March 27 saw the Iowa Supreme Court grant further review in not one but two important drug-testing cases.  Besides deciding to hear Dix v. Casey’s General Stores, Inc. (covered here), the Court also granted review in Woods v. Charles Gabus Ford, Inc. (19-0002).  Charles Gabus challenges the Court of Appeals’ ruling that it failed to substantially comply with the drug-testing statute’s post-test notice requirement.

Woods was fired after he failed a drug test.  Iowa’s drug-testing statute requires an employer like Charles Gabus to send the employee notice of the positive test along with specified contents, including the employee’s right to seek a confirmatory drug test.  Woods undisputedly received the notice.  Even so, he sued, asserting that the notice failed to recite the cost of the confirmatory drug test, as required under the statute.

Charles Gabus conceded that its notice didn’t feature that cost.  Instead, Charles Gabus argued it didn’t violate the statute because its notice “substantially complied” with the notice provision.  The Supreme Court has held that substantial compliance with the notice provision will do “if the employer’s actions falling ‘short of strict compliance . . . nonetheless accomplish the important objective of providing notice to the employee of the positive test result and a meaningful opportunity to consider whether to undertake a confirmatory test.’”

The Iowa Court of Appeals agreed with Woods, reversing the District Court.  The lower court had reasoned that the notice said that if the confirmatory test were negative for drugs, Woods would be reimbursed for its cost, making the cost zero and thus essentially immaterial to the post-test notice.  Indeed, Woods testified merely that he “might” have gotten the confirmatory test had he known its cost.  Yet the Court of Appeals rejected this analysis, concluding that Woods could not make an informed decision without the test’s cost.  It thus found that Woods was deprived of a meaningful opportunity to consider whether to take the confirmatory test.  So no substantial compliance.

Charles Gabus doesn’t challenge the substantial-compliance standard, only its application in the case.  The notice Charles Gabus sent met the notice provision’s other requirements; it notified Woods of the positive test and his right to seek a confirmatory test.  It also notified Woods that he’d be reimbursed for the confirmatory test’s cost if it returned negative.  It is in this context that the Supreme Court will determine with the notice, despite featuring the cost, substantially complied with the drug-testing statute.

We’ll follow up when the Court issues its opinion.

Although the timetable allowing businesses to reopen is different in every state, most businesses are starting to plan for the inevitable day when employees will be allowed to return to the workplace and resume business operations at least in some form.    In Iowa, the Governor’s April 27 proclamation loosened restrictions in 77 Iowa counties.   Although restrictions remain in the other 22 counties, the Governor promised to review the conditions again on May 15, setting the stage for the potential reopening in the entire state.

Whether your employees have been able to work remotely, are furloughed, or some combination thereof, restarting and ramping up operations presents a host of unprecedent logistical challenges and legal dangers to businesses.   We have identified ten of the most pressing questions employers are likely to face in the coming weeks and months as they undertake the task of getting their employees back to work.

Question No. 1:  I want to make sure the employees returning to work do not have COVID-19; What kind of health information is an employer entitled to obtain before allowing an employee to return to work?

In normal circumstances,  the ADA prohibits an employer from conducting a medical exam or otherwise asking about employee’s health, except under limited circumstances.   But, the COVID-19 pandemic has caused EEOC to relax its normal strictures against employee testing.   EEOC has published a Technical Assistance Guidance in which it has opined that taking an employee’s temperature before entering the workplace is permissible. You may also ask returning employees to complete a health questionnaire that inquires about facts relevant to COVID-19 (e.g., has the employee had a positive test, been exposed to someone with a positive test, has COVID-19 symptoms such as fever, cough, chills, or shortness of breath, or where the employee has recently traveled). Finally, you may ask whether the employee has or is working somewhere else, such as in a health care field that could present a higher risk of exposure. All medical information obtained a result of these efforts must be kept confidential.

Question No. 2:  What about testing?  Does an employer have the right to compel an employee who has no COVID-19 symptoms to take a test?

As a practical matter, there are not at the present time sufficient tests available, so widespread testing is probably not feasible.    But, what about when more testing becomes available? Because of evidence that a person with no symptoms may nonetheless have contracted the COVID-19 virus, it may be reasonable for an employer to require testing as a condition to allowing the employee to return to work.   EEOC recently updated its Technical Assistance Guidance to clarify that employers may require COVID-19 testing as a condition of returning to work.

Two cautionary notes for employers who decide to test. First, employers should consult with public health authorities or medical professionals before implementing a testing program, to ensure the tests are safe and accurate. Second, the testing EEOC permits is testing that detects whether the employee is currently infected with the virus.   There is no reliable guidance whether testing for the presence of antibodies using serology tests is permissible.   As such, serology testing should be avoided until more guidance is available.

Question No. 3: Does the employer have to pay employees for the time it takes for COVID-19 testing?

If testing is a requirement to return to work, the employer should pay employees for the time spent waiting for and undergoing a test.

Question No. 4: If an employee has an active case of COVID-19, when should that employee be permitted to return? 

An employer may require the employee to get medical clearance that they can no longer spread the virus.   However, in some communities physicians have not been available to provide return to work certifications.   In that case, employers should follow the CDC Guidelines, which require an employee to isolate for at least seven days from the onset of symptoms,  be fever free without fever reducing medications for at least 72 hours, and have seen an improvement in respiratory symptoms.

