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Title VII Extends Protection to Sexual Orientation Says the Seventh Circuit

By: Dan Cohen – 4/6/17

Earlier this week, the 7th Circuit Court of Appeals became the first federal appellate court to extend Title VII of the Civil Rights Act of 1964 to workplace discrimination on the basis of sexual orientation. The decision should not come as a surprise following the announcement last July by the Equal Employment Opportunity Commission that Title VII does prohibit discrimination on the basis of sexual orientation, which would be considered a form of sex discrimination.

The case was filed in 2014 by Kimberly Hively, a former part-time instructor at Ivy Tech Community College who said the college did not hire her full-time because she was a lesbian. Ivy Tech denied her claim. The federal trial court dismissed the case finding that Title VII did not protect against discrimination on the basis of sexual orientation. The 7th Circuit initially agreed with the trial court and affirmed the dismissal of the case.  However, the 7th Circuit decided to rehear the appeal en banc (before the entire bench) and reversed the lower court in an 8-3 decision.

According to Chief Judge Diane P. Wood, “Hively’s claim is no different from the claims brought by women who were rejected for jobs in traditionally male workplaces, such as fire departments, construction, and policing.” Judge Wood went on to conclude that sexual orientation is a form of discrimination based upon sex. Judge Richard Posner, in his concurring opinion, acknowledged that even though Title VII was passed without consideration of one’s sexual orientation, the concept of sex discrimination has since broadened as society’s definitions of gender and sex have also broadened.

The dissenting opinion, written by Circuit Judge Diane Sykes, argued that extending Title VII protection to sexual orientation violates constitutional design and gives the court a power left for Congress. According to Judge Sykes, “however welcome today’s decision might be as a policy matter, it comes at a great cost to representative self-government.” Moreover, rejecting the notion that sexual orientation is a form of sex discrimination, Judge Sykes noted the many federal statutes that refer to both sex and sexual orientation separately.

If it stands, the decision gives Kimberly Hively and other gay and lesbian people the right to sue over what they perceive as discriminatory employment practices based on their sexual orientation. This does not end the case, which will now proceed to trial on the merits unless Ivy Tech seeks to involve the Supreme Court. However, with the current composition of the High Court, a 4-4 ruling is likely, which would not change the outcome.  Of course, one can see how confirmation of Judge Neil Gorsuch could affect the outcome of this issue when it does reach the Supreme Court.

From my standpoint, I do not believe the case requires employers to do anything different or special. We have been preaching to our clients for my entire career that decisions should be based upon legitimate, non-discriminatory business reasons, that those decisions be well-documented and that policies and rules be applied uniformly.  This decision does not change that approach.  Moreover, many businesses have already modified their EEO policies to include sexual orientation and gender identity as protected classifications.  This ruling does not necessarily require that since the rationale of the 7th Circuit is that discrimination on the basis of sexual orientation is a form of sex discrimination, which is already a protected classification.  I do, however, think it’s a good idea to include catch-all language that extends the policy to “any other protected classification.”  If you conduct business in a state or municipality that specifically protects against discrimination on the basis of sexual orientation and gender identity, it is probably worth making the modification.

Don’t Miss This Unique Opportunity To CYA … I mean, Fix Salaried-Exempt Misclassifications

Don’t Miss This Unique Opportunity To CYA … I mean, Fix Salaried-Exempt Misclassifications

Looming Required Changes Can Help Disguise Past Problems

By: Bill Pilchak – 08/17/16

     The federal government has issued so many regulations that many (most?) companies cannot comply with them all. The Government Accountability Office reports that federal regulators issued 2,400 new rules during the 2014 “presidential year” (1/21/14-1/20/15). In our field of labor and employment law, employers must abide by statutes and corresponding regulations under the Affordable Care Act , OSHA, the Family and Medical Leave Act, the Fair Labor Standards Act, Title VII, the Americans with Disabilities Act, Sarbanes-Oxley, Department of Transportation driver regulations, the plant closing law (WARN), affirmative action, prevailing wages on government contracts, Fair Credit Reporting Act, HIPAA (health information), H1b + other immigration issues, ERISA pension, health and welfare plans, deemed export regulations, etc. (Whew!) The federal regulations under those statutes comprise more than 25000 pages plus innumerable safety standards, guidance memoranda and technical “assistance” manuals.

