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No Clear Answers for Employers: Colorado Baker Who Refused to Create Wedding Cake for Same Sex Nuptials Prevails in Supreme Court

June 8, 2018

By Scott J. Wenner

On Monday, June 4, the United States Supreme Court (“Court”) announced its decision in the highly publicized Masterpiece Cakeshop case. Employers and business owners were among many closely watching this case, hoping for insight on how to handle complicated situations involving competing rights of business owners, customers and/or employees, where charges of discrimination could result regardless of the employer’s or owner’s response. The Court’s decision in this case did not create any new law to guide businesses, but it does further highlight the need for employers to create processes to recognize and effectively manage the risks that arise when religious beliefs and expression intersect with antidiscrimination rights and protections.

In Masterpiece Cakeshop, the Colorado Civil Rights Commission found that the refusal of a devout Christian baker, Jack Phillips, to create and sell one of his highly artistic wedding cakes to a same sex couple on religious grounds was discrimination based on sexual orientation that violated Colorado’s public accommodations law. Like the laws of more than 20 other states, Colorado’s law prohibits any Colorado place of business that sells to the public from discriminating on the basis of disability, race, creed, color, sex, sexual orientation, marital status, national origin, or ancestry. A state court of appeals affirmed the Commission’s finding, and the Colorado Supreme Court declined to hear the case, setting the stage for review by the nation’s highest court. The Court reversed, finding in a 7-2 decision that the Commission’s actions violated the Free Exercise Clause of the First Amendment and were invalid. Although not an employment law case, both the business community and LGBT advocates anticipated an outcome that would reverberate into employment law as well.

Masterpiece Cakeshop presented an intriguing collision of important rights: freedom of expression of religious beliefs and freedom of speech (in the form of designing a creative wedding cake) on the one hand, and the right to be free from unlawful discrimination in public accommodations on the other. However, the Court’s opinion, written by Justice Anthony Kennedy, decided no broadly applicable principles of constitutional or anti-bias law, nor did it provide clear guidance to a business owner whose religious principles and/or free speech rights conflict with the rights of others protected by public accommodations laws. To the contrary, the Court decided the case on narrow grounds, based on the facts unique to that case. Indeed, to avoid any doubt over the limited reach of the decision, Justice Kennedy wrote: “The outcome of cases like this in other circumstances must await further elaboration in the courts, all in the context of recognizing that these disputes must be resolved with tolerance, without undue disrespect to sincere religious beliefs, and without subjecting gay persons to indignities when they seek goods and services in an open market.”

Why Did the Court Reverse the State Court of Appeals and Invalidate the Findings and Order of the Colorado Commission?

Without deciding whether Phillips’s religious objections to creating and producing a wedding cake for a gay wedding trumped the interests of the state’s Civil Rights Commission in protecting gay persons from discrimination, the Court nevertheless ruled in favor of Mr. Phillips. The seven-member majority found that the consideration of this case by the Colorado Civil Rights Commission “was inconsistent with the state’s obligation of religious neutrality that the Constitution requires” when considering the expression of a sincerely-held religious viewpoint. Justice Kennedy observed that the reason and motive for Phillips’s refusal to create the wedding cake were based on his sincere religious beliefs and convictions, thus the “delicate question of when the free exercise of his religion must yield to an otherwise valid exercise of state power needed to be determined in an adjudication in which religious hostility on the part of the State itself would not be a factor in the balance the State sought to reach. That requirement, however, was not met here. When the Colorado Civil Rights Commission considered this case, it did not do so with the religious neutrality that the Constitution requires.”

In support of its key finding, the majority opinion cited several examples of a clear and impermissible hostility among members of the Commission toward the sincere religious beliefs that motivated Phillips’s objection to creating a cake for a same sex wedding. These included statements by Commissioners at formal, public hearings endorsing the view that religious beliefs cannot legitimately be carried into the public sphere or commercial domain; disparaging Phillips’ faith as despicable and characterizing it as merely rhetorical; and comparing Phillips’s beliefs to slavery and the Holocaust – all without objection from fellow Commissioners or comment in its legal briefs. The Court also observed that in several other cases the Commission had ruled in favor of other bakers who objected to creating cakes with anti-gay messages and found this unexplained inconsistency to be further evidence that Phillips’s sincerely held religious beliefs were not considered with the religious neutrality required by the Constitution. It also noted that the state appellate court failed to even refer to the hostile comments of the Commission members and found that it failed to properly analyze the inconsistent treatment the Commission accorded Phillips’s religious expressions compared to how it treated the views of the other bakers.

