Proposed Rule Issued for Federal Contractor Paid Sick Leave

By Alexandra (Sasha) Thaler

The Department of Labor (DOL) announced last Thursday that it has posted for comment its Proposed Rule implementing President Obama’s September 7, 2015 Executive Order (EO 13706), which requires certain federal contractors and their subcontractors to provide employees with up to 7 days (56 hours) of paid sick leave annually.  The rule affects contractors entering into new contracts on or after January 1, 2017 that are covered by the Service Contract Act, the Davis-Bacon Act, or the Fair Labor Standards Act, concessions contracts, and service contracts in connection with federal property or lands. These contractors will need to include a new contract clause in applicable solicitations and government contracts, included as Appendix A to the Proposed Rule.

Under the new rule, employees must be allowed to earn paid sick time at a rate of 1 hour for every 30 hours worked. This mirrors many recently enacted state and municipal sick time laws across the country. However, accruals may not be capped at less than 56 hours, an amount that is higher than required by some jurisdictions, including Massachusetts and California.

The Proposed Rule provides that sick time must be made available for absences due to the employee’s own physical or mental illness, injury or medical condition, and for obtaining diagnosis, care or preventative treatment for the employee, as well as for caring for family members for the same reasons, and for absences relating to domestic violence, sexual assault or stalking (including for medical, legal and other needs that may arise in those circumstances). In a departure from some existing state and local laws, however, the definition of a family member is quite broad, and includes not only children, parents, spouses and domestic partners, but also “any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”

The new federal contractor requirement also has some of the same aspects of other sick time laws that are most likely to cause problems in administration, such as allowing employees to use sick time in 1-hour increments, requiring carryover of unused hours from year to year, requiring reinstatement of unused time following interruptions in service of up to 12 months, and requiring sick time to be granted even if the employee provides little or no prior notice.

Due to the rash of activity in this area in recent years, many employers have already implemented paid sick time policies, while others have had comprehensive PTO policies for some time. The Proposed Rule permits existing sick time, PTO or other time off policies to substitute for the new paid sick time requirement so long as those policies meet the minimum standards of the new rule. Employers that plan to rely on existing policies to meet the new requirements should consult with experienced employment counsel to assess whether they fully meet the new requirements. The good news is that employers will have until January 1, 2017 to implement compliant policies. The Wage and Hour division invites comments on the proposed rule until March 28, 2016.

Massachusetts: An Act to Establish Pay Equity

On January 28, the Massachusetts Senate passed S. 2119, titled “An Act to Establish Pay Equity” (the “Proposed Law”).   Touted by one of the Act’s co-sponsors as a way to “further close the wage gap between male and female workers in the Commonwealth,” the Proposed Law is claimed to ensure equal pay for comparable work by “establishing pay transparency and requiring fairness in hiring practices.” If enacted, the law virtually assures that there will be new litigation battles fought as employers defend against single plaintiff, class and collective actions asserting unlawful pay disparity. Beyond expensive litigation, another unfortunate consequence of the Proposed Law may be that many employers will assess and reassess whether it makes sense to continue to do business in Massachusetts.

Key provisions of the Proposed Law include:
•    Makes unlawful any disparity in the payment of wages (including benefits and other compensation) between different genders for “comparable work”, which is defined as work that is “substantially similar” in that it requires “substantially similar” skill, effort and responsibility, and is performed under “similar” working conditions. “Working conditions” is defined to include the “circumstances customarily taken into consideration in setting salary or wages, [such as] reasonable shift differentials, physical surroundings and hazards encountered by employees performing a job.” The Proposed Law provides no definition or further guidance as to what is meant by “substantially similar,” meaning that any such determination could only be made following an intensive and individualized factually inquiry in the context of litigated cases. Because of this, these cases will be extraordinarily expensive to defend.

•    Provides that employers can pay wages (including benefits and other compensation) that are different for comparable work if based upon (1) a “bona fide” seniority system; (2) a “bona fide” merit system[1]; (3) a “bona fide” system that measures quantity or quality of production or sales; (4) the geographic location in which a job is performed; (5) education, training, or experience, to the extent such factors are “reasonably related” to the particular job in question and “consistent with business necessity;” or (6) travel, if travel is a regular and necessary condition of the job. While some of these factors can be objectively measured (e.g., sales production), none of these factors permit differentials based on real workplace differentials influenced by qualitative performance and market differentials. In an economy that is driven by industries such as biotechnology (pharma and device), high technology, education and health care, many of these “exceptions” will have no practical application. As with the definition of comparable work, the one certainty is that there will be time consuming and expensive litigation over what these terms actually mean and their application to specific circumstances.

