By Lennon B. Haas and Kevin M. Young

Seyfarth Synopsis: In Sellars v. CRST Expedited, Inc. Case No. C15-117-LTS (July 15, 2019), the Northern District of Iowa held that employer responses to sexual harassment complaints need not deter harassment by other employees, where the employer lacks notice that those other employees might engage in harassing behavior.

Background

CRST Expedited, Inc. is a long-haul trucking company with more than 3,000 drivers. Two drivers staff each truck. One person drives while the other rests. When drivers join CRST, “lead drivers” train rookies, who become “co-drivers” after completing training. At new driver orientation, CRST provides new drivers copies of its written policies prohibiting sexual harassment and retaliation and trains them on those policies. Those policies also outline available reporting mechanisms, and detail how CRST will respond to complaints.

The three women who filed the case worked for CRST as drivers. Each alleged that she experienced multiple episodes of harassment from multiple different lead drivers. Each complained to CRST. When they did so, CRST followed its policy by, among other things, assigning them to work with a new lead driver who had not been accused of harassment and ensuring that the alleged harasser would not be paired with another female driver. The eventual plaintiffs alleged, however, that some of the new lead drivers with whom they were paired harassed them as well.

All three women ultimately left CRST and later joined together to sue on behalf of similarly situated female truck drivers. They asserted hostile work environment, retaliation, and constructive discharge claims on behalf of the class and as individuals. Because it decertified the class in a previous order, the Sellars court only addressed the individual plaintiffs’ claims.

The Court’s Analysis

The three Plaintiffs file suit under Title VII, which prohibits sex-based discrimination that creates a hostile or abusive work environment. To prevail on such a claim, a plaintiff must establish five elements. This case turned on the element requiring a plaintiff to show that her employer “knew or should have known of the harassment and failed to take prompt and effective remedial action.”

Plaintiffs first tried to show that CRST had constructive knowledge of their harassment by pointing to prior sexual harassment lawsuits against the Company, and one employee’s suggestion that CRST install cameras on its trucks. The court rejected this argument, reasoning that past harassment complaints cannot speak to an employer’s knowledge of current incidents unless the past and current occurrences involve the same alleged harassers. Employers need not foresee employee misconduct, the court noted, absent some indication it would occur.

Plaintiffs also argued that CRST’s response to their complaints was inadequate because the Company failed to prevent future harassment. The court disagreed, finding it significant that after Plaintiffs complained, CRST followed its policy by (1) promptly removing them from the truck with the alleged harasser ; (2) marking the alleged harasser as “male only”; (3) paying for any necessary lodging and return fares; and (4) pairing Plaintiffs with new lead drivers who had never been accused of harassment. That response, the court observed, prevented the alleged bad actor from harassing the Plaintiff or any other women and quickly addressed the immediate circumstances surrounding the harassment.

In reaching this conclusion, the court rejected the Plaintiffs’ reliance on Ninth Circuit precedent that requires an employer’s remedial responses to deter future harassers. Instead, the court concluded that imposing liability on CRST would punish the Company for failing to respond to an employee action that had not occurred and that CRST had no reason to suspect would happen. That, said the court, “is liability without end” and exceeds Title VII’s requirement that employers have knowledge of the harassment and respond reasonably. Measuring CRST’s response instead by what it knew at the time of the complaints and how it acted in response, the court found CRST was entitled to summary judgment.

Lessons Learned

CRST escaped liability despite some evidence of persistent sexual harassment issues involving its lead drivers. Key employer takeaways include:

  • It is important to develop, implement, and consistently enforce written sexual harassment policies that swiftly address reports of harassment; remedy the circumstances that lead to complaints; and prevent future abuse by credibly accused harassers.
  • It is equally important to ensure that new employees receive those policies, receive training on the policies, and that all employees receive periodic reminders about the policies.
  • Finally, it is advisable to periodically review and revise policies, particularly when a complaint serves in some way as notice of a potential deficiency in your existing response.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Policies and Handbooks or Labor & Employment Teams.

By Nicholas De Baun and Tara Ellis

Seyfarth Synopsis:  In Toomey v. U of Arizona, No. 19-35 (D. Ar. June 24, 2019), the Magistrate Judge determined on a motion to dismiss that Title VII does not prohibit discrimination based on a person’s transgender status.  However, she decided that the plaintiff had adequately alleged that the health plan exclusion for gender reassignment surgery disadvantaged a “suspect class”, justifying a heightened level of scrutiny, and that defendants had failed to argue that the exclusion would survive this level of scrutiny. 

Plaintiff Russell Toomey, a transgendered male, filed suit in early 2019 against his employer, the State of Arizona, after the self-funded health plan provided by the State of Arizona denied Toomey’s request for medical preauthorization for a total hysterectomy.  The Plan generally provides coverage for “medically necessary care”, and Toomey’s doctors contended that the hysterectomy was medically necessary, but the Plan denied authorization under an exclusion for “gender reassignment surgery.”

Toomey’s complaint contends that the Plan’s denial of authorization for a hysterectomy was sex discrimination under Title VII and a violation of the Equal Protection Clause.  In March 2019, the State of Arizona and two individually named defendants employed by the State of Arizona filed a motion to dismiss Toomey’s complaint.

Magistrate Judge Bowman issued her Report and Recommendation on the motion to dismiss on June 24, 2019.  Judge Bowman recommended granting the motion to dismiss on Toomey’s Title VII claim on the grounds that Toomey could not show that the decision to deny his request for surgery under the Plan exclusion for gender reassignment surgery would have been different if his sex were different.  In reaching this conclusion, Judge Bowman noted that “[d]iscrimination based on a person’s status as a transsexual without more is not discrimination based on gender” under Title VII.

