Category Archives: Employment Counseling

November 20, 2018

Sexual Harassment Cases Provide Concrete Reason to Change Corporate Culture

Brad Cave

By Brad Cave

Sexual harassment can affect your workplace in many significant ways—for example, by lowering morale, increasing absenteeism and turnover, and decreasing productivity. But those consequences are often difficult to measure and quantify, making it harder to show how they affect your company’s bottom line. Real dollars and cents in the form of jury awards and settlements with employees who have sued their employers for fostering a hostile work environment are more easily understandable and can be persuasive when you need to justify expenditures designed to reduce harassment in your workplace.

A survey of sexual harassment awards and settlements in cases involving the Equal Employment Opportunity Commission (EEOC) in federal courts within the U.S. 10th Circuit Court of Appeals (which covers Wyoming, Colorado, Kansas, New Mexico, Oklahoma, and Utah) offers insight into how much money can be at stake in sexual harassment lawsuits. In addition to the monetary penalties noted in the chart at the bottom of this article, settlement terms often include numerous nonfinancial requirements, such as providing harassment training to supervisors and employees, updating policies and practices, apologizing in writing to the victimized employee, posting notices in the workplace about employees’ right to be free from harassment, and continued EEOC monitoring of your company’s practices.

And keep in mind that in addition to any financial award or settlement, you will incur the costs associated with defending sexual harassment claims. Not only do the attorneys’ fees add up, but supervisors, HR personnel, and others must take time away from their regular tasks to participate in investigations, depositions, and trial preparation. In short, the ramifications of sexual harassment in the workplace are significant, not only in financial terms but also in terms of distractions to your business operations and lost productivity.

Update your approach to sexual harassment

In its newly released statistics for fiscal year 2018, the EEOC reported a 13.6 percent increase in sexual harassment charges over the previous year and a 50 percent increase in lawsuits that include allegations of sexual harassment. In addition, the EEOC noted that its sexual harassment webpage has seen double the number of visits since the #MeToo movement gained momentum one year ago. As employees become more willing to come forward with harassment complaints and public scrutiny continues to damage companies’ reputations, it’s more important than ever to revisit and update your approach to handling and eliminating sexual harassment in your workplace.

On October 31, the EEOC held a public meeting titled “Revamping Workplace Culture to Prevent Harassment” at its headquarters in Washington, D.C. Stakeholders who spoke at the meeting stressed the need for leadership and accountability throughout the organization when workplace harassment is being addressed. According to EEOC Acting Chair Victoria A. Lipnic, “Over the past year, we have seen far too many examples of significant gaps in both areas. Our witnesses [at this meeting] stressed how both leadership and accountability must also be driven throughout an organization from the line employees, to the supervisors, to the CEO, and to the Board.”

Change your culture

So how does an organization change its culture? It has to come from the top. Company leaders and executives must set the tone by assuring employees that sexual harassment will not be tolerated. No one must be exempt from that zero-tolerance approach, no matter how important the individual is to the organization.

Complaints must be taken seriously, and employees who come forward should be treated with respect. If you find that harassment occurred, you must mete out significant consequences for the perpetrator and provide appropriate remedies for the aggrieved employee. Allegations must not be swept under the rug, and the perpetrator shouldn’t be permitted to hide behind a confidential settlement and continue working at the organization, creating the possibility that he or she may harass others in the future.

Changing your culture also requires executives, managers, and supervisors lead by example. Their actions and behavior must be irreproachable, never crossing the line into potential gray areas of sexual harassment. Yes, that means that folks in positions of power may need to rethink their jokes and refrain from certain types of banter. But never crossing the line will show the rest of the workforce that inappropriate behavior is unacceptable.

Encourage bystander intervention and reporting

Victims of sexual harassment often feel ashamed or traumatized, leaving them unable or unwilling to report what happened to them. One way to ensure that workplace incidents get reported is to make it every employee’s responsibility to report what they see and hear at the workplace. Tell employees that they are expected to come forward with any inappropriate conduct they witness or become aware of. Include that expectation in your harassment policy, and make sure you have reporting mechanisms to handle reports from bystanders and witnesses.

