What Employers Need to Know Now: Neither an agency fee nor any other form of payment to a public-sector union may be deducted from an employee, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay
Public Union “Agency Fees” Violate Employees’ First Amendment Rights
On the last day of its 2017‑18 term, the Supreme Court handed down a landmark decision protecting the First Amendment rights of public employees.
In Janus v. AFSCME, the Supreme Court overturned an older decision that upheld a union’s right to force non-members to pay an “agency fee”—an amount slightly less than the cost of “full” union membership.
The case was brought by Mark Janus, an Illinois Department of Healthcare and Human Services employee, who argued the “agency fee” he was forced to pay to the American Federation of State, County, and Municipal Employees Union (AFSCME) constituted “forced speech.”
While AFSCME argued these “agency fees” would only be collected as reimbursement for collective bargaining expenses, the Supreme Court rejected this defense. Specifically, the Court recognized what millions of public-sector employees already understand: public union spending is so entwined with politics it’s impossible to determine what—if any activities—are truly non-political.
As such, the Court ruled that by requiring employees like Mr. Janus to pay an “agency fee,” the State was “forcing free and independent individuals to endorse ideas they find objectionable. Such coercion, ruled the Court, violates the First Amendment.
Bottom Line for Public-Sector Employers: In the coming months, public-sector employers should expect a number of inquiries from employees who no longer wish to pay union fees. Employers should contact counsel to discuss how to navigate potential post-Janus legal landmines.Read More
As if the National Labor Relation Board’s aggressive expansion of social media protection wasn’t enough, Connecticut businesses must now contend with new legislation targeting employer’s online activity. On May 19, 2015, Governor Malloy signed into law “An Act Concerning Employee Online Privacy.” With this Act, Connecticut joins more than 20 other states to have legislation restricting an employer’s access to the social media accounts of applicants and employees. The Act, which goes into effect October 1, 2015, prohibits employers from requiring employees or applicants to:
- Provide their user name and password or any other access to an employee’s personal online account;
- Access an online account in the employers presence
- Accept an invite or other invitation from the employer to join a group associated with the employee’s online account. The Act applies to both private and public employees and offers few limited exceptions.
Fines for violations of the Act range from $25 against applicants and $500 against employees and can increase to $500 and $1,000 for continuing or repeat violations.
Fortunately, this new Act doesn’t cover any account created, maintained, used, or accessed by an employee or applicant for the employer’s business purposes. Furthermore, employers will still be able to monitor, review, access or block electronic data stored on an electronic communications device paid for by an employer, or traveling through or stored on an employer’s network.
Additionally, employers can conduct an investigation: based on receiving specific information about activity on an employee’s or applicant’s personal online account to ensure compliance with (a) applicable state or federal laws, (b) regulatory requirements, or (c) prohibitions against work-related employee misconduct.
An employer conducting these investigations can require an employee to provide access to a personal online account, but cannot require disclosure of the user name, password, or other means of accessing the personal online account. For example, an employee or applicant under investigation could be required to privately access a personal online account, but then provide the employer with access to the account content.
Connecticut’s regulatory environment just got a little more challenging, and, as a result, employers should review their Internet policies and practices to ensure compliance.Read More
The Connecticut Appellate confirmed today that continued employment alone will not bind an existing employee to an adverse change in contract terms.
In Thoma v. Oxford Performance Materials, Inc., Conn. App. Ct., No. AC 35313, official release 9/23/14, the Court found that a terminated executive was entitled to benefits of her original employment agreement, despite having the executive having signed a second employment agreement negating said benefits.
Specifically, the Oxford executive signed a first employment agreement with provisions including severance pay in the case of termination without cause and received at increase in salary. Some time after, Oxford decided that the benefits in the first agreement were too generous and revised the agreement. Both parties signed the second agreement, which excluded any severance benefits and did not provide any further increase in salary. As provided in the first agreement, the executive’s salary increased. When Oxford terminated the executive over a year later and failed to pay her severance, she sued Oxford.
