By Christopher Kelleher, Andrew Scroggins, and Christopher DeGroff

Seyfarth Synopsis: The Equal Employment Opportunity Commission (“EEOC”) has issued a report that should have high tech employers on high alert. According to the EEOC’s findings, analysis, and enforcement information, there are barriers to equal employment for high tech jobs, which the Agency intends to address through heightened enforcement efforts. It is important for all employers – not just high tech companies – to understand the EEOC’s report and be mindful of the agency’s strategic position it signals to avoid becoming the target of the EEOC’s enforcement efforts.

On September 11, 2024, the EEOC issued a report entitled High Tech, Low Inclusion: Diversity in the High Tech Workforce and Sector 2014-2022, which analyzes “demographic disparities for workers in 56 science, technology, engineering, and mathematics (STEM) occupations and the industries employing them.” In addition to providing an assessment of the current state of diversity in these fields, the report also discusses the most common discrimination charges filed by high tech sector workers with the EEOC.

The report follows on the EEOC’s Strategic Enforcement Plan (“SEP”) for fiscal years 2024-2028, which stated, in part, that “[t]he continued underrepresentation of women and workers of color in certain industries and sectors (for example, construction and manufacturing, high tech, STEM, and finance, among others), are also areas of particular concern, especially in industries that benefit from substantial federal investment.” (We’ve written previously about the proposed and final SEP.)

EEOC Findings of Underrepresentation of Certain Workers in High Tech Jobs

The report lists numerous findings that show, according to the EEOC, that the underrepresentation of Black, Hispanic, female, and older workers in the high-tech industry is due to “discriminatory barriers,” which the EEOC intends to address by proactively investigating charges of discrimination and pursuing litigation. The EEOC also plans to provide technical assistance and engage in extensive education and outreach efforts aimed at getting employers to comply with laws enforced by the EEOC.

The EEOC’s specific findings include:

  • Female, Black, and Hispanic workers remained substantially underrepresented in the high tech workforce and sector. According to the EEOC, between 2005 and 2022 there was very little change in the representation of Black workers and virtually no change in the representation of female workers occurred in the high tech workforce.
  • Black, Hispanic and Asian workers were purportedly underrepresented in managerial positions compared to their participation in the high tech workforce overall.
  • While women are nearly half of the total U.S. workforce, the EEOC reports that they were just 22.6% of the high tech workforce in all industries, and only 4% of the high tech workforce in the high tech sector.
  • The EEOC suggests that the high tech workforce is generally younger than the total U.S. workforce; 40.8% of the high tech workforce are ages 25 to 39, but only 33.1% of the overall workforce. Workers over age 40 in the high tech workforce reportedly lost ground between 2014 and 2022, declining from 55.9% to 52.1%.

EEOC Charge Filings in the High Tech Sector

The report provides charge filing information from 2022 (the most recent year for which the EEOC has reported data). The data show that the four most common types of charges filed in the high tech sector are: (i) retaliation; (ii) disability discrimination; (iii) race discrimination; and (iv) sex discrimination. Further, age, pay, and genetic information discrimination charges are more prevalent in the high-tech sector than in other sectors, with age discrimination charges representing the greatest difference in filings as compared to other sectors. Employers are likely to see surge in enforcement action by the EEOC in these areas, particularly with respect to Black, Hispanic, female, and older workers.

Implications for Employers

Employers in the high tech sector and with high tech employees must remain on high alert when it comes to the EEOC. The EEOC announced in the SEP that it intended to focus its enforcement efforts on this sector, and this report demonstrates that the EEOC is doing just that. As such, employers in the high tech industry and with high tech employees should be familiar with this report, and the EEOC’s promise to pursue large scale enforcement efforts in this space.  Employers in all industries should also mark the take-away that the EEOC continues its focus on systemic hiring and recruiting enforcement in a wide variety of sectors.

If you have questions about the information contained in the EEOC’s report, or would like guidance on how to respond to any threatened or pending litigation, contact your Seyfarth attorney or the authors of this post.

By Adam R. Young[1] and Mark A. Lies II[2]

A terrible accident has occurred at your worksite.  An employee operating a forklift made an errant turn, crashed into a support beam, and sustained serious injuries. 

