Mandatory Paid Sick Leave is Coming to NYC
New Yorkers are set to pick their first new Mayor in 12 years this November and the field of contenders, which includes the Speaker of the City Council, is wide open. In a burst of election year spirit the City Council has voted to enact the second major law in as many months that has been at the top of the “must have” list of the City’s powerful unions and community interest groups: mandatory paid sick leave for employers with more than 15 employees, and mandatory unpaid sick leave for the rest. The first enactment, prohibiting employment decisions based on the unemployment status of an applicant – see HERE – became law over a mayoral veto in March. While Mayor Bloomberg is expected to veto this measure as well, the 45 to 3 margin with which it passed assures its eventual passage – especially with the election in plain view. In addition, a third giveaway to the unions – a ban on credit checks by most employers, retailers included – is being readied for a possible vote this year.
For the details of this major new legislation that touches all NYC employers, please see our new Alert, which is available HERE. The essentials are:
- Effective Dates:
- April 1 2014: five days paid sick leave for employers of more than 20, and five days unpaid leave for all others, must begin to accrue; compliance with recordkeeping and notice provisions starts.
- October 1, 2015: paid sick leave threshold lowered, covering employers of 15 employees.
- Accrual Rate: One-hour leave per 30 hours worked.
- Eligibility to Use: after four months.
- Carryover Rights: Up to 40 hours can be carried over to next year; no compensation for accrued unused paid leave at termination.
- Permitted Purposes: personal or family medical condition, diagnosis or treatment.
- Enforcement: NYC Department of Consumer Affairs.
- Penalties: Triple lost wages plus civil penalties of up to $1,000.
- Notice and Recordkeeping Requirements: mandatory notice of rights upon hire; recordkeeping for two years.
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For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, 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.
Small Business Owners: Can a Fellow Owner Sue Your Business Claiming Employment Discrimination?
In a very recent opinion, the U.S. Court of Appeals for the Third Circuit answered the question with an emphatic (and lawyerly) . . . it depends!
The federal employment discrimination laws – Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, among others – prohibit discrimination in employment, which leads many to presume that if a person is not an employee of a business, that person is not protected from discrimination by that business on the basis of race, sex, age, religion, disability and other protected characteristics. This may leave an impression on many smaller businesses with working owners that the business needn’t exercise care to avoid appearing to act or make decisions regarding their business partners in a manner that would violate laws against employment discrimination and harassment. The Third Circuit’s opinion in Robert A. Mariotti, Sr., v. Mariotti Building Products, Inc. (April 29, 2013) confirmed that owners of a close corporation or other small business entity sometimes may bring actions for employment discrimination, depending on the circumstances.
Relying on U.S. Supreme Court authority, in a slightly different context, and on EEOC guidelines on determining whether “partners, officers, members of boards of directors, and major shareholders qualify as employees[,]”, the court listed the following factors as relevant to this determination:
- whether the organization can hire or fire the complainant or fix rules and regulations for the complainant’s work;
- whether and to what extent the organization supervises the complainant’s work activities;
- whether the complainant reports to someone higher in the organization;
- whether and to what extent the complainant can influence the organization;
- whether written agreements suggest that the parties intended the complainant to be an employee; and,
- whether the complainant shares in the profits, losses, and liabilities of the business.
Conclusion
Based on these factors the court affirmed the lower court’s conclusion that the complaining owner was not an employee and could not sue. However, the Mariotti opinion illustrates that small business owners are not exempt from discrimination, harassment and retaliation lawsuits from other shareholders, officers, directors and partners who are found to function more like employees. Guidance from corporate and/or employment law experts can help minimize the risk to a small business in these situations. Schnader lawyers stand ready to provide creative solutions to these and other issues that arise for small businesses.
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For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, 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.
Decision Offers Opportunity to Limit Exposure for Injuries to Employees of Contractors/Vendors
The Pennsylvania Supreme Court, in a 5-1 decision affirming the opinions below, held that the Pennsylvania’s Workers’ Compensation Act does not bar a disclaimer preventing an employee from suing a third-party customer for work-related injuries.
