As we have been following on this blog, Governor Wolf announced in January 2018 that the Pennsylvania Department of Labor and Industry (DLI) would propose new regulations under the Pennsylvania Minimum Wage Act (PMWA) that would modify the PMWA’s overtime and minimum wage exemption requirements for executive, administrative, and professional salaried employees.  DLI submitted a proposed rulemaking in June 2018 for new regulations, which included both big increases to the minimum salary requirements and changes to the duties tests for the PMWA’s white-collar overtime exemptions.

Public comments on the proposed regulations closed in August 2018, and in September 2018, the state’s Independent Regulatory Review Commission published critical comments and questions regarding the proposed regulations.  We currently wait to see whether the DLI will issue final regulations in 2019 and whether and to what extent the final regulations will differ from the controversial proposed regulations.

It increasingly appears that the U.S. Department of Labor also will issue (at least proposed) new regulations on the federal Fair Labor Standards Act’s own white-collar exemptions in 2019.  Reports recently indicated that the DOL has drafted proposed overtime exemption regulations and sent them to the White House’s Office of Information and Regulatory Affairs for review.  This is consistent with prior statements from the DOL of its intention to issue new proposed regulations in March 2019.

As you may recall, the DOL’s last attempt to revise the FLSA’s overtime exemption regulations were blocked by a federal court in Texas.  The contents of the DOL’s latest proposed regulations are unknown, although most observers expect some increase in the existing minimum weekly salary requirement of $455.  (The size of the expected increase is anyone’s guess at this point.)

So what does this mean for Pennsylvania employers?  It is fair to assume that we will see new regulations redefining the requirements for the white-collar overtime exemptions under both federal and Pennsylvania law in 2019.  It also is fair to assume that the requirements under these new sets of regulations will not be identical.  Thus, employers will need to reevaluate those employees they currently treat as exempt under one or more of the white-collar exemptions and determine whether these employees would meet both sets for new requirements in time for the new regulations’ effective dates.

We will continue to monitor these developments and update our blog as events warrant.  Stay tuned for what promises to be an eventful 2019!

The federal government shutdown at 12:00 a.m. Saturday, December 22, 2018, as congressional leaders and the White House failed to strike a bipartisan funding deal over the U.S.-Mexico border wall. As of the date of this post, and after very public feuding between the parties, there is still no agreement to resolve the standoff and re-open the federal government.

What is the shutdown and what does it mean for employers? When congressional leaders and the White House reached a standstill over the federal spending package, funding for several federal agencies lapsed, forcing them to close until the government re-opens. But only about a quarter of the federal government has actually shut down. Essential personnel (e.g. the military, homeland security, certain hospitals) are still required to work, without pay, throughout the duration of the shutdown.

The U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Justice, which appropriates funds to the federal court system, are among those federal bodies that are affected by the shutdown. Employers with cases before either body may experience delays. The courts are continuing to run by drawing down on court fees and other funds that are not dependent on congressional appropriations. Those funds are expected to last until January 11, according to the Administrative Office of the U.S. Courts. If those funds do run out before new appropriations, the courts will continue to operate on a court-by-court basis but will prioritize its most essential cases, typically criminal cases involving confinement. At the discretion of the courts and judges, all other non-essential cases could be delayed until the government reopens.

The Chief Judge for the Middle District of Pennsylvania, the district covering the mid-section of the Commonwealth, has issued an Order delaying miscellaneous civil cases in which the United States or any of its agencies or officers is a party. Moreover, the EEOC has also announced that it is closed due to the shutdown. If a charge is filed against an employer, the agency will still notify the employer of the charge; however, it will not investigate charges of discrimination during the shutdown. The EEOC has also stated that it will not respond to inquiries about pending charges. When the federal government reopens, however, employers may check the status of a pending charge on www.eeoc.gov or by calling the office where your charge is being investigated.

Washington is currently at a standstill. At this point, there appears to be no end in sight to the government shutdown putting it on track to be the longest in history as of January 11. Questions related to active cases before a federal agency or pending in federal court should be directed toward legal counsel.

