This amendment will permit any employee who makes less than $1300 a week (approximately $67,000 a year) to bring wage theft claims in court or before the New York Department of Labor (NYDOL). Previously, only employees who made $900 a week or less could bring such claims before the NYDOL.

Governor Hochul recently also signed Senate Bill S2832A, the Wage Theft Accountability Act, which amends the penal law to include “wage theft” in the definition of larceny, making this a felony offense encompassing nonpayment or underpayment of wages. Both bills are part of a larger initiative in New York that seeks to protect employees and their wages, resulting in potentially more severe, and even criminal penalties for noncompliant employers.

What is a ‘Wage Theft’ Claim?

Many of you are asking: what is wage theft? I am not stealing my employees’ wages.

As background, Article 6 of the NYLL regulates how frequently employees must be paid, as well as other aspects of wage payment such as direct deposit. Employers who violate Article 6 are now technically guilty of ‘wage theft.’

For example, New York employers:

• Must pay clerical and other non-exempt workers ‘not less frequently than semi-monthly.
• Must obtain advance written consent before paying wages via direct deposit.
• Must pay all wages and wage supplements within 30 days after they are due.

Any employer who fails to do these things is potentially guilty of wage theft. Claims for wage theft include those for unpaid wages, illegal deductions, unpaid wage supplements, minimum wage, and overtime pay.

Who is Protected By Article 6?

Before the new amendment, any employee working in an executive, administrative, or professional capacity making more than $900 per week, was exempt from Article 6.

Starting March 2024, that group will be much smaller. Employees working in an executive, administrative or professional role and making $1300 per week or less, (under $67,000) are covered by Article 6. Put another way, anyone making less than $67,000 can now sue their employer for wage theft. This new law effectively expands protection to cover even more employees under Article 6, resulting in two key changes:

1. Employees not subject to the exemption can bring wage theft claims with the NYDOL.
2. Employers must obtain employee consent before paying certain workers making below the $1300 a week threshold through direct deposit.

What Happens if an Employer Violates Article 6?

The ability to bring a wage theft claim increases liability for employers. For one, an employee may file a complaint at the NY Department of Labor, which can open your company up to a company-wide DOL audit.

Qualified employees may also bring civil action in state court under Article 6. If an employer is found liable for wage theft, there is a potential penalty of between $500 to $20,000 per offense, depending on the severity of the violation. And if the employer is found guilty of wage theft, the employee’s attorney can recover their legal fees. Wage theft claims are thus popular ‘add on’ causes of action, often tacked on at the end of a discrimination or wrongful termination claim.

Employers may be found guilty of wage theft, for failing to pay benefits or wage supplements to employees are now potentially guilty of a misdemeanor.

What Should Employers Do?

Starting in March 2024, New York employers will likely have a larger group of employees who are covered by Article 6 and who can bring wage theft claims at the NYDOL. From an administrative standpoint, employers should proactively work with their payroll, human resources, and other relevant departments to implement any necessary changes to payroll procedures before the law goes into effect. Specifically, employers should obtain written consent for direct deposit for this class of employees by providing a form during onboarding, or prior to March 2024 for current affected employees.

In addition to the payroll component, employers should work with counsel to evaluate whether the composition of their workforce puts them at risk for a potential increase in NYDOL claims. Employers may consider increasing salary for workers who are at the ‘edge’ of the exemption, to avoid a potential increase in NYDOL claims, but that decision comes at a cost, especially amidst recent increases to the New York minimum wage.

Finally, employers should recognize that the Bill concerns different thresholds than the recently-increased minimum wage and overtime thresholds under Article 19 of the NYLL, though all of these laws warrant special attention to the changing wage payment landscape in New York.

If you have questions concerning wage and hour practice and compliance, please contact a member of Kelley Drye’s Labor and Employment team.

What will this all mean for employers? There are challenges for sure, but with planning they are manageable. We take a look at the top trends that will shape labor and employment law in the months to come.

DISCRIMINATION AND EEO ISSUES

More enforcement

Given trends from last year and public messaging from top enforcers, we anticipate an increase in harassment and discrimination litigation, particularly for class-based claims.

In its recently released 2022 Financial Report, the EEO signaled its plan to strengthen enforcement around systemic discrimination. The Agency heralded several victories including obtaining $29.7 million in monetary benefits for victims and collecting over $28 million in damages from 10 lawsuits asserting systemic discrimination last year. Enforcers also recovered a combined $403 million from the Agency’s top 10 settlements of 2022 (nearly doubling rates from the previous year). Highlights include an $18 million settlement with Activision Blizzard over sexual harassment and pregnancy-bias claims and $8 million from Circle K stores over disability and pregnancy discrimination issues.

Even more, the EEOC’s enforcement hike has considerable support from the White House. The President’s proposed budget requests $481 million for the EEOC – a 5.7% increase over its 2023 allocations. While this money is unlikely to materialize in full, it does underscore the growing political support for anti-discrimination and harassment enforcement.

For its part, the workplace plaintiffs’ bar is also seeing historic scores. Last year, plaintiffs won nearly $2 billion combined and saw higher rates of success certifying classes in employment bias, benefits, and wage and hour cases. Top settlements included $597 million from Sterling Jewelers for sex bias claims; $118 million from Google in a pay discrimination dispute; and $185 million between the MLB and minor league players for violations of state and federal wage laws.

Expanded protections

The list of protected classes is growing – quickly. New York added discrimination based on citizenship or immigration status to its prohibitions while Illinois amended its anti-discrimination laws to include “work authorization status.” Seattle passed a first-of-its kind law banning “caste” discrimination while California joined New York in adopting protections based on an employee’s “reproductive health decision making” and off-duty cannabis use. CROWN Act legislation, which prohibits discrimination based on hairstyle and hair texture, is also making its way through the states. The Illinois version became effective most recently, on January 1, when the state joined California, New York, New Jersey, Washington D.C., and several other jurisdictions that have based similar bans. Because these classifications are jurisdiction specific, employers have an added burden of keeping up with numerous changing state and local laws to ensure compliance.

Pregnancy protections are also ramping up. In late December, the Protections for Nursing Mothers (PUMP) Act took effect, expanding protections for nursing employees under the FLSA. The new law covers both exempt and non-exempt employees, expanding its reach to nearly 9 million more employees, including teachers and nurses. Even more, the federal Pregnancy Workers Fairness Act will take effect this June, requiring employers to provide reasonable accommodations for workers with known limitations connected to pregnancy, childbirth, or related medical conditions.

Practical considerations for employers

Watch out for these “hot” areas and be wary if there is an EEOC investigator poking around your company. Be especially careful concerning potential workplace harassment or indications of systemic or ongoing infractions, requests for accommodation (including related to disability and FMLA leave), any accommodations for pregnant persons, and issues of pay disparity. All of these are examples of complaints that can lead to class actions, or large verdicts, so they should be handled carefully.

ARTIFICIAL INTELLIGENCE

Maybe it is not surprising to hear that nearly 1 in 4 organizations use artificial intelligence HR tools, according to a 2022 survey from the Society for Human Resource Management. Nearly 80 percent use AI for recruiting and hiring. This has sparked backlash from government regulators, who worry this software may run afoul of nondiscrimination laws if it illegally rejects candidates based on a protected characteristic.

In its recently proposed “Strategic Enforcement Plan,” the EEOC makes clear that it will target employers using HR software, including programs that incorporate algorithmic decision-making in recruitment, selection, or production and performance management tools. Last May, the EEOC sued three companies under the “iTutorGroup” umbrella for programming its online recruitment software to reject some older applicants. The agency sought back pay and liquidated damages for more than 200 applicants they say were illegally denied jobs based on age.

States are also taking up this cause. Illinois was the first in 2020, followed by Maryland, to regulate the use of automated decision tools in hiring interviews. New York City moved the goalpost even further with a new law that will require employers to audit certain automated tools for bias and post a number of public disclosures. While that law was set to take effect on January 1, enforcement has been postponed until April 15, 2023 to give regulators time to finalize proposed rules surrounding the law. California regulators have taken similar steps to ensure employers and vendors could face liability under state law, regardless of whether there was discriminatory intent, through a new proposed rulemaking. Even more, the California Consumer Privacy Act recently took effect, expanding data privacy law to cover employees, applicants, and others in the workplace.