     Worse, in addition to the regulatory labyrinth of labor and employment laws, our clients must comply with regulations on customer credit and financial data, environmental issues, food safety, product safety, patents and trademarks, taxation and more.

     Inevitably, compliance slips through the cracks. Many new clients come to us only after some agency has levied fines or an attorney asserts claims under some regulation unknown to them.

     As it turns out, most businesses share one species of non-compliance that sits like a time bomb within them: treating employees as salary-exempt when the position does not meet the technical requirements to avoid overtime.  We have written before how plaintiff-side attorneys now find it profitable to delve into the FLSA regulations to ensnare non-compliant companies. (See: Aesop for Employers http://mi-worklaw.com/aesop-for-employers-the-hyenas-and-the-maze/)

     Employers assume that as long as somebody performs non-manual, white collar work that they may be paid a salary without overtime for hours worked over 40 in a week. Not true. To be exempt from overtime, technical requirements must be met. Some frequent examples of misclassifications are:

  • “Administrative” employees must exercise independent judgment and discretion on matters of significance to qualify as salaried-exempt. So, many administrative assistants (executive secretaries) do not qualify; Office managers often lack the requisite authority; Employees who simply match facts to criteria (e.g., credit scores to interest rates; driving records to insurance rates) may not qualify.
  • “Executive” employees must have as their primary duty managing an enterprise or department with at least two fulltime employees (or part time equivalents) with the right to hire and fire or at least make recommendations that are given weight. Working supervisors might not qualify.
  •  “Professional” employees must be in a position that requires advanced knowledge typically obtained in a prolonged course of study. A PhD doing a job that others perform with only a Bachelor’s degree will not qualify. Moreover, the Dept. of Labor is stingy about designating “engineers” as professionals unless they do top-level engineering work.

     Misclassifications are time-bombs because an employee can bring overtime claims for the past two or three years, often in the form of a class (collective) action either during employment or after separation. For each $45,000 per year employee working only 45 hours per week, the overtime due would be $32,445 to $48,667 plus attorney fees that can run into six figures. At 50 hours, the liability increases to $64,950 to $97,425. (hourly rate x 1.5 x 5 (or 10) hours per week x 50 weeks (2 wks vac.) x 2 years (or 3) x 2 double damages)

     The usual dilemma is that fixing the problem often alerts employees that they have been owed overtime all along, which then results in claims.

     For the next few months only, employees can fix misclassifications with less chance of provoking claims.  Under new regulations effective December 1, 2016, employees paid a salary of less than $47,476 per year must be paid overtime.  Employers will have to reclassify them or give them raises.  The new regulation provides a “reason” to start paying employees overtime without implying they were misclassified in the past.  Since the salary threshold will adjust every three years, reclassifying those making more than $47,476 could be justified in anticipation of future increases. Reclassifying those well beyond $47,476 poses more of a risk, but still, careful working announcing a change as part of a broader new reclassification program could help disguise past arguable misclassifications.

     What to do right now: Smart employers should conduct a privileged (with their counsel) audit of salaried positions with counsel in the next 60 days, to identify and cure misclassifications as part of a change in payroll practices required by the new regulations.

Of course, Pilchak & Cohen can help in that regard.

Find us at MI-Worklaw.com.

The Smartest Man In The World Syndrome

The Smartest Man In The World Syndrome

By:  Bill Pilchak – 7/28/16

The current political landscape is causing people to have all sorts of thoughts about Presidential candidates that might not have entered our heads in the past. The politics of the past few days have touched on a phenomenon we often observe in our practice: The Smartest Man In The World Syndrome.  You may observe my own leanings in the commentary on politics below, but the ultimate point is non-partisan and relevant to business leaders.

The political/business point today is that for the umpteenth time in the campaign, Donald Trump has blurted something out which might have made an important and helpful point if articulated with a little attention to content and context. Any serious observer of politics notes with bemusement and derision how the Wiki-Leaks disclosure of Anti-Bernie e-mails has been spun and legitimate concerns obscured in recent days:

  • Wiki-Leaks releases e-mails showing the DNC sabotaging the Sanders campaign. (Legitimate, take-away-point: the system was rigged in favor of Hillary, just as Sanders had said);
  • DNC and FBI (i.e. the Obama administration) say the hackers were Russians. (Shifting attention from the DNC’s misconduct. Instead of the media’s point becoming: “If the Russians hacked the DNC, don’t we have to assume they hacked Hillary’s private server?” the media stressed: “The Russians are interfering in our election” – by disclosing true facts.)