Another method of involving employees who witness unlawful harassment is to teach bystander intervention techniques. For example, if an employee sees a coworker being inappropriately touched, she may intervene by getting the coworker out of the area and away from the situation. Inventing a meeting the victim must attend or a phone call she needs to take can be a way to defuse the situation. Bystanders need not (and should not) put themselves in harm’s way when they intervene, but the presence of an additional person is often all that’s needed to break up a harmful scenario.

Make harassment training personal and relevant

Many organizations offer their employees harassment training on a regular basis, often annually. But as time passes, the training may become dull, or it may only be offered online, which means employees might multitask during the training or tune it out altogether.

In-person training can go a long way toward getting employees to take workplace harassment seriously. When employees are allowed to interact with the trainer and each other, the concepts often sink in better, and clarifications that may not be possible with online training can be made. Training should involve harassment scenarios that help employees understand the type of conduct that’s unacceptable. It also should cover your policies, reporting mechanisms, and the consequences for violations.

Consider bringing in outside trainers to keep the content fresh. And remember to include leaders in your training to show that they take the issue seriously, helping to reinforce your antiharassment culture.

Make an anonymous hotline available

Consider setting up an 800 number or using a hotline service that allows employees to report potential harassment or workplace misconduct 24/7. The hotline need not be staffed as long as it permits employees to leave a message. Hotlines can be an additional reporting mechanism that feels less threatening or embarrassing to victims.

Why offer so many reporting avenues, including anonymous reporting? Because you can do something about workplace harassment only if you know it’s occurring. Reports of allegedly inappropriate behavior should trigger a prompt and thorough investigation. If you discover that inappropriate conduct occurred, take steps to stop it from happening again, including terminating the person responsible. You cannot have a zero-tolerance policy if you let harassment continue or allow employees to “get away with it.”

Avoiding liability for harassment is worth changing your practices

With sexual harassment settlements topping six and even seven figures, it’s definitely worth your while to update your approach to handling and preventing workplace harassment. Companies that continue to do what they’ve always done, refusing to change in the #MeToo environment, will find themselves in court—or, perhaps worse, in the news. But updating your approach and changing your culture to show employees that your organization won’t tolerate sexual harassment will keep you from having to write those big settlement checks.

Plaintiff and description of defendant	Claims and statutes at issue	Damages, settlement amount, or other relief
EEOC v. hospitality company (District of Colorado, 2016)	Claims: • Sexual harassment (hostile work environment) • Retaliation	Settlement. $1,020,000

EEOC v. packing company (District of Colorado 2015)	Claims: • Sexual harassment (hostile work environment) • Retaliation	Settlement. $450,000
EEOC v. retail meat company (District of Colorado 2015)	Claims: • Sexual harassment (hostile work environment) • Retaliation	Settlement. $370,000 split between 21 women
EEOC v. bakery (District of New Mexico 2013)	Claims: • Sexual harassment (hostile work environment) • Gender discrimination	Settlement. $220,000 split between 19 women
EEOC v. restaurant group (District of New Mexico 2012)	Claims: • Sexual harassment (hostile work environment)	Settlement. $1,000,000
EEOC v. automotive group (District of Colorado 2012)	Claims: • Sexual harassment (hostile work environment) • Retaliation	Settlement. $50,000
EEOC v. pest control company (District of Utah 2011)	Claims: • Sexual harassment (hostile work environment)	Settlement. $160,000 split between class of female employees
EEOC v. corrections company (District of Colorado 2009)	Claims: • Sexual harassment (hostile work environment) • Retaliation	Settlement. $1,300,000 to plaintiff, plus $140,000 in attorney’s fees and costs
EEOC v. auto dealership (District of Colorado 2007)	Claims: • Sexual harassment (hostile work environment) • Retaliation • Gender discrimination	Settlement. $12,500 split between four female employees

August 23, 2018

Asking Employees About Prescription Medicine Use

By Brad Cave

Brad Cave

As an employer, you may be tempted to ask your employees what prescription medications they use and whether their prescription drugs could affect their ability to perform their job. After all, you want to identify any potential safety and performance issues before they arise.

Be aware, however, that employers may ask about prescription medicine only in limited circumstances. The Americans with Disabilities Act (ADA) restricts employers from asking medical questions of applicants and employees. Asking about prescription medications clearly falls into the category of medical-related questions.

