Thursday, April 30, 2015

Supreme Court Gives Employers a New, But Not Very Sharp, Tool for their Defense Arsenal Against the EEOC

Earlier this week, the U.S. Supreme Court issued a much anticipated ruling on the question of whether courts have the authority to review the adequacy of the Equal Employment Opportunity Commission’s (EEOC) pre-lawsuit efforts to settle a case under Title VII of the Civil Rights Act of 1964. The EEOC’s website contains a press release declaring the Court’s Mach Mining ruling a “step forward” for discrimination victims, but other commentators have declared the ruling to be a victory for employers. This mixed reaction likely stems from the fact that the Court’s opinion, when read carefully, is a careful balancing act between permitting judicial review and giving deference to the EEOC.

The Supreme Court’s decision was issued on April 29, 2015, in the case of Mach Mining, LLC v. EEOC. Under Title VII, the EEOC is required, after finding probable cause on a Title VII charge, to “endeavor to eliminate” the alleged illegal practice “by informal means of conference, conciliation, and persuasion.” In addition, before the EEOC can sue an employer, it must be unable, within a specified time, to obtain a settlement agreement acceptable to the EEOC. In the Mach Mining case, the EEOC filed a lawsuit alleging that Mach Mining engaged in a pattern and practice of sex discrimination against female applicants. Mach Mining claimed that the EEOC case should not be permitted to proceed, because the EEOC had not participated in good faith pre-suit settlement efforts.

The Supreme Court sided with Mach Mining in finding that federal courts do have the authority to review whether the EEOC satisfied its conciliation obligations. The Court held that, while Congress gave the EEOC wide latitude as to the nature of its settlement efforts, it did not deprive the parties of the right to judicial review.

The Court also held, however, that the authorized scope of its judicial review is narrow. The Court rejected the EEOC’s position that only a facial examination of EEOC documentation was proper and Mach Mining’s position, at the other end of the spectrum, that a “deep dive” review was proper. Instead, the Court held that federal court review is limited to determining if the EEOC gave the employer notice of the claim and tried to engage the employer in some form of discussion to give the employer a chance to remedy the alleged illegal practice. In landing on this scope of review, the Court noted that Title VII’s conciliation provision “smacks of flexibility.” Under Title VII, the EEOC must make a conciliation endeavor, but can use any methods it wishes and has the sole discretion as to its settlement strategy, offers, and the ultimate decision as to whether to settle or litigate. The Supreme Court further noted that, in most cases, the EEOC will be able to present a sworn affidavit demonstrating it satisfied its conciliation obligations, with the court only needing to do further review if the employer provides credible opposing evidence.

While a partial victory for employers, those who had hoped the Mach Mining case would reign in some of the EEOC’s aggressive litigation tactics are bound to be disappointed. Mach Mining does provide employers a vehicle for requiring the EEOC to make a genuine effort at conciliation, but does not go so far as to require “good faith” settlement positions or tactics on the part of the EEOC.

Friday, April 24, 2015

Joint Employment: Whose Employees Are You Liable For?



Much has been written in recent months about the National Labor Relations Board (NLRB) standard for joint employment liability between separate businesses, especially with respect to franchisor McDonald’s Corporation, which is facing dozens of cases in which it has been named as a respondent along with its franchisees. The NLRB’s General Counsel has been advocating for a change to the joint employer test currently used by the NLRB.  An arm of the U.S. Chamber of Commerce recently published a 40-page report on how the NLRB’s proposed new joint employer test threatens small businesses.

Even without a change to the legal standard, though, businesses and nonprofits have often been caught off-guard by the types of arrangements that can give rise to claims of joint employer liability against an entity that doesn’t serve as the employer on paper or issue workers’ paychecks or Form W-2’s. Besides the franchise relationships at issue in the McDonald’s cases, arrangements with heightened joint employer risks include independent contractor relationships, the full range of temporary or contingent worker service models, and workforce supply arrangements. The latter sometimes come in the form of employee leasing or Professional Employer Organizations (PEO’s). Also, joint employment issues can arise when two companies are affiliated by some measure of common ownership or control.

