By Condon McGlothlen, Marc Jacobs, and Adam R. Young

Seyfarth Synopsis:  Earlier this month, Governor Pritzker signed into law SB 1557, revising the Recreational Cannabis Law to expand permissible marijuana testing and related adverse action.

The Original Legalization Bill As Enacted

The Illinois Cannabis Regulation and Tax Act (410 ILCS 705) (the “Legalization Act”) legalizes recreational cannabis for Illinois adults starting January 1, 2020. The Legalization Act specifically allows Illinois employers to enforce “reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call provided that the policy is applied in a nondiscriminatory manner.” The Act also permits employers to prohibit employees from being under the influence of or using cannabis in the employer’s workplace or while on call. Further, the Act (i) allows employers to discipline or terminate an employee who violates the employer’s workplace drug policy, and (ii) specifically insulates employers from liability for disciplining or terminating employees based on the employer’s good faith belief that the employee was either impaired at work (as a result of using cannabis) or under the influence of cannabis while at work.

However, when the Legalization Act was passed in November, it threatened to increase exposure for Illinois employers who test for marijuana and act on a positive test result. First, the Legalization Act created a potential cause of action for applicants who test positive for marijuana at the post-offer, pre-employment stage, and are therefore rejected for hire. The Act expressly amended the Illinois Right to Privacy in the Workplace Act, which prohibits discrimination against employees for their use of “lawful products” outside of work (defined as lawful products under state law), to include cannabis and marijuana. Because applicants have not started working, applicant testing could only detect marijuana use outside the workplace. Return-to-duty drug testing raised similar issues, typically detecting off duty drug use during a leave.

Second, employers who test current employees, e.g., post-accident or based on reasonable suspicion, faced new exposure if a discharged employee claimed the employer lacked a “good faith belief” that the employee had been impaired by or under the influence of cannabis.  For example, if the employer discharged some employees who tested positive but not others, a discharged employee could claim the employer lacked a “good faith belief” regarding impairment. Alternatively, because there currently is no legally or medically accepted definition of what constitutes “impairment” (or being “under the influence” of marijuana), the former employee could assert: (i) he or she was not in fact impaired at work; (ii) a positive test result alone cannot prove otherwise; and (iii) the employer still acted based solely on the test result, thus showing it lacked a good faith belief regarding the employee’s impairment.

Eleventh Hour Amendments Protect Employer Drug Testing

With the January 1, 2020 deadline approaching, Illinois business community representatives raised numerous concerns with lawmakers and proposed revising the Act to clarify permissible drug testing and limit possible causes of action against employers. On December 4, 2019, Governor Pritzker signed amendments into law that (among other things) provide:

Nothing in this Act shall be construed to create or imply a cause of action for any person against an employer for:

(1) actions taken pursuant to an employer’s reasonable workplace drug policy, including but not limited to subjecting an employee or applicant to reasonable drug and alcohol testing, reasonable and nondiscriminatory random drug testing, and discipline, termination of employment, or withdrawal of a job offer due to a failure of a drug test.

P.A. 101-0593, Sec. 705-10(50)(e)(1). This new provision is separate from the Act’s safe harbor for decisions based on the employer’s good faith belief that an employee was impaired or under the influence of marijuana while performing his or her job duties.

With regard to pre-employment, post-offer testing, the Legalization Act amendments seemingly eliminate employer liability for revoking an offer due to a positive marijuana result. The Legalization Act as amended explicitly permits “withdrawal of a job offer due to a failure of a drug test.” Section 705-10(50)(e)(1). Potential employer liability under the Right to Privacy in the Workplace Act for rejecting applicants who test marijuana-positive also effectively has been eliminated. While the original law amended the Privacy in the Workplace Act to permit discrimination claims founded on the use of “lawful products” (e.g. cannabis) outside work, the Privacy in the Workplace Act specifically invokes 705-10(50)(e)(1) of the Legalization Act. With that section amended, Privacy in the Workplace Act claims related to marijuana testing should no longer be viable.

