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By Stefani C. Schwartz Schwartz Simon Edelstein & Celso LLC
Editor’s Note: Attorneys from law firms and corporations gathered for a legal education conference in Atlantic City in April 2017, the New Jersey town where now-President Donald J. Trump made his name in the casino industry—boldly displaying it in bright lights on three glimmering properties. One of the sessions, titled “Employment Law: Why Having Policies is Not Enough,” featured Stefani C. Schwartz, partner, Schwartz Simon Edelstein & Celso LLC, Joseph D. Guarino, partner, DLA Piper LLP and Dominick Cirelli, Jr., deputy general counsel, Coface North America. Thanks to Stefani Schwartz for this recap of the session plus additional updates and insights. It is intended to reflect the potential impact of the new administration, led by one of Atlantic City’s former titans, on employers and employees.
On January 20, President Donald J. Trump signed an Executive Order directing the heads of all federal departments and agencies with authorities and responsibilities under the Patient Protection and Affordable Care Act, as amended, (ACA) to exercise, to the maximum extent permitted by law, all authority and discretion to waive, defer, grant exemptions from, or delay the implementation of certain ACA requirements and provisions.
The ACA Executive Order also directs these departments and agencies to exercise, to the maximum extent permitted by law, all authority and discretion to provide more flexibility to states and cooperate with states in implementing healthcare programs.
Lastly, the ACA Executive Order calls for each department or agency with responsibilities concerning healthcare or health insurance to encourage the development of a free and open healthcare market in interstate commerce, to the maximum extent permitted by law, with the purpose of attaining and preserving maximum options for consumers and patients.
Trump’s administration is actively attempting to repeal and replace the ACA and to give healthcare back to the states, however it seems that their efforts would be better spent on revising what is already some of the strongest healthcare regulation passed in the history of the United States.
[Editor’s note: Since this article was written the U.S. House of Representatives passed H.R. 277, the American Health Care Reform Act of 2017.]
Candidate Trump advocated a plan to enhance unemployment insurance to include six weeks of paid leave for new mothers so that they can take time off of work after having a baby. However this plan fails to account for low-income women and fails to account for medical complications from birth or recovery. While workers who have given birth need sufficient time to physically recover, limiting paid leave to mothers perpetuates the notion that only women can or should care for children. The regulation that is proposed does nothing for husbands, same-sex couples and single fathers who also need time to spend with their newborns. Legislation has yet to pass, so this is a topic that needs to be watched.
With that said, New Jersey is already on the forefront of family leave. The New Jersey Family Leave Act provides job-protected maternity leave of absence to care for a sick family member or birth, plus baby-bonding time. It applies to employers with over 50 employees anywhere worldwide, as opposed to the 75-mile radius rule of the federal family leave act. The New Jersey Family Leave Act allows for 12 weeks of unpaid leave during any 24-month period and also protects your job while you’re gone—as long as you have worked at least 1,000 hours and were employed for at least 12 months.
The then-President-elect’s website provided a “10-point plan” on immigration, a non-detailed list, the top item of which is to build a wall along the southern border of the U.S. Further down the list, there are items more likely to impact employers, including “Cancel Unconstitutional Executive Orders & Enforce All Immigration Laws”; “Suspend the Issuance of Visas to Any Place Where Adequate Screening Cannot Occur”; “Turn Off the Jobs and Benefits Magnet”; and “Reform Legal Immigration to Serve the Best Interests of America and its Workers.”
How this will actually play out remains to be seen. However, the list suggests employers wanting to sponsor individuals for work visas may face additional hurdles. In addition, the new administration may increase enforcement of existing immigration laws by, among other things, working with Congress to expand the mandatory use of E-Verify to verify eligibility for employment in the U.S. Under current federal law, E-Verify is voluntary for employers, except as mandated by executive order for federal government contractors.
Recently, President Trump signed the “Buy American, Hire American” executive order. By combining aspects of immigration policy with federal procurement regulations, President Trump is using executive action to advance his philosophy of economic nationalism without waiting for action from Congress. The executive order will stop short of the one- to two-year moratorium on new skilled worker visas that Trump called for during the campaign. This order comes too late to have a direct effect on this year’s visa season, which opened April 3. Instead, the executive order will look for administrative changes, including an overhaul of the lottery system used to determine which companies can sponsor the visas. Other visa programs, like the H-2B seasonal worker visa that President Trump himself uses to staff his Mar-a-Lago resort in Palm Beach, will be largely unaffected. However, like many of his previous executive orders, the order will largely call on cabinet secretaries to fill in the details with reports and recommendations about what the administration can legally do.