Practical considerations for employers

In short, employers will likely need to contend with a growing number of state laws on this issue, compounded by complexities of advertising remote work across several jurisdictions. For businesses using AI, consult with outside counsel (yes, you can call us) to ensure compliance with this legal patchwork. For businesses not formally using AI, be sure to audit whether employees are using AI tools. Clients are increasingly beginning to monitor employee use of various AI tools and create policies around their use in the workplace. Even if a tool is not distributed by the company, it may still raise legal concerns for employers if employees are using it unlawfully for work purposes. New York City employers can read more about the city’s recently passed sweeping AI law here.

LABOR, LABOR, LABOR!

Unions are, once again, getting prime political billing in Washington while the NLRB continues its pattern of aggressive enforcement. During the State of the Union, President Biden called on Congress to pass the Protecting the Right to Organize Act and condemned companies for “breaking the law by preventing workers from organizing.” While the Act is unlikely to succeed, this does signal that unions will take center-stage in the upcoming elections.

The NLRB got a $25 million funding boost to its 2023 budget. It had originally requested more than $100 million to account for an increase in its caseload, including an uptick in union representation petitions. In the last year, the NLRB has handed down a host of pro-union decisions and overturned some key Trump-era decisions. This included requiring employers to again deduct union dues after a collective bargaining agreement expired and a major opinion on severance agreements (more on that below).

On the horizon, the NLRB’s general counsel has signaled an interest in reconsidering when an employee is an “independent contractor,” educating the workforce about their rights under federal law, and tackling captive audience meetings.

As unions spread into new, non-traditional industries and we see a general uptick in labor activism (including strikes), the NLRB will likely continue is active role in shaping the workplace.

Practical considerations for employers

Employers with unions should already be familiar with the NLRB and the requirements of the NLRA. However, be aware that unions are becoming more active, and are looking now to organize pockets of the workforce who may not be unionized yet. Employers without unionized employees should watch out for new union organizing and upcoming rulings from the NLRB impacting all employees, not just those already unionized.

PAY TRANSPARENCY

Pay transparency has become a hallmark of the Equal Pay movement. With legislatures around the country enacting a patchwork of new restrictions and obligations, this is becoming a potential landmine for multistate employers.

This started years ago when several jurisdictions enacted laws prohibiting employers from inquiring about an applicant’s salary history. Next, states began requiring employers to disclose compensation ranges to applicants upon request or when making an offer. And now, states including California and New York, are moving the ball even further with laws requiring employers to disclose salary ranges in job postings if the job could be performed in that jurisdiction, including sometimes for internal opportunities. California and Illinois also require some employers to submit their pay data to state agencies. This not only affects how employers negotiate compensation for newcomers, it could also open the door to costly lawsuits should transparency laws unearth potentially discriminatory pay disparities. Even more, some states now prohibit retaliating against an employee for discussing their own or other employees’ pay.

On the federal level, the EEOC has also established pay equity as a main enforcement priority. So as pay ranges become more common on job applications and general anti-discrimination enforcement kicks up, we expect pay transparency issues to be a major focus to come.

Practical considerations for employers

Pay transparency issues can create exposure on multiple fronts for employers, including legal liability and public scrutiny. Employers operating in California and New York should take particular note of local laws, including requirements for job postings and data reporting. This may mean conducting an internal audit, updating hiring templates, and consulting with counsel. Read more of our coverage on laws in New York and California.

EMPLOYEE PRIVACY (Looking at You, Biometrics)

Biometric data has become big business for employers. This includes a host of services that rely on fingerprints, facial scans and voice recognition to do things like verify an employee’s identity, launch automated assistants, access events, or track time. But as these types of tools became more common, regulators took notice.

Illinois was the first state to directly regulated biometric data as a consumer (and employee) privacy matter. We’ve been covering the state’s Biometric Information Privacy Act (BIPA) since it first starting making waves for employers in court. Just recently, two monuments state supreme court decisions were handed down that should give any employer operating in the jurisdiction pause. The court made clear that BIPA violations will be tallied by act, not by individual. This means a new violation could accrue every time an employee uses a biometric time clock, potentially several times per work shift, and could open even more cases on this already contentious law. We expect this will lead to even more BIPA-related cases with huge payouts for employees and the plaintiffs’ bar.

Even more, other states are trying their hand at similar types of legislation. Texas and Washington have similar biometric laws, but do not allow for a private right of action. As of this January, Maryland and Mississippi have introduced new biometric privacy bills and other states may follow suit. We will continue to monitor major developments in this area of law as the legislative season moves forward.

Practical considerations for employers

Biometric tools can be very valuable in the workplace, but compliance with related privacy laws is also a challenge. The best advice is get good privacy counsel, as this is an area of the law which has become increasingly complex and specialized. Read more on BIPA – a monster of privacy statute – here.

RESTRICTIONS ON RESTRICTIVE COVENANTS

Noncompetes: An FTC Final Rule on … Maybe?

We’ve covered the Federal Trade Commission’s proposed rule that would ban essentially all noncompete agreements extensively (read more here) as unfair restraints of trade. From the Agency’s vantage, these common contractual provisions illegally suppress competition and employee wages. Before promulgating a final rule, the agency must accept public comment. The deadline to submit comments has been extended several times. Even if the rule is finalized, it will likely face a host of court challenges.

Practical considerations for employers

We’ve covered the FTC’s proposed rulemaking in depth (read that here), but there are some key takeaways for employers:

• Craft any restrictive covenant with caution. Restrictions on an employee’s post-employment prospects (be it their next job or their ability to “speak out” against their former employer) are increasingly disfavored.
• Restrictions should be targeted and narrowly tailored to protect an employer’s interests. In other words, try not to use boilerplate agreements, and tailor each agreement to the position or the person who is signing it.
• Carefully consider who signs a noncompete. This should be limited to senior executives or those who have access to sensitive data or information. Even more, be aware of local laws that could render restrictive convents more difficult to enforce.

Nondisclosures and Non-disparagement

The Biden administration has seemingly adopted a whole-of-government approach to restrictive covenants. Aside from the FTC’s historic rulemaking, the EEOC has identified overly broad waivers, releases, and non-disclosure and non-disparagement agreements as priorities for the Agency as barriers to access to the judicial system. And in December, Congress passed the Speak Out Act, which curtailed the use pre-dispute restrictive covenants that would prohibit employees from speaking out against sexual assault or sexual harassment.

The NLRB’s McLaren Macomb decision also took aim at the use of non-disclosure and non-disparagement clauses in severance agreements, which may apply to both union and non-union employers. (We covered that here.) And in a recent memo, the Board’s General Counsel Jennifer Abruzzo issued guidance following McLaren. Notably, it reasons that maintaining or enforcing a severance agreement with offending provisions would constitute a continuous violation and suggests employers may avoid liability by notifying former employees that certain provisions are no longer applicable in their severance agreements.

Practical considerations for employers

What to do with existing non-disclosure or non-disparagement agreements is a tricky issue, as there is no clear answer here. The “safest” option would be to look at all agreements and revise any agreement that contains a clause which may conflict with these new regulations. However, most clients are taking a “wait and see” attitude. The devil may be in enforcement of agreements in the future, and there may need to be consideration of whether an agreement should be enforced, if it contains a conflicting provision.

As the year unfolds and new laws and regulations come into view, we’ll keep you up-to-date with the major changes and issues you should be thinking about.