Please stay tuned for additional developments in Washington, including 2019’s legislative activity that may impact employers. In the meantime, if you have questions regarding this article, please contact any member of our Labor and Employment Practice Group.

As stewards of taxpayer dollars, there are many details that public sector employers must consider when negotiating collective bargaining agreements with their unionized employees.  What are the phases of the collective bargaining process?  Should outside counsel be engaged for some or all of these phases?  How many bargaining sessions will be conducted?  What happens after a tentative agreement has been reached between the employer and the union?

The video below addresses these questions, and more.  Public sector employers with questions about the collective bargaining agreement should reach out to any member of McNees’ Public Sector or Labor & Employment Groups.

 

On February 9, 2018, the Bipartisan Budget Act (the “Act”) was signed into law. The Act directed the IRS to revise regulations governing hardship withdrawal provisions in qualified plans. The legislative goal was to expand the circumstances under which hardship withdrawals may be made and eliminate some of the penalties associated with hardship withdrawals.

On November 14, 2018, the IRS released proposed regulations as directed in the Act. All of the following changes are optional for a qualified retirement plan’s 2019 Plan year and may be implemented operationally, effective January 1, 2019. Plan Sponsors may also wait until the end of the second calendar year that begins after the issuance of final regulations to amend the Plan to conform to the required changes. Key changes outlined in the proposed regulations include:

  • The six-month suspension of 401(k) contributions will be eliminated (Required for hardship withdrawals after January 1, 2020).
  • A new type of qualifying expense related to disaster relief will be added to the list. The IRS indicated that this addition will eliminate delay or uncertainty concerning access to plan funds following a disaster that occurs in an area designated by the Federal Emergency Management Agency for individual assistance (May be made effective for distributions made on or after January 1, 2018).
  • Allow for the Plan administrator to rely upon the participant’s written representation that he/she has insufficient cash or liquid assets to satisfy the financial need, but only to the extent that the plan administrator does not have actual knowledge to the contrary.
  • The requirement that a loan be taken from the plan before a hardship withdrawal is approved can be eliminated (Optional change).
  • Permit hardship distributions from earnings on elective deferrals (Optional change).
  • Permit hardship distributions from QNECs, QMACs, and earnings on these sources (Optional change).

Once the final regulations are issued, plan procedures should be reviewed to ensure compliance with the regulations and to determine whether adoption of conforming plan amendments will be necessary. Until then, plan administrators should determine whether they intend to implement any optional changes.

You may contact any member of the McNees Wallace & Nurick Labor and Employment Practice Group if you have any questions regarding this article.

As explained in Part 1 of this four-part series, we are exploring some of the more recent state law developments addressing sexual harassment in the workplace. Since the #MeToo movement began over a year ago, there have been various reactions from employees, employers and state legislatures. Employees have reacted by filing more internal and external complaints.  In fact, in early October the Equal Employment Opportunity Commission (EEOC) released its fiscal year 2018 statistics regarding workplace harassment. The data showed that charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017. In addition, the EEOC reported that it recovered nearly $70 million for victims of sexual harassment in fiscal year 2018, an increase of $22.5 million from fiscal year 2017. You can find more information on the EEOC’s report here.

Employers have reacted to the #MeToo movement by updating policies, conducting more trainings, and holding employees accountable.  While the United States Congress has not yet responded with specific legislation, many states have taken action to address sexual harassment and sexual misconduct in the workplace.

As a result, employers operating in multiple states must be aware of the various approaches taken by states and ensure compliance obligations are met.  Most employers have already taken action to address differing state law requirements such as how and when to pay employees, availability and use of paid leave, and the legality and enforcement of restrictive covenants.  Going forward, employers need to add sexual harassment compliance to the state-by-state compliance list.

The states take a varied approach to addressing this issue through legal regulations and requirements.  We anticipate that more state laws are on the way.  In Part 1 of this series we explored the recent flurry of legislation enacted in the State of California. In Part 2 we look at the recent developments under Delaware law.