Under the ADA, an employer may ask a current employee about prescription medicine only when it’s job-related and consistent with business necessity. That means you may not ask all employees to disclose any medications they take. Instead, you need to determine the job positions for which prescription-related questions would be job-related and consistent with business necessity. Typically, those will be safety-sensitive positions, such as drivers, police officers, and heavy equipment operators. Employees in jobs that don’t face a significant job-related safety risk associated with the side effects of prescription medications should not be asked about their use of those drugs.

Remember that the ADA doesn’t permit employers to ask medical questions of job applicants. Only after a job offer has been extended to a candidate may you inquire about medical information or require the individual to undergo an examination. In addition, be certain to keep all medical information confidential and in files separate from your regular personnel files.

July 19, 2018

FAQs About Implementing Arbitration Agreements and Class Action Waivers

Bryan Benard

by Bryan Benard

In late May, the U.S. Supreme Court ruled that arbitration agreements between an employer and an employee to resolve employment disputes through one-on-one arbitration do not violate the National Labor Relations Act (NLRA). In a huge win for businesses, the Epic Systems Corp. v. Lewis decision means that employers may use arbitration agreements to prohibit employees from filing and joining class or collective action lawsuits in employment-related matters.

In the weeks since SCOTUS’s decision, organizations have asked important and thoughtful questions on how to implement and use arbitration agreements and class action waivers with their employees. Although no guidance is “one-size-fits-all,” these FAQs may help answer common issues that come up.

Why Should We Use an Arbitration Agreement?

By requiring that employees resolve employment disputes through arbitration instead of filing a lawsuit in court, employers may benefit from numerous differences in both procedure and exposure. First, proceedings before a neutral arbitrator (or panel of arbitrators) are handled in private whereas lawsuits filed in a state or federal court are available to the public. In other words, unless documents are filed under seal, most court documents, hearings, and trials will be open to anyone, including reporters, competitors, other employees, etc. Consequently, requiring arbitration keeps publicity related to employment disputes at a minimum.

Second, procedures and evidentiary rules differ between arbitration and court proceedings. An employer may set forth in the arbitration agreement which arbitration rules will govern employment-related disputes. In addition, the employer and employee (and their attorneys) mutually select an arbitrator whereas the parties to a court action do not have input into the judge assigned to their lawsuit. In addition, an arbitrator has broad discretion over discovery and need not follow formal discovery and civil procedure rules that govern the courts (which may or may not be desirable in a given context). Finally, although there are some grounds for judicial review, arbitration awards generally cannot be appealed, meaning that disputes can get to a final resolution quicker.

What are the Benefits of a Class Action Waiver?

A class action waiver is typically one provision within an arbitration agreement stating that the employee agrees to resolve employment disputes on an individual basis and agrees to refrain from pursuing or joining any class or collective actions in conjunction with his or her fellow employees. By having employees waive class actions, businesses may avoid lengthy and expensive class action lawsuits that often involve hundreds, even thousands, of current and/or former employees nationwide. In addition, attorneys who represent employees are unlikely to receive the millions in attorneys’ fees that can be awarded as class counsel when forced to represent employees on an individual basis.

Are There Any Downsides to Using an Arbitration Agreement and/or Class Action Waiver?

Sure, it is possible that mandatory arbitration agreements and class action waivers may not be a good fit for every employer or for use with every employee. Although generally viewed as a benefit to employers, private arbitration can mean that resolution of an issue with one employee does not bind or even influence the resolution of that same issue with other employees. Accordingly, some employers may want to have a court rule on the lawfulness of a particular policy or practice so that it has more certainty for future enforcement. Also, smaller companies may not see the benefit in separately litigating each employee’s dispute in a separate proceeding if the company only has a handful of employees—meaning that in some situations, addressing multi-plaintiff cases could be less expensive if the pool of employees is relatively small.

In addition, arbitration is not always less expensive than court litigation since the employer is generally required to pay its own attorneys’ fees as well as most of the arbitration and arbitrator fees. There is also criticism and skepticism leveled at arbitration, on the theory that arbitrators will not grant motions to dismiss or summary judgment motions, or may attempt to “split the baby” rather than making tough decisions in favor of employers. Finally, a remote but possible scenario in a tight labor market is that key employees may refuse to agree to these mandatory agreements resulting in the loss of good talent or skilled, experienced workers.

May We Make New Employees Sign a Class Action Waiver as a Condition of Employment?