For post-accident, random, or other forms of current employee testing, the amended Legalization Act better protects employer interests by expressly limiting causes of action based on discipline or termination on account of a failed drug test. However, the statute still contains language regarding an employer’s “good faith belief”. Employees may therefore still pursue litigation alleging such a belief is required for lawful termination, and that the employer lacked this requisite belief in discharging the individual.

Employer Takeaways

Given imminent cannabis legalization, many Illinois employers are presently updating their policies and procedures.  Other states’ experience suggests Illinois employers may soon confront increased recreational marijuana usage, as well as additional workplace marijuana possession, use, and impairment.  Employers should consult outside counsel for help in revising policies and addressing new marijuana challenges in the workplace.

Medical marijuana developments present another set of challenges for employers in many states, Illinois included. Those issues are not impacted by the Legalization Act as amended.

The Illinois amendments both clarify and expand employer options by comparison with the original Legalization Act. Fundamental questions remain across the country, however, about how employers should view marijuana and its effect on work. Is widespread marijuana use in one form or another inevitable, in which case should employers continue investing the time, effort, and expense associated with rigorous pre-employment and employee testing efforts? Or is that question misguided because it ignores employer needs (safety and productivity among others) to test for other drugs no matter what happens with marijuana-related developments? Either way, recent marijuana developments and related uncertainty about developments to come are forcing companies to re-think when to test, whom to test (what positions or job categories), what to test for, and how to make sure decisions based on test results comply with the varied but generally expanding protections for both recreational and medical marijuana use.

In a sense, Illinois employers caught a break with the Legalization Act amendments —  a break not only from the original Legalization Act, but also from a larger state law trend towards always requiring employers to prove impairment to justify adverse action based on marijuana use. This follows from the widely recognized view that  a marijuana-positive result by itself says virtually nothing about impairment at work. Though it may no longer be required in Illinois, a best practice for employers who test current employees for marijuana is to establish a strong record of impairment independent of a marijuana-positive result. That would include thorough, contemporaneous documentation of the reasons employees are sent for reasonable suspicion testing. It could include an accident investigation report that rules out non-drug-related causes where circumstances warrant that conclusion.

Marijuana testing may remain a valuable tool for helping employers maximize productivity, reduce turnover, and avoid workplace accidents and injuries. But it is only one tool, and one met with skepticism if not outright antipathy in a growing number of jurisdictions. For now, Illinois is no longer among those. In this uniquely evolving area (many would say industry), however, change is the only agreed upon constant.

For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA), or Cannabis Law Practice Team, or the Employment Law Practice Group.

By Brandon L. Dixon and Erin Dougherty Foley

Seyfarth Synopsis:  The Americans with Disabilities Act (ADA) not only provides protection to individuals who have physical or mental impairments, but to individuals an employer may perceive to have such impairments.  These cases can be challenging for employers to defend, and the recent Sixth Circuit case, Babb v. Maryville Anesthesiologists, P.C., demonstrates how failure to appropriately identify and communicate about an employee’s perceived (or actual) impairment can create obstacles to a successful defense.

Maryville Anesthesiologists employed Paula Babb as a Certified Registered Nurse Anesthetist (CRNA).  About a month into her employment with Maryville, one of its physician-owners, Dr. Coleman, noticed that Babb was placing her face usually close to a computer screen at work.  Babb explained to Dr. Coleman that she suffered from a degenerative eye condition.  While it meant she had to hold medical records close to her eyes to read them, Babb assured Dr. Coleman that her eye condition did not impede her ability to safely perform her duties as a CRNA.

As time passed, other reports of issues related to Babb’s vision began to surface, which ultimately led a few physician-owners to meet with Babb. She tearfully explained to them her eye condition diagnosis, and that it did not impact her ability to do her job. The physician-owners calmed her by telling her that she was a “good fit” and “doing well.” They then asked her to schedule an appointment with her ophthalmologist and report back.  Babb agreed to do so. They also asked Babb if she had disability insurance because one of the owners believed she “might have a disability.” A physician-owner then emailed the other owners to report about the meeting with Babb, concluding with a note that they may need to speak with their attorney about Babb’s visual impairment.

