Category Archives: New Mexico

April 2, 2020

10th Circuit Upholds Hospital’s Rejection of Applicant Under ADA

Mark Wiletsky

by Mark Wiletsky, Holland & Hart LLP

The rules surrounding medical examinations under the Americans with Disabilities Act (ADA) can be tricky. The U.S. 10th Circuit Court of Appeals (whose rulings apply to all Colorado, New Mexico, Utah, and Wyoming employers) recently analyzed the rules in a case involving an employer’s decision to rescind a job offer based on a postoffer, preemployment medical examination. The lessons learned are helpful for all employers that use or consider medical examinations for applicants or employees.

Facts

Elena Sumler applied for a job as a sonographer with the University of Colorado Hospital Authority. Sonographers use their technical skills to obtain and analyze ultrasound images.

The hospital offered Sumler the position, contingent on a medical examination. As part of the medical exam process, she disclosed that she suffers from fibromyalgia and was taking medications, including two narcotic pain medications. She asserted, however, that she wasn’t disabled and had no restrictions preventing her from performing the essential job functions. Read more >>

October 1, 2019

Shifting the Risks of Employer’s Economic Loss Resulting from Employee Injury: Keyperson Insurance in New Mexico

Republished with permission, originally published in the September 19, 2019 issue of the DRI Life, Health, and Disability Committee News.

by Little V. West

What’s a New Mexico business to do if one of its key employees is absent from work due to a non-work-related injury? A pair of cases, one from the United States Court of Appeals for the Tenth Circuit, and another recently issued by the New Mexico Court of Appeals underscore and illustrate, for both New Mexico insurers and employers why keyperson insurance is important for New Mexico employers. These cases clarify the limits of other kinds of insurance and tort claims in the employment context.

In 1991, the Tenth Circuit Court of Appeals was called upon to decide if New Mexico law permits an employer to recover under an uninsured-motorist policy for economic damages the employer incurred when the corporation’s president was physically injured in an accident by an uninsured motorist. Cont’l Cas. Co. v. P.D.C., Inc., 931 F.2d 1429, 1430 (10th Cir. 1991). The language of the insurance policy at issue provided that the insurer would pay for:

all sums the insured is legally entitled to recover as damages from the owner or driver of an uninsured motor vehicle. The damages must result from bodily injury sustained by the insured, or property damage, caused by an accident.

Id. (emphasis from the original quoted policy document).

June 13, 2019

What’s Up In New Mexico Workplace Law

By Little v. West

Gov. Michelle Lujan Grisham signed bills into law from the 2019 legislative session that will impact private employers in New Mexico. Below is a summary of several bills that change the law applicable to private employers. Employers should consult with legal counsel and consider reviewing and updating employment policies, procedures and handbooks.

‘Right to work’

House Bill 85 rejects “right to work” as a matter of statewide policy and instead establishes that an employer or union in New Mexico can require membership in a union as a condition of employment. HB 85 also prohibits local governments in New Mexico from enacting “right to work” ordinances, invalidating the “right to work” ordinances several counties enacted.

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

April 2, 2018

Service Advisors Exempt From Overtime, Says Supreme Court

Brian Mumaugh

by Brian Mumaugh

In a 5-to-4 decision, the Supreme Court ruled that service advisors at car dealerships are exempt from overtime pay under the Fair Labor Standards Act (FLSA). In an opinion written by Justice Thomas, and joined by Justices Roberts, Kennedy, Alito and Gorsuch, the Court determined that service advisors are salesmen who are primarily engaged in servicing automobiles, putting them within the FLSA exemption language. Encino Motorcars, LLC v. Navarro.

Service Advisors Challenged Exempt Status

In 1961, Congress amended the FLSA to exempt all employees at car dealerships from overtime pay. A few years later in 1966, however, Congress narrowed the car dealership exemption so that it no longer exempted all dealership employees but instead applies only to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, truck, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers” (as currently written). Until 2011, federal courts and the Department of Labor (DOL) interpreted that exemption to apply to service advisors.

In 2011, however, the DOL issued a new rule stating that a service advisor was not a “salesman” under the FLSA exemption. This new interpretation ran contrary to 50-years of precedent and threw auto dealerships a curve ball. In 2012, service advisors at a Mercedes-Benz dealership in Los Angeles sued their employer, alleging that their regular work hours were 7 a.m. to 6 p.m. resulting in a minimum of 55 hours per week for which they were owed overtime pay for all hours over 40 in a work week.

