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Labor & Employment Insights

Anonymous Racist Note Triggers Liability for Employer Who Failed to Undertake an Investigation

Published on: October 19, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

A recent decision from the Fourth Circuit Court of Appeals (a federal court with jurisdiction over MD, NC, SC and VA) is a stark reminder to employers of the consequences of failing to appropriately respond to any and all claims of unlawful workplace harassment no, matter what the source. In Pryor v. United Air Lines, Inc. (United), the Fourth Circuit vacated summary judgment entered for United by the court below, noting that the company’s response to an anonymous violent and racially-charged note left for an employee was inadequate to shield the it from liability for creating a racially hostile work environment.

The Facts: In January 2011 July Renee Pryor, an African-American flight attendant for United Airlines, Inc. at is Dulles Airport facility, found an anonymous note in her company mailbox located in a secure mailroom restricted to United employees. The note contained numerous racial slurs and claimed to be a hunting license permitting the holder to “hunt & kill N****** . . . day or night, with or without dogs.” The note also contained an image of a lynching along with the words “this is for you.” Prior was frightened by the note an immediately shoed it to her supervisor, who told her he was “sorry” but there was not much United could to because there were no security cameras in the mailroom. The supervisor then gave Pryor an incident report to fill and told her that the report, along with the racist note, would be provided to security and the base manager. Unfortunately, the supervisor did not comply with United’s Harassment & Discrimination Policy that instructed supervisors to immediately report all complaints to the Employee Service Center (ESC) who would conduct an investigation into the claims.

Thereafter, United Management engaged in a series of missteps, including the following:

NLRB Announces New “Joint Employer” Standard Significantly Extends Liability to Employers for Workplace Labor Violations by Contractors

Published on: October 19, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

For nearly 30 years the National Labor Relations Board (“NLRB” or “Board”) has reasoned that two businesses can only be deemed “joint employers” – and thus jointly responsible for purposes of collective bargaining and unfair labor practices – upon a showing that the companies exercised actual, direct and substantial control over the terms and conditions of employment of the employees in the other entity. Factors such as the right to hire, terminate, discipline, supervise and direct employees were relevant to the level of control assessment, and theoretical, limited or routine control over workplace activities of the other was generally deemed insufficient.

In a decision that may have sweeping implications for companies that subcontract work through staffing agencies or other third party vendors, the NLRB has announced a new standard that will result in many more companies being deemed “joint employers” of their third-party contractors. The Board’s expanded joint employer standard will also have implications for franchisor/franchisee, parent/subsidiary and other corporate relationships.

The New “Direct or Indirect” Control Standard: In a significant departure from established precedent, a 3-2 majority in Browning-Ferris dramatically lowered the standard for establishing a “joint employer” relationship. At issue in the case was whether Browning Ferris Industries was a joint employer with Leadpoint, a staffing services company, in a union representation election among Leadpoint workers who staffed conveyor belts in Browning-Ferris’ plant. The union already represented Browning-Ferris’ employees at the plant.

U.S. Department of Labor Moves To Restrict “White Collar” Overtime Exemptions

Published on: July 20, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Employers: Prepare to Reclassify Employees

Ranks of OT-eligible employees will swell by an estimated 5 million, under proposed DOL rules

The U.S. Department of Labor’s (DOL’s) long-awaited proposals overhauling the “white collar exemptions (which include the executive, administrative and learned professional exemptions) to the overtime requirements of the Fair Labor Standard Act (FLSA) have finally arrived.

Proposed Regulation Subjects Financial Advisers to Fiduciary Duties Under ERISA and Tax Code

Published on: April 22, 2015 | by Sergio D. Simões

On April 14, 2015, the Department of Labor, Employee Benefits Security Administration (“EBSA”) released a proposed regulation defining who is a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (“ERISA”) as a result of giving investment advice to a plan or its participants or beneficiaries. If adopted, the new regulation would treat individuals who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owners as fiduciaries under ERISA and the Internal Revenue Code (the “Tax Code”). The proposed rule seeks to increase consumer protection for plan sponsors, participants, beneficiaries and IRA owners by naming financial advisers and their firms as fiduciaries, thus compelling such advisers to abide by certain duties of good faith and loyalty to their clients, subject to specific carve-outs and exceptions.

