Court Strikes Down Recent Joint Employer Rule

On September 8, 2020, a New York federal judge struck down most of a U.S. Department of Labor (“DOL”) rule that had narrowed the definition of “joint employer” by limiting when multiple businesses would be liable to the same worker under federal wage and hour law.  The lawsuit was filed by the attorneys general of 17 states and Washington, DC, who argued that the narrowing of the standard would eliminate important labor protections for workers and would make it more difficult to hold companies liable for violations by franchisees and contractors of minimum wage and overtime laws.

Brief History of the Joint Employer Rule

Although the Fair Labor Standards Act (“FLSA”) does not explicitly reference joint employment, the DOL has long recognized that workers may have multiple employers when employment by one employer is “not completely disassociated” from employment by the other employer.  The DOL has periodically updated this definition via informal guidance, most recently in 2014 and 2016, when it issued bulletin memorandums directing agency investigators to look past employers’ control over workers to the “economic realities” of their relationship.

The DOL rescinded those memorandums soon after President Trump took office in 2017 and proposed the first update to its formal joint employment regulations in decades, which was finalized in January 2020.  January’s final rule emphasized a company’s control over its workers, saying joint employment hinges on the division of powers to (1) hire and fire; (2) supervise and schedule; (3) set pay; and (4) maintain employment records.

The DOL’s attempt at narrowing the joint employer standard was seen as business-friendly and anti-labor, as labor advocates argued that employers who have franchise relationships or rely on subcontractors benefited from the new standard.  As a result, in February 2020, New York and 17 other states sued to block the rule, accusing the DOL of exposing workers to wage theft by narrowing its definition of joint employment further than the FLSA allows.

New York Federal Court Ruling

On September 8, 2020, Judge Gregory Woods of the U.S. District Court for the Southern District of New York issued a ruling striking down the majority of the new rule and agreeing with New York and the other 17 states who had challenged the rule.

According to Judge Woods, the new rule was “arbitrary and capricious” because the DOL failed to justify its departure from its prior interpretations of the joint employer rule or account for its costs to workers, which the states estimated at more than $1 billion annually. Judge Woods also ruled that the Trump administration’s changes to the joint employer doctrine were too narrow since they required a company to actually exercise control in the workplace instead of simply having the right to exercise control, and the DOL did not adequately explain why it disregarded evidence that narrowing its joint employment test would expose workers to wage theft.  Additionally, Judge Woods found that the new rule conflicted with the plain language of the FLSA because it ignored the statute’s broad definitions. 

As a result, Judge Woods vacated the portion of the rule applying to “vertical” employment relationships, in which workers for a staffing company or other intermediary are contracted to another entity.  However, he let stand the portion applying to “horizontal” relationships, in which a worker is employed by two “sufficiently associated” businesses.

Impact to Employers

It is likely that the DOL will appeal this ruling to the U.S. Court of Appeals for the Second Circuit, so this will not be the last time that a court opines on this issue.  In the meantime, however, there is no disputing that this ruling (especially if upheld on appeal) is a blow for the business community, which had urged the Trump administration to narrow the federal joint employment doctrine that had been expanded under the Obama administration. 

Due to this court ruling, employers now have less certainty about their relationship with one another in the joint employment context.  Thus, if any employers have revised their contracts with staffing agencies, subcontractors, or other intermediary employers since January, they should review those contracts to make sure they do not violate the joint employment standard that was in place prior to January.  And, until an appeal is ruled on or further guidance from the courts is issued, employers should adhere to the more expansive definition of joint employment when drafting contracts with staffing agencies or other subcontractors going forward.  

As always, we will keep you apprised of future developments in this ever-changing area of the law.

WARN Act Notices Deadline Approaching for Layoffs and Furloughs

Any employer that temporarily laid off or furloughed employees in the Spring of 2020 as a result of the COVID-19 pandemic and has not yet recalled those employees should be aware of an impending important deadline under the federal Worker Adjustment and Retraining Notification Act (“WARN Act”).

The WARN Act requires employers with 100 or more full time employees to provide at least sixty (60) calendar days written advance notice to their employees of an upcoming company-wide closing (referred to as a “plant closing”) or mass layoff.  While a “plant closing” is fairly self-explanatory, a mass layoff is defined as either (1)a layoff of 500 or more workers at a single site of employment during a 30-day period; or (2) a layoff of 50-499 workers, when these layoffs constitute 33% of the employer’s total active workforce at the single site of employment.

A WARN Act notice must be given to employees affected by a plant closing or mass layoff when those employees have suffered an “employment loss.”  While a temporary layoff or furlough lasting less than 6 months does not meet the definition of an “employment loss,” one that lasts longer than 6 months is indeed considered an “employment loss.”

