Commentary and Updates on Employment Law in Pennsylvania and New Jersey
Harvey Weinstein’s conduct is irresponsible, atrocious and potentially criminal, but that’s not the point of this blog. Instead, I would like to take the opportunity presented by Weinstein’s case (and the many others in the news this year) to talk about reporting and remediating workplace harassment.
Weinstein is the next in a line of prominent men accused of decades of harassment. It appears that at places like Fox and Miramax, and now Amazon, harassment by the boss was a feature of workplace culture. How did responsible employers allow this to continue? Did the women not complain? Did the employer bury the accusation? Didn’t anyone know? There is some evidence that the answer to all of these questions is yes: the women felt that they could not complain, the employer buried the accusations with financial settlements, and many knew and did not raise any red flags out of fear or intimidation.
The other common theme in these cases is the kind of harassment that took place: abuse of position, arrogance about complaints, “quid pro quo” promises, and intimidation.
Employers should consider their policies and practices to ensure a workplace free from this conduct. Serial harassers poison the culture of the workplace and hurt the bottom line. A recent article in the Wall Street Journalnoted the impact on the workplace of “rude” employees. Imagine the impact of intimidating, harassing executives who abuse their power? If employers have a serial harasser in a leadership position, it is time to face the music and address the behavior.
Employees should have an easy means of complaining. Policies should allow employees to “go around” the harassing superior in order to make the complaint, and the harasser should not be included in decision making regarding the complaint. Employers should avoid overly formal complaint procedures or reliance on form over substance. Employers should conduct professional, confidential investigations, and farm the investigation out to a third party if necessary.
It is important to note that settlements are not a license to keep a harasser employed. The employer still has knowledge of the harasser’s bad behavior, and steps should be taken to avoid repeated incidents. Those steps might include termination of important employees.
A common theme in these high-profile cases is that the conduct started (and thus the culture was created) in a “different time” when these workplace protections were not in place. That’s absurd. Title VII became law in 1964, and employers should pride themselves on operating a modern workplace, compliant with laws that have been on the books for decades.
So, how modern is your workplace? Do you have a serial harasser? Are you burying complaints to protect an executive? Do your employees have a safe, easy way to make complaints to an independent person? AMM can help employer develop a common sense policy that protects your business and your employees.
…At least until there is another overtime update.
Let’s review the history of these regulations. Prior to leaving office, President Obama’s Department of Labor significantly revised the salary requirements in order for certain classifications of employees to qualify for exemptions from overtime pay under the Fair Labor and Standards Act (“FLSA”). The DOL increased the salary minimum to qualify for an exemption from approximately $23,000 to approximately $47,000. Small employers and nonprofits scrambled to find a way to comply with the new regulations by the compliance deadline of December 1, 2016.
On November 22, 2016, the United States District Court for the Eastern District of Texas issued an injunction against the implementation of those rules. Small employers and nonprofits breathed a sigh of relief and tabled their new policies and employee classification changes.
Between November 22, 2016 and August 31, 2017, much happened in the Eastern District of Texas and the Fifth Circuit. Appeals were filed, extensions of time to file briefs were granted, and the Department of Labor, now led by President Donald Trump, revised its position on these rules. President Obama’s DOL had argued that the new regulations were a proper exercise of DOL’s rule making, and the President’s executive, powers. President Trump’s DOL argued that while the DOL and the President were within their rights to establish and revise a salary requirement, they would not defend this particular salary requirement.
On August 31, 2017, the Eastern District of Texas agreed, essentially, with the Trump DOL. The Court found that while the DOL is free to set and revise a salary requirement, this particular salary requirement was not enforceable.
The good news is that the salary requirement set by the Obama DOL was so high as to present a significant financial and operational burden for small employers and nonprofits, and this ruling eliminates that concern. However, the ruling leaves this DOL, or any DOL, free to revisit the salary requirement. In other words, we will all take this ride again sometime in the future.
Employers should continue to ensure compliance with the existing rules, and check back in with AMM for any future changes to the salary requirement.