The Mercedes-Benz dealership moved to dismiss the complaint, arguing that service advisors were exempt under the FLSA language, despite the new DOL interpretation. The district court agreed and dismissed the lawsuit. The service advisors appealed and the Ninth Circuit Court of Appeals reversed, relying on the DOL’s 2011 rule. The dealership appealed to the Supreme Court who decided that the DOL’s rule could not be given deference as it was procedurally defective. On remand, the Ninth Circuit again ruled in favor of the service advisors, determining that Congress did not intend to exempt service advisors from overtime, in part because FLSA exemptions should be narrowly construed and the legislative history did not specifically mention service advisors. The case went up to the Supreme Court a second time.

Service Advisors Are Salesmen Engaged in Servicing Automobiles

The Supreme Court looked to the plain meaning of “salesman” as someone who sells goods and services. Because service advisors sell customers services for their vehicles, the Court stated that a service advisor “is obviously a ‘salesman.’”

The Court also decided that service advisors are primarily engaged in servicing automobiles because they are “integral to the servicing process.” The Court acknowledged that service advisors do not physically repair cars, but the justices decided that the phrase “primarily engaged in servicing automobiles” necessarily included individuals who do not physically repair automobiles, including service advisors.

In an interesting passage of the opinion, the Court rejected the Ninth Circuit’s statement that FLSA exemptions should be narrowly construed. Justice Thomas quoted his friend and former colleague, deceased Justice Antonin Scalia, “Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.’” A fair reading of the FLSA, the majority concluded, focuses not only on the overall objective of the law but also on the stated exemptions. And the Court concluded that a fair reading of the automobile salesmen, partsmen, and servicemen exemption is that it covers service advisors.

Dissent Says Overtime Required, Unless Commission Exemption Applies

Justice Ginsburg wrote a dissent with which Justices Breyer, Sotomayor, and Kagan joined, stating that because service advisors neither sell nor repair automobiles, they should not be covered by the auto dealership salesman, partsman, and serviceman exemption. The dissent notes that many positions at dealerships are not covered by the exemption, including painters, upholsterers, bookkeepers, cashiers, purchasing agents, janitors, and shipping and receiving clerks. Consequently, the dissent stated that there are no grounds to add service advisors as a fourth category of dealership workers that are exempt, adding to the three positions explicitly enumerated in the FLSA exemption.

The dissent notes that many dealerships, including the Mercedes-Benz dealership in this case, compensate their service advisors on a primarily sales commission basis. According to the dissent, such commission-based positions could fall within the FLSA overtime exemption that applies to retail and service establishments where employees who receive more than half of their pay through commission are exempt from overtime pay, so long as each employee’s regular rate of pay is more than one-and-one-half times the minimum wage. The dissent concludes that even without the auto salesman, partsman, serviceman exemption at issue, many service advisors compensated on a commission basis would remain ineligible for overtime premium pay under the commission exemption.

Dealerships May Treat Service Advisors As Exempt

As a result of the Court’s ruling, car dealerships may continue to treat their service advisors as exempt from overtime under the FLSA. Dealerships should still review applicable state laws to ensure that the exemption applies under state wage law. It is also a good time to review written job descriptions to include service advisor duties that support their exempt status under this decision.

March 20, 2018

Settlements Reached in Joint-Employer Case That Could Have Affected Franchisors Nationwide

Steven Gutierrez

By Steve Gutierrez

Franchisor McDonald’s USA LLC has agreed to settle the high-profile labor disputes over whether it is a joint employer with its franchisees. Although the settlement still needs to be approved by the administrative law judge overseeing the litigation, McDonald’s and its franchisees negotiated settlement agreements with the National Labor Relations Board (NLRB) to settle allegations of unfair labor practice charges without admitting liability or wrongdoing. In doing so, McDonald’s avoids prolonged litigation and a potentially adverse decision that would have had sweeping ramifications for franchisors and their franchisees nationwide.

Protracted Litigation Over Joint-Employer Status

In 2012, multiple McDonald’s employees filed unfair labor practice charges against their employer, seeking to improve their working conditions. In 2014, former NLRB General Counsel, Richard Griffin, approved filing dozens of unfair labor practice complaints against the larger franchisor, McDonald’s USA, under a theory that McDonald’s USA is a joint employer of the employees of McDonald’s franchises. By pursing the franchisor, the 2014 NLRB signaled that it was attempting to hold the larger, nationwide entity responsible for treatment of its franchisees’ employees.

