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General Matters

Balancing Free Speech and Workplace Policy: Strategies for Employers

In today’s digital age, employees are increasingly active on social media, sharing opinions that can sometimes impact their employer’s reputation. For business leaders - whether a restaurant, a retail store or a manufacturer - understanding your rights and responsibilities when employees post controversial content is essential. The Scenario Imagine one of your employees, Jane, an active user of social media, posts several discriminatory comments about a religious group on social media. She recommends against hiring them and labels this religious group as terrorists. It is also clear from Jane’s posts and profile that she is employed by your company. You feel these posts are appalling, and you are concerned about their impact on your company’s brand and customers’ trust.  The situation raises two questions: Does Jane have a right to free speech under the First Amendment?  Can you terminate Jane for her posts?  Understanding the Law The answers to these questions are “No,” and “It depends.” First Amendment In regard to the first question, the First Amendment applies to government agencies and does not apply to the private sector. Private sector employees do not have the same protections as public sector employees. Jane’s conduct is not governed by the First Amendment.    However, the answer to the second question is more complicated.    The National Labor Relations Act (NLRA) The NLRA protects employee communications that concern the workplace. Employees are allowed to vent and complain about their supervisors or their employer, or about work-related issues, whether to each other or on social media.  However, the line between work-related speech and non-work-related speech can be gray.  Case Study: Home Depot and Protected Speech Last year, the NLRB ruled against Home Depot in a case involving its New Brighton, Minnesota store. Shortly after George Floyd’s killing, Antonio Morales began wearing a hand-drawn Black Lives Matter (BLM) marking on his orange Home Depot apron. During this time period, there were several racially related incidents at the store. Morales was told by the Home Depot he could not work unless he removed this marking. He resigned, alleging race discrimination.  Morales filed a charge with the National Labor Relations Board alleging he was terminated because he engaged in protected concerted activity. The NLRB agreed, holding that the BLM insignia was an outgrowth of prior employee complaints about racial discrimination at Home Depot. The BLM marks on the Home Depot apron constituted protected concerted activity. Therefore, the NLRB concluded that Home Depot unlawfully constructively discharged Morales by conditioning his return to work on removing the BLM markings from his apron. Applying the Law to Social Media Posts Why is this case relevant to an employer’s right to discipline Jane because of her social media posts supporting discrimination against a religious group? How do Jane’s discriminatory posts relate to the workplace?  The answer lies in what else is going on at your company and whether this conduct can be considered related to the workplace. Private employers can prohibit speech at work and away from work that is discriminatory, threatens violence or otherwise violates company policies.  However, in most cases, an employer cannot prohibit speech that discusses work-related issues. Questions Employers Should Ask As you consider whether to terminate an employee for social media posts, you should ask yourself several questions: Business Impact: How do the posts affect your business? Are you receiving complaints from customers? As a customer-driven business, you have the right to protect your brand and the product or service you sell. Are the posts disrupting your business? Employee Relations: Are you receiving complaints from other employees about the posts?  Are the posts causing divisiveness in the workplace and adversely affecting morale? Safety: Are the posts threatening or promoting violence? Policy Violations: Do the posts violate any of your company’s policies? Union/Legal Protections: If your employees are represented by a labor union, does the collective bargaining agreement contain any limitations on your right to discipline or terminate an employee, or contain provisions that protect posts on social media? Best Practices for Employers Consult Legal Counsel: You should consult with legal counsel regarding laws or ordinances that prohibit discipline for social posts. Laws vary by state, and some protect employees from discipline for political activity or lawful conduct outside of work. In Minnesota, employers are prohibited from economic reprisals, threats of loss of employment or physical coercion because of the employee’s political activity.  Other states such as California and New York, have laws that prohibit retaliation for lawful conduct that occurs outside of work. Consider Alternatives: Before terminating, consider speaking with your employee about the impact of their posts. Ask if they are willing to remove or clarify them. Sometimes, actions short of termination can resolve the issue and reduce the negative impact of the posts and reassure your customers and your employees. Ensure Consistency: Treat the employee posting as you would any other employee in similar circumstances to avoid claims of discriminatory treatment. Although you may not have experienced these exact circumstances with other employees, the company may have disciplined other employees for conduct that adversely affects morale or impacts the business.   Training and Policy Recommendations There are many actions your company can take to train employees: Explain that the First Amendment does not apply to private workplaces. Talk to employees about the mission of your company and the effect that their social media posts can have on your company’s business, so that they understand that they should carefully consider how their posts can affect your business. Consider adopting a social media policy that prohibits employees from posting threats of violence or harassment or any language that violates company policies. Request employees focus on respect and inclusivity in their posts. It is to be expected that the tensions in our country will spill over into the workplace. Employers should be cautious yet deliberative in addressing social media posts that can affect business, customers or employees. By understanding the law, asking the right questions and fostering a respectful workplace, you can protect your brand without violating the law.

September 24, 2025

General Matters

Can a Noncompete be Enforced in Wisconsin?

Employers often require employees to sign agreements which include restrictive covenants.  “Restrictive covenants” include noncompete agreements, non-solicitation restrictions (prohibiting solicitation of customers and/or employees), and confidentiality and nondisclosure agreements. These agreements can be important to protect the employer from the employee working for a competitor, or disrupting customer relationships after the employer has invested in that employee through training and the disclosure of proprietary information.  This article focuses on noncompetition and non-solicitation agreements signed by employees in the state of Wisconsin. Wisconsin courts are generally hostile to noncompetition agreements.  Wisconsin has a statute which allows a judge to void a noncompetition agreement that does not contain the elements described in the statute. In some states, including Minnesota, courts are allowed to modify a restrictive covenant so that it can be enforced.  In Wisconsin, if the restrictive covenant is deemed to violate this statute, it is unenforceable in its entirety. So what does a noncompetition or non-solicitation provision in the state of Wisconsin need to say to make it enforceable? The covenant must be necessary for the protection of the employer. The agreement should expressly state why and how the agreement is necessary to protect the employer. Simply restricting ordinary competition is not sufficient; the agreement should describe the special facts and circumstances which support the rationale for the restrictive covenant.  For example, if the employee has contact with the employer’s customers, the protection of these customer contacts may justify a non-solicitation restriction. The time limit should be reasonable. Wisconsin courts have held that a reasonable time frame for a nonsolicitation or noncompetition agreement is determined by facts and circumstances of the specific case.  Although there are no clear rules as to the definition of a “reasonable” period of time, Wisconsin courts have recognized that a two-year time limitation is reasonable. The geographic scope should be reasonable. The reasonableness of a geographic restriction is determined by the facts and circumstances of the particular situation.  The restriction cannot encompass territory where the company does not do business.   An agreement can list specific customers with whom the employee can have no contact or for which a new employer can have contact, or it can describe the territory in which the employee is subject to the limitation. It is not sufficient to simply says the employee cannot work anywhere in the marketplace.  It should be noted that non-solicitation restrictions may be enforced by a court without a specified geographical territory if the facts and circumstances warrant.  A provision which disrupts a customer relationship, regardless of where the customer is located, may be enforced if the relationships are critical to the employer enforcing the agreement. The restriction should not be unduly harsh to the employee. Courts are concerned as to whether a restrictive covenant prevents the employee from working anywhere and from using their skills anywhere.  Courts consider a number of factors, such as the economic conditions, the employee’s age and education, and the impact of the restriction on the employee’s ability to use their skills.  The noncompetition and non-solicitation agreement should not be so unreasonable the employee can’t find a job. The restrictive covenant should not violate public policy. For example, does the covenant contribute to the shortage of specialized services or education?  Does the restriction result in a monopoly because the employer is the only company that provides the services or products in issue?  The noncompetition and non-solicitation agreement should not impose a restraint of trade because it is so broad. Lastly, when an employee is employed in Wisconsin an employer can require that the employee sign a non-compete as a condition for employment to continue. This is different from many other states, including Minnesota, which require the employer to provide consideration to a current employee for the non-compete to be valid and enforceable.  In Wisconsin, an employee can be required to sign a noncompete any time after employment begins, without receiving additional pay or benefits for signing the noncompete. Although Wisconsin has a statute that limits the circumstances under which a noncompetition or non-solicitation provision will be enforced, if drafted properly, these kinds of restrictions can be enforced. ____________________ About the Author Phyllis Karasov advises businesses on labor and employment matters and has substantial experience drafting, interpreting and enforcing noncompetition agreements, confidentiality agreements, ‎and separation agreements.  Her clients come from a variety of sectors, including healthcare, construction, manufacturing, education and nonprofits. Phyllis also provides counsel in all areas of human resources, including hiring, handbooks, regulatory compliance, discrimination, sexual harassment, discipline and termination, Americans with Disabilities Act, OSHA rules and the Family and Medical Leave Act.  Phyllis is licensed to practice in both Wisconsin and Minnesota.  Phyllis is also a regular contributor to Larkin Hoffman’s Employment and Labor Law Blog. Contributor Michael Salchert has been advising dentists in corporate, business, real estate and transactional matters for more than 35 years.  As a member of both the Wisconsin and Minnesota Bar Associations, he primarily works with professionals on the sale or purchase of professional practices, providing general business advice including employment and other business contractual and real estate matters.  Michael leverages his longtime business experience in counseling his clients on a wide range of business and legal issues.

June 16, 2022

Collective Bargaining

Steps to Protect Your Non-Union Business Model

Union activity is on the rise and many labor experts believe the organizing efforts at companies such as Amazon and Starbucks are just a step in a growing nationwide movement.  Combine the events of the past couple of years with a shortage in the labor force, and workers everywhere are reevaluating and expecting more from their employers. Unions are using new tools to communicate with employees, and employers need to give more attention to employee concerns if they want to remain nonunion.  This recommendation applies to all employers of employees who are not currently represented by a union.  Employees leading recent union campaigns have said that they want a seat at the table, and feel their voices were not heard as their employers made changes in scheduling, work responsibilities, and safety protocols in light of the pandemic.   Employers of a workforce of any size, even if some employees are already represented by a union, need to consider whether their nonunion employees are vulnerable to a union campaign.  There are steps an employer can take to avoid employee interest in a labor union. Respond to employee concerns such as safety, personal work-life balance, and fair wages. Employers have had to adjust schedules due to the pandemic and employees have become more vocal that their personal needs seem to be secondary to the profit margins of their employers.  In this world of the Great Resignation and labor shortages, no employer can consider itself immune from employee interest in a union.  The term “living wage” has become a mantra. Employers should look at their pay structure and consider whether they should be increasing their pay, not only for retention, but also to show employees that they don’t need a union to get an increase in pay. In the face of union organizing, consider regular, direct communication with employees. In the cases of Amazon and Starbucks, they brought in outside consultants to design anti-union campaigns and to speak to employees about the reasons why they should vote against a union.  However, a concerted employee-to-employee grassroots effort proved more persuasive than were the hired outside consultants.  The consultants messaging was ineffective and came to represent the significant disparity between corporate profit and management pay. Employers should consider ways to increase employee engagement.  Taking care not to create an internal labor union, an employer can involve employees in decisions regarding benefits, scheduling, continuing education and company events.  Companies should consider programs that allow employee involvement in decisions affecting them. In recent union campaigns, employees have communicated with each other using social media, such as Twitter and Facebook, or text messaging.  Employers do not typically use this tool to communicate with employees and have relied on traditional techniques.  Social media is a powerful vehicle for employees and labor unions to communicate with each other.  Employers need to figure out how to engage with their employees.  Employees want a seat at the table, and transparent decision-making may go a long way in avoiding unionization.  Great communication is a critical tool. Make sure employees feel they are being listened to. One of the reasons behind forming an employee labor union is the belief that management is not listening to employees.  Employees who support the unions at Starbucks and Amazon said continuous changes in their schedules due to COVID-19 did not take into account the impact the changes had on personal lives.  Added to this was a sense that company management did not care about individual employees. Listen to your employees and consider additional benefits that discourage employees from seeking union representation.  Employees are asking for new and different benefits, such as pet insurance, bus cards, mental health days, or a health and wellness allowance.  Consider a health insurance plan supplement to include transgender-inclusive healthcare benefits.  Many employees want paid time off to volunteer or would like Fridays off during the summer. Employers should also consider offering flex time and work-from-home opportunities to show employees you are listening to their needs. Remain consistent with brand ideology. Many employers market on a progressive platform, such as being environmentally conscious, supportive of LGBTQ rights, or in support of Black Lives Matter.  In some cases, these progressive ideas attract workers who share their values.  When it is perceived that their employer is acting inconsistently with the social justice values publicized, they become restless and want more say regarding working conditions.  Even stores like REI, which say they put “purpose before profits”, are being organized.  Employees are conflating working conditions with social justice themes espoused by their employer.  Employers should take this into account when making employment policy decisions. Don’t ignore the power of social media. Employees and unions use social media to communicate with prospective members.  Twitter, Instagram, Facebook and text messaging are replacing the traditional communication tools.  Employees talk among themselves at work, which can be a compelling way to get the union message across to others.  Employers should be creative in how they communicate with their employees and be aware of the powerful tool that social media presents for the unions.  Employee meetings and written communications may not be enough to convey the employer’s messages regarding the reasons why employees should not vote for the union. Ensuring employees feel valued is a critical element in staying nonunion. The objective is to listen to employees and demonstrate that as their employer, you have their back. Make an effort to understand interests and needs and demonstrate that the company will listen as needs evolve. The General Counsel of the NLRB has announced that she will seek a ruling from the NLRB prohibiting mandatory employee meetings in which employees “are forced to listen to employer speech concerning the exercise of their statutory labor rights, especially during organizing campaigns. “Employers should increase their efforts to communicate with their employees before they become interested in a union.  One thing that is consistent in all businesses is that employees need to feel their opinions count and that their employer appreciates their contributions to the success of the company.