Tuesday, September 13, 2022 at 12:30pm ET Pay Equity & Transparency: Rising Workplace Trends

New York, which has over 9.3 million workers and counting, will soon join other jurisdictions in a growing trend of state and local pay transparency requirements for employers across the country. Currently there are 17 states (and numerous cities) that have laws requiring pay transparency and/or prohibit salary inquiries by current/prospective employers. Additionally, the recent focus on pay equity laws, both state and federal, has served as a catalyst for increased scrutiny by government agencies and resulted in an uptick in related class action lawsuits in recent years. While transparency is generally a virtue, compliance with the ever-evolving pay transparency and pay equity laws across multiple jurisdictions can create a quagmire of issues in attracting and retaining talent—not to mention the HR and legal landmines.

This webinar will cover:

• New pay transparency laws
• Review of pay equity and salary history ban laws
• Insights on compliance
• Practical implications for talent acquisition and retention

Tuesday, October 11, 2022 at 12:30pm ET Wake-up Call: The Resurgence of Unions

The death of union representation was probably not exaggerated—that is, before the pandemic. Now, with employers desperate to recruit and retain employees in a robust labor market, wages seeing the highest percentage increases in years, and a sense of worker-side empowerment not seen for years, unions are more powerful and relevant than at any time in decades.

This webinar will explore recent trends, strikes, organizing activity, and strategies to mitigate union-related risks and disruptions to your business.

This webinar will cover:

• The resurgence in union activity across all industries
• Changes at the NLRB that affect your everyday business operations
• Taking the temperature of your workforce

Tuesday, November 8, 2022 at 12:30pm ET Protecting Your (Human) Resources: Fighting Business Email Compromise and Ransomware

HR employees are, willingly or not, the guardians of the company’s most sensitive collection of data—its employee’s personal information. Cybercriminals often perceive the human resources department as the perfect gateway into a company’s employee data goldmine. Many scams and information theft are perpetrated through social engineering. Cybercriminals posing as job applicants, recruiters or new vendors prey on the fact that human resource employees often receive emails and attachments from unknown sources. Conversely, because of the central role that HR plays in employees’ lives, many employees reflexively open emails and attachments that appear to be sent from the HR department. Employees are just one click away from granting fraudsters the access they need to install ransomware or steal login credentials, potentially exposing employees’ sensitive and valuable personal information, and resulting in significant losses and legal exposure for your company.

This webinar will cover:

• Weapons and techniques fraudsters use to infiltrate company systems and current scam trends
• Proactive best practices for fraud and information theft prevention
• E! true HR stories: theft, lawsuits, and the one simple move that would have stopped it all
• What to do when the perpetrators are in-house

Gustavo Naranjo, a former security officer for Spectrum Security Services, Inc., filed a class action lawsuit alleging that Spectrum failed to provide its employees with meal and rest breaks. Naranjo’s suit sought damages and penalties for Spectrum’s alleged failure to report the premium payment on the employees’ wage statements and failure to timely provide the payments to the employees upon their discharge or resignation. The Court of Appeal held that employees are not entitled to pursue derivative waiting time and inaccurate wage statement penalties for meal and rest break premiums because such premiums are “penalties” not “wages.” Mr. Naranjo appealed the Court of Appeal’s decision.

The California Supreme Court granted review, and reversed the lower court’s ruling, holding that the premiums for missed meal and rest breaks constitute “wages” that must be reported on wage statements and timely paid to employees when they are discharged or voluntarily separated from a job. As such, employers can be liable under Labor Code section 226 for failure to provide an accurate itemized statement if they do not report missed meal and rest break premiums. Likewise, an employer that willfully fails to timely pay any missed meal and rest break premiums when an employee leaves the job can be liable for waiting time penalties under Labor Code section 203.

The Court’s decision raises the stakes for complying with meal and rest break laws. Specifically, the decision increases potential exposure for employers because it allows employees to bring derivative claims for violations of Labor Code sections 203 and 226 based solely on missed meal and rest break premiums. The decision is an important reminder that employers should audit their policies and procedures for meal and rest breaks, and evaluate their timekeeping and payment systems to ensure compliance with meal and rest break laws.

In a move that comes as no surprise, the EEOC has updated its COVID-19 technical assistance to provide guidance on when COVID-19 may be considered a “disability” under the ADA, making specific reference to the DOJ/HHS guidance discussed in the original blog below. The EEOC’s technical assistance focuses “more broadly on COVID-19” beyond just “long COVID,” and does so “in the context of Title I of the ADA and section 501 of the Rehabilitation Act, which cover employment.” However, the EEOC’s guidance clearly echoes the DOH/HHS guidance and states that long COVID or sustained symptoms of COVID may be a “disability” under the law.

In many states, long COVID could also qualify as a disability under state laws. So, employers should be ready for more claims into the future, even when the pandemic (finally) ends – from employees who suffer symptoms of COVID as a chronic illness.

THE GUIDANCE

What is Long COVID and when is it a disability?

The EEOC has reemphasized that determining whether COVID may be considered a “disability” under the law is a fact-intensive question, requiring an analysis of the extent to which COVID’s symptoms, its long-term effects, or the manner in which it exacerbated the symptoms of another condition “substantially limit a major life activity,” as discussed in the original blog below. This means that an individual suffering, even intermittently, from certain symptoms relating to long COVID can be considered to be “disabled” under the law.

The EEOC provides several examples of these impairments, including: “brain fog” and difficulty remembering or concentrating; substantially limited respiratory function; chest pains; or intestinal pain.

Importantly, the EEOC distinguishes these “substantially limiting” conditions from less-serious symptoms, such as “congestion, sore throat, fever, headaches, and/or gastrointestinal discomfort, which resolve within several weeks,” which would not create a “disability.” But make no mistake: even these relatively insignificant symptoms may constitute a disability if they last or are expected to last for a significant period of time (i.e. more than six months).

According to the guidance, while long COVID “does not automatically qualify as a disability,” as with any disability inquiry, an employer is obligated to engage cooperatively with an ailing employee to conduct an “individualized assessment” and determine whether that employee’s long COVID symptoms constitute physical or mental impairments that substantially limit one or more major life activities.

The guidance emphasizes that the symptoms need not necessarily manifest physically—long COVID may substantially effect an individual’s psychological or emotional wellbeing to the point that an accommodation may be required.

What You Can and Cannot Do

Thankfully, the EEOC has not issued employees with long COVID a ticket not to do their jobs.

Not wanting employers to lose sight of the bigger picture, the EEOC also clarified that taking an adverse action against an employee disabled due to COVID-19 does not automatically mean that the action to discriminatory. Rather, an employer may have legitimate, non-discriminatory reasons for having undertaken the adverse action. The EEOC points to the circumstance in which the affected employee was no longer able to perform their job duties at all due to the disability. Additionally, the EEOC states that “the ADA’S ‘direct threat’ defense could permit an employer to require an employee with COVID-19 or its symptoms to refrain from physically entering the workplace during the CDC-recommended period of isolation, due to the significant risk of substantial harm to the health of others.”

In sum, the EEOC’s guidance is concordant with the DOJ/HHS guidance we discussed back in August. But don’t let the blog’s focus on long COVID distract from the larger point that any COVID-19 infection, including active infections, may constitute a “disability” under Title I of the ADA depending on the severity and duration of the symptoms. As we said, each employee brings their own set of facts that require an individualized analysis. For prompt answers to your fact-intensive COVID-19 questions, contact Kelley Drye.

ORIGINAL BLOG: August 5, 2021

It seems that at every turn, COVID-19 is keeping employers from catching their breath. We’ve discussed on this blog how employers should navigate having employees work from home, reopening and remaining compliant with the law and CDC guidelines, mask and vaccine mandates, and what to do when an employee tests positive for the virus. Now another issue confronts employers: how to best accommodate employees who are suffering from COVID symptoms months after having been infected with the virus—long COVID.

What Employers Should Know

The guidance, just like our understanding of long COVID, is frustratingly vague. The silver lining is that any employer already sensitive to the accommodation needs of its employees is already well-positioned to account for the needs of employees with long COVID symptoms. Employers should not fall prey to tunnel vision and determine whether an employee’s symptoms are due to COVID per se.

Rather, they must stay focused on the fundamental question: are these symptoms substantially limiting my employee’s ability to perform their job?