Judge Bowman recommended denying the motion to dismiss on Toomey’s Equal Protection claim.  She concluded that Toomey had adequately alleged that the Plan exclusion disadvantaged a “suspect class”, justifying a heightened level of scrutiny, and that defendants had failed to argue that the exclusion for gender reassignment surgery would survive this level of scrutiny.

After the parties filed Objections to the Report and Recommendation, District Judge Rosemary Marquez scheduled oral argument on the Motion to Dismiss and Report and Recommendation for September 16, 2019.

The question of whether the protections of Title VII apply to transgender individuals is also before the Supreme Court for oral argument on October 8, 2019.  Given the timing of the argument, it is an open question how and whether the Supreme Court’s decision will impact Toomey’s claims.

We will continue to watch this case, and will keep you posted of any developments.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Labor & Employment Team.

By Tonya M. Esposito, Renee B. Appel, and Jonathan Huie

Seyfarth Synopsis: CBD is “thriving” in the current regulatory environment, but is it doing so illegally?

As former U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb opined last week, “the CBD craze is getting out of hand. The FDA needs to act.” Since the passage of the Farm Bill in December of 2018, there has been a marked uptick in interest in the cannabidiol (CBD) space from businesses and users alike. Congress explicitly preserved the FDA’s authority to regulate CBD-containing products to ensure that they are safe and that their claims are valid. Current federal law expressly allows for the distribution of hemp-derived CBD products that contain 0.3% tetrahydrocannabidiol (THC) or less to be sold, with certain caveats.

The FDA has provided clarity that hulled hemp seed, hemp protein powder, and hemp seed oil can be legally used in foods. Other CBD products, however, are still subject to various state law regulations as well as the U.S. Food, Drug, and Cosmetic Act (FD&C Act), which requires FDA pre-market approval for drug products. Currently, the FDA treats CBD products aimed at human or animal consumption as drugs and therefore they cannot be distributed without prior approval or a rulemaking exception (more on this below). The following is a brief update on recent developments within the federal regulatory regime of CBD products.

FDA’s Regulatory Efforts

In light of the enactment of the Farm Bill, along with growing activity and interest in CBD products, the FDA has taken initial steps toward exercising greater oversight—with a goal of devising a more robust regulatory regime. In March of 2019, the FDA established a Working Group to determine the possible legislative pathways to regulate CBD. Specifically, the group aims to “make recommendations” on CBD legislation to Congress.

On May 31, 2019, the FDA’s Working Group held a public hearing for stakeholders to share their experiences and challenges with CBD products, including information and views related to product safety. The public hearing attracted over 100 speakers and 2000 participants. In addition, the Working Group invited the public to submit written comments (the “Public Docket”), which closed on July 16, 2019. Dr. Amy Abernethy, the Principal Deputy Commissioner and Acting Chief Information Officer and head of the Working Group, recently Tweeted:

We are enthusiastic about research into the therapeutic benefits of CBD products but also need to balance safety. To understand the breadth of issues and gather data on safety we have conducted a public hearing, reviewed the medical literature, and have an open public docket.

Elaborating on this statement, on July 25, 2019, Dr. Abernethy testified before the Agriculture, Nutrition and Forestry Committee where she stated that providing clarity on the regulatory status of CBD products is an FDA priority, but cautioning that based on the FDA’s review of Epidiolex (the first CBD-approved drug), CBD is not risk-free. She stressed that, to the FDA’s knowledge, adequate studies simply have not been done, leaving the FDA without adequate information for science-based decision-making about CBD. The FDA is collecting data to fill these gaps . The Working Group is in the process of reviewing published medical literature and other available information from industry sponsors. In addition, as of July 29, 2019, the FDA received over 4400 comments on the Public Docket, which will add to the Working Group’s active review. The FDA is also meeting with other federal agencies and state counterparts, trade organizations, and patient groups in a quest for data.

The FDA is living up to its previous statement that it would apply both a “rigorous and science-based approach” to formulating its regulations on CBD products. And now, it appears, based on Dr. Abernethy’s public comments, the FDA is primed to roll out a report on its progress later this summer or early fall.

FDA’s Enforcement Efforts

Meanwhile, the FDA is seeking opportunities to provide regulatory clarity wherever possible. In 2019, the FDA issued warning letters to four companies marketing and selling CBD products. In each instance, the companies were selling products with flagrant disease-related claims that the FDA had not approved for the treatment or prevention of any ailments. The FDA has historically been passive in its oversight of CBD products. The recent shift underscores the need for companies to both understand and adhere to federal regulations over such products.

In its most recent warning letter, dated July 22, 2019, the FDA asserted that Curaleaf Inc., (based in Wakefield, Massachusetts) marketed unapproved products that qualified as “drugs” with improper labeling as defined under the FD&C Act. The FDA explained that Curaleaf’s products, advertised both through its online store and on social media sites, were aimed at the “diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.” The FDA specifically found that Curaleaf marketed its CBD products online with unsubstantiated claims that they treated (among other things) cancer, opioid withdrawal, pain and pet anxiety, and Alzheimer’s disease. For example, on one of Curaleaf’s pages entitled “How to Use CBD Oil for Anxiety,” the company explains that “CBD can successfully reduce anxiety symptoms, both alone and in conjunction with other treatments” and that “CBD oil can be used in a variety of ways to help with chronic anxiety.”

The FDA requested that, within fifteen working days, Curaleaf respond with the specific steps it has taken to remedy the violations. The FDA cautioned that, without prompt action, legal action may follow, including seizure and injunctions. On Friday, July 26, 2019, Curaleaf responded, noting that it has taken steps to review all inaccurate statements about CBD products from their websites and social media platforms. It has since removed from its site the specific offending statements previously identified by the FDA. CVS, one of the nation’s largest drugstore chains, has also removed Curaleaf products (CDB lotion and transdermal patches) from its shelves.

What’s Next?