Clarifying its earlier rulings, the Court of Appeals for the Third Circuit (which includes Pennsylvania) has ruled that a single utterance of a racial slur at the workplace could support a claim for harassment.
In this case, two African-American males (plaintiffs) brought suit challenging their firing on the basis that their termination was discriminatory and racially motivated.
The employees specifically alleged that when they arrived at work on various occasions, an anonymous note was written on the sign-in sheets: “don’t be black on the right of way.” They also asserted that while they had more experience working on pipelines than the non-African-American workers, they were only permitted to clean the pipelines rather than work on them. Significantly, a supervisor of these two African-American employees used a severe racial slur to threaten firing if a specific project was not completed to his satisfaction.
The two employees reported this offensive language to a superior and two weeks later they were fired without explanation. After being rehired they were again terminated for “lack of work”.
The suit filed in federal District Court specifically alleged unlawful harassment, discrimination and retaliation. The District Court dismissed the harassment claim, holding that the facts in the complaint did not support a finding that the alleged harassment was “pervasive and regular”. The Court also dismissed the related claims of discrimination and retaliation.
I hear a lot of interesting stories in my line of work: there are as many interesting employment law problems as there are interesting people, which is to say, a lot. A recent opinion from the United States Court of Appeals for the Fourth Circuit encapsulates this variety nicely, and serves as a reminder not to disregard unorthodox employee requests.
In EEOC v. Consol Energy, the Equal Employment Opportunity Commission sued Consol Energy on behalf of one of Consol’s employees, Beverly K. Butcher. Mr. Butcher worked diligently for Consol Energy for 37 years when his employer decided to install a biometric hand scanner to track employee attendance. Consol required each employee to have his or her hand scanned, and then, upon entering or departing the workplace, required the employee to wave the hand over the scanner.
Mr. Butcher identifies as a devout evangelical Christian. While the hand scanner seems like a fairly innocent and efficient way to track employees, Mr. Butcher did not see it that way. Mr. Butcher’s faith informed his belief in an Antichrist, whose followers are condemned to everlasting punishment. The followers of the Antichrist are identified by the Mark of the Beast. Mr. Butcher feared that the use of the hand scanner would result in his receiving the Mark of the Beast. No one disputed that Mr. Butcher’s belief were sincerely held. Indeed, Mr. Butcher resigned rather than submit to the new hand scanning rules, after his employer failed to accommodate his request.
The EEOC sued on Mr. Butcher’s behalf, arguing that the failure to accommodate Mr. Butcher’s sincerely held religious belief violated Mr. Butcher’s civil rights. A federal jury in West Virginia returned a verdict in excess of $550,000 in Mr. Butcher’s favor, finding that Consol had constructively discharged Mr. Butcher in violation of his rights to accommodations for his religious beliefs. For want of a simple accommodation, Consol Energy risked a verdict in excess of a $550,000, not to mention the related legal fees and expenses. Interestingly, Consol does not appear to have offered any operational reason for its failure to accommodate: other employees were permitted to clock in by entering their personnel numbers into a keypad, without additional cost or burden to the company. Indeed, email produced in the case seems to indicate that the employer was scoffing at the religious objection.
It would have been cheap and easy for Consol to accommodate the request. The failure to do so appears to be based on a judgment about the validity of the request. This type of fact pattern presents itself often in many contexts: religious accommodations, disability accommodations, requests for medical leave. It is easy, as Consol Energy appears to have done, to disregard requests as “kooky” or “odd.” This is a mistake. If the accommodation is not needed, or is overburdensome, or is not based in fact, that will come out in the accommodation process. The danger lies in not following the process that such a request, however strange, requires. Certainly, it is well worth the effort in the beginning to avoid the stress and expense of litigation later.
Earlier this week, the Wall Street Journal reported that Senators are considering a tax on employer-sponsored health insurance plans to raise revenue. It is not my intention to discuss the politics of this proposal, and instead, I write to consider how such a proposal would alter the economics of recruiting and retaining employees.