Workplace accidents create complex interaction of legal liabilities relating to worker’s compensation (if your employee was injured), OSHA (applicable to any worker onsite), tort law (particularly if a non-employee was injured), contract law, and criminal law. Employers must identify their legal duties and take appropriate steps to ensure they have a safe workplace going forward. This article provides a primer on how to protect employees, address legal liabilities, and respond to a workplace accident.

1.   Summoning Emergency Responders

The employer’s first duty is to protect the safety and health of anyone at its worksite, including those involved in the accident.  This may require the employer to contact emergency services, immediately investigate the facts of the accident, and provide clear direction to emergency responders to ensure they know where to go and how to protect themselves from any hazards.  

2.   Post-Accident Investigations

Employers with strong safety programs conduct comprehensive investigations into accidents to determine root causes and identify enhancements that can prevent future incidents.  Post-accident investigation is a necessary component of a Safety and Health Management System, though it can be outsourced to a safety investigator.  As explained below, an investigation may also be necessary to identify whether the injury or illness is reportable and recordable on the worksite’s OSHA Log, to obtain information to complete the OSHA forms, and to obtain information to complete a workers’ compensation first report of injury.  Some OSHA regulations require post-accident investigations relating to specific hazards.  Post-accident investigations further may be necessary to identify defenses and defend against OSHA or tort claims. OSHA sometimes bases Willful citations on a failure to take immediate and/or timely corrective action, which often can only effectively accomplished following a thoughtful investigation and analysis of the facts of the accident.

3.   Reporting Serious Injuries to OSHA

Most employers understand that they are required to report serious injuries and illnesses to OSHA shortly after they occur. Even employers in low hazard industries who are not required to keep written OSHA records still face reporting obligations. Federal OSHA regulations require employers to report work-related fatalities within eight hours, and serious injuries within 24 hours (amputations, loss of eye, or hospitalizations for medical treatment). California reporting obligations are more onerous, requiring reporting within 8 hours for a “serious” injury or illness. Employers must comply with the law and report all injuries and illnesses as required by law.

The decision to report can be difficult for employers because it requires rapid analysis of dynamic incidents and medical situations, and the regulations related to reporting are numerous and complex. OSHA aggressively conducts inspections relating to reporting and issues non-serious citations for failure-to-report or late reporting. OSHA learns about incidents from worker complaints, medical providers, and news media reports, and often opens investigations prior to receiving an injury report from the employer.

The employer must analyze whether the incident is work-related and whether it must be reported to OSHA, often within hours of its occurrence.  Qualified legal counsel can help advise on reporting obligations and legal analysis.   

4.   Recording Injuries on the OSHA Form 300 Log

Within seven calendar days of a work-related injury or illness that meets a recording criteria (e.g. days away from work), an employer who is required to maintain an OSHA Form 300 Log must also add the injury to the log and create an OSHA Form 301 Incident Report.

5.   Evidence Preservation

Accident investigations should not be destructive at the initial stages.  Employers should only disturb accident scenes to the extent necessary to provide emergency services to the injured and to protect any other employees from being injured. Further disturbance creates legal risks.  Where litigation is reasonably anticipated, as would be the case in an accident involving serious personal injury, the employer has a legal duty to preserve evidence from the scene. Some states have specific OSHA regulations requiring scene preservation, meaning that disrupting the scene can result in an OSHA citation.  Disturbing an accident scene can lead to an allegation of spoliation, an unlawful destruction of evidence that may result in an adverse inference against the disturbing party.  Employer should heavily document accident scenes with photographs and video. Employers should ask investigating agencies to release accident scenes prior to returning the area to operation or resuming work. Employers may also consider inviting third parties with potential legal claims to review accident scenes before destroying evidence.  

Employers also should send out a litigation hold letter, typically from counsel, for electronically stored information (“ESI”), to ensure that relevant emails and electronic messages are not lost.

6.   Strategies for Accident Investigation

Following an accident, the employer should assemble a team to investigate, often including local management, a safety director, and risk manager or legal counsel. Then develop a strategy to gather physical evidence (artifacts), documents (contracts, work orders, etc.) and memorialize accident site conditions (e.g., photographs, measurements, drawings, etc.). 

