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Appellate Court Affirms Dismissal of EEOC Challenge to Credit Checks

April 10, 2014

By Scott J. Wenner

In an important opinion that turned on a technical rule of evidence, but which has broader implications, the Court of Appeals for the Sixth Circuit yesterday strongly rejected the EEOC’s methodology for asserting that an employer’s use of credit checks has an unlawful disparate impact on minority applicants.

As we have written previously, [EEOC Begins Enforcing 2012 Criminal Background Check Guidance] and [EEOC Position on Criminal Background Checks Rejected Again], as part of its effort to eradicate systemic discrimination, the Commission has published sweeping guidelines and has filed a number of lawsuits aimed at curtailing use of background checks in the hiring process.  Its theory is that these methods have a disproportionately adverse impact on black and Hispanic applicants, and therefore must be justified as job-related and required by business necessity. While the pushback from employers, and even by a collective group of state attorneys general, was predictable in view of an employer’s obligations to its stakeholders in the areas of personal and financial security and safety, the Commission was undeterred.

The fact that its first two lawsuits challenging background check practices – by Kaplan Higher Education Corp. and by event organizer Freeman – were dismissed by federal district judges who plainly were highly dubious of the EEOC’s theory, did not prompt the Commission to change course. The short shrift given the EEOC’s position by the Sixth Circuit panel in Kaplan, which staunchly supported the district court’s analysis, should give the Commission substantial doubt over the viability of its theory, which also is pending review by the Fourth Circuit in Freeman.

Technically at issue in Kaplan was the methodology used by the EEOC to prove the impact of Kaplan’s credit background checks on black applicants.  As Kaplan did not record the race of applicants, a fact obviously needed to establish the impact of its practice on African-American applicants, the Commission retained a purported expert “race rater” to divine the race of 900 applicants using subpoenaed drivers’ license photos. The “expert’s” only credentials appeared to be a doctorate in organizational and industrial psychology and some statistical expertise.  On multiple unassailable grounds the appellate panel found that the method used to prove the races of the applicants (i) failed to satisfy any of the factors used by the courts to test the reliability of expert evidence under the Federal Rules of Evidence and (ii) was based on a sample that was unrepresentative of Kaplan’s pool of applicants.  As devastatingly summarized at the end of the Court’s relatively brief opinion:

The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.

What should be giving the Commission particular pause about the Sixth Circuit’s opinion reaches beyond its limited holding.  It is found in the opening paragraph of the opinion, which reads in its entirety:

In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses. The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan.

Coupled with the fact that the court ruled a mere three weeks after it heard oral argument, this passage, which is consistent with views expressed by the district courts that dismissed both the Kaplan and Freeman cases, certainly suggests that the EEOC will have a tough road ahead in convincing the courts to embrace its effort to curb the use of background checks to screen applicants.

Conclusions

The Court of Appeals for the Fourth Circuit will be deciding the EEOC’s appeal from the dismissal of its Freeman action, probably in the near future.  Further, the EEOC has not commented yet on whether it plans to seek Supreme Court review of the Sixth Circuit Kaplan decision.  Given the focus of Kaplan’s holding on the evidentiary value of the expert’s opinion and the EEOC’s apparent judgment error in bringing that action based on what the appellate panel obviously considered to be a poor excuse for an expert opinion, the Commission could take the position that strictly speaking, Kaplan does not affect the EEOC’s position on the unlawfulness of overly broad use of background checks to screen applicants. For all of these reasons, it is premature to assume that the Commission will back off the rather extreme position it has asserted in its guidelines and has taken in the actions it has brought thus far.

Thus, employers should continue to exercise care in selecting positions for which they will use background checks to screen applicants, and understand the risk that the costly defense of a challenge could be the result of a decision to continue to use credit and/or criminal background checks broadly in screening applicants.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

 

Philadelphia Employers: Notice to Employees of Pregnancy Related Accommodations

April 4, 2014

By Rebecca Lacher

Under the Fair Practices Ordinance enacted earlier this year and discussed here, Philadelphia employers have less than three weeks to provide individual written notification to employees that affirms the right of employees to be free from discrimination and to receive reasonable accommodations in relation to pregnancy, childbirth and related medical conditions. Employers also may post a notice that summarizes employee rights under the ordinance that recently was approved by the Philadelphia Commission on Human Relations. However, posting alone will not satisfy the notice requirements of the ordinance.

