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Employer Law Report

Texas Federal Court decision illustrates need for BYOD policies

Posted in Workplace Privacy

Saman Rajaee was a salesman for Design Tech Homes. He used his personal iPhone to connect to his employer’s Microsoft Exchange Server, which allowed him to access his work-related email, contacts and calendar from his phone. Design Tech did not have a BYOD policy. When Rajaee’s employment terminated, Design Tech remotely wiped his phone, which deleted all of his data, including personal emails, texts, photos, personal contacts, etc.

Rajaee sued under the federal Stored Communications (“SCA”) and Computer Fraud and Abuse Acts (“CFAA”) as well as raising various state law claims. Design Tech moved for summary judgment on the federal claims. On the SCA claim, the court held, based on Fifth Circuit precedent, that information an individual stores to his hard drive or cell phone is not in electronic storage within the meaning of the statute.

Design Tech was successful on the CFAA claim as well, but was forced to take a much riskier path than would have been necessary had it simply had a BYOD policy. Generally speaking, the CFAA prohibits accessing a protected computer without authority or in excess of authority, but requires a showing that the computer owner sustained at least $5000 in losses specifically due to either the cost of investigating and responding to an offense or the costs incurred because of a “service interruption.” In Rajaee, the court held that the value of the data wiped from Rajaee’s phone was not the type of loss or cost contemplated as being recoverable under the CFAA. In addition, the court held that the deletion of Rajaee’s data did not constitute a “service interruption.” As a result, his claim under the CFAA failed.

Takeaway for Employers:

Employers using a BYOD environment really need to put a BYOD policy in place. Had Design Tech had such a policy, it could have – and indeed, should have told its employees, including Rajaee, that upon separation of employment (or, for instance, also if the device is lost or stolen), any device used to access the employer’s network would be wiped. This would enable the employees to preserve any important personal data on their devices. In addition, using containerization software would permit the employer to segregate business data from personal data on the phone, which also would permit the employer to wipe only the business data upon separation from employment.

Business implications of the President’s Executive Action on immigration reform measures

Posted in Immigration

Last night President Obama addressed the nation and outlined his long awaited Executive Order to begin the process of immigration reform. His speech emphasized the policy imperative to improve the system, and encourage economic growth consistent with our values respecting and protecting individual rights. The President, anticipating the Republican response, reiterated that it is the role of Congress to make substantive changes in the laws, but that in the absence of Congressional action, he noted several steps that he can take as President to make the immigration system work a little better. Setting aside this constitutional controversy for the moment, the most dramatic, and controversial announcement established criteria for approximately 4.5 million undocumented immigrants who are parents of U.S. citizens or permanent residents to apply for “deferred action,” including employment authorization and the security of deferred deportation proceedings. There are also several items of interest to the business community.

Following the President’s speech, the Department of Homeland Security issued a series of memoranda that provided more insight into the nature of the executive orders. While more specific than the speech, the memos signed by the Secretary of Homeland Security still provide only broad outlines of policy initiatives. Some of the items are purely administrative, but most will require a change in federal regulations. Thus, the process to implement the regulatory reform will include publication in the Federal Register, public comment, and additional time for the respective agencies to finalize the new regulations. This process will take several months, and possibly longer, potentially giving Congress an opportunity to act in the interim.

The reforms most important to the business community and employers were set forth in a memorandum addressing the need for high skilled business and workers. This memo identified several areas where administrative reform can make the process easier for employers and their high skilled workers.

  • USCIS published a proposed regulation in June, 2014 that would permit spouses of certain H-1B employees who have applied for permanent resident status to be granted work authorization while the application is stalled awaiting an available visa number. The Secretary’s memo instructs USCIS to publish this final regulation “in a timely manner.”
  • Optional Practical Training (OPT) is granted to foreign students for one year following graduation. Because the H-1B lottery each April leaves many students without the ability to transition to H-1B status, USCIS in 2007provided for an additional 17 month extension for graduates in STEM occupations. The Administration has proposed a broader definition of STEM occupations and to extend OPT for an additional period. This will provide E-Verify employers the opportunity to hedge their bets on the H-1B lottery, and to enter as many as 3 or 4 times until the individual is selected.
  • The Immigration Act of 1990 created a national interest waiver of the labor certification requirement to attract individuals with advanced degrees or exceptional ability where the work or skills of the individual created a “significant public benefit.” However, the INS, and now the USCIS, have narrowly interpreted this exception in a manner that makes it mostly unavailable. The Secretary’s memo recognizes that the national interest waiver is underutilized and directs USCIS to issue either guidance or new regulations that will expand the ability of highly qualified individuals to apply for the national interest waiver.
  • Many employers have struggled with the increasingly limited interpretation of specialized knowledge for international transfers in the L-1B context. The Administration has promised that it will release guidance clarifying, and hopefully, relaxing the stringent standards that have made it difficult to transfer individuals from overseas to U.S. operations.
  • One of the most innovative provisions of the Senate bill passed last summer, and never considered by the House, was the ability of certain foreign entrepreneurs to apply for green cards based upon their ability to start new businesses. While the President does not have the authority to create new visa categories, he has promised to use his discretionary parole authority to permit certain investors to come to the United States and begin or expand their business. These new business owners will be able to start and expand their business, but the ability to complete the process and become permanent residents will need to wait for Congressional action.
  • The current limited number of immigrant visas has created a significant backlog for many employees whose PERM applications and visa petitions have been approved. In many instances, this backlog is measured in years and in some cases, decades. The Administration plans to publish a regulation that will permit applicants to pre-register applications to adjust status to permanent resident. While this will not be an actual application, and permanent resident status cannot be approved until there is an available visa number, pre-registered applicants will have many of the benefits of a pending application, including work authorization and advance parole (a document that permits a foreign national to return to the United States following temporary travel abroad). The proposal will also include increased job mobility and provide applicants the right to change jobs without abandoning the application. This will be a mixed blessing for employers as employees are no longer limited to the petitioning employer, but it will also expand the applicant pool for employers seeking talent. The Secretary’s memo notes the increase in economic benefits from eliminating barriers to job mobility, both within a particular company and among different employers.