Generally, yes. You may make it a condition of employment that new hires sign a mandatory arbitration agreement with a class action waiver. Read more >>

May 21, 2018

Arbitration Agreements Waiving Class Actions Do Not Violate the NLRA, Rules Supreme Court

By Dora Lane and Emily Hobbs-Wright

Dora Lane

The U.S. Supreme Court ruled today that arbitration agreements requiring that an employer and an employee resolve any employment disputes through one-on-one arbitration do not violate the National Labor Relations Act (NLRA). In an opinion authored by Justice Neil Gorsuch, the Court ruled 5-to-4 that the Federal Arbitration Act (FAA) dictates that arbitration agreements be enforced, and nothing in the NLRA overrides that policy to permit employees to bring class or collective actions when employees have agreed otherwise. Epic Systems Corp. v. Lewis, 584 U.S. ___, (2018).

NLRA Does Not Protect Class and Collective Lawsuits

Emily Hobbs-Wright

In three cases consolidated before the Court, employees alleging wage claims sought to pursue collective lawsuits, joining with other allegedly harmed employees, under the Fair Labor Standards Act (FLSA) and applicable state wage laws. In each case, the employer sought to dismiss the collective lawsuits and instead resolve each employees’ allegations through individual arbitration as provided in arbitration agreements signed by the employees. The employees argued that the class-action waivers in the arbitration agreements were unlawful, violating their rights to engage in concerted activities for their mutual aid and protection under §7 of the NLRA. The employers asserted that the FAA demands that the individual arbitration agreements be enforced, as the NLRA does not override the FAA’s enforcement provision.

The Court ruled that the FAA requires courts to enforce arbitration agreements on the terms that the parties select, subject to courts’ refusal to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract” (e.g., fraud, duress, unconscionability – not arbitration-specific defenses). In the majority opinion, the Court stated that the NLRA does not override the FAA, and that §7 focuses on the right of employees to organize unions and bargain collectively, not on the right to pursue class or collective actions. The Court concluded that neither the NLRA nor the FAA’s savings clause protected the employees’ ability to resolve employment disputes through collective or class action when the employees have agreed to arbitrate their disputes with their employers on a one-on-one basis.

Dissent Focuses On Employee Rights

Justice Ruth Bader Ginsburg wrote a scathing dissent, that was joined by Justices Breyer, Sotomayor, and Kagan. The dissenting opinion notes that an individual employee’s claim against his or her employer for unpaid wages, or a similar employment law violation, may be relatively small and not worth the expense and effort of pursuing, when going it alone. But by seeking redress for commonly experienced wage losses on a collective basis, banding together to confront an employer, employees are placed on a more equal footing with employers and may better safeguard employee rights.

Justice Ginsburg writes that the majority’s decision “is egregiously wrong.” The dissent states that lawsuits to enforce workplace rights fit within the NLRA umbrella of “concerted activities for the purpose of . . . mutual aid or protection.” The dissent points to over 75 years of Board rulings that have held that the NLRA safeguards employees from employer interference when they pursue joint, collective, and class suits related to the terms and conditions of their employment. The dissent further states, “Forced to face their employers without company, employees ordinarily are no match for the enterprise that hires them. Employees gain strength, however, if they can deal with their employers in numbers.” The dissenting justices believe that NLRA §7 rights include the right to use class or collective litigation to resolve disputes over wages and hours, and would hold that class-action waivers in arbitration agreements are unlawful.

Big Win For Employers

In this not-unexpected result, the more conservative members of the Court have sanctioned the use of arbitration agreements by employers to help avoid class actions in the employment context. By using arbitration agreements with their employees, employers are able to resolve employment disputes in front of a neutral arbitrator rather than in the more public setting of a state or federal court. By requiring that disputes be arbitrated on an individual, rather than a class or collective basis, employers avoid lengthy and expensive class action lawsuits that often involve hundreds, if not thousands, of current and/or former employees who allege they have similar claims against the employer. The Supreme Court’s decision is a clear win for employers who now may use individual arbitration agreements to better control the cost, publicity, and liability exposure related to alleged violations of employment laws.

