NLRB Flip Flops on Browning Ferris Standard for Joint Employment (Again)

Q.  What is the standard for determining whether two companies are joint employers?

A.  On February 26, the National Labor Relations Board (NLRB) decided unanimously to vacate its decision in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017) (vacated at 366 NLRB No. 26).  As we reported previously, in December 2017, the NLRB issued a 3-2 decision in Hy-Brand, in which it overruled the controversial joint-employer standard articulated in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015). The Browning-Ferris decision had significantly relaxed the standard for proving that two entities are joint employers, ruling that entities could be joint employers even if one had only indirect control or the unexercised right to control employees’ terms and conditions of employment. The Hy-Brand decision returned to the pre-Browning-Ferris standard for finding joint-employer status, under which entities are joint employers only if each has exercised direct and immediate control over employees.

With this latest development, at least for now, the Browning-Ferris standard is in effect again, making it much easier for employees and unions to establish that two companies are joint employers.

For more information about this topic, please click here.

Susan K. Lessack

Reducing Cybersecurity Threats from Employee Conduct

Q.  What can my company do to reduce the threat that one of our employees may cause a cyberattack?

A.  In September 2017, Equifax announced that hackers had gained access to the confidential information of more than 145 million consumers, almost half of the U.S. population.  Recent cases suggest that employers could be subject to liability when one of their employees causes a data breach by either knowingly or negligently revealing sensitive employee or customer data. In March 2016, for example, Snapchat announced that someone posing as the company’s chief executive officer obtained employee payroll data about 700 employees. More than seven other companies were tricked by similar phishing attacks that same year.

Companies often are surprised to learn that their biggest security threats come from their own employees. These risks range from the use of weak passwords to clicking on corrupt internet links to theft of sensitive data. The risk a cyberattack also extends to mobile devices accessed from employees’ homes.

There are several things that employers can do to tighten controls on their data.  For more information on how to tighten employee security, read here.

–Tracey E. Diamond

 

 

 

New York City Employers will be Subject to a New Accommodation Law Effective October 2018

Q: I am a New York City employer.  What do I need to know about the amendments to the law regarding accommodations?

A: Effective October 15, 2018, employers in New York City will be required to engage in a “cooperative dialogue” with a person who has requested accommodation or who the employer has notice may require an accommodation.  This new requirement stems from an amendment to the New York City Human Rights Law (“NYCHRL”).

While most employers are under an existing duty under the Americans with Disabilities Act (“ADA”) to engage in an interactive process with employees about accommodations, the expansion of the NYCHRL affects NYC employers in two key ways. First, the ADA applies to employers with 15 or more employees.  The NYCHRL has broader coverage, applying to employers with 4 or more employees.  Second, the NYCHRL amendments greatly expand the duty to engage in a cooperative dialogue beyond disability-related accommodations.

Employers will be required to engage in a cooperative dialogue for accommodations relating to: (1) disability; (2) religious needs; (3) pregnancy, childbirth, or a related medical condition; and (4) a person’s status as a victim of domestic violence, sex offenses, or stalking.

“Cooperative dialogue” is defined as a good faith written or oral dialogue concerning the person’s accommodation needs, potential accommodations (including alternatives to a requested accommodation), and the difficulties that potential accommodations may pose for the employer. This is similar to the interactive process under the ADA, which generally requires employers to request information about limitations, identity the barriers to job performance, and explore types of accommodation.  However, unlike the ADA, the NYCHRL requires that once a final determination is reached, employers must document it in writing, regardless of whether or not the accommodation is approved.

To prepare for the new law, NYC employers should ensure that all managers and other employees who may deal with accommodations are aware of the new requirements. In particular, employers should emphasize that the requirement to engage in cooperative dialogue extends beyond disability-related accommodations.  Employers should also develop internal processes for accommodation requests, dialogues, and determinations, so that all requests are addressed in a timely manner and properly documented.

Jessica X.Y. Rothenberg

Confidential Harassment Settlements No Longer Subject to Tax Deduction

Q.  Has the #MeToo Movement led to any changes on how companies settle harassment complaints?

A.  While there are numerous legislative initiatives on the horizon intended to change how employers handle harassment complaints in light of the #MeToo Movement, the most significant federal change is a little known revision to the Tax Code recently enacted.

The Tax Cuts & Jobs Act prohibits either the employer or the employee from taking a tax deduction for (1) any settlement or payment related to a sexual harassment claim that is the subject to a non-disclosure agreement; and (2) attorneys’ fees related to such settlement or payment. The intent of the statute is to discourage parties from keeping harassment claims secret and thereby reduce the risk that the alleged harasser will strike again.

The term “related to” is not defined in the statutory language. It is possible that the settlement proceeds for any claim that merely mentions the word “harassment” may not be deductible, even if the majority of the allegations involve other issues.  However, we believe that the IRS likely will allow parties to allocate the portion of the proceeds that is for settlement of harassment allegations in those cases in which harassment is part of a larger suit involving other disputes.

The impact of the deduction for attorneys’ fees also is significant. Most claimants pay their attorneys on a contingent fee basis, meaning that the settlement proceeds are split between the claimant and the attorney, often as high as 60 percent claimant/40 percent attorney.  Since proceeds from an agreement containing a nondisclosure provision cannot be deducted, this means that the employee may not be able to deduct even that part of the proceeds that goes directly to his or her attorneys.  This is true regardless whether the employer pays the attorney directly, or pays the proceeds to the employee who then pays his or her attorney.

The new rule may have several detrimental consequences to both parties and the public. As a confidentiality provision is an important component of most settlement agreements, the new tax burden will make settlements more costly.  Employers may be less interested in pursuing such settlements, resulting in harassment claims clogging the courts.  Additionally, employees who would rather keep their claims private due to the sensitive nature of the allegations will have to face the public eye.

While it remains to be seen how the IRS interprets this new provision, both employers and employees must consider the tax consequences of any agreement that they seek to keep confidential.

–Tracey E. Diamond

 

POTENTIAL CHANGES ON THE HORIZON FOR PENNSYLVANIA WAGE AND HOUR LAW

Q.  Have there been any recent changes to the overtime pay rules that we have to be concerned about?

A.  Currently, under both federal and Pennsylvania law, to be exempt from overtime under the “white collar exemptions,” an employee must meet both the salary basis test and the duties test, meaning they must make more than a certain amount weekly and perform certain identified duties. The salary threshold has been stagnant for decades. In 2016, however, the Department of Labor (DOL) announced new regulations that would increase the salary threshold from $23,660 annually ($455 per week) to $47,476 (or $913 per week).  The regulations however, fell short of becoming law when a federal court in Texas enjoined the DOL from implementing it, only weeks before it was set to go into effect.  Today, the federal law remains in limbo, with speculation that new regulations will be issued raising the salary test to less than the previously anticipated increase, although the exact amount remains unclear.

In the meantime, however, Pennsylvania Governor Tom Wolf has taken measures into his own hands. On January 17, 2018, Governor Wolf announced plans to issue rules that would increase the salary level from $455 per week ($23,660 annually) to $610 per week ($31,720 annually), beginning on January 1, 2020.  The threshold salary would again increase on January 1, 2021 to $39,832, followed by a third increase in 2022 to $47,892.  After the year 2022, the salary threshold would increase automatically every three years.  The goal of these proposed rules is to strengthen the middle class.

Although these rules have not yet been passed, employers should keep their eyes out for any changes that may occur. If the new rules do become implemented, Pennsylvania employers would be required to follow Pennsylvania law in determining overtime eligibility for Pennsylvania workers, rather than the federal law, assuming federal law remains less favorable for employees.

Kali T. James-Wellington