Many of these reforms can only be implemented by changes in the regulation, and will therefore take time before the specifics are finalized and can be implemented. The President very carefully crafted his list of reforms to limit steps that can be taken by executive action. It is a call to Congress to pass a comprehensive reform package, a step that has thus far been resisted. We look forward to the implementation of these steps, and hope that the provisions will ease some of the burden on employers and employees seeking to comply with the increasingly complex and dysfunctional immigration system.

State Department announces a change in visa reciprocity agreement with China

Posted in Immigration

This past weekend President Obama, while in China, announced changes in the reciprocity agreement for visas for Chinese citizens. The reciprocity agreement, which becomes effective on November 12, 2014, governs the period of validity for different kinds of visas which permit Chinese citizens to travel to the United States for different purposes. The agreement provides for the same provisions relating to U.S. citizens travelling to China in similar visa categories. The State Department issued a press release and announced the specific changes, together with a series of frequently asked questions with regard to the impact of this announcement for the different visa categories. The change in the reciprocity agreement permits the State Department to issue longer-term visas for students, business visitors, tourists and exchange visitors. However, it is important to note that the new reciprocity schedule does not apply to H-1B or L-1B visas. While many in China look forward to the ability to apply for Treaty Trader or Treaty Investor visas (E-1 and E-2, respectively), this announcement will not provide any assistance.

The impact of these changes is limited. It will not expand the number of individuals who can apply for visas, nor will have any impact on the eligibility of any individual for a visa. It does not extend the ability of anybody to stay longer in the United States. However, it will permit some individuals to avoid the need to apply frequently for a visa. It is important to note the distinction between the issuance of the visa and the right to stay in the United States. The visa is issued by the State Department and grants the right to enter the United States for a specific purpose and a specific time. The visa governs the period in which the holder of the visa can present himself for admission at the border, it does not govern how long he is permitted to stay. Thus, for individuals who wish to travel between the United States and China, it will reduce the number of visits to the American Consulate to apply for a new visa in the three designated categories. Student and exchange visitor visas will be valid for the duration of the educational program that supports the visa application up to a maximum of five years. Visitor visas, for both tourists and business visitors, will be valid for 10 years.

The State Department announcement notes that the governments of China and the United States continue to negotiate regarding the terms of other visas, presumably H-1B and L-1 visas, but at this time, only the visitor, student, exchange visitor visas will have extended periods of validity.

Ohio Appellate Court upholds employee termination for Facebook threats

Posted in EEO, Workforce Strategies

A recent Ohio appellate court decision highlights how an employer’s response to employee threats of violence made on social media sites can impact a court’s decision when the employee challenges their termination. In Ames v. Ohio Dept. of Rehabilitation and Correction, the plaintiff was employed by ODRC as a Senior Parole Officer. In 2009, after the plaintiff returned from a medical leave of absence due to depression and anxiety, her co-workers and supervisors began noticing what they described as a pattern of interpersonal conflicts, erratic behavior, and emotional outbursts at work. Later that year, while discussing her work situation on Facebook, she wrote a post that included the following “I’ll gimp into work tomorrow. I guess I could just shoot them all.” ODRC scheduled her for an IME to assess her mental health and her ability to perform her job duties. The psychologist who conducted the examination found no evidence of depression or anxiety and concluded that she is capable of employment consistent with her skills and capacities.

Beginning in 2010, plaintiff was involved in a series of incidents with a co-worker who was then in a relationship with plaintiff’s former partner. Ultimately, plaintiff’s former partner sought an order of protection against plaintiff, which prompted ODRC to schedule a second IME to determine if the plaintiff had a propensity for violence. Because that IME was inconclusive, ODRC scheduled a third IME, which resulted in a finding that there was insufficient evidence that the plaintiff was “dangerous.” Approximately three months later, however, the plaintiff posted an apparent threat against the co-worker on Yahoo! Messenger, which included the following: “Feeling the heat yet? It’s coming. I promise. You fucked with the wrong person…, your ass is mine!”

Plaintiff denied sending the message, but also resisted ODRC’s efforts to determine if her account had been hacked. She was then terminated for violating policies against “threatening, intimidating, or coercing another employee” and “interfering with, failing to cooperate in, or lying in an official investigation or inquiry.”