As with any medical condition, the substance of an ensuing “cooperative dialogue” between employer and employee may vary greatly depending on the employee’s duties, their symptoms, and the advice they receive from their medical care providers. Of course, any employer may make the reasonable request that an employee provide a doctor’s note in order to substantiate a request for an accommodation under the ADA, but simply making that request of an employee does not absolve an employer from making reasonable efforts to engage with that employee to determine what accommodations, if any, are available.

Planning for the Future

Employers should also anticipate ongoing and evolving accommodation discussions, particularly if the employee is in fact a COVID “long-hauler.” The long-term effects of a COVID infection are still not fully understood, and the best-prepared employer is the one ready to adapt to an employee’s needs not only reasonably, but also rapidly.

That can mean a few different things.

• DOCUMENT. It will be crucial for anyone performing a human resources function to (securely) memorialize the substance of every discussion regarding an employee’s requests for accommodation. At the same time, be sure to sequester and secure any medical records, and work to ensure confidentiality.
• ASSESS REGULARLY. As so little is known about long COVID, and because symptoms may suddenly lessen or become more severe in time, employers should require affected employees to agree upon pre-determined “check-in” meetings. At a specific date in the future, employer and employee might reconvene to reassess what further (or fewer) accommodations the employee could require. This is a sensitive issue, however, and is best done in concert with qualified legal counsel.
• BE FLEXIBLE. If an employee requires an accommodation for long COVID, be flexible in addressing their requests. Consider whether you can grant the accommodations, and document why you can or cannot. Finally, before denying an accommodation, be sure that there is now reasonable way that the accommodation may be granted.

Even though the Trump Administration issued the rule on January 7, 2021, intending for it to take effect on March 8, 2021, it never saw the light of day. The new Biden-administered DOL initially delayed the effective date until May 7, 2021, and on the eve of the new effective date, withdrew the rule in its entirety. Labor Secretary Marty Walsh, while acknowledging that classifying workers as independent contractors may be appropriate under some circumstances, stated that the five-factor test isn't the right approach. After considering public comments, the DOL announced that the independent contractor rule was not “fully aligned with the FLSA's text or purpose, or with decades of case law describing and applying the multifactor economic realities test.”

For the second time in two years, the U.S. House of Representatives recently passed the Protecting the Right to Organize Act, which would apply California’s ABC test to labor organizing. Although it faces an uphill battle in the Senate, employers should prepare for a ramp up enforcement of worker misclassifications under the new administration’s DOL, which will likely support efforts to establish a standard for independent contractors modeled after the employee-friendly ABC test.

Stay tuned to LaborDaysBlog.com to monitor more changes in employment and labor laws by the Biden administration.

Tuesday, May 18th at 12:30pm ET

Wage & Hour Laws: How To Avoid Common Pitfalls

The DOL’s Wage and Hour Division recovered a record $1.4 billion in back wages for workers in the past 5 years. According to the WHD, that’s an average of $1,120 for each employee. Suffice it to say that your company’s potential liability under wage-and-hour laws continues to be very real, and very expensive.

Happily, much of this risk can be reduced with the right policies and practices in place—if you know what to look for in an ever-changing regulatory and enforcement environment.

Join the Kelley Drye Labor and Employment team for as we help participants look for their next big litigation risk by helping them find their blind spots.

• Misclassifying non-exempt employees as exempt from overtime requirements
• Failing to recognize what time is compensable
• Misclassifying employees as independent contractors
• Getting tripped up on differences between federal and state laws

CLICK HERE TO REGISTER FOR THIS WEBINAR

Forget speculation about what is to come: the Biden administration has already acted to unravel the Trump legacy in employment and labor regulation—and to expand worker protections.

Join us on April 15, 2020 at 12:30 p.m. ET for a complimentary webinar, where we will take a deep dive into the regulatory changes immediately impacting your business.

Thursday, April 15th at 12:30pm ET

This Is Happening: Immediate Employment Law Impacts under the Biden Administration

• Significant changes to overtime classifications and wage & hour regulation
• Expansion and extension of COVID-19 laws and regulations
• Independent contractor classification rules
• Easier union organizing, and a more pro-union National Labor Relations Board
• Increased OSHA enforcement
• And others . . .

Click here to register

Number of Charges Dropped But Recovery Soared

Defying earlier predictions, the number of charges filed fell again in FY 2020. With just 67,448 charges filed, 2020 saw the lowest amount of filed charges since 1997. Why? No one can say, but it’s likely that the pandemic and the resulting shutdown, mass layoffs, and remote work played a big role. Despite a lower number of charges, the agency still managed to recover a whopping $106.1 million for charging parties and other aggrieved individuals—the largest recovery through the EEOC’s litigation program in the past 16 years. The EEOC filed 93 merit suits and resolved 165 merit lawsuits. Title VII suits brought in the largest recovery, but ADA claims accounted for $15.7 million, nearly double last year’s recovery, and Age Discrimination in Employment claim recoveries increased by over $15 million to $16.3 million.

Does this show a trend of fewer employment lawsuits? Not likely. This could indicate that plaintiffs are not going through the EEOC as they had in the past. In fact, in our practice, we saw fewer formal charges but an increase in threatening attorney letters. We also saw an increase in state and local charges and lawsuits, which may not have been filed with the EEOC.

Retaliation Rising

And despite decreasing charges, employers should still take notice of the types of claims which were filed. The report shows that even though claims were down, the agency still secured $439.2 million for victims through voluntary resolutions and litigation. The EEOC also increased its merit factor resolution rate from 15.6 percent in FY 2019 to 17.4 percent in FY 2020. Additionally, with a new administration that promises to be more worker-friendly, 2021 may be record year for claims. As this post will show, the data in the EEOC report further confirms many of the areas we have warned employers to look out for in the current year.

Notably, retaliation remained the most frequently cited claim, accounting for 55.8% of all filed charges. Following behind were disability (36.1 percent), race (32.7 percent) and sex (31.7 percent).

Focus on Disability

Disability discrimination claims remained a focus for the agency. And, it is no surprise that these claims, especially with the pandemic, remain a large portion of charges filed with the EEOC. While the number of claims filed in nearly every other category decreased, the number of disability claims increased slightly. Discrimination claims reached their highest ever percentage of all charges filed, continuing a growing trend present since 2008.

Disability issues are not going to abate in 2021. Indeed, with employees who have been working from home are asked to return to the office, and lingering fears of COVID-19 persists, claims under the Americans with Disabilities Act (ADA) will continue to be a space to watch in 2021.

Pregnancy Claims Increasing

While the number of pregnancy discrimination charges has been decreasing over the past several years, a cool $15.3 million was still secured for charging parties and other aggrieved individuals on such claims, representing an increase of one million dollars since FY 2012. We cautioned employers that pregnancy discrimination will likely be a hot issue in 2021 and could bring an increasing numbers of charges and recoveries in the new year.

LGBTQ Issues to Watch

Claims of LGBTQ discrimination have been a growing enforcement priority for the agency. The EEOC data show 1,857 charges were filed for LGBTQ-based sex discrimination. While this is slight dip from last year, it is over 1,000 more charges than were filed in 2013, when the agency first started tracking such charges. The agency also increased its merit factor resolution rate and secured $6 million for charging parties and other aggrieved individuals. We anticipate LGBTQ rights will continue to be an enforcement priority in 2021.

Pay Equity Remains an Issue

The EEOC also continues to increasingly focus on Equal Pay Act claims. In FY 2020, Equal Pay Act claims remained at 1.5 percent of all charges filed. This represents a gradual trend of increasing percentage of all charges filed since 2011, and a return to 2002 levels. The agency secured $10.7 million for charging parties and other aggrieved individuals on such claims. While that was almost half of what was recovered in FY 2019, it is nearly double the amount recovered five years ago. In our prior blog, we anticipated pay equity will be a major trend in the upcoming year. As promised in her campaign, Vice President Harris and the Biden administration will likely support any efforts for pay equity legislation. These efforts will likely mean even more Equal Pay Act claims will be filed in the current year.