Business organizations would be wise in this current legal climate to take a proactive approach to minimizing joint employment risks. Worthwhile steps to consider taking now include:
  • Reviewing employee handbooks and manuals for possible joint employer issues
  • Auditing workplace practices and procedures
  • Training directors, officers, and management on key joint employment risks
  • Reviewing affiliations with other entities, as well as service contracts, to assess and take steps to minimize joint controls and joint employer risks
  • Conducting insurance coverage audits and considering insurance against joint employment risks
Unfortunately, joint employer liability is not an area of the law that is well-defined and uniform.  The standards for determining joint employment can vary depending on the legal context and jurisdiction, and there are not many bright-line rules. Businesses can, however, enhance their chances of avoiding joint-employer surprises by being proactive and seeking legal counsel to navigate through these challenging issues.

Thursday, April 16, 2015

EEOC Issues Important Transgender Rights Ruling, Finding that Restroom Use Should Match Gender Identity

The Equal Employment Opportunity Commission (EEOC) forged new ground earlier this month when it ordered the U.S. Army to pay damages to a transgender employee based on a discriminatory restroom policy. We have reported in past posts on the EEOC’s increased enforcement focus on transgender rights in the workplace under Title VII of the Civil Rights Act of 1964, as well as the increased societal focus on this issue. (See, prior posts here and here.) The EEOC’s recent April 1st ruling in Tamara Lusardi v. John M. McHugh, Secretary, Department of the Army reflects this trend and sets forth important guidance on the EEOC’s position on transgender restroom rights.

The EEOC’s ruling stemmed from a charge of discrimination filed by Tamara Lusardi, a transgender woman. In its ruling, the EEOC found that the Army discriminated against Lusardi by prohibiting her from using the female restroom that matched her gender identity, repeatedly referring to her by male, rather than female, pronouns, and making other hostile remarks. In 2010, Lusardi talked with her supervisors about her process of transitioning her gender presentation/expression from male to female. At the time, Lusardi agreed to use a unisex restroom rather than the women’s restroom until she had undergone a planned surgery. On several occasions when the unisex restroom was unavailable, however, Lusardi used the women’s restroom. On each such occasion, she was confronted by her supervisor, told that her female restroom use made others uncomfortable, and that she must use the unisex restroom until she could show proof of having undergone a “final surgery” to become female.  

The EEOC found that the Army’s restroom restriction was a discriminatory adverse employment action based on Lusardi’s sex, noting that equal access to restrooms is a significant, basic condition of employment and a crucial aspect of a transgender employee’s transition. The EEOC found that it was improper for the Army to condition access to the female restroom on any medical procedure, stating:

“Nothing in Title VII makes any medical procedure a prerequisite for equal opportunity (for transgender individuals, or anyone else). An agency may not condition access to facilities – or to other terms, conditions, or privilege of employment – on the completion of certain medical steps that the agency itself has unilaterally determined will somehow prove the bona fides of the individual’s gender identity.” 

In ruling against the Army, the EEOC rejected the Army’s defense that Lusardi had agreed to use the unisex restroom, holding that an employee cannot prospectively waive Title VII rights. The EEOC also rejected the Army’s argument that the discomfort of other employees was a legitimate reason to restrict a transgender individual’s restroom use.

The EEOC also found that the harm to Lusardi extended beyond the denial of equal access to a resource open to others. By restricting Lusardi to use of a unisex bathroom, the EEOC found that the Army had isolated and segregated Lusardi from other persons of her gender and perpetuated the sense that she was not worthy of equal treatment, dignity, and respect.

The EEOC’s decision in Lusardi makes clear the EEOC’s position that transgender individuals must be permitted to use the workplace restroom that matches the individual’s gender identity. While the Lusardi decision is not binding on federal courts, federal courts often defer to the EEOC’s position on federal discrimination laws. As such, employers should review their restroom policies and practices to avoid discrimination risks and should be training managers and employees on transgender rights in the workplace.







Thursday, April 9, 2015

Increased Governmental Scrutiny for Employee Confidentiality Restrictions


Employers should be aware of recent federal agency activity that may require modifications to employee confidentiality agreements. The federal Securities and Exchange Commission (SEC) issued a press release on April 1, 2015, trumpeting the SEC’s first enforcement action against an employer based upon the company’s use of confidentiality agreements for its employees that included “improperly restrictive language.” In its press release, the SEC announced that KBR Inc., a Houston-based technology and engineering company, had entered into a settlement agreement with the SEC agreeing to pay a $130,000 penalty and agreeing to amend the company’s confidentiality statement to make clear that its employees are free to share information with the SEC. The SEC was driven by a concern that confidentiality language used by KBR could have a “chilling effect” on possible employee whistleblowers, causing them to be reluctant to report possible securities violations to the SEC.