McDonald’s USA, along with many restaurant, industry, and employer groups, vigorously objected, arguing that a franchisor is not a joint employer with its franchisees and therefore, cannot be held liable for any labor law violations made by a franchisee. The joint-employer test at the time was based on whether the putative employer exercises direct control over the employees and McDonald’s USA argued that it did not exercise such control over its franchisees’ employees.

In 2015, the NLRB issued its controversial decision in Browning-Ferris Industries that significantly broadened the joint-employer test so that an entity could be deemed a joint employer if it reserved contractual authority over some essential terms and conditions of employment, allowing it to have indirect control over the employees. (See our post here.) Under that expanded test, McDonald’s USA faced higher scrutiny from the NLRB as to whether it was a joint employer and whether it retained some indirect control over the employees of its franchisees.

Due to changes in the makeup of the NLRB under the Trump Administration, as well as a new NLRB General Counsel, the NLRB has sought to reverse Browning-Ferris Industries and return to the former joint-employer test that required direct and immediate control. In December 2017, the NLRB overturned Browning-Ferris in its Hy-Brand decision, only to have to vacate Hy-Brand in February 2018 because new Board member William Emanuel should not have participated in that decision. As a result, the 2015 Browning-Ferris joint-employer test is still the standard used to determine joint-employer status under the National Labor Relations Act.

Leaving The Status Quo on Joint-Employer Status – For Now

By settling these cases, both McDonald’s USA and the current NLRB avoid having to litigate and have a judge rule on whether franchisors like McDonald’s can be deemed a joint employer under the current Browning-Ferris test. Although the Board (and Congress) continue to seek to overturn Browning-Ferris, the McDonald’s settlement will push the issue down the road to another day.

According to the NLRB’s March 20, 2018 announcement, the settlement will provide a full remedy for the employees who filed charges against McDonald’s, including 100% of backpay for the alleged discriminatees. The settlement also will avoid years of potential additional litigation.

Take Aways

Franchisors, staffing companies, and other entities who have some contractual authority or obligations related to employees of a second entity need to use caution to ensure that the second entity complies with all applicable labor laws. With the broad Browning-Ferris test in place, entities with reserved contractual control or indirect control of another entity’s employees may be found to be a joint employer under the NLRA. This could open the door to liability for labor law violations as well as union organization and collective bargaining obligations related to joint employees. If in doubt about your exposure, consult with an experienced labor attorney.

Photo credit: AP2013/Jon Elswick

January 11, 2018

EEOC Reveals Its Strategy For Upcoming Years; Will Review Public Comments

Little V. West

By Little V. West

The U.S. Equal Employment Opportunity Commission (EEOC) recently issued its draft strategic plan for fiscal years (FY) 2018-2022. Because the strategic plan outlines the agency’s priorities for enforcing anti-discrimination laws in the upcoming years, employers can learn a great deal about the types of discrimination and class actions the EEOC will pursue and litigate to further its agenda. Let’s look at highlights of the draft plan to see where the EEOC intends to focus its resources.

Substantive Area Priorities

In its draft strategic plan for upcoming years, the EEOC makes some changes to the substantive areas of law that encompasses its priorities for enforcement efforts. First, it adds two new priorities under the Emerging and Developing Issues area. The agency will look to address discriminatory practices against those who are Muslim or Sikh, or persons of Arab, Middle Eastern, or South Asia descent, particularly protecting members of these groups from backlash following tragic events in the U.S. and the rest of the world. The agency also will look to clarify the employment relationship and the application of anti-discrimination laws to the evolving employment relationships related to temporary workers, staffing agencies, independent contractors, and the on-demand economy (e.g., Uber, Airbnb, freelancers, and other economic models that do not have a traditional employment relationship).

Second, the priorities under the Americans with Disabilities Act will be narrowed to focus on qualification standards and inflexible leave policies that discriminate against individuals with disabilities.

Third, in the area of Immigrant, Migrant, and Other Vulnerable Workers, the EEOC will look to its district offices and the agency’s federal sector program to identify vulnerable workers and underserved communities in their area. For example, the EEOC states that some district offices may focus on employment discrimination against members of Native American tribes, where those groups have local issues of concern.

