E L U MPLOYMENT AW PDATE BY JONATHAN INGBER, MST, JD, CPA Notice to readers Employment Law Update is intended solely for use in continuing professional education and not as a reference. It does not represent an official position of the American Institute of Certified Public Accountants, and it is distributed with the understanding that the author and publisher are not rendering legal, accounting, or other professional services in the publication. This course is intended to be an overview of the topics discussed within, and the author has made every attempt to verify the completeness and accuracy of the information herein. However, neither the author nor publisher can guarantee the applicability of the information found herein. If legal advice or other expert assistance is required, the services of a competent professional should be sought. You can qualify to earn free CPE through our pilot testing program. 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ISBN 978-1-11976-381-9(Paper) ISBN 978-1-11976-403-8 (ePDF) ISBN 978-1-11976-402-1(ePub) ISBN 978- 1-119 76-404-5 (oBook ) Course Code: 746443 LAWU GS-0419-0A Revised: April 2019 Table of Contents Chapter 1 1-1 Employment Law Overview 1-1 Protected classes 1-5 Chapter 2 2-1 E-Employment and Cyber Employment Issues 2-1 Chapter 3 3-1 Wrongful Termination, Harassment, and Retaliation 3-1 Chapter 4 4-1 Discrimination 4-1 Chapter 5 5-1 Disability Discrimination and the ADA 5-1 Chapter 6 6-1 Wage and Hour Laws, FMLA, HIPAA, and COBRA 6-1 Chapter 7 7-1 Noncompete, Nondisclosure, and Nonsolicitation Agreements 7-1 Appendix A A-1 Employment claim risk assessment tool A-1 Glossary Glossary 1 Index Index 1 © 2019 Association of International Certified Professional Accountants. All rights reserved. Table of Contents 1 Solutions Solutions 1 Chapter 1 Solutions 1 Chapter 2 Solutions 4 Chapter 3 Solutions 8 Chapter 4 Solutions 11 Chapter 5 Solutions 15 Chapter 6 Solutions 18 Chapter 7 Solutions 22 © 2019 Association of International Certified Professional Accountants. All rights reserved. Table of Contents 2 Chapter 1 Employment Law Overview Learning objectives Evaluate the major categories of employment law exposure for employers. Assess the historical and current trends in employment law claims, settlements, and verdicts. Analyze the process by which most employment claims get to federal or state court. Recognize that the applicability of state or federal law is a function of the concept of federalism. Preliminary note In September 2017, William J. Emanuel1 was confirmed as the newest member of the National Labor Relations Board (NLRB), marking the transition from Democratic to Republican majority control of the NLRB. President Trump has nominated Janet Dhillon to be chair of the Equal Employment Opportunity Commission (EEOC). In November 2017, Peter Robb was confirmed by the Senate as the NLRB’s incoming general counsel following his nomination by President Trump. 1 Mr. Emanuel practiced management labor law at Jones Day and Morgan, Lewis & Bockius prior to serving as a shareholder in Littler Mendelson, P.C. He has published labor articles and authored amicus curiae briefs. © 2019 Association of International Certified Professional Accountants. All rights reserved. 1-1 Commentators have suggested that the majority-Republican-controlled NLRB may revisit the NLRB’s effort to classify franchisors as co-employers with their franchisees (the McDonald’s case). Several of former President Obama’s executive orders have been rescinded, including: Executive Order 13673 [Fair Pay and Safe Workplaces] on March 27, 2017 Executive Orders 13683 and 13738, both of which had amended Executive Order 13673 The Trump administration and the Republican-controlled Congress2 has sought to limit or reduce theEEOC’s enforcement budget — consistent with the administration’s “pro-business” approach — and the EEOC may seek to eliminate or revise pending EEOC rules. One such rule made major revisions to the Employer Information Report (Form EEO-1) by requiring employers to report wage information broken down by gender and race. That rule was scheduled to become effective in March 2018, and was approved by a “party-line” vote of the then-Democratic EEOC majority. It also is possible that the new administration could at some point propose legislation to establish federal paid sick leave rights, as President Trump approvingly spoke of during the campaign. President Obama’s Executive Order 13706 required up to seven days of paid sick leave for workers on federal contracts. The U.S. Department of Labor implemented the order through final regulations effective January 1, 2017, covering procurement contracts for construction under the Davis-Bacon Act, service contracts covered by the Service Contract Act, and contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. Speaking in generalities, the newly constituted EEOC is expected to be more accommodating to employers in 2019 and the NLRB is predicted to exhibit a more business-friendly approach in 2019. No matter your politics, it is clear that labor policy and priorities in the new administration have and will differ materially from recent historical policies and priorities. Background