DELAWARE

On August 29, 2018, Delaware passed a law that includes mandatory distribution to employees of a state-created information sheet on sexual harassment. Employers with four or more employees in the state of Delaware will be required to distribute the information sheet to new employees at the commencement of employment and all existing employees by July 1, 2019 at the very latest. The sexual harassment information sheet can be found here.

In addition, much like California’s training requirements, Delaware requires employers with at least 50 employees in the state of Delaware to provide interactive sexual harassment training and education. However, unlike California’s training requirements, the new Delaware law requires that both non-supervisory and supervisory employees receive the training.

Employers covered by the new law must provide interactive sexual harassment training to employees that includes the following components:

  • Addresses the illegality of sexual harassment;
  • Defines sexual harassment with the use of examples;
  • Describes the legal remedies and complaint process available to employees;
  • Provides directions to employees on how to contact the Delaware Department of Labor; and
  • Instructs employees that retaliation is prohibited.

The training must be conducted for new employees within one year of the commencement of their employment. Current employees must receive the mandatory training by January 1, 2020.

New supervisors must receive additional interactive training within one year of the commencement of their employment in a supervisory role and existing supervisors must receive training by January 1, 2020. The additional training for supervisors must also include: (1) specific responsibilities of a supervisor regarding the prevention and correction of sexual harassment; and (2) the legal prohibition against retaliation.

For employers who provide – or have already provided – training that meets the requirements of the law prior to January 1, 2019, are not required to conduct additional training until January 1, 2020. After January 1, 2020, both the employee and supervisor training programs must be repeated every two years.

Stay tuned for Part 3 of our journey through the patchwork approach of other recent state law developments in response to the #MeToo movement. In the meantime, if you or your organization have any questions regarding compliance with state laws in the area of sexual harassment, please contact any member of our Labor and Employment Practice Group.

While most Americans prepared for the Thanksgiving holiday, the Pennsylvania Supreme Court issued an opinion that establishes new precedent in the ever-developing area of cybersecurity law, and also limits a longstanding tort doctrine that had previously barred a large subset of negligence claims where the plaintiff claimed only economic loss (not bodily injury or property damage).  As a result of this decision, Pennsylvania businesses and employers face increased exposure to liability.

The case, Dittman v. UPMC, arose after UPMC experienced a data breach where employee data was compromised and then used to file fraudulent tax returns.  After suffering financial loss as a result of the breach, UPMC employees sued UPMC for negligence, alleging that UPMC owed its employees a duty of reasonable care to protect their electronically stored information, and that UPMC breached that duty. The Court held that an employer who collects and stores employee information on its internet-accessible computer system has a common law duty to protect that data from any foreseeable risk of harm. The Court also held that the employees’ claims of economic loss were not barred by the longstanding economic loss doctrine, which generally prevents a party from recovering solely economic damages under a negligence theory of liability.  The Court provided much needed clarification on the doctrine’s scope, stating that it does not preclude all negligence claims where the loss is solely financial, but does bar solely financial claims where the duty arises from a contract between the parties.  Because the plaintiffs in Dittman alleged breach of a common law duty separate, apart, and independent from any contractual duty, the economic loss doctrine did not bar UPMC employees’ claims.

The Dittman ruling is significant for two major reasons.

  1. It Establishes a Common Law Duty to Protect Personal Information. Before Dittman, it was very difficult for a data breach victim to recover due to the difficulty of tracking down the ultimate wrongdoer and a lack of precedent allowing recovery from those who collected and stored the compromised personal information.  By establishing a duty of reasonable care for employers who collect and store their employees’ personal and financial information on internet-accessible computer systems, the Pennsylvania Supreme Court created a clear method of recovery for employee data breach victims.  While the Court only imposed this duty on employers who collect and store employee information on internet-accessible computer systems, it is likely that the Court’s reasoning will be extended to other contexts where one party collects and stores another’s information, such as the business-consumer context or the university-student context.

Companies with employees in Pennsylvania should take immediate action to evaluate existing data security measures or impose data security measures if none are in place.  Since data breach victims will likely attempt to extend Dittman to other contexts, any business or entity that collects and stores data of Pennsylvania residents should evaluate their data security measures in order to avoid liability.