The Working Group is continuing to collect and review information relevant to the science of CBD, as well as investigating possible pathways for regulating CBD. Under section 331(ll) of the FD&C Act (21 U.S.C. 331(ll)), the FDA prohibits the sale of products containing an ingredient that has been treated as a drug or involved in clinical trials, without prior FDA approval. This requirement is not without exceptions—some of which explicitly apply to CBD or could apply to CBD. One such exemption is that the drug was marketed in food before any approval and before substantial clinical investigations involving the ingredient were instituted. Another exemption exists if “the Secretary, in the Secretary’s discretion, has issued a regulation, after notice and comment, approving the use of such drug or such biological product in the food.”

Accordingly, the Secretary of Health and Human Services could exercise his authority and expedite the pathway for use of CBD in food products; although, any proposed regulation would take time to draft and be subject to public comment. The FDA won’t have to get too creative in finding a legal way to permit the use of CBD in food products, but any such action will have to wait until the Working Group has gathered enough science to inform its decision on the safety of CBD.

In addition to the anticipated FDA regulations and further guidance on CBD, activity at both the state and federal level add another layer of complexity that companies should consider. Both states and Congress are taking active measures to promote increased regulation of cosmetics and, on the other side, seeking to deregulate cannabis, which may consequentially affect CBD products. Increasingly fragmented state laws regarding marijuana and related products will further pressure the FDA to respond to confusion in this space. As for Congress, pending pieces of legislation aim to provide, more generally, stricter guidance on cosmetics and personal care products ingredients, labeling, and testing.

Two key pieces of legislation, one from each chamber of Congress, deserve attention, primarily for topical CBD products. First, Sens. Dianne Feinstein and Susan Collins reintroduced their “Personal Care Products Safety Act” (S. 726) in March of 2019. This Act would amend the 80-year-old FD&C Act in a variety of ways, including, but not limited to: requiring the FDA to review ingredients and other non-functional constituents for safety at a rate of at least five ingredients per year; requiring cosmetic ingredient statements for all cosmetics and fragrances, including the range of possible amounts of each ingredient; requiring ingredients, warnings and statements on professional products; and requiring complete label information (including manufacturer contact information) to be made available online in connection with online sales.

Second, Representative Jan Schakowsky’s pending bill entitled the “Safe Cosmetics and Personal Care Products Act of 2018” (HR 6903) likewise aims to amend the FD&C Act. While the bill is currently under review by several committees, it aims to require disclosure of all ingredients in beauty and personal care products, including fragrances. It also aims to outright ban toxic substances (e.g., carcinogens) from such products. The House, in June of 2019, has also set aside funds to further aid the FDA in setting guidelines for CDB products.

To further complicate matters, there has been a flurry of activity at the state level. Governor Andrew Cuomo of New York, for example, in July of 2019, signed into law a bill decriminalizing marijuana. Hawaii has also done so in the same timeframe. These are just two additional examples of a patchwork of states that have legalized marijuana usage. With such activity at both the state and federal level, CBD finds itself in a unique, complicated legal environment, which we continue to monitor.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Cannabis Law Practice or Workplace Policies and Handbooks Team.

 

By Christine Hendrickson, Annette Tyman, and Rhandi Childress Anderson

Seyfarth Synopsis: On July 31, 2019, the Illinois Governor J.B. Pritzker signed HB0834 into law, amending the state’s Equal Pay Act.  The amendments toughen the state’s pay equity protections and includes a salary history ban, among other provisions.  This adds Illinois to the growing list of states barring employers from inquiring about an applicant’s salary history.  Former Governor Bruce Rauner vetoed previous attempts to prohibit private employers from requesting applicants’ previous pay history, but current Governor J.B. Pritzker had publically pledged to sign the bill into law.  The new law becomes effective September 29, 2019.

Stronger Equal Pay Protections & Tougher Penalties

Since we have been tracking equal pay trends across the country, states, counties, and even cities have enacted more stringent equal pay laws.  (Click here for our 50-State Pay Equity Desktop Reference, which was updated in June.).  Illinois now joins a slew of other states to strengthen its equal pay protections, providing for a robust salary history ban and narrowed affirmative defenses, in addition to protecting wage discrimination on the basis of sex and against African American employees.

The amendments change the Illinois Equal Pay Act’s requirement that employers pay equally for work that requires “equal” skill, effort, and responsibility and instead allows comparisons to those with “substantially similar” skill, effort, and responsibility.  This change broadens the scope of equal pay claims under the Act by expanding the universe of potential comparators, putting Illinois in line with California, Massachusetts, New York, New Jersey and Oregon and other jurisdictions

The amendments also increase the employer’s burden of proof to defeat Equal Pay Act claims by requiring that any differences in pay meet the following criteria:

  • Not be based on or derived from a differential in compensation based on sex or another protected characteristic,
  • Be job-related and consistent with business necessity, and
  • Accounts for the differential in pay.

Violating the Act’s new provisions may now cost employers even more.  Prior to the amendments, an employee who suffers a violation of the Act was only entitled to lost wages and attorney’s fees and costs.  Now that the amendments have become law, violating Illinois’s Equal Pay Act becomes riskier than in the past since the statute will now allow an employee to recover lost wages, compensatory damages, special damages not to exceed $10,000, punitive damages and injunctive relief as may be appropriate.

An employer is also subject to civil penalties that range from $500 for the first offense to $5,000 for a third or subsequent offense, depending upon the size of the employer, for each employee affected.

Pay History Ban

Illinois is now the fourteenth state with a salary history ban that applies to applicants for employment.

The amendments prohibit Illinois employers from: (i) screening job applicants based on their wage or salary history, (ii) requiring that an applicant’s prior wages satisfy minimum or maximum criteria, and (iii) requesting or requiring as a condition of being interviewed or as a condition of continuing to be considered for an offer of employment that an applicant disclose prior wages or salary.