In the next few months, Babb committed two separate errors at work that were unrelated to her vision.  At the next meeting of the Maryville’s physician-owners, they made the decision to terminate Babb based on the two “clinical errors,” which they argued evidenced a lack of ability to provide safe patient care. The decision, which came only two months after the meeting during which Maryville told Babb she was doing well, came as a surprise to Babb.  Hours after her termination, and at the direction of a physician-owner, a first-year CRNA circulated an email to Maryville employees announcing Babb’s termination.  In it, the CRNA noted Babb had been “having major issues with her eyesight,” and, critically, “[Babb’s eyesight problems], in addition to other issues, has forced the group to make a very difficult decision” to let her go.

Maryville prevailed at summary judgment.  The district court first deemed inadmissible Babb’s expert testimony.  The expert called into question the reasonableness of Maryville’s decision to terminate Babb over the two clinical errors, explaining that they were not gross violations of the standard of care for CRNAs. It then found that there was a genuine issue of material fact concerning whether Maryville regarded Babb as “disabled.”  Nevertheless, the court granted summary judgment in favor of Maryville, reasoning that there was “no evidence that [Maryville] did not honestly believe” the clinical errors cited in support of Babb’s termination did not render her unsuited for a CNRA position.  Further, the court concluded that Babb could not show that the real reason for her termination was discrimination based on her perceived visual disability.

The Sixth Circuit reversed, first observing that the district court erred by disregarding the entirety of the expert witness’s testimony simply because there were some objectionable elements of the expert report.  It then moved on to find that while it agreed with the lower court’s conclusion that fact issues existed about whether Maryville regarded Babb as disabled, the district court had used the incorrect “substantially limits one or more major life activities” standard.  The correct inquiry, the appellate court explained, is whether the plaintiff has shown the employer believed the he or she had a “physical or mental impairment” (regardless of whether the impairment limits or is perceived to limit a major life activity).  An employer may rebut this by showing that the perceived impairment is both transitory and minor.  Here, the court found ample evidence establishing that Maryville may have regarded Babb as disabled, including Maryville’s query into whether Babb had disability insurance and expressing that they may need to meet with their attorney about Babb’s vision issues. Thus, there was indeed a genuine issue of material fact as to whether Maryville regarded Babb as disabled, even when using the correct standard.

Next, the circuit court reversed the district court’s ultimate holding that the evidence supported summary judgment in favor Maryville.  The focus here was on whether there was a genuine issue of material fact as to Babb’s position that the “clinical errors” cited by Maryville as the reason for her termination were pretext. It held that there were two fact disputes sufficient to allow Babb to survive summary judgment.  First, it determined there were fact issues surrounding the reasonableness of Maryville’s decision to terminate Babb for the clinical errors;  the less serious the errors, the more likely they were not the true motivation for her termination.  This is where the expert testimony the lower court improperly excluded was relevant, and when properly considered, created a fact issue precluding summary judgment.

The second fact dispute was, more generally, whether Babb’s perceived disability was the actual reason for her termination. The court did not mince words, noting that the email the CRNA sent on behalf of the physician-owners referencing Babb’s eye condition as the reason for her termination was “smoking gun” evidence of pretext.  That is, the CRNA’s email was clear evidence that the actual reason for Babb’s termination may have been because of her perceived disability.  While Maryville maintained that the CRNA’s email was based innuendo and rumors, there was contrary evidence that she wrote it at the specific direction of the owners.  The court declared that if this “cannot get an employment discrimination plaintiff past summary judgment on the question of pretext, it is hard to imagine what could.” Accordingly, it reversed the district court’s grant of summary judgment for Maryville, potentially sending this case to trial.

Takeaways

Congress eased the burden on employees bringing a “regarded as” claim by enacting the Americans with Disabilities Amendment Act. Some courts and attorneys are still operating under the old standard, which required a plaintiff to show that an employer “mistakenly believed” an impairment would “substantially limit[] one or more major life activities.”  However, this case reminds us that a plaintiff now need only show that the employer believed that he or she had a physical or mental impairment to satisfy the threshold question in a “regarded as” case.