Question No. 5: Some employees don’t want to come back to the workplace right now; does an employer have the right to insist they return? 

You should discuss with the employee the reason they don’t want to come back to work right now.   In some cases, the employee may have a legal right not to come back, but not in every case.  For example,  if the employee has contracted the COVID-19 virus, is quarantined because of medical advice, or is caring for a relative who is sick, the employee may be entitled to leave under the FFCRA or otherwise be entitled to an accommodation.   The employee may also be entitled to leave if caring for a child because the child’s school or daycare is close because of COVID-19.

If the employee is not sick now but is afraid coming into the workplace will expose them to the virus, you should explore where the fear is coming from.   If the employee is at high risk because of a medical condition or lives with someone who is, you should advise the employee the precautions you have made to prevent the spread of COVID-19 in the workplace (which should, at a minimum, follow the CDC mitigation strategies).   You should also explore reasonable accommodations, such as continued telework for a period of time or a leave of absence.  If attendance at work is an essential function and there is no reasonable accommodation, you may require the employee to come to work or suffer the consequences for refusing to report.

If the employee’s fear is not rational or there is evidence of other motives (such as continuing to receive the $600 enhanced unemployment benefit), an employer has the right to notify the unemployment authorities that the employee is refusing to return to work, which may jeopardize the unemployment benefits.

Question No. 6: If an employee believes they contracted COVID at work, is it covered by workers’ compensation?

A disease is compensable under the workers’ compensation laws only if it arose out of and in the course of employment.   The employee must be able to prove that exposure to the COVID-19 virus in the workplace caused the employee to contract it.   It may be more or less difficult to prove, depending upon the nature of the work and evidence of exposure in the workplace compared to other places the employee may have been exposed

It is important to note that benefits under the workers’ compensation law include lost time from work caused by the work-related illness, medical expenses, and permanent disability, if any, resulting from the illness.   If an employee dies, the employee’s dependents are entitled to death benefits.   Even in those cases where COVID-19 is proven to be work related, very few cases are likely to result in permanent disability or death.

Question No. 7: Does an employer have legal exposure if an employee contracts the virus while working?

Iowa Workers’ Compensation law in most cases is the only legal remedy for employees who have an injury or contract a disease on the job.   The only way to get around the workers’ compensation law is if a supervisor was grossly negligent, that is the person knew there that an injury was probable and a consciously failed to avoid the peril.   If the employer implements reasonable policies and procedures to limit exposure to COVID-19 it should eliminate any liability outside of workers’ compensation. (See Question 6, above).

Question No. 8: Do we have to tell our employees someone tested positive?

Employers should tell employees if someone in the workplace has tested positive for COVID-19, but should not disclose the employee’s identity, and take reasonable steps to prevent the identity from being disclosed.

Question No. 9: What if another outbreak in the fall causes schools to close again?

Paid leave for employees who cannot work because a child’s school is closed because of COVID-19 is effective until December 31, 2020.     It is important to note that an employee has a total of 12 weeks of leave available for this reason.  Whatever leave the employee has already used will reduce any future leave that is available.

Question No. 10: If a vaccine becomes available, can we compel employees to get the vaccine?

Maybe.   Employers in certain industries, particularly healthcare, have the right to insist their employees get a flu vaccine every year.   The same principle would probably apply to a COVID-19 vaccine.

As if the massive disruption resulting from the Coronavirus is not enough, mid-size employers must remain alert to union efforts to organize your workforce and petition for an election in the midst of the ongoing crisis.

Two recent events give rise to the concern that unions will be aggressive in their organizing efforts in this sector, not only during the COVID-19 related business interruption, but also in its aftermath.  First, on March 19, the NLRB suspended Board-conducted elections for two weeks, through April 3, because the developing COVID-19 situation made it impossible to ensure the safety or our employees or the public.   Then, on April 1, even though the COVID-19 situation has significantly deteriorated compared to two weeks ago, with more shelter-in-place orders, the closing of non-essential business on a wide scale, and a crisis in many hospitals and health care facilities, the Board announced that elections would resume on April 6. No word on how the logistics are supposed to work or how elections will be conducted in a way that keeps employees safe while maintaining fair election procedures. Even though many businesses have to shut down, apparently union elections must continue.

Second, the resumption of union elections is occurring at the same time the federal government is making loans available to businesses in financial distress under the recently enacted CARES Act. What’s the connection between the government loans and a union election? Like many government programs that are intended to help, the loans have strings attached that could make them less helpful than appears on the surface. For employers between 500-10,000 employees, one of the conditions of accepting a loan is that, until it is paid back, “the recipient will remain neutral in any union organizing effort.”    Many businesses are not aware of this condition because it’s buried on page 524 of an 883 page law.

What does it mean to “remain neutral?” Ordinarily, an employer that opposes a union has the right to engage in a campaign to counter the union’s organizing effort.   An employer is not allowed to say or do anything that might threaten employees who favor a union or coerce them into voting against it. But, employers are allowed to communicate to employees their desire to remain union free, to provide truthful information about employee’s rights to vote against the union, to explain potential disadvantages of becoming a union member, and how a union would change the relationship between employees and management.  To remain neutral means to give up all those rights, and allow the union to run its campaign completely unopposed.

