As the negative economic outlook continues to fill our news and social media feeds, many organizations are pondering what an economic shift may mean for their business.  Others have moved on to the next stage of grief, acceptance, and have started to plan ahead.  For some organizations, this means considering, and possibly implementing, a reorganization or reduction in force (RIF).

Regardless of company size, industry or location, employers considering a reorganization or a reduction in force must consider many variables—and avoid many pitfalls.  While there are too many issues to list here, here are five key questions for those organizations that are about to take the next step to implement a reduction in force.

  1. Do we have Federal or State WARN Act obligations?

The federal Worker Adjustment and Retraining Notification Act, or WARN Act, requires employers to give 60 days’ advance, written notice to employees impacted by certain mass layoffs and facility closures.  The WARN Act provides extensive detail on the who, what, when, where, why and how of such notifications.  Failure to comply with the notification requirements can result in significant penalties.

Here, as with many areas of employment law compliance, employers also must ensure that they are considering any state and local laws that may be implicated by their actions.  Some states and municipalities have their own “mini-WARN Act” on the books.  These state laws often apply to smaller organizations and smaller layoffs, which might not trigger the federal WARN Act.  For this reason, employers also must be aware of any “mini-WARN Act” obligations in the locations where they operate.

  1. How do we ensure there is no discrimination in our selection process?

Like just about every other employment decision, RIFs can expose your organization to various legal claims.  For example, employers who terminate a group of employees should be mindful of the potential for exposure to claims of discrimination—both intentional and unintentional.

In order to help reduce the risk of such claims and to prepare an appropriate defense for the worst-case scenario that a former employee challenges their termination as discriminatory, employers should strive to use objective selection criteria when identifying which employees will be selected for discharge.  This is critical as you determine which employees from the same or similar job classifications will be selected for termination.  These types of individual selection decisions may lead to disparate treatment claims—i.e., you selected someone for termination based on a protected class, such as age, gender, race, disability, etc., or based on a protected activity, such as making a complaint of harassment or requesting family or medical leave.

However, using objective selection criteria is not only important when evaluating individual selection decisions.  It is equally vital when evaluating the selected group as a whole.  This is because employers also must consider whether their selection criteria have an adverse impact on members of a protected group, such as members of a particular gender or race.  For example, perhaps your chosen selection criteria inadvertently resulted in the disproportionate selection of female over male workers, even though this skewed gender impact was completely unintentional.  Remember: even if the result was unintentional, an employer may still be liable for a discriminatory outcome.  Therefore, evaluating the group as a whole before finalizing RIF selection decisions is critical.

The results of an organization’s selection criteria may need to be reassessed following the evaluation discussed above.  If it appears that one or more of your selection criteria are problematic from a disparate treatment or disparate impact perspective, you might need to revise those criteria—and then conduct this evaluation again until you are comfortable with the results, and with defending them in the event of a legal challenge.

  1. Will we offer severance?

Many employers choose to offer severance to employees whose positions are being eliminated in a reduction in force.  There are significant benefits to such an approach for both the employee and the employer.  For example, severance provides the employees with income continuation and/or assistance with continuation of health care coverage to assist them with the transition.  On the employer side of this equation, employers who offer severance will almost always condition receipt of those benefits on the employee’s acceptance of a waiver and release agreement.  This allows the employer to receive the benefit of finality if the severance agreement contains a full release and waiver of claims.

As you are planning a RIF, determine early in the process whether you intend to offer some form of severance to affected employees.  If so, your organization will need to think through what the benefits will look like and what terms will be included in the agreement provided to employees, and it will need ensure that there is some consistency to the approach.

  1. How do we ensure compliance with the Older Workers Benefit Protection Act?

Speaking of severance, employers who offer severance and condition the receipt of that severance on the employee’s execution of a separation agreement must ensure that their separation agreement is legally compliant—and that it maximizes the benefit that the employer is receiving from the transaction.  This is particularly important when offering a separation agreement to employees who are age 40 or older.