Until now, it went without question that those who secured health insurance through their employers did so on a pre-tax basis. Employers, for their part, can deduct the cost. This incentivizes employers to offer health insurance coverage to employees as part of a compensation package. Health benefits are hugely important to employees when deciding whether to accept new positions. As such, these plans are powerful recruitment and retention tools.
In my practice, time and again, I hear that talented and experienced employees do not want to leave their current employment, not because of well-drafted restrictive covenants (as many employers believe), but because of their compensation package, that includes health insurance. Spouses and children may have medical conditions that require care, and employees resist the stress of leaving behind good coverage for new jobs or self-employment. Employees believe, in many cases correctly, that the cost of health insurance is cheaper through employer-subsidized plans than in the individual market, and that they can get better coverage for their dollar through their employer.
This is particularly true right now, as the healthcare debate rages on, and employees feel insecure about how their health insurance will work in the future. The Senate’s proposal would remove a tool from an employer’s recruitment arsenal, and dramatically change the economics of recruiting and retaining talented employees. Of course, employers have other tools, and should not rely totally on health insurance, but it is hard to overstate the importance of this coverage to employees. The implementation of such a tax would mean that employers would need to reconfigure compensation packages and rethink the manner in which they provide health insurance coverage to employees.
Lawmakers have referred to the tax-favored treatment of employer-sponsored health insurance plans as discriminatory to those who purchase their health insurance individually. Interestingly, removing these tax protections would also remove the incentive for employers to provide such healthcare. It would be interesting to know from these lawmakers if that is what they intend. A move away from employer-sponsored health insurance does not just change the economics of the employment relationship; it changes the economics of healthcare.
Of course, the healthcare debate impacts employer / employee relationships even as the status of the Affordable Care Act and employer-sponsored health insurance remains unclear. It is simply impossible for employers, or for their lawyers for that matter, to plan for changes in healthcare while proposals are floated and then rejected by lawmakers. However, the proposal to end the tax-favored treatment of employer-sponsored health insurance would mark a radical change. It will be interesting to see if it makes its way out of the pages of the Wall Street Journal.
Let’s check in with the January 2017 case filed in the United States District Court for the Eastern District of Texas challenging the Obama Administration’s proposed changes to overtime regulations. Those regulations would have required employers to reclassify many employees considered exempt from overtime rules to non-exempt status, requiring the employer to now pay overtime to those employees. The rule was widely considered a boon to employees, but a burden for small businesses and nonprofits.
Those rules would have required that in addition to meeting certain requirements with regard to an employee’s duties, the employee must also earn a minimum salary of $47,476 to qualify for “exempt” status. The current rule requires that the employee earn a minimum salary of $23,660. The dramatic increase in the salary requirement caused employers to reevaluate classifications and to generate new policies regarding overtime and work hours in advance of a December 1, 2016 deadline.
As previously discussed on this blog, on November 22, 2016, the Eastern District of Texas entered an injunction prohibiting enforcement of the new rules. Many clients have asked me, dreading the answer, whether that injunction remains in place. On December 1, 2016, the United States Department of Labor appealed the injunction order, and sought a stay of the Court’s order prohibiting enforcement. The Court denied the stay, and the matter is now on appeal. During the appeal, the Department of Labor cannot enforce the new rules. The appeals court granted a request submitted by the Department of Justice to extend time to file appellate briefs while “incoming leadership personnel” considered the issues. That brief is now due on June 30.
The Trump Administration has three choices: defend the rule, withdraw the rule, or rewrite the rule. Labor Secretary Alexander Acosta has telegraphed that a review of the rule was necessary, but that the salary increase was too dramatic. However, the Department of Labor’s repeated requests for extensions to file a brief indicate that it is not necessarily an easy call. For example, because the Eastern District’s order granting the injunction called into question the rulemaking authority of the Department of Labor, there may be good reason for the administration to challenge the court’s injunction order, even though it does not necessarily agree with the rule.
The overtime rules will remain in limbo until at least June 30, 2017. We will continue to monitor the situation. In the meantime, employers are not required to change their overtime policies or the classifications of their employees.