Even though you may be giving up our rights only during the term of the loan, if your employees vote to be represented by a union, the union will still be there long after the loan has been repaid. Once your workforce is organized, it’s very difficult to become union free again.   You will be obligated to bargain in good faith with the union to try and reach agreement on contract terms. There are only limited circumstances that would allow an employer to withdraw recognition from the union, and even then it is legally risky. Even if employees decide they don’t want the union to represent them anymore, it is difficult to decertify a union as the bargaining representative.  It requires a majority vote of employees, and the employer is not permitted to support a decertification campaign.

Of course, it is possible this part of loan provision is not enforceable, and it might be unconstitutional.     The NLRB is the agency with jurisdiction over the labor laws, but the loan program is administered by the Treasury Department, which has no authority over, or experience with, the National Labor Relations Act.   But, until a court rules the this part of the law cannot be enforced, an employer who accepts a loan and tries to oppose a union will have lots of legal trouble on its hands.    Businesses will have to decide if the short term financial protection the loan program offers is worth the potential long-term cost.

Photo attribution: Labor Union by Nick Youngson CC BY-SA 3.0 Alpha Stock Images

Last week, the Supreme Court granted further review in Dix v. Casey’s General Stores, Inc. (18-1464), a case under Iowa’s drug-testing statute (which covers alcohol testing too).  In Dix, the Iowa Court of Appeals held among other things that two-light duty workers weren’t in “safety-sensitive positions” and that the statute’s immunity protects employers only against claims based on third-party conduct.  Casey’s seeks further review of both rulings (plus one more).

In Dix, Casey’s randomly drug tested workers from a pool of employees it had determined were in “safety-sensitive positions”—a statutorily-defined term parroted in Casey’s policy.  Before testing, Casey’s determined that all warehouse employees were in safety-sensitive positions, even those who performed “light-duty assignments” in an area cordoned off by a chain-link fence.  It then used a third party to randomly select employees to test, administer the tests, and conduct a required medical review.

Three plaintiffs tested positive for drugs, two of whom had light-duty jobs.  The third’s duties included operating a forklift and building pallets—“heavy-duty tasks.”  All three were fired, and they sued (along with one other employee).

The Court of Appeals ruled that the two light-duty workers weren’t in safety-sensitive positions and thus had been improperly tested.  Under the statute, a safety-sensitive position is as relevant “a job wherein an accident could cause loss of human life, serious bodily injury, or significant property or environmental damage.”  Casey’s raised a few arguments on this point, among them that all warehouse workers fit this definition because forklifts “zip[ped] around” and boxes were stacked to the ceiling, so an accident could result in harm to any warehouse worker, duties no matter.

But the appeals court, like the district court, read the definition to focus on a worker’s duties.  And because the light-duty employees, unlike their heavy-duty coworker, did not have “tasks where an accident could risk” loss of life, injury, or damage, they did not come within the definition.  In other words, the employees were not in safety-sensitive positions even if the “general warehouse environment is dangerous.”

In its further-review application, Casey’s points out that amicus curiae Iowa Association of Business and Industry had pressed for an application of the business-judgment rule.  But Casey’s argues primarily that the Court of Appeals misread the definition of “safety-sensitive position” by ignoring the work environment.

Nothing about the statute’s terms compels an exclusive focus on job duties.   If someone asked, “What do you do for a job?” it would not be unusual to respond, “I work in a factory.”  Or grocery store, or restaurant, and on and on.  In other words, an ordinary speaker would deem it acceptable to identify the type of place where she works—a component of job environment—instead of her job’s duties.  The circumstances in which one performs her work are often no less a part of how she conceives of her job than are its tasks.

Finally, it’s not at all impossible to imagine a light-duty employee under the influence of drugs or alcohol carelessly contributing to an accident with one of those zipping forklifts.  Alcohol and drugs after all alter judgment and slow responses.  In a generally dangerous environment, like the Casey’s warehouse, even those whose duties aren’t dangerous may be at risk of causing an accident.  Casey’s illustrates this point by suggesting that the Court of Appeals’ reading of the statute would seemingly exclude the janitor at a nuclear power plant from the definition’s coverage.

Casey’s also seeks further review of the Court of Appeals’ holding that the drug-testing statute’s immunity provision as protects “employers only from suit arising from third-party conduct.”  As Casey’s reads the immunity provision, it applies where an employer has (1) established a drug-testing policy; (2) initiated a testing program in accordance with the statute; and (3) tested or taken action in good faith.  So Casey’s argues that the immunity is broader than the Court of Appeals allowed.

Besides the provision’s plain terms, Casey’s emphasizes the Supreme Court’s general instruction to read immunity provisions broadly.  And a broad reading of the drug-testing statute’s immunity provision is also consistent, Casey’s argues, with a legislative intent to protect an employer’s right to a drug-free workplace.

In light of these factors, Casey’s reading of the statute is reasonable.  The drug-testing statute contains many “safeguards” for employees.  By immunizing all employers with policies who comply with these safeguards except those acting in bad faith, the legislature encourages the adoption and use of drug and alcohol testing procedures.  And this in turn encourages reductions in drug and alcohol use generally.  Immunity reduces the risk of drug and alcohol testing.

