Are No-Hire Provisions Now Void and Unenforceable Under Pennsylvania Law?

Q.  Can two business entities agree not to hire each other’s employees?

A.  On January 11, an en banc panel of the Superior Court of Pennsylvania affirmed a trial court’s decision declaring that a no-hire provision in a commercial contract between two businesses was void and unenforceable under Pennsylvania law. Over the past 18 months, no-poach and no-hire provisions have received nationwide attention for their effects on employees’ wages and mobility. They have been attacked by antitrust authorities, politicians and the plaintiffs’ bar as illegal agreements under state and federal antitrust laws. But the Superior Court’s analysis of the no-hire provision under common law — not antitrust law — may have more far-reaching ramifications for commercial contracting in Pennsylvania, as it could make all no-hire provisions unenforceable. In its opinion, the Superior Court departed from other authority holding that ancillary no-hire provisions between commercial parties are generally enforceable so long as they protect a party’s legitimate interest and are reasonable in scope and duration. This case is worth watching to see if it is appealed and, if so, whether the Pennsylvania Supreme Court allows the decision to stand.

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A. Christopher Young and Robyn R. English-Mezzino

ADEA Waivers Must Be Written in Plain Language to Be Enforceable

Q.  I’m the HR Director of a large company that is planning a reduction in force in one of our divisions. We intend to offer early retirement incentives to some of the individuals, contingent on them signing an agreement to waive all future claims against the company under the applicable discrimination laws, including the Age Discrimination in Employment Act (ADEA).  What information needs to be included in the waiver to comply with ADEA requirements?

A.  Companies with plans to implement a reduction in force should proceed with caution following a recent decision in which the court found that a waiver and release of claims signed by an outgoing employee violated federal age discrimination laws. On January 11, 2019, in Ray v. AT&T Mobility Services, LLC, a federal judge in the Eastern District Pennsylvania held that AT&T violated the ADEA by giving employees a waiver that failed to meet the strict informational requirements of the Older Worker Benefit Protection Act (“OWBPA”).  The court found that the waiver lacked sufficient details regarding members of the overall decisional group, and therefore, affected employees did not have the information necessary to make an informed decision about whether to waive their right to assert claims against the company under the ADEA.

The OWBPA requires employers to include specific language and to follow certain safeguards when asking employees over age 40 to sign a waiver giving up their right to sue the company for age discrimination under the ADEA. This information must be provided to the employee “in writing in a manner calculated to be understood by the average individual eligible to participate.”

Among the other OWBPA requirements, exiting employees must be advised in writing that they have the right to consult an attorney before signing the waiver. If waivers are presented to a group of employees (i.e., in a RIF), each employee must be given at least 45 days to decide whether or not to sign it.  If the waiver is presented to a single employee, in the absence of a RIF, the employer must give the employee 21 days to decide whether to accept it.  In either case, after signing the waiver, employees have seven days to revoke the decision.

As demonstrated by Ray v. AT&T Mobility Services, LLC, however, the OWBPA’s most challenging requirements flow from the employer’s duty to provide information about its decision-making process, specifically in terms of the factors used to select the employees to be released.  In the context of a reduction in force, a waiver must clearly describe the group of employees under consideration and must delineate the eligibility factors relevant to the decision making process, including the job titles and ages of all individuals in the group selected and not selected for the reduction in force.

In Ray v. AT&T Mobility Services, LLC, the plaintiff, a former sales director, received a “surplus notification” letter from AT&T, informing her that she was losing her job due to a reduction in force in the company’s mobile phone sales and services division.  Employees targeted by the reduction in force were given the option either to remain in their current job while searching for other positions in the company, or to sign a waiver and release of claims ending their employment, after which they would be eligible for severance benefits.  The plaintiff decided to stay put, but after failing to land another job within the company during the 60-day period, she was terminated.  She then submitted the signed waiver and release, and the company paid her severance benefits.

Despite signing the waiver, the plaintiff filed a complaint, alleging that the waiver did not meet the “knowing and voluntary” requirements of the ADEA.

The waiver provided by AT&T informed employees that the pool from which the terminated employees were chosen was “the combined Affected Work Group(s)” in the ADEA listing, which for its part described the group as being “comprised of positions at the same level with similar definable characteristics from which the surplus employees are selected,” and further stated that the affected groups could be “any portion of an organization, described in terms of level, job title, similar job functions, geography, lines of organization or other definable attributes based on needs of the business.”

The court rejected this “vague and circuitous” language, explaining that the waiver did not provide terminated employees with “any meaningful information as to how the process of identifying those included in the reduction-in-force was conducted.” Moreover, the “combined Affected Work Group(s)” that constituted the decisional unit were created solely to effectuate the reduction, and thus “terminated employees such as [plaintiff] had no meaningful understanding of their composition or origin.”

