By: Christine HendricksonLisa L. SavadjianCameron A. SmithCourtney Stieber

Seyfarth Synopsis: The New York City Commission on Human Rights (the “Commission”) recently issued additional guidance in the form of “Frequently Asked Questions” on the Salary History Law that goes into effect on October 31, 2017.  

New York City’s Salary History Law goes into effect on October 31, 2017.  It will prohibit covered employers from inquiring about a candidate’s salary history, or relying on the salary history of candidates when determining their salary, benefits, or other compensation.  For more information regarding the law, see our prior alerts herehere, and here.

With the Halloween deadline fast approaching, many employers are revising their hiring practices to comply with the law.  Recently, the Commission issued guidance, which can be found on its website in a section entitled: “Frequently Asked Questions,” and here. The FAQs respond to some key concerns employers have about the law.

Key Takeaways

  • The FAQs provide guidance regarding deferred compensation and unvested equity. They clarify that, as part of a discussion about compensation expectations, employers can ask about the value and structure of deferred compensation or equity that would be forfeited.
  • The Commission takes an expansive view regarding the geographic scope of the law’s coverage, and will apply the law to job applicants that live in New York City and interview in New York City, even if they apply for a job outside of New York City.
  • The FAQs state that employers and consumer reporting agencies must comply with the law’s requirements even when running a background check, and suggest that it is a best practice to redact or exclude salary history from such reports.
  • Employers should remove all requests for current or prior salary on their job applications, particularly where it might be sent to a candidate for a job in New York City.
  • The Commission will conduct a case-by-case analysis regarding inquiries about the salary history of independent contractors and whether the employer may consider salary history when determining compensation for an offer of permanent employment in the same position or a comparable position. The Commission will primarily consider whether the temporary employee or subcontractor qualifies as an applicant for a new position or for internal transfer or promotion.

General Scope of Coverage

There were no big surprises on the scope of coverage.

  • The FAQs reaffirm that the law covers applicants for jobs in New York City.  The Commission acknowledges that the law will not apply where an applicant simply resides in New York City, but is interviewed and will work outside of New York City.  However, the FAQs indicate that the Commission is taking the position that if the employer asks a candidate about salary history during a job interview that occurs in New York City, even for a job based outside of the City, the law may apply.  Here, the Commission relies on the theory that the impact of the discriminatory conduct occurred in New York City.  Courts may take a narrower view when analyzing the locus of the impact of the challenged conduct and if the law applies in this situation.  Nonetheless, even employers without operations in New York City should exercise caution, particularly when interviewing in or considering applicants from New York City.
  • The law generally will not apply to former employers who disclose information about salary history to the hiring employer.  However, the Commission noted that others can be held liable if they intentionally aid and abet a violation of the law.
  • Applicants for internal transfer or promotion are not protected by the Salary History Law.
  • The salary history protections will go into effect on October 31, 2017, but they will not be retroactive to cover inquiries made prior to that date.  Nonetheless, employers should exercise caution if they are formulating or communicating offers after October 31st based on salary history obtained prior to that date.  Even if the information was lawfully obtained before the law went into effect, the law independently prohibits reliance on salary history in determining a candidate’s compensation, including the negotiation of a contract.

What Employers Can and Cannot Do to Learn About Applicants’ Salary Expectations

  • The Commission confirmed that a job application can ask an applicant to state his or her compensation expectations, as long as it does not request salary history.
  • Employers should review and revise their job applications, particularly where one might be sent to a candidate applying for a job in New York City, to remove all requests for current or prior salary.  Retaining or including a question on a job application that asks for salary history may violate the law.  Employers who use an application that requests salary history cannot avoid liability simply by adding a disclaimer stating that individuals in New York City or applying for jobs in New York City need not answer the application’s question about current or prior salary.
  • Inquiries made to a candidate’s current or former employers, or searching public records, for the purpose of learning an applicant’s salary history, are prohibited.  However, in cases of accidental discovery if, for example, an employer stumbles upon a candidate’s salary history while searching publicly available information for another purpose, the employer would not have violated the Salary History Law.  In such a situation, however, the employer may not rely on that accidentally discovered salary history to formulate the compensation details of an offer.
  • If an applicant volunteers information about his or her salary history without being prompted to do so, the employer may discuss and inquire about the applicant’s salary history, verify the applicant’s representations, and rely on the applicant’s salary history in determining an offer.
  • A voluntary disclosure of salary history is “without prompting” if the average job applicant would not think that the employer encouraged the disclosure based on the overall context and the employer’s words or actions.  While the Commission is articulating an objective “reasonable person” test, rather than a subjective standard, this “voluntary and without prompting” safe harbor remains vague.  Employers should exercise caution and train hiring managers and recruiting professionals not to prompt disclosure of salary history.