One of more insightful talking heads addressed the question as to why the Russians did what they did.  Does Putin really prefer that Trump have his finger on the nuclear button rather than Clinton, who presided as Secretary of State while the U.S. stepped down from its world leadership role and who promises to continue the Obama legacy of drawing but not enforcing red lines in the sand, troop withdrawals and promising more flexibility on missile disarmament once he did not face another election?  The talking head expressed concern that the Russians posted the DNC e-mails as a warning to Clinton that they had hacked her server too, had the 30,000 e-mails she deleted and could disclose them (and bring her down?) any time they chose.  In other words, the concern was that the Russians could blackmail her.

Trump seems incapable of expressing a nuanced thought like that and apparently does not listen to advisors. He came close to the legitimate concern, but blundered into his opponents’ hands by inviting the Russians to disclose Hillary’s deleted e-mails.  Earlier this week, he defended Roger Ailes and sought to discredit his accusers, when even the most junior HR generalist knows that because Fox News and Ailes parted ways, Fox must have found corroboration of the harassment allegations.

Like most business leaders at the top of the organization, Trump suffers from being surrounded by yes-men who always agree with the boss’ observations. When no one tells the boss he is wrong, he believes his perspective is the truth.  (Yes, “he;” the syndrome seems to be gender-specific.) This happens to be a constant problem in our practice. In virtually every case, the owner, president or chairman is the witness we worry about most before deposition and trial.  Since he thinks he is always right, the top dog sees no value (and claims he does not have the time) to fact-check his perspective against documents, data, others’ opinions, etc., or participate in preparation sessions that might disturb his view.  Accordingly, our defense often has to steer-around Trump-like statements that are unsupported by the established facts and inconsistent with our theory of the case.  At the very least, the unchecked statements by the biggest boss provide a “question of fact” that requires a trial and precludes dismissal.  In the worst cases, the improvident statements blow up the Company’s case.

Fortunately, there are two effective treatments for The Smartest Man In The World Syndrome.  First, instead of gnashing your teeth when you next hear a Trumpism, drill down and consider why he lacks the broader perspective others might have.  Who is at his elbow, and why are they not telling him the emperor has no clothes?  Resolve to tamp down our own ego and listen to others who disagree.  Trump has brilliant kids who delivered commanding speeches at the RNC, but if he wants to overcome The Smartest Man In The World Syndrome, he should hire my daughter, Noelle.   Noelle isn’t afraid to tell “the big guy” that his perspective has more holes than Michigan roads, although I must admit, I am getting smarter as she gets older.

The second antidote is a bit easier: Read the Dilbert comic in the funny pages every day. Scott Adams has a gift for illustrating how clueless executives can be.  Study the messages there, and you soon won’t be the “pointy-headed” boss that people laugh at in the office – or on nationwide TV.

Are You Covered?

Are You Covered?

By:  Dan Cohen – 7/25/16

In the past few months, I have had conversations with several clients about their obligations under the panoply of federal laws with which they must comply. I don’t know why it surprised me to know that my most sophisticated clients are not entirely clear on which federal laws apply to them. Given the rash of new federal regulations and constant changes in the law, business owners and human resource professionals practically have to be Philadelphia attorneys to have any hope of staying on top of their obligations. So, what are the thresholds in the private sector for major federal employment laws?

EPA—1 employee: The Equal Pay Act requires employers to pay equal wages to men and women in most conditions.

FLSA—1 employee: The Fair Labor Standards Act establishes minimum wage, overtime pay, recordkeeping and child labor standards for employers with a sales volume of $500,000 or that operate in interstate commerce .

ADA—15 employees: The Americans with Disabilities Act prohibits employers with 15 or more workers from discriminating against employees or applicants because of disability, a record of a disability or a perceived disability.

Title VII—15 employees: Title VII of the Civil Rights Act prohibits employers from discriminating against employees based on race, color, religion, sex and national origin.

PDA—15 employees: The Pregnancy Discrimination Act prohibits discrimination on the basis of pregnancy, childbirth or any other related medical issues.

GINA15 employees:  Title II of the Genetic Information Nondiscrimination Act protects individuals against employment discrimination on the basis of genetic information.