Employers are also prohibited from seeking the salary, including benefits or other compensation or salary history, of a job applicant from any current or former employer, with some exceptions.  This prohibition does not apply if a job applicant’s wage or salary history is a matter of public record or the job applicant is a current employee and is applying for a position with the same current employer.

Employers are free to provide salary information offered in relation to a position and engage in discussions with an applicant about his or her salary expectations.  Additionally, the amendments make clear that an employer does not violate the statute when a job applicant voluntarily and without prompting discloses his or her current or prior salary history.  But unlike many states that allow employers to consider voluntarily provided information, the Illinois law does not permit employers to consider or rely on the voluntary disclosures as a factor in determining whether to offer a job applicant employment, in making an offer of compensation, or in determining future wages, salary, benefits, or other compensation.

In short, employers may not ask about salaries, but employees are free to discuss that information as they see fit.

Expanded Anti-Retaliation Provision

The amendments also expand retaliation protections under the Act.  The Illinois Equal Pay Act has always prohibited retaliation in response to filing a charge related to the Act, giving information in connection with any inquiry relating to any right under the Act or testifying in a proceeding under the Act.  However, it now protects an individual who fails to comply with any wage or salary history inquiry.

Pay Transparency Protected

Finally, the amendments explicitly protects employees’ right to discuss wages, salary, benefits, or other compensation.  Employers are prohibited from requiring employees to sign any contract or waiver of these rights.  Notably, human resource employees, supervisors or any other employee whose job responsibilities require or allow access to another employees’ wage or salary information are exempted from this provision.

What Should Employers Do?

The new law becomes effective September 29, 2019.  Employers should review their job applications and other policies and procedures, make any necessary changes, and consider training hiring managers and human resources employees about the amendments.  Because of the complex risks associated with implementing changes to comply with the Act, we recommend working closely with legal counsel before making these changes.  In addition, employers should consider whether to conduct a comprehensive pay audit as a proactive step in complying with the statute’s protections against discrimination in pay on the basis of sex and against discrimination in pay for African American employees.

Please feel free to reach out to your Seyfarth attorney, members of Seyfarth’s Pay Equity Group, or the Group’s co-chairs Annette Tyman and Christine Hendrickson, with any questions.

By Minh Vu, Kristina Launey, and Susan Ryan

Seyfarth Synopsis: Data from the first six months of 2019 shows a 12%  increase over 2018.

The task of counting the number of ADA Title III lawsuits filed in federal courts grows with the ever-increasing numbers of lawsuits.  For the period from January 1, 2019 through June 30, 2019, our research team counted 5,592 ADA Title III lawsuits filed in federal court, versus 4,965 filed in first six months of 2018.  That’s a 12% increase.

If the lawsuits continue continue to be filed at the current rate, the number of federal ADA Title III lawsuits filed in 2019 will top 11,000 and it will be yet another record breaking year.

[Graph: ADA Title III Lawsuits in Federal Court Jan. 2014 – Jun. 2019: 2014: 4,436; 2015: 4,789, 8% increase over 2014; 2016: 6,601, 37% increase over 2015; 2017: 7,663, 16% increase over 2016; 2018: 10,163, 33% increase over 2017; 2019: Total: 5,592, as of 6/30/19, Projected Total: 11,184, 10% increase over 2018]

California continues to lead the country with 2,444 federal ADA Title III lawsuits in the first six months of 2019, with New York trailing far behind with 1,212 such suits.  Florida is a close third with 1,074 federal suits.  California continues to be a very popular jurisdiction because plaintiffs can add on a state law Unruh Act claim which provides for $4,000 in statutory damages for each incident of discrimination.  This statutory damages provision gives prevailing plaintiffs an automatic payment so they do not even need to prove that they incurred any actual damages, unless they want to recover more.  The 2,444 California federal ADA Title III lawsuit number does not capture the complete picture of disability access suits filed in California because many more access suits are filed in state court, which we do not track.

This holds true in other states as well, but, as we know anecdotally, it would still not put any other states anywhere near California in the number of disability access lawsuits filed in state and federal courts.  Few other states allow recovery of statutory damages for disability access claims; while Title III only allows recovery of attorneys’ fees and costs in addition to injunctive relief.  In stark contrast to California, the federal courts in Idaho, Iowa, Montana, North Dakota, Oklahoma, South Dakota, and Vermont have seen no ADA Title III lawsuits this year.

[Graph: Top 10 States for ADA Title III Federal Lawsuits Jan. 2019 – Jun. 2019: CA 2,444, NY 1,212, FL 1,074, GA 128, TX 126, PA 71, NJ 66, IL 63, MA 55, MI 36]

What are these lawsuits about?  Based on the many cases we see in our practice, most cases concern allegedly inaccessible physical facilities or websites.  However, there have also been a number of lawsuits claiming that hotels are not putting information about the accessibility of their physical facilities on their reservations websites as required by the ADA regulations, and some lawsuits regarding service animals and sign language interpreters.

Businesses feeling under siege are not likely to see relief any time soon.  Attempts to curb this lawsuit tsunami through federal legislation such as the ADA Education and Reform Act passed by the House last year have seen no progress.

Our Methodology:  Our overall ADA Title III lawsuit numbers come from the federal court’s docketing system, PACER.  However, because the area of law code that covers ADA Title III cases also includes ADA Title II cases, our research department reviews the complaints to remove those cases from the count.

By Latoya R. Laing, Kevin M. Young, Tracy M. Billows, Sara Fowler

Seyfarth Synopsis: Last week the Chicago City Council passed the Chicago Fair Workweek Ordinance, arguably the most expansive law of its kind. When the law takes effect in July 2020, it will require covered employers to publish employee schedules at least ten days in advance and impose premium pay requirements for schedule changes after that time. The law is noteworthy for numerous reasons, including the fact that it covers not just retailers, restaurants, and hotels, but also industries not typically targeted by fair workweek measures, such as health care, manufacturing, building services, and warehouse services. Employers operating in Chicago should act now to begin formulating a plan to ensure compliance and minimize impacts.