May 9, 2022

Best Practices

Unlimited PTO Policies: Avoid the Risks

In light of current labor shortages, employers are paying higher wages and contemplating different benefits and working conditions that employees are now demanding.  One such benefit is an unlimited paid time off (PTO) policy.  An unlimited PTO policy allows employees to take as much paid time off as they desire as long as they complete their work and meet all applicable deadlines.  Most policies require supervisory approval of paid time off and reserve the employer’s right to deny a request for PTO because of business needs and deadlines. Typically, an unlimited PTO policy is made available to exempt employees and not nonexempt employees. There are unique issues that employers must consider in developing their unlimited PTO policies.  For the reasons explained below, I will refer to these policies as unlimited absence policies. Family and Medical Leave and ADA Reasonable Accommodation Leave Without including restrictions on unlimited absence policies, employers may find that they must pay for lengthy absences due to family and medical reasons.  To avoid such situations, there are a number of provisions an employer can include in their unlimited absence policy. Don’t call the policy an unlimited PTO policy. Label it as an unlimited vacation policy.  This title clarifies that unlimited paid time off is not for absences due to medical or family medical reasons but rather, is for vacations. Limit the number of consecutive days for which an employee can be absent in a specified period such as within a week or a month. If unlimited PTO can only be used for absences of, say, up to ten consecutive working days, an employee cannot use PTO for a reason that qualifies for a leave required by the Family and Medical Leave Act (FMLA). The same issue exists for a leave of absence which is a reasonable accommodation under the Americans with Disabilities Act (ADA). If unlimited PTO is allowed for any absence, then a leave of absence which is a reasonable accommodation will also be entitled to be fully paid. Continue to have separate FMLA, workers’ compensation, and ADA leave policies and clearly state in the unlimited absence policy that unlimited PTO applies to absences for reasons other than mandated FMLA leave or leave granted as a reasonable accommodation. In addition to the above, unlimited absence policies should include a number of elements.  Informing employees that they are responsible for completing their work and that the unlimited absence policy does not excuse them from meeting applicable deadlines and carrying out their normal job responsibilities is an important caveat.  Employees should be required to follow established procedures for taking time off, including requiring approval from a supervisor. Paid Sick Time Employers should keep track of the amount of time that employees are taking off for medical reasons vs. for vacations. This is important as an increasing number of cities and states enact paid sick and safe time laws.  If employees work in locales that require paid sick and safe time, the employer should ascertain if by implementing a PTO policy they are entirely exempt from all requirements of the paid sick and safe time requirements.  In some jurisdictions, employers who offer paid time off rather than vacation/sick leave policies are still required to keep track of the amount of paid sick and safe time that employees are taking. Payment for Unused PTO at Separation. An unlimited absence policy should also make it very clear that paid time off does not accrue and that unused paid time off is not paid at termination.  Employers should consult with legal counsel to determine whether there are any applicable laws regarding payment of unused paid time off at termination.  For example, the Illinois Department of Labor’s FAQs state that if an employer has a vacation policy that allows employees to take vacation subject to business needs, the employer must at termination pay a “monetary equivalent equal to the amount of vacation pay to which the employee would otherwise have been allowed to take during that year but had not taken.”  Thus in Illinois, if an employer can demonstrate the average amount of vacation time an employee takes in any given year because the employer has been tracking such vacation, the employer will be in a better position to determine how much-unused vacation is due to an employee at separation.  Legal counsel can advise employers about specific city or state policies that may apply to their employees. Conclusion Unlimited absence policies are becoming more and more popular however when designing a program, employers need to consider mandated family and medical leave laws, paid sick and safe time requirements, leaves of absence that are a reasonable accommodation under the ADA, and state laws regarding the obligation to pay for unused vacation at separation.  If the policies are not crafted carefully, employers may find they are required to pay for a lengthy leave of absence.

April 18, 2022

Collective Bargaining

Project Labor Agreements are Now Required for Large Federal Construction Projects

Last week, I wrote a blog post predicting that President Biden may be requiring project labor agreements (PLAs) on projects funded by the Infrastructure Investment and Jobs Acts, effective November 15, 2021 (link here).  That prediction has now become reality. On Friday, February 4, 2022, President Joe Biden signed Executive Order 14063 (EO 14063).  EO 14063 requires PLAs on federal large-scale construction projects. A “large-scale construction project” means a federal construction project for which the total estimated cost of the construction contract is $35 million or more.  Federal agencies, awarding any contract in connection with a large-scale construction project, must require every contractor or subcontractor engaged in construction on the project to agree, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations. Any project labor agreement reached pursuant to EO 14063 must: Bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents; Allow all contractors and subcontractors on the construction project to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements; Contain guarantees against strikes, lockouts and similar job disruptions; Set forth effective, prompt and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement; Provide other mechanisms for labor management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety and health; and Fully conform to all statutes, regulations, Executive Orders and Presidential Memoranda. EO 14063 contains some exceptions to the PLA requirement.  A senior official within an agency can grant an exception by providing a specific written explanation of why as least one of the circumstances described in EO 14063 exist: Requiring a PLA would not advance the federal government’s interests in achieving economy and efficiency in federal procurement. Such a finding must be based on the following factors: The project is of short duration and lacks operational complexity; The project will involve only one craft or trade; The project will involve specialized construction work that is available from only a limited number of contractors or subcontractors; The agency’s need for the project is of such an unusual and compelling urgency that a PLA would be impracticable; or The project implicates other similar factors deemed appropriate in regulations or guidance which may be issued pursuant to EO 14063. Based on inclusive market analysis, requiring a PLA on the project would substantially reduce the number of potential bidders so as to frustrate full and open competition. Requiring a PLA on a project would otherwise be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda. President Biden stated that nothing in the Executive Order prohibits an agency from voluntarily requiring a PLA even though they are not required to do so by EO 14063. EO 14063 is effective immediately and will apply to all solicitations for contracts issued on or after regulations are issued by the Federal Acquisition Regulatory Council (FAR Council).  The Order states that the FAR Council must propose implementation regulations within 120 days of, February 4, 2022. Both union and non-union contractors should be alert to this significant new requirement for large-scale federal construction projects.  Union contractors should be aware that a PLA could apply certain working conditions to the project which are not contained in the contractor’s existing collective bargaining agreement(s). EO 14063 is a dramatic shift from the Executive Order President George H.W. Bush issued in 1992, which was rescinded by President Bill Clinton in 1993, and the Executive Order President George W. Bush signed in 2001, which was rescinded by President Barack Obama in 2009, both prohibiting the use of PLAs for federal construction projects. Please see Phyllis Karasov’s explanation of what a PLA is here.

February 8, 2022

Best Practices

The Roller Coaster Continues: OSHA’s Emergency Temporary Vaccine Standard for Large Employers

Most of our readers are aware that on November 9, 2021, OSHA issued an Emergency Temporary Standard (ETS) requiring covered employers (employers with 100 or more employees) to require employees to be vaccinated against COVID-19.  The ETS allows employers to decide whether to adopt weekly COVID-19 testing and mask mandates in lieu of vaccinations.  On November 12, the U.S. Court of Appeals for the Fifth Circuit prohibited the ETS from taking effect, additional lawsuits were also filed against OSHA.  All lawsuits were consolidated and assigned to the Sixth Circuit Court of Appeals.  On December 17, the Sixth Circuit Court of Appeals dissolved the order of the Fifth Circuit and reinstated the ETS. Many employers and state attorneys general requested that the U.S. Supreme Court pause the Sixth Circuit Order.  These petitioners asked the Supreme Court to fast-track their appeals and temporarily stop enforcement of the ETS while the Supreme Court considers the appeal.  The Supreme Court declined to stop the enforcement. The Supreme Court has scheduled oral arguments for January 7, 2022, on both the OSHA ETS and the Interim Final Rule, requiring health care workers to be vaccinated, issued by the Centers for Medicare and Medicaid Services. What should an employer do? Large employers who are subject to the ETS are presented with the dilemma of whether to prepare for enforcement of the ETS or delay until the U.S. Supreme Court rules on the appeal from the Sixth Circuit Court of Appeals order.  OSHA has announced that in light of the uncertainty caused by the appeal to the U.S. Supreme Court, they have delayed the original effective date of the ETS.  OSHA has stated that it will not issue citations for non-compliance with any requirements of the ETS before January 10, 2022, and will not issue any citations for noncompliance with the testing requirements before February 9, so long as an employer “is exercising reasonable, good faith efforts to come into compliance” with the vaccine standard. We recommend that covered employers with 100 or more employees begin to prepare for the implementation of the ETS so that they are ready when it comes into effect.  With oral arguments before the U.S. Supreme Court scheduled for January 7, it is unlikely that any decision will be issued until after January 10, the date OSHA has set as the effective date of the ETS.  Therefore, as of January 10, 2021, covered employers must begin to exercise “reasonable, good faith efforts to come into compliance” with the vaccine standard. Employers should take the following steps while waiting for the Supreme Court’s ruling: Develop a mandatory vaccine policy. Determine whether to adopt weekly testing for employees who do not wish to be vaccinated. This policy must require that unvaccinated employees wear face coverings. If weekly testing will be allowed in lieu of vaccinations, unvaccinated employees should provide proof of a negative test by February 9, 2022. Determine the process for employees to request religious or medical exemptions, and who will be involved in making decisions on these requests. Develop forms for employees to request exemptions. Collect vaccine status information for your employees and develop the required vaccination roster showing the vaccination status of each employee. Develop compliance training for managers involved in implementing the vaccination/testing policies. Deliver information about the policies to employees as required by the ETS. The ETS requires that employers pay up to four hours of paid time off to non-exempt employees to obtain the required vaccination so employers should begin preparations for payments.  In addition, the ETS requires that employees be given reasonable paid time off, including paid sick leave, to recover from the side effects following each dose of the vaccine. The tumultuous introduction of the ETS has caused uncertainty and confusion for employers.  However, at present, the OSHA ETS goes into effect on January 10 and employers cannot afford to simply do nothing and wait for the Supreme Court to rule.  Employers must engage in good faith efforts to come into compliance with the ETS by January 10, 2022. If you have questions about the ETS or would like further guidance please contact Phyllis Karasov at pkarasov@larkinhoffman.com.

December 27, 2021

Accommodations

Undue Hardship for Religious and Medical Exemptions From a Mandatory COVID-19 Vaccination Policy

Many employers are adopting a mandatory COVID-19 vaccine policy, or they are required by owners, contractors, developers, or state, local or federal government to adopt such a policy for employees working on particular projects.  The recognized exceptions to mandatory vaccination policies are for employees who have a medical condition, or employees who have a religious objection to the COVID-19 vaccination. If an employee is entitled to an exemption from a mandatory vaccine policy because of a medical condition, the employer must determine if a reasonable accommodation exists so that the employee can continue to work without the vaccination.  Similarly, when an employee is entitled to an exemption because of a sincerely held religious belief, the employer should determine if a reasonable accommodation exists. Title VII prohibits religious discrimination and requires an employer to provide a reasonable accommodation for an employee’s religious beliefs.  A similar obligation to provide a reasonable accommodation exists under the ADA for a qualified employee’s known physical or mental limitations.  “Undue hardship” is the limitation on the obligation to provide a reasonable accommodation under both Title VII and the ADA.  However, the criteria for “undue hardship” are very different between Title VII and the ADA. Under the ADA, undue hardship means an action that requires significant difficulty or expense.  Accommodations may cause an undue hardship if the accommodation is unduly expensive, substantial, disruptive, or will fundamentally alter the nature or operation of the business.  The factors that are to be considered in determining whether an undue hardship exists include (1) nature of the accommodation; (2) the cost of the accommodation; (3) the employer’s financial resources; (4) the size of the business; and (5) the operation of the business. Another important aspect of the analysis under the ADA is whether the presence of an unvaccinated employee in the workplace poses a direct threat to the employee or others.  A direct threat is defined as “a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.”  Assessment of whether there is a direct threat is very fact-based and dependent upon individual circumstances.  Among the factors to be considered is the type of work environment, whether the employee works with others, the ability to social distance, the extent of contact an employee has with co-workers, and whether the employee works indoors or outdoors. If an unvaccinated employee poses a direct threat to themselves or others, the employer must ascertain if a reasonable accommodation is possible.  If the employee does not pose a direct threat, the employer must allow the unvaccinated employee to perform their work at the employer’s location. In contrast, there is a much lower standard for undue hardship under Title VII when dealing with a religious belief.  Under Title VII, an undue hardship requires only “more than de minimus cost.”  Thus, the burden on an employer to accommodate a religious objection to a COVID-19 vaccination is lower than the burden to accommodate a disability-related objection to a COVID-19 vaccination. Despite the difference in the criteria for determining undue hardship in the case of religious objection vs. medical exemption, the accommodations for an unvaccinated employee are most likely the same.  Reasonable accommodations for both exceptions could include social distancing, working remotely, masking, weekly COVID testing, moving the employee to an isolated work location, reassignment, or changing work hours.  The difference is that if a reasonable accommodation for a sincerely held religious belief results in more than a minimal cost, the employer does not have to provide that accommodation.  On the other hand, if the accommodation is requested because of an employee’s medical condition, the burden the employer must accept is much higher under the ADA. An employer should engage in an interactive dialogue with the employee requesting an exemption, whether the request is based on a medical condition or a religious objection.  Regardless of the basis, the employer must consider which accommodations may be possible and discuss the options with the employee. Conclusion Employees have the right to request an exemption from a mandatory COVID-19 vaccination policy because of a disability or because of a sincerely held religious belief.  When a request for an exemption is made, employers must assess whether a reasonable accommodation exists such that an unvaccinated employee can continue to work, or whether such accommodations pose an undue hardship to the employer.  While the standards for undue hardship are different when analyzing a religious objection vs an exemption for a medical condition, the accommodations may not be that different.  Regardless of the basis for the exemption request, an employer should document the request, the reason(s) for the request, any documentation submitted by the employee, and the accommodations which were considered.  An accommodation can be reasonable for one employee, but not reasonable for another employee because of the nature of their jobs and the location of their work areas. For more information regarding reasonable accommodations for religious exemptions please see: An Employer’s Guide to Addressing Requests for Religious Exemption From a Mandatory COVID-19 Vaccine Policy. Please reach out to Phyllis is you have any questions regarding your labor and employment issues.  Phyllis can be reached at pkarasov@larkinhoffman.com or 952-896-1569.

