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



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

Interplay of FMLA and ADA Precludes Employers from Automatically Terminating Employees at End of FMLA Leave

Q: Can my company fire an employee once the person has exhausted his or her FMLA leave entitlement?

A: Many employers are surprised to learn that they may not necessarily terminate an employee if he or she does not return to work at the end of FMLA leave.  Under the Family Medical Leave Act (FMLA), an employee is eligible for up to 12 weeks of unpaid job-protected leave.  Upon returning from FMLA leave, except in a few limited situations, an employee is guaranteed the right to return to the same position or to an equivalent position with equivalent benefits, pay, and other terms and conditions of employment that the employee held before the leave commenced.  Under FMLA regulations, however, an employee does not have a right to return to work if he or she is unable to perform the essential duties of the position.

But what if the employee asks for more time off after the FMLA leave period has expired?

Once an employee has exhausted his or her FMLA leave, the Americans With Disabilities Act (ADA) requires employers to consider whether an extension of leave is warranted as a reasonable accommodation of a disability. An extended leave may be a reasonable accommodation if it is for a finite period of time to receive treatment or to recover from a disability.  Employers must consider each situation on a case-by-case basis, engaging in the interactive process with the employee to determine whether the employee has a disability within the meaning of the ADA, and whether an extended leave would be a reasonable accommodation to enable the employee to perform the essential functions of the job once he or she returns to work.  Employers also must determine whether there are any applicable state laws or worker’s compensation laws that are implicated.

In addition to considering the application of the ADA to each employee’s situation, employers should ensure that their employee handbooks do not contain return to work policies that violate the law. Language that calls for automatic termination after the employee has been absent for a certain period of time may give rise to liability for failure to consider the impact of the ADA.

Renee C. Manson


Employer May Require Employee to Undergo Mental Fitness for Duty Exam if Employee Exhibits Concerning Behavior

Q: One of our employees has been exhibiting strange, erratic behavior at work. Can we require the employee to submit to a mental health examination?

A: Possibly. The ADA prohibits employers from requiring their workers to undergo medical exams unless the exam is “shown to be job-related and consistent with business necessity.”  However, an employer may require an employee to undergo a mental health examination if the employee’s behavior raises questions about the employee’s ability to perform essential job-related functions or raises a safety concern.

The Seventh Circuit (which has federal jurisdiction over the States of Illinois, Wisconsin and Indiana) recently affirmed a district court’s decision rejecting a plaintiff’s claim for disability discrimination when her employer required her to undergo several mental health examinations in response to her behavior. In Painter v. Illinois Department of Transportation, No. 16-3187 (7th Cir. Dec. 6, 2017), the company placed the plaintiff on administrative leave and required her to undergo a fitness for duty exam after she had several outbursts aimed at coworkers and habitually walked around the office talking to herself.  Many employees expressed fear that the plaintiff would become physically violent, did not want to be alone with the plaintiff in the office, and believed that the plaintiff was spying on them at work.  After two exams by a doctor and one exam by a psychologist, the plaintiff returned to work and was transferred to another division.

In her new division, the employer continued to receive reports from co-workers complaining of incidents with the plaintiff.  The plaintiff kept a detailed written log of her co-workers’ actions and conversations, purportedly in order to determine why she was put on leave.  The plaintiff also sent her supervisor numerous nonsensical emails, often during the evening and in the middle of the night.  The plaintiff was again placed on administrative leave and underwent two additional fitness for duty exams.  The doctor found that the plaintiff exhibited signs of a personality disorder, but deemed her fit to return to work.  This pattern repeated a few additional times until the plaintiff ultimately was found by a psychiatrist to be unfit for duty.  She then sued.

The Seventh Circuit noted that employers bear a high burden of establishing that compelled medical examinations are consistent with business necessity. Nonetheless, in this case, the court held that the employer had established it had a reasonable belief based on objective evidence that the plaintiff may have had a medical condition that impaired her ability to perform essential job functions, and that the medical condition could cause the plaintiff to pose a safety threat.  The court noted that, prior to each leave and exam, multiple employees raised concerns about the plaintiff’s behavior in the workplace, and a number of employees felt unsafe around the plaintiff.  Each leave and exam was based on new incidents of behavior, and in general, on more than person’s complaints.  The court therefore concluded that inquiries—even multiple inquiries—concerning a worker’s psychiatric health may be permissible if they reflect concern for the safety of other employees and the public at large.

The Seventh Circuit’s decision is consistent with EEOC guidance, which states that an employer may require an employee to undergo a medical examination if the employer has a reasonable belief, based on objective evidence, that a medical condition will impair the employee’s ability to perform essential job functions, or that the employee will pose a threat due to a medical condition.

When assessing whether to have an employee undergo a fitness for duty exam based on unusual behaviors, it is important for employers to keep in mind that there must be a genuine reason to doubt whether the employee can perform job-related functions, or there must be a genuine safety concern. Behavior that simply is annoying or inefficient does not rise to that level.

Jessica X.Y. Rothenberg