In Bowman v. Sunoco, Inc., the appellant, Sandra Bowman, was an employee of Allied Barton Security Services and worked at a Sunoco refinery at which Allied Barton provided security services. Bowman signed a disclaimer as a condition of her employment with Allied Barton explaining that the “Workers’ Compensation statutes cover work-related injuries” and that “in consideration of Allied Security offering me employment, I hereby waive and forever release any and all rights I may have to: make a claim, or commence a lawsuit, or recover damages or losses from or against any customer . . . to which I may be assigned.”
Bowman slipped and fell on ice while working at the Sunoco refinery. She filed for and received workers’ compensation benefits from Allied Security’s insurer and then sued Sunoco for negligence seeking recovery for her injuries from the same slip and fall. Bowman argued that the disclaimer violated Section 204(a) of the Workers’ Compensation Act, which states that no “release of damages made before the date of any injury shall be valid or shall bar a claim for damages resulting therefrom” and is contrary to public policy.
The Pennsylvania Supreme Court disagreed, holding that the provisions of Section 204(a) “speak directly and solely to employers and employees” and “apply only to agreements to bar a claim against an employer.” The Court found no violation of public policy where the employee “is absolutely covered” by workers compensation and explained that Bowman “was not forced to sign the release, and the release did not in any way prevent her from receiving compensation for her work-related injuries as provided by the Act.” Instead, “it served as a benefit to Allied’s customers and in no way affected [Bowman’s] right to recover from her employer for work-related injuries,” observing that the release applied only to injuries for which she already was compensated under the Act – injuries for which she had bargained away her right to sue and seek civil damages.
Significance
This is an important decision for employers whose employees regularly work at the site of the third parties with whom they contract. Perhaps even more significantly, it offers to businesses that have employees of contractors and vendors on their premises regularly or periodically a vehicle for limiting their potential liability to those employees for personal injuries sustained on their premises that are compensable under the workers compensation system.
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For more information regarding this or other labor and employment issues, please contact Rebecca Lacher, a member of Schnader’s Labor and Employment Practice 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.
New York State Minimum Wage to Increase Beginning in 2014
Through an unusual agreement, the New York State Legislature and Governor Andrew Cuomo decided to hike New York State’s minimum wage in three steps from the current $7.25 per hour to an hourly rate of $9.00 in 2016. The minimum wage schedule looks like this:
| 2013 | $7.25 per hour |
| 2014 | $8.00 per hour |
| 2015 | $8.75 per hour |
| 2016 | $9.00 per hour |
What places the pact in the category of “unusual” is the compromise reached to ease the burden on employers of lower wage employees. Under the recently passed legislation, tax credits will be provided to employers that hire seasonal workers aged 16 to 19 who are still in school. Republican leaders contend that the subsidy is intended to protect the employment of those otherwise most likely to lose their jobs when the hikes take effect. Eligible employers would effectively receive an hourly subsidy of $0.75 when the wage rate increases to $8.00 per hour. That subsidy will increase to $1.31 per hour when the minimum wage increases to $8.75 in 2015 and will hit $1.35 per hour in 2016 when the rate of pay hits $9.00.
However, politics will be politics as several labor unions – the United Food and Commercial Workers International (UFCW) among them – have slammed the deal even though the result increases the minimum wage. Among the accusations: that the subsidy is a payoff to Wal-Mart, which stands to benefit from the tax credits “on the backs of hard-working taxpaying Americans,” for its years of making campaign contributions to New York Republicans. Wal-Mart has denied lobbying for the tax credits and the State Republican leadership denies the charge, expressing wonderment “that these unions would oppose this provision given the high unemployment rate among young New Yorkers, especially minorities.”
For questions or assistance on implementing the minimum wage increase or in seeking the tax credit after January 1, 2014, contact your Schnader lawyer.
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For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, 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.
Third Circuit Defers to DOL and Adopts ARB’s New and Expansive Definition of Protected Activity under SOX
A sharply divided panel of the Court of Appeals for the Third Circuit has embraced the Department of Labor Arbitration Review Board’s (ARB) broad redefinition of “protected activity” under the Sarbanes-Oxley Act (SOX).