The SEC's action taken in the KBR matter should cause all companies, not just publicly traded companies, to review their existing employment-related agreements and policies to ensure that they do not run afoul of whistleblower protections. Similar considerations may also arise from the perspective of other governmental agencies including the Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB), and analogous state agencies, to name a few. Careful employment law attorneys regularly ensure that confidentiality provisions that exist in a variety of employment-related agreements do not improperly restrict the right of an employee (or former employee) to provide assistance or input to the EEOC on an investigation of the employer. Similarly, careful employers – and their attorneys – should be mindful of confidentiality requirements that might be perceived by the NLRB to improperly encroach upon workers’ rights to organize or exercise rights under the National Labor Relations Act (applicable to all employers, whether with unionized workforces or otherwise).

Considerations about potentially over-reaching confidentiality clauses may be raised by a variety of documents commonly generated and used in the workplace, including, for example:
  • Separation/severance agreements
  • Internal compliance/investigation process documents
  • Front-end confidentiality agreements/employment agreements
  • Other confidentiality policies used in the workplace
It would be prudent for employers to review their current confidentiality agreement wording, in all of these types of documents or agreements, to ensure that the language does not inadvertently run afoul of these “whistleblower stymying” concerns or other concerns of governmental agencies. At the same time, employers should still continue to be aware of the significant value that confidentiality provisions may provide in protecting a company’s sensitive business information. The key for these provisions continues to be that if they are to be used, they require careful consideration when drafting them. Using “off-the-rack” agreements or wording can be risky. 

Wednesday, April 1, 2015

The Latest in Labor Law - New Handbook Rules for All Employers


The federal National Labor Relations Board (NLRB) is at it again. This time, the Board’s general counsel has issued a March 18, 2015, Report Concerning Employer Rules. The Report is a detailed document setting forth the NLRB’s position on the types of employee handbook policies that comply with or run afoul of Section 7 of the federal National Labor Relations Act (NLRA).  Under Section 7, all non-management employees have a legally protected right to engage in group activity aimed at improving their terms and conditions of employment. Many employers are surprised to learn that Section 7 rights apply in both unionized and non-unionized workplaces. 

In light of the NLRB’s new Report, it is time to dust off your employee handbook and check on whether your policies put you at risk of an unfair labor practice charge by the NLRB.  As you engage in this process, you will find that, while sometimes helpful, the NLRB’s new Report also includes maddeningly fact-specific and contextual policy analysis that often feels counter-intuitive.  Based on our “deciphering,” here are a few specific takeaways for employers on the types of policies that, according to the NLRB, are either lawful or unlawful based on their “chilling” effect on the exercise of Section 7 rights:

 Confidentiality Rules:
  • UNLAWFUL
o   Expressly or implicitly prohibiting discussions of terms and conditions of employment, including but not limited to wages
o   Expressly or implicitly prohibiting discussion of “employee” or “personnel information” given that this could “chill” discussions of employment terms and conditions
  • LAWFUL
o   Broadly prohibiting disclosure of unspecified “confidential” information
o   Prohibitions on disclosing partner, vendor, customer or client data, rather than coworker data

Employee Conduct Toward Company and Supervisors:
  • UNLAWFUL
o   Requiring employees to be “respectful” of the Company or management, given that employees have the right to be negative about the company and its managers in connection with trying to improve work conditions
o   Expressly or implicitly prohibiting employees from making statements that might damage the Company’s business or reputation
  • LAWFUL
o   Prohibiting rudeness toward customers or clients
o   Requiring cooperation with supervisors, coworkers, customers, and vendors

Employee Conduct Toward Colleagues: 
  • UNLAWFUL
o   Expressly or implicitly prohibiting online arguments, insults, or hurtful comments about company management or other company employees
o   Expressly or implicitly prohibiting the sending of unwanted or inappropriate emails, although limiting such emails to “non-working” time is permissible
  • LAWFUL
o   Expressly or implicitly prohibiting coercing, intimidating, or harassing behavior or statements

Employee Interaction with Third Parties: 
  • UNLAWFUL
o   Banning employee interaction with the press or government agencies
  • LAWFUL
o   Requiring the Company’s response to be made by designated spokesperson(s)

Use of Company Logos, Copyrights, Trademarks:  
  • UNLAWFUL
o   Prohibiting the use of logos or company graphics in social media   
  • LAWFUL
o   Requiring employees to respect copyright and trademark law

Photography and Recording Restrictions: 
  • UNLAWFUL
o   Completely banning photography or recordings on job-site 
  • LAWFUL
  Requiring pre-approval for cameras to be allowed on job-site