At the outset of the COVID-19 pandemic in March 2020, many of our clients were considering a temporary layoff or furlough and as a result, they asked us whether they needed to provide their workers with a notice under the WARN Act.  At that point, since it was anticipated that any job losses as a result of the pandemic would last for less than 6 months, notice under the WARN Act would NOT have been necessary.  Now, however, it is rapidly approaching the 6-month mark for those employees that have been temporarily laid off or furloughed since March or April.  Thus, covered employers once again want to know whether a WARN Act notice is now required.

The short answer to that question is yes, a WARN Act notice likely will be required based on the Act’s definition of “employment loss.”  Specifically, under the Act, a temporary layoff or furlough without notice that is initially expected to last six months or less but later is extended beyond 6 months (which is likely the case for many U.S. employers) may violate the Act unless: (1) The extension is due to business circumstances not reasonably foreseeable at the time of the initial layoff; AND (2) Notice is given when it becomes reasonably foreseeable that the extension is required.  This means that an employer who previously announced and carried out a short-term layoff of 6 months or less and later extends the layoff or furlough beyond 6 months due to business circumstances not reasonably foreseeable at the time of the initial layoff (e.g., COVID-19) is required to give notice at the time it becomes reasonably foreseeable that the extension is required.  Given that it is now foreseeable that the layoff or furlough extension is necessary that would result in an employment loss exceeding six months, an employer’s failure to provide WARN notice to its affected employees (and other required recipients) could expose the employer to liability under the WARN Act.

It is important to note that there are several exceptions to the WARN Act’s 60-day notice requirement that may apply to COVID-19 related scenarios, including:

(1) the faltering company exception, which is when a company is actively seeking capital or business and reasonably in good faith believes that advance notice would preclude its ability to obtain such capital or business, and this new capital or business would allow the employer to avoid or postpone a shutdown for a reasonable period; and

(2) the unforeseeable business circumstances exception, which is when the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that 60-day notice would have been required.

An employer must keep in mind, however, that even if one of these exceptions applies, a plant closing or mass layoff STILL requires notices to affected employees. That notice should include a statement as to why the employee did not receive the full 60-day notice, which in all likelihood would be due to COVID-19 related circumstances. 

The WARN Act is enforced by private legal action in the U.S. District Court for any district in which the violation is alleged to have occurred or in which the employer transacts business.  An employer’s violation of the WARN Act could result in substantial liability, including back pay and benefits for each day of violation to each aggrieved employee up to 60 days, and $500 in civil penalties for each day an employer fails to provide notice to a unit of local government.

In addition to the federal WARN Act, employers should keep in mind that approximately 23 states have their own state “mini-Warn Acts” that may impose more stringent requirements than Federal WARN.  These states include Alabama, California, Connecticut, Delaware, Georgia, Hawaii, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Tennessee, Washington, and Wisconsin.  Thus, if you have operations in any of those states, you must take into account your obligations under both the Federal WARN Act and your applicable state mini-WARN Act.

We are available to assist with questions about whether the WARN Act applies to your particular circumstances and/or to assist with providing WARN Act compliant notices when necessary. 

New COVID-19 Federal Paid Leave Requirements Signed into Law

On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (the “Act”) to provide some relief to employees as a result of the Coronavirus (“COVID-19”).  This law will go into effect on April 1, 2020 and will expire on December 31, 2020.

Paid family leaveThe Act includes many provisions which apply to employers, such as paid sick leave for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19.  Indeed, there are two provisions providing leave to employees forced to miss work because of the COVID-19 outbreak: an emergency expansion of the Family Medical Leave Act (FMLA) and a new federal paid sick leave law. The Act is the first federal law requiring private employers to provide paid sick leave to employees.  Importantly, not all private employers are covered, as the Act applies only to private employers with fewer than 500 employees.  A summary of the most relevant provisions of the emergency expansion of the FMLA and the paid sick law are as follows:

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Employers Face a Myriad of Wage & Hour Issues with COVID-19

There are significant developments happening every day (and virtually every hour) relating to the Coronavirus (COVID-19).  While we cannot predict all the effects of this virus, we can say that first and foremost, employers across all industries need to focus on the safety of their employees, customers, and guests.  Thus, whether your employees are working at your company’s office or from home, employers must monitor guidance from federal, state, and local public health experts and implement recommendations or orders designed to maintain a safe work environment.  To that end, please see our blog post from last week providing advice and FAQ’s regarding how employers can respond to COVID-19. COVID-19

In addition to so many other issues, COVID-19 poses unique wage and hour and human resource challenges. Indeed, Since our last post, we have received dozens of wage and hour related questions from clients resulting from this virus. Although no employer could have full been prepared for the scope of this pandemic, it is important to be aware of both federal and state laws that apply to situations such as this. The best protection is to have a policies and procedures in place in advance (or if that ship has already sailed, to quickly create some policies and procedures) to ensure your employees are paid and well taken care of during this unprecedented time. Our guidance can be used by employers in navigating through the legal and business implications created by this pandemic.  In addition, the information may be applicable to other future crises or disasters.