The case also serves as a reminder of the importance and sensitivity of communications and decisions surrounding an employee’s actual or perceived impairment.  Employers should take great care in identifying, discussing, and documenting any issues that may give rise to an  Americans with Disabilities Act claim.  The same is true concerning any authorized or official communication announcing an employee’s departure. Assuming such communication is deemed necessary, it should be carefully drafted or reviewed by HR and/or an attorney.  Failure to do so can open the door to the type of “smoking gun” evidence that makes surviving a legal challenge to otherwise legitimate personnel decisions far more difficult and costly.

If you have any questions regarding this area or need assistance evaluating personnel decisions relating to potential physical or mental impairment, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Absence Management and Accommodations Team.

By James L. Curtis, Mark A. Lies, IIMatthew A. SloanAdam R. Young, and Craig B. Simonsen

Seyfarth Synopsis:  Recently the U.S. House of Representatives passed a bill with bipartisan support that would require the Department of Labor to promulgate an OSHA standard specifically aimed at protecting healthcare and social service workers from workplace violence.

The “Workplace Violence Prevention for Healthcare and Social Service Workers Act,” HB 1309, is the most significant step to date by the federal government to address the rise of workplace violence episodes in the healthcare and social service industries.  In 2018, for example, there were 14.8 nonfatal injuries from assaults for every 10,000 full-time workers across the private health-care and social assistance industry in 2018, according to Bureau of Labor Statistics data.  This was a significant increase from 2014, that rate was only 8.2 for every 10,000 full-time workers, still 4 times higher than the rate for workers in the private sector overall.

If passed by the Senate, the U.S. Secretary of Labor would have one year to implement an OSHA standard requiring employers in the healthcare and social service industries to develop and implement comprehensive workplace violence prevention plans to protect their workers from workplace violence.  A new standard would provide specific regulation requirements for employers.  Currently, Federal OSHA regulates workplace violence via the General Duty Clause, which broadly requires employers to take affirmative steps to protect their employees from hazards.  For more information on how Federal OSHA uses the General Duty clause in healthcare and social service workplace violence context, please visit our March 2019 blog post, titled “Commission Decisions Confirm that Employers Must Take Action to Protect Employees from Workplace Violence.”

The Federal OSHA standard proposed in HR 1309 would require employers to develop a workplace violence prevention plan that would include:

  • The individual responsible for implementation of the plan;
  • A risk assessment for each work area or unit at the facility;
  • Security controls such as security and alarm systems, adequate exit routes, monitoring systems, barrier protection, established areas for patients and clients;
  • Reporting, incident response, and post-incident investigation procedures;
  • Procedures for emergency response; and
  • Training for employees on workplace violence hazards.

California’s state plan already has a specific standard that requires employers in the healthcare and social service industries to create and enforce workplace violence prevention plans.  We previously blogged about these California regulations at “CA Nears Adoption of New Workplace Violence Regulations for Healthcare Employers, Home Health Providers, and Emergency Responders.”

The efforts of the House of Representatives track the increased interest by state and federal agencies in the prevalence of workplace violence in healthcare and social service settings over the last five years.  In addition to the aforementioned California legislation, we have noted that “OSHA Issues “Strategies and Tools” to “Help Prevent” Workplace Violence in the Healthcare Setting.”  We have also blogged that “OSHA Updates Workplace Violence Guidance for Protecting Healthcare and Social Service Workers.”  Moreover, in 2016, Federal OSHA considered whether to commence rulemaking proceedings on a new standard for preventing workplace violence in healthcare and social assistance workplaces perpetrated by patients and clients.  Prevention of Workplace Violence in Healthcare and Social Assistance, 81 Fed. Reg. 88147 (December 7, 2016).

The House bill, backed by National Nurses United, passed with the support of a bipartisan group of representatives.  However, the bill faces significant opposition from the healthcare industry and its allies in the U.S. Senate and the White House.  Senate Majority Leader Mitch McConnell has pigeon-holed more than 300 pieces of legislation passed by the Democratic house, and the White House Office of Management and Budget has urged the President to oppose the bill.  We will follow the legislative process closely.  Irrespective of this new legislation, many healthcare employers are already developing workplace violence prevention plans.  In developing an effective plan, healthcare employers should consider their history of workplace violence and consider contacting outside counsel to advise and develop a program.

For more information on this or any related topic, please contact your authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team or the Workplace Counseling & Solutions Team.