By Patricia Collins, Esquire
On May 2, 2017, the House passed the Working Families Flexibility Act. The purpose of the Act is to give employees flexibility in how they choose to be paid for overtime: in wages or in compensatory time off. The Act crystallizes a tension I see often in my representation of employers.
Presently, the Fair Labor Standards Act (“FLSA”) requires employers to pay nonexempt employees overtime compensation for work hours in excess of 40 in a workweek. Employers cannot compensate employees for those overtime hours in compensatory time off (“comp time”). Such a policy violates the FLSA, exposing the employer to liability for the unpaid overtime hours as well as penalties and attorney’s fees.
The FLSA prohibition against payment in comp time is intended to protect employees from abusive overtime demands by employers. The statutory obligation to pay additional wages for hours over forty in a workweek, so the argument goes, forces the employer to base the decision to require overtime hours on business and financial considerations. The FLSA’s ban on comp time legislates a policy determination that offering comp time will not protect employees from abusive demands by employers.
Republicans this week argued otherwise. They argue that permitting employees to take comp time rather than payment for overtime work gives employees flexibility. Democrats who opposed the bill countered that the Act’s provision allowing employers the final say does not adequately protect employees.
Practically, the Act sits at the tipping point of many competing considerations: employers want to establish policies that comply with the law, protect the business, and benefit employees. Employees want flexibility, but they also need to be paid for their work. The reality is that banked comp time can be a liability for employers because there are jobs for which attendance is extremely important, and unscheduled or unpredictable time is off is sometimes expensive or interferes with the progress of work. Further, employees might not be free to use that comp time in the manner they would like if it interferes with the employer’s business. Most employers offer paid time off in a set amount, in order to create predictability as to an employee’s attendance. While this proposed rule might create flexibility and reduce overtime costs, I do wonder whether it is really a savings in the long run.
It will be interesting to see how the Senate balances these concerns, and whether employers will create policies that allow comp time. The bill now goes to the Senate – no word yet on whether they will vote on it. Stay tuned!
Employers have been working to comply with new overtime rules issued by the United States Department of Labor that raise the salary level in order to meet certain exemptions from overtime rules before a December 1, 2016 deadline. Those rules require that in addition to meeting certain requirements with regard to an employee’s duties, the employee must also earn a minimum salary of $47,476. The old rule required that the employee earn a minimum salary of $23,660. The dramatic increase in the salary requirement caused employers to reevaluate classifications and to generate new policies regarding overtime and work hours.
On November 22, 2016, the United States District Court for the Eastern District of Texas issued a preliminary injunction, temporarily barring the Department of Labor from enforcing the new overtime rule. The order will remain in place pending a full hearing on the issue. While the order is temporary, as a prerequisite to entering the order, the Court was required to find that there was a substantial likelihood of success on the merits of the argument that the DOL exceeded its authority in promulgating the rule. So, there is some indication that the Court may bar enforcement of the new rules permanently.
For now, employers are temporarily relieved of the obligation to comply with the new rules by the December 1, 2016 deadline. Because the outcome is not guaranteed, employers should have their new policies ready to go, but do not need to implement them on December 1. It is simply too early to say whether employers should “shelve” those new policies. We will have to wait for the Court’s final ruling. Stay tuned to this space as the case unfolds.
Patricia Collins is an employment and litigation Partner at Antheil Maslow & MacMinn, LLP and chair of the labor and employment practice group.
The Department of Labor has issued a final rule which will have a dramatic effect on which employees are exempt from the Fair Labor Standards Act’s overtime pay requirements. These requirements, in general, provide that an employer must pay a non-exempt employee a minimum of one and one-half of his/her salary (computed on an hourly basis) for hours worked in excess of 40 in any given work week.
The existing regulations, modified by the new rule, had exempted so-called white collar employees: professional, executive and administrative, outside sales and computer employees (as defined by the regulations) who earned a minimum of $455 per week or $23,550 annually. Also exempt were highly compensated employees-employees who regularly performed some of the functions of professional, executive or administrative employees and were paid a minimum of $100,000 annually.
The new rule, while not changing the description of the exempt categories, increases the exemption threshold for white collar employees to $47,476 and the highly compensated employee to $134,004.