Ultimately, the Court’s decision should not come as a huge surprise to Connecticut employers. For some time, Connecticut courts have leaned toward requiring some form of additional consideration to bind existing employees to any adverse change in their terms or conditions of employment. Employers should know that if they want to incorporate a non-compete agreement or a mandatory arbitration clause, these significant restrictions on employees must be done in connection with hiring or some incentive other than continued employment to be binding and enforceable.Read More
Do pre-employment criminal background checks discriminate against minorities? Not according to the U.S. District Court for the District of Maryland.
Last week, the U.S. District Court for the District of Maryland ruled that the Equal Employment Opportunity Commission failed to show that a nationwide event planning company’s use of criminal background and credit-checks resulted in a disparate impact against black and make job applicants.
In a stunning rebuke to the controversial Enforcement Guidance Regarding Consideration of Arrest and Conviction Records in Employment Decisions, the District Court hammered the EEOC’s evidence, dismissing its analyses as “flawed,” “skewed,” “rife with analytical errors,” “laughable,” and “an egregious example of scientific dishonesty.” Specifically, the court determined that one EEOC expert’s analysis focused on an unrepresentative section of applicants to fit the commission’s theory that pre-hire employee criminal background checks have a disparate impact on minorities.
EEOC: Where’s the Evidence?
The reports furnished by the EEOC were not the only thing that concerned the court; the EEOC also failed to meet its burden of raising triable disparate impact claims because “the commission did not identify a specific employment practice responsible for the alleged impact.” Citing Wards Cove Packing Co. v. Atonio, the court held that “under Title VII, it is not enough to show that ‘in general’ the collective results of a hiring process cause disparate impact. Statistical analysis must isolate and identify the discrete element in the hiring process that produces the discriminatory outcome.”
While the EEOC is still considering an appeal, the court’s ruling was clear: “it is simply not enough to demonstrate that criminal history or credit information has been used,” to advance a discrimination claim based on disparate impact. Granted, the issue of criminal background checks and disparate impact claims remains far from settled, last week’s U.S. District Court ruling should offer encouragement to employers drowning in red tape and over-zealous regulation.Read More
Connecticut Legislature Restricts the Use of Non-Compete Agreements: Late last month the Connecticut General Assembly passed “An Act Concerning Employer Use of Noncompete Agreements” (the “Act”).
Effective October 1, 2013, the Act will dramatically alter how employers approach mergers and acquisitions. Specifically, under this new law: If, after a merger or an acquisition, an employee is being hired by, or continuing his or her employment with, the surviving entity, and the surviving entity intends to bind the employee to non-competition restrictions, then the employer must provide the employee with a written copy of the non-compete agreement and at least seven (7) days to consider signing the agreement.
While inconvenient for employers, the Act, on its face, isn’t particularly alarming. However, the practical implications are considerable. For example, as a result of this new law, employers may be forced to inadvertently give employees advance notice of possible business transactions, such as closings or consolidations. Ultimately, notice of plant closings resulting from mergers or acquisitions will be dictated by legislative fiat—not business necessity or the unique culture of each organization.
Furthermore, employers must also now consider the possibility that an existing employee might balk at signing a new non-compete agreement, thereby complicating—and perhaps even jeopardizing—a merger or acquisition.
Bottom Line for Employers:
Effectively navigating a business merger or acquisition has never been easy. And with passage of the new Act, life for Connecticut’s employers just became a bit more complicated. For assistance in adhering to this new law, contact Bud O’Donnell.
On Tuesday, May 7, 2013, the United States Court of Appeals for the District of Columbia issued another decision against the National Labor Relations Board. This time, the court found that the NLRB had exceeded its authority when it issued the rule requiring employers covered by the National Labor Relations Act to post a notice informing workers of their right to unionize. (This same court, in January, 2013, invalidated the NLRB recess appointments made by President Obama; the NLRB has appealed that decision, Noel Canning v. NLRB, to the U.S. Supreme Court.)