November 1, 2021

Collective Bargaining

The NLRB Gets Tougher on Penalties for Unfair Labor Practices

Several months ago, we settled an unfair labor practice charge filed by an employee against our client alleging retaliation for the employee’s protected concerted activity.  The employee had enlisted the support of other employees in challenging certain pay practices, and it was alleged that the charging party was terminated because of those efforts, rather than for his performance.  We were able to resolve the charge with a settlement agreement. The settlement agreement, consistent with the practice of the National Labor Relations Board (NLRB), included posting a notice informing employees that the employer will comply with the National Labor Relations Act (NLRA),  pay back-pay, and a provision in the agreement that our client denied violating the law.  The employee was not interested in reinstatement so that was not a condition of the settlement agreement, although normally it would be included in a termination case.  The NLRB has settled termination cases with these terms for at least 40 years, if not more. Today, that settlement may not have been possible.  On September 8, 2021, Jennifer A. Abruzzo, the NLRB’s General Counsel, issued a memorandum in which she discussed the NLRB’s revision and updating of the remedies available to victims of unfair labor practices.  On September 15, 2021, General Counsel Abruzzo issued a second memorandum, describing the types of remedies that regions should seek in settlement agreements.  Both memoranda signal a significant expansion of the types of remedies that Regional Offices will seek when they determine that a party has engaged in an unfair labor practice, or in a settlement agreement with the NLRB. General Counsel Abruzzo stated in the memoranda that the Board possesses broad discretionary authority to create remedies to fit the circumstances of every case.  She wrote that as part of the make-whole remedy to which victims are entitled, the Regional Office should seek an award of consequential damages to make employees whole for economic losses, apart from the loss of pay or benefits, either in the settlement agreement or after a determination that a party violated the NLRA.  Abruzzo provided examples of economic losses suffered as a direct and foreseeable result of an employer’s unfair labor practice for which the Regional Offices should seek a remedy in a settlement agreement or after a determination that a violation occurred.  Examples include: Compensation for health care expenses that an employee incurred as a result of the unlawful termination of health insurance. Compensation for credit card late fees. Compensation for the loss of a home or car that an employee suffered as a result of an unlawful discharge. Front pay when an employee is not interested in reinstatement. Incorporating default language into a settlement agreement. Requiring letters of apology. Sponsorship of work authorizations for undocumented employees who unlawfully terminated. In cases involving unlawful conduct committed during a union organizing campaign, where an employer engaged in unlawful conduct that interfered with the “laboratory conditions” necessary for a free and fair election, she suggested examples of remedies that Regional Offices could seek from the NLRB: Union access to the employer’s premises or bulletin boards. Reimbursement of the union’s organizational costs. Reading of the notice to employees and the explanation of rights to employees by a management official or by an NLRB agent. Training employees, including supervisors and managers, on employees’ rights under the NLRA. Hiring a qualified applicant of the union’s choice in the event a discharged discriminate is unable to return to work. In cases involving unlawful failures to bargain in good faith with a union or an employer, General Counsel Abruzzo stated that she was considering make-whole remedies that would: Compensate employees for the losses they incurred as a result of their employer’s refusal to bargain or failure to bargain in good faith. Dictate bargaining schedules and require bargaining not less than twice a week at least six hours per session until an agreement or bona fide impasse is reached. Reimburse collective bargaining expenses. Conclusion We already know that the current Democratic majority NLRB is far more pro-union and pro-employee than was the Republican majority NLRB under President Trump.  We had previously been put on notice that the NLRB will begin reversing many of the decisions made under President Trump regarding employee handbook provisions, using company email for union organizing, union access to private property, and other types of cases.  General Counsel Abruzzo’s September 8 and September 15, 2021 memoranda are further evidence of the significant changes which are occurring at the NLRB.  We expect to see much harsher remedies sought from employers in settlement agreements and when an employer is found to have engaged in an unfair labor practice.

October 25, 2021

Collective Bargaining

The National Labor Relations Board and College Athletes in a New World

In 2015 the National Labor Relations Board (NLRB) declined to exercise jurisdiction over a petition filed by a union seeking to represent Northwestern University’s scholarship football players.  The NLRB was unwilling to make an affirmative decision as to whether the Northwestern University scholarship football players were “employees” within the meaning of the National Labor Relations Act  (NLRA).  Last spring, President Biden appointed a new General Counsel who is turning the world of college athletics upside down. On September 29, 2021, Jennifer A. Abruzzo, General Counsel for the NLRB, issued a Memorandum in which she made it clear that she views scholarship football players such as those at issue in the Northwestern University case as employees under the National Labor Relations Act. In her September 29, 2021 memorandum, Ms. Abruzzo explains that certain college athletes can be considered employees because “under common law, an employee includes a person who perform[s] services for another and [is] subject to the other’s control or right of control.” Ms. Abruzzo describes the evidence presented in the Northwestern University case that supports the conclusion that the scholarship football players are employees under the NLRA.  For example: The athletes play football (perform a service) for the University and the National College Athletic Association (NCAA), thereby generating tens of millions of dollars for their institution. The football players received significant compensation covering their tuition, fees, room, board and books. The NCAA controls the players’ terms and conditions of employment, including a maximum number of practice and competition hours, limits on compensation, minimum grade point average and other such rules. Northwestern University controls the manner and means of the players’ work on the field and various dimensions of the players’ daily lives to ensure compliance with NCAA rules. General Counsel Abruzzo further explains how “significant developments in the law, NCAA regulations and the societal landscape” demonstrate that traditional notions that college athletes are amateurs have changed.  She cites the unanimous finding by the U.S. Supreme Court in NCAA vs. Alston that NCAA rules limiting certain education-related compensation that schools can offer athletes violate anti-trust law.  Shortly after that decision, the NCAA revised its rules and announced that the name, image and likeness rules for players at academic institutions are suspended.  Thus, players at academic institutions can now collect payment for use of their name, image, and likeness, which will open the door for them to profit from endorsements, public appearances and other uses of their name, image, and likeness. General Counsel Abruzzo likened the freedom to engage in business enterprises as making players at academic institutions much more similar to professional athletes who are employed by a team to play a sport.  She also described how players at academic institutions have been engaging in “collective action” in a number of areas, such as activism on issues of social justice, speaking out about racism at their colleges, and demanding changes, even going so far as to threaten to withhold their services.  Ms. Abruzzo concluded that activism concerning these types of issues directly concern terms and conditions of employment and therefore is protected concerted activity. Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right to refrain from such activities. General Counsel Abruzzo used this Memorandum to announce that the scholarship football players at issue in the Northwestern University case, and similarly situated players at other academic institutions, are employees under the National Labor Relations Act.  Ms. Abruzzo also made it clear to institutions of higher education that she will consider the misclassification of players as “student-athletes” rather than employees as a violation of the NLRA in and of itself. ESPN estimates the top-tier NCAA athletes can earn up to $1 million per year in sponsorships that use their name, image, and likeness.  Professional athlete labor unions have collectively bargained that players receive a percentage of revenues from their team revenues.  A decision that college athletes can form a union and collectively bargain the terms and conditions of their employment will significantly change the landscape of college athletics. President Biden has stated that he seeks to be the most pro-union president.  In Ms. Abruzzo’s September 29 Memorandum, she is following through with the President’s objective and making it easier for college athletes to unionize.

October 4, 2021

Accommodations

An Employer’s Guide to Addressing Requests for Religious Exemption From a Mandatory COVID-19 Vaccine Policy

Employers mandating that employees be vaccinated against COVID-19 should know how to respond to an employee’s request for a religious exemption from the vaccination policy.  In this post, I discuss the process an employer can use to distinguish an employee’s personal opposition to a vaccination from a sincerely held religious belief that qualifies as a religious exemption and what options an employer has to protect its business. Sincerely Held Religious Belief When an employee requests a religious accommodation, the first question to ask is whether the employee has a sincerely held religious belief, practice or observance which prevents them from being vaccinated.  Title VII of the Civil Rights Act, states that sincerely held religious beliefs “include moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views.”  This vague statement means that employees who have a personal or philosophical disagreement with a vaccine are not entitled to a religious exemption. However, it is difficult to distinguish a personal or philosophical belief from a moral or ethical belief held with the strength of traditional religious views.  The religious belief does not have to be based on traditional religions and could derive from a religion or ethical or moral code with which the employer is unfamiliar. The U.S. Equal Employment Opportunity Commission (EEOC) has stated that employers should generally assume that an employee’s stated religious belief is sincerely held unless the employer has a good faith and objective basis for questioning the religious nature or the sincerity of the stated belief.  There is little guidance as to the definition of a “good faith and objective basis” for questioning a claim of religious belief. Documentation of a Request for Religious Exemption We recommend that employers require employees who claim they have a sincerely held religious belief and request an accommodation, to submit the request in writing explaining the basis for the sincerely held religious belief.  The employer is entitled to request information relating to the accommodation request and require a certification from the employee that the statements, documents and information provided to the employer are true and correct. An employer who has a good faith and objective basis for questioning the religious nature or the sincerity of the stated belief, can request documentation of the religious belief.  Examples of good faith and objective bases for questioning the validity of a claim for religious exemption include: when an employee has never requested an accommodation in the past for religious reasons; an employee has made statements to others that they distrust the vaccine; an employee quotes an online news article challenging the efficacy of the COVID-19 vaccine. These statements reflect personal opposition to the vaccine and are inconsistent with the claim that the vaccination is contrary to the employee’s religious belief.  The types of documents that an employer can request could include: Explanations from the employee about the nature and principles of the employee’s asserted beliefs and information about when, where and how they follow the practice or belief. Religious materials which describe the religious belief or practice. Written statements from others, such as religious leaders, with whom the employee has discussed his or her beliefs or who have observed the employee’s past behavior that evidences this religious belief. Each employee’s request for an exemption should be assessed on a case-by-case basis.  The individual reviewing the request for the religious exemption is entitled to consider whether the employee has engaged in any previous behavior or conduct that either deviates from or is consistent with the principles of his or her beliefs.  For example, perhaps the employee has made previous requests for accommodations for their religious beliefs.  The person reviewing the request is entitled to consider all previous statements made by that employee which may help to ascertain whether the employee’s objection is truly based on a sincerely based religious belief or, rather, is a personal or philosophical objection to the vaccine.  It is advisable for the same person to review and decide all requests for religious accommodation to ensure that these determinations are consistent and objective. An Interactive Process Should be Used to Determine if an Accommodation is Feasible If the religious exemption is granted, the employer should engage in an interactive process with the employee to determine whether the exemption from the COVID-19 vaccine requirement can be accommodated without creating a safety risk for other employees or the public.  Examples of possible accommodations include: Weekly COVID-19 testing; The employee is required to wear a mask at all times; Requiring the employee to maintain social distancing from co-workers and/or others; Move the employee to a more isolated work area where they will be more than six feet apart from co-workers; Reassign the employee to another available position which will allow the unvaccinated employee to work in a more isolated manner. Employers should discuss the possibility of these options with the employee if they are feasible; an employer is not required to give the employee the specific accommodation the employee has requested. Whether any accommodations are feasible depends upon the unvaccinated employee’s job duties; the physical set-up of the work place; whether the employee interfaces with the public; and other characteristics unique to the employer and to the unvaccinated employee’s job responsibilities.  There are situations where accommodations are not possible and, in that case, employers have the option to exclude employees who refuse to be vaccinated from the workplace.  In this situation, the employee could be terminated or placed on an unpaid leave of absence until the pandemic subsides.  Employers should not, however, exclude an employee from the workplace without consulting legal counsel. Accommodations Creating an Undue Hardship Employers can determine that the accommodation requested by an employee for religious reasons is an undue hardship for the employer.  The existence of “undue hardship” in the context of religious accommodation uses a lower standard than is used to determine “undue hardship” under the Americans With Disabilities Act (ADA).  An undue hardship in connection with a religious accommodation is one that would require more than a de minimis (minor) cost or burden to the organization or the business operations.  In contrast, the standard for undue hardship under the ADA is “significant difficulty or expense.”  Certainly, a safety risk or impact on the business operations or objectives can be considered in determining whether there is an undue hardship. Conclusion Religious objections to a mandatory vaccination policy can be very difficult to evaluate.  Employers should be alert to statements which employees make to other employees or to management concerning their personal views of the vaccination. These statements may evidence either a sincerely held religious belief, for which an accommodation may be appropriate, or a personal or philosophical objection to the vaccine, for which no accommodation is required. If you have questions about your vaccine policies or other workplace policies during this challenging time, I am available to help.  Please feel free to phone or email pkarasov@larkinhoffman.com with any questions you may have.