Fourth, the EEOC proposes to expand its priority on equal pay to go beyond discrimination based on sex, but to address compensation systems and practices that discrimination based on race, ethnicity, age, individuals with disabilities, and other protected groups. Consequently, addressing and remedying pay discrimination is intended to reach all workers, not just those paid differently because of their gender.

Fifth, the agency will focus on preserving access to the legal system and challenging practices that limit workers’ substantive rights or impede the EEOC’s investigative or enforcement efforts. In particular, the EEOC intends to focus on overly broad waivers and releases of claims. It will also target overly broad mandatory arbitration provisions. In addition, the agency looks to focus on significant retaliatory practices that dissuade other employees from exercising their rights.

Finally, the EEOC will continue to make it a priority to prevent systematic workplace harassment. Given the current environment that has shed new light on sexual harassment, the EEOC will look specifically to claims that raise a policy, practice, or pattern of harassment.

Strategy Leads to Priority Handling and Litigation

Because of limited resources, the EEOC will use its strategic priorities to guide its charge handling, investigations, and litigation. If a charge raises a substantive area priority, it will be given priority in charge handling. Cases with strong evidence in substantive priority areas will be given precedence in the selection of cases for litigation. In general, the agency looks to its strategic plan to offer a more targeted approach to its enforcement efforts.

Integrating EEOC Efforts Across The Agency

In addition to the substantive priority areas, the EEOC states that it is committed to using an integrated approach to consider ideas, strategies and best practices across the agency. It looks to reinforce consultation and collaboration between the investigative staff and the EEOC’s lawyers who litigate the cases. It also looks to increase the collaborative efforts between the federal and private sector staff, especially with respect to protecting LGBT workers. It also looks to enhance a coordinated and consistent nation message when it comes to education and outreach activities.

Next Steps

The EEOC accepted comments from interested parties on its draft strategic plan through January 8, 2018. The agency is expected to review submissions and approve its final version of the plan in the coming months.

January 8, 2018

Confidential Sexual Harassment Settlements No Longer Tax Deductible

Steven Gutierrez

By Steve Gutierrez

The recently enacted tax reform bill contains a short provision that could significantly affect whether and how employers settle sexual harassment claims. Section 13307 of the Tax Cuts and Jobs Act states that no deduction is allowed for any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement. The new provision also prohibits a tax deduction for attorney’s fees related to confidential sexual harassment settlements or payments.

Deductibility Hinges On Confidentiality of Settlement

The new tax provision eliminates a tax deduction for sexual harassment-related settlements only if the settlement or payment is subject to a nondisclosure agreement. In other words, if an employer requires the alleged victim of sexual harassment or abuse to keep the settlement (and presumably the underlying claim) confidential, then the amount of the payment and any attendant attorney’s fees are not tax deductible. Sexual harassment/abuse settlements and related attorney’s fees remain tax deductible if they are not subject to a nondisclosure agreement.

The policy behind this provision appears to be in response to the recent spate of sexual harassment and abuse claims coming to light. The “#MeToo” campaign has raised significant concerns about companies and their high-level employees hiding behind nondisclosure agreements to avoid public scrutiny about unlawful sexual conduct in the workplace. Repeat offenders often keep their jobs when their employers pay off the victims in secret. By eliminating the tax deduction for confidential settlements and related attorney’s fees, companies will be forced to weigh confidentiality against tax deductibility when deciding whether to settle each claim.

What If Sexual Harassment/Abuse Is Only One of Multiple Claims Being Settled?

One of the questions left unanswered in this new tax reform provision is what happens to the tax deduction for payments that settle more than one kind of employment claim. In many cases, the victim of sexual harassment or sexual abuse brings other claims against his or her employer, such as retaliation, gender discrimination, violation of the Equal Pay Act, or defamation. The language of the provision is unclear as to what is meant by any settlement or payment related to sexual harassment or sexual abuse. One could argue that a retaliation claim that arose from an adverse action following a complaint of sexual misconduct would be related to the sexual harassment claim. But what about an Equal Pay Act claim? Is that related to sexual harassment or sexual abuse?

