New EEOC rules allowing employers to offer employees incentives to participate in wellness programs took effect on January 1, 2017. The AARP had sued to block the rules contending that the rules permit employers to compel employees to surrender private health and genetic information that the ADA and GINA generally protect from involuntary disclosure. The EEOC rules provide that employers may offer workers up to 30% of the cost of self-only health insurance for participation in wellness programs that include health risk assessments or tests that can divulge disabilities or genetic data. The rules contemplate that these financial inducements are "incentives" and not penalties against workers who refuse to give out their private health and genetic information. On December 29, 2016, a federal district court in Washington refused to enjoin the implementation of these rules. AARP v. EEOC, No. 16-2113 (12/29/16).
A number of recent developments have occurred in worker authorization for purposes of the immigration laws.
Form I-9. All employers must use the new Form I-9 beginning no later than January 21, 2017.
Notice of Suspect Documents. An employer who receives a "Notice of Suspect Documents" from the government must take certain steps to avoid liability. It is not sufficient to ask the employees who provided the suspicious documents whether they are authorized to work. (Split Rail Fence Co. v. United States, No. 15-9561, 10th Cir. Dec. 20, 2016). Split Rail Fence Co. received a "Notice of Suspect Document" for 32 employees. After Split Rail showed the notice to the employees, 23 admitted they were not authorized to work (and were fired) and 9 claimed they were authorized to work. Instead of asking the 9 employees to provide new work authorization documentation, Split Rail asked the employees whether they owned houses and cars. The 10th Circuit Court of Appeals agreed with the government that Split Rail should pay a fine for those employees. Split Rail could have avoided liability by showing the notice to the employees, asking the employees to provide new work authorization documentation, and providing the new documentation to the government for verification.
New Discrimination Rules. The government adopted new regulations that make citizenship and national origin discrimination in the hiring process easier for the government to prove. The regulations assert that treating workers differently is discrimination even if there is no hostility to the group, even if there is no economic harm to the employee, and even if no worker complains. The government is using and will continue to use E-Verify to monitor whether a large percentage of permanent resident employees provide a permanent resident card to prove identity and work authorization. If so, the government may investigate and may impose fines against the employer. To avoid liability, the employer must provide a legitimate, nondiscriminatory reason for the large percentage of permanent resident cards, such as, the employees voluntarily provided the documents without prompting from the employer. In other words, the employees must have complete freedom to choose from the List of Acceptable Documents which document(s) to present without the employer suggesting a preference. Also, if the employee presents three documents to the employer (such as, a driver's license, Social Security card and permanent resident card), the employee, not the employer, must decide which of the three documents the employee wants the employer to use in completing Section 2 of Form I-9. Although the regulations are subject to challenge for many legal reasons, employers should review their hiring practices and make any necessary changes to minimize liability.
These changes occurred in a final rule issued on December 16, 2016, which went into effect on January 18, 2017. As an example in the preamble to the final rule, the Homeland Security Department often will refer an employer to the Department of Justice if a large percentage of permanent resident employees have provided a green card to prove identity and work authorization, but U.S. citizen employees present driver’s licenses and Social Security cards. The circumstances indicate that E-Verify statistics will be a large part of the number of complaints or independent investigations by the government. Many employers may innocently violate these rules thinking they are doing the right things by asking for more or different documents to complete Form I-9. The validity of these new rules will ultimately have to be tested in the courts, as most of the issues turn on a statutory provision relating to "intent to discriminate."
Misclassification cases in which it is alleged that independent contractors are actually employees have been one of the most important and heavily-litigated areas of employment law in recent years. Many of the lawsuits are filed under the Fair Labor Standards Act or comparable state laws and seek wage and hour and other protection for workers. In a recent twist, the NLRB has become involved in these issues.
Last April, the NLRB Regional Director in Los Angeles issued an unfair labor practice complaint against Intermodal Bridge Transport contending that the company treated its drivers at the port as contractors in order to stop the Teamsters’ union from organizing them. Pacific 9 Transportation, Inc., 21-CA-150875. NLRB General Counsel Richard Griffin a month earlier had issued a memo that the NLRB is cracking down on worker misclassification and urging NLRB regional directors to refer cases involving misclassification claims to Washington for review. Previously there has been little or no NLRB precedent on whether the intentional misclassification of workers as independent contractors interferes with worker’s rights to organize under the Labor Act. More recently, in August, the General Counsel issued an advice memorandum directing the NLRB regional directors to treat employee misclassifications as a violation of the Labor Act.
Editor’s Note: These developments create other reasons for employers to be careful in their use of independent contractors, particularly in the careful drafting of their independent contractor agreements, and the practices under such agreements. In essence, the implication of the recent NLRB developments is to create a "federal case" out of each independent contractor agreement. As a practical matter, it is likely that some type of union involvement would generate such claims, since the Labor Act permits only employees to join unions.