Conclusions

Although the Supreme Court invalidated the Commission’s finding that Phillips’s actions constituted unlawful discrimination based on sexual orientation, it did not absolve Phillips from the claim of discrimination on the merits as the opinion never had to address the merits. Thus, the Court’s action should not be mistaken as granting a license to discriminate based on sexual orientation whenever a business owner’s sincere religious beliefs might motivate his or her action. While suggesting that limited exceptions might exist in given cases based on religious objections, the opinion cautioned that “it is a general rule that such objections do not allow business owners and other actors in the economy and in society to deny protected persons equal access to goods and services under a neutral and generally applicable public accommodations law.” In this and in other places in his opinion, Justice Kennedy carefully confirmed that this decision brought no change in the law.

It is important that employers ensure that none of their decision makers, supervisors and other agents who may have heard the headline but failed to read the story understand that Masterpiece Cakeshop changes nothing in the workplace setting. Whether or not the employment laws of jurisdiction(s) in which an employer operates specifically protect members of the LGBT community, the invocation by a supervisor of a religious belief as the basis for taking an adverse action against anyone – whether or not that person is in a protected class – is fraught with risk and raises complex and highly nuanced legal questions. Employers should obtain guidance from experienced legal counsel before responding if faced with similar circumstances, and should have counsel develop or revisit the processes already in place to handle these delicate situations. This may be a good time to provide additional training for supervisors and other employees about the risks of taking action on their own or expressing views of any kind, including religious views, that could lead a customer or coworker to file a charge of discrimination.

Employers and business owners may be frustrated that this highly visible case raises new questions for legal compliance, while resolving little. As in most employment matters, the best approach may be to consult with counsel, establish and disseminate standard processes, train employees, and document incidents as they occur.

For more information regarding this or other labor and employment issues, please contact Jo Bennett or Michael Wietrzychowski, co-chairs 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.

Addressing Romantic Relationships in the Workplace Through a Conflict of Interest Policy

June 6, 2018

By Michael J. Wietrzychowski

With the continued media exposure of highly charged complaints of sexual harassment in the workplace, many employers have experienced an uptick in the number of administrative actions and lawsuits alleging sexual harassment. Employers concerned about workplace romantic relationships often fail to address them because they feel reluctant to appear overly intrusive. To alleviate this concern, an alternative to crafting a specific workplace dating policy is for an employer to expand its conflict of interest policy to cover workplace romantic relationships in the same manner as it would apply to any other workplace relationship where the potential for a conflict exists.

Are Consensual Romantic Relationships in the Workplace Sexual Harassment?

Of course the answer is no. By way of example, the U.S. Equal Employment Opportunity Commission defines sexual harassment as “unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature.” Consensual relationships in the workplace that do not include promises or threats, real or perceived, generally are not considered sexual harassment under the law. But as with any romantic relationship, workplace relationships also are not always destined to last. At times, the behavior of a party after a romantic relationship has ended can rise quickly to the level of “unwelcome,” even if the same conduct had once been welcomed. A claim of sexual harassment can ensue if the employer learns or should know of the unwelcome conduct but fails to address it. Simply put, office romances create risk.

How Should Employers Address Romantic Relationships in the Workplace?

Let’s face it – in today’s world, many people meet their significant other in the workplace. No policy can prevent office romances, although some employers have tried by imposing strict “no dating” policies. Our experience with policies forbidding dating is that they are almost impossible to enforce equitably, tend to chill the reporting of sexual harassment, and/or adversely affect employee morale by making the employer appear like Big Brother to employees (and to the outside world once someone anonymously posts the policy on social media). A better approach is to avoid policies that punish consensual romantic relationships, and instead, to implement policies that address the actual and perceived conflicts of interest that can arise out of romantic relationships in the workplace – while strictly enforcing policies against unlawful harassment.

What is a Conflict of Interest in the Workplace?

An internet search of “conflict of interest” returns a myriad of definitions, some rising to the level of multi-page sections of state and federal statutes and regulations. However, in its simplest workplace form, a conflict of interest is a situation where an employee’s duty to her employer is or could be compromised by self-interest or the interests of another – including those of another employee with whom she is romantically involved. Conflicts of interest in the workplace, or their appearance, can arise from many types of relationships. Some are patently evident, such as a salesperson who sells a competing company’s product while employed by another, or a procurement manager who negotiates a vendor contract with his brother’s office supply firm. These are conflicts that the employer should expect the employee to report, and in the latter case, the vendor as well. But what about relationships where the apparent conflict of interest is more subtle, such as where:

  • An employee supervises a friend to whom she rents an apartment;
  • A manager hires a fellow congregant from a close-knit, 50-member church that is their primary social and spiritual circle;
  • A manager supervises an employee whose family employs the manager’s wife.