A fight that began more than two years ago ended on Wednesday, when Chicago joined the growing number of cities across the country that have enacted predictive scheduling laws. The Ordinance, originally introduced in June 2017, received unanimous approval by the City Council. The new law is incredibly expansive, and it only adds to the complex web of wage and hour laws that multi-state employers must account for in order to ensure compliance.

What Does the Ordinance Require?

Similar to many other predictive scheduling laws, the Chicago Ordinance requires covered employers to publish covered employee schedules at least 10 days in advance (or 14 days starting July 1, 2022) of the first working day of any new schedule, beginning July 1, 2020.

Subject to a handful of exceptions, if the employer changes the schedule after posting, then it must provide the employee with “predictability pay” in the amount of one hour of pay at the employee’s “regular rate,” as defined by Section 7 of the FLSA (29 U.S.C. § 207(e)). If a change is made within 24 hours of the shift, the employee would be entitled to at least 50% of their regular rate for any scheduled hours not worked due to the change.

The Ordinance speaks to more than just schedule changes, however. It also establishes the following requirements, among others:

  1. The Ordinance penalizes employers who fail to provide employees with at least 10 hours off in between shifts. Specifically, similar to spread-of-hour requirements in New York, the Ordinance requires that employees who work a shift that begins less than 10 hours after the end of the prior day’s shift must be paid at a rate of 1.25 times their regular rate of pay for the shift.
  2. The Ordinance dictates that when a shift becomes available, they must first be offered to covered, qualified employees. If the offered shifts are not accepted, the shifts must then be offered to temporary or seasonal workers who have worked for the employer for two or more weeks. This suggests that there may be cases when an open shift may not be offered to a current employee who is not covered by the Ordinance (e.g., an employee earning $27/hour) before it is offered to a temporary or seasonal worker.
  3. Covered employers must provide new employees covered by the law with a written estimate of the employee’s projected days and hours of work for the first 90 days of employment, including average hours per week, expected days and times or shifts that the employee can expect to work (or not work), and whether on-call shifts are expected

Who Is Affected?

The Chicago Ordinance will require attention from employers who are not accustomed to being covered by similar measures in other areas of the country. Those who have grappled with fair workweek laws in other jurisdictions will not be surprised to learn that the Ordinance applies to the hospitality, retail, and restaurant industries. But the law goes much further: it also encompasses health care, manufacturing, warehouse services, and building services.

Restaurants, as a general matter, are covered if they have at least 30 locations and 250 employees globally (though there is a carve-out for certain franchises with no more than three locations in Chicago). Employers operating in the other covered industries are subject to the law if they employ more than 100 employees globally (or 250 in the case of a non-profit).

The Ordinance is also expansive in the types of employees it covers. It covers not only hourly employees—specifically, those earning no more than $26/hour—but salaried employees earning $50,000/year or less. While the Ordinance includes an exception for employees who “self-schedule,” that term is defined to include only employees who “self-select work shifts without employer pre-approval pursuant to a mutually acceptable agreement.”

Finally, it is important to note that the Ordinance covers any employee of a “day and temporary labor service agency” who has been assigned to a covered employer for 420 hours within an 18-month period. Thus, certain temp agencies that might not otherwise be covered will need to monitor where their employees work and for how long.

How About the Exceptions?

The Ordinance carves out a few scenarios in which predictability pay is not required. A few of the more notable exceptions include: (i) mutually agreed upon shift trades between covered employees; (ii)  mutually agreed upon changes between the employee and employer, if confirmed in writing; and (iii) changes that an employee requests and confirms in writing.

Additionally, the Ordinance contains exceptions specific to manufacturing and health care employers. In the former setting, predictability pay is not triggered when a schedule change is the result of events outside the employer’s control (e.g., delay of raw materials). For health care employers, employers will not be penalized for changes due to (i) patient care needs that require specialized skills to complete a procedure, or (ii) substantial increases in demand due to weather, violence, or other circumstances beyond the employer’s control.

Employers with unionized workforces will also need to take note of the Ordinance. Like many other local wage measures, the Ordinance provides that its requirements may be waived in a collective bargaining agreement. But any such waiver must be explicitly stated in clear and unambiguous terms, and, at this time, the city has not provided guidance on how that requirement will be interpreted, particularly for CBA’s that are not up for renegotiation until after the July 1, 2020 effective date.

How Will the Ordinance Be Enforced?

The Ordinance provides employees with the right to file a civil lawsuit within two years of a violation, but only after submitting a complaint to the Department of Business Affairs and Consumer Protection, which will then provide the employer the opportunity to respond. An employee who wins such a lawsuit is entitled to unpaid predictability pay, as well as attorneys’ fees and costs.

In addition, employers are subject to a fine of $300 to $500 for each offense. Each employee whose rights are violated constitutes a separate offense, and each day of violation constitutes a separate offense. Thus, the penalties for non-compliance can mount quickly.

In furtherance of these provisions, the Ordinance authorizes City officials to access work sites and records to monitor compliance and investigate complaints.

Takeaways and Next Steps

We will continue to monitor and provide updates on what comes next for the Chicago Ordinance, including any regulations or other guidance. In the meantime, here are some steps to consider:

  • Review existing scheduling policies in preparation for implementing new policies or revising existing policies to satisfy the Ordinance;
  • Review dates for collective bargaining agreements to determine when to address the new Ordinance and seek a waiver during bargaining; and
  • Be on the lookout for further information such as regulations, model notices, and other administrative guidance.

With predictive scheduling/fair workweek laws continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with this Ordinance and other similar measures across the country.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team or the Workplace Policies and Handbooks Team.