Plaintiff filed suit against ODRC in the Ohio Court of Claims alleging that she was discriminated against on the basis of a perceived disability. The plaintiff contended that ODRC perceived her as having a disability based on the fact that the agency had scheduled the plaintiff for three mental health IME before ultimately terminating her employment. The court rejected this argument because the IME’s were reasonably sought to determine whether she potentially was a danger in the workplace based on evidence that reasonably suggested the potential for violence. Furthermore, none of the IME’s resulted in any conclusion suggesting that the plaintiff had a disability. Even assuming that the plaintiff could demonstrate a perceived disability, the court found that ODRC properly terminated her for the last threatening social media posting, which occurred after the final IME.

Takeaway: Ohio and federal law holds that an employer does not perceive an employee as having a disability simply by seeking an independent medical examination. But here, the employer definitely opened itself up to such a lawsuit by initially seeking an IME after the plaintiff first suggested on Facebook that she “could just shoot them all.” But for the fact that the employer had not terminated another employee who made a similar comment, a termination decision easily could have been justified after that initial comment. Either way, the employer here properly took the plaintiff’s comments seriously. One question that the employer should always consider when faced with threats of violence: Which lawsuit would you rather defend – the perceived disability discrimination lawsuit or the lawsuit alleging that you had information regarding a potentially violent employee and did nothing?

The FCRA is the new FLSA

Posted in Workplace Privacy

Recent multi-million dollar settlements highlight the importance for employers of complying with the Fair Credit Reporting Act (FCRA). They also highlight that, when it comes to class action lawsuits in the employment-law context, the FCRA is the new FLSA!

The FCRA has very specific requirements employers must comply with if they engage a background check service providers (referred to as “Consumer Reporting Agencies” (CRAs) in the FCRA) to compile background reports on applicants or employees. These types of reports include credit reports, criminal background reports, and other reports that have any bearing on someone’s moral character or reputation. We have discussed these requirements at length here and here, but, long story short, employers who run background checks on applicants or employees must do all four of the following:

  1. Disclosure: Disclose to the applicant or employee that a consumer report, i.e., a background check is going to be compiled on the applicant or employee for employment purposes;
  2. Authorization: Obtain authorization from the applicant or employee allowing the employer to have the report complied;
  3. Pre-Adverse Notice: If the employer decides that it may take an adverse action against the applicant or employee in part because of any information that was disclosed in the background report, the employer must provide the applicant or employee notification of that fact and make other required disclosures; and
  4. Adverse Notice: If the employer is going to take an adverse action against the applicant or employee in part because of any information that was disclosed in the background report, the employer must provide the applicant or notification of that decision and make other required disclosures.

Many employers run into problems because they fail to comply with one or more of these four distinct steps, but even employers who do manage comply with these four broad requirements tend to miss some of the more intricate, lesser-known requirements that each step further requires. Add a per-violation statutory penalty and an award of attorneys’ fees for each FCRA violation an employer commits and it becomes clear how FCRA class actions are quickly becoming the new go-to class action lawsuits for plaintiff-employment lawyers.

The proof is in the pudding. Take, for example, the recent preliminarily-approved $6.8 million class action settlement in Knights v. Publix Super Mkts., Inc., No. 3:14-cv-0072 (M.D. Tenn. 2014) – the largest FCRA class settlement of its kind to date. In Knights, the class members, which includes all job applicants who applied for positions with Publix from March 12, 2012 through May 13, 2014, claimed that the supermarket chain violated the FCRA by failing to provide them with “stand alone” disclosures before obtaining consumer reports that were used for employment purposes.

This “stand alone” requirement concerns the first two steps. While the “stand alone” requirement does not prevent an employer from combining the disclosure and the authorization requirements into one form (see 15 U.S.C.S. § 1681b(b)(2)(A)(ii)), it does prohibit the disclosure and authorization from being combined with other things, like an employment application. In fact, the FCRA provides that the disclosure must be made in writing in a document that consists “solely” of the disclosure. See 15 U.S.C. § 1681b(b)(2)(A)(i). This means an FCRA-compliant disclosure must not contain extraneous information.

So what is prohibited extraneous information? Well, the class plaintiffs in Knights claimed that Publix illegally included a liability release on its background check authorization forms that essentially sought to change the disclosure and authorization document into a waiver document where applicants would release their legal rights. Other courts have heard these types of cases and have concluded that waiver language in an FCRA disclosure form can violate the FCRA. See Reardon v. ClosetMaid Corp. (W.D. Pa. Dec. 2, 2013); Singleton v. Domino’s Pizza (D. Md. Jan. 25, 2012).

Under the terms of the proposed settlement, Publix will pay approximately $48 to each of 90,633 class members. About $2.27 million is set to be allocated to attorneys’ fees.

In another case, Dollar General and class plaintiffs have asked a Virginia federal court to approve a $4 million class settlement in response to class allegations that the retail company violated the FCRA by sending applicants outdated notices. As we discussed here employers have been required to provide updated forms to applicants and employees since January 1, 2013.

Other similar class suits are also making their way through the courts. Mack v. Panera, LLC and Mack v. American Multi-Cinema, Inc. (AMC) have been filed by a former employee of both companies. The plaintiff claims both companies forced potential employees to sign off on illegal background checks by requesting background checks in applications filled with language not related to the background check itself. Mack is seeking up to $1,000 in statutory damages for each class member, which consists of applicants and employees nationwide who filled out job applications with the companies within the past five years. Nine West Holdings Inc. was also recently hit with a putative class action that alleges the company conducts background checks on job applicants without proper disclosures.