September 9, 2021

Best Practices

What to Do about Vaccinations: Employer Recommendations

On May 28, 2021, the Equal Employment Opportunity Commission (EEOC) updated its Technical Assistance Questions and Answers (Technical Assistance) about COVID-19 and Equal Employment Opportunity laws, including the Americans with Disabilities Act (ADA).  In the Technical Assistance, the EEOC addressed many questions concerning the right of employers to screen for COVID-19 and/or for symptoms of COVID-19.  Much of the Technical Assistance had been previously published but on May 28, the EEOC updated its answers to many of the questions.  One question which had not been clearly answered by the EEOC until the Technical Assistance came out was whether an employer can require all employees physically entering the workplace to be vaccinated for COVID-19.  This question was added in the May 28, 2021 version of the Technical Assistance. The EEOC stated that federal Equal Employment Opportunity (EEO) laws do not prevent an employer from requiring all employees physically entering the workplace to be vaccinated for COVID-19, subject to reasonable accommodation provisions.  Attorneys have been advising clients for many months that it is permissible to enact a mandatory vaccination policy, and the May 28 Technical Assistance confirmed the lawfulness of such a policy.  The purpose of this article is not to discuss reasonable accommodation although obviously, it is an important concern if an employer mandates that all employees must be vaccinated.  A mandatory vaccination policy must allow for exceptions if an employee is suffering from a medical condition that prohibits the employee from being vaccinated, or if an employee has religious objections to being vaccinated.  Rather, this article will discuss a few issues that we have seen with respect to vaccinations. In the updated Technical Assistance, the EEOC also stated that employers can encourage employees and their families to get vaccinated, without violating any discrimination laws. Again, employers have been offering such incentives for many months, but the updated Technical Assistance provides additional regulatory support for this position.   It is also lawful for employers to provide educational information to employees to address concerns about vaccinations, and to raise awareness of the advantages of being vaccinated. Is it legal to ask employees for documentation that they received a COVID-19 vaccination? Normally, it is unlawful for an employer to make inquiries concerning an employee’s medical treatment or condition, unless such an inquiry is job-related and consistent with business necessity. However, the updated Technical Assistance makes it clear that when an employer asks employees whether they obtained a COVID-19 vaccine, the employer is not asking a question that is likely to disclose the existence of a disability.  Thus, requesting documentation of vaccination is not a disability-related inquiry under the ADA.  Employers should not forget that vaccination documentation is medical information about an employee and must be kept confidential. Can an employer publicize which employees have not been vaccinated? The Technical Assistance provides that information about an employee’s COVID-19 vaccination is confidential medical information under the ADA.  Employers must keep this information confidential, as they would any other medical information.  Employers cannot publicize who has and has not been vaccinated. What can an employer do if an employee refuses to be vaccinated? Employers are struggling with the proper way to handle an employee who refuses to be vaccinated and is not refusing because of a medical condition or a religious objection.  Many companies, particularly those which interface with the public, want the public to know that employees have been vaccinated and it is safe to be in physical contact with their employees.  Some companies, faced with the knowledge that a significant number of employees will refuse to be vaccinated, have offered incentives to motivate employees to be vaccinated, and education about the risks associated with COVID vs. the benefits of being vaccinated. Suggestions for dealing with employees who are not vaccinated: Implement alternative work situations for those employees who are not vaccinated.  An example is to stagger employee schedules so that employees who work in close proximity are not in the office on the same days. Allow employees who are not vaccinated to continue to work from home. Continue to require social distancing. Require that all employees wear masks, or request that unvaccinated employees wear a mask. Just last week, a client called asking what to do with a minor rebellion he was encountering where many unvaccinated employees were refusing to wear masks. This employer requires that all employees wear masks.   He asked what he could do?  We told him that, assuming the employees are not refusing to wear a mask because of a medical condition or religious objection, the employer can terminate the employees for refusing to wear a mask. What if vaccinated employees feel uncomfortable being exposed to unvaccinated employees? The General Duty Clause of the Occupational Safety and Health Act requires that an employer provide employees with a work environment free of recognized hazards that are causing or likely to cause death or serious physical harm to employees.  If an employer fails to take precautions to protect employees from the risk of exposure to an unvaccinated employee, they could be violating the General Duty Clause.  Therefore, we recommend that employers continue to require that unvaccinated employees wear masks and that social distancing continue to be enforced.  In addition, the employer should consider the alternatives discussed above.  These actions will help demonstrate the concrete steps an employer has taken to protect workplace safety. What is an employer’s obligation to unvaccinated employees being harassed by other employees? If an employer does not mandate that all employees be vaccinated, the employer should make sure that unvaccinated workers are not harassed or made to feel isolated.  It is permissible to offer incentives to employees who voluntarily receive a COVID-19 vaccination.  The incentive should not be so substantial that it is deemed to be coercive.  Employers should be cautious about conditioning access to training, career development activities, or other work-related events, on being vaccinated.  Employers should enforce their policies concerning harassment, bullying, respect and civility when unvaccinated employees are harassed or mocked because they are unvaccinated. Conclusion As COVID case numbers are going down, and government agencies are reducing mask and social distancing requirements, employers are grappling with how to bring employees back to work, and what COVID health and safety rules will be applied to the workplace. Whether to require that employees be vaccinated is one of the challenging questions for all employers.  The EEOC, the CDC, and state and local governments are loosening up the requirements and giving businesses more flexibility in what they can demand of their employees.  In making these important decisions, employers must balance safety, employee preference, and the impact of mandating vaccinations.

June 7, 2021

General Matters

The American Rescue Plan Act Subsidizes 100% of COBRA Premiums

On March 11, 2021, President Joseph R. Biden signed the American Rescue Plan Act of 2021 (“ARP”).  Among other provisions, the ARP makes COBRA coverage more affordable by subsidizing 100% of the COBRA premiums during the period beginning April 1, 2021, until September 30, 2021, for an employee or dependent who is a COBRA “qualified beneficiary” due to an involuntary termination of employment or an involuntary reduction in hours. This subsidy will not count towards an individual’s gross income. Eligibility The COBRA subsidy is only available to individuals: (1) who are involuntarily terminated or had their hours reduced; and (2) who are enrolled in COBRA coverage (or will elect such COBRA coverage) on or after April 1, 2021, and before the subsidy ends on September 30, 2021. The ARP simply suspends the eligible individual’s obligation to make COBRA premium payments for up to 6 months. Extension of Election Period – Second Opportunity to Elect COBRA The ARP also provides a second opportunity to elect COBRA coverage for certain qualified individuals through the extended election period. An individual who fits the eligibility criteria and who did not initially elect COBRA coverage or discontinued COBRA coverage before April 1 but would otherwise be within his or her 18-month COBRA coverage period between April 1 and September 30, 2021, can elect COBRA coverage from April 1 until 60 days after the plan administrator of the applicable group health plan notifies such individual of the extended election period. COBRA coverage for any COBRA election by these individuals during the extended election period will commence on and after April 1. An individual electing COBRA during the extended election period may maintain the coverage only until the expiration of the COBRA coverage period (which is most often 18 months) he or she would have had if they had elected COBRA when first eligible. For example, an individual first eligible for COBRA on January 1, 2021, who did not elect COBRA until April 1, 2021, will be eligible for COBRA through June 30, 2022. Plan Enrollment Option Employers may allow eligible individuals to switch the coverage option that the individual initially elected at the time of their COBRA qualifying event. With some exceptions, an individual who is currently enrolled in COBRA continuation coverage has up to 90 days after the receipt of notice of the plan enrollment option to enroll in a different coverage option with that employer, provided that (1) the premium of such different coverage is not more expensive than the premium for the coverage in which the individual was enrolled at the time of such termination or reduction of hours, and (2) the different coverage is also offered to similarly situated active employees at the time the assistance eligible individual elects to enroll. If the individual elects the different coverage and such employer permits it, the COBRA subsidies shall apply towards the different coverage. Again, employers are not required by the ARP to make such plan enrollment options available. Reimbursement If an eligible individual makes a COBRA premium payment, “the person to whom such payment is payable” (including a multiemployer plan, employer, and insurer) will reimburse the individual for the amount of the premium paid not later than 60 days after the date on which the individual made the premium payment. Limitation on Subsidy The subsidy terminates if the individual becomes eligible to enroll in any other group health plan or Medicare program. Individuals who fail to notify their employer or health plan that they are no longer eligible for the subsidy may face a financial penalty equal to the greater of $250 or 110% of the premium subsidy after termination of eligibility under the ARP. The subsidy does not extend beyond the period of COBRA continuation coverage itself (which is most often 18 months) so if an individual’s COBRA coverage is set to expire, even if that is in the middle of the subsidy period, the ARP does not require the coverage to be extended through the end of September. For example, if an employee and dependents lost benefits as of March 1, 2020, 18 months of COBRA eligibility would expire at the end of August 2021 and premiums would be subsidized only for 5 months, namely, April through August 2021. Tax Credit The multiemployer plan, employer, or insurer must provide COBRA subsidies to eligible individuals and pay or incur the COBRA premium cost. The ARP provides that the above-mentioned entities can recover the cost of the COBRA premiums that are subsidized by claiming a credit against its quarterly payroll tax liability. If the amount of the credit exceeds the employment taxes due for any calendar quarter, such excess will be treated as an overpayment that would be refundable. The credit, including the refundable portion, may be advanced under rules that will be set out by the Treasury Department. The amount of these credits will constitute the gross income of any entities allowed a credit under the ARP. Notices to Individuals The ARP includes specific notification requirements for employers to amend existing COBRA notice forms or send an additional written notice describing the availability of premium subsidies (along with other specific requirements) to all eligible individuals. The ARP also requires the plan administrator to provide to each individual no more than 45 days but no less than 15 days before the expiration of the subsidy, a written notice that includes clear language regarding the premium subsidies, the expiration date, and how such individual may be eligible for coverage without any premium subsidies through COBRA coverage or a group health plan. The Departments of Treasury, Labor and Health and Human Services are directed to issue regulations and guidance, including model notices for these notification purposes within 30 to 45 days of enactment. What an Employer Should Do Now All multiemployer plans, employers, or insurers subject to the ARP should have a compliance plan in place while awaiting further guidance and model notices from federal agencies. Employers may wish to consult their plan administrators to confirm they will be performing the notification obligations. This article does not encapsulate all of the details required by the ARP, and additional or different regulations and guidance may be issued by federal agencies. For further information please contact Phyllis Karasov at pkarasov@larkinhoffman.com.

March 18, 2021

Best Practices

Does your employee handbook create an employee contract? The answer might surprise you!

This post is co-authored withLarry Morgan, MAIR, SPHR, SHRM-SCP, GPHR Originally published in The Minnesota Society of CPA’s Virtually all employee handbooks contain the statement, “This handbook is not a contract.” Most employers assume with this contract disclaimer none of the policies and provisions in their employee handbook constitute a contract. On Feb. 3, 2021, the Minnesota Supreme Court held in Hall v. City of Plainviewthat a general disclaimer that a handbook should not be construed as a contract may not be effective to prevent a paid time off(PTO) policy contained in the handbook from forming a contract. Findings The court first found that the handbook contained sufficiently definite terms to create an offer for a unilateral contract for PTO. The court reasoned that the handbook detailed an overview of the objectives of the PTO program, a PTO accrual schedule based on employee seniority and hours worked per year, instructions on how employees could use their PTO, procedures for rolling over PTO year over year and procedures by which departing employees could cash out PTO. Further, Plainview relied on the handbook’s terms when it initially denied payment of the employee’s accrued PTO benefits. These provisions, the court reasoned, amounted to, “More than general statements of policy; rather, they provide[d] specific information and procedures by which employees [could] comprehend and take advantage of the City’s PTO program.” The city argued that the handbook disclaimers meant that none of the provisions in the handbook, including the PTO provisions, created an enforceable contractual right. The court disagreed. The court first stated that the disclaimer did not affect the employee’s rights to be paid PTO. Next, the court examined a statement in the handbook that it set a “uniform and equitable system of personnel administration” and “should not be construed as contract terms.” The court found that the second disclaimer was broad and general and was ambiguous with respect to its applicability to the PTO policy. The Minnesota Supreme Court clearly stated that an employer is not required to provide employees with paid time off, unless required by a statute, such as paid sick and safe time. However, if paid time off is offered, it is critical that handbook policies regarding paid time off discuss any applicable restrictions on payment for unused time off. If the policy makes a promise that employees will be paid for unused paid time off, that promise may be a contract. The court did not decide whether the paid time off policy in the city of Plainview’s employee handbook constitutes a contract. The court said that whether Hall is entitled to be paid for his 1,778.73 accrued PTO hours is based on a contractual right. Hall could not recover his accrued PTO without a valid contract entitling him to payment. The case was remanded to district court to decide whether a contract exists and whether Hall satisfied the requirements of the handbook’s PTO payment provision and is owed payment for his accrued PTO under that contract. What does this case mean for Minnesota employers? The case reminds us that employers must comply with the paid time off policies in their handbook. If the employer does not pay separating employees for unused paid time off, they should clearly state this fact in the employee handbook. It is not required that employees in Minnesota be paid at termination for unused paid time off. If there are restrictions on the circumstances in which unused paid time off will be paid (i.e., employees will be paid for up to a specified number of hours of unused PTO regardless of how much they accrued), the handbook should state such restrictions. The problem in the city of Plainview handbook was that the city refused to pay any PTO to Hall, despite the fact that the handbook stated that some or all of unused PTO would be paid when an employee ends their employment with the city, for any reason. Employers should review their handbooks, application forms, offer letters and policy statements for language that could create a potential right to benefits, and give rise to claims of contractual employment obligations or the inability of the employer to modify programs. Failure to pay employees for unused paid vacation, sick leave and PTO when the limits or restrictions for such payment is not specified in the employee handbook, could constitute wage theft under local and state law. Thus, failure to comply with an employee handbook policy on paid time off can expose the employer to a claim of wage theft if employees are promised they will be paid for unused paid time off and they are not. Review policies for the following While not addressed specifically in the court case above, employers should review their employee handbook, offer letters, policy manual and other related documents to include language such as the following: Specific and clear descriptions as to whether separating employees will be paid at termination for unused accrued paid time off, including PTO, sick time and vacation. If employees are to be paid for such unused time, up to specified limits, such limits should be expressly stated. Employers who allow carryover of PTO or vacation into the next year should consider restricting the accrual of additional paid time off once a specified limit has been reached. This will limit the amount of unused paid time off an employee can accrue. The offer letter, handbook and other documents do not constitute an employment contract. A statement regarding employment is “at will” and either party may terminate employment at any time, and for any reason provided that no local, state or federal laws are violated. The employer reserves the right to change, amend, modify or terminate employee compensation and benefit programs at any time (unless protected under a collective bargaining agreement). For multistate employers, continued monitoring of state regulations and a statement that “in the event of contrary local or state regulations, those regulations will apply.” Employers with employees in Minneapolis, St. Paul and Duluth should ensure compliance with the safe and sick leave benefit requirements. Employers may wish to provide clear guidance on use and carryover of paid leave benefits including following the Minnesota expansion of sick, vacation and PTO for employee relatives. Disclaimers in offer letters and stated several times within the handbook. We are here for you Do you have more questions on this topic? Reach out to Larry Morgan at the MNCPA HR Hotline at hrhotline@mncpa.orgor Phyllis Karasov at 952-896-1569 or pkarasov@larkinhoffman.com.

February 26, 2021

Best Practices

Do You Need a Teleworking Policy?