In this most recent decision, National Association of Manufacturers v. NLRB, 717 F.3d 947 (2013), the court concluded that the NLRB’s rule was in violation of the National Labor Relations Act because it subjected an employer to an unfair labor practice for the failure to post this notice; and because it infringed upon the First Amendment right to free speech by forcing a company to disseminate a view that it did not agree with (i.e., the right to unionize).
Section 8(c) of the National Labor Relations Act grants employers the right to express “any view, argument or opinion, or dissemination thereof, whether in written, printed, graphic or visual form.” As long as there is no threat of reprisal, these communications are protected from being treated as unfair labor practices. The court stated that the NLRB’s rule violated Section 8(c) because “the right to disseminate another’s speech necessarily includes the right to decide not to disseminate it.”
While this decision represents another significant setback to the NLRB, the court’s decision also raises the possibility that its rationale could be extended to other federal notice-posting requirements that have been imposed on employers by various agencies (i.e., OSHA and the EEOC). It remains to be seen whether this decision will generate that type of litigation.Read More
When the United States Department of Labor (USDOL) announced its “Misclassification Initiative” in September, 2011, it was clear that employers utilizing independent contractors were doing so at their own peril. At a meeting of the Connecticut Bar Association’s Labor and Employment Law Section representatives from both the Connecticut Department of Labor (CTDOL) and the Hartford office of the United States Department of Labor confirmed that as the one-year anniversary of their partnership agreement approaches, both agencies are continuing to increase their joint efforts to identify and penalize those employers who misclassify – even inadvertently – employees as independent contractors.
The DOL Misclassification Initiative
On September 19, 2011, the U.S. Department of Labor, the Occupational Safety and Health Administrative (OSHA) and the Employee Benefits Security Administration (EBSA) entered into a memorandum of understanding with the Connecticut Department of Labor with the specific goal of pooling their resources to identify and pursue employers utilizing independent contractors. The CTDOL also formed its own Joint Task Force consisting of representatives from the Workers’ Compensation Commission, the Department of Consumer Affairs and the Department of Revenue Services; amongst others.
In addition, the USDOL also entered into a memorandum of understanding with the Internal Revenue Service (IRS) for “enhanced information sharing and other collaboration.”
The Impact Of The Misclassification Initiative On Connecticut Employers
The consequences of this collaborative effort are many. For example, instead of having just one agency knocking on your door following a complaint or random audit there may be joint visits with representatives from both state and federal agencies present.
Far more significant, however, is the sharing of information amongst all applicable state and federal agencies. Gone is the day when an employer might receive a CTDOL complaint, settle up with that agency for a minimal amount, revise its practices and be done with the matter. Now instead of just wage and hour exposure from the CTDOL complaint, you can assume that information regarding the complaint will be forwarded to numerous agencies so that an employer may find itself liable for unpaid payroll taxes, workers’ compensation penalties, unemployment payments and assessments and other penalties and fines in addition to wage and hour overtime payments. Interestingly, the representative of the USDOL noted that it does not automatically contact the IRS following every complaint but instead will look at each complaint on a case-by-case basis before also making a referral to the IRS. Frankly, by doing so, the USDOL can utilize the threat of potential IRS involvement as “leverage” in any investigation and related settlement discussions.
Not surprisingly, another critical component of the DOL misclassification initiative is the amount of personnel and other resources devoted to conducting independent contractor-related audits and complaints. As the USDOL represented noted, over 350 additional investigators have been hired nationwide with several of those assigned to the USDOL Connecticut office. Further, these investigators (many of whom are also lawyers) are all being supplied with laptops and other technological assistance so that they can complete their audits quicker and therefore, initiate even more audits. The USDOL representative also noted that approximately forty percent (40%) of the Hartford office’ investigators are involved in what he described as “directed investigations,” meaning that investigators will target a particular industry or even a large project and conduct an investigation – even absent a complaint. Some of the industries receiving the most attention are: construction, healthcare, restaurant, motor carriers, payroll services and nail salons.