In granting partial summary judgment to the plaintiff, the court pointed out that the company had disclosed ages and job titles only for those employees selected or not selected within certain groups it determined would be impacted by the reduction. Instead, the court explained, the company should have disclosed the job titles and ages of every employee in its sales and services division who was selected or not selected for inclusion in the decisional unit.  In other words, the company could not simply describe a subset of the larger decisional group without explaining the process by which the subgroup itself was cleaved from the division overall.  According to the court, AT&T’s “circuitous decisional unit definition is precisely the type of disclosure the OWBPA seeks to prevent.”

For companies implementing a reduction in force, the Ray v. AT&T decision serves as a reminder to pay close attention to the strict requirements of the ADEA and the OWBPA when providing waivers to outgoing employees, and to draft the language in a way that it is easy for employees to understand.  Aside from the ADEA/OWBPA rules, employers also should note that other laws may be triggered by a RIF, depending on the specific circumstances.  For example, the Worker Adjustment and Retraining Notification Act (“WARN”) requires employers to provide 60 days written notice for certain plant closings and mass layoffs. Moreover, federal and/or state anti-discrimination laws could be implicated if the RIF has a disparate impact on a protected group.

As the Ray v. AT&T court explained, the major underlying policy of the OWBPA disclosure requirements is to “arm employees with enough information to make an informed decision whether to release any potential ADEA claims against an employer.”  While it may seem counterintuitive to “arm” outgoing employees with information that might result in a lawsuit against your company, the case shows that a lack of transparency could result in liability despite the lack of discriminatory intent.  Given the myriad of rules and regulations potentially applicable to a RIF, employers should seek legal counsel prior to taking action to ensure compliance and avoid liability.

Rogers Stevens

SOCIAL MEDIA JOB POSTINGS AND AGE DISCRIMINATION

Q:        Does using social media advertisements targeted to younger potential applicants raise age discrimination concerns?

A:        The Age Discrimination in Employment Act (“ADEA”) makes it illegal to discriminate against workers over the age of 40 in employment advertising, recruiting, hiring, and other employment opportunities.  The publication provision of the ADEA generally makes it unlawful to “print or publish” job notices or advertisements “indicating any preference, limitation, specification or discrimination, based on age.”  Age preferences for younger employees are only appropriate when age is demonstrated as a bona fide occupational qualification that is reasonably necessary for the normal operation of the business.

Age discrimination claims pursuant to the ADEA have been rising steadily in the past 10 years. The number of age discrimination complaints submitted to the U.S. Equal Employment Opportunity Commission totaled about 18,000 in 2017 — about 20% of all complaints filed with the federal agency.

At the same time, the manner and method by which employers are posting job advertisements has been changing and evolving. Not surprisingly, given the rise of social media usage, many employers are turning to sites like Facebook to recruit new hires.  However, using such sites to target specific demographics, such as younger applicants, may run afoul of the ADEA.

In December 2017, a group of some of the largest U.S. employers found themselves in federal court, facing tough questions about their social media hiring practices. A class action lawsuit was filed against the various employers, alleging that they used Facebook-provided targeting tools and algorithms to direct ads to younger potential applicants, thereby discriminating against older applicants in violation of the ADEA.  The individual plaintiffs in the case, who are all recently unemployed workers over the age of 40 who use the social media site, claim they have been denied the opportunity to view certain employment advertisements simply because of their age. Because they could not view the ads, consequently, they could not apply for the posted jobs.

Although we do not yet know the outcome of the pending litigation, it is likely similar claims will follow. So what can an employer do to mitigate the risks associated with posting jobs on social media sites?  Treat the online posting no differently than any other publication, such as a newspaper.  Avoid using language that may be deemed discriminatory (i.e. “young” or “new grad”).  Research the social media site’s advertising policies and procedures.  When completing the criteria for the posting, do not affirmatively limit how the advertisement will be shared among different age demographics who use the site.  Ensure that your company’s advertisements are accessible and open to potential applicants of all ages.

Leigh McMonigle

Connecticut Law Prohibiting Wage History Inquiries and Restrictions on Employee Wage Discussions Now in Effect

Q: I have employees in Connecticut.  What do I need to know about the new pay equity law?

A:  Effective January 1, 2019, employers are not allowed to: (1) inquire (whether directly or through a third party) about a prospective employee’s wage history; or (2) prohibit employees from disclosing or discussing the amount of their wages or the wages of another employee that has been voluntarily disclosed by the other employee.

“Wages” are defined as “compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation.” 2018 Conn. Pub. Act No. 18-8, Section 1(a)(3).  Employers can  inquire about the existence of other elements of a prospective employee’s compensation structure (such as stock options), but cannot inquire about the value of those elements.

Under the new law, employees must be permitted to discuss wages with each other, but the law does not require any employer or employee to disclose the wages paid to any employee.  As a result, employees have a right to discuss their wages with other employees, but are under no obligation to do so.  Importantly,  employers may continue to keep individual employee wage information confidential.