Therefore, please filed below answers to the most frequently asked questions we have received:

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Court Stresses the Need for a Business to Provide an Accessibility Statement on its Website

In 2018 and 2019, there were approximately 5,000 federal lawsuits filed against hotels, restaurants, stores, and other places of public accommodation alleging that their shutterstock_web accessibilitywebsites violated Title III of the Americans with Disabilities Act (“ADA”).  In all likelihood this number of lawsuits will increase in 2020 now that the U.S. Supreme Court has declined to review a Ninth Circuit Court of Appeals decision against Domino’s Pizza that essentially gave the green light for individuals with visual impairments to file suit against places of public accommodation if their websites are not fully compatible with screen reader software or otherwise not accessible.  You can read more about the Supreme Court’s decision here.

Despite the Supreme Court’s recent denial of Domino’s petition for Writ of Certiorari, business owners and operators have at least some room for optimism.  Indeed, as we explained in a prior blog post, there were two rulings from the Southern District of New York in the Spring of 2019 that ruled in favor of businesses when: (1) the business had already fixed the website which mooted the case; and (2) the plaintiff had failed to identify any concrete or particularized injuries she suffered, including which sections of the website she tried to access, the date on which she visited the website, and what goods or services she was unable to purchase.  Thus, it is comforting to know that at least some defenses are available and can succeed on a motion to dismiss.

Then, in November 2019, another business prevailed on a website accessibility case, this time in a case arising out of the Eastern District of New York.  See Castillo v. The John Gore Organization, Inc., Case No. 1:19-cv-00388-ARR-PK (E.D.N.Y. Nov. 14, 2019).  This case arose out of a theater’s stated policy on its website Continue reading

U.S. Supreme Court Declines to Rule on Website Accessibility Issue

In a blog post from February of this year, we discussed the case of Robles v. Domino’s Pizzain which a blind man sued Domino’s in 2016 for violating the Americans with Disabilities Act (“ADA”) shutterstock_pizzaafter he was unable to order food from the pizza chain’s website using screen reading technology because the website lacked sufficient software compatibility capabilities.  Because the ADA guarantees people with a disability “full and equal enjoyment of the goods and services … of any place of public accommodations,” the plaintiff claimed that he had been the victim of unlawful disability discrimination.  Domino’s, on the other hand, argued that while the ADA applies to its brick-and-mortar locations, it does not apply to its website because a website is not defined in the ADA as a place of public accommodation.

In its decision, the U.S. Court of Appeals for the Ninth Circuit agreed with the plaintiff, finding that the ADA protects not just restaurants, hotels, stores, and other physical “brick and mortar” locations, but also the “services of a public accommodation,” notably websites and apps.  The Court then found that Domino’s violated Title III of the ADA because its website’s incompatibility with screen reader software impeded access to the goods and services of its physical pizza franchises.  Notably, this decision was the first by any U.S. Court of Appeals Continue reading

Recent Rulings Provide Hope for Business Owners Amidst Rise of Website Accessibility Lawsuits

As we have written about on multiple occasions, public access lawsuits relating to website accessibility under Title III of the Americans with Disabilities Act (“ADA”) have been increasing at a rapid pace.  In fact, 2019 is on pace to have more than 2,000 website accessibility lawsuits, which will be by far the highest number on record (and this number does not include the hundreds of “brick and mortar” lawsuits filed against places of public accommodations).  Thus, regardless of whether you own or manage a retail store, a large hotel chain, a small bed & breakfast, or any other place of public accommodation, you are at serious risk of getting hit with an ADA lawsuit relating to your company’s website, especially if your website does not comply with the Web Content Accessibility Guidelines (“WCAG”), a series of web accessibility guidelines published by the Web Accessibility Initiative of the World Wide Web Consortium, the main international standards organization for the Internet.