By John P. Phillips, Joshua D. Seidman, and Tracy M. Billows

Seyfarth Synopsis:  On Wednesday, July 24, 2019, approximately one week before San Antonio’s paid sick leave ordinance was scheduled to go into effect for most employers, a Texas state court stayed implementation of the city’s paid sick leave ordinance until at least December 1, 2019.  In the meantime, the Dallas paid sick leave ordinance remains scheduled to go into effect on August 1, 2019 for most employers.

Since Austin passed the first paid sick leave (“PSL”) ordinance in Texas last year, the state has enjoyed an ongoing PSL saga, including similar ordinances passed by Dallas and San Antonio, failed preemption legislation, court battles, and a pending appeal to the Texas Supreme Court.  The drama has not abated.  We last reported on the state of PSL ordinances in Texas a week ago.  Since that time, a whirlwind of activity has occurred.  Most notably, on July 24, 2019, a Bexar County District Court stayed implementation of San Antonio’s PSL ordinance until at least December 1, 2019.  Meanwhile—for the time being at least—Dallas’ PSL ordinance is still scheduled to go into effect on August 1, 2019.

San Antonio PSL Ordinance Is Stayed Until December 1

As we previously reported, San Antonio’s PSL ordinance was scheduled to go into effect on August 1, 2019 for most businesses.  On July 15, however, a group of local businesses and business associations filed a lawsuit in Texas state court seeking an injunction of the San Antonio ordinance’s August 1 effective date.  The business plaintiffs focused on the same constitutional grounds that suspended implementation of Austin’s paid sick leave ordinance last year.

On July 19, the State of Texas (through the Attorney General’s office) intervened in the San Antonio lawsuit, siding with the business plaintiffs.  The City of San Antonio then agreed to voluntarily stay implementation of the PSL ordinance until December 1 stating that it would use the four-month delay to consider possible revisions to the PSL ordinance.  On July 24, 2019, the court granted the stay, halting the August 1 implementation date and postponing the San Antonio PSL ordinance.  Accordingly, businesses in San Antonio now need not worry about PSL compliance until at least December 1.

Dallas PSL Ordinance Is Scheduled To Go Into Effect August 1—At Least For Now

Not to be deterred by San Antonio’s PSL delay, the Dallas PSL ordinance is still scheduled to go into effect on August 1, 2019 for most businesses.  Dallas is continuing to prepare for implementation as the city recently published PSL Rules and Frequently Asked Questions.  Accordingly, employers in Dallas should continue to prepare for the city PSL ordinance’s implementation, subject to any further developments over the next week.

To date—unlike in Austin and San Antonio—no lawsuit has been filed challenging the Dallas PSL ordinance.  That being said, a lawsuit could be filed in the next several days.  We will continue to monitor developments as they unfold in Texas, and will provide updates as additional information becomes available.

To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list. Companies interested in Seyfarth’s paid sick leave laws survey should reach out to sickleave@seyfarth.com.

By Eric W. May and Daniel C. Whang

Seyfarth Synopsis: In Biel v. St. James School, the Ninth Circuit once again split from other circuit courts, this time by narrowly construed an affirmative defense known as the “ministerial exception” that bars claims of employment discrimination brought by ministerial employees of religious institutions. The Ninth Circuit recently denied the request for a rehearing en banc, entrenching its departure from other circuits on the ministerial exception.

The U.S. Supreme Court previously held that under the First Amendment’s protection of freedom of religion, the government cannot interfere with “decision of a religious group to fire one of its ministers.” If this ministerial exception applies, then discrimination laws would generally not apply to termination decisions by religious groups.

For the ministerial exception to apply, the key question is whether an employee actually qualifies as a “minister.” This is the question taken up by the Ninth Circuit.

The Supreme Court’s Ministerial Exemption Test

In Hosanna-Tabor Evangelical Lutheran Church and School v. E.E.O.C., the Supreme Court examined four “considerations” to determine whether an employee is a “minister” and could be subject to the ministerial exception:

(1)        the formal title given the employee by the church;

(2)        the substance reflected in that title;

(3)        the employee’s own use of the title; and

(4)        the important religious functions the employee performs for the church, including whether the employee’s job duties reflect a role in conveying the church’s message and carrying out its mission.

In enumerating these considerations, the Supreme Court recognized that determining whether the ministerial exception applies in a given case will depend on all of the facts, and not necessarily just the four that caused it to conclude that the plaintiff in Hosanna-Tabor fell within the ministerial exception.

As the Ninth Circuit distinguished the facts in Hosanna-Tabor, a brief summary of the case will be helpful. Hosanna-Tabor involved a former elementary school teacher at a Lutheran school, who was diagnosed with narcolepsy and subsequently terminated. Prior to her termination, she taught a religious class four days a week, led the students in prayer and devotional exercises each day, and attended a weekly school-wide chapel service that she led herself twice per year. In response to the teacher’s claim of employment discrimination, the Lutheran school responded that this employment decision was protected under the ministerial exception. After analyzing its four key considerations for applying the ministerial exception, the Supreme Court agreed that the plaintiff qualified as a ministerial employee, and her employment claims were barred.

The Ninth Circuit’s Narrow Application of the Ministerial Exception Test

In Biel, the plaintiff was also a former elementary school teacher at a Catholic school who sued her former employer after she was diagnosed with breast cancer and subsequently terminated. The plaintiff taught all academic subjects, including religion, which she taught four days per week. She also supervised and joined her students during twice-daily prayer led by students and escorted them to a school-wide monthly mass.

The Ninth Circuit found that the plaintiff did not meet the definition of “minister” under Hosanna-Tabor—concluding that the only similarity with the teacher in Hosanna-Tabor was that they both taught religion in the classroom. The Ninth Circuit took issue with the plaintiff not having any religious credentials, training, or ministerial background, and that the church did not hold out the plaintiff as a “minister” with special expertise.