What Do Philadelphia Employers Have to Do?

  • Provide written notice by April 20, 2014. The Commission approved a poster in late March, available here, that, if distributed both to current employees and to all new hires going forward, will satisfy the notice requirement. The ordinance does not require public posting, but instead states that in addition to distributing individual notices, employers may post the notice conspicuously in an area that is accessible to all employees.
  • Train managers and human resources personnel on how to reasonably accommodate women based on pregnancy, childbirth or a related medical condition. Accommodations under the ordinance include, but are not limited to: restroom breaks; periodic rest for employees who stand for long periods of time; assistance with manual labor; leave for a period of disability arising from childbirth; and, reassignment to a vacant position.
  • Review handbooks and policies to update reasonable accommodation policies and procedures and ensure notice of the ordinance is provided to all new hires.

Employers with employees in jurisdictions outside of Philadelphia should review applicable laws for each facility location as other states and municipalities have passed similar laws with varying requirements. For example, New Jersey requires accommodation if the employee requests such accommodation on the advice of a physician and Maryland requires consideration of “all possible means of providing the reasonable accommodation,” including a complete change of job duties. While reviewing and revising policies to include the new requirements for pregnancy accommodations, employers covered by the Fair Labor Standards Act should ensure they are providing nursing mothers the required reasonable break time to express milk in a space that is free from intrusion for one year after the child’s birth.

For more information regarding this or other labor and employment issues, please contact Rebecca Lacher, a member of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Connecticut Wins Race to Raise Minimum Wage to $10.10 Per Hour

April 3, 2014

By Scott J. Wenner

On Wednesday, March 27, the Connecticut legislature approved a bill to make that state the first in the nation to raise the minimum wage to $10.10 per hour – the figure that President Obama proposed that Congress mandate nationally.  Both houses of the state’s legislature have Democratic majorities of 3 to 2 or greater.

One day later, Connecticut Governor Dannel Malloy signed the minimum wage measure into law.  And the next day, March 29, Gov. Malloy announced his candidacy for re-election this November.  Confirming the careful orchestration of the timing of his signing the minimum wage increase and his next day announcement of his candidacy, the Governor’s signing ceremony was covered live by all three major network affiliates in Hartford.

The new law will not force an immediate raise in the minimum wage to $10.10 in Connecticut, which was just increased to its present $8.70 per hour on January 1 of this year.  The new law instead mandates a phased increase to $10.10 in 2017.

More specifically, Connecticut’s new law will increase the minimum wage in the state to $9.15 (instead of the $9.00 figure set by a law Malloy signed last year). The hourly minimum then will increase to $9.60 on Jan. 1, 2016, and to $10.10 on Jan. 1, 2017.

Near-unanimous Republican opposition centered on Connecticut’s above average unemployment rate of 7.2 percent, and the fact that the Congressional Budget Office released a report last month that predicted that raising the minimum wage to $10.10 an hour nationally would reduce total employment by some 500,000 workers.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner,  past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

White House kicks off new campaign against overtime exemptions

March 14, 2014

By Scott J. Wenner

In what business may view as the White House’s most substantial contribution to the Democrats’ 2014 mid-term election campaign, President Obama has directed Secretary of Labor Thomas Perez to “update” and “simplify” the overtime rules – but with a clear view towards narrowing the executive exemption at the least. On March 12, Perez was on Capitol Hill testifying in support of the other branch of the Administration’s strategy to galvanize the support of lower wage earners: a minimum wage increase to $10.10 per hour.

Tacitly acknowledging rebukes received by the Administration from the courts for imposing significant regulatory changes in the labor and employment arena with insufficient notice or opportunity to meaningfully comment, the President promised that Perez would consult with business and worker representatives alike before changes are mandated.  The message was clear nonetheless:  he was directing Perez “to restore the commonsense principle behind overtime.”  That principle: “if you work more, you should get paid more.”