Takeaways: The FCRA is not an easy statute to comply with. In addition, many states have their own background check laws that add additional requirements on employer hiring in their states. It is advisable that employers conducting background checks of any kind on applicants or employees consult with competent counsel before doing so and have counsel review their forms and their processes to ensure they are FCRA compliant in all respects – even if the background screening company assures them their forms are compliant.

They’re BAAACK: Five things to consider before rehiring boomerang employees

Posted in Traps for the Unwary, Workforce Strategies

Nathaniel S. Butler/NBAE/Getty Images & Mark Duncan/AP Images

As the NBA Season gets ready to tip off, Cleveland is certainly ready. The return of LeBron James to the Cleveland Cavaliers has riveted the sports world and reinvigorated Cleveland. But for employers, this “going home” phenomenon has prompted conversations of boomerang employees — those employees who leave an employer only to return sometime later. This article looks at this relatively-new concept, and outlines what employers should consider before re-hiring a boomerang employee.

When the question used to come up of whether to re-hire a former employee, many employers aligned with one school of thinking: “If you thought the grass was greener on the other side, you can stay there.”

This particular mindset, however, has increasingly becoming the minority view. This attitude shift is forcing recruiters and employers to rethink not only their recruiting strategies, but also their hiring and exit strategies.

This attitude shift seems spurred by four major factors: (1) generational disparity; (2) the economy; (3) changing/expanding gender roles; and (4) skill specialization.

1.  Generational Disparity

Employees born during the Veterans (born before 1946) and the Baby Boomer (born 1946 – 1964) eras would have been far more hesitant to leave one job for another out of fear of being considered disloyal or a job hopper. This is no longer the case. Now the percentage of employees who stay with one employer throughout the course of their careers is extremely low. This became first noticeable for workers in Generation X (born 1964 – mid-80’s). In fact, it seems that when Generation Xers entered the workforce, they abandoned the idea of life-long employment, along with 8-track tapes. This change in ideology did not stop with Generation X, and continued to Generation Y, also known as the Millennials (born mid-80’s to early 2000’s). While many Generation Xers turned to job hopping as a means of survival, Millennials took it further, and turned to job hopping as a means of career advancement.

2.  The Economy

As alluded to earlier, this attitude shift is not based solely on the workers’ personalities — those pesky Generation Xers did not let their listening to too much Nirvana rot their brains — economic factors played a key role.

Baby Boomers have been slower to leave the work force due to financial constraints, meaning there have been fewer advancement opportunities for younger workers to step into. Job hopping is no longer a sign of poor character; it is a career plan, and many Generation Xers and Millennials subscribe to the line of thinking: “The only way to move up is to move on.”

In addition, most private sector employers long ago phased out defined pension plans that rewarded long-term service and replaced them with far more portable 401k plans and the like. With that, a major incentive for long-term employment with just one employer dried up.

Generations X and Y also got to experience the recession that started in 2008. Many workers lost their jobs, lost their homes, and basically saw their lives turn upside down. But one thing these groups had that the Baby Boomers had far less of, student loan debt, and lots of it. The recession changed the way these groups look at things. These groups were taught growing up that if you went to college, you could get a good job with financial security. The recession proved this to be untrue for many new job seekers. For many, higher education is no longer the golden ticket to a good job; now, it has to be viewed as an investment that comes with potential risks just like other more traditional investments, like the stock market and real estate.

3.  Changing/Expanding Gender Roles

This ties into the next factor, changing/expanding gender roles. More women than ever are in the workforce, more families are dual-income, and more women are breadwinners. These changing/expanding gender roles have caused people to leave employment for one reason or another. They move for their spouse’s job, for school, to have children, etc. Some employees also change jobs to have a better work-life balance. This leads some employees to opt for project-type work, rather than a steady 9-5 job. In other words, life happens, and the flexible employers win out.

4.  Skill Specialization

The last factor is skill specialization. The professional workforce has changed, and the demand for employees with specialized skills is high. As such, employees with the covetable skills are constantly offered opportunities. Some employees leave, not because they are disloyal, but because they can and because, these days, money and job flexibility talk. Some employees stay, not because they are loyal, but because they have to. This is just as much the employer’s fault though as it is the employee’s, because employers need to learn how to retain top talent through more flexibility, creative fringe benefit options like onsite day care, etc.

The combination of generational disparity, the economy, changing/expanding gender roles and skill specialization have made life-long employment a thing of the past. The present and the future is the free-agent generation. The good news is that employers seem to be getting on board. To many, leaving a company is no longer viewed as a betrayal, and many companies have changed their thinking about boomerang employees. They no longer see them as “ex-employees,” or “traitors”; rather, they consider them “alumni,” and continue to maintain their connections to these former employees.

Advantages

There is no denying that there is value in hiring a boomerang employee. The cost of losing an employee and hiring and training a new one is expensive. Studies suggest that hiring a boomerang employee has one of the highest returns on a recruiting investment – 1/3 to 2/3 the cost of hiring a newbie employee. It often makes sense then for an employer to rehire a former worker to offset some of these costs.