As the CTDOL representative noted with regard to investigations that are initiated by complaints, it is not merely disgruntled individuals filing complaints. Rather, she noted that approximately fifty percent (50%) of the complaints are generated by upset competitors! Apparently, in these difficult economic times when work is scarce, what better way to place a competitor at risk than by “dropping a dime” with the CTDOL that the competitor is alleged to be utilizing independent contractors.
Finally, all of this increased focus and effort has resulted in the collection of increased overtime wages, payroll taxes and fines and penalties or worse. For example, the CTDOL recently issued stop work orders to twenty-three (23) construction contractors in only a one-month period – February 27 to March 30! Big Brother is not only watching, but also acting.
Bottom Line For Employers
So what options do Connecticut employers have when faced with this onslaught of federal and state resources in attempting to prudently and lawfully operate their businesses with independent contractors.
First, employers must realize that the ostrich “head-in-the-sand” approach will no longer be effective in minimizing their exposure. So, if an employer is going to utilize independent contractors, it must conduct an analysis of whether or not the independent contractor satisfies the applicable legal standards. For certain agencies such as the USDOL, IRS and Connecticut Department of Revenue Services and Connecticut Workers’ Compensation Commission this means satisfying what is essentially variations of the more traditional common law “right of control” test. Unfortunately for those issues within the CTDOL’s jurisdiction, employers are required to satisfy the far more rigorous so-called “ABC” test contained in Connecticut General Statutes Section 31-222(a)(1)(B). In fact, a scenario could arise in which an employer satisfies the “right of control” test but not the “ABC” test, thereby at least limiting its exposure to CTDOL’s wage and unemployment tax obligations.
In conducting its analysis, employers can also utilize labor and employment counsel, not only to participate in the analysis but also to prepare, if appropriate, an opinion letter explaining why the proposed independent contractor arrangement satisfies, or at least would appear to satisfy, all applicable legal standards. Reliance on such letters will not only assist in defending any complaints, but also should at least constitute a good faith defense, precluding any claim that the employer “willfully” disregarded the applicable independent contractor standards. Such a scenario is significant because the DOL can seek damages for three (3) years prior to the date of a complaint for willful violations instead of just two (2) years for non-willful violations.
Finally, the CTDOL representative noted that employers concerned about whether or not their use of independent contractors complies with all legal requirements could voluntarily contact the CTDOL for a review. While the agency does not have a formal amnesty plan like the IRS, the representative noted that by voluntarily contacting it, employers will not only obtain a detailed response regarding their use of independent contractors but also they will minimize their exposure in the event it is determined that they have misclassified individuals as independent contractors instead of employees. Employers contemplating engaging a voluntary audit should, of course, consult with legal counsel before doing so.
The appropriate use of independent contractors can certainly contribute significantly to an employer’s effective operations and bottom line. Their use has always involved some risk but with state and federal governments looking for ways to increase tax revenues in these difficult economic times, the risks of utilizing independent contractors has never been greater – a scenario likely to continue for the foreseeable future as a result of the “misclassification initiative.”Read More
The NLRB General Counsel has issued an unfair labor practice complaint against 24 Hour Fitness, an employer in California. The NLRB is alleging that, as a result of its mandatory arbitration policy dealing with employment disputes, 24-Hour Fitness has violated the National Labor Relations Act. The policy in question required employees, when hired, to waive their right to participate in class actions against 24 Hour Fitness. However, the employees were allowed 30 days to opt out from this restriction by submitting a specific form to the company.
The General Counsel has taken the position that this opt-out procedure is unlawful because it forces the employees to take exception to the mandatory arbitration policy on class actions very shortly after they are hired. In other words, in the view of the NLRB, the employer’s policy constitutes unlawful coercion because the newly hired workers are going to be reluctant to identify themselves as potential “troublemakers” in the event they want to preserve their rights to file or join in a class action lawsuit or arbitration against 24 Hour Fitness.