Two new developments have raised the stakes in the drafting and enforcement of non-competition agreements. While there are various forms of non-competition agreements, basically they prohibit a former employee from competing against a former employer for a period of time, such as two years. An alternative is to prohibit the former employee from soliciting the former employer’s customers for such a period of time. According to a fact sheet distributed by the White House, non-compete agreements apply to an estimated 20% of workers in the U.S.
The Obama Administration had called on Congress to pass federal legislation eliminating non-competes for workers who fall below a specified salary. Currently the law of non-competes is based almost entirely on state law, which varies considerably from state to state. Some states, such as California, ban non-compete agreements almost completely, but a majority of states enforce non-compete agreements that are reasonable in terms of time, territory and activities prohibited.
As part of the Obama Administration’s interest in non-competes, the Department of Justice and the Federal Trade Commission in October, 2016, issued guidance to help human resource professionals deter collusion among competing employers who agree to use non-compete agreements to suppress wages. These agencies have issued so-called "best practices" as suggestions for human resource departments. In a news release issued on October 20, 2016, the Justice Department announced that it would criminally investigate no-poaching or wage fixing agreements among employers. Such agreements to cap employee pay or avoid recruiting another’s employees could be considered a criminal anti-trust violation, according to the announcements. While the Justice Department has never criminally prosecuted an HR anti-trust violation, it has brought some civil cases, particularly involving several California technology companies that allegedly agreed not to call each other’s employees with job offers. The guidance acknowledges that there may be exceptions for such prohibitions in connection with a legitimate merger or acquisition proposal.
In a related development, the National Labor Relations Board (NLRB) has recently ruled that an employer commits an unfair labor practice by requiring new employees to sign non-competition agreements without prior bargaining with the union. Minteq International, Inc., 364 NLRB No. 63 (7/29/16). The Board ruled that employee work rules are mandatory subjects of bargaining, and that the employer’s non-compete agreement, which prohibited an employee from competing during employment and for 18 months afterward, represented precisely the type matters in which collective bargaining is required. The Board rejected the employer’s argument that nothing in the agreement indicated that an employee would be disciplined during employment under the non-compete agreement. The Board further found that an "interference with relationships" provision in the non-compete agreement was unlawful. This provision required employees for 18 months after their employment to refrain from soliciting or encouraging any present or future customer or supplier of the company to terminate or otherwise alter the relationship with the company in an adverse manner. The Board concluded that this "interference" provision would impair the ability to engage in communications, such as asking customers to boycott the company’s services or products.
Editor’s Note: The Minteq case and others represent a growing trend of using seemingly unrelated laws to attack agreements reached between employers and employees. An employee might defend an employer’s effort to enforce a non-compete agreement by arguing that the agreement was never negotiated with the union. There are a number of cases currently pending before the U.S. Supreme Court dealing with the issue of whether individual employment agreements requiring employees to bring all legal claims in arbitration rather than in court, and waiving class or collective actions, are invalid because they adversely affect the rights of employees to engage in concerted activities under the Labor Act.
One day after President Trump’s first nominee for Secretary of Labor withdrew, the President announced that Alexander Acosta would be his new Labor Secretary - Designate. The prior Labor Secretary - Designate, Andy Pudzer, had been the President’s perhaps most controversial appointment to the Cabinet. Not only was he president of various fast-food restaurant chains, but he was a highly-publicized advocate of management rights. In response, Democrats made him their primary target for opposition and an almost a "perfect storm" of adverse publicity caused even several Republican senators to have doubts. In this environment, on February 15, Pudzer withdrew his nomination and a day later the President appointed a person who is widely considered a "safe" nominee.
It is hard for anyone to say anything bad about Alexander Acosta. He is Hispanic and has been confirmed by the U.S. Senate three times in prior positions as a member (for eight months) of the National Labor Relations Board, as Assistant Attorney General for Civil Rights, and as a U.S. attorney for the Southern District of Florida. He is Harvard-educated and is currently the law school dean at Florida International University. He has even been a former law clerk for Supreme Court Justice Samuel Alito.
Both Republicans and Democrats have praised the nomination, and even organized labor has been somewhat supportive. Most commentators consider him a deep thinker and an intellectual, and he is likely to be affirmed by the Senate which is currently on recess through February 27.
How should employers react to the nomination of Acosta? In general, employers looked upon the prior nominee, Pudzer, as a leader and a "firebrand" for management rights. Many aggressive measures in support of management were expected. Acosta, on the other hand, is expected to move much slower to build more of a consensus, and to be more of a moderate. Such an approach is not all bad, however, as his changes are much less likely to generate the intense opposition that would have developed to anything Pudzer attempted.