Although the above relationships appear to create the potential for conflicts of interest, they would likely go unreported to an employer that did not impose a duty on its employees to report such relationships. Moreover, what makes these relationships problematic for the employer isn’t necessarily the relationship itself, but rather, the workplace roles these employees have relative to each other. Workplace romantic relationships create a similar potential for conflict as in the examples above.

Do All Romantic Relationships in the Workplace Create Conflicts of Interest?

Not always. The answer depends on the size of the company and the role, as well as the influence and input an employee has relative to her romantic partner. For example, a conflict of interest clearly arises where a supervisor has direct input into the terms and conditions of employment of her romantic partner. But the potential for conflict of interest is not limited to a direct reporting relationship. For example, an actual or perceived conflict of interest could arise where a CFO provides input into the budget of a department where her romantic partner works, or where a VP of Operations has input into a reduction of force that could affect the department where his romantic partner works.

Tips on Drafting a Conflict of Interest Policy

Like all policies, a workplace relationship policy should provide the rationale for its adoption (here, it is the potential for conflicts, perception of unfairness, etc.), the action or conduct expected from the employees under the policy, and the potential discipline for violating the policy. A sound conflict of interest policy covering workplace romantic relationships includes the following:

  • Purpose of policy (avoid conflicts of interest or their appearance, and promote fairness in the workplace);
  • Definition of conflict of interest;
  • Examples of relationships that likely cause conflicts of interest or their appearance (e.g., supervisor/subordinate relationship);
  • Requirement that both parties to a romantic relationship immediately report it to allow the employer to determine whether the potential for conflict exists;
  • Process for reporting such relationships by participants and other employees;
  • Penalties for failing to report;
  • Explanation of the process for addressing and resolving the potential for conflicts of interest (e.g., meeting with human resources, drafting plan to eliminate the potential for conflicts of interest);
  • Statement that employees in a consensual romantic relationship remain protected by other policies, such as anti-harassment policies, if they believe their rights are violated in the future;
  • Statement that parties to a workplace romantic relationship must continue to abide by rules of professionalism and decorum;
  • Statement that the policy should not be interpreted to interfere with employees’ rights under federal, state or local laws.

As many employers are limited by federal or state laws in the implementation of new or revised policies, they must be aware of the laws that may govern their ability to do so and take steps to comply with any such laws before implementing a new or revised policy.

 

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowskico-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.

SCOTUS Holds that Class Action Waivers in Employment Contracts Must be Enforced

May 22, 2018

By Stephen A. Fogdall

In a landmark decision, the U.S. Supreme Court has ruled 5-4 that arbitration clauses in employment contracts requiring individual dispute resolution procedures and prohibiting class actions and other collective litigation procedures must be enforced under the Federal Arbitration Act.  The Court rejected the position taken by the National Labor Relations Board and some private plaintiffs that employees’ right to engage in “concerted activities” for their “mutual aid or protection” recognized in Section 7 of the National Labor Relations Act makes such class and collective action waivers unenforceable.  The Court issued its ruling in three consolidated cases:  Epic Systems Corp. v. Lewis, Ernest & Young LLP v. Morris and National Labor Relations Board v. Murphy Oil USA, Inc.  In the latter case, the Fifth Circuit reversed the NLRB’s determination that the employer violated Section 7 by including an individual arbitration clause in its employment contract.  In the former two cases, the Seventh and Ninth Circuits respectively adopted the NLRB’s position and allowed private plaintiffs to pursue collective actions under the Fair Labor Standards Act notwithstanding that they had agreed to individual arbitration clauses in their employment contracts.

The Court, in a majority opinion written by Justice Gorsuch, began its analysis by noting that arbitration clauses in employment contracts fall squarely within the FAA’s command that all arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”  The Court then rejected the argument that the final clause of this command, called the “savings clause,” implicates Section 7 of the NLRA.  The Court explained that the savings clause permits a party to oppose arbitration based on defenses, such as fraud in the inducement or duress, that might apply to “any contract.”  However, the savings clause does not allow a court to refuse to enforce an arbitration agreement based on defenses that specifically target arbitration.   The Court reasoned that a putative defense to enforcement of an individual arbitration clause on the theory that such a clause violates employees’ right to engage in “concerted activities” under Section 7 is precisely the type of defense that is not preserved by the savings clause because it specifically targets the alleged illegality of such clauses in the employment setting.  It is, by definition, not a defense of general applicability.