ADEA—20 employees: The Age Discrimination in Employment Act prohibits companies with 20 or more workers from discriminating against people age 40 or older in hiring, firing, wages and benefits.

COBRA—20 employees: The Consolidated Omnibus Budget Reconciliation Act mandates continuing coverage when an employer with 20 or more workers offers health coverage.

FMLA—50 employees: The Family and Medical Leave Act grants up to 12 weeks of job-protected, unpaid leave to certain workers in companies with 50 or more employees who work within a 75-mile radius of the work site.

ACA—50 or more full-time employees or equivalents: The Affordable Care Act requires large employers to offer full-time employees affordable qualifying health care benefits to avoid the possibility of penalties.

WARN—100 employees: The Worker Adjustment and Retraining Notification Act requires companies to give at least 60 day notice of closings and mass layoffs.

Many of these laws require that a covered employer have the requisite number of employees “for each working day during 20 or more calendar workweeks in the current or preceding calendar year.” (See e.g., ADA, ADEA, FMLA, Title VII)

If you are below the coverage thresholds of the above federal laws, you are not necessarily without obligations concerning the subject matter of these laws. Most states have parallel legislation. For example, in Michigan, employers of all sizes are covered by the Elliott Larson Civil Rights Act, which protects employees from employment discrimination. The ELCRA protects each of the classifications protected under Title VII, but also prohibits employment discrimination on the basis of height, weight, age, familial status and marital status. The Michigan Persons with Disabilities Act also applies to employers regardless of size and protects against disability discrimination. The Michigan Payment of Wages and Fringe Benefits Act and the Michigan Whistleblower’s Protection Act also apply to employers of all sizes. Coverage under the Michigan Minimum Wage Act requires at least two employees.

One final note: Make sure you know the thresholds for coverage under the various state laws where you conduct business.


NLRB Weakens Employer’s Right to Hire Permanent Replacements

NLRB Weakens Employer’s Right to Hire Permanent Replacements

By:  Dan Cohen – 6/7/16

On May 31, 2016, in a 2-1 decision by Chairman Mark Pearce and Member Kent Hirozawa, the NLRB has once again disrupted an employer’s right to protect its business interests. The case is American Baptist Homes of the West, 364 NLRB No. 13, and the issue pertains to an employer’s right to permanently replace economic strikers.  Nearly 80 years ago, the Supreme Court established an employer’s right to permanently replace economic strikers as an “economic weapon” when faced with an economic strike. Mackay Radio & Telegraph Company, 304 U.S. 333 (1938).  While it is true that neither the Mackay Radio decision nor subsequent Board decisions suggested that the employer’s right was absolute, the Board adopted a rule back in 1964 disallowing scrutiny into the employer’s motive for hiring permanent replacements.  Indeed, the Board had held that the employer’s motive for such replacement to be immaterial absent evidence of “an independent unlawful purpose” extrinsic to the strike.  Thus, an employer had a recognized right to permanently replace economic strikers to continue is operation and counteract the union’s ultimate economic weapon.

After receiving notice from the SEIU that workers would go on strike on August 2 and unconditionally return on August 7, American Baptist retained a staffing firm to temporarily staff its continuing care facility in Oakland, California during the strike. American Baptist extended temporary employment offers to 60-70 staffing employees at a cost of $300,000.  Eighty of the 100 bargaining unit employees went out on strike on August 2.  Shortly thereafter, American Baptist started permanently replacing the striking employees by making 44 permanent job offers.  Within 24 hours of the anticipated return to work date set by the SEIU, striking employees were notified that they would be placed on a preferential hiring list.  When the striking employees returned on August 7 consistent with the prior offer of unconditional return, only some were permitted to work.  The majority were advised they had been permanently replaced and would be placed on a preferential hiring list.

The ALJ concluded that American Baptist’s’ motivation for permanently replacing the strikers—to teach the strikers “a lesson” and ensure that employees would not strike again—was related to the underlying strike and therefore did not constitute an “independent unlawful purpose.” The Board disagreed and found the permanent replacement of the strikers in violation of the NLRA. According to Chairman Pearce and Member Hirozawa, General Counsel does not have the burden of showing an unlawful purpose extrinsic to the strike, but, rather, only that the hiring of permanent replacements was motivated by a purpose prohibited by the Act.  The majority then determined that hiring permanent replacements to “teach the union a lesson” and to “curtail future strikes” were both independently unlawful.  As for the latter reason, the majority concluded that the evidence established an independent unlawful motive, specifically, a desire to interfere with employees’ future protected activity.