The Supreme Court has discretion to decide one, both, or neither of these issues.  It may have granted further review to address the third issue on which Casey’s sought review.  But if the Supreme Court does address either of these two issues, it will have important consequences for Iowa’s workplaces.  We’ll follow up when the Court issues its opinion.

Lawyers and law firms have done a great job providing information and analysis about the Families First Coronavirus Relief Act (FFCRA).  I’m especially proud of our team at Fredrikson & Byron for their heroic efforts putting  together the firm’s Coronavirus Resource Center.    Despite the flood of information, however,  many practical questions about day-to-day compliance and implementation remain.  While the Department of Labor Guidance and other publications have addressed most of the “big” questions, clients have asked many others for which there is not much published guidance, and in some cases no easy answer.  In this post we give our best answers, based upon what we know today, to ten of those questions:

  1. How much notice does an employee have to give about a request for emergency paid sick or family leave?

The law tells employers they have to post a notice of rights in the workplace but says nothing about what notice an employee who is eligible for paid sick or family leave must give to the employer.   We think employers should rely on the regular FMLA regulations, which require employees to follow the employer’s regular call-in procedure to report an absence if it is unforeseeable.   If foreseeable, the employee should tell the employer as soon as they can once the need for leave is known.

  1. Do I have the right to ask an employee requesting paid leave for documentation about the reason for the leave?

Yes. While full-blown FMLA certification may not be necessary, you are entitled to some evidence the employee qualifies for the paid leave, such as a doctor’s note or note from a daycare that is closed. If information about school closures is widely publicized (which it probably is), that is adequate.   If you are inclined to give employees the benefit of the doubt and don’t ask for documentation right away, you will still need it to claim the tax credits.

  1. My employee wants paid leave because her child’s school is closed, but she has a stay-at-home spouse.   Can I deny paid leave because someone else is available to care for the child?

That’s a tough one.   We think the employer is entitled to ask questions about whether leave is truly essential to care for their children home from school.   That said, we advise caution about delving too deeply into the family’s personal situation and limit the questions to whether there are alternatives for child-care, or whether the employee can telework while at home. Whether an employee whose child’s school or daycare has closed is really “unable to work” involves subjective judgments, and it is generally  better to give the employee the benefit of the doubt that to risk invading their privacy too much.

  1. Some employees claim they are afraid coming to work will expose them to COVID-19, but I think the real reason is they want to get unemployment because it will pay more than they earn working.  Can I successfully contest their unemployment? What can I do to get my employees to show up?

In Iowa and many other states, the agencies that run the unemployment system will not delve into whether an employee’s expressed fear of contagion is legitimate or driven by ulterior motives. Thus, it is likely such an employee will qualify for unemployment benefits.

One potential solution is to pay employees who show up to work during this crisis premium pay, such as a temporary wage increase or a bonus for attendance at the end of a certain period. This is a costly cure, but maybe better than a temporary shutdown.

Even in an at-will state like Iowa, be careful about terminating employees who don’t show up for work during this crisis because of potential workplace exposure to COVID-19.  Iowa recognizes a claim for wrongful discharge if the employee is terminated for seeking unemployment compensation, as well as for employees who complain about unsafe workplaces.

  1. If everyone who is eligible for paid emergency family leave takes it, I won’t have enough employees left to run my business; is there any relief in this situation?

There might be, if you have fewer than 50 employees. Small employers are exempt from FFCRA expanded paid family leave requirements if you satisfy one of the following conditions:

  • Providing paid sick and expanded family leave would cause expenses to exceed revenues and result in the business ceasing to operate;
  • The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or
  • There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
  1. What if an employee has already used some FMLA leave; are they still entitled to 12 weeks of emergency family leave?

No.   Although FFRCA changed some of the eligibility requirements for FMLA leave (e.g., number of employees, amount of time worked), it did not add more covered weeks to the twelve already available. As such, if an employee eligible for paid sick or paid emergency family leave has already used FMLA leave during the last year, they will have fewer hours available for paid leave under FFCRA.

  1. How does paid sick or emergency family leave work with exempt employees?

Employers typically must pay an exempt employee their entire weekly salary, even if the employee does not work all scheduled hours during the week.   One exception is FMLA leave, which can be unpaid even for exempt employees, and even when used intermittently.   We believe the principle that exempt employees are not entitled to be paid for FMLA hours applies to emergency paid sick and family leave under FFCRA. The only difference is that, instead of FMLA hours being unpaid, they are paid at 2/3 the employee’s regular rate.  An exempt employee’s salary can be converted to an hourly rate for this purpose.

  1. My employee needs to care for a child whose school has closed because of COVID-19, but still wants to work because she needs to earn more than 2/3 of her pay; is that allowed?

Yes.   Emergency paid sick and family leave may be used intermittently. Work hours are paid at the regular rate, and emergency paid sick or family leave is paid at 2/3 the regular rate. To make up the difference between 2/3 pay for emergency paid sick or family leave and regular pay, the employee may use accrued vacation, sick, or other paid time off.