Legal counsel can direct the investigation and create legal privileges (attorney client; work product; self critical analysis). The investigation team is not required to prepare a written report and may choose not to do so.  Written reports containing opinions on the causes of accident may constitute legal admissions, creating civil and criminal liability for the Company and individuals. Written statements of individuals which admit liability can be used to establish criminal liability against the Company and the individual (Miranda criminal protections will not apply). Employer must exercise caution when requesting employees to submit written statements about what happened, until evidence has been evaluated.

The investigation team should identify the root causes and consult with Management regarding an action plan to make corrections and enhancements. They then should document corrective actions to memorialize the Company’s good faith efforts to eliminate workplace hazards. 

7.   Inspection Management for a Reported Injury or Illness

An accident, particularly one that results in a serious injury reportable to OSHA, may trigger an onsite inspection by OSHA.  For an onsite inspection, OSHA will have a particular location or equipment focus. OSHA will want to see the site of the accident or the equipment on which there has been a complaint. The employer should plan a route on how to get to that area of the worksite, minimizing exposure to other equipment or alleged hazards that OSHA will see. Sometimes the most efficient route will be walking around or driving in a car to remote parts of the worksite. For unprogrammed inspections based on injury reports or referrals the employer knows about, management should assume OSHA is coming onsite and can plan/map the route ahead of time. A qualified manager can walk the route to ensure there are no visible safety hazards (e.g. exposed wiring, unguarded edges), and to ensure prompt and proper correction of any hazards they identify.

8.   Engage Qualified Outside OSHA Counsel

Because of these many legal liabilities, it is essential for employers to engage a qualified attorney experienced in accident investigation and OSHA. If OSHA opens an inspection, experienced OSHA counsel can be integral to proper OSHA inspection management. Improperly managed inspections can result in avoidable civil and criminal liability.   

[1] Adam R. Young is partner in the Workplace Safety and Environmental Group in the Chicago office of Seyfarth Shaw LLP. Mr. Young focuses his practice in the areas of occupational safety and health, employment law, and associated commercial litigation. Mr. Young can be contacted at ayoung@seyfarth.com (312/460-5538).

[2] Mark A. Lies, II is an attorney in the Workplace Safety and Environmental Group in the Chicago office of Seyfarth Shaw LLP. Mr. Lies is a partner who focuses his practice in the areas of products liability, occupational safety and health, workplace violence, construction litigation and related employment litigation. Mr. Lies can be contacted at mlies@seyfarth.com (312/460-5877).

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By Diane Dygert

Seyfarth Synopsis: On Monday, September 9, 2024, the Departments of Health and Human Services, Labor and Treasury (the “Departments”) issued their final rule regarding the nonquantitative treatment limitation (NQTL) comparative analysis required under the Mental Health Parity and Addiction Equity Act (MHPAEA). (These acronyms roll right off the tongue, don’t they?)

The Departments note that final rules reflect thousands of comments they received after publishing their proposed rules last August 2023. They remark that through these rules they “aim to further MHPAEA’s fundamental purpose – to ensure that individuals in group health plans or group or individual health insurance coverage who seek treatment for covered MH conditions or SUDs do not face greater burdens on access to benefits for those conditions or disorders than they would face when seeking coverage for the treatment of a medical condition or a surgical procedure. These final rules are critical to addressing barriers to access to MH/SUD benefits.” 

While laudable, the rules seek to implement that goal by imposing fairly burdensome requirements on sponsors of self-funded medical plans who have been left to sort through the NQTL requirements without a clear roadmap and at considerable expense. 

The final rules appear to make discreet changes to the proposed rules. Your Seyfarth EB team is busy digesting the guidance and will issue a Legal Update shortly analyzing the final rule, and most importantly what this means for sponsors and administrators of self-funded plans. 

Posted in Employee Benefits, Health & Welfare Plans

Tags: health plans, HHS, Mental Health Parity

By Eric Barton

Seyfarth Synopsis: Jimmy Buffett once eloquently said that “without geography, you’re nowhere.”  But how does that insight apply to restrictive covenants that lack explicit geographic limitations in Georgia? While Jimmy never got to find out, we now have some much-needed clarity from the Georgia Supreme Court.

