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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.

Sixth Circuit Decision: Title VII Protects Transgender Workers

March 9, 2018

By Jo Bennett

On March 7, the Court of Appeals for the Sixth Circuit issued an opinion in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc. holding that discrimination based on transgender status and transitioning identity is sex discrimination under Title VII of the Civil Rights Act of 1964.

The case concerns Aimee Stephens, a funeral director at R.G. & G.R. Harris Funeral Homes, Inc., who was terminated after informing owner Thomas Rost that she intended to transition from male to female.  Stephens filed a complaint with the Equal Employment Opportunity Commission (EEOC), and after an investigation, the EEOC brought suit against the funeral home for unlawful sex discrimination in violation of Title VII. The district court granted summary judgment to the funeral home, and this appeal followed.

A large part of the opinion dealt with the Religious Freedom Restoration Act (RFRA), which prohibits the government from burdening an individual’s exercise of religion absent a compelling governmental interest. The district court had agreed with the funeral home that RFRA trumps Title VII, but the Sixth Circuit held otherwise, noting that a religious claimant cannot rely on presumed biases to establish a burden, nor is he burdened by merely employing a transgender person. The court noted, “Bare compliance with Title VII—without actually assisting or facilitating Stephens’s transition efforts—does not amount to an endorsement of Stephens’s views” and “the fact that Rost sincerely believes he is being compelled to make such an endorsement does not make it so.”

The decision is the first in the nation to address the issue of whether Title VII’s prohibition against discrimination based on sex includes gender identity bias without a showing that the worker did not conform to traditional gender stereotypes. This makes it easier for workers in Kentucky, Michigan, Ohio and Tennessee to bring discrimination claims.

This decision follows a Second Circuit opinion filed last week, which held that sexual orientation discrimination is banned under Title VII.

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.

2nd Cir Rules Sexual Orientation Discrimination Covered Under Title VII

February 27, 2018

By Jo Bennett

On Monday, in Zarda v. Altitude Express, Inc., the Court of Appeals for the Second Circuit joined the Seventh Circuit in holding that sexual orientation discrimination is banned under Title VII of the Civil Rights Act of 1964.

Donald Zarda was a skydiving instructor employed at Altitude Express. He brought a discrimination charge with the EEOC alleging he was fired after disclosing to a client that he was gay. He subsequently brought a federal lawsuit alleging sex stereotyping in violation of Title VII and sexual orientation discrimination in violation of New York law. The District Court granted summary judgment to the defendants on the Title VII claims.

In resolving this appeal, the court cited evolving legal doctrine, including the EEOC’s 2015 decision holding that sexual orientation is a sex-based consideration as well as Supreme Court decisions that Title VII prohibits discrimination based on traits that are a function of sex, such as life expectancy and non-conformity with gender norms. The court was further guided by the Supreme Court’s view that Title VII covers not only the “principal evils” that Congress was concerned with when it enacted the Civil Rights Act, but also “reasonably comparable evils” as well. Applying that view, the court ruled that sexual orientation discrimination constitutes a form of discrimination “because of … sex,” in violation of Title VII.

Both the Department of Justice and the EEOC filed amicus briefs in the Zarda case. DOJ argued that Title VII does not extend to sexual orientation discrimination, while the EEOC argued that it does. Meanwhile, and as we discussed here, the Supreme Court in December declined to hear a similar case out of the Eleventh Circuit, in effect leaving in place a decision that Title VII does not cover sexual orientation discrimination.

In addition to the Circuit and Executive Branch splits, a patchwork of state and local laws governs sexual orientation discrimination as well.  As we have advised before, employers should continue to enforce policies that protect LGBTQ workers.

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.

3d Circuit Clarifies Standard in FCA Retaliation Cases

February 26, 2018

By Jo Bennett

In a precedential decision, the Third Circuit Court of Appeals held that the “but-for” standard applies in retaliation cases filed under the False Claims Act (FCA).

The False Claims Act prohibits retaliation against employee whistleblowers who engage in protected activity.  Under the FCA, the Third Circuit noted, an employee is entitled to relief if she was “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts.”

In Difiore v. CSL Behring, LLC, decided in January, Marie Difiore claimed that CSL retaliated against her for voicing concerns that the company was marketing drugs for off-label use. At trial, the judge instructed the jury that the protected activity must be the “but-for” cause of adverse actions against DiFiore.  The jury found for CSL. On appeal, the question was which causation standard applies to the “because of” language in the statute. DiFiore argued that the FCA required only that her protected activity be a motivating factor in the adverse action.

To resolve the case, the Third Circuit looked to two Supreme Court cases: Gross v. FBL Fin. Servs., Inc. which held that the words “because of” in the Age Discrimination in Employment Act required the “but-for” standard, and Nassar v. University of Texas Southwestern Medical Center, which held that the word “because” in Title VII of the Civil Rights Act also required the “but-for” standard in Title VII retaliation cases.  Following this precedent, as well as its own cases interpreting Gross and Nassar in the context of FMLA retaliation claims, the Third Circuit concluded that to find retaliation, the protected conduct must be the “but-for” cause of the adverse employment action.

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

New Tax Law Quashes Deduction for Some Sexual Harassment Settlements

January 3, 2018

By Jo Bennett

Payments made pursuant to a confidential settlement of sexual harassment allegations will no longer be a permissible tax deduction for business under a little-noticed provision in the Tax Cuts and Jobs Act.  The tax law permits the deduction if the settlement agreement does not contain a non-disclosure provision.

The provision is not clear whether a company may deduct legal fees incurred before settlement, or whether some or all of the fees are deductible if there are claims in addition to a claim of sexual harassment.  There is no discussion in the congressional record concerning these issues.

The new tax provision states that “[n]o deduction shall be allowed under this chapter for— (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.”

Settlement agreements for workplace claims, including workplace sexual harassment claims, routinely include non-disclosure provisions.   Congress revised the Code in response to the very public conversation about the prevalence of sexual harassment.

As details of the provision circulated, some tax experts have opined that the law might also have negative tax consequences for claimants.  As they note, in many settlements, a company typically issues a payment to the claimant’s lawyer and to the claimant, then issues a Form-1099 to both the claimant and to her counsel for the payment to the claimant’s lawyer.  The claimant was permitted to deduct the amount of the counsel fees from her taxable income.

If this interpretation is correct, these observers suggest that because the statute prohibits any deduction “under this chapter” (i.e., the Internal Revenue Code), a claimant who reaches a confidential settlement agreement of a sexual harassment claim will have to pay taxes on the gross amount of the settlement, not the net amount the claimant actually received.  Others have noted that because the provision is contained in that portion of the tax code relating to “ordinary and necessary trade or business expenses,” it  should not be read to impose a tax on what would be “phantom income” for the claimant.

Counsel for businesses must take this new tax provision into account when resolving claims of sexual harassment or sexual abuse.

For more information regarding this or other labor and employment issues, please contact Jo Bennett, 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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