The Court likewise rejected the argument that there is a “conflict” between the FAA and Section 7 of the NLRA such that Section 7 overrides or impliedly repeals the FAA to the extent the FAA would require enforcement of an individual arbitration clause in an employment contract.  The Court held that there could be no conflict between Section 7 and the FAA because “Section 7 doesn’t speak to class and collective action procedures” and contains no “hint about what rules should govern the adjudication of class or collective actions in court or arbitration.”  The Court reasoned that “[u]nion organization and collective bargaining in the workplace are the bread and butter of the NLRA,” and it is “more than a little doubtful that Congress would have tucked into the mousehole” of Section 7 “an elephant that tramples the work done by” the FAA and other laws governing “the particulars of dispute resolution procedures in Article III courts or arbitration procedures.”

Lastly, the Court rejected the argument that the NLRB’s position was entitled to deference under the Chevron doctrine (which requires courts to defer to a federal agency’s interpretation of the statute it administers in certain circumstances).  The Court explained that Chevron was inapplicable because the NLRB did not confine itself to interpreting NLRA, the statue it administers, but rather “sought to interpret this statute in a way that limits the work of a second statute,” the FAA.  If an agency’s “reconciliation” of allegedly competing statutes were subject to deference under Chevron, then “[a]n agency eager to advance its statutory mission, but without any particular interest in or expertise with a second statute, might (as here) seek to diminish the second statute’s scope in favor of a more expansive interpretation of its own,” thus “bootstrapping itself into an area in which it has no jurisdiction.”

The decision is a significant win for employers seeking to limit the costs and risks of class and collective litigation by employees.

Chief Justice Roberts and Justices Kennedy, Thomas and Alito joined Justice Gorsuch’s majority opinion.  Justice Ginsburg wrote a dissenting opinion, joined by Justices Breyer, Sotomayor and Kagan.  The Schnader firm submitted an amicus brief in support of the enforceability of class action waivers in employment contracts in all three cases on behalf of the Mortgage Bankers Association and several state mortgage lending associations.

For more information regarding this or other labor and employment issues, please contact Jo Bennettco-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.

NJ Enacts Equal Pay Law

April 27, 2018

By Jo Bennett

On April 24, New Jersey Governor Phil Murphy signed the Diane B. Allen Equal Pay Act into law.  Most commentators consider it the strongest equal pay law in the nation.

The law amends New Jersey’s Law Against Discrimination to make it illegal to pay employees of protected classes rates of compensation, including benefits, less than the rate paid to employees not of the protected class for “substantially similar work when viewed as a composite of skill, effort and responsibility.”  The protected classes are broad and include characteristics such as age, disability, gender, race, sex, and sexual orientation.

The phrase “substantially similar work” in New Jersey’s law is a departure from most laws aimed at the gender wage gap, which tend to require “equal pay for equal work.”  While it remains to be seen how the courts will apply this phrase, employers should assume that it would cover workers with different titles in different departments who have similar levels of responsibility.  The Act does carve out limited exceptions for circumstances such as seniority, education level, or quantity/quality of production. However, the statute prohibits an employer from justifying a lower salary based on an employee’s past salary at a prior employer.   

Other highlights of the new law include:

  • Employers are prohibited from retaliating against workers who discuss their compensation with co-workers;
  • Employers are prohibited from cutting the pay of a higher-paid worker in order to bring salaries in line upon discovering a pay discrepancy;
  • The statute of limitations for claims based on pay equity is six years;
  • Employees may seek up to six years of back pay for alleged violations of the law; and
  • Treble damages may be awarded if an employer is found in violation of the law.

The legislation, which was previously vetoed several times by former Governor Chris Christie, takes effect July 1.  In the meantime, employers are advised to review their hiring and compensation practices to ensure compliance.

For more information regarding this or other labor and employment issues, please contact Jo Bennettco-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.

NJ Set to Pass Sick Leave Law

April 23, 2018

By Jo Bennett

On April 12, the New Jersey Senate passed the New Jersey Paid Sick Leave Act. The New Jersey Assembly had passed the bill in March, and Governor Phil Murphy is expected to sign it shortly. The law requires nearly all private employers to provide up to 40 hours of paid sick leave to employees per benefit year. The Act exempts public employees, who already have sick leave benefits, as well as per diem healthcare employees and construction workers covered by collective bargaining agreements. However, small businesses are not exempt.