Background Checks and the Implications of the Credit Reporting Laws

  • In circumstances where an employer is legally permitted to perform a background check before a conditional offer has been made, or runs a background check after a conditional offer, the Commission recommends that employers specify to reporting agencies that information about salary history be excluded from the report.  Inquiries into salary history would violate the law regardless of whether such inquiries are made before or after a conditional offer, unless the employer makes the inquiry to verify information the applicant disclosed voluntarily and without prompting.
  • Consumer Reporting Agencies (“CRA”) should consider no longer verifying salary information for applicants in New York City or applicants for jobs in New York City.  In addition, where CRAs collect W-2 or other tax reporting forms from candidates, they should redact salary history.

Broad Definition of “Compensation”

  • The Commission has defined “salary” broadly.  The same is true of “benefits” and “other compensation,” which extend to various forms of remuneration, including, but not limited to, a car allowance, retirement plan, or bonus.  This also includes commissions an applicant earned.
  • An employer is allowed to ask about objective indicators of performance such as a book of business, or the volume, production, value, or frequency of sales.  However, an employer should not ask about an applicant’s current or former profit percentages, or information from which it can determine the applicant’s compensation earned on production or commissions (unless the applicant volunteered that information without prompting).
  • Employers may ask about the value of a counter offer or competing offer that the candidate might also be considering, because it is not “current or prior” salary.

Deferred Compensation

  • One of the most significant pieces of guidance contained in the FAQs concerns deferred compensation.  In September, the Commission’s policy counsel represented to us that it would take the position that employers should not affirmatively ask candidates whether they have deferred compensation or would forfeit deferred compensation.  The Commission stated that if the candidate offers information about deferred compensation as part of a discussion about compensation expectations, the employer can verify the value of the deferred compensation that would be forfeited, either with the prior employer or with the candidate.  However, when the Commission issued Fact Sheets in September, they were silent on deferred compensation.
  • The FAQs now state clearly that, in the context of a discussion with candidates to learn about their compensation expectations, employers may ask whether an applicant will have to forfeit deferred compensation or unvested equity upon resignation from his or her current employer, and may ask about the value and structure of the deferred compensation or unvested equity that would be forfeited.  Employers may request documentation to verify the applicant’s representations, and consider such information in making an offer.

Exemptions to the Law

  • There is no specific exemption in the law for actions taken by an employer pursuant to foreign or international law that specifically authorizes the disclosure or verification of salary history or requires knowledge of salary history.
  • Private positions for which compensation is set pursuant to procedures established by collective bargaining are not exempt. The only exemption in this area applies to public employees where compensation is set pursuant to a collective bargaining agreement.
  • Headhunters are not exempt.  Headhunters who qualify as employers, employment agencies, or agents of an employer may be liable under a direct or aiding and abetting discrimination theory.  The Commission recommends that headhunters obtain written confirmation from job candidates that they consent to disclosure of their salary history.  Employers working with headhunters should also obtain a copy of the applicant’s written consent before relying on a headhunter’s representations about an applicant’s salary history.
  • The Commission did little to clarify the debate surrounding independent contractors.  The law does apply to independent contractors.  However, the Commission hedged on whether an employer may consider the salary history of a temporary employee or a subcontractor in determining compensation for an offer of permanent employment in the same position or a comparable position.  The Commission stated that this must be assessed on a case-by-case basis. The Commission will consider whether the temporary employee or subcontractor qualifies as an applicant for a new position or for internal transfer or promotion.  The Commission suggests that if the employer is willing to concede that it is a joint employer of the subcontractor or temporary employee, then the application may be one for internal transfer or promotion, which would not be covered by the law.

Corporate Acquisitions

  • A company seeking to acquire another company may obtain salary information about the employees of the target company as part of the due diligence process because the employees of the target company are not “job applicants” under the law.
  • However, despite this corporate acquisition exemption, the FAQs explain that if employees of the target company are being asked to interview for new positions in the acquiring company, the law may apply.  Accordingly, in those circumstances, the Commission recommends that any salary information that may have been shared in the due diligence process not be shared with hiring managers making decisions about compensation.  Employers considering a corporate acquisition should assess the law’s potential applicability.