  1. It Is Much Easier for Plaintiffs to Bring Negligence Claims Seeking Solely Economic Damages. Before Dittman, defendants relied on the economic loss doctrine to quickly dispose of negligence claims seeking solely economic damages (as opposed to physical injury or property damage).  Now, negligence actions seeking solely economic damages cannot be dismissed as quickly or easily.  Instead, defendants will be tasked with proving that the plaintiff alleges a breach of a purely contractual duty, not a duty separate and apart from any contractual relationship.  By clarifying and limiting the economic loss doctrine in this way, the Court has opened the door to increased litigation and slower resolution of negligence claims seeking only economic damages.

As recognized by the trial court, the Supreme Court’s decision is certain to spark increased litigation. Indeed, in dismissing UPMC employees’ claims, the trial court noted that the creation of a private cause of action for victims of data breaches would likely trigger the filing of hundreds of thousands of lawsuits each year and overwhelm Pennsylvania’s judicial system.  Interestingly, in overturning the trial court’s decision and reviving UPMC employees’ claims, the PA Supreme Court did not address the impact of its decision.

Carol Steinour Young and Sarah Dotzel practice in McNees Wallace & Nurick’s Litigation Group.

The Fair Credit Reporting Act (“FCRA”) has been a fertile area for lawsuits against employers.  Recently, the Third Circuit Court of Appeals provided yet another warning for employers regarding compliance with the FCRA.  In Long v. SEPTA, the court held that an employer violates the FCRA when it fails to provide a copy of the applicable consumer report to prospective employees before taking an adverse employment action.  This decision serves as an important reminder of employer obligations under the FCRA and also provides clear and direct guidance on the steps an employer must take before it rejects an applicant on the basis of information contained in a consumer report or background check.

In Long v. SEPTA, SEPTA denied employment to three applicants who had been convicted of drug offenses.  Prior to making that decision, however, SEPTA did not send the plaintiffs copies of their background checks, nor did it send them notices of their rights under the FCRA.  The plaintiffs, in turn, filed a class action lawsuit, alleging that SEPTA violated the FCRA by taking an adverse employment action against them without providing copies of their background check reports or notices of their rights under the FCRA.

SEPTA argued that it made no difference whether the plaintiffs’ consumer reports were provided before or after its decision not to hire them because the reports were accurate.  Therefore, according to the employer, the plaintiffs suffered no legal injury under the FCRA.

The court rejected the employer’s argument and instead interpreted the statute based on its plain language as establishing two fundamental requirements: (1) that an employer must provide a consumer report and FCRA rights disclosure; and (2) that it must do so before it takes any adverse action.  The court explained that doing so “allows [the prospective employee] to ensure that the report is true, and may also enable him to advocate for it to be used fairly—such as by explaining why true but negative information is irrelevant to his fitness for the job.”  The court went on to note that the “required pre-adverse-action notice of FCRA rights provides the individual with information about what the law requires with regard to consumer reports….It helps ensure that reports are properly used and relevant for the purposes for which they are used.”

Accordingly, a prospective employee has the right to receive their consumer report and a description of their rights under the FCRA before an employer takes any form of an adverse action against them on the basis of information discovered in the report—regardless of how accurate the background check may be.  The court has made it explicitly clear that prospective employees have the right to know of and respond to such information prior to an employer’s adverse action.

If you have any questions regarding FCRA compliance, please contact any member of our Labor and Employment Practice Group.

On October 17, the Pennsylvania Senate signed the previously approved House Bill 1840, known as the “Protz Workers’ Compensation Legislative Fix,” which is expected to be signed into law by Governor Tom Wolf within the next several days.