Under the law, employers must establish a benefit year and allow employees to accrue up to 40 hours of paid sick leave at a rate of one benefit hour per 30 hours worked. Employees may use sick time for a family member’s health issues or to attend a school-related conference, as well as for their own health issues. Carrying sick time over to a new benefit year is not required nor is paying out unused sick time upon the employee’s separation. However, employers will be required to document hours worked and sick leave used by employees and to retain these records for five years. The Act also provides a method for employees to sue for damages for alleged violations of the law. The Act expressly preempts local sick leave ordinances passed by municipalities such as Newark and Trenton.

The Act will take effect 180 days after the Governor signs it into law.  In light of the Bill’s imminent passage, New Jersey employers should review their sick leave or paid time off policies to ensure compliance with the new law.

For more information regarding this or other labor and employment issues, please contact Jo Bennettco-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.

San Francisco Law Would Expand the Bar on Background Checks

April 6, 2018

By Scott J. Wenner

On January 1, 2018, recreational marijuana officially became legal in California. Three months later, on April 3, 2018, the San Francisco Board of Supervisors passed an ordinance that would bar employers from inquiring about any conviction that arises out of conduct that has been decriminalized since the date of [sentencing].  While the ordinance ostensibly seeks to broadly protect conduct that is now decriminalized, the measure, if signed by the Mayor, would bar employers from asking applicants or employees, at any time, about convictions for growing or using marijuana. The ordinance is an amendment to San Francisco’s Fair Chance Ordinance. San Francisco Mayor Mark Farrell now has ten days to sign or veto the ordinance. If he does not act, the ordinance will become law and will take effect October 1.

The Fair Chance Ordinance was enacted in 2014 to restrict the use of criminal records in making employment decisions.  Under the Fair Chance Ordinance, employers, contractors and subcontractors may only conduct a background check on applicants after making a conditional offer of employment. The penalty for noncompliance is $500 for the first offense, $1,000 for the second offense, and $2,000 thereafter, and applicants have the right to sue over violations. However, it is important to reiterate that the prohibition of inquiries into marijuana-related convictions extends beyond the application and pre-employment period, and includes inquiries made during employment as well.

Employers in San Francisco – and throughout California – must also comply with California’s statewide Fair Chance Act, which took effect on January 1, 2018. That legislation is part of the nationwide “ban the box” movement.

The take-aways: Employers in San Francisco should ensure that employees with human resources responsibilities, as well as supervisors and managers, understand that marijuana-related convictions are off limits not just in making decisions affecting terms and conditions of employment, but also in everyday discussion. After all, if an employer is not aware of a marijuana conviction, it cannot have unlawfully considered one in its decision making.

Also note that nothing in the ordinance prevents an employer from taking action against an employee who is under the influence of marijuana while at work, or from investigating a possible marijuana-related connection between an industrial accident and marijuana – so long as the employer does not include inquiry into past marijuana convictions in its investigation.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner 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 Rules Auto Service Advisors Are Overtime-Exempt

April 2, 2018

By Michael J. Wietrzychowski

On April 2, 2018, the U.S. Supreme Court issued its opinion in Encino Motorcars v. Navarro, holding that service advisors employed at auto dealerships are exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA).

The case involved a Mercedes-Benz dealership in California and its current and former service advisors, whose job duties include meeting customers to hear concerns about their cars, suggesting repair and maintenance services, and selling new or replacement parts. In 2012, the service advisors sued for back pay, alleging Encino violated the FLSA by failing to pay them overtime. They relied on a 2011 rule from the Department of Labor which interpreted “salesman” to exclude service advisors. However, the Lower Court dismissed the case, agreeing with Encino that service advisors fall under the “salesman” exemption to the FLSA, which exempts from overtime: “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles.”  Subsequently, the Ninth Circuit reversed, but the U.S. Supreme Court vacated the decision and remanded the case to the Ninth Circuit, asking the court to decide the case without reference to the 2011 rule that the Supreme Court deemed procedurally defective.

With these instructions, the Ninth Circuit again held that the service advisors were covered under the FLSA overtime requirements.  The decision again was appealed to the U.S. Supreme Court, which overturned the Ninth Circuit, concluding that service advisors fall under the salesman overtime exemption.  The Supreme Court explained that service advisors are “salesmen” because they sell customers services for their vehicles and that they are “primarily engaged in servicing automobiles” because they are integrally involved in the servicing process, even though they do not manually repair the vehicles.

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowskico-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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