Best Practices

The Commission recommends as a best practice:

  • During the hiring process, focus questions on applicants’ salary demands, skills, and qualifications.
  • Employers and hiring managers change the tenor of the conversation around salary discussions in interviews, to move away from what the applicant is currently making, and instead focus on his or her salary demand. The Commission believes this is an important change to prevent current salary from being based on prior salary, which may be artificially depressed.
  • Ensure that job applications and other forms do not include questions about applicants’ salary history, even if such questions are framed as “voluntary.”
  • Modify written policies and educate interviewers and hiring staff to prohibit inquiries about applicants’ salary history.

Unintentional violations of the law may lead to imposition of civil penalties of up to $125,000, and the Commission may impose a penalty of up to $250,000 for a willful and malicious violation. Individual applicants may also file claims under the New York City Human Rights Law for violation of the Salary History Law, and seek compensatory damages and other relief including punitive damages and attorneys’ fees.

As always, we are available to answer any questions employers may have regarding the Salary History Law.  If they have not done so already, employers should evaluate and reassess their practices and procedures with respect to recruiting and hiring in light of this new law and guidance.

By Sam Schwartz-Fenwick and Michael W. Stevens

Seyfarth Synopisis:  The Texas Supreme Court held that the U.S. Supreme Court’s landmark marriage equality decision, Obergefell v. Hodges, did not dispositively address how far government employers must go in providing benefits to same-sex married couples.

In a provocative opinion, in Pidgeon v. Turner, No. 15-0688, the Texas Supreme Court held that Obergefell v. Hodges, 135 S. Ct. 2584 (2015), does not necessarily require state governments to extend marital benefits to same-sex married couples.

Procedural Background

In 2013, the city of Houston began extending benefits to same-sex spouses of city employees who were lawfully married.  Shortly thereafter, Pidgeon was filed. It alleged that the city’s actions violated Texas and Houston law. The law was enjoined by a state court. In July 2015, the Texas court of appeals reversed the injunction, holding that Obergefell represented a “substantial change in the law regarding same-sex marriage since the temporary injunction was signed,” and that Obergefell forbade states from refusing to recognize lawful same-sex marriages.  The appeals court also remanded to the trial court to issue opinions “consistent with” Obergefell . Plaintiffs then appealed to the Texas Supreme Court.

The Court’s Opinion

The Texas Supreme Court reversed. The Court wrote “The [U.S.] Supreme Court held in Obergefell that the Constitution requires states to license and recognize same-sex marriages to the same extent that they license and recognize opposite-sex marriages, but it did not hold that states must provide the same publicly funded benefits to all married persons.”  Slip op. at 19 (emphasis added). The Texas Supreme Court remanded the case, so the trial court could decide if the Constitution or Obergefell “requires citizens to support same-sex marriages with their tax dollars.” Id. at 20.

The decision rested on the proposition that Obergefell is “not the end” of the inquiry as to the “reach and ramifications” of the constitutional status of same-sex marriage.  Id. at 23.  Notably, the Texas Supreme Court acknowledged that the U.S. Supreme Court had, in the same week, decided Pavan v. Smith, No. 16-992, which rejected the state of Arkansas’ efforts to limit recognition of same-sex parents on birth certificates.  In Pavan, in a per curiam opinion, the Court held that same-sex couples are entitled to the same “constellation of benefits that the Stat[e] ha[s] linked to marriage.”  2017 WL 2722472, at *2 (citations omitted).

Despite the apparent inconsistency with Pavan, the Texas Supreme Court emphasized the purported uncertainty over the reach of same-sex marital benefits by noting that the U.S. Supreme Court has also granted certiorari in Masterpiece Cakeshop, Ltd. v. Colo. Civil Rights Comm’n, No. 16-111, a case involving a baker who was sued after he refused to make a wedding cake for a same-sex wedding.

Next Steps

The trial court may now proceed to the merits of the case, and a ruling that is inconsistent with Obergefell and Pavan is a distinct possibility.  Should the case ultimately proceed to the U.S. Supreme Court, in light of Pavan, and assuming the current membership of the Court remains the same, it seems unlikely that a narrow reading of Obergefell, at least as to governmental actors, would be upheld.  Unlike Masterpiece Cakeshop, Ltd., Pidgeon does not raise any questions of freedom of speech or religious liberty.  Rather, as with Pavan and Obergefell, it addresses whether state actors can treat same-sex marriages differently than opposite sex marriage.