Nonetheless, there are two recent rulings that at least provide a sliver of hope for business owners, although both cases arise out of the Southern District of New York and therefore are limited to that jurisdiction.  Most recently, on June 4, 2019, a judge in the Southern District of New York ruled that a website accessibility case could be mooted by a defendant fixing their website.  shutterstock_360272774.jpg(See Diaz v. The Kroger Company, 1:18-cv-07953).  In that case, Diaz, a legally blind individual, brought a lawsuit against Kroger, a large supermarket chain, alleging that Kroger’s website was not compatible with screen reader software and thus failed to comply with Title III of the Americans with Disabilities Act because it denied equal access to visually impaired customers.  In response, Kroger filed a motion to dismiss, claiming that among other things: (i) it had undertaken to make its website comply with WCAG 2.0 before the lawsuit was even filed; (ii) its website was now fully compliant with WCAG 2.0; (iii) that each barrier to access identified by the plaintiff had been fixed and/or no longer existed; and (iv) it was committed to keeping the website in compliance with WCAG 2.0 in the future.  By taking those actions, the court found that the plaintiff’s ADA claim was moot and thus granted Kroger’s motion to dismiss. Continue reading

Court Ruling Further Clarifies ADA Website Accessibility Obligations

Over the past several years, we have written extensively about employers’ obligations to make their websites accessible for individuals with visual, hearing and physical impairments.  In the past, we have counseled employers who are considered a “place of public accommodation” (such as a hotel, restaurant, place of recreation, doctor’s office, etc.) to at the very least do some due diligence to determine whether their websites are accessible for disabled users, so that those individuals can use and navigate those websites and/or purchase goods sold onWebsite Accessibility Picture the websites.  (For more information about the developing law on this issue, check out our prior posts here and here.)  Now, for the first time, a U.S. Court of Appeals has ruled on this issue and has confirmed that so long as there is a “nexus” between a company’s website and a physical location (which is typically the case), a company must make its website accessible or risk significant legal exposure for violating the Americans with Disabilities Act (“ADA”).

(As a reminder, although not the subject of this blog post, we have also written about a second consideration here regarding website accessibility that applies only to hotels and other places of lodging and currently is the subject of a tremendous amount of litigation.  Specifically, the implementing regulations of Title III of the ADA require a hotel’s website to provide information regarding various accessibility features at its property, so that a mobility impaired individual can determine whether he or she can navigate the public areas and guestrooms at the property.).

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[Webinar] OSHA & the ADA: How two Labor Laws Can Align & Diverge

On Tuesday, December 4, 2018, at 1 pm EDT, join Jordan B. Schwartz and Lindsay A. Disalvo of Conn Maciel Carey’s national Labor & Employment Practice Group for a complimentary webinar:  “OSHA & the ADA: How two Labor Laws can Align & Diverge.”Cover slide

OSHA guidance states that “if an employee can perform their job functions in a manner which does not pose a safety hazard to themselves or others, the fact they have a disability is irrelevant.”  Although OSHA portrays this policy as straightforward, in practice, it can be difficult to determine when and how to accommodate a disability under the Americans with Disabilities Act (“ADA”), while also protecting the safety of the disabled employee and his or her co-workers.  This assessment can be further complicated when the employer is unaware a disability may cause or contribute to a workplace safety issue.  The importance of understanding the laws at play in this context has increased, and will continue to increase significantly, due to the aging workforce, and the unique challenges these types of workers may face.

The ADA also requires that medical information related to a disability be kept confidential, yet OSHA mandates certain information be provided when recording injuries and illnesses for OSHA Recordkeeping.  A disability may also impact whether and how an injury is recorded.  Therefore, it is critical for employers to understand the intersection between the ADA and OSHA.

During this webinar, participants will learn:

  • Requirements related to ADA disability accommodation, and how to evaluate an accommodation in the context of legitimate safety concerns
  • How to address unsafe conditions or performance related to an employee disability
  • Best practices to foster safety in the context of an aging workforce
  • Injury and illness recordkeeping practices related to employee disabilities

Click here to register for this webinar.

 

 

Tips, Service Charges, and Automatic Gratuities Continue to Cause Problems for Employers

Hospitality employers nationwide continue to be hit with class action lawsuits alleging failure to properly pay/distribute tips, as well as failure to correctly characterize service charges and automatic gratuities.  These lawsuits have the potential to result in verdicts or settlement amounts more costly than virtually any other employment-related matter.  As a result, it is important to periodically review what is or is not permissible under the law is it relates to tips, service charges, and automatic gratuities.  shutterstock_waiter

Most employers are familiar with the basic premise that a tip is a voluntary amount a guest leaves for an employee over the amount due for the goods sold or services rendered, while a service charge is an amount agreed-upon in advance by a venue for services provided, often in connection with large pre-planned events.  However, service charges are treated differently than tips for tax and other purposes, and automatic gratuities add an extra complicated layer in this analysis. A brief synopsis of the differences of these terms from a legal perspective is set forth below:

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