By Pamela Q. Devata and Jennifer L. Mora

Seyfarth Synopsis: After six years of litigation, on November 18, 2019, the Equal Employment Opportunity Commission (EEOC) announced a multi-million settlement with a national employer, which resolved litigation that claimed the employer’s use of criminal history had a disparate impact on minority job applicants. The announcement is a reminder to employers to carefully draft and implement their screening policies as they relate to use of an applicant’s criminal history.

Criminal history information can be a crucial tool in the employment decision process. During the past few years, state and local governments have been limiting employers’ use of criminal history information in the employment process through regulation, litigation, and legislation. In 2012, the Equal Employment Opportunity Commission issued guidance in an effort to limit employers’ options with respect to their use of this tool.

The EEOC has brought several high-profile lawsuits against national employers over their use of criminal history information, with some cases resulting in employer victories. Most recently, on November 18, 2019, the EEOC announced in a press release that a nationwide retailer settled a race discrimination lawsuit brought by the EEOC, which challenged the employer’s use of criminal history for employment purposes. Specifically, the EEOC had alleged that the employer’s use of criminal history resulted in a disparate impact against minority workers, especially African Americans who had been excluded from jobs at higher rates than non-minority applicants. The EEOC gave as an example an applicant denied a position for having a six-year-conviction for possession of a controlled substance, which fell within the employer’s 10-year exclusionary rule for this type of conviction.

The three-year consent decree requires that the employer not only pay $6 million (to be distributed to aggrieved individuals) but also, if the employer elects to continue considering criminal history pre-employment, hire a criminologist to develop a new criminal background check based on certain factors including: (a) the time since conviction; (b) the number of offenses; (c) the nature and gravity of the offense(s); and (d) the risk of recidivism. Once the consultant provides a recommendation, the employer is not allowed to use any other pre-employment criminal background check. Until the criminologist provides a recommendation, the employer must continue to conduct individualized assessments.

The settlement also enjoined the employer from discouraging people with criminal histories from applying, engaging in retaliation, and otherwise discriminating on the basis of race in implementing a criminal history check. The employer also is now required to advise conditional hires of its background screening processes and state that having a criminal history is not an automatic bar to employment. In addition, the settlement requires the employer to update its process when a rejected applicant requests that the company reconsider its decision. As part of this process, the employer is required to clearly communicate to disqualified applicants that they may provide additional information to the employer to support reconsideration of the adverse decision. Finally, the employer must provide reports to the EEOC regarding its implementation of any new criminal history checks and its reconsideration process.

The employer remained steadfast in its position that its screening policies were lawful, and the settlement should not be viewed as any admission by the retailer of any wrongdoing.

Employer Considerations

Employers in all jurisdictions should consider an attorney review of their pre-employment and hiring practices by experienced counsel. Setting aside the EEOC’s guidance, many states and localities have their own laws concerning “job relatedness” requirements for an employer’s use of criminal history information, including California, New York, Pennsylvania, and Wisconsin, among many others. Further, subject to narrow exceptions, some states, counties and cities do not even permit employers to inquire about criminal history information on the initial written application form or before a conditional offer, including ordering a criminal background check report from a consumer reporting agency. Against this backdrop, and based on an individual employer’s operations, a company might consider the following best practice recommendations, including:

  • Eliminating policies or practices that exclude people from employment based on a bright-line rule, for example, any criminal record or any felony.
  • Training managers, hiring officials, and decision-makers about the numerous laws that impact use of criminal history information.
  • When asking questions about criminal history information, limiting inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity.
  • Keeping information about applicants’ and employees’ criminal history information confidential and only using it for the purpose for which it was intended.

In addition, employers continue to be targeted in Fair Credit Reporting Act (FCRA) class action lawsuits over the process they use to obtain and make decisions based on background check information obtained from a consumer report agency. As a result, employers are well advised to consider evaluating their use of criminal history information and any other background check information to ensure compliance with the FCRA, similar state fair credit reporting statutes and substantive employment laws.