  1. If I must wait for the tax-credits I won’t have the cash flow to pay for the leave; what am I supposed to do?

The IRS and DOL announced a plan that allows employers to immediately obtain the credit by retaining the payroll taxes withheld from employee’s checks, and the employer’s share of Social Security and Medicare, instead of remitting the taxes to the government. Details are here.

  1. What if I make a mistake in administering the paid leave?

The DOL announced it will not bring enforcement actions against an employer for violations of the FFCRA that occur within the first 30 days.    To avoid such an enforcement action, the violation cannot be willful, and the employer must have acted reasonably and in good faith, including remedying any violations by making affected employees whole, and committing in writing to not violate the Act in the future.

Note that the DOL measures 30 days from the date the law was enacted (March 18), not the date it is effective (April 1).    So, employers have until April 17 to take advantage of this safe-harbor.

“Mistakes happen. Including in the context of employment decisions. But not every mistake amounts to actionable employment discrimination.”   Smith v. Towne Properties Management Co., Inc. (6th Cir. 3-4-2020).

So stated the Sixth Circuit in affirming the grant of summary judgment to the employer in a FMLA and disability discrimination lawsuit. The plaintiff, Robyn Smith, was the manager of an apartment complex for a property management company.   Smith was diagnosed with pseudotumor cerebri, a condition caused by spinal fluid pressure on the brain. The symptoms of the condition mimic a brain tumor, including migraines, blurred vision, vertigo, and short-term memory loss.   This condition sometimes made it difficult for Smith to perform her job, and she took several FMLA covered absences.

Part of Smith’s compensation included free rent at the complex she managed.  Sometime after the diagnosis and use of FMLA leave, another company employee alleged to its management that Smith was also charging her gas, electric, and water bills to the apartment complex.   The company investigated, learned the allegations were true, and fired Smith.   The company learned after the termination that the prior owners of the complex, Jack and Cynthia Brauer, for whom Smith worked before the company acquired the property, provided her free utilities in addition to rent.   Despite learning this information, the company did not reconsider its decision to terminate Smith.

The issue on summary judgment was whether the company’s stated reason for the termination, that Smith engaged in theft by charging her utilities to the complex, was pretext for disability and FMLA discrimination.   In ruling for the employer, the Court relied upon the so-called “honest belief” defense.   That means, if the decision maker honestly holds a belief and acts on it in good faith, it does not matter whether the facts upon which the belief is based are true.   Incorrect facts honestly believed are not evidence of pretext.

The evidence showed the company investigated multiple sources to confirm the truth of the theft allegation.   A supervisor reviewed the utility bills to confirm they were charged to the complex and not to Smith personally. When the company called Mr. Brauer to ask whether utilities were included in Smith’s compensation when she worked for them, he was “very surprised,” and said he had “no idea” Smith was not paying utilities.   The company looked for documentation showing Smith was authorized to received free utilities and found nothing. But it did find a letter itemizing Smith’s compensation, which listed an apartment allowance, but did not mention utilities.

Smith objected that the honest belief defense requires the employer to make a reasonably informed and considered decision, and should not apply if the factual error was “too obvious to be unintentional.”   In other words, the employer can’t hide behind an honest belief in facts that were uncovered during a shoddy or incomplete investigation.   For example, Smith pointed out that Mr. Brauer had Alzheimer’s, and therefore did not remember that utilities were included as part of her compensation package.  The company found out the truth from Mrs. Brauer after the termination.  The Court rejected Smith’s argument however, because at the time the decision was made, the company did not know Mr. Brauer had Alzheimer’s and thus did not know its facts were wrong.

Takeaways

The honest belief defense is an important tool in the defense lawyer’s toolbox.  It can be very effective to win on summary judgment, so long as the employer has evidence it relied in good faith on facts reasonably available to it at the time. To take advantage of the defense, employers should endeavor to do the following:

  • The investigation of the employee’s offense should be reasonably thorough, examining if possible multiple potential sources of evidence;
  • The evidence relied upon to support the honest belief should be objective (e.g. documents, e-mails, statements that are corroborated by others);
  • While it is not essential to interview the employee to get her side of the story (the company did not interview Smith), it is nonetheless recommended so you have the employee’s version of the fact;
  • If the employee requests her job back or reapplies after you know you were mistaken, you should seriously consider the request, even if you don’t grant it.     The Smith Court implied that if Smith had asked for her job back, there may have been a different result.

Many employers use job applications that ask applicants to disclose their salary or wages at prior jobs.   Sometimes the question comes up in an interview. Employers have many potential motives for asking the question: perhaps to determine what compensation the applicant will expect if hired; to determine whether the applicant would fit within the position’s existing compensation structure, or to ensure the salary offered is not too little, or too much.

But, it may be time to stop asking questions about prior pay.  Thirteen states and many municipalities have enacted laws barring or limiting an employer’s right to inquire about an applicant’s past wage or salary history, or relying upon such information in determining the salary to offer a new employee. The premise underlying these laws is that is women have generally lower pay than men for similar jobs because of historic pay discrimination. Therefore, allowing reliance on prior pay in setting a new salary has the effect of perpetuating the gender pay gap. Although such laws have faced legal challenges on First Amendment grounds, the U.S. Court of Appeals for the Third Circuit ruled in a recent high-profile opinion, that Philadelphia’s ordinance barring inquiry into applicant’s prior wage history does not violate the First Amendment. See Greater Philadelphia Chamber of Commerce v. City of Philadelphia (3rd Cir. 2-6-2020).  In the wake of the Third Circuit’s ruling, it would not be surprising to see more states and localities enact these kinds of laws.