For many years, most Georgia litigants, individuals, and businesses operated under the assumption that some restrictive covenants did not need to contain an explicitly defined geographic limitation to be deemed “reasonable” in terms of “geographic area” because O.C.G.A. § 13-8-53(a) of the Georgia Restrictive Covenants Act (“GRCA”) did not include such a requirement. That longstanding belief was called into question last year, however, when the Georgia Business Court ruled that North American Senior Benefits, LLC (“NASB”) could not enforce an employee non-solicit covenant because the provision lacked an explicit geographic limitation.  On appeal, the Georgia Court of Appeals affirmed the lower court’s ruling. In so doing, it primarily relied upon and adopted the holding in CarpetCare Multiservices v. Carle, 347 Ga. App. 497, 819 S.E.2d 894 (2018), which voided a customer non-solicit because it did not include an explicit geographic limitation.

NASB appealed the Court of Appeals’ decision to the Georgia Supreme Court. Technically, the question certified by the Supreme Court was limited to whether an employee non-recruit must include an explicit geographic area to be “reasonable” under the GRCA.

Last week, the Georgia Supreme Court unanimously reversed the Court of Appeals’ opinion in North American Senior Benefits, LLC v. Wimmer et al., No. S23G1146 (Ga. 2024), holding that an employee non-solicit covenant does not need to contain an explicit geographic limitation to be considered “reasonable” in terms of “geographic area,” as required by the GRCA.  In its opinion, the Georgia Supreme Court also rejected the prior CarpetCare ruling, noting that the “plain text” of O.C.G.A. § 13-8-53(a) does not require a restrictive covenant to contain a precise, defined “geographic area.” Instead, the statute only mandates that the applicable “geographic area” (be it expressly defined or merely implied) be “reasonable.” Based on this analysis, the Supreme Court also held that the Statewide Business Court “must assess whether the provision’s geographic scope is reasonable in light of the totality of the circumstances including, but not limited to, the total geographic area encompassed by the provision, the business interests justifying the restrictive covenant, the nature of the business involved, and the time and scope limitations of the covenant.”

Notably, the Georgia Supreme Court’s opinion in Wimmer contains additional analysis and direction beyond merely how Georgia courts should rule on geographic limitations contained in an employee non-recruit provision. The Georgia Supreme Court also addressed O.C.G.A. § 13-8-53(c), which concerns situations “whenever a description” of a “geographic area” is required, and held that despite this subsection, “there are times when [a defined geographic area] is not required” opening up its holding to clauses past just employee non-solicits.

Jimmy Buffett also famously said, “indecision may or may not be my problem.” Well, with this Georgia Supreme Court ruling, we can now move forward with some much-needed certainty on an important issue for many employees and employers (maybe even sailors and Parrot Heads?).

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By Karla Grossenbacher and Leon Rodriguez

Seyfarth Synopsis: With the myriad claims for religious accommodation that came out of mandatory COVID vaccination policies, employers have become familiar how to handle requests for religious accommodation in the workplace.  However, healthcare employers face unique challenges when it comes to request for religious accommodation from healthcare providers who refuse to provide certain treatments or perform other duties based on religious objections.  These challenges lie at a complex intersection between employment and healthcare law.

Consider the following scenarios:

  • A nurse at a hospital has a religious objection to participating in abortion procedures.
  • A healthcare provider who is a Jehovah’s Witness refuses to administer blood transfusions.
  • A physician at a family planning clinic refuses to prescribe contraceptives due to religious beliefs.
  • A fertility doctor refuses to perform artificial insemination for a patient based on the patient’s sexual orientation or marital status.
  • A receptionist at a doctor’s office objects to scheduling appointments for procedures like vasectomies on religious grounds.

Employers who confront these scenarios in the workplace must consider federal and state legal protections for healthcare providers who have conscience or religious objections to providing certain treatments.  There are compliance obligations under Title VII, which requires employers to accommodate the religious beliefs of their employees absent undue hardship, as well as the separate laws allowing conscience and religious objections that specifically protected healthcare workers.  These compliance obligations must be balanced against the employer’s duties to its patients, which includes a duty not to discriminate in the provision of healthcare services. 