In Wiest v. Lynch, No. 11-4257 (March 19, 2013), Judge Vanaskie, writing for himself and Chief Judge McKee, held that the court should defer to the ARB’s interpretation of SOX by accepting its new, more expansive definition of a “protected activity” under SOX. Neither the dramatic change of course presented by redefining this key term, nor the fact that the new meaning supplanted a preexisting definition that had been adopted by all the appellate courts called upon to review it, convinced the majority that the ARB’s rejection of its original interpretation of the statute in favor of a significantly different one was not worthy of deference and approval.
The concept of “protected activity” is a key part of SOX. A plaintiff must plead and prove that s/he engaged in a protected activity under SOX – which generally involves a communication – as part of a prima facie case in order to avoid dismissal or entry of summary judgment in favor of the employer. To qualify as “protected,” until recently the ARB required the communication or other activity to “definitively and specifically” relate to one of the categories of fraud or securities violations listed in §806 of SOX, most of which are imported from the Securities & Exchange Act. Platone v. FLYi, Inc., ARB Case No. 04-154 (ARB Sept. 29, 2006), aff’d, Platone v. U.S. Dept. of Labor, 548 F.3d 322 (4th Cir. 2008). This required the communication to assert specific elements of one of the violations identified in §806.
Then, in Sylvester v. Parexel International LLC, ARB Case No. 07-123 (ARB May 25, 2011), with an Obama-appointed ARB firmly in place, that body abruptly changed course and repudiated its Platone “definitively and specifically” standard for a protected activity or communication, finding the analysis of SOX by the 2006 ARB faulty. It instead substituted a less stringent and nonspecific “reasonable belief” standard that it deemed more consistent with language of §806 of SOX, which prohibits retaliation for reporting an act that the reporting employee reasonably believed violated SOX. Under the reasonable belief standard propounded in Sylvester and approved by the panel in Wiest, the plaintiff must only prove that s/he believed the conduct in question violated some provision of SOX, and that a reasonable person with the same levels of training and experience would believe that conduct could violate SOX as well.
Also key to the majority opinion was its decision to defer to the ARB’s changed interpretation. Under standards announced by the Supreme Court 30 years ago in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, if Congress failed to address a question in a statute, such as what constitutes a “reasonable belief” as that term is used in §806 of SOX, and the responsible enforcement agency has framed an answer that is challenged in court, the court must determine initially “whether the agency’s answer is based on a permissible construction of the statute.” Wiest, supra. If so the courts should defer to the agency’s answer. And where the agency’s answer represents a reversal of its prior position, the Supreme Court has directed that the new answer also should be deferred to by a court “if the agency adequately explains the reasons for a reversal of policy.” National Cable &Telecommunications Ass’n v. Brand X Internet Services, 545 U.S. 967 (2005). The majority in Wiest found that ARB had adequately explained the change – a conclusion with which dissenting Judge Jordan forcefully disagreed, declaring: “Sylvester’s rejection of Platone is hardly explained and far from persuasive.”
Implications
The Wiest panel’s adoption of the ARB’s weakened test for whether a communication or other act is protected under SOX eases the way for purported whistleblowers to gain protection from discipline or discharge, to withstand dismissal motions in SOX actions, and to prevail on the merits. It could well permit employees to obtain protection based on vague assertions of belief that conduct was observed that might turn out to have violated SOX – a far cry from the definiteness and specificity employers need to properly investigate and evaluate a claim, and hardly consistent with an ostensible goal of SOX to motivate employers to root out and correct conduct that violates the securities laws.
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For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, 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.
Supreme Court Closes CAFA Federal Court Evasion Loophole; Employers Likely to Benefit
In a case arising outside the employment context but with clear applicability to employment class actions, the U.S. Supreme Court has unanimously held that a plaintiff filing suit on behalf of a putative class may not skirt federal court jurisdiction under the Class Action Fairness Act (CAFA) by stipulating that, even though a larger sum could be awarded, the class would not seek to recover more than $5 million. (Standard Fire Insurance, Co v Knowles, March 19, 2013.)