In a previous case, D.R. Horton, Inc., which was decided earlier this year, the NLRB held that it was unlawful for the employer in a mandatory arbitration agreement to impose a class action waiver upon its employees. The Board said this restriction violated the workers’ Section 7 rights to engage in protected concerted activities. That case is on appeal to the federal circuit court of appeals. However, it seemed to have left the door open for the type of opt-out procedure crafted by 24 Hour Fitness.
Bottom Line for Employers
While the case involving 24 Hour Fitness must still be decided by an administrative law judge, the NLRB is communicating its strong opposition to employer mandatory arbitration agreements. This position is not shared by the courts, as reflected in particular by the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion (2011), which upheld class action waivers in consumer arbitration agreements.
These issues involving mandatory arbitration policies in the employment setting will remain in a state of uncertainty until these cases can be resolved by the courts.
–Peter Janus represents employers in various industries and in the private and public sectors in all aspects of employment and labor relations lawRead More
For many years, employees and customers in the securities industry signed agreements that their disputes must be arbitrated before the self-regulatory organization for broker-dealers, Financial Industry Regulatory Authority (“FINRA”), previously known as the National Association of Securities Dealers (“NASD”). Compulsory arbitration has been the norm for small and large customer claims, employee disputes and large complex cases, excepting only class actions.
Rule 13204 prohibits class actions from being arbitrated under the Code:
Any claim that is based upon the same facts and law, and involves the same defendants as in a court-certified class action or a putative class action, or that is ordered by a court for class-wide arbitration at a forum not sponsored by a self-regulatory organization, shall not be arbitrated under the Code, unless the party bringing the claim files with FINRA one of the following:
- a copy of a notice filed with the court in which the class action is pending that the party will not participate in the class action or in any recovery that may result from the class action, or has withdrawn from the class according to any conditions set by the court
- a notice that the party will not participate in the class action or in any recovery that may result from the class action.
Now, with collective actions having increased in popularity, and despite FINRA having experienced, well-trained arbitrators hearing its cases, FINRA now believes that collective actions under the Fair Labor Standards Act (FLSA), the Age Discrimination in Employment Act (ADEA), and the Equal Pay Act of 1963 (EPA) would best be heard in the courts.
Why should these claims be excluded from arbitration under the Industry Code? The courts see differences between class actions and collective actions. See, e.g., Velez v. Perrin Holden & Davenport Capital Corp., 769 F.Supp.2d 445 (S.D.N.Y. 2011) (compelling arbitration because collective action differs from class action); Gomez v. Brill Securities, Inc., 2010 WL 4455827 (S.D.N.Y. Nov. 2, 2010) (recognizing significant differences between an opt-out class action and an opt-in collective action; Gomez v. Brill Securities, Inc., 2012 WL 851644 (NY App. 1st Dept. Mar. 15, 2012) (denying motion to dismiss or to compel arbitration of class action claims).
Bottom Line for Employers
FINRA claims that the courts have established procedures to manage both types of representative claims. It also believes that the rule change would preserve access to courts for these types of claims for employees of FINRA members. Of course it does, but couldn’t FINRA do so as well?Read More
On January 20, 2012, the Acting General Counsel, Lafe Solomon, of the National Labor Relations Board (Board) issued a memorandum recommending the Board revise its policy for deferring unfair labor practice charges to arbitration. Presently, the Board will defer a charge to the parties collectively bargained arbitration process for resolution.
Under the suggested policy, the Board will not permit deferral of Section 8(a)(1) and 8(a)(3) charges unless the arbitration process can be completed in a year. If it cannot be completed in a year, Acting General Counsel expects the Region to conduct a full investigation of the charge and if found to be meritorious, the case should be sent to the Division of Advice for further action. The change in the deferral policy will not effect of the Board’s approach to Section 8(a)(5) allegations involving breach of contract.
The stated rationale for the Acting General Counsel’s position is his concern that undue delay in the arbitration process caused by deferral renders any potential Board remedy meaningless given the passage of time.
Bottom Line for Employers
This memorandum by the Acting General Counsel continues his trend to revisit long-settled legal principles of the National Labor Relations Board and revise them where he deems it appropriate.Read More