While the decision in Pidgeon may ultimately be vacated, that this decision was issued 2-years after a ruling by the Supreme Court legalizing same-sex marriage, underscores that opponents of marriage equality continue to use courts as a vehicle to limit or reverse marriage equality.

As Pidgeon and other challenges to marriage equality make their way through the courts, employers and benefit plans considering modifying their benefit offerings to exclude same-sex spouses should tread very carefully, especially given the EEOC’s position that differential benefit offerings to same-sex spouses violates Title VII of the Civil Rights Act.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment Team.

Voting is open for the American Bar Association’s annual 100 Best Legal Blogs competition, though this year the contest is a “Web 100” and will include websites and social media along with legal blogs. We hope you will cast your vote today to help Seyfarth’s Employment Law Lookout blog get on the ABA’s list for 2017.

The Employment Law Lookout Blog is a resource for employers seeking intelligent discourse and updates on the today’s most pressing workplace issues. Our mission is two-fold: to provide critical, real-time updates on employment law matters to in-house counsel and HR executives, and to keep our audience apprised of new trends and developments on the horizon.

Seyfarth’s bloggers draw upon their own first-hand experiences counseling businesses large and small to provide you with their insights about the most cutting-edge issues on new regulations, guidance, and court decisions.

Help us gain some extra recognition by casting your vote in the ABA’s Web 100 competition!

Click here to vote. Simply provide a short explanation of why you like this blog.

The deadline to nominate the blog is Sunday, July 30, 2017, so don’t delay. Polls are open!

 

By Lorie E. Almon, Gerald L. Maatman, Jr., Ian H. Morrison

Seyfarth Synopsis:  As we face a new year, Seyfarth is pleased to offer strategic guidance through our 13th Annual Workplace Class Action Litigation Report.

Across all varieties of workplace litigation, class action dynamics increasingly have been shaped and influenced by recent rulings in the U.S. Supreme Court. This past year the Supreme Court issued several key decisions on complex employment litigation issues and accepted more cases for review that are posed for rulings this coming year. Some decisions may be viewed as hostile to the expansive use of Rule 23, while others are hospitable and strengthen the availability of class actions against employers.   In our workplace class action webinar, highlights from the Report will outline a number of key trends for employers in 2017, including:

  • The implications and fall-out from the Supreme Court’s key decisions on complex employment litigation and class action issues of 2016, and discussion of the cases accepted for review that are posed for rulings in 2017.
  • Lessons to be learned from the monetary value of the top employment-related class action settlements and why they declined significantly in 2016 after they reached all-time highs in 2014 and 2015.
  • The background on why more favorable class certification rulings for the plaintiffs’ bar were issued in 2016 than in past years.
  • How the private plaintiffs’ bar is likely to “fill the void” after the Trump inauguration and increase the number of wage & hour lawsuit filings in 2017, following case filing statistics reflecting that wage & hour litigation filings decreased over the past year for the first time in a decade.
  • Why there were more conditional certification and decertification decisions in the wage & hour space than in any other area of workplace class action litigation.
  • The dynamics behind the U.S. Department of Labor and Equal Employment Opportunity Commission’s continued aggressive litigation approaches in 2016 and what is in store for government enforcement litigation under the Trump Administration.

REGISTER

If you have any questions, please contact, events@seyfarth.com. *CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

By Sam Schwartz-Fenwick and Kylie Byron

Seyfarth Synopsis: A Seventh Circuit panel’s ruling that Title VII does not cover claims of sexual orientation discrimination will be heard en banc by the Circuit.  Whether an en banc ruling affirms or reverses the panel’s decision, it is likely that this issue will only be resolved with certainty by the Supreme Court.

On October 11, 2016, in response to a petition for rehearing filed by the Appellant, and as we predicted in our blog, the Seventh Circuit vacated its panel ruling that Title VII did not extend to claims of sexual orientation discrimination, and decided to hear the case before the entire Seventh Circuit en banc.

The panel decision, issued in August 2016, was controversial and for many inconclusive.  The Court was friendly to the reasoning of the EEOC, which has been arguing that sexual orientation discrimination is per se sex discrimination covered by extant law.  Despite negating the rationale for not covering sexual orientation discrimination, the panel held fast to stare decisis and upheld the district court’s decision that sexual orientation discrimination claims were not covered by Title VII.