•    The Proposed Law requires pay equity for all compensation and benefits – it expressly provides that it covers “wages, including benefits or other compensation. This presumably includes bonuses, stock options or other equity awards, or any other economic benefit. This will have enormous impact for employers that attract new employees and/or reward top performers with periodic equity awards.

•    Provides that an aggrieved employee can bring a lawsuit, whether on his or her own behalf or on behalf of others (i.e, as a class or collective action). If the individual or group prevails, the employer is automatically liable for twice the lost wages (framed as liquidated damages), benefits and other compensation (with lost wages, benefits and other compensation calculated as the difference between what was paid and what should have been paid), and attorneys’ fees. A prevailing employer gets nothing.

•    There is a three year statute of limitations.

While The Attorney General also may also bring suit on behalf of one or more employees, it is far more likely that the litigation will be brought by the industry of plaintiffs’ attorneys who stand to be paid their attorneys’ fees, either by settlement or if they prevail .
An employer may defend against a claim if, within three years prior to the commencement of such claim, it completed a self-evaluation of its pay practices (which practices include wages, benefits, and other compensation) and can demonstrate that reasonable progress has been made towards eliminating any gender-based compensation differentials that may have been found. Amazingly, however, an employer that conducts a self-audit and discovers that one or more employees are overpaid in relation to other employees cannot reduce employees’ wages, benefits or other compensation to come into compliance.

In addition, if the Proposed Law is enacted as drafted, employers will not be allowed to:

•    Prohibit employees from discussing their own or other employees’ wages (this is already protected by federal law, specifically the National Labor Relations Act and, for federal contractors and subcontractors, Executive Order 13665).
•    Screen job applicants based on their wage history, or requesting or requiring an applicant, as a condition of being interviewed or continuing to be considered for an offer, disclose prior wage history. As with all other aspects of the Proposed Law, “wages” includes benefits and other compensation. This will make it very difficult to determine how to make a competitive offer to an individual.
•    Seek the compensation history of any prospective employee from any current or former employer, unless an offer of employment has been made and the prospective employee so authorizes, in writing.
•    Retaliate in any way against an employee exercising his or her rights under the Proposed Law.

Many employers obviously are concerned about the impact that this Proposed Law will have on their businesses. By way of example only, employers are concerned about the ability to attract talent at market rates that may be different than individuals already employed, as well as the myriad other circumstances where the Proposed Law may impede business decisions and expose them to costly and uncertain litigation. As the Proposed Law has not been enacted, for those employers who are concerned about it, now would be the time to contact industry associations, legislative representatives and any others with political involvement to raise their concerns about the negative consequences of this legislation as presently drafted.
[1] A published Federal Jury Instructions provides that in order to establish a bona fide merit system, an employer must demonstrate a “structured process under which employees are systematically evaluated according to established standards that are designed to determine the relative merits of their performance”. Such a definition defies the reality that an individual’s performance is measured in multiple ways, many of which are not easily measured (e.g., enthusiasm, commitment to a job, level of effort, etc.).

EEOC Publishes Proposed Enforcement Guidance on Retaliation

By Emma L. Melton

The U.S. Equal Employment Opportunity Commission (EEOC) has released proposed Enforcement Guidance on Retaliation and Related Issues.  This proposed guidance provides insight as to how the EEOC interprets applicable law and hints at the areas that may receive increased focus going forward.

Existing federal employment laws prohibit employers from retaliating against applicants or employees for exercising rights protected by fair employment practice laws. This protected activity includes an employee’s opposition to a practice believed to be unlawful, such as complaining about discrimination or refusing an order believed to be discriminatory. It also includes participation in an employment discrimination proceeding, such as submitting a complaint, filing a charge of discrimination, or participating in an investigation of discrimination.