Conclusion

Despite general decreases in overall number of charges, employers should not let their guard down, especially under the new administration. Employers should particularly take heed of the significant increase in monetary recoveries through litigation. As we mentioned before, employers should be particularly cautious of retaliation and discrimination claims. Here are some best practices for employer for the remainder of 2021.

• Continue to provide regular training and make sure internal complaint and investigation procedures and policies are properly followed.
• Review and retrain management and HR personnel on how to respond to requests for accommodation.
• Review and update pregnancy leave polices to ensure compliance with current federal and state laws.
• Proactively conduct pay equity audit to ensure there are no gender disparities.

Tuesday, March 2nd at 12:30pm ET

Employee Leave Laws: Managing the Intersection of FMLA, ADA, and COVID Leave

Join the Kelley Drye Labor and Employment team for a complimentary webinar where we take you through a practical and effective thought process to mitigate (not remove) risk from the more challenging employee leave situations. Our goal is to equip you with the right tools to coordinate employee leave with confidence.

Click here to RSVP

Laws That Took Effect in 2020

Workers’ Compensation COVID-19 Liability

By signing SB 1159 into law on September 17, 2020, California Governor Newsom codified his earlier issued executive order, which states that under certain circumstances, when an employee tests positive for COVID-19, there is a rebuttable presumption that the employee contracted the virus while at work and, therefore, said illness is covered by the employers’ workers’ compensation insurance coverage.

Additional Exemptions from the ABC Test

At the beginning of 2020, AB 5 took effect, codifying the Dynamex “ABC test” to determine whether a worker is properly classified as an employee or independent contractor. In September 2020, the Governor signed into law AB 2257, which expanded the list of occupations exempt from the test, revised the referral agency exemption, and expanded the business-to-business exemption to include relationships between two or more sole proprietors.

Some of the occupations added as exemptions include insurance underwriters, those providing professional consultant services, and musicians involved in a single-engagement live performance relationship.

It is important for employers to note that just because workers may be exempt from the ABC test, they do not automatically classify as employees, but instead their classification must be determined by the Borello multifactor test. Under Borello, the primary test of an employment relationship, known as the "right to control" test, is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.

Laws Effective January 1, 2021

COVID-19 Infection Reporting Requirements

Effective January 1, 2021, employers are required to provide written notice to all employees assigned to a worksite and employers of subcontracted employees who were on the premises of any potential COVID-19 exposure within one business day of receiving “a notice of potential exposure.” Employers must also notify local public health agencies within 48 hours of all workplace outbreaks, defined as three or more laboratory-confirmed COVID-19 cases within a two-week period. Any employer in violation risks the shutdown of the entire worksite.

Expansion of Medical Leave Under the CFRA

Senate Bill 1383 significantly expands family and medical leave under the California Family Rights Act (“CFRA”). The CFRA will now apply to all entities with at least five employees, including public agencies. It requires employers to provide up to twelve weeks of unpaid leave for an employee’s serious medical condition or that of a qualifying family member. Additionally, SB 1383 also expands the list of qualifying members to include siblings, grandparents, and grandchildren. Employers should also be aware that in certain circumstances, CFRA leave will not run concurrently with leave under the Family Medical Leave Act (“FMLA”) including leave for care of an adult child capable of self-care, a grandparent, grandchild, or sibling. Employers should reevaluate how they track FMLA and CFRA leave in circumstances where such leave runs separately.

You can find additional information on this expansion here.

Leave Expanded for Victims of Crime and Abuse

Under Labor Code section 230.1, employers with 25 or more employees were previously prohibited from terminating a victim of domestic abuse, sexual assault, and/or stalking to take time off to seek medical attention. AB 2992 expands these protections to a victim of any crime causing physical or mental injury or a threat of physical injury. It also requires employers to allow victims to take time off not only to seek medical attention, but also to obtain services from specified entities related to an experience of crime or abuse, including psychological counseling or mental health services, or to participate in safety planning and take other actions to increase safety from future crime or abuse.

Employees Permitted Additional Six Months to file DLSE Complaints

Previously, employees had only six months from the occurrence of a violation to file a complaint against an employer with the California Division of Labor Standards Enforcement (DLSE). However, AB 1947 extends that time an additional six months, leaving employers potentially on the hook for a full year after the complained-of conduct.

In addition, employers can also be subject to an award of reasonable attorneys’ fees to an employee who prevails on a “whistleblower” claim.

Minimum Wage Increase

Effective January 1, 2021, minimum wage in the State of California increased to $13 per hour for employers with 25 or fewer employees and $14 per hour for employers with 26 or more employees. This increase in state minimum wage requires employers to reevaluate the salary of exempt employees, as they are entitled to a “monthly salary equivalent to no less than two times the state minimum wage for full-time employment” in order to maintain the employees’ exempt status. Additionally, many cities and counties throughout California have enacted their own minimum wage laws that exceed the state’s minimum wage requirements, including, but not limited to, the cities of Los Angeles and San Francisco. California employers must comply with both state and local minimum wage laws.

Mandated Report of Abuse

The California Child Abuse and Neglect Reporting Law requires “mandated reporters” to formally report any suspected child abuse to law enforcement. AB 1963 expands the list of “mandated reporters” to include: (i) human resources employees working for a business with at least five employees that also employs minors; and (ii) front-line supervisors of businesses with at least five employees whose duties require direct contact with, and supervision of, minors in the performance of the minors’ duties in the workplace. Employers should ensure that any newly designated “mandated reporters” receive training in the identification and reporting of child abuse and neglect.

Limited No-Rehire Provisions in Settlement Agreements

Since January 1, 2020, “no-hire” provisions, which restrict an employee who has filed a claim against an employer from working for the employer, its parent, subsidiary or other affiliates, have been prohibited from use in employment settlement agreements, subject to limited exceptions. AB 2143 loosened the restrictions by allowing the “no-hire” provision when either (i) the employee failed to file the claim in good faith; or (ii) the employer has made and documented a good faith determination that the employee engaged in sexual assault, sexual harassment, or criminal conduct prior to the employee bringing the claim.

Laws To Take Effect In Coming Months/Years

New Requirements in Reporting Pay Data

Beginning on March 31, 2021, certain California employers will be required to report to the Department of Fair Employment and Housing information regarding employee pay data on an annual basis. The new law applies to employers that employ at least 100 employees and are required to file an annual Employer Information Report (EEO-1) under federal law.

Each applicable employer will be required to report the number of employees by gender, race, and ethnicity in their respective job categories used to report demographic information on the EEO-1 form, such as executive or senior-level officials, first or mid-level officials, laborers, technicians or service workers. Such employers are also required to establish and implement effective written procedures for determining the quantity and types of equipment used.

For a more detailed breakdown of this new requirement, please refer to our October post.

Hospital Employers Required to Maintain PPE Stockpiles

Beginning April 1, 2021, employers of workers in California general acute care hospitals are required to maintain a three-month supply of personal protective equipment (PPE), including surgical masks, eye protection, and specified respirators. Employers must also establish and implement effective written procedures for determining the type and quantity of each type of PPE used in its normal consumption.

Diversity Requirements For Corporate Boards

On September 30, 2020, AB 979 was signed into law, and requires a publicly held domestic or foreign corporation with its principal executive office located in California to meet certain diversity requirements as it pertains to its board of directors. These companies must have at least one director from an underrepresented community on its board by the end of 2021. In addition, by the end of 2022, a corporation with 5 to 8 directors must have a minimum of 2 directors from underrepresented communities, and a corporation with 9 or more directors to have a minimum of 3 directors from underrepresented communities. A director from an underrepresented community refers to a director who self-identifies as Black/African American, Hispanic/Latinx, Asian, Pacific Islander, Native American/Native Hawaiian/Alaska Native, or Gay/Lesbian/Bisexual/Transgender.