Reading the tea leaves, many believe the Seventh Circuit may be poised to reverse the panel decision.  Judge Posner, most notably, has recently been outspoken in his opinions on LGBT issues.  He wrote a scathing dissent in a recent Seventh Circuit case, Fuller v. Lynch, No. 15-3487, lamenting an immigration judge’s denial of relief to an asylum seeker on, in Posner’s words, “a supposed lack of ‘proof’ of bisexuality.”  Posner also previously authored the opinion striking down Wisconsin’s ban on same-sex marriage in Wolf v. Walker, on the basis of equal protection.

Judge Posner is not, of course, the only Judge in play.  He is, however, singularly and vocally outspoken on the issue, acting as a correspondent on LGBT rights in the law in the media.  Between Judge Posner’s vocal position, the panel’s internally conflicted initial opinion, and the willingness of the Seventh Circuit to take the case up for rehearing, many see the case as a ripe opportunity for the Seventh Circuit to become the first Circuit Court of Appeals to endorse the EEOC’s outlook on Title VII’s protection on the basis of sexual orientation.

However the Circuit Court rules will hardly be the last word on this issue.  The rehearing may result in some stabilization of the law in the Circuit, but is unlikely to portend for consistent results nationwide.  A Circuit split is likely to emerge, a split that will only be resolved by legislative or Supreme Court action.

In this time of flux, employers should consult with counsel to evaluate their internal policies, practices and procedures with an eye towards sexual orientation claims.

If you have questions regarding this topic, please contact the authors or your Seyfarth attorney.

 

shutterstock_267261659By Annette Tyman and Meredith Bailey

The White House announced a new Equal Pay Pledge for private sector companies as part of yesterday’s “United State of Women Summit” in Washington, D.C.  The Pledge is one of several initiatives announced at the Summit intended to tackle “gender-based discrimination” in the workplace.

By signing the voluntary Pledge, companies promise to conduct an annual gender pay analysis and reassess their hiring and promotion processes to ensure “wage fairness for all workers.”  In a statement, the White House said that the Pledge highlights “the critical role that businesses must play in reducing the national gender pay gap.”

The Equal Pay Pledge builds on the Obama administration’s focus on legislation and policies designed to promote fair pay.  The Lilly Ledbetter Fair Pay Act–which extended the limitations period for pay discrimination claims–was the first major bill President Obama signed into law in January 2009. Since then, the White House has championed Federal and state initiatives that further gender equality in the workplace, including equal pay and paid leave.

The Pledge highlights that equitable pay is more than a compliance issue — Companies must ensure fair pay practices to maintain a competitive advantage.

Seyfarth Shaw’s Pay Equity Group (PEG) has over 20 years’ experience counseling employers on best practices related to pay equity audits and fair pay analyses, such as those intended by yesterday’s Equal Pay Pledge.  If you have questions about the Equal Pay Pledge or other pay equity questions, please contact a member of Seyfarth’s PEG:  http://www.seyfarth.com/pay-equity-group.

By Maria Papasevastos and Nadia Bandukda

Seyfarth Synopsis:  New Jersey Governor Chris Christie has conditionally vetoed a pay equity bill that would have strengthened protections against pay discrimination in the workplace. The bill’s sponsors will now decide whether they want to override the veto, accept the Governor’s changes or rewrite the bill.

On Monday, Governor Chris Christie conditionally vetoed proposed amendments to the New Jersey Law Against Discrimination concerning equal pay for women in the workplace. As we reported previously, both the Assembly and Senate passed a bill that would impact New Jersey employers by making it an unlawful employment practice for an employer to discriminate on the basis of gender under a “substantially similar work” standard.  The bill also would have allowed employees to be compared even if they do not work in the same establishment, with no geographic limitation; and, unlike other recently-enacted fair pay laws in New York and California, would have permitted unlimited back pay.

Governor Christie has vetoed bills with similar language in the past, stating that their penalties and requirements were too broad.  However, he has now provided some additional insight in his conditional veto recommendation for this bill.  Specifically, Governor Christie criticized the bill’s allowance of unlimited back pay as going beyond what the Lilly Ledbetter Fair Pay Act provides, and recommended limiting back pay to two years.

