The Ever-Changing Landscape of Employment Laws in the New Year

Article

New Jersey Law Journal

March 19, 2018

By: Kelly Ann BirdElizabeth CowitBrittany E. Grierson

As 2018 progresses, businesses are contending with a whirlwind of activity involving many facets of employment law. This activity is not limited to any specific area of law, but rather encompasses a wide range of issues, including exemption status, pending Supreme Court cases, and responses to myriad harassment claims—to name a few. Given the fast pace at which changes are occurring in so many areas, employers must now, more than ever, stay updated on the evolving legal landscape. Here are just a few areas we are watching.

The DOL Overtime Rule

Under the Fair Labor Standards Act (FLSA) certain employees, including those who fall within the executive, administrative and professional (EAP) exemption, are not subject to the FLSA’s minimum wage and overtime requirements, provided they meet certain job duty requirements, are paid on a salary basis, and receive compensation at a minimum salary threshold. 29 U.S.C.A. §213(a) (1); 29 C.F.R. §541.100.

On May 23, 2016, the Department of Labor (DOL) issued a final rule concerning the EAP exemption. 79-FR-18737 (Apr. 3, 2014); “Dept of Labor, Wage & Hour Div., Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” 81 Fed. Reg. 32391, 32392 (May 23, 2016). The rule, which had been set to take effect on Dec. 1, 2016, would have significantly increased the minimum salary requirement of the EAP exemption from $455 per week to $913 per week (with no change to the job duties requirement), raised the salary threshold for Highly Compensated Employees, and provided for automatic increases to the minimum salary levels. 81 Fed. Reg. 32393.

Many employers, anticipating the effective date of the rule, implemented changes to employee classifications and compensation. To the surprise of many, however, on Nov. 22, 2016 (one week before the rule’s effective date), the U.S. District Court for the Eastern District of Texas enjoined the rule from taking effect, after challenges were brought by the state of Nevada, other states, and business coalitions. Nevada v. U.S. Dep’t of Labor, 218 F.Supp.3d 520, 524-25, 534 (E.D. Tex. 2016). On Aug. 31, 2017, the Nevada court invalidated the rule, finding it made the EAP exemption primarily depend on an employee’s salary level, without any analysis of job duties, and was contrary to Congress’s intent. Nevada v. U.S. Dep’t of Labor, 275 F.Supp.3d 795, 806 (E.D. Tex. 2017).

In July 2017, while the Nevada litigation was pending, the DOL (under a new administration) reset the rulemaking process, inviting public comment on a range of issues, including the method used to set a minimum salary threshold, whether different levels should be set, and the automatic updating provisions. Request for Information, 82 FR 34616-01 (Jul. 26, 2017). The comment period has ended, and the DOL is reviewing the submissions. The rule-making has resulted in a stay of litigation, as—although on Oct. 30, 2017. the U.S. Department of Justice, on behalf of the DOL, filed a notice of appeal of the Nevada decision to the Fifth Circuit—the DOL also moved to hold the appeal in abeyance while rule-making continues, and that request was granted.

For now, employers are required to comply with the federal lower minimum thresholds predating the rule, along with any state salary level requirements.

Sexual Orientation and Gender Identity Protections

Departing from the Obama administration, the Justice Department, which previously supported an expansive interpretation of Title VII workplace protections, has argued for a more limited scope relative to sexual orientation and gender identity. In July 2017, the U.S. filed an amicus curiae brief in a Second Circuit Court of Appeals case, arguing (contrary to the position of the Equal Employment Opportunity Commission [EEOC]) that Title VII does not prohibit sexual orientation discrimination.

On Feb. 26, 2018, the Second Circuit ruled that federal law does prohibit such discrimination, stating: “sexual orientation is doubly delineated by sex because it is a function of both a person’s sex and the sex of those to whom he or she is attracted.” Zarda v. Altitude Express, No. 15-3775 (2nd Cir., Feb. 26, 2018). This decision creates a circuit split, with the Sixth and Seventh Circuits aligned with Zarda, and the Eighth and Eleventh Circuits holding differently. Again departing from the prior administration’s interpretations, in October 2017, the Attorney General’s Office stated that, as a matter of law, Title VII protection does not include gender identity per se, and thus does not prohibit discrimination against transgender employees because “sex” is “defined to mean biologically male or female.” See U.S. Att’y Gen., Memorandum: Revised Treatment of Transgender Employment Discrimination Claims Under Title VII (October, 2017). These unsettled interpretations at the federal level do not, however, impact state or local protections, such as New Jersey’s Law Against Discrimination, which prohibits discrimination based on sexual orientation and gender identity or expression. See N.J.S.A. 10:5-12. Multistate employers should thus consider federal, state and local laws in drafting policies and defending against claims.