The “Buy American” portion of the order will tighten the waivers and exemptions that agencies use to get around procurement laws that favor American-made goods, and require agency heads to sign off on those waivers. It will require agencies to consider whether foreign governments are using unfair trade practices when considering the lowest responsible bidder. And it includes language requiring transportation projects to use steel “melted and poured” in the United States.
In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages. For example, the current minimum wage in New Jersey is $8.44/hour and $10.50/hour in California (both increased as of 2017). The current federal minimum wage is $7.25 (as of 2009).
The federal minimum wage has not been increased since 2009. However, President Obama did issue an executive order that impacted the minimum wage paid by government contractors. Executive Order 13658, “Establishing a Minimum Wage for Contractors,” signed by President Obama on February 12, 2014, raised the hourly minimum wage paid by contractors to workers performing work on covered federal contracts to $10.10 per hour, beginning January 1, 2015. Unless rescinded by the Trump Administration, the minimum wage rate for federal contractors should now be $10.20 per hour and $6.80 per hour for tipped workers. While it is too early to tell what will happen with federal minimum wage, the states are nonetheless left to set their own minimum wage. It is anticipated, however, that President Trump will repeal this executive order.
So many questions. Will the Trump administration change these rules? He has signaled the Department of Labor (DOL) will save small business from the “crushing burdens of unnecessary regulations.” If the federal government deregulates, will states fill in the gaps? What are you telling your clients and company?
More likely than not, Trump’s organization will change the rules President Obama passed. As it was to be implemented, President Obama’s overtime rule would have raised the minimum salary below which “executive, administrative or professional employees” could receive overtime pay. President Obama had said the requirements had not kept up with the times, and asked that the minimum be moved from $23,660 annually to $47,476 annually. This could have made some four million more employees eligible for overtime pay.
But a federal judge in Texas halted the rule nine days before it would have become enforceable, arguing the agency exceeded its regulatory authority. The judge ruled that injunctive relief was warranted because the DOL exceeded its authority in setting such a high salary threshold of $47,476, below which workers are automatically eligible for overtime pay. Obama’s Justice Department appealed that decision, and the Texas AFL-CIO filed a motion to intervene in the event the next administration reversed course. The AFL-CIO’s motion is still pending. President Donald Trump’s DOJ had until May 1 to file a brief stating its position on the appeal, after receiving two filing extensions totaling 90 days. If Labor Secretary Alexander Acosta, disagrees with the rule as issued under Obama’s DOL, the government’s options generally are to withdraw the appeal before the U.S. Court of Appeals for the Fifth Circuit, settle the case with state attorneys general plaintiffs and promulgate a new rulemaking, or some combination of those scenarios.
If the federal government deregulates, generally speaking, states are always welcomed to fill in the gaps as long as no federal law pre-empts the state’s provisions. Similar to minimum wage law, states are generally on the forefront as they are better in tune with their own workforce. New Jersey, for example, which has some of the best protections for workers and overtime pay, has always produced its own rules and regulations for work within the state.
We tell our clients to make sure their overtime policy, especially if compensatory time is involved, is clearly stated when the employee is hired and further reiterated in a handbook all employees have access to. It is important to establish good time- and book-keeping policies to make sure all employees who are entitled to overtime are properly compensated. Lastly, unless the employee is exempt, they are generally entitled to overtime at time and a half for hours worked over 40 hours in a week.
What are you telling your clients or company about remaining in compliance with these rules? What are the risks?
The federal government sets the floor on pay transparency on a national level. Section 7 of the National Labor Relations Act (NLRA) protects certain employees from employer retaliation when discussing compensation. As recently as 2015, a judge at the National Labor Relations Board found T-Mobile guilty of NLRA violations for having polices that prohibited its workers from discussing compensation. Despite these federal protections, at the national level, about half of all workers report that the discussion of wage and salary information is either discouraged or prohibited and/or could lead to punishment.
In January 2016, the DOL announced new reporting requirements that will begin in 2017. The DOL will require businesses with 100 or more employees (both private industry and federal contractors) to submit data, on among other items, compensation by gender and race. Even when these new DOL reporting requirements go into effect, employers with less than 100 employees will not have to report the data. State legislation will have to fill in this gap on pay transparency.
Finally, with the new DOL reporting requirements likely taking effect in the near future, businesses employing 100 employees or more would be wise to review their current employee compensation structure and correct any gender pay disparities that cannot be justified under current equal pay laws. The risk of litigation for failing to provide appropriate compensation based on gender or race is not worth taking, especially if your policies state one thing but the company’s records paint another picture.
What are the pros and cons of this rule? Is it being challenged? Again, what do you tell employers or your company?