The Ninth Circuit Denies Rehearing En Banc

The Ninth Circuit declined the request for a rehearing en banc. In an opinion dissenting from the denial of rehearing en banc, Judge R. Nelson voiced his concern that the Ninth Circuit’s opinion improperly limits the ministerial exception to apply only when a religious organization’s employee serves a significant religious function and either has a religiously significant title or has obtained significant religious training.

But the problem, according to Judge Nelson, is that “courts are ill-equipped to gauge the religious significance of titles or the sufficiency of training,” especially when it comes to different religions. Judge R. Nelson notes that the first three Hosanna-Tabor factors—title, training, and how an employee holds herself out—vary widely from religion to religion. For example, the formal title “[m]inister, although commonly used in Protestant denominations, is ‘rarely if ever used in this way by Catholics, Jews, Muslims, Hindus, or Buddhists.’”

Employer Takeaways

The import of the Ninth Circuit’s decision and whether it will encourage titles that value form over substance by religious institutions remains to be seen. Time also will tell whether the Ninth Circuit will remain the outlier on its narrow application of the ministerial exemption or whether the Supreme Court will step in again to further clarify the appropriate standard. In the meantime, there will likely be increased litigation regarding who is considered a “minister” in the Ninth Circuit.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team or the Workplace Policies and Handbooks Team.

 

By Phillip J. Ebsworth and Jennifer L. Mora

Seyfarth Synopsis: While employees often will toot their own horn, employers sometimes may have concerns about their ability to safely perform their job. If this situation rings a bell, it will be music to your ears to hear that it may be possible to request employees to undergo a medical examination to certify their fitness for duty.

Fitness for duty examinations are permitted under both the federal Americans with Disabilities  Act (ADA) and the California Fair Employment and Housing Act (FEHA). However, because employers are generally prohibited from inquiring about employees’ physical and mental conditions, employers must exercise caution and should not march to the beat of a different drum.

What if I Don’t Think an Employee is Ready to Return from Leave?

Under the Family and Medical Leave Act (FMLA), when an employee’s physician certifies that  the employee can return to work from leave, the employer must return the employee to work. However, if the certification is incomplete or insufficient, the employer can give the employee a written notice stating what additional information is necessary.

Alternatively, as discussed by the California Court of Appeal in White v. County of Los Angeles, once the employee has returned to work from FMLA-protected leave, an employer can request an examination consistent with the ADA.

Under California’s FEHA, an employer may require an employee to undergo a medical examination to certify an employee’s fitness for duty upon the employee’s return from a non-FMLA medical leave of absence if there are reasonable safety concerns regarding the employee’s ability to perform the essential job functions. The examination must be job-related and a business necessity under the specific circumstances.

Can I Require a Fitness for Duty Examination when there are Safety Concerns?

An employer may require an employee to submit to a medical examination and obtain a fitness for duty certification if the employer has a reasonable belief based on objective evidence that the employee’s ability to perform essential job functions will be impaired by a medical condition, or that the employee will pose a direct threat due to a medical condition. If a medical examination and fitness for duty certification is sought under those circumstances, the examination must be job-related and consistent with business necessity.

Employers must have a “genuine reason to doubt” an employee’s ability to perform job-related functions. So, when considering a fitness for duty examination, it is instrumental to have evidence to drum up support for your reason to doubt the employee’s fitness. Excessive absenteeism, difficulty performing essential functions of the job, or poor productivity (particularly where outside of the employee’s usual patterns or character) may all be “cymbal-ic” of an employee being “unfit for duty.” These situations are highly fact specific and employers will have to play it by ear to see if a fitness for duty examination is appropriate in a particular circumstance.

What Can a Fitness for Duty Examination Tell Me?

Under California’s Confidentiality of Medical Information Act (CMIA), unless the employee provides written authorization, an employer can only know whether the employee is able to perform the essential functions of the job. In other words, the employer cannot be told the diagnosis or cause of an employee’s inability to perform—it is simply a pass/fail examination. However, if an employee would be able to perform the essential functions of the job with a reasonable accommodation, the employer is entitled to know the medical restrictions of the employee’s fitness for duty, such as lifting or standing restrictions, or needing an alternative schedule. Of course, if there is any doubt as to the accommodations needed, an employer can request that the employee provide additional clarification.

Workplace Solutions: Fitness for duty examinations are a useful instrument for employers, but be wary of playing solo. Your favorite Seyfarth attorney can chime in to make sure you land on the right note.

Edited by Coby Turner and Elizabeth Levy

By Andrew S. Boutros, Michael D. Wexler, Alex Meier, Daniel P. Hart, Robert B. Milligan

Seyfarth Synopsis:  On June 24, 2019, the Supreme Court issued its decision in Food Marketing Institute v. Argus Leader Media and resolved fractured circuit splits about the parameters for when the government may withhold information from a Freedom of Information Act (“FOIA”) request based on responsive information being confidential or a trade secret.

Earlier this year, we reported on this case when the Supreme Court granted certiorari and predicted that the case would have significant ramifications for the protections given to sensitive information submitted by companies to the government.

And it has. The Court did away with the former requirement that the company requesting confidential treatment demonstrate it would suffer “substantial competitive harm,” which, in practice, could be quite costly to prove up and, as a practical matter, required the company to prove harm based on the occurrence of a hypothetical event. Now, an entity seeking shelter under FOIA’s confidentiality exemption, Exemption 4, need only show that (1) the commercial or financial information is customarily and actually treated as private by its owner; and (2) that the information was provided to the government under an assurance of privacy. The decision creates a far more accommodating framework for entities seeking to protect information as confidential under FOIA Exemption 4.