The Older Workers Benefit Protection Act (OWBPA) requires employers to jump through several hoops in order to obtain a valid waiver of age discrimination claims from individuals aged 40 or older.  There are differing requirements for individual terminations versus group terminations like a RIF (i.e., when more than one employee is being terminated and offered severance in exchange for signing a release).  By way of most critical example, in a group termination scenario, OWBPA requires employers to provide those employees with certain disclosure information, which can be burdensome.  Employers must understand these requirements and their obligations when preparing OWBPA-compliant separation agreements.

OWBPA requirements are many, and frankly, there are simply too many obligations to list here.  We will say, however, that the aforementioned disclosure requirements will drive decision making in a number of key respects.

  1. Do we have any obligations to labor unions?

Unionized employers should expect that they may have a number of additional requirements to consider when conducting a reduction in force.  Collective bargaining agreements (CBAs) often contain layoff and bumping provisions that will dictate the order in which employees must be laid off.  Notice may be due to the union, additional benefits may be due to the bargaining unit employees being laid off, and recall rights likely will need to be established.  In certain instances, the employer’s RIF may trigger an obligation to engage in effects bargaining.

Each CBA, and the layoff obligations under each CBA, are different.  For unionized workplaces, the collective bargaining agreement often will be the first place to start the reorganization planning process.

These five considerations are basic, threshold questions—and they are key to developing the beginnings of an effective strategy to plan and implement your reduction in force.  These are not, however, the only considerations.  As noted above, there are many, many more things for an organization to consider prior to finalizing and implementing their reduction in force.  Planning ahead in a careful and thoughtful manner, with an eye towards legal compliance, can place your organization in the best position possible under difficult circumstances.

Last, but not least, engage your labor and employment counsel early and often in the process—both to obtain appropriate guidance and in order to preserve the attorney-client privilege over the planning and selection processes to the maximum extent possible.  Doing so can help minimize your organization’s exposure to potentially costly legal claims that could erode some of the savings you may have experienced from the RIF.

A recent decision from the Third Circuit suggests that the leak of information onto the Dark Web provides standing to class action plaintiffs in data breach litigation. In Clemens v. ExecuPharm, Inc., 48 F.4th 146 (3d Cir. 2022), the Defendant employer suffered a data breach that permitted a ransomware gang to steal sensitive information pertaining to the Defendant’s current and former employees. Eventually, the hackers posted the data on underground websites located on the Dark Web.

The plaintiff, a former employee whose data was stolen by the hackers, filed a class action lawsuit on behalf of herself and other employees whose information was accessed. However, the plaintiff did not allege that she (or any other employees) suffered any financial losses as a result of the breach. Since showing financial harm is traditionally a required element to establish standing, the District Court dismissed the case.

However, the Third Circuit reversed. Interpreting the U.S. Supreme Court’s holding in Transunion[1], the Third Circuit held that the leak of information onto the Dark Web by itself constitutes an “injury-in-fact” sufficient to provide standing to sue in federal court. Explaining their decision, the Third Circuit wrote, “Because we can reasonably assume that many of those who visit the Dark Web, and especially those who seek out and access [the ransomware group’s] posts, do so with nefarious intent, it follows that Clemens faces a substantial risk of identify theft or fraud by virtue of her personal information being made available on underground websites…”

In light of this decision, and the increasingly digitized world, employers are strongly encouraged to implement appropriate security measures and ensure that those measures continue to comply with ever-changing industry standards. Failure to take these preventative measures could leave employer networks vulnerable to data breach, subjecting employers to potential liability for the breach of employee or customer data itself, let alone the financial consequences that could result if such information is misused.

[1] In this case, the U.S. Supreme Court held that an allegation of a risk of future harm is sufficient to establish an injury-in-fact for standing purposes, if such risk of future harm is “sufficiently imminent and substantial.” TransUnion LLC v. Ramirez, __ U.S. __, 141 S.Ct. 2190, 2210-11 (2021).