Replacing striking workers always has the effect of dissuading future strikes, but until this ruling, it was a long-recognized economic weapon of management. Apparently, this Board intends to divest management of their “equalizer” economic weapon.  This should not come as much of a surprising given the Board and General Counsel’s objectives of strengthening unions at every chance they get.  By changing the meaning of “independent unlawful purpose” to nothing more than antistrike animus, which the Supreme Court long ago recognized as a given when faced with a potentially devastating economic strike, the majority now suggests that economic strikes should be a “risk free” proposition for strikers. American Baptist is likely to appeal this decision, but for now, employers facing strikes and entertaining the idea of permanent replacements must be exceedingly careful.  One word to the wise—it is probably not a good idea to tell the Union that you permanently replaced the workers to “teach the union a lesson” and to “curtail future strikes.”  I would suggest making the decision to permanently replace economic strikers as a means of carrying on the business, nothing more and nothing less!



New Trade Secret Protection Coming to a Federal Court Near You

New Trade Secret Protection Coming to a Federal Court Near You

 By:  Dan Cohen – 5/17/16

         On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA), which amends the Economic Espionage Act of 1996 and adds a civil remedy for misappropriation of trade secrets. The ESA had been limited to criminal remedies with investigations and prosecutions conducted by the U.S. Attorney’s office. The law provides a new federal civil cause of action to trade secret owners whose misappropriated trade secret is “related to a product or service used in, or intended for use in, interstate of foreign commerce.” Trade secret owners can now recover:

    • their actual damages caused by the misappropriation;
    • damages for unjust enrichment;
    • injunctive relief to prevent actual or threatened misappropriation;
    • exemplary damages for “willful and malicious misappropriations (up to twice the amount of actual damages);”
    • reasonable attorney’s fees

          The law also provides authority to courts to condition future use of the misappropriated trade secret on the payment of reasonable royalties where injunctive relief is inequitable. While much of the remedial scheme of the law mirrors state trade secret laws premised on the Uniform Trade Secrets Act, the DTSA provides for one very unique and brand new remedy: the Court may order the seizure of property “necessary to prevent the propagation or dissemination of the trade secret” at issue upon ex parte application (without notice to the defendant or counsel) based upon affidavit or verified complaint.

          Applications for seizure must demonstrate a number of specified facts before the Court can issue the order and have federal marshals seize property. Among those facts are (1) a temporary restraining order would be inadequate; (2) immediate and irreparable injury will occur absent seizure; (3) the harm to the plaintiff outweighs the harm to the defendant; (4) the defendant or those acting in concert with the defendant would destroy, hide or otherwise make the trade secret inaccessible to the court if put on notice. A seizure order requires a hearing within seven days of the seizure and restricts the owner’s access to its trade secret, must protect the defendant from publicity, requires the court to secure the seized property and permits the appointment of a special master.

          The DTSA contains immunity provisions for individuals who disclose trade secret information to the government for the purpose of reporting a suspected violation of law or in a complaint or filing made under seal. Employers are required to provide notice of the DTSA’s immunity provisions to take advantage of the full range of remedies provided under the law. The DTSA states that notice shall be provided “in any contract or agreement with an employee that governs use of a trade secret or other confidential information.” Accordingly, employers may wish to modify their confidentiality agreements to provide appropriate notice of the DTSA immunity provisions.

          It is hard to say how much this adds for employers who have trade secrets worth protecting. State court actions continue to be available as the DTSA does not preempt state law. Employers may like the idea of being in federal court, which was only available in trade secret actions involving diversity of citizenship, unless another federal claim was alleged in the litigation. The federal cause of action may be attractive for the simple reason that many attorneys are not used to being in or are intimidated by being in federal court (of course, we are not such attorneys). Finally, the added feature of an ex parte seizure of a computer or cell phone containing trade secrets is one aspect of the DTSA cause of action, which might tip the scales in favor of pursuing trade secret actions in federal court. However, I would not get too excited about it as seizure orders are only supposed to be entered where there are “extraordinary circumstances.”