Connecticut joins many other states and localities that have enacted similar laws, including New York City, Delaware, and California. Like New York City’s law,  Connecticut’s prohibition on, inquiries about wage history does not apply if the applicant discloses his or her wage history voluntarily.  The question of whether such a disclosure was made voluntarily can be tricky, however, especially after the fact, so employers should tread carefully.

The Connecticut law provides a private right of action to both prospective employees and employees, and authorizes suit within two years of an alleged violation. Employers who are found to have violated the law may be liable for compensatory damages, punitive damages, and attorney’s fees and costs.

To ensure compliance, employers should review job applications for positions in Connecticut to ensure that they do not include inquiries about wage history. Employers should also review offer letters and employment agreements to ensure they do not contain language prohibiting disclosure and/or discussion of compensation.  Finally, employers should update internal policies and interview guidelines, and ensure that all relevant personnel are aware of the new law.

Jessica Rothenberg

Philadelphia Enacts Fair Workweek Ordinance

Q.  Can you explain to me Philadelphia’s new Fair Workweek Ordinance?

A.  In late December 2018, Philadelphia Mayor Jim Kenney signed an Ordinance that will require large fast-food chains, retailers, and hotels to provide employees with advance notice of their schedules and a variety of other protections. The Ordinance—known as the “Fair Workweek” Ordinance—requires certain Philadelphia employers to provide employees with at least two weeks’ advance notice of their schedules, offer remuneration to employees if their schedules are changed, and provide minimum periods of rest in between shifts. The Ordinance is similar to ordinances adopted in New York, San Francisco, and other large cities.  It is scheduled to become effective on January 1, 2020.

Some key facts about the Ordinance:

  • The Ordinance applies only to “Covered Employers,” which consist of retail, hospitality and food services establishments that have 250 or more employees and 30 or more locations worldwide. This definition includes chain establishments and franchises associated with a franchisor or network of franchises.
  • Upon hire, all Covered Employers must provide employees with a written, good faith estimate of the employee’s work schedule. The Covered Employer must provide a revised schedule when the employee’s availability changes or the Covered Employer’s business needs change. The employee’s work schedule must include the following information: (1) The average number of work hours the employee can be expected to work over a typical 90 day period; (2) Whether the employee will be expected to work any on-call shifts; and (3) A subset of days/times/shifts that the employee typically will work.
  • Covered Employers also must provide employees with written work schedules. When the law takes effect in 2020, the schedules must be provided at least 10 days in advance of the schedule start date. Covered Employers will be required to provide 14 days advance notice beginning in 2021.
  • An employee may decline to work hours or additional shifts not included in the posted work schedule.
  • The Ordinance requires “Predictability Pay.” Predictability Pay is a monetary payment made by a Covered Employer to an employee as compensation for making changes to the employee’s work schedule. Predictability Pay is in addition to any other wages earned by the employee for actual work performed.
  • Covered Employers must pay one hour of “Predictability Pay” at the employee’s regular rate of pay if the Covered Employer adds time to a work shift or changes the date, time, or location of the shift, even if there is no loss of hours. Additional Predictability Pay is required if a Covered Employer subtracts hours from a regular shift or a regular shift is cancelled. If the employer makes changes to a posted schedule within 24 hours of initially posting the schedule, then no Predictability Pay will be required.
  • Employees may decline, without penalty, any work hours that are scheduled or otherwise occur less than nine hours after the end of the previous shift. An employee working a shift that begins less than nine hours after the end of the previous shift must be compensated $40 (in addition to their normal wages) for each such shift.
  • Covered Employers must offer work shifts to existing employees before utilizing subcontractors or hiring new employees from an external applicant pool. The work must remain available to existing employees for at least 72 hours (unless less time is necessary in order to complete the work).
  • As with most statutes, Covered Employers must post notice of the requirements of the Fair Workweek Ordinance. It is expected that the City will provide a model notice before the Ordinance’s effective date.
  • Covered Employers must be careful to maintain records (including but not limited to good faith estimates of work schedules provided to employees at the commencement of employment, work schedules, and payroll records that specify the amount of Predictability Pay paid to employees) for a period of at least two years in order to demonstrate compliance with the Ordinance.
  • At the request of any employee, a Covered Employer must provide employees with work schedules for all employees at the particular location for any previous week in the past two years, including the originally posted and any modified versions of work schedules.
  • Employees will have a private right of action under the Ordinance, and upon prevailing in such an action, can recover the full amount of any unpaid compensation, including Predictability Pay, and an equal amount as liquidated damages up to a maximum of $2,000. Employees will also be able to recover attorneys’ fees and costs.We expect that the agency charged with enforcing the Ordinance will issue implementing regulations prior to the Ordinance’s effective date. While the Ordinance does not take effect until 2020, the Ordinance is likely to impose significant administrative burdens and costs on Covered Employers. Covered Employers should work with experienced employment law counsel to minimize the burden and begin to take steps to prepare for implementation of the Ordinance.

Lee Tankle