Our blog post on Nanny Cams in the workplace turned out to be one of our most popular posts (makes us wonder what people are putting in the search bar?).  So, we thought we would follow up with some more information for employers about surveillance in the workplace.

Employers with unionized workforces will need to be sure that any surveillance program or policy complies with the National Labor Relations Act.  It has long been the policy of the National Labor Relations Board that employers with a unionized workforce must bargain with the union before installing hidden cameras.   In Colgate-Palmolive Company, 323 NLRB 515 (1997), the Board held that the installation and use of covert cameras was a mandatory subject of bargaining.  That decision left open, however, the question of whether an employer could install non-hidden, or conspicuous, methods of surveillance without going through the union.

It appears that question was answered earlier this year, however, in Endurance Environmental Services, LLC, 2022 NLRB LEXIS 45, 2022 WL 393229 (2022).  In a footnote in that decision, the Board said, “[t]he Respondent’s decision to install cameras that observe employees at work was a mandatory subject of bargaining.” The Board further indicated that it would likely not matter if cameras were for surveillance purposes or not, as the installation of cameras in the workplace is likely always a mandatory subject of bargaining.  So, it appears the current Board views the installation of cameras as a mandatory subject of bargaining, regardless of whether the cameras are covert or conspicuous.

The NLRA also impacts non-union employers who may engage in surveillance.  For example, in AdvancePierre Foods, Inc., 366 N.L.R.B. No. 133 (July 19, 2018), the Board held (and the D.C. Circuit affirmed) that an employer’s video surveillance of employees distributing union materials violated the Act.

The scale and scope of an employer’s ability to conduct workplace surveillance are topics we could spend a lot of time on, but we will save those for another day.

In addition to the NLRA, employers should also be aware of the wiretapping and surveillance laws of the states in which they operate.  Many state wiretapping laws require both parties to consent to the audio recording of a conversation or a communication.  That is true in Pennsylvania, for example.  See here for more on how the Pennsylvania law may be implicated in the workplace.  Other state laws only require one person to consent to such recording or allow recordings in situations where two individuals did not have a reasonable expectation of privacy.

In order to get around state wiretap laws, some employers use cameras that do not capture audio recording, but instead capture only video.  But, even still, employers must be aware of state laws that govern such recordings.  Some states, such as Delaware, prohibit video surveillance in certain workplace locations.  Other states require notification to employees prior to the installation of workplace cameras.

Suffice to say that video monitoring of employees in the workplace is a compliance minefield for employers.  Despite these challenges, many employers do it, and do it successfully.  If you have not already started that process, and maybe even if you have, we recommend that you work with your friendly neighborhood labor and employment attorney to ensure compliance.

In Valley Hospital Medical Center, 371 NLRB No. 160 (Sept. 30, 2022) (Valley Hospital II), a divided National Labor Relations Board held that employers must continue to deduct union dues from employees’ pay and remit such dues to their union – a process known as “dues checkoff” – even after the expiration of the collective bargaining agreement containing a checkoff provision.  The decision demonstrates the current Board’s rather unfriendly approach to employers.  It also illustrates how employers have been whipsawed in recent years by swings in Board precedent depending on the Board’s political makeup.

In Valley Hospital, the employer and union were parties to a collective bargaining agreement that had a dues-checkoff clause.  Over a year after the agreement had expired, the employer ceased deducting union dues from its employees’ pay.  The practical effect was that the union would have to collect dues directly from the employees.  The union objected and claimed that the employer’s action violated the National Labor Relations Act (NLRA).

Under well-established U.S. Supreme Court precedent, where a collective bargaining agreement has expired, an employer must generally refrain from unilaterally changing terms and conditions of employment until the parties either negotiate a new contract or bargain to lawful impasse.  However, in its 1962 decision, Bethlehem Steel, 136 NLRB 1500 (1962), the Board held that an employer’s obligation to check off union dues ends when the collective bargaining agreement containing a checkoff provision expires.  As such, an employer could unilaterally – and lawfully – cease dues checkoff upon expiration.  For over 50 years, the Bethlehem Steel rule was consistently applied by the Board and enforced in the United States Courts of Appeals.