Federal and State Legal Protections for Conscience and Religious Objections of Healthcare Providers

Healthcare providers who object to performing their duties on the basis of religion can avail themselves of various federal and state laws that protect health care workers who refuse to participate in certain medical procedures due to conscience or religious objections. For example, the Church Amendments, 42. U.S.C. § 300a-7, and the Coats-Snowe Amendment, 42 U.S.C. 238n, provide express federal protections for healthcare workers who object to participating in procedures such as abortions or sterilizations at federally-funded healthcare organizations.  Some states also have specific laws providing protections for healthcare workers with such objections.

Moreover, even though the Church amendments focus on objections to abortion and sterilization, they also contain a provision that generally prohibits a health care provider from requiring an employee to perform a service for which they claim a moral or religious objection.  Even though this provision appears in a section entitled “Sterilization or abortion,” OCR relies on this “catch all” provision as a justification for policing a wider range of religious and conscience objections by healthcare providers that go beyond abortion and sterilization.  

In January 2024, the Department of Health and Human Services implemented a final rule entitled “Safeguarding the Rights of Conscience as Protected by Federal Statutes.”  This rule clarifies the process for enforcing the protections provided under the Church Amendment laws and strengthens protections prohibiting discrimination against health care providers with conscience and religious objections.  Although OCR has stated it will take into account the operational impact on healthcare employers of accommodating religious and conscience objections (noting that the conscience statutes “co-exist with others protecting rights of access to health care”), the final rule does not articulate a specific standard.  One could argue it would be logical to impute the reasonable accommodation standards found in other anti-discrimination laws, but neither OCR nor any other legal source have explicitly supported that approach.

An Employer’s Duty to Accommodate Employee Religious Beliefs

Healthcare providers who object to performing any of their duties for religious reasons also have protections under Title VII of the Civil Rights Act of 1964 and its state law equivalents, which prohibit employment discrimination based on religion.  These laws generally require employers to reasonably accommodate an employee’s religious beliefs or practices, unless doing so would cause undue hardship on the operation of the employer’s business.

Healthcare Organizations Non-Discrimination Obligations to Patients Under Federal Law

To make matters more complicated for employers considering religious and consciences objections that healthcare providers have to performing patient-facing duties, hospitals have independent obligations under federal law not to discriminate against patients in the provision of health care services.  Under Section 1557 of the Affordable Care Act, hospitals are prohibited from discriminating on the basis of race, color, national origin, sex, age or disability in their health care programs or activities. 

Balancing Accommodations and Operational Needs

When faced with religious objections from health care providers, employers must carefully balance the need to accommodate a provider’s religious beliefs with their duty not to discriminate against patients and the operational requirements of their healthcare facilities. 

From a Title VII perspective, the employer can deny a request for religious accommodation if the accommodation presents an undue hardship.  Employers denying requests for religious accommodation on undue hardship grounds under Title VII must show that the cost to their business of accommodating a request for religious accommodation would be excessive or unjustifiable.  To the extent a healthcare provider is refusing to provide a treatment that must then be provided by a co-worker, in order to demonstrate undue hardship, an employer must show how the accommodation’s impact on other employees would substantially affect the conduct of its business.  In terms of federal healthcare protections, an employer could theoretically apply the Title VII undue hardship standard to accommodations requested by healthcare workers who may also have certain rights under conscience laws since it presents a high bar, but an employer must do so with the awareness that OCR has not been transparent about what standard it will apply when reviewing complaints from healthcare providers who believe they have been wrongly denied religious accommodation.

If an employer grants a religious accommodation, it should be thoughtful and transparent in conversations with the employee with the religious objection about how that employee will decline to provide the services to which the employee objects on religious grounds.  If not handled correctly, the declination could lead to claims of discrimination by a patient or hurt the employer’s reputation among the communities it serves.

Conclusion

Handling religious objections from health care providers requires a nuanced approach. Healthcare providers and institutions should ensure they understand and comply with all applicable laws.  By understanding the legal framework and considering practical effect of accommodations, healthcare employers can respect their employees’ beliefs while ensuring that patient care remains uncompromised. Employers should also consult with legal counsel and regularly review policies and procedures can help maintain compliance and protect both employees’ rights and the institution’s interests and train managers on these policies and procedures.