Social media sites like LinkedIn make it even easier to keep track of former employees, and it is typically less expensive to rehire them directly and bypass the search and recruitment process altogether. With these employees, employers know what they are getting.

Another advantage with boomerang employees is saving time on training and ramp-up time, and they tend to acclimate more easily as they re-enter the workforce because they understand the organization’s work structure and culture. They may also know most of the key players (if the company has not had a lot of turnover).

Another value, boomerang employees have gotten their chance to see if the grass really is greener on the other side. Returning employees who have gotten to see firsthand that it is not, are many times better workers, more committed, more loyal, and better brand ambassadors.

The Risks

But it is not all positive. There are risks involved in hiring a boomerang employee because not all boomerang employees are created equal, and it is not always the “one that got away” that tries to return. Here are five considerations when deciding whether to return a boomerang employee.

Number 1: Circumstances of the Departure

The number one consideration is to determinate why and how the employee left. Not surprising, employees who left voluntarily on good terms are best suited to return to work, as opposed to those employees who left involuntarily or on bad terms. Did the employee leave because of dissatisfaction with the company, or because of some personal reason, like spouse job relocation, pregnancy, or some other reason?

If an employee left because of lack of growth opportunities, because the employee thought he was underpaid, or because he had a less-than-stellar relationship with a supervisor or co-workers, unless the company has undergone a significant change since the employee left, it is unlikely that the employee’s issues with the company will have resolved or stabilized in a manner that will result in long term, sustained employment.

In addition, if the employee was fired or forced out, they should not be considered for re-hire, unless of course the person or persons who forced them out were discovered to be the source of the problem. Similarly, if an employee left involuntarily because of poor performance, the employer would generally be foolish to rehire them.

Some employers also refuse to re-hire an employee who left to go to a competitor. There may be non-compete issues to consider in this type of situation. It could be become a very expensive rehire decision is if it results in litigation with the employee’s most recent employer.

These considerations are examples of why it is important for employers to conduct and document exit interviews when employees resign or are terminated. An exit interview gives the employee an opportunity to provide the employer constructive feedback about their job, co-workers, supervisors, and the company overall. If the employer documents what the individual said during the exit interview and retains that information, it can be an invaluable resource to refer back to when considering that individual for rehire a few years down the road.

Number 2: Length of Departure

Another consideration is how long the employee was away from the workforce. Employees gone for short periods take less time to train and re-acclimate to the organization, its culture, and the demands of the job given the current organizational climate. Bottom line, the shorter the leave, the more money the company can save.

Number 3: Past Performance

This largely follows Number 1. One reason to keep good employment records is to determine if an employee should be considered for re-hire. Of course no employer wants to re-hire a poor performer or a chronic attendance problem. But for large employers or employers with high turnover, there may be little or no institutional knowledge of an employee’s prior employment tenure. This means, if details about the employee’s prior employment are not in the records, the employer may not discover it.

This is also why it is important for employers to ask on the employment application if the applicant has ever worked for the company before and, if so, why the employee left. If the employee was terminated, it should come out at this time. If the employee lies and is hired, once the lie is discovered, the employee could perhaps be terminated for lying during the application process.

Number 4: Performance at Current Employer and Reason for Returning

During their absence, there is a good chance that boomerang employees have learned new skills, expanded their network, and had other successes. It is important to have a candid conversation with the employee and find out exactly why the employee wants to return. There are right reasons to return and there are wrong ones. If an employee wants to return because the employee misses former colleagues, it is not a good reason. If the employee wants to return because the employee has not had success in subsequent employment, it is not a good reason.

The best case is when an employee wants to return because the employee has had time to learn, grow, develop new skills, and believes the former employer can take advantage of the employee’s newly-expanded skillset and network.

Number 5: Needs of the Company

No matter how great a former employee might have been or currently is, ultimately the decision to re-hire comes down to whether the company needs the skills of the employee, the money to hire the employee, and has a job open for the employee.

In addition, hiring a boomerang can be political, and the re-integration of a boomerang precarious. The players may have changed since the employee left and interpersonal relationships may have changed too. Dynamics may also prove tense if the boomerang leapfrogged over an incumbent employee, who might feel slighted by not getting the job.

On a personal note, I am happy LeBron is returning to Cleveland. When I practiced in Cleveland, I had the pleasure of meeting him a few times. While he was younger then, he was always polite, respectful, and even gracious enough to pose for pictures.

Confused or overwhelmed about the new obligations and regulatory activity related to federal contractors? You aren’t alone.

Posted in EEO

The Office of Federal Contacts Compliance Programs (OFCCP) has been very busy changing the rules for federal contractors and subcontractors. There are 8 new developments from the second half of 2014 that all covered contractors should be aware of:

  1. New scheduling letter released requiring submission of data regarding veterans, disabled persons, compensation, and other items not previously required.
  2. New form for annual submissions about veterans to be used beginning in 2015 (replaces VETS-100A and VETS-100).
  3. Proposed rule to prohibit federal contractors from discharging or discriminating against employees and job applicants for discussing, disclosing, or inquiring about compensation of themselves or others.
  4. Proposed rule on the Fair Pay and Safe Workplaces Executive Order addressing 3 issues: (A) companies bidding for contracts in excess of $500,000 must disclose labor law violations in the past 3 years, which may be used against them during the bidding process; (B) companies with a federal contract in excess of $500,000 must make certain disclosures on employee pay stubs regarding hours and pay; and (C) restrictions on the use of pre-dispute arbitration agreements for contractors with a contract of more than $1 million.
  5. Proposed rule to require an annual Equal Pay Report, with summary compensation data, be submitted by federal contractors with more than 100 employees.
  6. Executive Order 13672 and Directive 2014-02 prohibiting discrimination against sexual orientation and gender identity for federal contractors subject to Executive Order 11246.
  7. Proposed rule on federal contractor minimum wage—$10.10 per hour—for all federal contractor employees, beginning with contracts resulting from solicitations for contracts issued after January 1, 2015. A final rule is due to be published on October 7, 2014.
  8. The benchmark for veterans hiring, required by amended VEVRAA rules, has been lowered from the initial proposal of 8% to 7.2%

1.     New desk audit scheduling letter
On October 2, 2014, the OFCCP issued a new scheduling letter to be used in desk audits beginning October 15, 2014. The new scheduling letter requires individual compensation data as of the date of the workforce analysis in the AAP (rather than aggregate, annualized compensation data). That compensation data must include columns for hours worked, incentive pay, merit increases, locality pay, and overtime. Second, contractors can no longer identify applicants and employees by “minority” and “non-minority” but must provide specific race or ethnicity information. Data must be provided electronically if it is maintained electronically. In addition, OFCCP will require submission of accommodation policies, assessment of personnel processes, and an assessment of physical and mental qualifications. The new scheduling letter also requires new data on veterans (benchmark information and documentation of required audits) and disabled individuals (utilization analysis and documentation of required audits).

2.     VETS-100A and VETS-100 replaced by VETS-4212 in 2015
On September 25, 2014, OFCCP announced that the VETS-100A and VETS-100 will be replaced in 2015 by a VETS-4212 Form. The requirement to report on categories of veterans will end, and contractors will only be required to report on aggregate numbers of “protected veterans” by EEO category.

3.     E.O. 13665 – Prohibiting discrimination for discussing compensation
On September 17, 2014, OFCCP issued a proposed rule implementing Executive Order 13665 prohibiting federal contractors from discharging or discriminating against employees and job applicants for discussing, disclosing, or inquiring about their own compensation or the compensation of another employee or applicant. The proposed rule mandates inclusion of the requirement in covered contracts. The proposed rule also requires that federal contractors incorporate the nondiscrimination provision into their existing employee manuals or handbooks, and disseminate the nondiscrimination provision to employees and to job applicants. There is an exception to the requirement where the employee or applicant makes the disclosure based on information obtained in the course of performing his or her essential job functions—e.g., payroll and human resources employees. Comments on the proposed rule are due by December 16, 2014.

4.     Proposed rule on Fair Pay and Safe Workplaces Executive Order
A proposed rule implementing the Fair Pay and Safe Workplaces executive order was issued September 17, 2014. The Fair Pay and Safe Workplaces Executive Order, issued July 31, 2014, has 3 parts. First, it requires any company bidding for a procurement contract of more than $500,000 to disclose labor law violations that occurred in the past three years. Violations are defined as “any administrative merits determination, arbitral award or decision, or civil judgment.” These violations include OSHA, FLSA, NLRB, OFCCP, federal equal employment (ADA, FMLA, Title VII, and ADEA), and equivalent state law violations. The contracting agency is instructed by the executive order to consider this information in awarding the contract. The contracting agency also must require contractors to update this information every 6 months. If new violations require any remedial measures or compliance assistance, the contracting agency can require such measures or assistance, or in extreme cases, termination or cancellation of the contract or an option on the contract or debarment. Contractors are further required to impose similar disclosure obligations on their subcontractors, where the subcontract is in excess of $500,000, and add language to covered subcontracts requiring disclosures of violations. This information as to subcontractors must be updated every 6 months. The Executive Order also mandates information sharing between executive agencies and labor agencies regarding federal contractors and subcontractors. The Department of Labor is directed to issue regulations to guide other agencies as to whether violations are serious (taking into account the number of employees affected, the severity of the risk or harm, and the amount of penalties), repeated (more than 1 violation of the same or a substantially similar requirement in the past 3 years), willful (knew of, showed reckless disregard for, or acted with plain indifference), or pervasive (depending on the number of violations and size of the entity). The Department of Labor has stated that single violations will not have a preclusive effect on procurement awards in most cases.

Second, the rule requires “paycheck transparency.” Contractors with a single contract for more than $500,000 must disclose—on each employee’s pay stub—hours worked, overtime hours, pay, and any additions or deductions from pay. Hours worked and overtime hours need not be included on pay stubs for FLSA-exempt employees, provided they are informed of this status. This requirement will be placed in all covered federal contracts and must be included in all covered subcontracts. Independent contractors must be informed in writing of their status as an independent contractor.

Third, contractors with a single contract for more than $1 million are restricted in their use of pre-dispute arbitration agreements. Covered contractors may only arbitrate claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment with the voluntary consent of employees or independent contractors and only after such disputes arise, except where (a) a collective bargaining agreement applies or (b) pre-existing agreements were in place before the executive order. This clause must also be included in federal contracts and covered subcontracts.