According to news reports, the Administration may be focused on making a significant adjustment to both the salary basis and the duties tests in their present forms.  More specifically, the President noted that an employee presently can be deemed an “executive” who is exempt from the overtime pay requirements of the Fair Labor Standards Act if he or she earns as little as $455 per week (or $23,660 per year). It seems to be a virtual certainty that the minimum salary component of the test for exempt status will increase – perhaps substantially. Some states, e.g., California and New York, already require a higher salary level to qualify an employee as exempt.

Even more significantly, however, there are suggestions that the Administration is considering replacing the “primary purpose” portion of the duties test with a quantitative measure that will require an employee to spend the majority of his or her time actually performing executive, professional or high-level administrative duties.  This is the present rule in California that has provided some of the fodder for class actions.   Such a rule could require employers to retain consultants to perform expensive time and motion studies in order to justify exemptions, and could also make it impossible for small employers to deem any employees exempt, as necessary multitasking dilutes the time a manager can spend on pure managerial duties.

The President’s proposal and Secretary Perez’s actions on it certainly will heat up this election year.  Stay tuned.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner,  past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

NYC Earned Sick Leave Law expanded just before April 1 effective date

March 7, 2014

By Scott J. Wenner

As promised, as one of his first orders of business New York City’s new mayor asked the City Council to amend the Earned Sick Time Act, which was enacted over former Mayor Michael Bloomberg’s veto.  Our blog reported on this ordinance here, here and here.  It was not surprising that the overwhelmingly Democratic Council delivered the amendments Mayor Bill de Blasio requested. The amendments extend coverage of the legislation to 500,000 more workers and moved up the timetable for implementation to April 1, 2014 for all covered employers – now including employers with five or more employees.

The legislation passed last year just covered employers with 15 or more employees and the April 1 compliance date originally applied only to those employing 20 or more, phasing in employers with 15 to 19 employees on October 1, 2015.

The new ordinance, dubbed the Expansion of Earned Sick Time Act, made the following changes to the Earned Sick Time Act as originally enacted in mid-2013:

  • Added grandparents, grandchildren and siblings to the definition of “family member” under the Earned Sick Time Act.  (The Earned Sick Time Act permits covered employees to use earned sick time to care for family members who are ill.)
  • Removed exemptions in the original Act for certain manufacturers and mills, as well as bakeries, custom tailors and candy stores.
  • Extended paid sick leave coverage to employers of five or more employees, as noted above, lowering the coverage threshold from 15 workers.  Employers with fewer than five employees still must provide unpaid sick leave (as the prior law already required them to do.)
  • Eliminated the phasing in of coverage of the Act to any group of employers, so that the Act becomes effective simultaneously to all covered employers this April 1.

While the Earned Sick Time Act presently is to be administered by the New York City Department of Consumer Affairs (DCA), the new amendments grant authority to the Mayor to reassign that responsibility to another agency. If this provision suggests that the City Council lacks confidence in the DCA, perhaps that lack of confidence stems in part from DCA’s failure as of this late date to publish an informational form notice to employees for which it is responsible. The Act requires employers to distribute notices about the law to all new employees beginning April 1.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner,  past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

NLRB General Counsel Memo Highlights Possible Pro-Union Changes in the Law

March 5, 2014
tags:

By Michael J. Wietrzychowski

From time-to-time, the NLRB’s General Counsel issues memoranda to NLRB field offices regarding cases that the General Counsel believes require serious legal review by the NLRB’s Division of Advice. These memoranda often signal the possibility that the NLRB may deviate from current legal precedent regarding these issues. On February 25, the General Counsel issued a memorandum that highlighted some of the following cases and issues that require such submission:

  • Circumstances under which a clear corporate successor is obligated to bargain with a union before setting initial terms of employment.
  • Allegations that an employer’s permanent replacement of economic strikers was done with an unlawful motive.
  • Employees’ right to use an employer’s e-mail system for union activities.
  • The employer’s duty to furnish financial information in bargaining where the employer asserts an “inability to pay” or where the employer has made more specific financial assertions and refuses to provide information in support of those assertions.
  • Denial of Weingarten rights to non-union employees.
  • Refusal to furnish information related to a relocation or other decision subject to a Dubuque Packing analysis.
  • Partial lockouts by the employer.
  • “At-will” provisions in employer handbooks that are not resolved by NLRB Advice memoranda.
  • The legality of any aspect of a “neutrality” or card check agreement or other pre-recognition agreement that is not answered by the Board’s decision in Dana Corp.
  • Rights of contractor employees who work on another employer’s property to have access to the premises to communicate with co-workers or the public, where the issues are not resolved by the Board’s decision in New York New York Hotel and Casino.
  • Mandatory arbitration agreements containing a class action prohibition that are not resolved by D.R. Horton or subsequent Advice memoranda.
  • Beck issues regarding the chargeability of job targeting program expenses, the chargeability of legislative expenses, and the chargeability of organizing expenses in complex cases.

We will be posting updates regarding these matters as they wind their way through the Board.  In the meantime, there are some actions that you can take now to ensure that you are currently in compliance:

  1. Review your policies and practices, including handbooks, to ensure that they do not run afoul of current NLRB law. Non-complying policies and handbooks, even if not enforced, can give rise to an unfair labor practice charge. Common areas of NLRB violation include policies addressing confidential information, use of and dissemination through social media of employee speech, policies against disruptive conduct, and non-solicitation policies and practices.
  2. Train your managers on the “do’s and don’ts” of communication involving a union, union organizing activities, and employee speech and communication. This also extends to non-union employees, as they also have protectable rights under the law.
  3. Review your practices for any unequal treatment. For example, if your company’s policy prohibits the use of its email system or computers for non-business matters, and it turns out that employees are using email and computers for non-business matters, then the employer may be limited to stop such use if used for union organizing activities.

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowski, Co- Chair of Schnader’s Labor and Employment Practices Group. 
 
The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Philadelphia ordinance requires reasonable accommodation for pregnancy and childbirth

February 14, 2014

By Anne Kane

On January 20, 2014, Philadelphia Mayor Michael A. Nutter signed an amendment to the Philadelphia Code, expanding protection of pregnant employees in the workplace. The ordinance requires Philadelphia employers to make reasonable accommodations for female employees “affected by pregnancy” regardless of whether those employees are “disabled.” This means that an employee who is having a healthy pregnancy is entitled to accommodation to allow her to perform her job. Failing to provide such accommodation constitutes unlawful sex-based discrimination.

Reasonable accommodations may include:

  • Restroom breaks
  • Periodic rest for employees whose jobs require that they stand for extended periods
  • Assistance with manual labor
  • Leave for a period of disability arising from childbirth
  • Reassignment to a vacant position
  • Job restructuring

Employers must grant requested accommodations unless doing so would impose an undue hardship on their business. Factors relevant to whether an accommodation would cause an undue hardship include: (1) the nature and cost of the requested accommodations; (2) the overall financial resources of the employer’s facility or facilities; (3) the size of the employer, including the number of employees and facilities; and (4) the type of operations and workforce structure.

Other states and municipalities outside of Pennsylvania have passed similar laws expressly requiring employers to reasonably accommodate pregnant employees, including Alaska, California, Connecticut, Hawaii, Illinois, Louisiana, Maryland, New Jersey, New York City and Texas. However, these laws vary in their terms. For example, Maryland’s pregnancy discrimination law classifies pregnancy as a “disability” and requires employers to consider “all possible means of providing the reasonable accommodation,” including changing job duties completely. In New Jersey, a duty to accommodate only arises if the employee requests it on the advice of her physician. Employers should review carefully their practices and procedures to ensure compliance with the laws applicable to their facilities.

Employers must post a notice of employees’ rights under the Philadelphia ordinance on or before April 20, 2014 (90 days after the January 20, 2014 effective date).

For more information regarding this or other labor and employment issues, please contact Anne Kane, Co- Chair of Schnader’s Labor and Employment Practices Group. 
 
The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.
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