The Governor also stated that while he supported an “explicit prohibition on wage discrimination on the basis of gender,” the bill in its current form went too far in changing the legal standard for establishing wage discrimination and “would require an oversimplified comparison of wages while ignoring any consideration of the employer’s practices or facilities,” thus making New Jersey “very business unfriendly.”  He recommended that the standard for comparing employees be whether they are performing “substantially equal” work, rather than “substantially similar” work, and that employees only be compared if they are performing such work “under similar working conditions,” among other changes.

Additionally, Governor Christie remarked on axing the bill’s treble damages provisions, which he believed would “make New Jersey a liberal outlier,” as well as his disagreement with – and suggested removal of – the bill’s reporting requirements for state contractors.

The bill’s sponsors can now attempt to override the veto, accept Governor Christie’s changes or rewrite the bill.

By Johanna T. Wise and Alexander Meier

Seyfarth Synopsis. The Eleventh Circuit clarifies the framework in mixed-motive cases. Although damages are limited, a plaintiff can establish a mixed-motive claim by showing a protected characteristic was a motivating factor for an adverse employment action.

Historically, district courts in the Eleventh Circuit were loath to depart from the traditional McDonnell Douglas burden-shifting framework in all but the most egregious employment discrimination cases involving allegations of direct evidence.  That preference and the exclusivity of McDonnell Douglas is, however, showing signs of erosion.

In two recent decisions, the Eleventh Circuit reversed a district court’s grant of summary judgment and fashioned a new framework for Title VII causation determinations.  These decisions suggest that summary judgment will be more difficult to obtain in mixed-motive employment discrimination cases under a 1991 amendment to Title VII: 42 U.S.C. § 2000e-2(m). The provision allows an employee to establish an unlawful employment practice by demonstrating that a protected characteristic “was a motivating factor for any employment practice, even though other factors also motivated that practice.”

The Eleventh Circuit first hinted that employees could proceed under the more lenient “motivating factor” causation standard in Chavez v. Credit Nation Auto Sales, LLC.  That case involved alleged sex discrimination against a transgender auto mechanic.   The company owner allegedly made comments that he was “very nervous” that the mechanic’s gender transition could “negatively impact his business.”  The company owner disciplined the mechanic for various performance issues, and ultimately fired her when he found her asleep at work.

Chavez sued and the district court granted summary judgment based on the company’s legitimate, non-discriminatory reason for her termination, namely falling asleep on the job.  The circuit court reversed and indicated that an employer’s presenting a legitimate, non-discriminatory reason is not a complete defense to liability.  The circuit court reasoned that an employee could still recover declaratory relief and attorneys’ fees, though not damages, by establishing that discrimination based on a protected characteristic was a “motivating factor” for the adverse employment action.

The full impact of Chavez was not entirely clear.  The decision was unpublished, and there were some signs that the company owner deviated from the written disciplinary system to immediately terminate the mechanic.

But the Eleventh Circuit’s recent decision in Quigg v. Thomas County School District, issued just over a month after Chavez, clarified that alternatives to the McDonnell Douglas burden-shifting framework were not as narrowly available as past cases suggested.

Quigg involved an employee who claimed that the school district discriminated against her based on her sex and gender by failing to renew her employment contract.  The school district countered that the employee had performance issues and violated the school district’s ethics policies.

The district court granted summary judgment on all claims using the traditional McDonnell Douglas burden-shifting framework.  The district court found that the school district provided a legitimate, non-discriminatory reason for her termination and that the employee’s evidence was insufficient to establish that her performance issues were mentioned only as a pretext for discrimination.

The Eleventh Circuit reversed, holding that the McDonnell Douglas framework did not apply in mixed-motive cases. Rather, an employee could survive summary judgment by demonstrating that the protected characteristic was a motivating factor, even though the school district had legitimate issues with the employee’s job performance.  The circuit court held that, rather than examine the case under McDonnell Douglas, the proper framework on summary judgment should be to “ask only whether a plaintiff offered evidence sufficient to convince a jury that: (1) the defendant took an adverse employment action against the plaintiff; and (2) [a protected characteristic] was a motivating factor for the defendant’s adverse employment action.”  The decision brings the Eleventh Circuit in line with the majority of other circuits that addressed the issue, including the Second, Third, Fifth, Sixth, and Tenth Circuits. To date, only the Eighth Circuit persists in applying McDonnell Douglas to mixed-motive claims based on circumstantial evidence.

Significantly, an employer can still reduce the damages available to the employee by establishing that it would have made the same decision “in the absence of the impermissible motivating factor.” 42 U.S.C. § 2000e-5(g)(2)(B). This partial defense allows an employer to escape liability for actual damages and the potential for reinstatement but leaves a litigant’s ability to request declaratory relief and fees intact.