May 15, 2018

IRS Is Sending ACA Penalty Notices to Employers

Bret Busacker

By Bret Busacker

If you believe your company was subject to the Affordable Care Act (ACA) coverage requirements in 2015 (generally, all employers with 50 full-time or full-time equivalent employees), please take note that the Internal Revenue Service (IRS) is beginning to send out notices of ACA penalties due from employers who failed to satisfy ACA health coverage requirements. Specifically, the IRS is mailing Employer Shared Responsibility Payment (ESRP) notices to employers that it believes failed to comply with the ACA coverage requirements in 2015. Some employers receiving these notices may have actually complied with the ACA requirements in 2015, but the IRS received inaccurate or incomplete information and consequently has incorrectly identified the employer as failing to satisfy the ACA coverage requirements.

Limited Time To Respond To IRS Notice

If an employer receives an ESRP notice, it must dispute the IRS penalty within 30 days of the date of the notice. We have seen employers receiving very large fines for periods in which the employer actually complied with the ACA coverage requirements.

Employers who were subject to the ACA coverage requirements in 2015 should review their 2015 ACA filings (on Form 1094-C) to: (1) determine who at the company will receive the ESRP notice from the IRS, if one should arrive; and (2) make sure the contact address is correct (See Part 1; Lines 1 thru 8 of Form 1094-C). If any of the contact information on the Form 1094-C is inaccurate or if the contact person is no longer employed by the company, the employer should consider updating its contact information with the IRS. Employers with questions about responding to an ESRP notice should contact their legal counsel promptly.

December 14, 2017

NLRB Overturns Controversial Standards on Joint-Employer Status and Neutral Employment Policies; Questions Quickie Election Rule

By Steve Gutierrez

In a series of decisions that affect both union and non-union employers, the National Labor Relations Board (NLRB or Board) has overruled numerous controversial standards that had broadened the coverage of employee rights in recent years. On December 14, 2017, the Board returned the standard for determining joint-employer status to the pre-Browning-Ferris standard as well as walking back the standard for determining whether facially neutral employment policies infringe on employees’ section 7 right to engage in protected concerted activities. The return to more employer-friendly standards will help ease the risk of engaging in unfair labor practices under the National Labor Relations Act (NLRA). Here are the highlights of the new developments.

Joint-Employer Status Depends on Control

In its 2015 controversial decision in Browning-Ferris Industries, the NLRB significantly broadened the circumstances under which two entities could be deemed joint employers for NLRA purposes. In that case, the Board ruled 3-to-2 that Browning-Ferris Industries was a joint employer with a staffing company that provided workers to its facility for purposes of a union election because Browning-Ferris had indirect control and had reserved contractual authority over some essential terms and conditions of employment for the workers supplied by the staffing company.

Today, in a 3-2 decision, the now Republican-majority Board overruled Browning-Ferris, now requiring that two or more entities actually exercise control over essential employment terms of another entity’s employees and do so directly and immediately in a manner that is not limited and routine, in order to be deemed joint employers under the NLRA. This returns the joint-employer standard to the pre–Browning Ferris standard. Consequently, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine, will no longer be sufficient to establish a joint-employer relationship.

This doesn’t mean that the Board will no longer find two or more entities to be joint employers under the NLRA. In fact, in the current case in which it overturned Browning-Ferris, it applied the tougher standard and still ruled that two construction companies were joint employers and therefore jointly and severally liable for the unlawful discharges of seven striking employees. Still, the requirement that entities have direct control that is exercised over the workers in question is a more workable and beneficial rule for employers.

New Standard For Facially Neutral Policies

In recent years, the NLRB has ruled that many types of standard employee policies unlawfully interfered with employees’ section 7 rights. That scrutiny went back to the 2004 decision in Lutheran Heritage Village-Livonia which ruled that employer policies that could be “reasonably construed” by an employee to prohibit or chill the employees’ exercise of section 7 rights violated the NLRA, even if such policies did not explicitly prohibit protected activities or were not applied by the employer to restrict such activities. Consequently, a series of Board rulings deemed certain language in employer policies unlawful even when facially neutral on their face, including policies on confidentiality, non-disparagement, recording and video at work, use of social media and company logos, and other typical employment rules.