It is unclear whether confidential settlement payments related to these other types of employment claims will remain tax deductible when lumped in with a sexual harassment settlement. This open question will likely lead employers to separate settlement agreements and payments for non-sexual harassment claims in order to keep the settlement of these other types of claims confidential and tax deductible. It also could lead employers (on likely advice from their attorneys) to structure settlements of multiple claims with an allocation of only a small amount, say $100, to the settlement of the sexual harassment claim, with the remainder of any settlement payment attributed to other types of claims alleged by the victim. Absent any clarification on this issue, we expect this will be the subject of much litigation down the road. In the meantime, companies and their attorneys likely will use creative drafting of settlements to try to separate unrelated claims in order to keep the settlement of non-sexual-harassment claims confidential and retain the deductibility of payments and attorney’s fees incurred for non-harassment matters.

Deductibility of Victim’s Attorney’s Fees

Another open question is whether the denial of deductibility applies only to the companies making settlement payments and their own attorney’s fees related to such settlements, or if it applies to the attorney’s fees incurred by the victim as well. The new provision denying deductibility for settlements subject to nondisclosure agreements amends section 162 of the Internal Revenue Code (IRC) which is the section that allows deductions for ordinary and necessary trade or business expenses paid or incurred during the course of a taxable year. Generally, an individual would not be able to take a business deduction under IRC Section 162. However, the language in the new provision does not make it clear that it applies only to the business’s own attorney’s fees, thus leaving open an interpretation that it also prohibits the victim of sexual harassment or sexual abuse from deducting his or her attorney’s fees related to settlements of such claims. It also could be interpreted to deny the deduction to a business that pays the victim’s attorney’s fees as part of a confidential settlement.

This could hit victims hard as those who sign nondisclosure agreements may have to pay taxes on the entire settlement, including any amounts paid to cover his or her attorney’s fees. Or, it could lead victims to reject any settlement containing a nondisclosure provision in order to avoid paying taxes on the attorney’s fee portion of the settlement payment. It also may make employers less likely to agree to pay the victim’s attorney’s fees as part of a confidential settlement because the total amount of fees paid to attorneys on both sides would not be deductible as a business expense. It is unclear whether Congress meant to hamstring victims in this way, or if it was the result of inarticulate drafting. We will have to see whether a correction or guidance is issued to clarify how the new denial of deductibility provision affects a victim’s ability to deduct attorney’s fees.

Get Advice Before Settling

The denial of deductibility provision affects any amounts paid or incurred after December 22, 2017 (when the tax reform act became effective). This makes one thing about this new tax deduction provision clear – employers should get advice from competent counsel and tax professionals before settling any sexual harassment or sexual abuse claims. Employers will need to evaluate each case individually to decide whether confidentiality trumps deductibility. Then, after the employer decides whether to impose a nondisclosure requirement on the alleged victim of sexual harassment/abuse, the settlement agreement must be drafted carefully in light of this new provision. If the victim asserts multiple claims, employers may be able to keep the settlement of non-harassment claims both confidential and deductible, if the settlement agreement is drafted correctly.

The bottom line is seek advice early and don’t use boilerplate settlement agreements without considering the tax deductibility consequences of nondisclosure provisions.

January 2, 2018

Sexual Harassment – Employers Should Act Now

By Mark Wiletsky

Roger Ailes, Bill O’Reilly, Harvey Weinstein, Kevin Spacey, Charlie Rose, Matt Lauer, politicians from both sides of the aisle – the list of prominent individuals accused of sexual harassment and assault continues to grow. And as sexual harassment dominates the headlines, workers are coming forward in increasing numbers to describe inappropriate sexual conduct in the workplace.

This heightened awareness by both the public and employees should make every employer pause to consider if it is doing enough to keep employees safe and free from harassment. Here are our recommendations for steps you should take right now to help prevent your organization from appearing in the headlines.

Have a Strong Anti-Harassment Policy

Every employer should have a written policy that prohibits sexual harassment in the workplace. If you do not have one, you should strongly consider implementing one to ensure your employees know that sexual harassment is absolutely prohibited. If you already have one, review it to ensure that it includes the following provisions:

zero tolerance for unlawful harassment and inappropriate sexual conduct in the workplace
examples of unacceptable physical conduct, such as unwelcome touching, hugging, kissing, groping, and gestures, as well as inappropriate verbal or visual conduct, such as sexual jokes, emails, cartoons, pictures, and propositions
requests for sexual favors or demands to engage in intimate relationships will not tolerated
policy applies to inappropriate conduct by managers, co-workers, vendors, customers, and others who come into contact with your employees
every employee is expected to report any harassment that he or she experiences or witnesses
reporting mechanism that offers two or more reporting channels (such as a supervisor and the human resources manager)
commitment to take complaints seriously through timely and thorough investigation
no retaliation or adverse consequences will occur to those who report sexual harassment or cooperate in any investigation or proceeding
employees found to have engaged in sexual harassment or other inappropriate conduct will be subject to discipline, up to and including termination.