Before the COVID-19 pandemic, most employers were reluctant to allow employees to work from home on a continuous basis.  Many companies prohibited all teleworking or allowed employees only to work remotely when recovering from an illness or when required as a reasonable accommodation.  When COVID-19 hit, many employees began working remotely and it appears that working from home is now, for many employees, a permanent situation.  I, myself, have seen the advantages of working from home although I miss the collegiality and professional dialogue with other attorneys in my firm. It has been estimated that about half of employed adults are currently working from home.  Job applicants have indicated that they place a high value on the ability to work from home.  Flexible scheduling is a significant perk that younger workers prefer, even more than a higher salary. Many employers developed written policies regarding teleworking once it became clear that employees would be working from home for some period of time.  Other employers, thinking that remote working was a temporary situation, do not have written policies on teleworking but instead issue periodic directives, instructions, and procedures to employees who are working from home. Key Elements of a Teleworking Policy If an employer expects that all or a segment of its employees will continue to be working from home, even after the pandemic ends, it may be time to consider developing a teleworking policy.  Although allowing employees to work from home may retain or attract employees, the ability to work outside the office can also create nightmares for an employer.  Whether employees work full-time from home or partially work from home, it is important that employers and employees have the same expectations as to productivity, communications, and compliance with company policies.  Below I have highlighted some key elements of a telecommuting policy: Specify what positions are eligible to work from home. Identify those persons responsible for making the decisions as to whether particular employees or positions can work remotely and how often the employees can work remotely (i.e. how many days per week). Identify the expectations and requirements for employees who will be working remotely.Are employees expected to participate in any meetings in the office?  Do they have flexibility in their work hours?  How often do they need to communicate with their supervisors?  Employers may have concerns about the diligence and reliability of employees who work from home, so the expectations need to be clearly stated.  It may be appropriate to remind employees that when they are participating in video meetings, such as Zoom or Teams meetings, they need to dress appropriately.  How many of us have seen others in Zoom meetings wearing pajamas, sweatshirts or other clothing that they would never wear to an in-person meeting involving the same people as those in the Zoom meeting? Discuss expected communications protocols. Employees should be told when they are expected to be available for telephone conferences, video meetings and other group confabs.  Should employees regularly check-in? Should employees inform their supervisors when they are ready to start their day at their computer?  Will employees have to list the specific tasks they will complete or have completed during the day or during the week? Discuss the equipment which an employee will need for their work and who will provide it. The policy should describe what equipment and supplies the employer will be providing versus the employee, and if provided by the employee, whether the employer will be reimbursing the employee for these supplies and equipment.  Explain what personal use an employee can make of equipment which is provided by the employer, such as a printer and scanner.  Outline the accepted use of a personal device and if or when it is acceptable to download or access company files on a personal device. Security is a critical element of the arrangement for an employee to work from home. Firstly, if employees are accessing a company network or other confidential information, what procedures must they follow from their home office to ensure the security of company networks and communications.  Will the company be providing a shredder or is it up to the employee to discard paper generated during the workday?  What safeguards should the employees be setting up against potential hacks, breaches or theft?  The policy should describe the need to password protect all devices used for work purposes. Expectations of work hours. Many employees working remotely have children at home because their daycare or schools are closed. How much flexibility will employees have to extend their work hours to accommodate taking care of their children, or assisting their children with schoolwork?  Are there specific hours during which employees must be working?  How do employees keep track of the hours they work? Consequences of abuse of the policy. The policy should state that employees can be disciplined for violation of the teleworking policy or any other company policy while working remotely. At some point, an employer may decide to withdraw an employee’s right to work remotely because that employee has been abusing the privilege of working from home. Workers Compensation and Remote Workers Employees who are injured while working at home may be covered by the employer’s workers compensation insurance.  Over 10 years ago, the Minnesota Workers Compensation Court of Appeals considered the question of whether an employee’s injury while working at home was covered by the employer’s workers compensation insurance.  The employee was taking a short break from his computer to get a cup of coffee.  While he was walking down the stairs, he slipped and landed on his back on the steps.  He suffered a fracture of his T9 vertebra and eventually required surgery.  The employee filed a claim for workers compensation insurance alleging that his fall arose out of and in the course of his employment.  The employer and insurer disputed the employee’s claim.  The Workers Compensation Court of Appeals held that when he left his home office to go to the kitchen for a cup of coffee, the employee was no different from an employee who, while working at the office, goes to a kitchen for a cup of coffee.  The court found that the injury arose out of the employee’s employment and therefore was covered by workers compensation insurance. To possibly control workers compensation liability for remote workers, an employer should consider establishing guidelines for a home office such as requiring a designated work area and provide training related to setting up a workstation and appropriate safety measures.  When feasible, conduct periodic checks of employee home offices to identify and eliminate work area safety hazards. This suggestion may not make sense for many, if not most employers, but companies should understand that an injury because of hazardous conditions in an employee’s home may be covered by workers compensation insurance.   Consider setting fixed work hours and meal and rest periods for telecommuters.  This may help establish whether an injury was “in the course of employment.” Conclusion If an employer has a written teleworking policy, the employer should periodically discuss with supervisors and managers whether the teleworking policy is effective and whether it is addressing all issues that arise when employees are working from home.  Employers should also check with the remote employees to discuss how isolated they may feel from the rest of the company, whether they feel they are working at their most effective and efficient level and what adjustments may be appropriate for their schedule and/or in the teleworking policy.  Employers should consult with their attorneys to ensure that their teleworking policy complies with all state and federal requirements.

February 19, 2021

Construction Industry

Did You Know There Is a New Independent Contractor Ordinance in the City of Minneapolis Effective January 1?

The City of Minneapolis determined that many freelance workers (independent contractors) need legal and economic protections since they are not covered by employment laws.  The City, therefore, enacted the Minneapolis Freelance Worker Protections Ordinance (the “Ordinance”).  This Ordinance, effective January 1, 2021, requires companies to enter into written agreements with most freelance workers. The Ordinance contains provisions applicable to a commercial hiring party, and other requirements applicable to an individual hiring party. Commercial Hiring Party A commercial hiring party means any person or entity regularly engaged in business or commercial activity, including a digital network-based entity, who retains a freelance worker to provide any service as part of that business or commercial activity.  A commercial hiring party that retains freelance workers to perform work in the City of Minneapolis must have a written contract with each worker if the worker will perform a minimum of: $600 worth of work within a one year period; or $200 of work within one week. The Ordinance applies to a commercial hiring party that retains a freelance worker not only when the worker provides services directly to that company.  It also applies to a freelance worker who provides services through a digital network to a third party. “Retains” means to enter into a contract through which the freelance worker provides services either to the hiring party or to a third party (such as a digital platform).  For example, if food is delivered in the City of Minneapolis via a digital network, the digital network must have a written agreement with the driver. The written agreement must be signed by the freelance worker and contain the following minimum elements: The name and address of the hiring party and the worker; An itemization of all material services to be provided by the worker; The compensation for the services, including the rate or rates and method of compensation; and The date on which the hiring party must pay the agreed-upon compensation or the mechanism by which the date will be determined. Where the parties are not able to specify the total compensation prior to performance, the written contract must describe the method by which the total compensation will be determined and identify which party is responsible for maintaining the information necessary to determine the compensation (such as tracking the number of hours worked, the applicable project or other method by which the freelance worker is paid). If the commercial hiring party is responsible for tracking the information necessary to determine the compensation, the commercial hiring party must provide the freelance worker with an earnings statement setting forth the total compensation being paid and a detailed calculation by which the amount was determined. When the independent contractor/freelance worker is responsible for keeping track of this information, they must provide the commercial hiring party with an invoice stating the total compensation amount and a detailed calculation by which the amount was determined. If the contract does not specify the date or mechanism for when payment becomes due, payment must be made no later than 30 days after the completion of services. Individual Hiring Party Individual hiring party means any person who retains a freelance worker to provide any service in the City of Minneapolis when the person is acting in a personal capacity and not as part of or on behalf of a business or commercial activity.  These provisions could apply to painters, handymen, cleaning persons, nannies, groundskeepers, and other freelancers who perform services for an individual. The Ordinance applies if the compensation is $600 or more, either by itself or when aggregated with all contracts for services between the same individual hiring party and freelance worker during the calendar year, for work performed in the City of Minneapolis. Individual hiring parties and freelance workers performing services in the City of Minneapolis are required to have a written contract only if the freelance worker requests a written contract. The freelance worker must present a proposed written contract to the individual hiring party before the work begins.  The written contract should include the same information described above for a commercial hiring party and both parties must sign the contract. The Ordinance does not obligate an individual hiring party to retain the services of a freelance worker who has proposed a written contract, nor does it require either party to enter into a contract if the parties are unable to agree upon the terms. Penalties The Minneapolis Department of Civil Rights investigates and enforces the Ordinance.  It is a violation of the Ordinance for a hiring party to fail or refuse to pay the agreed-upon compensation or require the freelance worker to accept as a condition of timely payment less compensation after the work has commenced.  If a hiring party is found to have violated the Ordinance, a freelance worker may be able to recover compensatory damages in the amount of the unpaid sum and liquidated damages up to double the compensatory damage award.  There are also additional civil fines, fines for repeat violations and the City’s Department of Civil Rights can seek reimbursement for investigation costs. If a commercial hiring party fails to create a written contract, it is subject to a fine of up to $250 for each violation, if the freelance worker can establish they requested a written contract and made the hiring party aware of the requirement that the contract be in writing. A freelance worker who passes only incidentally through the City in the performance of the contract is not covered by this Ordinance. No Effect on Contract Validity The Ordinance provides that it is a defense to any alleged violation under the Ordinance that the freelance worker has not completed the services contracted for, unless the failure to complete such services was caused by the hiring party’s failure to cooperate in good faith with the freelance worker.  The hiring party cannot withhold timely payments for completed services because of a dispute over whether other services had been completed. The Ordinance makes clear that the existence of a written contract that complies with the Ordinance is not be construed as evidence that an individual is properly classified as an independent contractor. Recommendation Any commercial hiring party which uses an independent contractor to perform any services in the City of Minneapolis should review their written contract to ensure that it contains the above-described elements.  If no contract exists, the company should immediately prepare such a contract. If you have any questions as to whether this Ordinance applies to a particular freelance worker or any other questions concerning the requirements of this new Ordinance, you can contact a Larkin Hoffman labor and employment law attorney. Tags

January 26, 2021

Collective Bargaining

The Changing Landscape of Union Organizing and Worker Activism

Union organizing is down as compared to previous years, but that does not mean employers should believe that support for labor unions has decreased.  NLRB records indicate that the number of representation petitions filed in 2020 is dramatically down from each of the previous four years.  This reduction in representation petitions can be attributed to the challenges for union organizers to personally meet with employees, as well as the fact that for many employees, their primary focus has been on retaining their jobs, looking for jobs, and keeping food on the table.  Joining a union may not be the highest priority for many employees. We are seeing a lot of signals that union activity will be strong once the vaccine is widely available and employers are able to return to their former production and service levels.  Many employees question whether their employers are implementing adequate safety precautions or providing sufficient personal protective equipment.  Some employees have experienced a layoff, are concerned about a layoff, or feel they should be given more flexibility for leaves of absence due to the illness or vulnerability of their family members.  Employees may believe these problems can be addressed by electing a union to represent them.  We have heard that some employees want their employers to advocate for social activism and be involved in championing organizations seeking to promote racial justice, such as Black Lives Matter.  Again, they think a union will buoy these efforts. What steps can an employer take to prepare for a  possible increase in union activity?  Obviously, positive employee relations and human resources practices will go a long way to persuade employees their employer respects and values their contributions and reduce interest in union representation.  Other suggestions include: When the employer becomes aware of employee concerns, respond to them. Employees who feel ignored may be convinced that they need a third party to represent them. Supervisors should have a positive relationship with their employees. Treat subordinates with respect.  Listen to their problems. Management should be visible and show an interest in their employees. Walk through the workplace and talk to employees.  Welcome employees to come into their offices to talk to them.  Employees need to feel their opinions matter. Train supervisors about what they can say about labor unions and union representation. When a union petition has not been filed, there is far more flexibility in what supervisors can say to employees to educate them that a union will not make the workplace any better and that a union cannot carry out most of its promises.  Many supervisors feel uncomfortable when asked by employees about labor unions because they do not understand what they can legally say to employees. Be aware of the representation process when a petition is filed with the NLRB. There is a short time period between the date the petition is filed, and the election is held, so an employer should be ready to act once made aware a petition has been filed, rather than spending several days learning about the process. Supervisors should have their eyes and ears open so they can detect whether employees are interested in a union. Sometimes the petition is a complete surprise, but often, the supervisors are already aware of employee discontent.  Sometimes this discontent can be addressed so that employees do not feel they need a third party to represent them. Listen to the podcast of Phyllis Karasov, with assistance from her colleague Dan Ballintine, to learn about union organizing going on in the Twin Cities, as well as what to expect with union organizing when the pandemic is over.

January 11, 2021

General Matters

The COVID -19 Vaccine is Here! What’s Ahead?

Now that the first COVID-19 vaccines are being delivered and administered and a second vaccine is close behind, employers are asking whether they can require that employees be vaccinated.  In September,  Dan Ballintine and I recorded a podcast on mandatory vaccines. On December 16, 2020, the EEOC issued guidance on the ADA and vaccines.  Although this guidance does not change the information that Dan and I provided in our podcast, I thought it would be helpful to highlight a few points the EEOC makes.  The EEOC addressed vaccinations in the publication “What You Should Know About COVID-19 and the ADA, the Rehabilitation Act and Other EEO Laws.”  Below you will find several highlights of the EEOC’s guidance. Question: Is asking or requiring an employee to show proof of receipt of a COVID-19 vaccination permissible under the ADA? Answer:  The general rule is that employers are not allowed to ask about an employee’s medical condition unless it is job-related and consistent with business necessity.  In its December 16 guidance, the EEOC said that asking or requiring an employee to show proof of receipt of a COVID-19 vaccination is not a disability-related inquiry and therefore it is a permissible question. Question:  If an employer requires vaccination when they are available, how should it respond to an employee who indicates that he or she is unable to receive a COVID-19 vaccination because of a medical condition? Answer:  Employers have the right to have qualification standards that include a requirement that an individual does not pose a direct threat to the health or safety of individuals in the workplace.  If a COVID-19 vaccination is required, the employer must show that an unvaccinated employee would pose a direct threat due to a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation. Therefore, employers dealing with an employee who refuses to take the COVID vaccine should conduct an individualized assessment of four factors in determining whether a direct threat exists: The duration of the risk The nature and severity of the potential harm The likelihood that the potential harm will occur The imminence of the potential harm A conclusion that the employee poses a direct threat would include a determination that an unvaccinated individual will expose others to the virus at the work site.  The EEOC guidance is clear that if an employer determines that an individual who cannot be vaccinated due to a medical condition poses a direct threat at the work site, the employer cannot exclude the employee from the workplace without undergoing the interactive process to determine if there is a reasonable accommodation that would eliminate or reduce this risk. If the employee poses a direct threat that cannot be reduced to an acceptable level, the employer can exclude the employee from entering the workplace.  This does not necessarily mean the employer may automatically terminate the employee.  Employers will need to determine if there are any other EEO laws that may be implicated. Question:  How should an employer respond to an employee who indicates that he or she is unable to receive a COVID-19 vaccination because of a sincerely held religious practice or belief? Answer:  Once an employer is on notice that an employee’s sincerely held belief, practice or observance prevents the employee from receiving the vaccination, the employer must provide a reasonable accommodation for the religious belief, practice or observance unless it would pose an undue hardship.  “Undue hardship” with respect to a sincerely held religious practice or belief is far different from undue hardship under the ADA.  Under Title VII, undue hardship means that the accommodation creates more than a minimal cost or burden on the employer.  If an employee requests a religious accommodation and an employer has an objective basis for questioning either the religious nature or the sincerity of a particular belief, practice or observance, the employer would be justified in requesting additional supporting information.  Assuming the employee has a sincerely held religious practice or belief, and there is no reasonable accommodation available, the employee can be excluded from the workplace. Conclusion Once there is sufficient COVID-19 vaccine available, employers can require that employees provide evidence of COVID-19 vaccination before they can enter the workplace.  The specific evidence an employer can require to demonstrate that the employee has been vaccinated is unclear at this time.  If an employee says that he or she cannot be vaccinated because of a sincerely held religious belief or practice or because of a disability, the employer will have to engage in the interactive process and decide if there are any reasonable accommodations that can be made to allow that employee to work.  Before terminating an employee for failing to be vaccinated, an employer should contact an attorney to ensure that there are no other laws that may be implicated.