But things changed in 2015.  The Obama Board overruled Bethlehem Steel and held that an employer’s obligation to check off union dues continues after expiration of the collective bargaining agreement establishing such an arrangement.  Lincoln Lutheran of Racine, 362 NLRB 1655 (2015).  Lincoln Lutheran was short-lived, however, because in 2019, in an earlier decision in the Valley Hospital case, the Trump Board overruled Lincoln Lutheran and reinstated the Bethlehem Steel rule.  Valley Hospital Medical Center, 368 NLRB No. 139 (2019) (Valley Hospital I).  The union appealed to the United States Court of Appeals for the Ninth Circuit, which remanded the case to the Board.

On remand in Valley Hospital II, the Board – now controlled by Biden-appointees – reversed its decision in Valley Hospital I, once again rejected Bethlehem Steel, and reinstated the rule of Lincoln Lutheran.  The Board majority observed that the NLRA’s policies would be furthered by holding that dues checkoff provisions survive expiration of the collective bargaining agreement.  The majority also distinguished dues checkoff provisions from other contract terms that do not survive contract expiration – mandatory arbitration, no-strike, and management-rights clauses – reasoning that the latter category involves the waiver of rights the parties would otherwise enjoy and thus are presumed not to survive contract expiration.  The majority concluded that it would apply its decision retroactively in all pending cases – even in cases in which the employer acted in reliance on Valley Hospital I.  Finally, the majority ordered the employer to make the union whole for dues that it should have deducted and remitted had it not ceased dues checkoff, but prohibited the employer from recouping from the employees any dues amounts that it was required to reimburse.  This is a particularly harsh remedy because union dues are a financial obligation that employees owe to their union.  The employer simply performs an administrative service of facilitating union dues collection.

Members Kaplan and Ring dissented.  They quoted language from the Taft-Hartley Act providing that employers may not deduct union dues from their employees’ pay unless “the employer has received from each employee, on whose account such deductions are made, a written assignment which shall not be irrevocable for a period of more than one year, or beyond the termination date of the applicable collective agreement, whichever occurs sooner.”  The “logical implication” from the reference to “applicable collective agreement,” they argued, was that employers may terminate dues-checkoff provisions upon expiration of the agreement containing such provisions.  They also argued that the majority decision impermissibly interferes with the bargaining process by “eliminating one of employers’ legitimate economic weapons” to persuade unions to agree to a successor collective bargaining agreement.  Finally, they argued that it would be manifestly unjust to apply this decision retroactively to employers who acted pursuant to current Board law (Valley Hospital I) and to “a practice that had been settled law for decades”; and that the make-whole order barring the employer from recouping funds that it had already paid the employees in dues money was “clearly punitive” and exceeded the Board’s remedial authority.

Valley Hospital II is the latest swing in the dues checkoff “pendulum.”  Going forward, employers who are parties to collective bargaining agreements containing dues-checkoff provisions must continue to deduct and remit dues after the agreement expires.  Failing to do so could not only violate the NLRA, but also make the employers financially responsible for the union dues of their employees.

If you have any questions about the Valley Hospital II decision or dues-checkoff provisions, please contact a member of the McNees’ Labor & Employment Group.

Last week, the U.S. Department of Labor introduced a proposed rule to update its test for determining whether a worker is an employee under the Fair Labor Standards Act (the “FLSA”).  If implemented, the proposed rule would likely make it more difficult for employers to classify workers as independent contractors.

The proposed new test would rescind the independent contractor test that was adopted by the DOL in the waning hours of the Trump Administration.  That test emphasized two core factors for determining whether a worker was an independent contractor: a worker’s control over their work, and the worker’s opportunity for profit and loss.

Under the new proposed rule, the DOL would return to a “totality of the circumstances” analysis to evaluate the economic realities of the relationship between a worker and a company.  For many employers, that rule is about as clear as mud.  Explaining the rationale for its new proposed rule, the DOL stressed that independent contractors are those workers who are not economically dependent on their employer for work and are in business for themselves.