Liability Extends to Successor Employers

Effective January 1, 2022, AB 3075 expands the potential liability of any employer regarding wages, damages, and penalties owed to employees to its successor entity. This expansion applies to any entity that has acquired a business through a merger or consolidation, and either: (i) uses substantially the same workforce or services to offer substantially the same services as the original business; (ii) has substantially the same owners or managers that control the labor relations as the original business; (iii) employs any person who controlled the wages, hours or working conditions of the original workforce as a managing agent; or (iv) is an immediate family member of any owner, partner, officer or director of the original business.

In addition, a company is also required to include in its filed statement of information whether any officer or director has an outstanding final judgment issued by the Division of Labor Standards Enforcement or a court of law for a violation of any wage order or Labor Code violation.

If you are seeking guidance related to any of these newly passed laws or any other employment-related issue, please contact a member of the Kelley Drye Labor and Employment team.

• The Illinois Human Rights Act (“IHRA”) was amended to cover “single-employee” employers and to require employers to report to the Illinois Department of Human Rights (“IDHR”) all adverse judgements and rulings relating to harassment and discrimination;
• Employees covered by the Chicago Fair Workweek Ordinance now have a private right of action against employers for violations of the law;
• Chicago Enacts COVID-19 Anti-Retaliation Measures; and
• Class action lawsuits under the Illinois Biometric Information Privacy Act (“BIPA”) are expected to continue to rise in 2021.

Expansion of IHRA Coverage and New Mandatory Reporting Obligations for Employers

Effective July 1, 2020, Illinois employers with one or more employees are covered by the IHRA. Previously, the IHRA applied only to businesses with 15 or more employees, except in cases of sexual harassment, pregnancy discrimination, and disability discrimination, where the definition was one or more employees. The new definition means that smaller employers will now be subject to race, national origin, gender, sexual orientation, religion, and age discrimination claims under the IHRA.

Additionally, before July 1, 2021, and each subsequent year thereafter, Illinois employers must report to the IDHR all adverse judgments and administrative rulings from the preceding calendar year. An “adverse judgment or administrative ruling” is defined as any final and non-appealable judgment that finds sexual harassment or unlawful discrimination, where the ruling is in the employee’s favor. While employer reports will be treated as confidential and are exempt from the Illinois Freedom of Information Act, the IDHR will publish an annual report aggregating the number of rulings for each protected class, omitting any identifying information about employers.

Private Right of Action for Violations of Chicago’s Fair Workweek Ordinance

Although Chicago’s Fair Workweek Ordinance (“the Ordinance”) took effect on July 1, 2020, the City of Chicago delayed the effective date for an employee’s private right of action under the law until January 1, 2021, in response to the COVID-19 pandemic. The Ordinance requires Building Services, Healthcare, Hotels, Manufacturing, Restaurants, Retail, and Warehouse Service employers to, among other things, provide employees with advance notice of their work schedules and to compensate employees for last-minute schedule changes.

Employees are covered by the Ordinance if they work in one of seven covered industries and make less than $26/hour or $50,000/year. Covered employers are defined as having at least 100 employees globally (250 employees globally for non-profits, or 250 employees with at least 30 locations globally for restaurants). The Ordinance requires employees to first exhaust their administrative remedies with the City of Chicago Department of Business Affairs and Consumer Protection before initiating a civil action against an employer. An employee who prevails in a civil action is entitled to an award of compensatory damages resulting from a violation of the ordinance, including litigation costs, expert witness fees, and reasonable attorneys’ fees.

Chicago’s COVID-19 Anti-Retaliation Law

The Chicago Anti-Retaliation Ordinance (“Anti-Retaliation Ordinance”) prohibits an employer from demoting or terminating a “covered employee” for complying with an order issued by the Mayor, the Governor of Illinois, the Chicago Department of Public Health, or, in the cases of (2), (3), and (4) below, a treating healthcare provider requiring an employee to:

1. Stay home to minimize the transmission of COVID-19;
2. Remain at home while experiencing COVID-19 symptoms or sick with COVID-19;
3. Obey a quarantine order issued to the covered employee;
4. Obey an isolation order issued to the covered employee; or
5. Obey an order issued by the Commissioner of Health regarding the duties of hospitals and other congregate facilities.

The Anti-Retaliation Ordinance defines “covered employee” as any employee “who, in any particular two-week period, performs at least two hours of work for an Employer while physically present within the geographical boundaries of the City.”

Employers who violate the Anti-Retaliation Ordinance will be subject to citations of up to $1,000 for each violation per day. Additionally, employees prevailing in a civil action under the Anti-Retaliation Ordinance: reinstatement to their previous position or an equivalent position; damages equal to three times the full amount of wages lost; any other actual damages caused by the retaliatory action; and costs and reasonable attorney’s fees.

Illinois BIPA Class Actions Will Continue to Rise in 2021

Finally, as the number of BIPA class-action lawsuits continue to soar in 2021, employers that use biometric information (e.g., fingerprints, facial recognition, voice, or retina scans) for attendance and/or security purposes should ensure its compliance with the procedural requirements of BIPA. Illinois’ BIPA is the most plaintiff-friendly biometric law of its kind in the nation, providing employees with a private cause of action for liquidated damages of up to $5,000 for each willful violation and attorneys’ fees. BIPA class actions have been filed against Facebook, Southwestern Airlines, Google, and other large and small companies.

Further, Illinois employers that engaged in, or that plan to engage in, COVID-19 screening programs should determine the privacy and security implications of applying such measures and whether they can be implemented without violating BIPA. Just recently Amazon was hit with a BIPA class-action, alleging that the company’s COVID-19 screening measures, which include facial recognition scans and temperature checks, violate the biometric privacy rights of Amazon employees. Although resolution of the Amazon class-action is pending, the case is a reminder to all employers to make sure that any COVID-19 related screenings comply with the procedural requirements of BIPA.

Kelley Drye’s comprehensive treatment of Illinois’ BIPA can be found here.

Enter the Department of Labor (“DOL”) and its January 7, 2021 publication of the final rule on classifying “Independent Contractor Status under the Fair Labor Standards Act” (the “Final Rule”), which goes into effect on March 8, 2021.

The Final Rule provides a multifactor “economic reality” test for determining whether workers are independent contractors and six examples of the DOL applying the multifactor test. The Rule provides that employers consider the following five factors in determining whether someone is an employee or an independent contractor:

1. the nature and degree of the worker’s control over the work (a core factor according to the DOL);
2. the worker’s opportunity for profit or loss (a core factor according to the DOL);
3. the amount of skill required for the position;
4. the permanence of the working relationship; and
5. and how integrated the worker’s role is to the organization’s overall operation.

Whether the Biden Administration will withdraw the Final Rule before it takes effect on March 8, 2021 remains to be seen. However, President-elect Biden’s invocation of California’s ABC test is a strong signal that his administration will ramp up enforcement action designed to root out independent contractor misclassification. To understand the significance of his call out of California’s state law on this issue we must review California’s topsy-turvy guidance for classifying employees.

The California labor industry has been seeking legislative guidance ever since the California Supreme Court greatly narrowed the types of workers who may lawfully qualify as independent contractors when it decided Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 in 2018. Since the Dynamex decision, many business groups have concentrated their lobbying efforts in attempts to get the legislature to either overrule the decision by statute, or to create exemptions to the rule. The latter of these lobbying efforts proved to be successful, when, on January 1, 2020, AB 5 took effect, codifying the Dynamex test while creating a long list of not-so-clear exceptions for certain industries. However, some of these business groups had to wait an additional eight months for clarity and/or guidance until the legislature passed AB 2257.

While helpful for some, AB 2257 proved problematic for companies like Uber, Lyft and Doordash, leading to Proposition 22, a ballot measure to exempt on-demand, app-based companies from the state labor law that would have forced them to employ drivers and pay for health care, unemployment insurance and other benefits. Proposition 22 passed into law in the November 2020 election. In voting to support Proposition 22, Californians rejected the principles outlined in a 2018 State Supreme Court ruling and enshrined in a 2019 state law that said workers who performed tasks within a company’s regular business — and were controlled by the company and did not operate their own firms — must be treated as employees.