December 21, 2020

Best Practices

The Minnesota Employer’s Guide to Navigating Workplace Issues During COVID-19

When COVID-19 began its pernicious spread, causing Americans to lock down and employers to close or curtail their workplaces, lawyers were busy advising clients on required leaves of absence, the eligibility of laid-off employees for unemployment compensation and other paid benefits, as well as other legal issues associated with closing a business or sending a workforce home. Employees are a company’s most important asset.  Without employees, an employer is unable to manufacture its goods, provide the services it offers, or engage in its normal business activities.  We have seen many clients struggle to balance the business and financial needs of their company with compassion and concern for their employees. As restrictions and shut-down orders are diminishing, many companies are moving from concerns about closing their business to consideration of the best way to operate during the pandemic.  Many employers continue to allow all or a substantial number of employees to continue to work from home, but are seeking advice on how best to ensure employee accountability and efficiency when working remotely.  Other employers are dealing with the challenges of returning employees to the workplace when some do not want to return. The Labor and Employment Law practice group at Larkin Hoffman thought it would be helpful to prepare a resource that employers could use as a starting point for evaluating the legal issues associated with operating a business in the current COVID-19 environment. We have prepared The Minnesota Employer’s Guide to Navigating Workplace Issues During COVID-19 to assist employers grappling with the complex legal and human resources questions that arise.  This guide is an additional resource to the articles, blog posts, webinars and podcasts which can be found in Larkin Hoffman’s COVID-19 Resource Center.  Please understand that this guide is not intended to be definitive legal advice, but rather a resource for employers to review in order to identify potential issues and when to seek legal counsel to assist with the implementation of decisions. Our labor and employment attorneys are available for consultation and advice during the pandemic.  We hope you find The Minnesota Employer’s Guide to Navigating Workplace Issues During COVID-19 to be a helpful resource. View and download a copy here.

October 1, 2020

General Matters

To Require Vaccines or Not: That is the Question

We are all waiting for a COVID-19 vaccine. When we have a vaccine, can an employer require that applicants and employees be vaccinated against COVID-19? Employers have a legitimate desire to keep their workplaces safe and to protect their employees from contracting COVID-19 in the workplace. Phyllis Karasov and Dan Ballintine discuss the practical and legal issues associated with an employer mandatory vaccination program. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance

September 11, 2020

Best Practices

Phyllis Karasov and Dan Ballintine Discuss Re-opening a “Safe” Workplace: OSHA, ADA and More

Employers are legally required to make their workplaces “safe” for their employees and customers.  What does “safe” mean, given that no employer can guarantee a virus-free workplace?  What are the rules on screening employees, taking temperatures, and refusing to allow employees showing symptoms of COVID-19 into the workplace?  This session will talk about how to make the workplace safe, OSHA guidance, how to handle employee requests for reasonable accommodation for medical conditions that place them at higher risk if they become infected with coronavirus, whether employees should be required to sign waivers and more. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance.

May 26, 2020

Best Practices

Re-Opening A Business the Right Way: Tips to Avoid Pitfalls

Phyllis Karasov and Dan Ballintine discuss the matters employers need to consider when re-opening businesses after the Covid-19 shutdowns. Recalling only some employees, screening employees before they enter the workplace and dealing with employees who refuse to return to work are among the issues discussed. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help. Please reach out for additional guidance

May 7, 2020

General Matters

DOL Finally issues “Major” Temporary Rules Under the FFCRA for Small Businesses (Under 50 Employees)

This is the first of several articles in which Larkin Hoffman attorneys will be discussing various topics covered in the Temporary Rule. On April 1, 2020 the Department of Labor (“DOL”) implemented and published a 124-page rule covering all aspects of the Families First Coronavirus Response Act (“FFCRA”). According to the Small Business Reports, there are 5,755,307 private businesses in the United States with less than 50 employees, representing 96% of all impacted businesses potentially covered under the FFCRA (businesses with fewer than 500 employees). These millions of small businesses have been waiting to receive some explanation of their obligations, and the possibility of some exemptions from this Act. As a reminder, under the FFCRA, small businesses may be exempted from the requirement to provide paid sick and family and medical extended leave to employees for certain COVID-19 related reasons under the following conditions: An employer, including a religious or non-profit organization, with fewer than 50 employees (small business) is exempt from providing paid sick leave under the EPSLA and expanded family and medical leave under the EFMLEA when the imposition of such requirements would jeopardize the viability of the business as a going concern. A small business under this section is entitled to this exemption if an authorized officer of the business has determined that:The leave requested would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity; The absence of the employee or employees requesting leave would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed to perform the labor or services provided by the employee or employees requesting leave and these labor or services are needed for the small business to operate at a minimal capacity. To elect the small business exemption, the employer must document that a determination has been made to the criteria set forth above. The employer should NOT send such documentation to the Department, but rather retain the records in its files. Regardless of whether a small employer chooses to exempt one or more employees, the employer is still required to post a notice pursuant to Section 826.80. When the above listed reasons exist, the employer may deny paid sick leave or Expanded Family and Medical Leave only to those otherwise eligible employees whose absence would cause the small employer’s expenses and financial obligations to exceed available business revenue, pose a substantial risk, or prevent the small employer from operating at a minimum capacity, respectively. Under those existing circumstances the small employer must document the facts and circumstances that meet those criteria to justify such a denial. In general, under the FFCRA’s leave provisions, employees have a right to be restored to their previous position or and equivalent one upon return from the leave in the same manner that an employee would be returned to work under the FMLA. However, businesses with fewer than 25 employees are not required to reinstate employees if all four of the following conditions are met: The employee took leave to care for his or her son or daughter whose school or place of care was closed or whose childcare provider was unavailable; The employee’s position no longer exists due to economic or operating conditions that (i) affect employment and (ii)) are caused by a public health emergency (i.e. due to COVID-19 related reasons) during the period of the employee’s leave; The employer made reasonable efforts to restore the employee to the same or an equivalent position; and If the employer’s reasonable efforts to restore the employee fail, the employer makes reasonable efforts for a period of time to contact the employee if an equivalent position becomes available. The period of time specified to be one year beginning either on the date the leave related to COVID-19 reasons concludes or the date twelve weeks after the employee’s leave began whichever is earlier. In exercising its authority to exempt certain employers with fewer than 50 employees, the DOL balanced two potentially competing objectives of the FFCRA. On the one hand, the leave afforded by the Act was designed to be widely available to employees to assist them with navigating the social and economic impacts of COVID-19, as well as public and private efforts to contain and slow the spread of the virus. On the other hand, the DOL recognized that FFCRA leave entitlements have little value if they cause an employer to go out of business and, in so doing, deny employees not only leave but also their jobs. The DOL attempted to extend the leave benefits as broadly as practicable, but not in circumstances that would significantly increase the likelihood that small businesses would be forced to close. The Employment, Labor and Benefits team at Larkin Hoffman is available to help. Please reach out  for additional guidance.

April 3, 2020

General Matters

DOL Regulations Governing Documentation Requirements for Employees Taking Emergency Paid Sick Leave and Expanded Family and Medical Leave

On April 1, 2020, the U.S. Department of Labor Wage and Hour Division posted a temporary rule issuing regulations pursuant to the Family First Coronavirus Response Act (FFCRA). The regulations outline, among other issues, notice and documentation requirements that an employee must provide to his or her employer in order to receive benefits from the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA). In order to qualify for leave under the EPSLA or EFMLEA, the employee must provide a signed statement that includes: (1) the employee’s name; (2) the date or date range that the employee is requesting leave for; (3) the COVID-19 related qualifying reason; and (4) a statement providing that the employee is unable to work or telework because of the qualifying COVID-19 reason. There are additional documentation requirements that depend on the qualifying reason for which the employee seeks leave. Requirements Under the Emergency Paid Family Leave Act There are six qualifying reasons that allow an eligible employee to take paid sick leave under the EPSLA. It is important that employers maintain documentation that supports each employee’s leave, in order to receive the appropriate tax credits. Below is a list of the qualifying reasons pursuant to the EPSLA and the documentation required. The employee is subject to a Federal, State or local quarantine or isolation order. The employee must provide his or her employer the name of the governmental entity that issued the quarantine or isolation order. This may include a state or county level “shelter-in-place” or “stay-at-home” order issued by the governor or the local Public Health Official where the employee lives. The employee is advised by a health care provider to self-quarantine due to COVID-19 concerns. The employee must provide his or her employer with the name of the health care provider who advised them to self-quarantine due to concerns related to COVID-19. The advice to self-quarantine must be based on the health care provider’s belief that the employee has, or may have, COVID-19 or is particularly vulnerable to COVID-19. The employee is experiencing COVID-19 symptoms and seeking a medical diagnosis. Symptoms that could trigger this reason include, but are not limited to, fever, dry cough, shortness of breath, or other COVID-19 symptoms identified by the CDC. Paid sick leave is limited to the time the employee is unable to work because he or she is taking the steps to obtain a medical diagnosis. For example, this may include the time the employee spends making, waiting for, or attending an appointment to test for COVID-19. There is no specific documentation required for this reason. The employee is caring for an individual subject to a federal, state or local quarantine or isolation order, or is caring for an individual who has been advised by a health care provider to self-quarantine due to COVID-19 related concerns. The employee must provide the employer with either (1) the name of the governmental entity that issued the quarantine or isolation order to which the individual being cared for is subject; or (2) the name of the health care provider who advised the individual being cared for to self-quarantine due to concerns related to COVID-19. These individuals must meet the same requirements of reason (1) or (2) respectively, for the employee to qualify for leave. Additionally, the individual being cared for must be an immediate family member, roommate, or similar person with whom the employee has a relationship with that would generally require the employee to care for that person if he or she self-quarantined or was quarantined. The employee is caring for his or her child if the child’s school or place of care is closed, or the child’s usual care provider is unavailable due to COVID-19 related reasons. The employee must provide the employer with (1) the name of the child being cared for; (2) the name of the school, place of care, or child care provider that has closed or become unavailable; and (3) a representation that no other suitable person (co-parent, co-guardian, or the usual child care provider) is available to provide the care the employee’s child needs. Documentation that the school, place of care or child care provider has closed or is unavailable due to COVID-19 may take the form of a posting on the applicable government, school, or day care website, an article or story in the local newspaper, or an email to the employee from the school or child care provider. The employee is experiencing a substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and Secretary of Labor. There is no documentation required for this reason. Emergency Family and Medical Leave Expansion Act Unlike with the EPSLA, there is only one qualifying reason that will allow an employee to take leave pursuant to EFMLEA. The employee must be caring for his or her child whose school or place of care is closed, or the child’s usual care provider is unavailable due to COVID-19 related reasons. Similar to the above-mentioned qualifying reason 5, the employee must provide the employer with (1) the name of the child being cared for; (2) the name of the school, place of care, or child care provider that has closed or become unavailable; and (3) a representation that no other suitable person (co-parent, co-guardian, or the usual child care provider) is available to provide the care that the employee’s child needs. Additionally, documentation that sufficiently provides notice that the school, place of care or child care provider has closed or is unavailable due to COVID-19 may take the form of a posting on the applicable government, school, or day care website, an article or story in the local newspaper, or an email to the employee from the school or child care provider. The employer may also request additional documentation as needed to support its request for tax credits in accordance with the FFCRA. An employer should carefully follow the documentation requirements listed above because the employer must be able to substantiate each employee’s claimed leave in order to receive all of the applicable credits. The Employment, Labor and Benefits team at Larkin Hoffman is available to help. Please reach out  for additional guidance.