Even in those states where the law does not expressly prohibit an employer from asking about an applicant’s wage history, employers who ask about prior wages should re-consider whether continuing the practice is worth the legal risk. A recent opinion from the U.S. Court of Appeals for the Ninth Circuit highlights the potential legal liability employers face when asking about or relying upon an applicant’s prior pay history.

The case is Rizo v. Yovino, (9th Cir. 2-27-2020). it involved a challenge to a pay disparity between a female math teacher and male math teachers under the federal Equal Pay Act (EPA).  The EPA prohibits an employer from paying female employees less than male employees (and vice versa) for substantially similar work, which means work that requires equal skill, effort, and responsibility, and which is performed under similar working conditions.   The Iowa Civil Rights Act has similar provisions concerning equal pay for equal work.

The EPA allows wage disparities between men and women for substantially equal work under four circumstances. The exceptions apply where the disparity is based on, 1) a seniority system; 2) a merit system; 3) quantity or quality of production; and 4) any other factor other than sex.   It is the fourth exception that has resulted in the most litigation, and was at issue in the Rizo case.

The Fresno County Office of Education hired Rizo as a math consultant. She had thirteen years experience as a middle and high school math teacher, and a master’s degree.   Fresno County set new employee salaries based upon a pay schedule that had 12 salary levels that corresponded to a job classification. Each salary level had up to 10 steps.   To determine a new employee’s pay, the County started with the employee’s prior salary, added 5 %, and placed the employee at the step on its pay schedule that was closest to that number. Rizo was placed on Step 1, level 1 when she started, at a salary of $62,133.   In 2012, after working at Fresno County for three years, Rizo learned that a newly hired male math consultant was hired at Step 1, level 9, with a starting salary of $79,088.   That was more than Rizo’s salary after working there for three years.   She also learned all male math consultants were paid more than she was, even though she had more education and experience.   Rizo did not obtain any relief when she complained to HR, and ended up filing suit against Fresno County, alleging that its decision to pay her less than her male colleagues who did the same work violated the EPA.

The legal issue was whether Fresno County’s reliance on Rizo’s salary at a prior job to justify paying her less than male colleagues who did the same work qualified as “any other factor other than sex.”   Fresno County’s defense was that it applied its pay scale to all new employees regardless of sex; therefore, by definition, its decision was based upon a factor “other than sex.”

But, the court did not interpret the language so broadly.   The court concluded that the fourth exception, “any other factor other than sex,” must be interpreted in the context of the first three exceptions, all of which relate to the job being performed. The court held that Fresno County’s reliance on Rizo’s pay at a prior job to determine her salary was not a factor that related to Rizo’s current job.   Even if factors in addition to prior pay are considered, the court ruled, relying upon prior pay even as one factor violates the EPA.

In the Ninth Circuit, therefore, pay disparities between men and women in substantially similar jobs that are based, all or in part, on the employee’s pay at a prior job, are impermissible under the EPA.  No other circuit has yet adopted the Ninth Circuit’s strict approach, so this decision is not binding elsewhere.  But, the ruling could set up a Supreme Court challenge to resolve the differing approaches in the Circuits.   In addition, Plaintiff’s lawyers are likely to rely upon the Ninth Circuit’s ruling to challenge pay disparities under State equal pay act statutes, regardless whether other federal circuits follow the Ninth’s lead.

Given the unsettled legal landscape, employers should consider whether asking about prior pay is really essential in their hiring practices.   Sometimes the question about prior pay is asked just because the employer has not updated its application, or uses a form purchased from an office-supply store.    There remain many other factors other than sex that an employer can permissibly rely upon in setting a new salary, such as years of experience, education, and skills.   Even if prior pay is sometimes a proxy for those items, they can also be evaluated without reference to prior pay.    if pay disparities between men and women in similar jobs exist, having merely asked the question about prior pay sets you up for potential legal challenge.   If you don’t ask about prior pay, you won’t know, and can’t be accused of relying on it.

Compared with many states, Iowa’s laws governing the employment relationship are generally pretty employer friendly.   But, if some members of the Iowa House of Representatives get their way this legislative session, that will change in a hurry.   House members have introduced no fewer than twenty-one bills (21!) that add new or expand existing obligations and potential liability on employers.

The number of proposed bills dealing with employment issues is unprecedented, and it is not easy to discern the sponsors’ motivation for offering the bills in this session. Given that Republicans control the House, Senate, and Governor, it is hard to imagine any of these bills will be enacted into law this year. Perhaps in this election year the bills’ proponents are signaling the agenda they would promote if they are able to flip one or both of the chambers in November?