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By Kyle D. Winnick and Lennon B. Haas

The rules governing the employment relationship are always changing. Laws creating new employer obligations, technology solutions making work more efficient and more complicated, and rules governing the resolution of disputes between employers and their workers are around every corner. Wage and Hour Around the Corner is a new blog series for employers, in-house lawyers, and HR, payroll, and compensation, that helps employers stay on the cutting edge of wage and hour changes happening now and those on the horizon.

Seyfarth Synopsis: The viable use cases for Artificial Intelligence are skyrocketing as AI models become capable of more and more. Some of those include various applications in remote work environments, like tracking employees’ time worked and work activities. According to the DOL, however, using AI-driven surveillance software to track time worked poses risks under the Fair Labor Standards Act.

Working remotely is here to stay.  Although declining from pandemic-era levels, telework remains popular, especially hybrid-style arrangements where employees work remotely part of the time.  That poses certain problems from a wage-hour perspective.  Generally, under the Fair Labor Standards Act, employers have an obligation to pay employees for all work the employer knows or should know has been performed.  But it is not always clear when an employer “should know.”  As the Department of Labor has noted, this is especially so with respect to telework, when employees are working without any direct oversight.  This has important implications for employers who use Artificial Intelligence tools to monitor and track time worked by remote employees.   

Those tools have made it easier to work remotely.  Increasingly, AI is also being used for automated timekeeping in which software tracks when workers sign in and out of work and then determines an employee’s “active” and “idle” time.  ‎These tools capture data such as application and website usage, mouse and keyboard activity, and even physical movement.  Some AI tools act as a fully digital time clock that allows businesses to calculate an employee’s weekly, bi-weekly, or monthly pay.     

But as noted here, reliance on AI also poses certain risks from a wage-hour perspective.  While AI-driven software allows employees to monitor and record when employees login and logout, employers may face FLSA exposure if the software fails to account for all time worked, including offline tasks.  According to the DOL, “[a]n AI program that incorrectly categorizes time as non-compensable work hours based on its analysis of worker activity, productivity, or performance could result in a failure to pay wages for all hours worked.”  AI-powered monitoring software can potentially fail to fully account for the time employees spend working away from their workstation, offline time spent thinking about or reviewing a document, or offscreen engagement with clients or co-workers. 

Other risks include if AI-monitoring tools automatically code all non-productive work as non-compensable time.  Short breaks lasting 20 minutes or less are generally deemed to be for the employer’s benefit and, therefore, compensable.  29 C.F.R. § 785.18.  If AI-monitoring tools automatically deduct from pay all time deemed non-productive time, even non-productive time of short duration, employers may unwittingly run afoul of the FLSA.    

These are not hypothetical concerns.  In a case brought in the Western District of Texas, a plaintiff brought a proposed collective action under the FLSA for unpaid off-the-clock work and her purported former employer.  The plaintiff, who primarily worked remotely, alleged that she and others similarly-situated were monitored through tracking software and compensated based on the software’s tracking of her activities.  For example, she claimed that if the surveillance software did not see her working, she would not be paid for that interval of inactivity, such as “10-minute time frame[s].”  The plaintiff claimed that the system failed to account for various offline work, including reviewing and annotating hard copy documents, receiving work-related phone calls away from her computer webcam, and participating in online conferences on her mobile phone away from her workstation.  The parties eventually settled for an undisclosed amount.      The upshot is that reliance on AI-powered monitoring software may provide insight into employees’ work habits, but it should not be used as a panacea for time tracking.  Best practices include auditing any AI-powered software to ensure it does not lead an employer to unwittingly violate the FLSA.  Best practices also include implementing a reasonable reporting system that allows non-exempt employees to report hours worked that they believe were not captured by the software.  By doing so, employers will help guard against potential off-the-clock claims.   

Welcome to Decoding Appeals, where Seyfarth’s Appellate Team brings to in-house counsel our insights and expertise from the front lines of the appellate courts. Throughout this short video series, we break down the nuances of appellate advocacy, sharing tips and lessons we’ve learned to help companies’ in-house legal teams understand the complexities of the appeals process.