In its recent decision, the Board ruled 3-to-2 to overturn Lutheran Heritage Village-Livonia and its standard governing facially neutral workplace rules. The new standard for evaluating employer policies will consider: (1) the nature and extent of the potential impact on NLRA rights, and (2) legitimate justifications associated with the rule. To provide greater clarity for employers, employees, and unions, the Board announced that prospectively, it will categorize workplace rules into three categories depending on whether the rule is deemed lawful, unlawful, or warrants individualized scrutiny. This change should significantly relieve the uncertainty that has existed under the “reasonably construed” standard.

Quickie Elections Being Reconsidered

In another move to reverse recent Board rules, the Board published a Request for Information (RFI) asking for public input on the 2014 representation election rule that changed the process and timing of union elections. In particular, the Board seeks public input on whether the 2014 quickie election rules should be retained, changed, or rescinded. The deadline for submitting responses is February 12, 2018. This RFI signals that the quickie election rule could be on its way out.

Conclusion

We will continue to monitor these and other Board developments. If you have any questions or concerns about these changes and how they may affect your workplace, you should reach out to your labor counsel.

January 12, 2017

Dealing With The Decline In Wyoming Jobs

By Bradley T. Cave

Recent jobs numbers reflect what many Wyoming employers already know – large job losses have hit the state, pushing down wages and possible tax revenues. Our look at the practical implications of this job environment should help you expect the best while preparing for the worst.

First Quarter Jobs Numbers

The numbers are rather grim. According to a November report from the Research & Planning section of the Wyoming Department of Workforce Services (DWS), 9,367 jobs were lost in Wyoming from first quarter 2015 to first quarter 2016. The average monthly employment numbers decreased from 277,691 in the first quarter of 2015 to 268,324 in the same quarter of 2016, reflecting a 3.4% drop statewide.

The largest job losses occurred in the mining sector, which includes oil and gas extraction jobs, which saw a 23% loss of jobs from the first quarter 2015 to 2016. The next highest loss was in transportation and warehousing with a 9.4% decrease, followed by company management which experienced an 8% decrease.

The decline in the total unemployment insurance (UI) covered payroll for the same period was $243.5 million, or a 7.6% drop. Average weekly wages for private sector jobs was down from $890 to $834, a drop of 6.3% which means workers received an average of $56 less in their paychecks each week.

Second Quarter Numbers Continue To Fall

In its preliminary data for the second quarter (April through June), Wyoming employment continued to decline from 2015 to 2016 by approximately 10,500 jobs, or 3.7%. Approximately 5,500 of those job losses were in the mining/oil and gas sector, with about 1,700 jobs lost in construction, and another 1,100 job losses in transportation and warehousing.

Not All Bad News

In its county-by-county breakdown, the DWS reported that employment rose in seven Wyoming counties and total payroll increased in eight counties for the first quarter comparison. Teton County saw a 3.7% increase in jobs while employment in Lincoln County grew by 3.4%. Other counties that experienced a modest increase in jobs year over year were Albany, Crook, Niobrara, Sheridan, and Weston.

Practical Effects Of Declining Job Numbers

Job statistics can provide an interesting and telling view of the overall health of the state’s economy. But more than that, the numbers suggest that many Wyoming employers have faced, or soon may face, difficult decisions about whether to layoff or terminate workers. Read more >>

November 8, 2016

EEOC Questions Whether “Big Data” Analytics Help or Hinder Workplace Diversity

By Jude Biggs

As more and more employers use new analytical tools for recruiting and hiring, the potential exists for employment decisions to become more fair, objective and unbiased. But could the use of big data and technology-driven decision-making disfavor candidates who lack a robust digital footprint? These are questions that the Equal Employment Opportunity Commission (EEOC) will continue to explore after an initial “big data” public meeting in Washington, D.C. in October.

What Is “Big Data?”

The EEOC refers to “big data” as the use of algorithms, data scraping of the internet, and other technology-based methods of evaluating huge amounts of information about individuals. Big data can include computer algorithms that are based on various factors designed to correlate to successful characteristics on the job; for instance, a model may look for longevity on the job, degrees from particular institutions, membership in certain organizations, or a multitude of other factors. Computer models then use this seemingly objective criteria to scan the internet for individuals possessing the desired characteristics in “passive” candidate searches. Other types of predictive or talent analytics, based on the harvesting of a wide range of empirical data, are being incorporated into HR recruiting and decision-making platforms.