To determine economic dependence, the proposed rule puts forth a six-factor test.  According to the DOL, these factors are simply “tools” or “guides” to evaluate the totality of the circumstances, and the outcome – i.e., whether a worker is properly classified as an employee or an independent contractor – doesn’t depend on one isolated factor, but instead hinges on the larger picture to determine whether the worker is economically dependent.

The six factors are as follows:

  • Opportunity for profit or loss depending on managerial skill. This factor considers whether the worker exercises managerial skill that affects the economic success or failure in performing the work.  For example, if the worker can negotiate a higher rate for the work, can accept or decline certain jobs, or can engage in marketing efforts to secure more business, then they may be an independent contractor.
  • Investments by the worker and the employer. Under this factor, the DOL posits that a worker’s investments should be such that they support an independent business or serve a business-like function for this factor to weigh in favor of an independent contractor status.
  • Degree of permanence of the work relationship. If the work relationship is indefinite in nature, this factor will weigh in favor of employee status.  On the other hand, if the relationship is for a definite time period, non-exclusive, project-based, or sporadic due to the worker marketing their work to other entities, this factor may weigh in favor of independent contractor status.
  • Nature and degree of control. This factor looks at the degree to which an employer controls the performance of the work and the economic aspects of the working relationship.  Facts relevant to this inquiry include the extent of control over the worker’s schedule, performance, the worker’s ability to work for others, the imposition of discipline, as well as control over the economic aspects of the job, such as price setting and marketing or products or services provided by the worker.  More control by the employer would tend to indicate employee status, whereas more control by the worker would tend to favor independent contractor status.
  • Extent to which the work performance is an integral part of the employer’s business. This factor examines whether the function the worker performs is an integral part of the business.  If the function is critical, necessary, or central to the business, the factor will weigh in favor of employee status.
  • Skill and initiative. This factor looks at whether the worker has some specialized skill that may contribute to the “business-like initiative.”  If the worker brings specialized skills to the work relationship, use of those skills in connection with business-like initiative may indicate independent contractor status.

Finally, the DOL notes that there may be additional factors that are relevant to evaluating whether a worker is economically dependent on an employer for the purposes of determining if they are an employee under the FLSA.

This proposed rule is likely to make it much more difficult for a worker to be properly classified as an independent contractor.  As a result, employers should take a hard look now at any independent contractor relationships to evaluate whether adjustments need to be made to the relationship or the worker’s classification.  For any questions about these issues, contact any member of the McNees Labor & Employment Group.

The National Labor Relations Board has held that Telsa must allow employees to wear shirts with a union insignia while on the job.  The decision is certainly a learning opportunity for employers and a strong signal of the approach to these issues likely to be taken by the Biden Board.  Let’s look at the facts.

Under Tesla’s existing uniform policy, employees were permitted to wear either company-provided shirts bearing Tesla’s logo or all black clothing that is mutilation-free, work appropriate, and poses no safety risks. However, according to several employees at the company’s Fremont, California facility, Tesla did not enforce the dress code, and workers frequently wore shirts displaying the logos of other companies.

Employees also alleged that amid a union organizing campaign in 2017, Telsa reportedly began to “strictly enforce” the policy against employees wearing shirts displaying the union’s logo and campaign slogan.  In defense of the enforcement of its Policy, Tesla relied on a recent NLRB decision, which held that employer rules regarding the size or appearance of union logos, but that do not forbid their display altogether, should be analyzed under a more lenient standard.

The Board rejected the application of the more lenient standard and overruled its own very recent decision on this issue.  The Board, relying on Supreme Court precedent to justify its position, held that Tesla violated the National Labor Relations Act by strictly enforcing its policy with respect to union insignia.  According to the Board, the previous decision was flawed because it treated the display of union emblems as a privilege, rather than a right.  Thus, Tesla violated the NLRA by restricting employee rights.