A proposed rule was issued on September 17, 2014. Comments on the proposed rule are due December 16, 2014.

5.     Proposed rule to require annual submission of compensation data
On August 6, 2014, OFCCP issued a proposed rule to require contractors with more than 100 employees and a contract of $50,000 or more to submit summary information on compensation. (See our previous post) Specifically, covered contractors would be required to submit total W-2 compensation for each EEO-1 job category for each race, ethnicity, and sex. Contractors would also be required to submit total hours and total numbers of employees by race, ethnicity, and sex. This data would be submitted electronically as a companion to the annual EEO-1 report by March 31st of each year (whereas the EEO-1 report will still be due September 30th) on year-end compensation data for the prior year. The information would then be shared publicly aggregated by industry. According to OFCCP, companies and their employees could use the publicly available data to benchmark their compensation against that of other companies in their industry. Comments on this proposed rule are due by November 6, 2014.

6.     E.O. 13672 and Directive 2014-02 – Gender identity and sexual orientation protected
Executive Order 13672, issued July 21, 2014, amends Executive Order 11246 with regard to any contracts entered into on or after implementing regulations are issued, and protects gender identity and sexual orientation (as new protected classes) from discrimination. Proposed rules should be issued later this month. However, OFCCP issued Directive 2014-02 on August 19, 2014, effective immediately, including gender identity and sexual orientation within its enforcement jurisdiction under protections against sex discrimination—but not adding them as categories for AAP statistical analysis.

7.     E.O. 13658 – Minimum wage changes
On June 17, 2014, the Department of Labor proposed rules for the minimum wage hike for federal contractors, imposed by a February 12, 2014 executive order (Executive Order 13658). (See our earlier blog post) Final rules will be published October 7, 2014. Of note, contractors must include a clause on the minimum wage in all covered subcontracts providing that “Executive Order 13658 – Establishing a Minimum Wage for Contractors, and its implementing regulations, including the applicable contract clause, are incorporated by reference into this contract as if fully set forth in this contract, [with a citation to a webpage that contains the contract clause in full, to the provision of the Code of Federal Regulations containing the contract clause set forth at Appendix A of the regulations, or to the provision of the FAR containing the contract clause promulgated by the FARC to implement this rule].” An additional requirement will be imposed by the final rules, requiring posting a notice to all employees of the minimum wage (the notice is forthcoming). The final rules make it clear that the minimum wage requirement applies to Davis-Bacon Act construction contracts, in addition to those contracts typically covered by rules for federal contractors—supply and service contracts.

8.     New benchmark figure for veterans hiring
The benchmark for veterans hiring, required by amended VEVRAA rules, has been lowered from the initial proposal of 8% to 7.2%. This figure will be updated annually.

With all of the different rules, coverage levels, and obligations, is your head spinning yet?

The latest surge in data breaches highlight key takeaways for employers

Posted in Traps for the Unwary, Workforce Strategies, Workplace Privacy

The recent data breaches at Target, Home Depot, and Jimmy John’s have kept data privacy and security in the news lately. But from a legal perspective, there has never been much that the victims of these breaches could do to obtain a remedy in the absence of actual proof of identity or other theft. Indeed, ever since the U.S. Supreme Court decision in Clapper v. Amnesty International, it has been clear that the mere potential for future injury is insufficient to confer standing on a data breach victim to sue. Instead, the plaintiff must prove that injury is “certainly impending,” a standard that was thought to rule out class action lawsuits arising out of data breaches.

Except in California. Bucking the trend for dismissing class actions resulting from data breaches, a federal court in the Northern District of California in In re Adobe Systems, Inc. Privacy Litigation recently denied a motion seeking dismissal based on a lack of standing. The Adobe litigation arose out of a 2013 hacking that caused a data breach that compromised customer debit and credit card numbers and other personal information. In addition to claims brought under California statutory law, the plaintiff customers, like most of the plaintiffs in other data breach class actions, alleged damages as a result of an increased risk of future harm by identity theft and the cost of mitigating that harm. (The plaintiffs also alleged that they suffered economic injury in the form of lost value of the Adobe products that they paid for, but the court found it unnecessary to address that issue.) Contrary to every other post-Clapper court that has addressed this issue – with the exception of the Southern District of California Court in In re Sony Gaming Networks & Customer Data Security Breach Litigation – the Adobe Court found that the plaintiffs had stated a sufficient claim to establish standing to sue.

First, the court found that the plaintiffs’ complaint contained sufficient allegations of threatened harm to show that injury was “certainly impending.” Specifically, the court noted that “the risk that Plaintiffs’ personal data will be misused by the hackers who breached Adobe’s network is immediate and very real” in that the data was targeted by hackers and that some of it had been decrypted using Adobe’s own systems. The court also recognized that the Plaintiff’s complaint alleged that some of their stolen personal information had already surfaced on the Internet. Under these circumstances, the court stated that “the threatened injury here could be more imminent only if Plaintiffs could allege that their stolen personal information had already been misused. The court found a similar Ohio federal court decision unpersuasive in finding that the potential for injury resulting from a data breach caused by a computer hacking was not “certainly impending.”

Second, the court found that the costs incurred by two of the named plaintiffs to pay for data monitoring services constituted an injury-in-fact. The court found the expenses to be “fairly traceable” to Adobe’s failure to maintain reasonable security measures and that their purchase of data monitoring services would redress their harm.