The U.S. Equal Employment Opportunity Commission (EEOC) released rules allowing employers to assess penalties against workers who decline to participate in their health insurance–connected wellness programs, however enforcement is in question. The EEOC rule says that employer wellness programs that ask employees about their medical conditions or that ask employees to take medical examinations (such as tests to detect high blood pressure, high cholesterol or diabetes) must ensure that these programs are reasonably designed to promote health and prevent disease, that they are voluntary (however how can it be said to be voluntary if you are hit with a penalty for not participating) and that employee medical information is kept confidential.
This new rule is an effort to allow employers to force employees to start to get healthier. In essence companies will “reward” people who participate in the wellness program. Theoretically this will make the workforce healthier and should drop insurance costs because more people will become proactive about their health. In the alternative, there is minimal evidence that workplace wellness programs work in the first place and currently many employers are slow to take these regulations on because they do not want to violate the confidentiality and right to privacy under HIPAA for people’s medical records.
Currently, more than two-thirds of employers offer wellness programs as part of a benefits package, according to a report from the Society for Human Resource Management, and employees who refuse to participate in their employer’s wellness plan could face a penalty of up to 30% of the total cost of their health premium for an individual health insurance plan and up to 60% for employees on a spousal plan. The cons of this are varied; while it might not be a big deal to a worker who earns $150,000 dollars a year, it could be potentially devastating for someone whose salary is $20,000, $30,000 or even $60,000 a year and they have to pay 30% or 60% of the total health premium because of a spousal plan.
Further, the rules also require employees to hand over medical and genetic information during enrollment through questionnaires and assessments. Thus, if you don’t participate in corporate wellness programs, you won’t have to turn over any medical information, but then if you don’t participate, you’ll pay a fine. Lastly, Health assessments and questionnaires could potentially violate rights to medical privacy and increase the risk of discrimination based on pre-existing medical conditions. The real danger is the potential for employers to use the wellness plan to identify and terminate workers who might increase the company’s healthcare costs.
Because the current wellness rule is a relatively new development there has not been much litigation regarding the matter. However, AARP did file suit in order to combat this rule and get clarification. In AARP v. EEOC, No. 1:16-cv-02113 (D.D.C., Oct. 24, 2016) the central issue is whether it is truly a “voluntary” provision. A program is “voluntary” if the employer does not require employees to participate, does not deny any health insurance coverage to non-participating employees, does not retaliate or take other adverse actions against non-participating employees, and provides a written notice of rights to employees regarding the collection and use of medical information. AARP claims in its lawsuit that the new definition of “voluntary” in the ADA rules “is not a reasonable construction of the statutory term.” The, complaint further states that the 30% “penalty” for non-participation allowed by the rules is “arbitrary and capricious.”
Additionally, the EEOC rule may very well be amended soon by the Preserving Employee Wellness Programs Act (H.R. 1313) introduced by Rep. Virginia Foxx (R-NC), which was approved with amendments on March 8 by the House Committee on Education and the Workforce. The proposed Act provides that if a wellness program is complying with the relevant requirements of the Public Health Service Act (PHSA), it is also complying with the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA).
Our recommendation to employers would be to make sure they are, at least, in minimal compliance with the regulation. This includes going over current policies and making appropriate corrections while notifying all employees of their rights under the new rule. The program must be “voluntary” and have certain incentive limits. If you want to make sure you are in compliance, contact your legal counsel. Further, the employers must clearly post and explain: what medical information will be obtained, how the info will be used, who will receive the info and an explanation of disclosure protections.
What are the pros and cons of this “don’t ask” rule? Is it catching on? What should employers do? How should the salary conversation go? Best practices for compliance? Have these rules been challenged or have they resulted in cases?
Unfortunately legislation proposed in New Jersey was vetoed by the Governor and the proposed Pay Equity for All Act of 2016, which would have amended the Fair Labor Standards Act to make it illegal to ask an applicant to disclose information about his or her previous compensation, was introduced in Congress last year but died in committee. However, more and more states are taking action into their own hands and passing state legislation to address this issue. Soon enough this will be the case in New Jersey.
The pro of this “don’t tell” rule is that it would help in bridging the gender pay discrepancy gap. For example, if a woman is earning less than a male counterpart and they are both applying for the same position, the prospective employer—armed with the woman’s current salary information—may be prone to offer her less than would be offered to the similarly qualified male applicant. She may enter the new job at a lower salary than her male counterpart and, regardless of how long she stays with the company and how many raises or promotions she gets, may never achieve parity. Additionally, should she decide to move on from there, will probably be underpaid at her next job as well. As long as the woman is forced to reveal her salary history at every job interview throughout her career, she will probably never close the wage gap. The ban on salary inquiries is aimed at disrupting this vicious cycle. Without knowing how much a person is currently earning, new employers will not be able to adjust their offers accordingly, and the candidate will have a better chance of achieving pay equity.