The DOL specifically rejected California’s ABC test in its Final Rule, stating “the Department continues to believe that the ABC test would be infeasible, difficult to administer, and disruptive to the economy if adopted as the FLSA standard.” But even still, the endless carve-out exemptions for various Californian professions suggest this may not be the final ruling.

What should employers do now? We strongly encourage you to evaluate any existing agreements with independent contractors to determine the Final Rule’s impact on your business. We can tell you from experience that independent-contractor-vs.-employee issues have been a nightmarish source of liability for employers of all sizes across jurisdictions, so now may be a good time to reach out to your employment counsel for guidance. And, as always, stay tuned to LaborDaysblog.com to monitor more changes in employment and labor laws, courtesy of the incoming Biden administration.

Whatever their political orientation, businesses are cautiously eyeing a Biden-Harris administration for signs of “Obama redux,” or perhaps an even more aggressive labor agenda, particularly in the form of Executive Orders from a Democratic administration energized by (or careful to placate) its more progressive elements.

Biden’s actual legislative opportunities in Congress are far more uncertain and run from modest to expansive, largely depending on the results of Georgia’s U.S. Senate runoff elections on January 5, 2021. If Republicans keep control of the Senate, employers should expect more gridlock in Washington. That kind of stalemate may well result in the exact reaction some state legislatures had to Trump: more progressive employment legislation at the state and local levels. But with Executive Orders remaining, recent Presidents’ weapon of choice (a trend for which Trump became known but which, ironically, was ushered in by Obama himself), employers can also expect a Congressionally stymied Biden-Harris administration to compensate with more of the same. We don’t have to look far for evidence of these plans: for example, Biden has already committed to rescinding President Trump’s Executive Order 13950, which directed federal contractors to refrain from conducting diversity and inclusion training.

Other predictions include the following:

Coronavirus

President-elect Biden campaigned on shutting down the coronavirus, not the economy. Employers can expect his administration to issue workplace safety rules for employers to follow on a national level to protect workers from exposure to the virus. The new president could implement these rules quickly even without Senate confirmed leadership at the Labor Department or OSHA.

Expanded family leave and emergency paid sick leave under the Families First Coronavirus Response Act (FFCRA) will expire on December 31, 2020. During the campaign, President-elect Biden indicated that he would support: (1) expanding the additional $600 per week in federal unemployment benefits that expired in July 2020, and (2) an extension of emergency paid sick leave and family medical leave under the FFCRA. Biden would likely support a bill that would make these benefits available to both employees and part-time workers, gig workers, and independent contractors. Senate Republicans favor the inclusion of valuable liability protections for businesses. In the event Senate Republicans keep control of the Senate, President-elect Biden may support a compromise bill with both benefits for employees and employers (for employers making a good faith effort to comply with COVID safety measures).

Additionally, President-elect Biden supports 12 weeks of paid leave for all workers to care for their newborns, newly adopted or fostered children, for their own or a family member’s serious health condition, or to care for injured service members or deal with “qualifying exigencies arising from the deployment” of a family member in the Armed Services.

Misclassification – Employee vs. Independent Contractor

The ping pong that has gone on over the legal definition of an “employee” will likely continue, as President-elect Biden has committed to “work with Congress to establish a standard modeled on the ABC test for all labor, employment, and tax laws.” (The “ABC” test finds its origins in California state law, most clearly embodied in 2020’s Assembly Bill 5, or “AB5,” which is shorthand for “almost impossible to classify workers as independent contractors.”)

Whether the Biden-Harris administration can actually deliver on its promise of legislative action with respect to independent contractor misclassification remains to be seen. However, President-elect Biden’s invocation of California’s ABC test is a strong signal that his administration will ramp up enforcement action designed to root out independent contractor misclassification.

National Labor Relations Board

While a Republican-controlled Senate is unlikely to pass union friendly legislative proposals, President-elect Biden will place individuals on the National Labor Relations Board who share his pro-union views, and who are likely to overrule many of the precedents issued during the Trump administration and who will revive the Obama-era rules expediting union elections, requiring contractors to agree to be neutral with respect to union organizing, and impose a version of the “Fair Pay and Safe Workplaces” order.

OSHA

Similarly, a Biden-Harris administration will likely include the reinstatement of the Obama-era rule requiring employers to publicly disclose occupational illnesses and injuries at their workplaces, which is intended to incentivize compliance with health and safety standards.

Pay Equity

When Vice President-elect Kamala Harris was herself a presidential hopeful, she revealed her intention to make the U.S. a worldwide leader in the fight for pay equity. If Republican control in the Senate remains, it is unlikely that the Biden administration could push through Congress any pay equity legislation imposing significant burden on private employers. However, pay parity standards for federal contractors are likely along with the resuscitation of the Obama-era requirement that pay data be disclosed by employers on EEO-1 reports and a directive to the OFCCP to aggressively enforce prohibitions on wage discrimination by federal contractors.

Arbitration

If the Democrats gain control of the Senate, employers can expect Biden to sign the Forced Arbitration Injustice Repeal (“FAIR”) Act, which is legislation that would prohibit employers from requiring employees to sign pre-dispute arbitration agreements as a condition of employment. If Republicans maintain their Senate majority, the FAIR Act will be blocked in the Senate.

Immigration

The Biden Administration is expected to make it easier for businesses to use immigration to strengthen their businesses.

Minimum Wage

President-elect Biden previously called for a $15 federal minimum wage. The Biden Administration also will seek to eliminate the reduced minimum wage for tipped employees (i.e., the tip credit) and likely will seek an increase in the minimum salary to qualify as an exempt employee under the FLSA.

* * *

Kelley Drye's Labor and Employment team will continue to track and provide updates on the latest legislative and regulatory developments. If you have any questions, please contact our co-chairs, Barbara Hoey and Mark Konkel.

How exactly did we get here? Let’s turn back the clock to September 2019 when California first signed Assembly Bill 5 (“AB5”) into law. AB5 codifies the California Supreme Court’s decision known as Dynamex. In that decision, the Court imposed a stricter three-prong test on employers seeking to classify their workers as independent contractors. We previously reported on this decision here back in May 2018.

In short, the test, known as the “ABC test,” places a heavy burden on companies to prove the independent contractor status of their workers. The test’s starting presumption is that all workers are employees, and the employer must prove, by satisfying all three factors, that the worker is performing work “outside of the hiring entity’s business.” Under the test, employers must show:

A) The worker is free from control and direction of the company – This was the previous legal standard, and fairly uncontroversial. The same cannot be said of the other two prongs.

B) The worker performs work outside the usual business – A strict reading of this standard limits independent contractors to workers who perform services completely unrelated to the company’s core function. The Dynamex court used the examples of a retail store that “hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line.”

C) The worker is regularly engaged in the trade, occupation, or business they are hired to do, independent of the work for the company – The Dynamex court explained this prong prevents “unilateral[] determin[ations]” by companies that workers are independent contractors simply by assigning the label. The point is to identity whether individuals have actually “made the decision to go into business for himself or herself.”

The debate as to whether the ride-hailing companies meet the three prongs has centered on whether the companies meet the “B” prong: whether their workers perform work outside the usual business. Uber and Lyft have maintained that they satisfy this prong because they do not provide rides, but rather provide a platform that connects independent drivers to customers.

For San Francisco Superior Court Judge Ethan Schulman, this argument was of no moment. In a ground-breaking decision on August 10, 2020, Judge Schulman granted the state a preliminary injunction, reasoning, in a sort of axiomatic, conclusory fashion, “it’s this simple: defendants’ drivers do not perform work that is ‘outside the usual course’ of their businesses.” As such, Judge Schulman concluded Uber and Lyft could not possibly meet prong “B” of the test and therefore, there is a strong argument that the drivers are not independent contractors under AB5, warranting the injunction.

Judge Schulman did however stay the order for a 10-day period in order for Uber and Lyft to appeal the decision, which they intend to do.