Why is a “Protz Fix” necessary? Employers in Pennsylvania suffered a major blow, when the Impairment Rating provisions of Act 57, were invalidated by the Pennsylvania Supreme Court in the 2017 case of Protz v. WCAB. The Impairment Rating Evaluation (“IRE”) process reduced WC costs by limiting temporary total disability benefits (“TTD”) to 104 weeks, so long as the degree of impairment under the American Medical Association Guidelines to the Evaluation of Permanent Impairment was less than 50%. The Supreme Court in Protz found that the IRE provisions were an unconstitutional delegation of legislative power under Article II, Section 1 of the Pennsylvania Constitution, since impairment was to be determined “pursuant to the most recent edition of the AMA Guidelines to the Evaluation of Permanent Impairment.” The AMA Guidelines are revised every few years, and accordingly, the Court found that the Impairment Rating provisions allowed the measurement standards for impairment to “automatically” change every few years, without any ongoing legislative oversight.     

The Protz Fix, which hopefully will be signed by Governor Wolf, corrects this problem by specifying the use of the Sixth Edition of the AMA Guidelines. In a compromise gesture to injured workers, the Bill would also lower the impairment threshold from 50% to 35%, for entitlement to ongoing TTD benefits.

Although the Protz Fix, if signed, will certainly be challenged by plaintiff attorneys, the new law would seem to satisfactorily address the Constitutional concerns raised by Protz.

We will keep you posted concerning further developments and naturally, if you have any questions or concerns, please contact a member of our WC group, including Denise Elliott, Micah Saul or Paul Clouser.

There have been a variety of responses to the #MeToo movement since it began a little over a year ago. Employees have responded by filing more internal and external complaints.  In fact, in early October the Equal Employment Opportunity Commission (EEOC) released its fiscal year 2018 statistics regarding workplace harassment.  Among other things, the data showed that charges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017.  In addition, the EEOC reported that it recovered nearly $70 million for victims of sexual harassment in fiscal year 2018, an increase of $22.5 million from fiscal year 2017.  You can find more information on the EEOC’s report here.

Employers have responded to the #MeToo movement by updating policies, conducting more trainings, and holding employees accountable.  While the United States Congress has not yet responded with specific legislation, many states have taken action to address sexual harassment and sexual misconduct in the workplace.

As a result, employers operating in multiple states must be aware of the various approaches taken by states and ensure compliance obligations are met.  Most employers have already taken action to address differing state law requirements such as how and when to pay employees, availability and use of paid leave, and the legality and enforcement of restrictive covenants.  This year, employers will need to add sexual harassment compliance to the state-by-state compliance list.

The states take a varied approach to addressing this issue through legal regulations and requirements.  We anticipate that more state laws are on the way.  In this four-part series, we explore some of the more recent state law developments addressing sexual harassment in the workplace.  We will start our exploration with the State of California.

CALIFORNIA

Limitations on Settlements of Sex-Based Harassment and Discrimination Claims

On September 30, 2018, a new law was enacted that prohibits the inclusion of language in settlement agreements that prevent the disclosure of factual information related to:

  • Acts of sexual assault;
  • Acts of sexual harassment as defined under Section 51.9 if the California Civil Code;
  • Acts of workplace harassment and discrimination based on sex;
  • Failure to prevent acts of workplace sexual harassment or sex discrimination; and
  • Retaliation against a person for reporting harassment or discrimination based on sex.

The new law applies to any settlement agreement entered into on or after January 1, 2019 settling a claim filed in a civil or administrative action. If a settlement agreement contains a provision prohibiting disclosure of the information listed above, the provision will be considered void as a matter of law and against public policy.

As a result of this new law, employers with operations in California should consider the impact on potential settlement of sex-based harassment and discrimination claims. The new prohibitions on certain confidentiality provisions of a settlement may create a greater risk for damage to the employer’s reputation even after settling a sex-based claim with an employee or former-employee.

Increased Sexual Harassment Training Requirements

Since 2005, California employers with at least 50 employees have been required to provide two hours of sexual harassment prevention training to all supervisory employees once every two years. On September 30, 2018, legislation was approved that will require California employers with at least five employees to provide sexual harassment training and education to all employees (both supervisory and non-supervisory).  This new law requires employers to provide at least two hours of sexual harassment prevention training and education to all supervisory employees and at least one hour of such training to all non-supervisory employees by January 1, 2020.  Thereafter, the training and education must be provided once every two years.