Given the limited nature of relief in mixed-motive cases, time will tell whether mixed-motive claims will begin to increase in the Eleventh Circuit or if McDonnell Douglas will continue to apply as the prevailing framework.

 

By Robert B. Milligan

As January quickly passed by and new projects increase by the day, there is still a golden opportunity to capitalize on some low-hanging fruit to immediately improve your company’s practices and add immediate value to your company.

The opportunity lies in improving your company’s restrictive covenant and confidentiality agreements and confidentiality policies.  Below are five tips that you can employ immediately to improve your company’s agreements/policies and practices.

First, make sure your company is using confidentiality agreements and confidentiality policies with your employees.  You may be surprised to learn how many companies do not ask their employees to sign such agreements.  When those companies later seek to explore their options against employees who have joined competitors, their options are significantly narrowed.  Also, your company should not rely solely on employee handbook policies or other similar policies.  While your company may not use non-compete or non-solicitation covenants with your workforce, at a minimum, companies should use non-disclosure agreements with their employees.  There is really no excuse not to ask employees to sign such agreements.

Additionally, companies should consider using the maximum legally permissible restrictive covenants in their jurisdictions, including non-competes and non-solicitation of customers and employees as applicable, with their workforces; otherwise, companies are leaving a competitive advantage at the table. While some companies may elect not to use non-compete agreements because such covenants are viewed as not supportive of their company “culture,” companies should carefully survey what their competitors are doing and determine whether they are putting themselves at a disadvantage in the talent market.

Second, spend some time with the business leaders in departments that create your company’s confidential information to make sure that your company’s non-disclosure agreement provides sufficient descriptions of the information that each department considers high value confidential information.  Oftentimes, companies give little thought to the categories of information described in the non-disclosure agreement or have no description of the information whatsoever.  While your company should not provide the secret information in the agreement, your company should at least describe the category of information in which it belongs and some specifics so that the category is easily identifiable by employees.  The value in describing the information in more detail is that the employee then understands what the company deems confidential, and it also provides the company a better chance in the courtroom to hold a former employee accountable if he or she misappropriates such information.

Third, review your company’s restrictive covenant and confidentiality agreements to make sure that they do not unnecessarily limit the company’s rights.  In one recent case, an employer lost its trade secret suit because its non-disclosure agreement defined confidential information as only that information which had been marked confidential.  The court found that the trade secret claim failed because the information in dispute had not been marked confidential.  The trade secret claim may have proceeded if the contract had not unnecessarily restricted the term “confidential” information to only signify information labeled confidential.  While labeling information as confidential indicates that such information may be subject to reasonable secrecy measures to support a classification as a trade secret, it is typically not dispositive as to whether contract and trade secret claims can be pursued for the theft of company information.

Additionally, companies operating in states that permit non-compete and non-solicitation agreements should consider using such agreements with their employees in those states even if those companies’ corporate headquarters are in jurisdictions where non-competes are typically void in the employment context, such as California.  Simply put, just because your company is headquartered in California does not mean that you should not ask your employees in Florida to sign non-compete and non-solicitation agreements governed by Florida law.  Additionally, some companies have been successful in using forum selection and choice of law provisions to bind employees who work in jurisdictions where restrictive covenants are limited to non-competes and non-solicitation covenants in the company’s home forum, particularly where such employees are provided access to trade secrets and maintain well-established relationships with company clients.  A company should also consider whether to use a prevailing party provision for attorney’s fees and costs for actions brought on or related to the agreement.

Fourth, take into account some recent developments in state non-compete law to make sure that your company’s agreement is compliant.  For example, Oregon has limited the duration of employee non-competes to two years effective January 1, 2016.  Hawai’i has banned the use of non-compete and non-solicit agreements with technology works effective July 1, 2015.  Alabama has made it easier to enforce non-compete agreements with a revised statute that became effective January 1, 2016.  Also, in Alabama, non-competes of one year will now be presumed to be enforceable.  Additionally, Illinois and Pennsylvania have special requirements for the roll-out of non-compete agreements with existing employees, including providing consideration apart from continued employment alone, to enforce such agreements.  The Wisconsin Supreme Court recently has found that continued employment was adequate consideration for non-compete agreements entered into after the inception of employment. There are also active movements in Utah and Washington to restrict the use of non-compete agreements.