Retaliation claims may be brought under every law that the EEOC enforces, including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Equal Pay Act, and others. The percentage of retaliation charges has increased significantly in recent years, constituting about 42% of charges filed with the EEOC in 2014, making it the most frequently alleged violation by complainants. Importantly, retaliation may be found even when the underlying claim of discrimination is ruled to be without merit. For example, if an employee files a complaint erroneously alleging sexual harassment in the workplace, but is fired because she filed the complaint, she could be successful in a claim of retaliation, despite the fact that no harassment occurred.

The proposed guidance does little to change current law.  It does, however, update prior guidance published in 1998.  After defining retaliation and outlining the three elements of a retaliation claim, the guidance provides an updated overview of relevant case law. The guidance also expands on the examples of retaliation given in the 1998 publication, and provides examples of both lawful employer action and unlawful retaliation. In addition to updating these sections, the proposed guidance includes a new section with five “best practices” for employers to implement to minimize the likelihood of retaliation violations.  These best practices are:

  • Designing and implementing written employer policies that include clear examples of both legal and illegal behavior and a reporting mechanism for potential or perceived retaliation;
  • Providing training on anti-retaliation policies for all employees;
  • Providing support for managers and supervisors to improve responses to complaints of retaliation;
  • Implementing a follow-up procedure to check in with employees after a complaint has been filed; and
  • Designating an individual to review proposed adverse employment decisions before action is taken.

The EEOC is requesting public input during the 30-day comment period ending February 24.  The proposed guidance may be viewed here.

EEOC Proposes Changes to EEO-1 Reporting to Include Pay Data

By Martha J. Zackin

Today, the U.S. Equal Employment Opportunity Commission (EEOC) issued a proposed revision to the Employer Information Report (EEO-1) to include the annual collection and reporting of pay data.  Currently, federal law requires federal contractors with 50 or more employees, and all other employers with 100 or more employees, to file an annual EEO-1 report, which reports employees’ ethnicity, race, and sex by job category.  The revised EEO-1 would require all employers with 100 or more employees to continue to collect and report this demographic data and, in addition, pay data.  Federal contractors with between 50 and 99 employees would not be required to report pay data, but would continue to report ethnicity, race, and sex.

According to the press release published announcing this new requirement, the data collected will be used by both the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) “to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.”  In addition, as described in an EEOC- published “Questions and Answer” document, the data will be aggregated and published, to “help employers evaluate their own pay practices to prevent pay discrimination in their workplaces.”

A “Small Business Fact Sheet” provides a detailed description of the data that would be collected if the proposal becomes law.  In summary, using W-2 wage data employers would tally and report the number of employees within each EEO-1 job category whose W-2 pay for twelve months was in one of twelve “pay bands.”  These pay bands, which would track the twelve pay bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey, are:

    1. $19,239 and under;
    2. $19,240 – $24,439;
    3. $24,440 – $30,679;
    4. $30,680 – $38,999;
    5. $39,000 – $49,919;
    6. $49,920 – $62,919;
    7. $62,920 – $80,079;
    8. $80,080 – $101,919;
    9. $101,920 – $128,959;
    10. $128,960 – $163,799;
    11. $163,800 – $207,999; and
    12. $208,000 and over.

In addition to reporting (by ethnicity, race and sex) the number of employees whose total W-2 pay fell into each pay band, employers would also tally and report the total number of hours worked by the employees counted in each pay band over the prior twelve months. This would accounts for part-time or partial-year employment.

Members of the public may submit comments through April 1, 2016.  Barring revision or withdrawal of the proposal, employers will be required to comply with the new EEO-1 obligations by submit ting pay data as of the September 30, 2017 EEO-1 filing deadline.

The EEOC also The proposed revised EEO-1 may be viewed here.

Joint Employment: DOL Issues Adminstrator’s Interpretation

By Martha J. Zackin

The legal concept of joint employment has been around for many years, first gaining national prominence in 1996, after a federal appeals court found Microsoft to be a co-employer of thousands of workers classified either as “contractors” or “temporary employees” retained through a staffing company.  The case, Vizcaino v. Microsoft,, 97 F.3d 1187 (9th Cir. 1996), ultimately settled for $97 million dollars.

In 2015 the National Labor Relations Board weighed in, with Browning-Ferris Industries of California, Inc., 362 NLRB No. 186.  As described in a press release describing the BFI decision, the NLRB will now find two or more entities to be joint employers of a single workforce if “(1) they are both employers within the meaning of the common law;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment.”  In evaluating joint employment status, the NLRB considers whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, such as a staffing company.  Remarkably, with BFI, the NLRB will find joint employment even where a company has not actually exercised control, but has merely “reserved the authority to do so.”