In this second episode, host Rob Szyba is joined by Dawn Solowey, a co-chair of Seyfarth’s Appellate Team. They discuss various considerations that should take place at the initial stages of any appeal.  For example, appeals may involve very specific and tight timing requirements and certain court systems may require various procedural nuances that might not be intuitive but can have a significant impact on an appeal.  Additionally, appellate courts serve a function that is distinct from trial courts and thus may have a different perspective that warrants ensuring the correct standards of review are utilized and arguments are framed for an appellate court, not a trial court.  Rob and Dawn will discuss these and several additional key considerations for prospective appellants and appellees to consider in the early stages of their appeals. 

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By Ariel D. Cudkowicz and Michael E. Steinberg

Tips from Seyfarth is a blog series for employers, and their in-house lawyers and HR, payroll, and compensation professionals, in the food, beverage, and hospitality sector. We curate wage and hour compliance “tips” to keep this busy industry informed.

Seyfarth Synopsis: In a unanimous decision, a panel of the Fifth Circuit invalidated the DOL’s 2021 rule codifying the 80/20 rule.

As we here at TIPS predicted not too long ago, the Fifth Circuit on Friday issued an opinion striking down the DOL’s December 2021 regulation codifying the Department’s longstanding “80/20 rule.” The Fifth Circuit’s decision roundly rejects the 80/20 rule’s focus on whether employees’ discrete work activities are tip-producing or not, and instead concludes that the plain meaning of the statute is clear: an employer may claim the tip credit for any employee who, when engaged in her job—whatever duties the job entails—customarily and regularly receives more than $30 per month in tips.

To back up for a moment, the 80/20 rule, as we’ve explained, stems from a provision the DOL added to its 1988 Field Operations Handbook (“FOH”)—guidance that itself purported to synthesize enforcement positions taken in opinion letters dating back to 1979.  Under the DOL’s guidance, employers could take a tip credit, and therefore pay a service rate of pay (currently $2.13/hour under federal law), for tipped workers—but only for time spent engaged in “tip producing” work and work that “directly supports” the tip producing work. And, only if the time spent on the directly supportive work was not “a substantial amount,” which the DOL said was time in excess of 20% of total hours in a workweek for which the employer sought to take a tip credit.  Then, in the 2021 rulemaking, the DOL largely codified the 80/20 Rule, but added a new onerous limitation: employers would also not be able to take a tip credit for any directly supporting work performed for more than 30 continuous minutes.

Organizations representing the national and local restaurant industries promptly sued to enjoin enforcement of the new 80/20 regulation.  After an initial battle over whether a preliminary injunction should issue ended up at the Fifth Circuit, the District Court upheld the new rule, concluding that it was a permissible construction of the relevant statutory text under the Supreme Court’s Chevron doctrine of agency deference.

The challengers appealed again. Back at the Fifth Circuit, the panelists seemed more than a little skeptical of the 80/20 rule’s validity. Then, while the appeal was pending, the Supreme Court overruled Chevron, instructing lower federal courts that they need not defer to agency rules construing federal statutes even when those statutes are ambiguous.

In the Fifth Circuit’s view, though, the 80/20 rule would fail under any test, Chevron or not, because the relevant statutory text, 29 U.S.C. § 203(t), is not ambiguous.  That provision says that employers may take a tip credit for any employee “engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”  The court rejected the DOL’s position, codified in the 80/20 rule, that determining whether an employee is “engaged” in such an occupation for hours worked depends upon how much of that time is spent doing tasks for which the employee receives tips.  Instead, the court held, “engaged in an occupation” means something much more straightforward: employed in a job. As the court put it, the statutory definition “indicates a focus ‘on the field of work and the job as a whole,’ rather than on specific tasks.”

Additionally, the Fifth Circuit was unmoved by the fact that the 80/20 rule has reflected the DOL’s interpretation of § 203(t) for most of the period since at least 1988. Although courts should pay attention to longstanding agency interpretations of the law, the Fifth Circuit explained, the court in this case was “not persuaded that the 80/20 standard, however longstanding, can defeat the FLSA’s plain text.”