April 3, 2020

General Matters

What the Paycheck Protection Program Offers Nonprofit Organizations and Small Businesses

The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) provides important public funding to small businesses. The following are some of the highlights of the Paycheck Protection Program (the “Program”) which is part of the CARES Act. This Program is an expansion of the Small Business Administration (“SBA”) 7(a) loan program. The available pool for these loans is $349 billion.  Loans will be made on a first-come, first-serve basis, so businesses should apply as soon as possible. The information below is based on the Interim Final Rule promulgated by the SBA on April 2, 2020. Who Can Borrow? Businesses and nonprofits that employ fewer than 500-employees can borrow from the government under the Program. For businesses in the accommodations and food service sector (NAICS code beginning with 72) the 500-employee limit applies to each location. Full-time and part-time employees are counted. Sole proprietors, independent contractors and other self-employed individuals are also eligible borrowers. Eligible nonprofit organizations must be exempt under Section 501(c)(3) of the Internal Revenue Code or a “veteran organization” under Section 501(c)(19). How Much Can an Eligible Business Borrow? A small business can borrow up to 2.5 times its average monthly payroll costs over the last 12 months (up to $10 million).  So, for example, if an employer’s average monthly payroll in the last 12 months was $100,000, the employer can borrow up to $250,000 under the Program. Payroll costs cannot include compensation exceeding $100,000 annualized for any employee, federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, and qualified sick and family leave wages paid pursuant to the Families First Coronavirus Response Act. Thus, it is unclear how the allowable loan amount will be calculated when payroll taxes and sick and family leave wages, which are to be subtracted from the allowable amount of the loan, will not be known until after June 30, 2020. Loan Forgiveness Borrowers under the Program can apply for forgiveness of their loans. The amount that can be forgiven will depend, in part, on the total amount of payroll costs, payments of interest on mortgage obligations incurred before February 15, 2020, rent payments on leases dated before February 15, 2020, and utility payments under service agreements dated before February 15, 2020, over the 8-week period following the date of the loan. No more than 25% of the loan amount forgiven may be attributable to non-payroll costs. Reduction of Loan Forgiveness The CARES Act describes two potential situations that would reduce the amount of the loan to be forgiven.  Reduction of loan forgiveness is not addressed in the Interim Rule other than to say that the SBA will issue additional guidance on loan forgiveness. The two situations described in the CARES Act that would reduce the amount forgiven are: If there is a reduction of FTEs during the 8-week period compared to the lower of prior periods February 15, 2019 through June 30, 2019 or January 1, 2020 through February 29, 2020.  The average number of FTE employees is determined by the average number of FTEs for each pay period within the month. If the amount of any reduction in total salary or wages of any employee employed during the 8-week period is in excess of 25% of the total salary or wage of such employee during the most recent quarter ending before the 8-week period. Unless otherwise stated in the expected guidance on loan forgiveness, to demonstrate they qualify for loan forgiveness, borrowers will be required to submit documentation, such as payroll tax filings, unemployment insurance filings, canceled checks or mortgage interest payments. If Borrowers Lay Off Employees, They are Still Eligible for Loan Forgiveness Under the CARES Act, Borrowers that have laid off or reduced salaries of employees between February 15, 2020 and the date which is 30 days after the enactment of the CARES Act, will not be subject to a reduction in the loan amount forgiven to the extent the borrower has resurrected its FTE level or eliminated the compensation reductions by June 30, 2020. This may change when the SBA issues its promised guidance on loan forgiveness. Loan Terms The interest rate for these loans is 1% and collateral and guarantee requirements do not apply.  The portion of a loan that is not forgiven must be repaid within 2 years of the disbursement of the loan proceeds. Interest is deferred for 6 months following the disbursement of the loan, with discretion to extend deferment for one year. Eligibility for Loan A borrower must certify that they were in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, that the uncertainty of current economic conditions makes the loan request necessary to support ongoing operations; the funds will be used to retain workers and maintain payroll, or make the mortgage, lease or utility payments; that the business does not have an application pending for a loan for the same purpose or amounts applied for; and other matters. Where to Apply for the Loan Loans can be obtained from SBA lenders, community development organizations and micro-lending institutions. Emergency Economic Injury Disaster Loan Program (“EIDL”) Nonprofit corporations and other small businesses are also eligible to apply for an EIDL.  An employer cannot receive loans under both the EIDL Program and the Paycheck Protection Program and any amounts advanced would be reduced for any amount of a Paycheck Protection Program loan that is forgiven. An EIDL does not require personal guarantees or certification that the business has been in operation for at least a year or a demonstration that the business was unable to obtain credit elsewhere.  Applicants for an EIDL can request an advance of up to $10,000 from the SBA.  The SBA must provide such advance within 3 days.  If the borrower is ultimately not approved for an EIDL, the advance does not have to be repaid.  The advances can be used for approved purposes including providing sick leave due to the COVID-19 crisis, maintaining payroll, making rent or mortgage payments, meeting certain increased costs and repaying prior debt obligations. Click here for detailed information on the EIDL program.

April 3, 2020

General Matters

Employment Law Implications of Coronavirus

  Updated 3/16/2020 An employer’s response to the coronavirus pandemic can change from day-to-day, depending on guidance and recommendations issued by the CDC, state departments of health, OSHA and the World Health Organization. The questions employers are asking are changing depending on the day, as are the answers! Can employers question their employees about their recent travel for personal reasons? Questioning employees about their travel could, to some employees, imply invasion of privacy and the fear of potential discrimination. Many employers are asking employees to voluntarily inform their employer of their personal travel plans so the employer can decide whether the employees should be quarantined at home upon their return. An employer can inform employees that they are monitoring the coronavirus and making work-related travel decisions based on the coronavirus. They can provide employees with information about the countries that have experienced cases of coronavirus. If feasible, one person should be designated as a contact person for employees who have questions about coronavirus, have concerns about other employees and their symptoms, or fear that they may have been exposed to coronavirus. Employees should be given reassurance that these contacts will be kept confidential and will be shared with others only on a need to know basis or if required by any government agency. Can employers ask employees about their health? The Americans with Disabilities Act (ADA) prohibits an employer from making a medical inquiry or requiring medical examinations of employees, except in very specific circumstances. In general, the ADA prohibits employers from requiring medical examinations unless they are job-related and consistent with business necessity, such as if the employee poses a direct threat to others. However, because coronavirus has been declared as a pandemic, employers can ask ill employees about their symptoms, and assess whether they will allow the employee to remain in the workplace. They can take the temperature of an employee, because fever is a known symptom of coronavirus. Can employers require employees to take unpaid time off if they are ill or they have been exposed to coronavirus? If an employee has exhausted their paid time off, or they do not want to use their paid time off while home, employers face a difficult problem. It can be expensive to offer employees paid time off because the employer has requested that they not come to the workplace. If paid time off is not offered, or the employee is required to use their paid time off, they may not voluntarily report symptoms or self-quarantine themselves at home. There is no legal requirement that an employer provide paid time off to employees asked or required to remain at home and they cannot work remotely, unless otherwise required by an applicable collective bargaining agreement. Nonexempt employees do not have to be paid for hours not worked. Employers should be cautious with exempt employees. The Fair Labor Standards Act does not allow an employer to make deductions from salary for partial days not worked in a week. A deduction is permitted for absences which are covered by paid sick time or other paid time off. If an exempt employee is absent all week they do not have to be paid for that week. Can employers require employees to take unpaid time off if they are ill or they have been exposed to coronavirus? If an employee has exhausted their paid time off, or they do not want to use their paid time off while home, employers face a difficult problem. It can be expensive to offer employees paid time off because the employer has requested that they not come to the workplace. If paid time off is not offered, or the employee is required to use their paid time off, they may not voluntarily report symptoms or self-quarantine themselves at home. There is no legal requirement that an employer provide paid time off to employees asked or required to remain at home and they cannot work remotely, unless otherwise required by an applicable collective bargaining agreement. Nonexempt employees do not have to be paid for hours not worked. Employers should be cautious with exempt employees. The Fair Labor Standards Act does not allow an employer make deductions from salary for days not worked in a week during which the employee provided more than de minimis work. A deduction is permitted for absences which are covered by paid sick time or other paid time off. If an exempt employee is absent all week they do not have to be paid for that week. What issues should an employer consider when employees are working from home? Because the CDC is recommending social distancing to reduce the spread of coronavirus, many, if not most, employers are allowing employees to work from home when they can. Employers should assess each position and determine if some or all functions can be performed at home. Employers should survey employees to determine their technology capabilities at home, and what resources or equipment the employer is willing to provide to enable the employees to work at home. Employees should be told that they may be asked to perform duties not normally in their job descriptions so that work is carried out as efficiently as possible. The employer should also be clear that working remotely is a temporary measure and employees will be expected to return to the workplace when it is determined safe to do so. Nonexempt employees should record and report their hours worked so that they can be properly paid.

February 27, 2020

Best Practices

Should You Buy Employment Practices Liability Insurance?

Over the past decade or so, more and more employers have purchased employment practices liability insurance (EPLI) through their agents. In general, EPLI provides employers with coverage, usually for both defense costs and damages potentially awarded in cases involving claims of discrimination or harassment by employees, overtime, and other allegedly unfair employment practices. At first glance, EPLI coverage seems to be a no-brainer: the employer pays a premium and gains the peace of mind from knowing that if a lawsuit is commenced, insurance will generally pick up the tab, subject to exhaustion of some type of deductible. But employers should not be too hasty to sign the dotted line on an EPLI policy. Often, such policies allow the insurer to dictate the lawyer who will represent the employer in any litigation. And in most cases, that lawyer will be from a firm which is listed as one of the insurer’s “panel counsel,” a group of firms that have contracted with the insurer to keep their rates down in return for referrals of EPLI cases. That, in and of itself, can create a conflict of interest. Any lawyer an employer hires to defend it should solely look out for the interests of the employer. But with panel counsel, the lawyer often has the competing concern to maintain a solid relationship with the insurer which, after all, is feeding cases to the lawyer. That can create situations where the lawyer is not necessarily doing what is solely in the best interests of the employer. For example, an employer may wish to exonerate itself and take a case to trial. The insurer, of course, may prefer to avoid that expense and push for a quick settlement. This can present a conflict for the lawyer, who was brought into the case by the insurer and almost certainly hopes to continue to get referrals of cases from the insurer in the future. In a real-world example, in the summer of 2019, an employer sued its EPLI insurer and its panel-provided lawyer in the Los Angeles Superior Court for bad faith and legal malpractice. The employer, who had been sued by a former employee on a multitude of claims, alleged the lawyer consistently treated the insurer as the true client, and defended the case in a manner which directed liability to the claims with little or no insurance coverage and away from those for which there was strong EPLI coverage. In other words, the lawsuit alleged the lawyer handled the case with an eye toward benefitting the insurer, as opposed to the employer, who should be the true client. And potential pitfalls with EPLI coverage are not limited to the possible conflicts of interest with panel counsel. Many EPLI policies limit the type of claims they cover. For example, they often exclude contractual claims for wages, or payment of damages for overtime. In situations where an employee has asserted a myriad of claims against an employer, as is often the case, it is typical for only some of the claims to be covered by insurance. In those situations, the EPLI insurer may agree to pay for an employer’s defense, but only to the point where the claims covered by insurance remain in the case. If the insured claims are successfully dismissed, an employer may have to find new counsel at that point to continue to defend the uninsured claims. The employer is also using an insurance selected attorney to represent them in a claim which is not covered and for which they may not have as much interest as they do in a covered claim. Many employers decide to hire their own counsel to represent them in uncovered claims to protect them from a disinterested insurance attorney. In the end, EPLI coverage can certainly be a smart and integral part of employers’ risk mitigation strategies. But do not sign such policies blindly. Consider adding clauses which allow the employer to choose its own lawyer and give the employer sole discretion on when to settle and determine strategy for defending the case, and other such clauses.

February 21, 2020

Best Practices

Wellness Fees, Service Charges, and Automatic Gratuities, Oh! My!

If you have eaten out recently, you may have seen an additional charge at the bottom of your bill that says something like “health care 3%” or “3.9% mandate compliance surcharge.” As restaurant and other service-industry employers face growing employee costs further eroding already razor-thin margins, many increasingly add extra charges to their bills to help cover these costs. The CityPages recently published an article looking into the precarious restaurant situation and the use of service fees to try to ease the pain. However, mandatory service charges also face push back—with one restaurant group facing a lawsuit over their inclusion of a 3 percent wellness fee added to their bills. While most media attention has focused on such service charges in the restaurant industry, the service-charge rules apply to any service-oriented employers considering adding a service charge to their bills (For example, hotels often add a “resort fee” to their bills.). So, are these charges legal? As with most things when it comes to the law, the answer depends upon the situation. A service charge or fee is a mandatory charge that is added to a customer’s bill in addition to the basic charge for products and services. Employers are not required to add service fees to their bills. Properly done, employers can legally charge customers a service fee. Improperly done, additional charges can be considered employee gratuities (a/k/a “tips”) under Minnesota law but income to the employer under tax law. As discussed in my prior post about the Dos and Don’ts of Tipping, Minnesota has strict laws about tipping policies. If you are an employer that is considering adding a service charge to customer bills, you will want to make sure your policies comply with these laws. Under Minnesota law, any mandatory additional charge is considered a gratuity to the employee by default. There are two exceptions: A mandatory charge is not considered a gratuity if it would be completely unreasonable under the circumstances for the customer to interpret the charge as “payment for personal services rendered.” For example, it would be unreasonable for a customer to think the charge is a gratuity if an employee directly tells the customer that the charge “is not a gratuity.” However, relying on this type of exception is highly risky because it depends upon the facts of each situation and can easily be disputed. A mandatory charge is also not considered a gratuity if “clear and conspicuous notice” is provided to customers. The rules defining this standard are very particular about what type of notice is “clear and conspicuous.” However, the notice includes printing a statement that the charge “is not a gratuity” clearly in at least 9-point font on the menu or bill. This is the most common approach used by restaurants in the Twin Cities. The use of service fees varies widely and is often rather ambiguous. If you decide to implement a service charge, you should also make sure that the service charge accurately reflects its purpose. For example, saying that a service charge is “mandatory” under state law is not accurate when the state does not require businesses to add the service charge. Similarly, a charge listed as a “wellness fee” should be used for wellness purposes. Some employers charge a “wellness fee” to cover only mandatory healthcare costs, such as insurance and sick and safe time pay. Other employers have found cost-effective plans that also enable the employer to provide basic health and wellness services to all of their employees. Improperly identifying the purpose of the charge could invite challenges from customers or employees—some employers segregate these funds for the identified use. Another way to minimize customer complaints and other potential challenges to the charges is to fully train your staff on the purpose, use, and reason for the charges. If your staff is on-board and excited about the benefits, they can turn any customer questions into an opportunity for increased loyalty and appreciation. For example, employees explaining how they directly benefit from a wellness fee makes it personal. Some employers will even agree to drop the service charge if a customer still does not want to pay the charge. Some employers do charge obligatory gratuities—particularly for large parties. The IRS considers obligatory gratuities to be service charges—not tips—and taxes them as part of your gross income. As explained above, however, Minnesota labor law considers these to be tips. Accordingly, you must distribute mandatory gratuities to the appropriate service employees while also treating them as business income and wages for tax purposes. The increased use of service fees has generated significant discussion among customers and service-industry groups. Some opponents say they would rather see increased prices with postings explaining the increase or touting the benefits the increases provide. Others support the service fees and believe that the fees ensure that the money will be used for the stated purpose. Whichever approach you decide to take, you will want to make sure that you understand the potentially strict legal implications under Minnesota and local law. Additional Resources: Minnesota Statute § 177.23, Subd. 9: Definition of Gratuities Minnesota Administrative Rule 5200.0080: Gratuities/Tips Credits IRS Revenue Rule 2012-13: Regarding Tips versus Service Charges

January 24, 2020

General Matters

It’s Complicated – Understanding the Impact of Non-Discretionary Bonuses on Overtime Pay