Employers, union and non-union alike, will need to be sure to analyze existing dress code and attire standards in light of the Board’s new approach to union insignias and displays.

Whether two entities are “joint employers” is an important question under the National Labor Relations Act.  Consider Company A, which contracts with Company B, a staffing company, to provide maintenance or other services at Company A’s facility.  The maintenance workers are employed directly by Company B.  While working at Company A’s facility, Company B’s employees file unfair labor practice charges against Company B and also vote to form a union.  Can Company A be held liable for the unfair labor practices committed by Company B?  Can Company A be ordered to bargain with the union, alongside Company B?

On September 6, 2022, the National Labor Relations Board issued a Notice of Proposed Rulemaking, which would drastically alter the test used for determining joint-employer status under the NLRA (“2022 Proposed Rule”).  The 2022 Proposed Rule would rescind the joint-employer rule very recently issued in 2020 and replace it with a union-friendly test that would expand the circumstances in which Company A could be deemed a “joint employer” of Company B’s employees, and therefore be subject to liability and bargaining obligations under the NLRA.

Background

The Board’s standard for determining joint-employer status has shifted over the past seven years with each new presidential administration.  For at least thirty years prior to 2015, the Board’s longstanding rule was that an employer could be considered a joint employer of a separate employer’s employees only if it exercised “direct and immediate” control over those employees’ essential terms and conditions of employment (e.g., wages, benefits, hours of work, hiring, discharge).  Indirect control or a reserved but unexercised right to control, was insufficient.

In a 2015 decision, the Obama-era Board overruled this precedent and announced a new joint-employer test.  See Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 (2015) (“BFI”).  Under BFI, the Board no longer required that the joint employer’s control over terms and condition of employment be exercised directly and immediately.  Rather, one company could be deemed the joint employer of another company’s employees based solely on either indirect control or a contractually reserved but never exercised right to control such terms and conditions.  Another way to say this is “theoretical” control.

In February 2020, the Trump Board issued a rule that reinstated and clarified the joint-employer standard that was in place prior to BFI.  See 29 C.F.R. § 103.40 (“2020 Rule”).  The 2020 Rule makes it clear that an employer can be a joint employer of a separate employer’s employees only if it possesses and actually exercises substantial direct and immediate control over one or more essential terms or conditions of their employment.  Evidence of indirect control, or contractually reserved but never exercised control, is probative of joint-employer status, but only to the extent it supplements and reinforces evidence of possession or exercise of direct and immediate control.  The 2020 Rule also provides an exhaustive list of “essential terms and conditions of employment” and defines “direct and immediate control” with respect to each listed term or condition of employment.

2022 Proposed Rule

The 2022 Proposed Rule, which has been issued by the Biden Board, would rescind the 2020 Rule and replace it with a new rule incorporating the BFI standard.  The 2022 Proposed Rule would provide as follows:

  • An “employer” is an employer of particular “employees” (as those terms are defined in the NLRA) if the employer has an employment relationship with those employees under common-law agency principles.
  • For all purposes of the NLRA (i.e., union elections and unfair labor practices), two or more employers of the same group of employees are joint employers of those employees if the employers “share or codetermine those matters governing employees’ essential terms and conditions of employment.”
  • To “share or codetermine those matters governing employees’ essential terms and conditions of employment,” an employer must either possess the authority to control (directly, indirectly, or both) or exercise the power to control (directly, indirectly, or both) one or more essential terms and conditions of employment.
  • Indirect control, control exercised through an intermediary, or a contractually reserved but never exercised right to control, is sufficient to establish joint-employer status. Thus, like the BFI standard, the 2022 Proposed Rule eliminates the requirement that control be exercised directly and immediately.
  • “Essential terms and conditions of employment” are defined generally to include, “but are not limited to: wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance” [emphasis added]. Notably, unlike the 2020 Rule, this list is not exhaustive, and the Board contemplates that what are “essential” terms and conditions could change over time, as well as vary from industry to industry or occupation to occupation.  The 2022 Proposed Rule also does not define what it means to “possess the authority to control” or “exercise the power to control” with respect to any particular essential term or condition of employment.
  • Evidence of an employer’s control over matters that are immaterial to the existence of an employment relationship, or that do not bear on the employees’ essential terms and conditions of employment, is not relevant to joint-employer status.
  • The party asserting that an employer is a joint employer has the burden to prove by a preponderance of the evidence that the entity is a joint employer under the requirements of the 2022 Proposed Rule.