Take-Away

AB5 is proving to be a powerful weapon in California’s crusade against juggernaut tech companies, and this latest decision may only be the beginning. California’s labor commissioner, Lilia García-Brower, also recently brought a pair of lawsuits under the law against Uber and Lyft for allegedly committing wage theft by willfully misclassifying drivers.

The swift enforcement of AB5 may force a tectonic shift in the way California companies will have to conduct business going forward, especially companies that have founded their business models on utilizing large independent contractor workforces. Such companies may be forced to reclassify large portions of their workforces, which will come at an enormous cost.

Reclassifying workers as “employees” means companies may have to pay certain payroll taxes and afford these employees certain labor protections and benefits, including guaranteed minimum wage, overtime pay, paid rest breaks, paid parental leave, unemployment insurance, health care subsidies and workers’ compensation. The list goes on and on. Importantly, as employees, “gig” workers have the right to unionize.

What are California companies to do? To the extent they have not already, companies need to start reviewing their classification practices now and modify them accordingly, or prepare to defend them under the new standard.

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JOIN US: TUESDAY, JULY 21, 2020","12:30PM EST<\/h4>\nFour months ago, the Dow was close to 30,000, employment rates were at historic highs, the coronavirus was still “novel,” and millions had not yet taken to the streets in global protests against police brutality and racial inequality. The workplace we now return to exists in this supercharged social and political climate, with new rules, laws, risks, and social issues creating new and uncharted waters for employers to navigate.\n\nJoin Kelley Drye’s

First Up: DOL Expands Overtime Exemption for Commission-based Retail and Service Workers

Monday’s final rule withdraws 60-year-old interpretive rules that limited employers’ ability to invoke Section 7(i) of the FLSA, which exempts certain commission-based employees in “retail or service establishments” from overtime eligibility. To qualify for the exemption, a business needs to show: (i) it is a retail or service establishment, as defined by the regulations; (ii) the employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and (iii) more than half the employee’s total earnings in a representative period must consist of commissions.

Prior to the new rule, the DOL’s old interpretive rules set forth lists of businesses that either did not not qualify, or only possibly qualified, as “retail or service establishments.” The first list identified businesses that were categorically excluded from the exemption because they had “no retail concept,” which included real estate companies, construction contractors, and our personal favorite, tree removal firms. The second list identified businesses that “may be recognized as retail,” which included department stores, restaurants and auto repair shops.

Commentators and courts have often criticized these archaic and seemingly arbitrary catalogues because they contained internal inconsistencies, created confusion and failed to offer any real reasoning or analysis. The DOL’s new rule takes a more rationalized and consistent approach by eliminating these rigid lists and affording all businesses an equal chance at proving they are retail or service establishments and that they meet the other exemption requirements. The new rule takes into account that modern businesses are multi-faceted and may possess some retail characteristics, which would qualify them for the exemption, even if the outdated lists previously excluded them.

Second: DOL Clarifies Additional Compensation is Compatible with Fluctuating Workweek Method of Computing Overtime

The FLSA’s fluctuating workweek method dictates that employees with fluctuating workweeks, and who agree to receive a fixed weekly salary that covers all hours worked, are entitled to halftime premium for hours worked in excess of 40 per week. These employees are not entitled to time and a half premium because the fixed salary covers the “straight-time” component of pay for the hours worked over 40. However, Section 114’s requirement of a “fixed salary” has led to confusion over whether additional compensation, such as commission or bonuses, are compatible with Section 114’s method of pay.

The new rule amends Section 114 to clarify that employers are able to provide additional pay to fluctuating workweek employees beyond the “fixed salary,” including commissions, bonuses, premium payments and hazard pay. Such additional compensation must nevertheless be included in the regular rate of pay, unless otherwise excluded under the regulations.

The DOL’s stated purpose in amending the overtime rules is to “allow employers and employees to better utilize flexible work schedules.” Flexible schedules are imperative in the modern workforce. This becomes a particularly acute need given the COVID-19 crisis, when staggered shifts will form part of the inevitable solution to reducing employee “density” at work (code for social distancing at work). The new rule allows employers and employees to agree to these flexible schedules, while still guaranteeing that employees have access to bonuses and other incentive-based pay provided to them by their employers.

There are two major distinctions between the FFCRA and the New York Sick Leave Law:

• The NY law applies to ALL employers, not just those with under 500 employees.
• The NY paid sick leave law for employees with COVID-19 issues is effective immediately. The amendments to New York Labor Law mandating state-wide paid sick leave go into effect in 180 days. This article focuses on the COVID-19 portion of the law.

Overview

Amount of Sick Leave: To create more confusion, the amount of leave varies depending on an employer’s net income and an employer’s size.

The law specifically provides:

• Employers with 10 or fewer employees (measured as of January 1, 2020) and a net income of less than $1,000,000 must provide:

Unpaid sick leave for the entire period of quarantine or isolation and employees will be eligible for PFL and short-term disability benefits.

• Employers with 11-99 employees and employers with 10 or fewer employees (measured as of January 1, 2020) and a net income greater than $1,000,000 million must provide:

5 days of paid sick leave and then unpaid sick leave for the remainder of the quarantine or isolation period. Once employees have exhausted paid sick leave, they will be eligible for PFL and short-term disability benefits.

• Employers with 100 or more employees (measured as of January 1, 2020) and public employers (regardless of size), must provide:

At least 14 days of paid sick leave during any order of quarantine or isolation. (This generally tracks the FFCRA, but is applicable to ALL employers, not just those with less than 500 employees, and provides four more extra days of leave)

• This paid leave is in addition to any paid sick leave an employee has accrued under an employer policy, with limited exception to employees who engage in non-business travel to CDC level 2 and level 3 countries.

Exceptions: This legislation also contains an exception for private employers who have voluntarily closed business operations for COVID-19 safety-related concerns. Thus, if an employee is out because the store they work in chose to close, and then get the virus, they do not get the paid sick leave.

Exclusions: An employee who is “deemed asymptomatic or has not yet been diagnosed with any medical condition and is physically able to work while” under a quarantine or isolation order is not entitled to sick, PFL or disability benefits under the COVID-19 provisions of the law.

Real-World Implications Of This New Law

The exception for employers who have voluntarily closed business operations could be quite large, as many small employers have decided it is cheaper to close their doors, when they have so little business.

Further, what constitutes “mandatory or precautionary orders of quarantine or isolation” is unclear, as the definition section of the law merely repeats that exact phrase without providing any additional guidance. As a result, the types of orders in which the law covers is equally unclear. For example, it is unclear whether Governor Cuomo’s March 19, 2020 Executive Order and March 20, 2020 announcements implementing mandatory work from home measures for non-essential businesses would apply. The law provides the Department of Labor with the authority to issue guidance on this point-which we are following closely and is needed at this time.

In addition, and evident from the name of the legislation, sick leave is not available for any employee who is asymptomatic (i.e., who is well) or who has not yet been diagnosed with any medical condition and is physically able to work remotely or through other means while under a mandatory quarantine or isolation. Thus, unlike the federal FFCRA, which we have written about here, this leave does not apply to employees who need to care for sick family members (although New York Paid Family Leave would likely apply) or who have children whose school has closed.

The new NY law also deals with any overlap with the benefits provided under the FFCRA. It provides that any leave provided under the New York law is NOT in addition to any FFCRA leave.

Accordingly, to the extent there is any overlap, employees will only be entitled to benefits under New York law that are in excess to the leave provided under the FFCRA.

With all of these laws coming at a fast and furious pace, it is a challenge for employers to keep track of every new mandate. We encourage employers to actively stay current by subscribing to our blog and COVID-19 Resources Center for the most up-to-date development news and analysis. We also encourage employers to consult with Kelley Drye before making any employment decisions.

The FFCRA contains two main centerpieces: (1) new paid Family and Medical Leave to deal with the COVID-19 “public health emergency"; and (2) emergency paid sick leave. This advisory addresses the most important aspects of the FFCRA. We have injected some initial guidance to employers in italics, but this advisory is not designed to address all of the many details of the Act. Please look for a deeper dive and analysis from us when the law becomes effective.

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