In invalidating an order remanding the case back to state court after the defendant had removed it to a federal court, the Supreme Court reasoned that because no class had yet been certified in this early stage case, under settled law the named plaintiff had no authority to bind putative class members to accept a lesser recovery than they might be entitled were the class to prevail. Therefore, the stipulation – an artifice to avoid federal court – was binding only on the representative plaintiff’s own claim. Thus, it failed to show that the $5 million amount in controversy threshold needed to establish federal jurisdiction under CAFA could not be satisfied.
Facts and Procedural Background
The plaintiff brought a putative class action in state court in Arkansas against an insurance company complaining that its practice of excluding general contractor fees from payments it made for homeowner’s insurance losses was unlawful. According to the complaint a class of possibly thousands of similarly harmed policyholders existed which he wished to represent. The complaint included the following language: the “Plaintiff and Class stipulate they will seek to recover total aggregate damages of less than five million dollars.” Attached to the complaint was the named plaintiff’s affidavit promising he would not seek a recovery for the class as a whole exceeding $5 million.
Before answering, the defendant removed the case to federal court under CAFA. CAFA’s jurisdictional language provides that federal “district courts shall have original jurisdiction” over a putative “class action” where, inter alia, the “matter in controversy exceeds the sum or value of $5,000,000.” 28 USC §§ 1332(d)(2), (5). To determine whether the matter in controversy exceeds that sum, CAFA directs that the “claims of the individual class members shall be aggregated.” The district court found that more than $5 million actually was in controversy given the claims asserted, but nonetheless remanded the action back to state court based on the named plaintiff’s stipulation that less than $5 million – less than what they might otherwise be awarded should they prevail - would be sought on behalf of the alleged class members. The Court of Appeals for the Eighth Circuit declined to hear an appeal, but the Supreme Court granted certiorari and emphatically reversed.
Court Protects CAFA Jurisdiction
In its unanimous reversal, the Court observed that the named plaintiff’s stipulation was ineffective to speak for the putative class members and their intentions. It explained that until a class is certified, the putative representative plaintiff cannot legally bind members of the class. Accordingly, he had no authority to compromise the value of the claims of the absent class members by conceding that the amount in controversy would be under $5 million after the district court found that the value of the class claims exceeded CAFA’s jurisdictional threshold. Noting further that federal jurisdiction cannot be based on contingent future events – a point that the plaintiff conceded – the Court observed that the stipulation purporting to diminish the amount in controversy itself was contingent, as it could not bind the putative class members.
The plaintiff pointed out that federal courts routinely permit plaintiffs to avoid removal by stipulating that the amounts at issue fell below the jurisdictional amount, and argued that this case should be treated consistently. The Court demurred, finding that the plaintiff’s stipulation’s non-binding effect on absent class members whose claims were being devalued to avoid federal jurisdiction was a defining difference. The stipulation therefore was ineffective to defeat federal jurisdiction under CAFA and required the district court’s order of remand to state court to be vacated.
The Purpose of CAFA Would be Thwarted by Permitting a Subterfuge
Although Justice Breyer disposed of the case largely in simple and concise terms based on the inability of a named plaintiff to bind members of an uncertified class, his opinion included some language that will be useful in combating future subterfuges by class action mills fearful of venturing outside friendlier state court venues:
“CAFA’s primary objective [is] ensuring ‘Federal court consideration of interstate cases of national importance.’ § 2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.”
Thus, Standard Fire Insurance offers support for the notion that the district courts should be sensitive and resistant to efforts by the plaintiff’s class action bar to evade CAFA jurisdiction by slicing, dicing or otherwise masking their claims to avoid federal jurisdiction.
Potential Impact on Employment Litigation
The facts of Standard Fire Insurance are commonplace in the world of wage and hour litigation, particularly in states such as California where the available state law remedies dwarf potential Fair Labor Standards Act awards; where state courts are perceived as far more hospitable to the choking volume of wage and hour class actions; and where federal judges seemingly have been eager to remand these cases – including based on pre-certification representations similar to the one before the Supreme Court. The Standard Fire Insurance opinion can only help the employment defense bar to ensure that CAFA jurisdiction keeps the higher value wage and hour class actions in federal court.
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For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, 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.