According to a recent survey of Society of Human Resource Management (SHRM) members, about one-third of respondents reported that they use big data in employment. The proportion was even higher among larger employers.

Why Does the EEOC Care About Big Data?

The EEOC is trying to get ahead of this issue by making sure that employers’ use of technology-driven HR tools does not lead to discrimination in the hiring process. EEOC Chair Jenny Lang noted that while big data has the potential to drive innovations that reduce bias in employment decisions, “it is critical that these tools are designed to promote fairness and opportunity, so that reliance on these expanding sources of data does not create new barriers to opportunity.”

What Are The Potential Advantages of Technology-Based HR Decisions?

Technology is here to stay so the question is not will it be used in the HR context but rather how should it be used to best achieve employers’ goals. Using technology and big data can result in many positive outcomes, including that it:

may help identify non-traditional candidates who would not have been considered for a particular job previously
can help overcome implicit and explicit prejudice and bias in the workplace
can improve person-job fit
may increase diversity in the workplace
may expand the pool of candidates with the qualities necessary to succeed
may reduce employee turnover.

In fact, given the global nature of online data, it is possible for certain types of employers to increase their diversity dramatically, by being able to cast a larger net to find applicants.

What Is The Potential Downside of HR’s Use of Big Data?

As with anything technology-related, the outcome is only as good as the computer program, factors selected, and data used. Many algorithms focus on correlation of successful characteristics without looking to specific job requirements. For example, a set of characteristics of high-performing employees may reflect the group’s demographics (for instance, graduation from an Ivy League school) rather than their skills or abilities to perform certain jobs (for example, leadership shown during a military deployment or creation of a successful program serving the poor). In such cases, algorithms may match people characteristics, but not job requirements.

Using big data may perpetuate past discrimination. If an algorithm is based on looking for applicants with the same characteristics as those possessed by existing managers, secretaries or high-tech programmers in a company, then the algorithm may limit diversity. Similarly, certain talent-seeking algorithms may rely too much on the make-up of the company’s current staff, meaning that minorities or other groups not currently represented in the workforce continue to be passed over.

Think about whether individuals who do not have a robust online presence will be at a disadvantage in the new, data-mining recruiting world. Individuals with lower incomes or in rural areas may not have ready access to computers, lessening their ability to engage digitally. Other individuals may choose not to engage in many online activities. Or, others who are at the start (or end) of their careers may not have established much of an online presence. Employers who focus only on technology-driven programs to identify and hire candidates may miss out on large groups of qualified individuals who simply lack significant online experience that is discoverable by algorithms.

In addition, the collection of other data points, such as attendance or leave-related data, may discriminate against disabled individuals, giving rise to ADA concerns. Moreover, such data, coupled with information about gaps in employment, could disproportionally hurt female candidates who are more likely to have taken time off of work for pregnancy or child-rearing reasons. Read more >>

October 4, 2016

Employment Contracts with California Employees Require California Law

By Jude Biggs

Beginning January 1, 2017, employers may not require a California employee to agree to litigate claims in a state other than California or to apply the law of another state to disputes that arose in California. These new restrictions pose particular problems for companies headquartered outside of California who employ workers in California.

New CA Labor Code Section 925

Recently signed into law by Governor Jerry Brown, Senate Bill 1241 adds section 925 to the California Labor Code. It provides that an employer “shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:

Require the employee to adjudicate outside of California a claim arising in California.
Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.”

In other words, an employer may not force an employee who primarily works and lives in California to enter into an employment agreement, as a condition of employment, that provides that any claims must be resolved, either in court or by arbitration, in another state (a so-called forum-selection clause) or that another state’s law, which offers less protection to the employee than California law, will apply (a choice-of-law provision).

Why It Matters

California law is typically more pro-employee than other states’ laws. For instance, California law prohibits employers from requiring employees to waive their right to a jury trial before a dispute arises and places substantial restrictions on arbitration agreements. It also requires the payment of business expenses, where many other states do not.

Multi-state companies frequently seek to create some uniformity and predictability in where employment disputes will be litigated so they insert a venue clause into their employment agreements. Such clauses often provide that disputes must be heard in the state where the business is based or where its legal team is located, regardless of where the employee lives or works. Similarly, companies may write into contracts that the law to be applied is that of the state where they are headquartered or incorporated. This offers the business uniformity across all its operations and helps to avoid onerous employment laws in certain states.