on employment law Employment laws in the United States consist of federal laws that apply throughout the country, as well as state laws that sometimes are consistent or may vary from state to state. Our employment laws developed in response to a variety of factors, including media exposés of unsafe or poor working conditions,3 societal changes, and perceptions that employers may have taken advantage of workers or failed to compensate them fairly. Many employment laws are intended to “level the playing field” among job applicants, employees with similar skill sets and work performance, and persons of different races, genders, religious beliefs, and other attributes. One constant in employment law is change; that is, as our society’s values and beliefs evolve, employment law is often revamped in reaction to those changes. For 2 As of January 3, 2019, the House of Representatives is controlled by the Democratic majority. 3 Upton Sinclair’s 1906 novel The Jungle depicted health violations and unsanitary practices in the Chicago meatpacking industry. A review by the writer Jack London called it “the Uncle Tom’s Cabin of wage slavery.” © 2019 Association of International Certified Professional Accountants. All rights reserved. 1-2 this reason, employment is a dynamic4 area of the law that calls for financial officers and managers to understand recent developments and anticipate the impact of identifiable trends. In addition to applicable employment laws, the courts also have acted to protect employees from unscrupulous employers. Over time, the courts developed “public policy” rights that are important bulwarks against wrongful actions by employers. Sometimes public policy rights are set forth in employment laws, while in other instances the courts or the EEOC have issued decisions that define or expand public policy5 rights. The following are examples of public policy rights that the courts or the EEOC have enforced, even for employees who are employed “at will”6 and who can be terminated at any time for any reason or no reason at all: Free of discrimination An employee should work in an environment free of, and not be terminated or forced to resign because of, discrimination based on a protected category. Free of harassment An employee should work in an environment free of, and not be terminated or forced to resign because of, sexual, racial, religious, or disability-based harassment. Free of retaliation An employee should work in an environment free of retaliation by the employer if the employee reports wrongdoing, violations of law, violations of company policies, or if the employee refuses to perform an act that would violate federal or state law. Time off An employee should be able to take time away from work to which the employee is legally entitled. Exercise free speech rights An employee should be free to express factually based opinions and exercise in any media permitted free speech rights that do not disparage others, are not false, are not intended to cause emotional distress, and do not divulge company confidential information. 4 “The demands on those who study and practice labor and employment law have increased as well. The 1952 edition of the United States Code (the official edition) included a Title 29 (Labor) that occupied 58 pages and ended with Section 262; by 1970, its 149 pages concluded with Section 678; the 1988 edition version of Title 29 was 578 pages in length. The 712 pages of the 2000 edition went to Section 3058. In 2016, the final section number is 3361. The case law growth has been similar.” Employment Law in a Nutshell, Covington and Seiner, 4th ed. 5 “Broadly, principles and standards regarded by the legislature or by the courts as being of fundamental concern to the state and the whole of society. Courts sometimes use the time to justify their decisions, as when declaring a contract void because it is ‘contrary to public policy.’” Black’s Law Dictionary, 9th Ed., Bryan A. Garner, Editor in Chief. 6 “In 1877, the first edition of H.G. Wood’s treatise on the master-servant relationship articulated what seemingly became America’s at-will employment doctrine. Fn 4, Covington and Seiner. © 2019 Association of International Certified Professional Accountants. All rights reserved. 1-3 Benefit from applicable privacy rights An employee should have his or her protected health information, disciplinary matters, and personal information protected in accordance with applicable privacy laws. Benefit from consistent application of employer policies An employee should have the right to have the employer consistently follow investigative, disciplinary, and termination procedures that are set forth in the employer’s policies or in applicable law. When an applicant’s or employee’s statutory or public policy rights are violated, an applicant or employee may be able to sue for hiring, reinstatement, promotion, back pay, forward pay, and reasonable accommodation. Compensatory damages may be recoverable for actual monetary losses, future money losses, mental anguish, and inconvenience. Where an intentional act is alleged and an employer acted with malice or reckless indifference, the applicant or employee also may be