Cons are the added costs involved in the new process and reduction of the amount of information you can obtain from new candidates. Hiring is so expensive to begin with, and losing the ability to gauge pay based on previous employment in order to not to waste both the hiring manager and candidate’s time may make the process even more costly.
“Some companies find that an understanding of where an applicant fits within a company’s pay structure at the outset allows both parties to streamline the hiring process, eliminating unnecessary delays,” said Dominick Cirelli, deputy general counsel at credit insurance giant Coface North America. “Keep in mind that there is a constant pressure on H.R. Departments to fill open positions quickly, which would only increase if the don’t tell rule is universally enacted. Regardless of the don’t tell rule, it is vitally important for a company to make a commitment to create and adhere to appropriate salary levels for specific positions.”
Salary expectation is a huge factor for all parties involved, and this rule makes it the elephant in the room. Small companies often don’t pay the same as larger ones, and they rely on the discussion of salary history to tout what they can offer beyond pay in order to compete.
To help hiring managers operate in a market-focused hiring environment, employers must provide training not only in how to handle the interview process but also how to set salary levels for a specific position and candidate. At some point, employers will offer pay that falls short of applicant expectations. In these cases, the employer will have to determine whether to adjust the offer or lose out on its preferred applicant. Imagine the appeal to high-talent candidates and the positive brand-building buzz that could result from a company saying, “Based on your previous salary, we believe you were underpaid. Our company is committed to pay equality and would like to offer you $_____ instead.”
Here are some things to consider doing:
Are these folks protected from discrimination in the workplace? Risks, rewards, best practices? Any recent cases?
In New Jersey, LGBTQ persons enjoy strong protection from discrimination, and have had the right to marry since October 21, 2013. Further, the New Jersey Law Against Discrimination, which was amended to include sexual orientation and gender identity in 1991 and again in 2006, prohibits discrimination in employment, housing and public accommodations. Further, criminal law deters bias-motivated crimes against LGBTQ individuals, and New Jersey schools are required to adopt anti-bullying measures that address LGBTQ students. In August 2013, Governor Chris Christie signed a bill into law prohibiting mental health providers from providing so-called “reparative therapy” to LGBTQ minors. New Jersey has and will continue to offer LGBTQ individuals strong protections from workplace and other forms of discrimination.
The risks are great, as they always are, with any kind of discrimination claims brought forward especially if the claims are meritorious and the employer did a poor job of handling the discrimination and associated investigation/discipline.
Best practice is to have a reporting policy for any kind of discrimination and to be certain those claims are addressed promptly. Make sure to investigate each claim thoroughly and be sure to be consistent in how your company investigates and disciplines people found to be discriminating in the work place, especially if the employee is a higher-level employee (supervisor, manager, etc.). Their actions are more likely to jeopardize the company than actions of say, normal hourly employees.
Recently, a case of LGBTQ discrimination was settled in April of 2017. The city of Glen Rock, N.J. settled with Officer Matt Stanislao, but admitted to no wrongdoing. The city agreed to reinstate him, consider him for appropriate promotions and education programs, and pay him $750,000 as part of a settlement agreement. The lawsuit, which was filed in 2014, alleged that Stanislao was harassed by other officers using derogatory comments and lewd gestures referring to his homosexuality on a daily basis. It also claimed Stanislao was never recognized for his meritorious service, which included rescuing two people from a mostly submerged car. While this case was settled, and thus never reached a jury, it is a prime example of the kinds of repercussions a township could face when a LGBTQ discrimination suit is brought forward with meritorious claims and when an employer allows conduct to continue that should have been stopped day one.
Why aren’t policies enough? What else should employers be doing? Isn’t training expensive?
Policies mean nothing if you do not follow them. More specifically, if your employees never bother to get acquainted with the policies beyond what they are told in their first-day orientation, how can you expect them to know what to do and not to do? Employers should have an open door policy, because if you can make your employees feel like you have their best interests in mind and are doing everything to make sure the workplace is as comfortable as possible, employees will have better morale and more drive to go the extra mile for you knowing you have their backs.
While training is expensive, litigation costs and statutory damages awards under LAD and CEPA will make you wish you paid for training on a weekly basis. The question isn’t whether training is expensive, the question should be: What resources can you provide to your employees so they are aware of their rights and obligations? How can you make my employees feel like you have their back, regardless of their sexual orientation, gender, race, etc.? Training does not have to be expensive; a simple one-hour meeting with staff on a weekly or monthly basis to go over policies, address concerns and train on new procedures or policy is enough. In addition, supervisors should be trained so that they are aware of laws and polices, and to be cognizant of problems since they are the eyes and ears of your business. Preventing and eliminating all discrimination in the workplace through proper procedures and training so your employees feel welcomed and want to be productive should be a goal.