Not surprisingly, the Board was divided 3-2 over the decision to issue the 2022 Proposed Rule.  Chairman McFerran and Members Wilcox and Prouty were in favor of the proposed rule, while Members Kaplan and Ring – who were on the Board in 2020 – dissented.  In their dissenting statement, Members Kaplan and Ring argued that there was no valid justification to engage in another joint-employer rulemaking a mere two-and-a-half years after the 2020 Rule was promulgated.  They also argued that the 2022 Proposed Rule is contrary to the common law, inconsistent with the policies of the NLRA, arbitrary and capricious, and fails to provide any meaningful guidance to regulated parties.

What’s Next?

The 2022 Proposed Rule is subject to a public comment period that ends on November 7, 2022.  The public then has another 14 days, or until November 21, 2022, to file comments in response to comments submitted during the initial comment period.  The Board must then consider the public comments before issuing a final rule.  If the Board does issue a final rule, we anticipate that it will be substantially similar to the 2022 Proposed Rule, although possibly modified to incorporate some of the public comments.  We also anticipate, however, that any final rule will be subject to legal challenges for the reasons articulated by Members Kaplan and Ring in their dissenting statement.

As such, whether the 2022 Proposed Rule becomes law remains to be seen.  Nevertheless, it would be prudent for businesses like Company A, which contract for services from third parties, to review their contracts and evaluate whether their relationships potentially could be subject to the 2022 Proposed Rule.  Organizations in franchisor-franchisee relationships should also carefully consider the potential impact of the 2022 Proposed Rule.

We will keep you posted on the status of the 2022 Proposed Rule.  In the meantime, if you have any questions about the 2022 Proposed Rule, or about joint-employer status generally under the NLRA or other labor and employment laws, please contact a member of the McNees’ Labor and Employment Group.

No, your eyes aren’t playing tricks on you.  You read that correctly.  The U.S. Court of Appeals for the D.C. Circuit recently affirmed a ruling by the NLRB which found an employer violated the National Labor Relations Act when it fired an employee who wrote a vulgar phrase on an overtime sign-up sheet.  But, the decision isn’t all bad news for employers. Examination of the facts underlying the ruling suggests that crass graffiti isn’t always protected activity.

In Constellium Rolled Products Ravenswood v. NLRB, the employer posted overtime sign-up sheets so that employees could volunteer for overtime shifts.  One employee apparently took exception to the practice and wrote the words “whore board” on the sign-up sheets.  After investigating the incident, the Company determined that the graffiti violated its anti-discrimination policy (among other policy violations).  The Company fired the perpetrator.

The terminated employee complained to the NLRB that his graffiti was protected under Section 7 of the NLRA because he wrote it in protest of the Company’s overtime practices.  The employer argued that the content of the graffiti was gender-based profanity that violated Company policy as well as anti-harassment laws.  The Board rejected the employer’s argument, pointing to evidence that the Company routinely allowed employees to use vulgar, profane, and crass language at work.  The evidence also showed that the Company did not discipline workers for writing graffiti on other Company property.

On review, the D.C. Circuit agreed with the Board.  It held that the employer’s tolerance of “extensive” vulgarity, profanity, and graffiti in the workplace rendered its defense ineffective.  The Company’s willingness to disregard such misconduct until it related to the overtime sheet supported the Board’s and the D.C. Circuit’s conclusions that the termination was based on the employee’s protest of overtime practices, and not his vulgarity.