Train Both Managers and Employees

A policy does little good if your employees are not aware of it. Take this opportunity to conduct sexual harassment training for your entire workforce. Live in-person presentations may be the best way to train your employees, allowing you to take questions and emphasize your organization’s commitment to preventing and resolving any harassment issues. If live training sessions are impossible, offer video or recorded training. Provide specialized training to your executives, managers, and supervisors so that you can stress their input in creating a culture that is free of harassment, and to help them recognize and learn how to handle harassment scenarios.

Encourage Reporting of Inappropriate Conduct

Employees won’t report harassment to you if they feel their complaint will fall on deaf ears.
They may, instead, talk to the media or an attorney. Consequently, management and human resources professionals need to encourage reporting of workplace improprieties, no matter who it involves or how sensitive the accusation. If you do not welcome complaints, you will not have an opportunity to nip inappropriate conduct in the bud or resolve situations that could prove highly detrimental to your company.

Investigate Every Complaint

You must treat every report of sexual misconduct or harassment seriously and conduct a timely, thorough investigation to determine whether the alleged conduct occurred. If the complaint is against your company president or another high-ranking individual, you still must investigate it in the same vigorous manner you would for any other employee accused of the misconduct. Consider whether you need to hire outside counsel or a third-party investigator to preserve privilege and to avoid allegations that the investigator was biased because he or she reports to the person accused of misconduct. Take time now to make sure you have an investigation process in place so that when a report of harassment comes in, you don’t waste time determining who does what.

Take Prompt, Appropriate Action

As you receive a sexual harassment complaint and begin an investigation, you need to determine what action, if any, should be taken pending the investigation’s outcome. You may need to place the alleged harasser on leave, or you may need to separate workers so that they work on separate shifts or in different locations. Your duty is to stop any harassment from occurring, so take whatever steps may be necessary to do that. Then, when you have sufficient facts about the alleged harassment, determine what action is warranted to resolve it. If you conclude that harassment likely occurred, you need to impose consequences. Depending on the severity, that could mean immediate termination of employment. Remember, zero tolerance means no unlawful harassment goes unpunished.

Preventing and Resolving Sexual Harassment Should Help Keep You Out of the News

Because the topic of sexual harassment is so hot right now, take the time to recommit your organization to preventing and resolving workplace harassment by following the steps above. Your efforts now will go a long way in avoiding surprise allegations in the future.

October 12, 2017

Top Five Ongoing Challenges For Collective Bargaining and Organizing

By Steve Gutierrez

Most expect that the White House and federal agencies will take a more business-friendly approach than in recent years. Employers hope that will mean they can now look forward to a potential rollback of regulations and enforcement efforts that have stymied their business objectives. Yet when it comes to responding to union organizing campaigns and negotiating collective bargaining agreements, employers still face wide-ranging challenges. Here is my list of the top five ongoing challenges.

1. Affordable Care Act (ACA) Cadillac Tax

Many unions, such as the Teamsters, prioritize and bargain extensively over top quality, employer-paid health insurance. They often use it as a selling point to their members. Yet, the ACA’s 40 percent excise tax on workers with comprehensive insurance plans (the so-called “Cadillac tax”), set to be implemented in 2020, is seen by the unions as an affront to their hard-fought bargaining to obtain high quality health care for their membership.

In fact, reports show that unions, including the Teamsters, have actively lobbied members of Congress for a repeal of the Cadillac tax. Because health care reform has not yet passed, it may be unlikely that relief from the Cadillac tax is forthcoming anytime soon.

This opens the door for alternate bargaining tactics over health care plans and benefits. Economics can be based on the ultimate cost to the employees/members, when factoring in the tax. This issue remains a challenge for both employers and the union and can change the overall approach to structuring the economic package during contract negotiations.

