returned to the same or nearly identical position upon their return from FMLA leave.  Most importantly, employers should be aware that the Guide contains an entire page of detailed information informing employees how to file a complaint with the U.S. Department of Labor if they feel their FMLA rights have been violated.

Finally, employers are reminded that while the Guide can be a helpful and informative resource to employers and employees alike, it does not serve as a substitute for a well-drafted FMLA policy that is compliant with the law.