Below is a  summary of each of 19 of proposed bills (two are duplicative), along with a link to the text of the actual bill (a bill introduced in the house is called a “House File” or “HF”).   Employers, if you are concerned about how these proposals will impact your business, you should contact your legislators this year, regardless of their party:

HF 109:   A proposal to amend the Iowa Civil Right Act to require employers to provide reasonable accommodations relating to pregnancy and childbirth.  What is different about this proposal compared to existing law is that “reasonable accommodation” is specifically defined to mean  “actions which would permit an employee with a medical condition relating to the employee’s pregnancy or childbirth to perform in a reasonable manner the activities involved in the employee’s specific occupation and include but are not limited to the provision of an accessible worksite, acquisition or modification of equipment, job restructuring, and a modified work schedule.”

HF 146:  This would amend the ICRA to make it illegal for an employer to inquire about an employee’s past salary history, to release a former employer’s salary to a prospective employer, and to advertise a position without including information about the minimum salary for the position.

HF 147:    HF 2074;  HF 2075:   These three bills purport to undo the public sector bargaining reforms enacted in 2017.   They would expand the subjects o bargaining to include virtually all aspects of wages, benefits, and working conditions; allow for bargaining over dues checkoffs, and eliminate the requirement that the a bargaining unit must vote to recertify at the end of the agreement.

HF 155:  This proposal would prohibit an employer from taking adverse employment action based upon the reproductive choices of an employees, including the decision to use  certain contraceptive drugs or medical devices.

HF 64: This would prohibit employers from inquiring into an applicant’s criminal background or asking for the disclosure of criminal history until an interview is conducted; or, if there is no interview, until a conditional job offer is made.

HF 177: Amends the ICRA to require break time for employees to express breast milk and provide a suitable private room; the employer may not discipline or terminate an employee whose production is adversely affected by the need to express breast milk.

HF 19:  This bill would make it illegal to discriminate against applicants based upon their unemployment status, i.e. applicants who are unemployed at the time of application or have a history of unemployment could not be excluded on that basis.

HF 22:   This bill would impose requirements on employment agencies to provide certain notices to employees, and regulate the amount they charge for transportation services or meals.

HF 24:  Imposes a penalty on employers who are found to have willfully misclassified employees for purposes of unemployment contributions.

HF 25:  Requires the payout of all accrued vacation or paid time off at the time of employment separation.

HF 26:  Requires employers to provide a 30 minute meal break for every 7 hours worked; and a ten minute rest break for every 4 hours worked.

HF 28:  Establishes an annual “prevailing wage” for public improvement construction projects.

HF 29:  This bill would make licensed teachers exempt from the 2017 public sector collective bargaining reforms by designating teachers as public safety employees.

HF 30:   The proposal requires employers to treat adoptive parents the same as biological parents with respect to employment policies, benefits, and protections.

HF 90    In calculating the wage basis for workers’ compensation benefits, overtime and premium pay must be included; under existing law those items are excluded.   In addition, if permanent partial disability or death benefits are payable, this bill would require an annual cost of living adjustment.

HF 91     Increases the minimum wage gradually until it reaches $12 per hour on January 1, 2022.    Starting July 1, 2022, the minimum wage would be adjusted annually based upon the cost of living.  A bill for an act relating to the state minimum hourly wage

HF 2096:   Provides state employees with paid family leave.  A bill for an act providing for paid family leave for state employees.  “Family leave” is allowed for reasons similar to FMLA leave.

 

Although “joint employment” is not a new legal concept, in recent years federal agencies such as the Department of Labor and National Labor Relations Board have made aggressive efforts to expand its application. The targets of those who seek to expand the concept of joint employment are typically employers who use independent contractors (common in the construction industry), those who hire vendors to perform certain tasks (e.g. janitorial services), employers that rely upon a staffing agency to supply workers, and even franchisors (e.g. McDonald’s) that license their business model to independent operators.   Of course, one of the reasons an employer might use vendors, contractors, or staffing agencies is to delegate to others certain obligations that come with having employees, such as payroll administration, wage and hour compliance, collective bargaining, or workplace safety.  But, the agencies seeking to expand joint employment want the employers who try to delegate such tasks to remain legally responsible, along with the contractor, vendor, or staffing agencies, for violations of the employment and labor laws.

The good news for employers is that these same agencies that pushed for expanded joint employment a few years ago are now dialing back. They are also trying to create more clarity for employers about when joint employment does or does not exist, so employers have more certainty about their legal obligations.   The first of these efforts occurred last week. On January 16, the U.S. Department of Labor is published a final regulation to update and revise the Department’s interpretations of joint employer status under the Fair Labor Standards Act (FLSA).

With these new regulations, the DOL aims to “promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy.”   Other agencies with jurisdiction over employers, including the NLRB and EEOC, are also working on revising their standards governing joint employment, supposedly in a way that harmonizes with DOL’s approach.

The DOL’s new rule examines whether the potential joint employer is actually a joint employer under the FLSA based upon the following four factors:

  • Who hires or fires the employee;
  • Who supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Who determines the employee’s rate and method of payment; and
  • Who maintains the employee’s employment records.

No one single factor is controlling and the weight to be given each factor will vary on a case-by-case basis.  Importantly, however, the rule provides additional guidance on how to apply the four factors. For example, the potential joint employer must actually exercise one or more of the control factors. The contractual right to act in relation to the employee may be relevant, but such right does not alone demonstrate joint employer status in the absence of actual exercise of control.