Legalized Marijuana

Although marijuana is an illegal drug under the Federal Controlled Substances Act, medical marijuana is legal in New Jersey, and a review of New Jersey’s medical marijuana program is underway, with a goal of expanding its parameters. New Jersey’s Executive Order No. 6. Recreational marijuana is also on the state legislators’ agendas. Although New Jersey employers are currently not required to accommodate marijuana users, employers in other states may have to.

For example, in Massachusetts, where medical and recreational use are legal, the Supreme Court recently held an employee who was legally prescribed and tested positive for marijuana might require employer accommodation of off-site marijuana use under disability accommodation laws. Barbuto v. Advantage Sales and Marketing, 78 N.E.3d 37 (Mass. 2017). Maine also has a new recreational marijuana law, barring employers from refusing to employ or penalize anyone solely for consuming marijuana outside the employer’s property, but not requiring employers to “permit or accommodate” the use, consumption or sale of cannabis at work, and permitting discipline of employees who report to work while “under the influence of marijuana.” Maine Code Revised Title 17-A, Chapter 45. While proving impairment is a recognized challenge, leading employers to reconsider testing for marijuana use, companies enforcing drug-free workplace policies may continue to rely on marijuana’s status as an illegal substance under federal law but should tread carefully given the expansion of state laws legalizing marijuana and potentially protecting users even in the employment context.

Sexual Harassment

Countless reports of sexual harassment and assault in workplaces across the nation have brought renewed attention to prevention and a laser focus on responses to complaints and remedial action. Notably, legislators in New Jersey and other states have been working to ensure employers are incentivized to prevent such conduct. The Tax Cuts and Jobs Act, enacted in December 2017, disallows deductions for “any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or [for] attorney’s fees related to such a settlement or payment.” Public Law No: 115-97 (Dec. 22, 2017). This law will certainly cause employers to balance the financial implication of a settlement payment against the benefit of nondisclosure.

Closer to home, on Dec. 4, 2017, the New Jersey legislature introduced Senate Bill 3581, which: (i) would deem unenforceable provisions in employment contracts and agreements which “conceal[]”…“details” relating to harassment, discrimination and retaliation claims; and (ii) bar waiver of any procedural or substantive rights relating to such claims. Other states have proposed similar legislation. These laws would limit employers’ ability to require employees to arbitrate claims under fair employment practices laws, allowing employees to file civil claims, with the potential publicity attendant to same.

U.S. Supreme Court

Justice Neil Gorsuch’s appointment to the Supreme Court, bringing the court back to a conservative majority, will undoubtedly affect labor and employment cases in 2018. Two notable pending cases are Epic Systems Corp. v. Lewis (consolidated with Ernst & Young v. Morris and NLRB v. Murphy Oil USA), and Janus v. American Federation. The Epic Systems case concerns enforceability of class action waivers in arbitration agreements involving employment-related disputes. The court will address whether such agreements, which prevent employees from participating in class and collective proceedings asserting employment claims against their employers, violate an employee’s right under the National Labor Relations Act (NLRA) to engage in “concerted activities.” 29 U.S.C. §157. The employers have argued that the Federal Arbitration Act requires enforcement of the agreements absent a contrary command from Congress, and no such command is found in the NLRA. Oral argument was held on Oct. 2, 2017.

In Janus, the court is considering whether to overrule a 1977 decision concerning the constitutionality of union dues in the public sector. In Abood v. Detroit Board of Education, 431 U.S. 209 (1977), the court held that a state may require all public employees (even non-union members) to pay “service charges” to unions, provided the receipts are used to cover only expenses for purposes of collective bargaining, contract administration and grievance adjustment, and not to support an ideological cause a public employee may oppose. Id. at 225-26, 235-36. In Janus, the petitioner has argued that collective bargaining with a government entity is inherently political, and the type of mandatory service charge permitted by Abood necessarily subsidizes political speech in violation of the First Amendment. In 2016, following the death of the late Justice Antonin Scalia, the court issued a gridlocked, 4-4 decision on this very issue. Friedrichs v. California Teachers Assoc., 136 S. Ct. 1083 (2016). Accordingly, the court’s decision in Janus may rest with Justice Gorsuch, who remained silent during oral argument on Feb. 26, 2018.

With these and so many other pending issues on the employment front, we are watching to see how the rest of the year unfolds.