After finding the 80/20 rule to be contrary to the FLSA and therefore invalid, the court vacated the rule and set it aside. Simply put, the 80/20 rule—for now—is dead, at least in the Fifth Circuit (which encompasses the federal district courts in Texas, Louisiana, and Mississippi). Although we don’t pretend to know the future, we think it is a pretty safe bet that this case is now on a fast track to the Supreme Court.

In an upcoming TIPS post, we will discuss how restaurant and hospitality employers should respond in the wake of the Fifth Circuit’s decision. Stay tuned.

About the Program: Organizational change can present tremendous opportunities for in-house counsel with both small and large legal teams to create efficiencies, streamline processes, and bolster what is working well. It also presents challenges, including securing buy-in from stakeholders and maintaining momentum across competing priorities when time and resources are in short supply

In this session, Seyfarth and the Northeast Chapter of the Association of Corporate Counsel will share practical examples of change management and how they can succeed, including: 

  • Standing up self-serve resources for legal stakeholders
  • Outsourcing low-touch work
  • Refining team culture and dynamics
  • Technology implementation, including AI

Join us as we use these examples to illustrate how to maximize the opportunities within organizational change while navigating potential pain points by applying principles of change management. 

Register Here

Speakers

Whitney Woodard, Legal Project Manager, Seyfarth Shaw LLP
Benjamin Hayden, Vice President, Legal Operations, Cengage Group
Rachel DiGiacomo, Senior Manager, Contract Management, Cengage Group

By Helen M. McFarland and Jacob J. Roes

Seyfarth Synopsis: On August 20, 2024, Western District of Washington Judge John H. Chun asked the Washington Supreme Court to answer the question of what a party must prove to be considered a “job applicant” for the purposes of a pay transparency claim under the Equal Pay and Opportunities Act (EPOA). 

Since June 2023, there have been over 100 purported class-action lawsuits filed alleging that employers failed to disclose wage and salary ranges to applicants in job postings in alleged violation of the EPOA. As described in our prior post, modifications to the law require all employers since January 1, 2023 with “15 or more employees, engaging in any business, industry, profession, or activity in Washington” to disclose a wage scale or salary range for any new job posting. A “posting” means any solicitation aimed at recruiting candidates for a specific job opening, whether conducted directly by the employer or indirectly through a third party. This includes both electronic and printed job postings that outline the qualifications required for applicants.  Employers must include both the reasonable and expected bottom and top range for wages and salaries as well as a general description of benefits. 

In Branson, et al. v. Washington Fine Wines & Spirits, LLC, and other similar cases, defendants have argued that the plaintiffs did not apply to the postings with the intent to gain actual employment. On August 16, 2024, Judge Chun, sua sponte, ordered the parties to submit briefing on two issues: (1) their respective positions on whether the Court should certify a question to the Washington Supreme Court regarding the definition of “job applicant;” and (2) if the Court decides to certify the question, what the proposed wording of that question should be.  After reviewing briefs from the parties, Judge Chun certified the following question to the Washington Supreme Court:

“What must a plaintiff prove to be deemed a ‘job applicant’ within the meaning of RCW 49.58.110(4)? For example, must they prove that they are a ‘bona fide’ applicant?”

The Court’s order notes that Chapter 49.58 RCW does not define “job applicant,” nor does any case law specifically address the term. Judge Chun highlighted that the defendants argued the plaintiffs were not “bona fide” job applicants and therefore should not be entitled to pursue relief under the EPOA.  The Department of L&I, charged with overseeing the EPOA, has provided guidance indicating that it believes an applicant must be “bona fide.”  By contrast, plaintiffs’ counsel argues that anyone who applies is entitled to a penalty under a strict liability standard.  Given the unsettled nature of the requirement under the EPOA, Judge Chun determined that resolving the definition of “job applicant” is essential for the disposition of Branson.

The certified question, along with several pleadings from the docket, has now been submitted to the Washington Supreme Court. The Branson matter has been stayed pending the Supreme Court’s decision. While the timeline for the Supreme Court’s decision on this question is currently unknown, the Supreme Court’s answer to this question will significantly impact the hundreds of other cases currently pending in the federal and state courts in Washington.

If your business solicits job applicants in the State of Washington, either directly or through a recruiter, Seyfarth’s Seattle office can assist you in developing a compliance plan and crafting appropriate disclosure language.