Fifth, critically examine which employees and third parties your company asks to sign restrictive covenant and confidentiality agreements and be mindful of third-party scrutiny.  Regulators, legislators, and employee groups are scrutinizing the use of restrictive covenant agreements.  While some employers may not be using such agreements enough, particularly with the right people (i.e., executives, engineers, R&D personnel, sales representatives, among others), other companies may be accused of overreaching in asking all employees to sign non-compete agreements.  While the janitor does not necessarily need to sign a non-compete, he or she probably should sign a non-disclosure agreement in certain instances.  Also, your company should perform an audit or ensure one has been performed to see if your company has signed agreements with key employees, particularly high level executives and employees who may be flight risks.

Companies should think critically about who they are asking to sign such agreements and who they should be asking to sign such agreements (e.g., appropriate restrictive covenants and non-disclosure agreements with vendors and contractors).  We have found that while some companies may have solid agreements with employees, the same high value information may be provided to contractors and vendors without similar protections, which erodes the confidentiality protections placed on the information.  Government agencies such as the NLRB, SEC, and EEOC are actively scrutinizing employer confidentiality restrictions, so companies should be mindful to provide examples of confidential information instead of broad undefined labels, to not prohibit disclosure of information protected by Section 7 of the National Labor Relations Act (such as concerted activity involving discussions of conditions of employment or wages), and to not prohibit participation in government investigations or including similar provisions which impede the ability of employees to act as whistleblowers.

As many have already broke their New Year’s resolutions as we move into February, there is still an opportunity for you to add value to your organization by addressing these critical issues and providing useful recommendations to your organization.  Don’t wait.  Act today and reach for this low-hanging fruit.

By Christopher DeGroff, Gerald L. Maatman, Jr., and Howard Wexler

With little fanfare, the EEOC quietly announced on February 18, 2016 its adoption of new “Nationwide Procedures for Releasing Respondent Position Statements and Obtaining Responses from Charging Parties.” Importantly, the Nationwide Procedures retroactively apply to all EEOC requests for position statements made on or after January 1, 2016.  Pursuant to the Nationwide Procedures:

“EEOC will provide the Respondent’s position statement and non-confidential attachments to Charging Parties upon request and provide them an opportunity to respond within 20 days. The Charging Party’s response will not be provided to Respondent during the investigation.”  (emphasis added).

Employers often produce highly sensitive materials in defense of an EEOC Charge, with assurances that EEOC files are confidential. For example, employers often provide confidential comparator information concerning other similarly-situated employees to demonstrate consistent, non-discriminatory approach in cases of alleged disparate treatment.  Employers also sometimes provide the EEOC with protected commercial and trade materials as exhibits to these position statements.  Although it is not unheard of for the EEOC to provide a Charging Party with some of the information submitted by an employer in its Position Statement to get his or her take on the defenses asserted by an employer, the wholesale production of the position statement itself and its supporting documents represents a sea change in practice.   If included with a position statement, “eyes-only” confidential company information could go directly to an individual who is, by definition, disgruntled, with no clear protections as to how those materials can be used.  In litigation, these materials are disclosed to a private party only after iron-clad and detailed protective orders are put in place.  Based on the Nationwide Procedures, this information is available to any all Charging Parties simply “upon request” with no provisions that the information be kept confidential.

But all is not as it seems. On the other hand, Charging Parties are often in denial about the legitimate, non-discriminatory basis of a personnel decision. As such, giving a Charging Party and their legal counsel access to the employer’s position statement and accompanying exhibits allows for a playing field where the continued prosecution of an EEOC charge — or of the filing of a subsequent lawsuit — is no longer due to the worker’s misapprehension or inability to face the reality of the employer’s defense. In other words, in many cases, this may assist an employer by educating a worker and his or her lawyer about the weaknesses in their case and eliminate the filing of lawsuits.

Implications for Employers

Based on the Nationwide Procedures, employers must consider being far more measured about what is contained in, or attached to, position statements given that they likely will end up in a former employee’s hands. Indeed, the Nationwide Procedures could actually result in more EEOC-initiated subpoena actions, as employers must be more concerned about who will ultimately have access to their confidential documents and may be less willing to voluntarily provide certain information in a position statement.

How the Nationwide Procedures will play out in practice remains to be seen, including whether other information shared during an investigation (e.g., responses to additional requests for information) will also be provided to Charging Parties. Stay tuned, as we will report any updates as they develop.