Hopefully, the Adobe and Sony decisions will not be exported outside of California, but in case they are, here are the takeaways that I see for employers:

  1. A company’s workers can be either the strongest or weakest link in any company’s data security program, they can be the key to avoiding having to respond to these lawsuits. The Home Depot data breach reportedly occurred after employee concerns about the strength of the company’s cybersecurity were ignored by management. A data breach last year at Vodafone was said to have been an inside job.  And let’s not forget about all of the potential data breaches that may occur because employees don’t understand how to identify phishing and other social engineering exploits. Outsourcing certain business functions likewise may not help avoid data breaches. The Target breach resulted from the hacking of Target’s HVAC vendor.
  2. Human resources departments are now at greater risk than ever of being the targets of data breaches, particularly as employers begin to embrace big data for employee selection and placement. The data breach at the University of Pittsburgh Medical Center this past spring resulted from a breach of its payroll system, which exposed the personal information of approximately 62,000 employees.  A lawsuit is pending against UPMC and its software vendor. Recognition that human resources data networks may be vulnerable to hacking likewise will go a long way towards avoiding these lawsuits.
  3. Finally, employers need to remember that their human resources and customer data is not vulnerable to just computer hacking. Sloppy policies and procedures and the lack of enforcement of reasonable policies relating to laptops, mobile devices and portable media also contribute heavily to data breaches.  Close any gaps now.

Is your workplace ready for Fall? Check the Employer Law Forecast

Posted in Porter Wright News

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Check the Fall forecast for your workplace at

Porter Wright’s Employer Law Forecast

Fall is here – time for football, back to school activities and planning for the holidays.

For many employers, however, Fall also comes with its fair share of seasonal headaches, including:

Paying employees correctly during daylight savings Holiday pay and FMLA issues during the Fall holidays
Fantasy football in the workplace Voting leave laws during Election Day

To address these and other seasonal concerns, Porter Wright is pleased to share the latest posts on our microsite – Employer Law Forecast, a new way to deliver insightful legal content to readers.

The Employer Law Forecast is an online tool that helps employers and human resource professionals plan for employment law issues that occur seasonally. The site offers visitors a wealth of knowledge on employment law, combining relevant and educational information within entertaining and thought-provoking content.

In the Forecast’s posts, Porter Wright’s attorneys provide analysis and insight into new developments in employment law and provide links to helpful resources.

The Employer Law Forecast is a supplement to the firm’s long-standing Employer Law Report Blog – www.employerlawreport.com. The Forecast’s user-friendly seasonal format makes it easier for human resource professionals to find relevant information before it’s needed, and to serveas a helpful reminder of what employers can expect next.

The Forecast was designed to provide easy access from mobile devices, optimizing the user experience depending on the type of device used to view the site. The Forecast functions like a smart phone app, but is still available on desktop computers, making it easy for readers to find the content they seek without downloading an app.

Click here to view the Forecast and sign up for its seasonal updates.

OSHA modifies rules for reporting of severe injuries and fatalities – updates exemptions from record-keeping requirements

Posted in Workforce Strategies

Recently, the federal Occupational Safety and Health Administration (OSHA) announced a final rule changing requirements for reporting severe injuries and fatalities. The rule also modifies OSHA’s exemptions from its record-keeping requirements. The new rule takes effect January 1, 2015.

In most circumstances, there is no obligation to notify OSHA when there is an injury or illness incurred at work. Employers are required to log work-related injuries and illnesses on OSHA forms. OSHA does inspect those logs when they conduct workplace investigations. But, in most cases there is no general obligation to notify OSHA when an employee becomes ill or injured at work except in two instances.

Employers do have an obligation to notify OSHA within eight (8) hours if there is a fatality at work. Even though the obligation relates to “work-related” fatalities, OSHA interprets the obligation broadly and requires, for example, that every heart attack that occurs at the workplace must be reported, even if the employer feels circumstances suggest there was no work causation. Under the old OSHA regulation, the other circumstance under which an employer was required to notify OSHA was if a single workplace accident resulted in in-patient hospitalization of three or more workers. In that case, notice to OSHA was required within 24 hours.

OSHA’s revised rule keeps intact the obligation to notify OSHA of work-related fatalities within eight (8) hours. The new rule expands the obligation for notice to OSHA of other kinds of workplace incidents. Under the new rule, employers will be required to notify OSHA within 24 hours if a workplace incident results in any in-patient hospitalization, regardless of how many employees are affected, and also in the case of any amputation or the loss of an eye.

The new rule does not change OSHA’s basic obligations for record-keeping. Employers with 10 or fewer employees are still exempt from the basic OSHA record-keeping requirements. However, OSHA has updated the list of specific industries that are exempt from the requirement to keep routine injury and illness records. Certain low-hazard industries have always been exempt from the basic record-keeping requirements. The new rule establishes a new list of exempt industries. The basic OSHA record-keeping requirements will now be extended to some industries that were previously exempt. The list of newly-covered industries includes, but is not limited to, automobile dealers, many retailers, industries providing services to buildings and dwellings, and various amusement and recreation industries. The changes are a result of OSHA switching from reliance on the old Standard Industrial Classification system over to the new North American Industry Classification System.