Constellium puts a new spin on an age-old employment law axiom.  Employers must interpret, apply, and enforce their work rules consistently.  Selective application of workplace policies will often be used as evidence that other (sometimes unlawful) motives are at play.

We recently wrote about the Equal Employment Opportunity Commission’s Guidance on the use of Artificial Intelligence in the hiring process.  AI is exploding.  It is being put to use in many different industries and toward many different applications, including in various human resources related functions.  As we previously discussed, the use of AI can be extremely helpful to employers, if done properly.

Recently, New York City became one of the first jurisdictions to address the proliferation of AI tools in the employment context.  NYC passed a local ordinance prohibiting employers from using AI tools, which it calls Automated Employment Decision Tools, unless the employer takes certain steps to “vet” and disclose use of the tool.

The local law goes into effect on January 1, 2023 and will apply to employers operating in New York City that target NYC residents.  It will require that employers subject the AI screening tool to a validation test.  The ordinance calls the test a bias audit.  The bias audit must be conducted by an impartial auditor and will require evaluation of the tool’s potential disparate impact on protected traits.  In addition, the employer must post a summary of the bias audit on the employer’s web site.

Employers using Automated Employment Decision Tools will also need to provide certain notices to applicants.  Employers will need to notify applicants at least 10 days in advance that the AI tool will be used and must allow the applicant to request a different testing/screening method.  The employer must also give notice of the characteristics that the AI tool will assess, the types of information that will be collected, and how that information will be retained by the employer.

This approach seeks to directly address two of the most significant concerns with the use of AI tools in the screening process: (1) the potential to accidently or unintentionally screen out applicants based on a protected trait (disparate impact); and (2) potential disability-related accommodation obligations in the hiring process.  Recall that we took a close look at these risks in our previous post.  The ordinance also goes further to address applicant privacy concerns as well.

Like many new developments, employers relying on tried-and-true HR best practices will be ahead of the curve.  That’s because it has long been a best practice to require any pre-employment screening tool to be properly validated to protect against disparate impact concerns.  Organizational Psychologists have been talking about this type of validation for years. Many reputable third-party service providers who offer such applicant screening tools have already conducted similar validation tests or bias audits.

While this may be the first, we certainly do not think that the NYC ordinance is the last local or state law to address the use of AI in the hiring process.  Employers adopting these tools will need to be ready to comply with this changing legal landscape, as the AI tools themselves continue to develop and increase in popularity.

On August 11, 2022, the CDC issued new guidance regarding isolation and masking for individuals exposed to COVID-19. According to the CDC, high levels of immunity and the availability of COVID-19 prevention and management tools have reduced the risk for medically significant illness. While employers still must traverse through the complicated web of COVID-19 mitigation regulations, the CDC’s new relaxed guidance may signal a light at the end of the tunnel.

Prior to this update, individuals exposed to COVID-19 were instructed to quarantine for 5 days. This presented difficult operational challenges for employers, who were expected to monitor and trace COVID-19 exposures throughout their workforce and instruct exposed employees to quarantine, often at times when companies were already understaffed. Now, however, the CDC recommends that individuals exposed to COVID-19 wear a mask for ten days around others while monitoring for symptoms, eliminating the precautionary quarantine period. Additionally, exposed persons should test for COVID-19 five days after their exposure. If the test is positive, the CDC recommends isolating for either five days or 24 hours after symptoms cease, whichever is later.

This change in the CDC’s guidance should help to alleviate some of the staffing challenges employers are facing this year. Greta Massetti of the CDC stated, “We…have a better understanding of how to protect people from being exposed to the virus, like wearing high-quality masks, testing, and improved ventilation. This guidance acknowledges that the pandemic is not over, but also helps us move to a point where COVID-19 no longer severely disrupts our daily lives.” If an employee is exposed to COVID-19, even in the workplace, they are no longer expected to isolate and miss time from work. Instead, exposed employees must simply wear a mask for ten days and test for the virus after five days.

 

For more information, or if you have questions, please contact any member of the McNees Labor and Employment Group.