In addition, the final rule states that an employee’s economic dependence on the potential joint employer is no longer relevant on joint employer liability under the FLSA.  This is a significant change in the analysis of a joint employment relationship, and substantially reduces joint employer situations. The rule cites specific factors that are not to be considered indicia of economic dependence, including, whether the employee’s work requires special skill; whether the employee has the opportunity to control profit and loss; and whether the employee invested in equipment or materials. These “economic reality” concepts are no longer part of the FLSA’s joint employer analysis.

Finally, the rule identifies specific business models and practices that do not make joint employer status more likely under the FLSA. Such models and practices include:

  • Franchise model;
  • Allowing the operation of a store on one’s premises;
  • Requiring a vendor or independent contractor to have a sexual harassment policy;
  • Providing a sample handbook or forms;
  • Participating in an association health or retirement plan;
  • Requiring, monitoring, and enforcing other businesses’ compliance with quality control standards to ensure the consistent quality for a work product, brand, or business reputation

While the DOL’s new rule helps to clarify the circumstances under which that agency will pursue liability for joint employment, it is important to remember that, as of now, other agencies have their own tests that do not necessarily mirror the DOL’s new standard.   In addition, each state’s common law, as well as stage agencies, apply tests that may or may nor comport with the DOL’s more business friendly approach.   A this point, it is also too early to tell whether courts will adopt the DOL’s new approach to joint employment.  Employers trying to avoid joint employment liability must continue to tread carefully, and consider the myriad agencies and jurisdictions that have an interest in joint employment.

As many employers recall with chagrin, the National Labor Relations Board and its General Counsel were very active during the Obama administration, overturning long-established precedent, changing rules in a way that favored unions over employers, and inserting itself into employment issues where the Board traditionally had not acted.

The NLRB, now with a majority of seats held by Republicans, has just this month issued a number of new rules and rulings rolling back some of the more aggressive changes that occurred when Democratic appointees held the majority of Board seats, as well as other changes that return the Board to its traditional role as a neutral arbiter of the labor laws.

Some of the significant changes include:

  1. Confidentiality of Employment Investigations: In a 2015 decision (Banner Estrella Medical Center), the Board held it was presumptively unlawful to prohibit an employee from disclosing information relating to an internal investigation.  Confidentiality was permitted only if  the employer could show the specific circumstances of the investigation made it necessary.     On December 16, 2019, the Board reversed that decision in Apogee Retail, LLC, making instructions about confidentiality presumptively lawful as long as the practice was facially neutral, i.e., it was not intended to prevent an employee from engaging in protected, concerted activity.
  2. Employers may Limit Union’s Right to use Company e-mail to Business Purposes: In the 2014 decision Purple Communications, Inc., the Board ruled that employees who have access to the employer’s e-mail for business purposes may also use the e-mail system, on non-working time, to communicate about union related matters.    On December 17, 2019, in Caesar’s Entertainment, the Board reversed that decision, holding that employers may limit e-mail to business purposes so long as such a practice applies to all non-work communication; i.e., it does not discriminate against communications related to protected, concernted activity.
  3. The Board will Give Greater Deference to Grievance Arbitration: A decision issued December 23, 2019 (United Parcel Service, Inc.) held that the NLRB will defer to grievance arbitration decisions that also deal with labor law violations, so long as the arbitral proceedings were conducted fairly and without irregularities, the parties agreed to be bound by the result, and the arbitrator considered the labor law violations.  Under prior precedent the Board was less inclined to defer to arbitration decisions that also dealt with labor law violations, meaning that employers sometimes had to contest those issues twice, once in arbitration, and a second time before the Board.
  4. Limits on Employee’s right to Wear Union Insignia when Customers are Present: In Wal-Mart Stores, Inc., decided December 16, 2019, the NLRB ruled a policy that employees may wear only “small, non-distracting” union insignia in the workplace did not violate the law, so long as it was applied only in customer facing areas.   The rule was unlawful to the extent it applied in “employee-only” areas.
  5. The Right to End the Mandatory Collection of Dues when a Contract Expires: In 2015, the Board ruled in Lincoln Lutheran of Racine, that an employer must continue to recognize a “dues checkoff” in a collective bargaining agreement, even after the agreement expires. On December 17, 2019, in Valley Medical Center, the NLRB returned to the pre-2015 precedent, holding that an employer is not required to continue deducting dues or transmitting them to the union after the agreement containinig a “dues checkoff” expires.
  6. Board Sends Signal in Joint Employer Settlement: On December 12, 2019, the Board overruled an administrative law judge’s decision not to approve 30 settlements between McDonald’s Corp. and employees of McDonald’s franchisees.  The ALJ rejected the settlements even though the employees received all of their claimed back pay, because McDonald’s did not admit liability or joint employer status.    Although this case was not a definitive ruling on the joint employer question, the Board sent a signal of its view on the issue with the following:  “we conclude that further litigation would imposed a substantial burden on the parties without a significant probability of prevailing on the complaint’s joint employer allegation.” (emphasis added).
  7. Quickie Elections Slowed Down: See this post for a discussion of the revised election rules issued December 13, 2019.

Best wishes to everyone for a Happy New Year!