 

Multiple federal courts also joined the discussion in during 2015, with both the Third and the Fourth Circuit Courts of Appeals finding staffing buyers to be joint employers with the staffing companies whose workers performed the services.   Although the tests applied by the courts were slightly different, the courts in both Butler v. Drive Automotive, 793 F.3d 404 (4th Circuit 2015) and Faush v. Tuesday Morning, Inc., (3rd Circuit 2015) focused on the staffing buyers’ right to control the manner and means by which the work was performed.

Today, the Department of Labor offered its view on joint employment, issuing Administrator’s Interpretation No.  2016-1.  Not surprisingly, the DOL advocates an expansive definition of joint employment “to ensure that workers receive the protections to which they are entitled.”  Within the Administrator’s Interpretation, the DOL introduces the concepts of “horizontal joint employment” and “vertical joint employment.”  According to the DOL, both “horizontal” and “vertical” joint employment exist when “an employee is employed by two (or more) employers and the employers are responsible, both individually and jointly, for that employee under the law.”  With “horizontal” joint employment, an employee may be employed by two companies that share operations.  The “vertical” joint employment relationship is akin to the traditional staffing relationship, where a business obtains workers through an arrangement with an intermediary employee.

With the Administrator’s Interpretation, the DOL also published a blog entry, along with FAQ’s graphic illustrations of “horizontal joint employment” and “vertical joint employment.”

A broad standard of joint employment will have a significant impact on many businesses.   For example, entities deemed to be joint employers may find themselves liable for actions taken by their contractors and suppliers, if those contractors and suppliers are deemed to be joint employers.  Moreover, under the expansive definition described above, non-unionized employers found to be joint employers of unionized entities may find themselves subject to collective bargaining obligations.  Small businesses and franchise owners may be responsible for medical care under the Affordable Care Act, among other laws, if their employees are grouped together and counted with the employees of their co-employers.

Stay tuned for further developments.

Form I-9 Compliance: New Guidance Issued

By Martha J. Zackin

The Immigration and Nationality Act (INA) requires employers to verify the work authorization of employees using the Form I-9.   Some employers choose to conduct periodic internal audits of their Forms I-9, to ensure compliance.  Concerned that improperly conducted internal audits could “create barriers to employment for work-authorized individuals,” the Department of Homeland Security’s U.S. Immigration and Customs Enforcement (ICE) and the Department of Justice’s Civil Rights Division together published new Guidance for Employers Conducting Internal Employment Eligibility Verification Form I-9 Audits.

The guidance, developed by DOJ and ICE with input from the Department of Homeland Security’s Office of Civil Rights and Civil Liberties, the U.S. Citizenship and Immigration Services, the Department of Labor, the National Labor Relations Board, and the Equal Employment Opportunity Commission, seeks to provide employers with, among other things:

  •  information regarding the scope and  purpose of audits;
  • considerations before conducting internal audits;
  • details regarding how to correct errors, omissions or other deficiencies found on Forms I-9 and how to cure deficiencies related to E-Verify queries; and
  • guidance regarding the anti-discrimination mandate.

For further information, the DOJ’s press release announcing the guidance may be found here.

Nothing in the law or this guidance requires employers to self-audit I-9 compliance.  Those employers who choose to do so, however, should look to the guidance to help structure and implement self-audits in a manner consistent with the employer sanctions and anti-discrimination provisions of the INA.

Federal Contractors and Subcontractors Must Comply with New Pay Transparency Rules

By Martha J. Zackin

As is often reported, there is a pay gap in many of today’s workplaces between men and women, and between wages earned amongst various racial groups.   Many commentators believe that employer policies forbidding employees from discussing pay with co-workers perpetuate these wage gaps, by preventing workers from finding out if they are being discriminated against in time to act.

To narrow and, ultimately eliminate that gap, in April 2014, President Obama issued Executive Order 13665, which prohibits federal contractors and subcontractors from firing, failing to hire, or otherwise disciplining employees or job applicants who inquire about, discuss, or disclose their compensation or the compensation of other employees or applicants.   Read more