The Fair Labor Standards Act (“FLSA”) defines certain employees as exempt and others as nonexempt.  Nonexempt employees are generally entitled to receive overtime pay at a rate of at least one and one-half times the employee’s regular rate of pay.  Overtime is often easy to calculate on straight weekly earnings, but what happens when employees earns a bonus on top of their regular rate of pay?  The answer is that it depends. Discretionary vs. Nondiscretionary Bonuses Bonuses can be considered discretionary or nondiscretionary.  Bonuses are discretionary if the employee has no expectation of payment, the employer retains freedom to decide the amount and timing of payment, and the bonus is not tied to meeting specific goals.  These types of bonuses are not reflected in overtime rate calculations.  Nondiscretionary bonuses, on the other hand, are those that are provided to employees in an effort to encourage them to work more efficiently, rapidly or those that encourage employees to remain with the employer.  Nondiscretionary bonuses can include such things as hiring bonuses, attendance bonuses, production bonuses, retention bonuses, profitability bonuses, or bonuses tied to quality and accuracy of work.  These types of bonuses are the kind that must be considered part of a nonexempt employee’s total wages for the purposes of calculating overtime. Overtime Rate and Nondiscretionary Bonus The FLSA requires that overtime pay be calculated on an employee’s regular rate of pay, and any nondiscretionary bonuses an employee earns must be factored into the employee’s regular rate of pay.  This is relatively easy to calculate when bonuses are earned and paid during the pay period, but recalculating the regular rate of pay becomes much more difficult when bonuses are earned over a series of pay periods, such as quarterly or annually. Because certain bonuses are not earned until well after the pay period, it is permissible for an employer to disregard the bonus when initially computing the regular rate (and overtime) of pay, but once the bonus becomes known and is paid, the employer is required to retroactively recalculate the regular rate of pay for each workweek in which the bonus was earned in order to pay additional overtime compensation on the bonus.  So how exactly is this done? As explained by the Department of Labor, if an employee receives a productivity bonus of $2,000 after six months, the employer is required to calculate any additional overtime earnings the employee is due for each week the employee worked overtime hours.  Overtime is not being calculated retroactively for all wages paid—the employee already received overtime pay on his or her base wage—it is calculated on the additional wages, i.e. the bonus, and only one half of the increase in the regular rate of pay is due for each overtime hour worked. For purposes of this example, suppose that the employee worked 50 hours (10 hours of overtime) in the 9th week of the bonus period.  The calculations would be done as follows: Step 1:  $2,000 ÷ 26 weeks (6 months in bonus period) = $76.92 Step 2:  $76.92 ÷ 50 hours (total hours worked in week nine) = $1.54 (increase in the regular rate) Step 3:  $1.54 x ½ = $.77 (increase in the additional overtime premium rate) Step 4:  $.77 x 10 hours of overtime = $7.70 (increase in overtime earnings) Employers engaging in these calculations must do the same calculation for each week of the bonus period in which the employee worked overtime hours.  This can undoubtedly feel like a daunting process for an employer, so it is important to keep records of hours worked on a week-by-week basis.

January 6, 2020

Best Practices

Are you covered? Employment Practices Liability Insurance

Employment practices liability insurance (EPLI) is a popular product for employers of all sizes. Many companies obtain EPLI coverage by purchasing a package of insurance policies covering a variety of management risks, such as directors and officers liability, professional liability, and cyber security. Once the policies are in hand, reviewing your company’s voluminous insurance terms and conditions might not be at the top of your to-do list. It is important, however, to take the time to understand your EPLI coverage before you need it. Doing so will help avoid costly reporting mistakes and maximize your benefits. Here are some common questions and answers about EPLI coverage: What does EPLI typically cover? EPLI provides coverage for specified employment-related claims that are listed and defined in the policy. Covered types of claims usually include employment discrimination, harassment, and retaliation, wrongful termination, and workplace torts like defamation, invasion of privacy, and negligent employment. Coverage is usually also afforded to certain breach of contract claims. EPLI offers protection from both the risk of paying claims as well as the cost of defending them. As discussed below, your policy will either require the insurer to assume the defense of the claim by appointing counsel of its choice (a “duty to defend” policy), or to reimburse the expenses that you incur in defending the claim with counsel of your choice (a “defense expenses” policy). Your EPLI policy may provide coverage for amounts that you become legally obligated to pay as a result of a claim, such as compensatory damages, back pay, or front pay, but there are also amounts that are not covered. What does EPLI typically exclude? EPLI policies usually exclude coverage for risks covered by other types of insurance, such as directors and officers liability or unemployment insurance, as well as bodily injury and property damage covered under commercial general liability or workers’ compensation policies. EPLI policies also usually exclude coverage for intentional acts, labor disputes, and the cost of complying with injunctive relief. Most EPLI policies exclude coverage for wage and hour claims unless the insured purchases a separate endorsement (i.e., an amendment) that expands coverage to include them. Many EPLI policies will cover the defense of claims for breach of contract, wrongful termination, and loss of benefits, but they will often exclude coverage for amounts that you become legally obligated to pay as a result of such claims. An exception to this exclusion for breach of contract damages are amounts that you would be liable for even in the absence of the contract. In these circumstances, the insurer may agree to defend you subject to a reservation of rights to deny coverage for the claim, and as discussed below, this circumstance requires you to carefully consider your rights under the policy and the risks associated with the lawsuit in order to maximize your insurance benefits. What is “claims made” coverage? EPLI policies typically provide “claims made” coverage, which means that the claim must be made against you during the policy period in order to trigger coverage under the policy. This is different from general liability insurance, which is “occurrence” based, providing coverage so long as the damage occurred during the policy period even if a claim does not arise until later. Many EPLI policies that provide claims-made coverage also contain an important additional requirement: that the insured report the claim to the insurer as soon as practicable during the policy period or during a specified extended reporting period after the policy’s expiration. This requirement is often enforced by insurers and many courts if the late notice causes the insurer prejudice, so it is critical that you timely report claims. Insurers will deny coverage for costs incurred and settlements agreed to by the insured prior to receiving notice of the claim. What is the difference between the insurer’s defense and indemnity obligations? Liability insurance policies place two obligations on the insurer: the duty to defend (or alternatively, to reimburse defense expenses) and the duty to indemnify. The former is triggered if the claim merely alleges any facts regardless of merit that are “arguably” within the scope of the policy’s coverage, while the latter is triggered only if the actual facts ultimately establish coverage. This means that an insurer may be obligated at the outset to defend you from claims even if it may not ultimately be obligated to pay any judgments or damages resulting from them. In such cases, the insurer will typically issue a “reservation of rights” letter, agreeing to provide you with a defense, but reserving the right to withdraw from it and deny coverage for any resulting judgments or damages if the facts ultimately do not establish coverage. This is particularly common under EPLI where employees allege many facts, plead alternative causes of action, and request a variety of forms of relief. A duty to defend is triggered if at least one claim is arguably covered under the EPLI policy, but its many exclusions, such as those for intentional acts, loss of benefits, breach of contract, wrongful termination, and injunctive relief, may ultimately eliminate the insurer’s obligation to indemnify you from any resulting judgments or damages. If you are receiving a defense subject to a reservation of rights, it is important to consult with independent counsel about your policy’s coverage because it may affect your litigation and settlement strategies. An insurer’s reservation can also, at times, entitle them to seek to recoup defense costs paid if the policy holder does not properly respond. You should not assume that your insurer-appointed defense counsel will be willing, interested, or capable of providing you with objective advice about your policy’s coverage. An insurer providing a defense subject to a reservation of rights may have interests that do not align with yours and this could affect how it controls the defense, its willingness to contribute to a settlement, and its expectation that you will do so as well. Am I covered? Unlike commercial general liability policies, there is very little uniformity among EPLI policies, meaning that the terms and conditions of each policy often vary from insurer to insurer. Endorsements to the policy may add, remove, or modify the scope of EPLI coverage. EPLI policies often have claim-specific limits, which is particularly common for wage and hour claims, and the limits may or may not be eroded by defense expenses. Depending on your particular business, it is important to consider who qualifies as an “insured” and an “employee,” whether the EPLI policy provides coverage for claims made by third-parties, whether exclusions for “intentional acts” apply before a judicial finding is made, and how your EPLI coverage works with other insurance that may be available to you. You can contact us if you have more questions about your EPLI coverage. We are experienced in assisting our clients with choosing the right EPLI coverage options, explaining the scope of coverage afforded by their EPLI policies, reporting claims to insurers, and evaluating your options if your insurer is providing a defense subject to a reservation of rights or has denied coverage for your claim.

January 6, 2020

Best Practices

It’s Party Time!

The time has come for companies to begin planning their 2019 holiday parties.  While these events are a great way to show appreciation for employees and build morale, they can present certain risks for employers.  Being mindful of the following issues can help employers avoid complaints, or worse, lawsuits, associated with holiday parties. Alcohol While alcohol is common, and often expected, at holiday parties, employers can and should be mindful of potential problems which could follow, including employees driving after drinking at the party.  If an employee drives drunk and injures another person while driving home from the party, a lawsuit could follow in which the employer could potentially be exposed to liability.  The best way to avoid alcohol-related problems at a holiday party is to consider some or all of the following suggestions: •   Use drink tickets rather than an open bar to limit consumption; •   Offer taxi or Uber credits to employees; •   Instruct bartenders not to overserve and to monitor employees’ alcohol consumption; •   Close the bar well before the party comes to an end; and/or •   Before the party, remind employees in writing that, although alcohol will be served, employees are still expected to behave professionally and that anyone who plans to drink must secure a ride home. In addition, employers should consider designating one or more managers to be on the lookout for anyone who appears to be impaired so that any problems can be addressed early on. Sexual Harassment Harassment claims often go hand in hand with alcohol consumption.  While employers certainly do not need to hand out copies of their harassment policies at the entrance, they should be conducting harassment trainings with their employees and reminding employees of harassment policies on an annual basis, if not more often.  Doing so will place the issue in employees’ minds and potentially help support a legal defense to any harassment claim down the road if an incident does occur. Discrimination In general, employers should avoid making holiday parties about one particular holiday or another.  Instead, the celebration should be inclusive of all employees’ beliefs and cultures.  A holiday party with overt religious references may cause an employee who believes that he or she has been the subject of religious discrimination with one more reason to voice a complaint or assert a claim.  The same applies to other forms of holiday celebration (e.g. “secret Santa” gift exchanges which can make non-Christians feel excluded).  While an employer’s reference to Christmas, Hanukkah or any other seasonal religious holiday is unlikely to be the reason an employer has legal exposure, it certainly won’t help when defending against a claim based upon religious discrimination or harassment. Mandatory Attendance and Wage and Hour Issues Every company wants its holiday party to be well attended.  Some go so far as to make attendance mandatory.  However, if an employer tells nonexempt employees that attendance at the party is required, the employer may be opening itself up to a host of Fair Labor Standards Act (FLSA) and state law claims.  If attendance at a holiday party truly is mandatory, it is likely employees will have to be paid for the time they spend there.  Additional relevant factors include whether the party takes place during working hours and on or off the company’s premises.  If an employer does not plan to pay non-exempt employees for attendance at its holiday party, the employer should make clear, in writing, that attendance is optional (and ideally, that the party will take place outside of working hours and away from the employer’s office). Conclusion These are just a few of the commonsense tips employers should have in mind when preparing for and hosting holiday parties.  Although not all employers (and certainly not all employees) will necessarily embrace these tips, they can help holiday parties serve as a fun-filled event rather than a source of liability and legal headaches.

November 26, 2019

General Matters

Another Sick and Safe Leave Ordinance- Duluth’s Entry into the Field

  Earlier this year, Duluth passed its Earned Sick and Safe Time Ordinance, joining Minneapolis and St. Paul in requiring employers to provide their employees with paid sick and safe time leave, which the employees accrue over time and carry forward from year-to-year. Duluth’s ordinance goes into effect on January 1, 2020. Well before then, Duluth employers will need to understand the ordinance’s requirements and develop written policies implementing them for inclusion in their employee handbooks. To Which Employers Does the Ordinance Apply? The ordinance applies to all employers with five or more employees, defined as including any person who: “[P]erforms work within the geographic boundaries of the city [of Duluth] for more than 50 percent of the employee’s working time in a 12 month period,” or “[I]s based in the city of Duluth and spends a substantial part of his or her time working in the city and does not spend more than 50 percent of their work time in a 12 month period in any other particular place.” Technically this means that the ordinance applies to employers located outside Duluth’s boundaries who have a sufficient number of employees working within Duluth’s boundaries. However, a decision earlier this year by the Hennepin County District Court held that Minneapolis’s ordinance was limited to employers located within Minneapolis’s boundaries, and this decision could provide guidance for similarly limiting the territoriality of Duluth’s ordinance in the future. Like the Minneapolis and St. Paul ordinances, Duluth’s ordinance does not apply to construction industry employees who are paid the prevailing wage rate. What is the Rate of Accrual? Under the ordinance employers must provide their employees with paid sick and safe time earned at a rate of one hour per 50 hours worked, for a maximum of 64 hours earned per year, and allow them to carry forward at least 40 hours from year-to-year. Employees begin accruing sick and safe time on their first day of employment, or once the ordinance goes into effect for existing employees, and after 90-days of employment they may use up to 40 hours of sick and safe time per year. Alternatively, employers can satisfy the ordinance by providing their employees with 40 hours of sick and safe time up-front after 90-days of employment, and an additional 40 hours of sick and safe time up-front at the beginning of each subsequent year. Employers do not need to pay out accrued sick and safe time upon their employees’ separation. Of course, nothing in the ordinance prohibits employers from providing more generous benefits to their employees, and if an employer chooses to provide its employees with paid vacation or paid time off, such benefits may already satisfy the ordinance’s requirements. For What Purposes Can Employees Use Their Accrued Sick and Safe Time? Employers must allow their employees to use their sick and safe time for absences resulting from the effects, treatment, care, prevention, or diagnosis of mental or physical illness, injury, or health conditions, as well as domestic abuse, sexual assault, or stalking, and for the care of family members suffering from the same conditions. Employers may require employees to comply with their customary notice and procedural requirements for absences and requesting sick and safe time so long as they do not interfere with the purposes for which the employees need the leave. For absences of more than three days, employers may require reasonable documentation to establish that the sick and safe leave is for a covered purpose. Employers Must Track Employee Accrual and Use of Sick and Safe Time The ordinance requires employers to track their employees’ sick and safe time balances and provide them their earned and used sick leave balances upon request. The ordinance further requires employers to provide employees with notice of their right to paid sick and safe leave. Although the ordinance does not specify whether this notice must be posted on employers’ premises, or set forth in their employee handbooks, we recommend that at a minimum employers prepare written policies implementing the ordinance’s requirements and include the policies in their employee handbooks.

October 29, 2018

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