2. Micro-units

In 2011, the NLRB issued its Specialty Healthcare decision permitting unions to establish bargaining units that include only a small fraction of a workforce. For example, in 2014, the Board certified a micro-unit of cosmetic and fragrance salespersons working at a Macy’s department store rather than requiring all employees at the store (or even all salespersons at the store) to make up the bargaining unit. The Board authorized the micro-unit by finding that the cosmetics and fragrances salespersons were a readily identifiable group and shared a community of interest. The Board also found that other Macy’s employees did not share an overwhelming community of interest with the cosmetics and fragrances employees, and prior NLRB cases involving the retail industry did not require a wall-to-wall unit.

These micro-units can make union organizing easier as they do not require a majority of the historical “wall-to-wall” bargaining units to vote in favor of the union. For example, a unit of only nine employees needs just five to vote “yes” and the union has its foot in the door with that employer. And organizing on that micro level can more easily go unnoticed by employers. Micro-units can also result in an employer having to negotiate with multiple unions affecting small segments of its workforce, and the headaches involved with administering varying contracts.

Numerous efforts are underway in the current administration to do away with micro-units. Current NLRB Chairman Phillip Miscimarra disagrees with the Specialty Healthcare standard for determining an appropriate bargaining unit, raising chances that the Board will abandon the approval of micro-bargaining units. However, Miscimarra has announced that he will leave the Board when his term expires in December 2017. Despite his impending departure, it is possible that a majority-Republican Board will reverse course on micro-units.

In addition, this past Spring, Senate Republicans introduced (again) the Representation Fairness Restoration Act (S. 801) which would do away with micro-units. That bill has been assigned to the Senate Health, Education, Labor, and Pensions committee where it is one of 250 bills currently being considered by the committee.

Until the law or Board precedent is changed, micro-units remain a challenge for employers. But because a more employer-friendly Board might rule against a micro-unit, it becomes vastly important to challenge proposed bargaining units and any potential outlier unit members. Increased pressure on the Board on this issue should be a continued focus.

3. Transparency with Employees/Members

Unions are becoming quite savvy in communicating with their members and potential members. Union leaders are increasingly focusing on being more transparent with their members during the bargaining process. They continue to build strong communications networks centered on social media and other online platforms, with development of mobile apps and company-specific websites, Facebook pages, and Twitter accounts.

To stay ahead of and counter union communications, employers facing a union organizing campaign or in the midst of negotiating a contract should institute and invest in more robust communication strategies with their employees as well. Social media and other online communications boards are essential in getting the company’s message out, especially to millennials and other employee demographics who will seek their information from such sources. But, be aware that in late 2014, the NLRB ruled that employees may presumptively use a company’s email system for statutorily protected communications as long as it takes place during nonworking time and does not interfere with productivity. That Board decision, Purple Communications, is on appeal in the Ninth Circuit Court of Appeals but remains a challenge for employers until such time it is reversed or overturned.

4. New Technology in the Workplace

As more technology comes into the workplace and robots threaten to replace workers, collective bargaining will likely face these issues head on. Just as outsourcing used to be (and in many cases, still is) a sore spot for unions, workplace automation is a similar threat to jobs and future expansion.

One example involves the Teamsters who recognize that autonomous driving vehicles are becoming a reality. The Teamsters are urging lawmakers to prioritize workers and safety when crafting legislation and rules regarding autonomous vehicles. Their concerns likely spill over into their contract negotiations as well.

As workplace technology accelerates, discussions of the use of such technology will likely become key in any bargaining where robots and automation are a possibility. Anticipating that topic, and the potential impact on workers, opens the door for employers to bargain for potential gains and/or trade-offs in their favor when the union opposes or seeks to limit autonomous technology.

5. Favorability of Unions on the Rise

According to a January 2017 Union Favorability Survey by the Pew Research Center (PRC), 60 percent of respondents viewed labor unions favorably while only 35 percent viewed unions unfavorably. This is the highest union favorability rating compiled by the PRC since March of 2001 and only the second rating at or above 60 percent since 1985.

Employers should be aware of this rising trend, especially when communicating with employees during an organizing or bargaining campaign. Opposing and criticizing unions too strongly could backfire so communications and strategies should be formulated to focus on issues, rather than the institution of unions and union membership itself.

Responding to organizing campaigns and preparing for collective bargaining is always a challenge but thinking ahead about these top five issues, and investing in some preventative training and education for managers, can help you manage the process and achieve a favorable outcome.