Under the current statutory and regulatory scheme, fiduciary status is central to protecting the integrity of retirement and other important tax-favored benefits. Generally, a person is a fiduciary to a plan or IRA to the extent that the person engages in specified plan activities, including rendering investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of a plan. ERISA imposes standards of care and undivided loyalty on plan fiduciaries and holds such fiduciaries liable when these duties are violated. IRA and plan fiduciaries are not permitted to engage in “prohibited transactions” which stem from conflicts of interest and endanger the security of retirement, health and other benefit plans.

EBSA’s new proposal expressly expands these duties to financial advisers and their firms, by broadening the definition of fiduciary “investment advice,” subject to specific exceptions or carve-outs for particular kinds of communications that are non-fiduciary in nature. Under the new definition, a person renders investment advice by:

Employers Who Implement Effective Sexual Harassment Policies Can Avoid Vicarious Liability

Published on: March 5, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In its recent landmark decision in, Ilda Aguas v. State of New Jersey, No. A-35-13 (Feb. 11, 2015), the New Jersey Supreme court broke new ground in the law of sexual harassment with an opinion that can be viewed as a victory for both employers and employees. For employers, the Court formally adopted the United State Supreme Court’s affirmative defense analysis, which may now be invoked to shield employers from liability for a supervisor’s sexual harassment. Consistent with the affirmative defense, the Court made clear that the defense is only available to those employers who develop comprehensive and effective sexual harassment programs that include written polices, complaint procedures, employee training and prompt investigation of harassment complaints.

On the employee side, the Court expanded the definition of “supervisor,” thus broadening the scope of employee’s whose conduct can trigger employer liability for workplace sexual harassment.

The Facts: Aguas, a corrections officer at the Department of Corrections (DOC), alleged her male supervisors sexually harassed her over the course of several months, including inappropriate comments and touching. Aguas conceded her supervisors did not take any tangible employment action against her.

Company Email Can Now Be Used By Employees For Union Activity

Published on: February 2, 2015 | by John H. Schmidt, Jr.

Section 7 of the National Labor Relation Act protects employees’ right to communicate with one another regarding their terms and conditions of employment and to engage in unionization activities at the jobsite. However, the National Labor Relations Board (“NLRB”) historically held that employers may place reasonable restrictions on employees’ conduct and communications while on employer property and while on working time without violating Section 7 rights. Consistent with those holdings, in 2007 the NLRB issued its ruling in, holding that employers could prohibit employees from using the employer’s email system to communicate with each other about union matters or other terms and conditions of employment, even if employees were permitted access to the email system for other purposes.

That all changed with the NLRB’s recent ruling, reversing the decision. Effectively immediately, employees provided access to employer email systems for work activities may now be permitted to use these systems during non-work time for “statutorily protected communications” concerning unionization efforts, salaries and benefits and other terms and conditions of employment. Employers looking to restrict email access for such purposes must demonstrate that the measures are necessary to maintain production, discipline or other “special circumstances” warranting restriction of these employee rights. However, the NLRB cautioned that “because limitations on employee communication should be no more restrictive than necessary to protect the employer’s interests, we anticipate that it will be the rare case where special circumstances justify a total ban on nonwork email use by employees.”

In ruling in favor of employee access to email systems for Section 7 activities during non-work time, the NLRB pointed to a recent observation by the U.S. Supreme Court that email has become a fundamental means of communication in the workplace and “some personal use of employer email systems is common and, most often, is accepted and tolerated by employers.” The NLRB concluded that employees’ Section 7 rights trump an employer’s property rights to its communications systems.

DOJ Expands Title VII Protection To Transgendered Individuals

Published on: February 2, 2015 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

By: Kathleen Connelly, Esq.

Last December Attorney General Eric Holder issued a memorandum directing the Department of Justice to consider prosecuting claims on behalf of individuals who believe they have been discriminated against based on their gender identity or transgender status. While such claims were previously not recognized under Title VII of the Civil Rights Act, the Attorney General’s memorandum observed that “the text of Title VII, the relevant Supreme Court case law interpreting the statute, and the developing jurisprudence in this area” support the DOL’s new interpretation that Title VII’s prohibition of “sex” discrimination encompasses gender identity and transgender bias.

This action is consistent with other federal efforts to expand lesbian, gay, bi-sexual and transgender rights. Last August the Office of Federal Contract Compliance Programs issued clarifying that Title VII’s prohibition of “sex” discrimination prohibits LGBT discrimination in all federal government contracts. This action was on the heels of President Obama’s issuance of , amending to expressly include gender identity as a protected class requiring affirmative action and non-discrimination in government contracts. Likewise, in its 2012 holding in , the Equal Employment Opportunity Commission ruled that Title VII’s protections extended to an employee claiming discrimination on the basis of her gender identity and transgender status. On the Congressional front, lawmakers have introduced the Employment Nondiscrimination Act which would specifically prohibit employment discrimination on the basis of LGBT status, although those efforts have been stalled.