The new Labor Code section 925 makes non-California venue and choice-of-law provisions virtually unenforceable per se for California employees, when made a condition of employment. If an employee has to go to court to enforce his or her rights to have a case in California and to use California law in the case, the court may award reasonable attorney’s fees to the employee. Read more >>

July 15, 2016

Executive Compensation for Tax Exempt and Governmental Employers: Unraveling New Proposed Regulations on Non-Qualified Deferred Compensation Under Section 457

By Bret Busacker and John Ludlum

Nearly 40 years ago, Congress concluded that because tax-exempt employers are not subject to taxation, they are more inclined (more so, at least, than taxable employers) to provide non-qualified deferred compensation to their employees. As a result, Congress passed Section 457 of the Internal Revenue Code (Section 457) to limit the amount of deferred compensation a tax-exempt employer may promise to its employees. Now, the IRS has proposed new regulations that will greatly impact non-qualified deferred compensation plans maintained by tax-exempt employers under Section 457. Here are our key takeaways from the proposed regulations.

Background on Section 457 Arrangements

Section 457 generally separates non-qualified deferred compensation arrangements into two types of programs and regulates these two types of plans in different ways.

Eligible Plans: if a deferred compensation program is designed to look much like a 401(k) plan and provides limited benefits (capped at $18,000 in 2016), the arrangement is subject to Section 457(b) which allows the deferred amounts to avoid taxation until distributed to the employee.

Ineligible Plans: if a deferred compensation arrangement provides larger or different benefits than those permitted under eligible plans, the arrangement is likely subject to Section 457(f) which means that the deferred amounts become taxable when they are no longer subject to a substantial risk of forfeiture (i.e., when they become vested).

The newly proposed IRS regulations will significantly affect ineligible plans.

Substantial Risk of Forfeiture Is the Name of the Game

In an attempt to even the playing field with taxable employers not subject to Section 457(f), tax-exempt employers often pushed the envelope with ineligible plans by using various tactics to delay the vesting date of deferred compensation. These tactics created uncertainty regarding what constitutes a substantial risk of forfeiture. The proposed Section 457 regulations address these important 457(f) design tactics in a mostly favorable way for tax-exempt employers:

A. Current Compensation Deferrals

The IRS currently takes the position that salary deferrals cannot be made to ineligible plans because such amounts are already vested when they go into the plan. In other words, they cannot escape taxation at the time of deferral. Under the proposed Section 457 regulations, employees may defer current compensation if the following requirements are met:

The employer must provide a match of more than 25% of the amount the employee contributes.
The employee must commit to provide additional substantial services for at least two years in order to receive both the deferral and the match.
The deferral election must be made in writing and document the employee’s agreement to continue service. To defer current compensation, the deferral election must be made prior to the beginning of the year to which the compensation relates.

B. Rolling Risk of Forfeiture

Historically, some ineligible plans were designed to allow the employer and employee to agree to push out the vesting date of an amount payable under the arrangement (and thereby push out the time of taxation), referred to as rolling the risk of forfeiture. But practitioners worried that by pushing out the vesting date, the arrangement became subject to, but did not comply with, Section 409A, which would make the compensation taxable.

The proposed regulations will legitimize the practice of rolling the risk of forfeiture, provided that the election to push out the vesting date occurs at least 90 days prior to the date the compensation would have otherwise vested. The election to roll the risk of forfeiture also must otherwise comply with the general requirements applicable to deferring current compensation, as summarized in paragraph A above.

C. Non-Competes

Another tactic employers utilize to push out the vesting date of an ineligible plan in order to defer taxation of compensation is to condition the amounts payable under the ineligible plan on the employee adhering to the terms of a non-compete. Like the rolling risk of forfeiture, this practice too was called into question under Section 409A because Section 409A does not recognize non-competes as creating a substantial risk of forfeiture. If implemented, the proposed Section 457 regulations will legitimize this practice as well, subject to the following requirements:

The right to the compensation must be clearly tied to adherence to the terms of the non-compete.
The employer must make reasonable and regular efforts to verify adherence to the non-compete requirements.
The facts and circumstances must support a bona fide interest of the employer in subjecting the employee to a non-compete and a bona fide interest of the employee, and the ability of the employee, to otherwise compete.