entitled to an award of punitive damages.7 The term “punitive” is derived from “punish,” which is the objective when a wrongdoer engages in willful or deliberate behavior that injures another person. In general, an at-will employee may be fired with cause, without cause, or for no reason at all — as long as public policy rights or other legal rights of the employee are not violated. This holds true even in California, where the California Supreme Court held in 2006 in Dore v. Arnold Worldwide8 that an employer who provided the employee notice of an at-will relationship at the time the employee was hired — in specific, clear, and unambiguous language — could terminate an at-will employee at any time, with or without cause. Note: California is singled out here because its courts are generally believed to be more favorably disposed to employee rights than the courts of many other states. For this reason, California state court employment litigation often can signal potential future employment law developments in other states. 7 Associate Justice Stevens in Cooper Indus. v. Leatherman Tool, 532 U.S. 424,432 (2001): “Although compensatory damages and punitive damages are typically awarded at the same time by the same decision maker, they serve distinct purposes. The former are intended to redress the concrete loss that the plaintiff has suffered by reason of the defendant’s wrongful conduct. The latter, which have been described as ‘quasi-criminal,’ operate as ‘private fines’ intended to punish the defendant and to deter future wrongdoing. A jury’s assessment of the extent of a plaintiff’s injuries is essentially a factual determination, whereas its imposition of punitive damages is an expression of its moral condemnation.” 8 “The Court of Appeal below agreed with Dore that AWI’s letter, signed by Dore, was not clear and unambiguous with respect to cause for termination. Notwithstanding the letter's statement that “your employment with Arnold Communications, Inc. is at will,” the court reasoned, by going on to define the term “at will” to mean that AWI had the right to terminate Dore’s employment “at any time,” AWI impliedly relinquished the right to terminate Dore without cause. We disagree.” 46 Cal Rptr. 668, 671 (2006). © 2019 Association of International Certified Professional Accountants. All rights reserved. 1-4 Protected classes When an applicant or employee is a member of a protected class, the applicant or employee will have rights under federal or state laws, or both, which are intended to protect the applicant or employee from unlawful discrimination or harassment based on membership in the class.9 Federal and some state laws broadly define protected classes as encompassing the following: National origin or ancestry Physical or mental disability, or medical condition Race or color Religion or creed Family or marital status Age Sex or gender Genetic information Veteran’s status Sexual orientation When (a) an applicant is a member of a protected class and is denied employment, or (b) a current employee who is a member of a protected class is terminated, denied promotion, suffers a decrease in compensation or benefits, or is demoted, the applicant or employee may file a complaint with the EEOC or equivalent state agencies seeking damages for denial of employment or other adverse actions. In general, an applicant denied employment must show that he or she was at least as well qualified as the least qualified successful applicant who is not a member of the protected class. A well-run employer will know that dealing with members of a protected class requires the employer to exercise “special care.” This does not mean that the employer cannot fire or take adverse employment action against members of a protected class, but doing so can involve an increased risk of claims or allegations that the employer may encounter — especially if the employer or supervisor mishandles the situation. Knowledge check 1. Willful or deliberate acts of an employer may entitle a former employee to recover a. Statutory damages. b. Compensatory damages. c. Lost pay. d. Punitive damages. 9 Here, public policy is expressed in enacted statutes as opposed to court decisions (judge-made law, if one will). © 2019 Association of International Certified Professional Accountants. All rights reserved. 1-5 2. A member of a protected class is protected from a. Employer discrimination only b. Employer discrimination and harassment. c. Employer discrimination and retaliation. d. Adverse employment action. Current trends in employment law claims The U.S. EEOC issued a press release on January 25, 2018, that included fiscal 2016 data on the numbers and types of discrimination charges filed by employees of private employers as well as federal, state, and local governments in 2017. Information for 2000, 2005, and 2010 is presented for purposes of comparison.10 Note in particular the dramatic increase in all retaliation claims over the periods presented and the continuing increases in disability claims. Exhibit 1-1 10 Adapted from EEOC, www.eeoc.gov/eeoc/statistics/enforcement/charges.cfm. © 2019 Association of International Certified Professional Accountants. All rights reserved. 1-6