As a reminder, the sexual harassment training required since 2005, must address all of the following:

  • The definition of sexual harassment under the California Fair Employment and Housing Act and Title VII of the federal Civil Rights Act of 1964;
  • The statutes and case-law prohibiting and preventing sexual harassment;
  • The types of conduct that can be sexual harassment;
  • The remedies available for victims of sexual harassment;
  • Strategies to prevent sexual harassment;
  • Supervisors’ obligation to report harassment;
  • Practical examples of harassment;
  • The limited confidentiality of the complaint process;
  • Resources for victims of sexual harassment, including to whom they should report it;
  • How employers must correct harassing behavior;
  • What to do if a supervisor is personally accused of harassment;
  • The elements of an effective anti-harassment policy and how to use it;
  • “Abusive conduct” under California Government Code section 12950.1, subdivision (g)(2).

This training must be provided in a classroom setting, through interactive E-learning, or through a live webinar. E-learning training must provide instructions on how to contact a trainer who can answer questions within two business days. All training must include questions that assess learning, skill-building activities to assess understanding and application of content, and hypothetical scenarios about harassment with discussion questions.

Additional information on the requirements related to California’s mandatory sexual harassment training can be found here.

Stay tuned for Part 2 of our journey through the patchwork approach of other recent state law developments in response to the #MeToo movement.

The Occupational Safety and Health Administration (OSHA) has rolled back Obama-era guidance on safety incentive programs and post-accident drug testing. OSHA has a rule prohibiting employer retaliation against employees for reporting work-related injuries or illness. In its latest guidance (a memorandum published October 11, 2018), OSHA clarified that workplace safety incentive programs and post-accident drug testing do not violate that anti-retaliation rule. This differs from OSHA’s approach in previous guidance, where OSHA took the position that, in some circumstances, safety incentive policies and post-accident drug and alcohol testing could be a retaliatory practice for deterring employees from reporting work-related injuries and illnesses. OSHA has changed its course, but the latest guidance is still not a model of clarity.

Specifically, OSHA most recently stated that most incentive programs and instances of workplace drug testing are permissible. However, OSHA warned that such programs can be unlawful and retaliatory if they seek “to penalize an employee for reporting a work-related injury or illness rather than for the legitimate purpose of promoting workplace safety and health.” The new guidance supersedes any other interpretive documents, to the extent they are inconsistent.

Safety Incentive Programs

OSHA clarified and reinforced that incentive programs can be an important tool to promote workplace safety and health. Positive programs, such as those that reward workers for reporting near-misses or hazards or encourage involvement in a safety and health management system, are always permissible, according to the memorandum.

However, the line is less clear regarding rate-based incentive programs (e.g., rewards with a prize/bonus for an injury-free month) and negative action against an employee (e.g., withholding a prize/bonus because of a reported injury). OSHA’s position is that rate-based incentive programs are permissible so long as they are not implemented in a manner that discourages reporting. OSHA claims it would not cite the employer if the employer has implemented “adequate precautions” to ensure that employees feel that they are free to report an injury or illness. The question becomes whether the employer has “adequate precautions” to counterbalance any inadvertent deterrent effect under a rate-based incentive program.

Workplace Drug Testing

OSHA has provided more definitive guidance for drug testing. The following will be deemed permissible:

  • Random drug testing.
  • Drug testing unrelated to the reporting of a work-related injury or illness.
  • Drug testing under a state workers’ compensation law.
  • Drug testing under other federal law, such as a U.S. Department of Transportation rule.
  • Drug testing to evaluate the root cause of a workplace incident that harmed or could have harmed employees.

OSHA has clarified that if an employer chooses to use drug testing to investigate an incident, the employer should test all employees whose conduct could have contributed to the incident, not just the employee(s) who reported injuries.

The attorneys of the McNees Labor & Employment Group are ready to assist your Company with developing OSHA-compliant safety incentives and drug testing policies.