These salary thresholds will increase every three years based on statistics from the U.S. Bureau of Labor Statistics.
The effect of the rule is to eliminate the exempt status of white collar employees including professional, executive and administrative employees making $47,476 or less or highly compensated employees making $134,004 or less.
The effective date of the new rule is December 1, 2016.
Since the new rule greatly increases the number of non-exempt employees covered by the overtime regulations, employers should review the written job descriptions of their employees as well as the nature of the work their employees actually perform (often not the same as written descriptions). Employers should also review their salary and wage structure.
Antheil Maslow and MacMinn, LLP can assist employers in assuring compliance with the FLSA.
Employers are now using a new strategy in an effort to keep their employees from leaving the company and working in a competitive enterprise. Traditionally, employers used restrictive covenant agreements, almost always built in to the employee’s written employment agreement. These covenants prohibit employees from engaging in competition with a former employer. Courts tend not to favor restrictive covenants because they impinge on the ability of a worker to earn a living – they are a restraint of trade.
To limit the scope of restrictive covenants, courts impose a reasonableness standard. Restrictions for a limited time, such as a year, and a small geographical area, such as a five mile radius, were favored. Long-term and broad covenants were not. The employee’s skill set and knowledge of the original employer’s enterprise are also key factors in assessing the business need for any restrictions. The more skill needed to do the work, the more knowledge an employee has of the employer’s business strategies, the more justifiable the non-compete clause becomes.
Why Employers Like the Employee Choice Doctrine
The strategy that employers are now using in some states, including Pennsylvania, is a little more artful. Employers are offering employees post-employment benefits such as stock options and deferred compensation with a condition – a catch. The catch is that the benefits are only available if the employee who leaves the company does not compete with the employer providing the benefits. The employee is given a choice to either accept the benefits and not compete, or compete, but forfeit the benefits and be subject to repayment, or "clawbacks” of benefits already paid. The choice has become known as the employee choice doctrine.
The employee choice option works better for the employer than the typical restrictive covenant because it enables the employer to shift the burden to the employee. In the classic non-compete case, the employer's remedy was to seek an injunction against the competing former employee ordering him or her to cease the competition. In employee choice cases, the employer can still seek an injunction. Better still, the employer can just terminate the benefits (the stock option or other post-employment benefit) thus shifting the burden to the employee to seek redress in the courts by demanding payment of the benefit.
In some states, like New York, there is no review of the employee choice option to assure that the choice offered to the former employee is reasonable. That is not the case in Pennsylvania. Pennsylvania law currently does allow employees to craft employment benefits that are tied to non-competition, but the tie has to be reasonable. The cases in Pennsylvania are evolving. As with restrictive covenants, the more reasonable, meaning less strict, the choice is - the more likely Pennsylvania courts will uphold it.
Key Drafting Issues in Employee Choice Benefit Contracts
When drafting employee choice benefit provisions, employers should keep in mind the following points:
• The Employee must have a real choice. The choice between competing in the new position and forfeiting the benefit or not competing and keeping the benefit should be clear. In short, the employee should understand that there is a trade-off.
• The Employee has to leave voluntarily. The choice option is likely only valid if the employee controls the decision about leaving the current employer. Some courts reason that the employee choice doctrine is not really a choice if the employer fires the employee without cause. In such a circumstance, the employer has little or no legitimate business interest in enforcing the non-compete obligation.
• Consideration. For the employee to be forced to make a choice between forfeiting assets and working with a competitor, the employer has to give the employee additional consideration over and above that which the employee would have been entitled to receive in the normal course of working for the employer, including severance or other payments normally paid upon termination.
Why Legal Counsel Can Help
Experienced business counsel understand the evolving nature of the employee choice doctrine. In particular, they keep current with the Pennsylvania and federal court decisions so they can craft documents which have the best chance of surviving attack by employees who seek to avoid them by claiming that the choice is invalid as a restraint of trade.
Before drafting, and certainly before presenting an employee benefit with a forfeiture provision – employers should seek to have their business counsel review the language of the benefit contract.
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