Employers Face Significant Difficulty Obtaining Injunctive Relief for Alleged Breach of Non-competition and Confidentiality Provisions

Published on: February 2, 2015 | by Eric B. Levine

By: Eric Levine, Esq.

In , the Superior Court denied Mega Brand’s application for injunctive relief against two former employees who purportedly violated the non-competition and confidentiality provisions of their employment agreements. The decision illustrates the burden faced by employers seeking to enforce post-employment restrictions against former employees, as well as the consequences of appearing less than truthful when seeking judicial relief.

The Facts: Mega Brands is a distributor of stationary products to large retail customers such as Wal-Mart and Target. Prior to joining Mega Brands, Michael Cerillo and Ben Hoch operated a company that sold stationary products comparable to those offered by Mega Brands. In 2006, Mega Brands acquired the company through a stock purchase agreement (“SP Agreement”) and hired Cerillo and Hoch under employment agreements containing standard non-competition and confidentiality provisions. These agreements expired on the later of five years from the date of the SP Agreement or twelve months after Cerillo and Hoch’s termination of employment with Mega Brands.

New Jersey Supreme Court Adopts Narrow Test for Determining Independent Contractor Status Under NJ Wage and Hour Laws

Published on: February 2, 2015 | by Lisa Gingeleskie

To avoid the costs inherent in the employer-employee relationship, including employee benefits, workers compensation insurance, employment taxes and other liabilities, many employers secure the services of an independent contractor to avoid these liabilities. There are significant risks with this approach, however. An employer who misclassifies a worker as an “independent contractor” who, in the eyes of the law, is actually serving as an “employee” faces significant liability for unpaid overtime, employee benefits, payroll taxes, statutory penalties and other consequences. To make matters worse, individuals who prevail on claims that they were misclassified as independent contractors are eligible for double damages and attorney fees from the employer.

Both at the state and federal levels, the courts have used various tests – applied to various legal contexts – to determine whether a worker should be classified as an independent contractor or an employee in the situation at hand. While some tests result in a greater number of workers qualifying as independent contractors, the far narrower “ABC test” is widely regarded as a more difficult test for employers to meet when facing an independent contractor misclassification challenge.

On January 14, 2015 the New Jersey Supreme Court issued its opinion in , resolving some of the uncertainty by declaring the ABC test as the governing test to determine an individual’s employment status for purposes of wage-and-hour and wage-payment disputes under New Jersey law.

Perceived Ostracism By Co-workers Does Not Create Employer Liability For Hostile Work Environment

Published on: February 2, 2015 | by Sergio D. Simões

Under the New Jersey Law Against Discrimination (the “LAD”), an employer who acts negligently in eradicating discriminatory conduct from the workplace may be held vicariously liable for the discriminatory actions of its employees. In a victory for employers statewide, the Appellate Division refused to find an oil delivery company liable for one of its trainer’s racially charged statements to a co-worker where the employer had appropriate mechanisms in place to prevent and address incidents of unlawful workplace harassment.

The Facts: In , the plaintiff employee, an African-American, asserted that he was subjected to a racially-hostile work environment as a result of certain offensive, racially-charged comments by a trainer who was not a supervisor of the employee. After the employee complained to the company about the trainer’s behavior, his supervisors met with him to discuss the incident, conducted an internal investigation and assigned the employee a new trainer. The company also maintained a detailed non-discrimination policy in its employee handbook that was distributed to every employee. The employee left the job despite the company’s efforts, claiming that he felt ostracized by his co-workers following his complaint to management. Thereafter, the employee filed suit claiming he was subjected to a racially-hostile work environment in violation of the LAD. The company argued that it was not liable for the co-worker’s actions, pointing to its policies against discrimination and the prompt remedial actions it took in response to the employee’s complaint.

The Finding: The court agreed with the company and dismissed the discrimination suit. The court cited the fact that the company kept a detailed employee handbook with a policy barring harassment and discrimination and providing detailed procedures to be followed when reporting and investigating harassment and discrimination claims. Moreover, when the company learned of the employee’s complaint it did not ignore it or otherwise overlook reprehensible behavior, but undertook efforts to investigate his claim and separated him from the alleged harasser. In the face of the efforts, the employee’s perception of his co-workers’ opinions of him was insufficient to support a hostile work environment claim.