FOIA Exemption 4

FOIA Exemption 4 protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” Prior to the FMI decision, the Supreme Court had never weighed in on what that meant, leaving a wide range of circuit-level decisions. In early decisions, the courts adhered to the ordinary, everyday usage of the term “confidential,” viewing it as commercial or financial information that the person would not want in the public sphere. A company’s price lists would be one such example. This interpretation generally comports with the understanding of what constitutes “confidential information” for purposes of non-disclosure agreements.

But, in National Parks & Conservation Association v. Morton (1974), the D.C. Circuit adopted a much different and somewhat counterintuitive test, holding that the government may invoke FOIA Exemption 4 and refuse disclosure of so-called confidential information requested under FOIA only if the disclosure is likely either to (1) impair the government’s ability to obtain necessary information in the future (“impairment”); or (2) cause substantial harm to the competitive position of the person from whom the information was originally obtained (“competitive harm”).

Most circuits adopted this test or something very similar to it, even though lower courts and litigants generally criticized the test as unmoored from any ordinary understanding of what qualified as confidential information. Although the Supreme Court had previously declined to grant certiorari in cases where the test was challenged, that changed when it agreed to hear the FMI case.

The Food Marketing Institute Case

The Argus Leader, a South Dakota newspaper, submitted a FOIA request to the United States Department of Agriculture (“USDA”) seeking the name, unique identifier, address, store type and the yearly Supplemental Nutrition Assistance Program (“SNAP”) sales figures for every store in the United States. The USDA produced all the data requested, except for the yearly revenue, which it withheld under Exemption 4. After exhausting its administrative remedies, Argus sued the USDA in district court.

The district court initially granted summary judgment in the government’s favor. The Eighth Circuit reversed and instructed the district court to consider whether releasing store-level SNAP data would likely result in substantial harm to the stores that submitted the data.

After a two-day bench trial, the district court ruled in favor of Argus and in support of the data’s release. The USDA made known that it intended to release the data to Argus, which in turn caused Food Marketing Institute (“FMI”) to obtain leave to intervene and then file an appeal.

Now on appeal for the second time, the Eighth Circuit affirmed the district court’s judgment. The circuit court found that, although the SNAP data could be commercially useful, that was not enough to show that FMI’s members, retail food stores that participate in SNAP, and others would experience a substantial likelihood of competitive harm.

FMI then filed for certiorari and asked the Supreme Court to abandon the competitive harm test or, alternatively, apply the test and find that the district court and circuit court erred. FMI urged the Court to reject the D.C. Circuit’s National Parks test and instead apply the plain meaning of the term “confidential,” as the D.C. Circuit had done when determining what constituted “commercial or financial” information. FMI objected to National Parks’ focus on whether the information’s release would cause “substantial competitive harm,” which represents a reversal of the test when assessing whether information is confidential or a trade secret: whether the information provides a competitive advantage by virtue of the information not being broadly known.

The Supreme Court Reverses the Eighth Circuit

In a 6-3 decision, the Supreme Court reversed the Eighth Circuit, holding that the National Parks test grafted requirements onto Exemption 4 that lacked any textual support. After quickly finding standing, the majority turned to the “ordinary, contemporary, common meaning” for the undefined term “confidential.” From dictionary definitions, the Court viewed the core aspects of confidentiality as requiring that the information be “customarily kept private” or “closely held” and that the receiving party provide some assurance that it will remain secret.

The Court did not find any indication that confidentiality required the disclosing party to demonstrate that, if the information were shared, that some harm would result from the disclosure. Rather, the Court criticized National Park’s introduction of the “substantial competitive harm” test as a “relic from a ‘bygone era of statutory construction’” that resulted from elevating legislative history over the statute’s text and structure. The Court also found significant that subsequent cases had actually created two definitions of what qualified as “confidential” based on whether the disclosure was voluntary or involuntary. The Court did not address whether a party could disclose information to the government without requiring the government to keep it confidential and then later assert that it is confidential information protected under Exemption 4.

The three dissenting Justices agreed with the outcome and that the National Parks test had gone too far in requiring the disclosing party to prove harm but were of the view that the majority went too far in jettisoning from the test any harm requirement. The dissent advocated for the test to incorporate an additional element: whether release of the information “will cause genuine harm to an owner’s economic or business interests.” The dissent considered this requirement to be more accommodating than National Parks while still preserving FOIA’s preference for disclosure and narrow construction of its exemptions.

The Key Takeaways

The Court’s decision has significant ramifications for industries that provide important, valuable data to the government, particularly where the confidential information is subject to a mandatory reporting or disclosure obligation. The decision also generally supports the proposition that companies can maintain property rights in their confidential information through written agreements (such as those used with employees and third parties) and that courts should give effect to those agreements.

As a result of this decision, government contractors will likely be able to protect more information that is disclosed to the government. In contrast, government contractors that regularly seek such information through FOIA requests may receive much less information in response.

Prior to disclosing confidential information, entities faced with a government request to disclose information should clearly identify and label confidential information as confidential and also seek to obtain written assurances from the government that such information will be treated as such. Entities should also review their internal policies and procedures to proactively identify materials that warrant confidential treatment and to establish procedures for how such materials should be handled when distributed to the government or other third parties. Of course, once implemented, all such policies should be vigilantly enforced so that such policies are not used as evidence of a company’s non-compliance with its own procedures.

Andrew S. Boutros and Michael Wexler are partners in Seyfarth’s Chicago office, Alex Meier is an associate and Daniel P. Hart is a partner in Seyfarth’s Atlanta office, and Robert B. Milligan is a partner is Seyfarth’s Los Angeles office.  If you have any questions, please contact Andrew S. Boutros at aboutros@seyfarth.com, Michael Wexler at mwexler@seyfarth.com, Alex Meier at ameier@seyfarth.com, Daniel P. Hart at dhart@seyfarth.com, or Robert B. Milligan at rmilligan@seyfarth.com.