By Tonya M. Esposito and Renee B. Appel

Seyfarth Synopsis:  In its largest mass enforcement action involving cannabidiol (CBD) yet, the U.S. Food & Drug Administration (FDA) announced on November 25 the issuance of 15 warning letters to various companies for illegally selling products containing CBD.  In addition to the letters, the FDA published a revised Consumer Update detailing safety concerns about CBD products more broadly.  Notably, the FDA commented that it “plans to provide an update on its progress regarding the agency’s approach to these [CBD] products in the coming weeks.” 

Previously, the FDA had indicated it would generate a report by this Fall.  Finally, the FDA reiterated that “[i]t is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement.”  Unlike hemp derivatives– hulled hemp seed, hemp seed protein powder, and hemp seed oil–which were added to the FDA’s Generally Recognized as Safe (GRAS) inventory, the FDA also confirmed that, at this time, CBD is not generally recognized as safe for use in human or animal food.

The latest series of letters signal that while the FDA is continuing its work to develop a regulatory framework, it is still regularly monitoring the market.  As FDA Principal Deputy Commissioner Amy Abernathy remarked, the FDA will “take action as needed against companies that violate the law in ways that raise a variety of public health concerns.”  Of critical concern to the FDA, “[m]isleading, unproven, or false claims associated with CBD products may lead consumers to put off getting important medical care, such as proper diagnosis, treatment, and supportive care.”  In the warning letters, the FDA makes familiar scolding that the recipient cannot make claims about CBD’s ability to cure or treat a disease on product labels, company websites, Facebook, Instagram, and YouTube.  The letters also explain that because CBD is an active ingredient in the epilepsy drug, Epidiolex, products containing CBD are therefore outside the definition of a dietary supplement and cannot be added to food products.

Implicated in the letters is an array of CBD products, including oils, tinctures, balms, gummies, lotions, roll-on gels, caramels, soaps, face masks, pet products, water, sprays and creams.  While a majority of the letter recipients reside in California, other companies in Texas, Oklahoma, Colorado, Oregon, New York, Florida, North Carolina, Arizona, and Kentucky also received warning letters, demonstrating that the unauthorized sale of CBD products is a growing national problem.  The FDA has requested responses from the warning letter recipients within 15 working days stating how they plan to correct these violations, with serious legal ramifications on the line should they fail to comply.

The FDA also highlighted the issue it has proclaimed since May 2019, when the CBD Policy Working Group held a public hearing–“many unanswered questions and data gaps about CBD toxicity” remain.  Dr. Abernathy cautioned, “[a]side from one prescription drug approved to treat two pediatric epilepsy disorders, these products have not been approved by the FDA and we want to be clear that a number of questions remain regarding CBD’s safety – including reports of products containing contaminants, such as pesticides and heavy metals – and there are real risks that need to be considered.”  In the revised Consumer Update, the FDA seeks to eliminate the concept that CBD “can’t hurt.”  To combat that misconception, the FDA outlines a number of known concerns with CBD, including liver injury, drug interactions, male reproductive toxicity, and side effects.  As to areas that the FDA is “actively working to learn more about”, those include: cumulative exposure, effects on special populations, and CBD use with animals.

Importantly, the FDA’s latest update reminds companies that it is illegal under federal law to market food products that contain CBD or label CBD as a dietary supplement.  With an emphasis on the safety concerns posed by CBD use–both known and unknown–the FDA’s enforcement efforts and consumer publications serve as a plea to manufacturers to exercise patience and let the FDA continue to assess the outstanding safety issues of potential uses of CBD, and develop a sufficient regulatory framework for non-drug uses accordingly.  Until the FDA issues its much-anticipated CBD policy, we can expect the FDA to continue sending warning letters to manufactures that simply are not listening to regulators and instead heeding consumer demand.

Additionally, class actions continue to populate the federal docket based on third-party testing revealing that CBD supplements are not as advertised, only bolstering the FDA’s safety concerns.  See, e.g., Gaddis v. Just Brands USA Inc., et al., Case No. 0:19-cv-62067-RS, in the U.S. District Court Southern District of Florida; Darrow v. Just Brands USA Inc., et al., Case No. 1:19-cv-07079, in the U.S. District Court Northern District of Illinois; Kathryn Potter v. PotNetwork Holdings Inc. et al., case number 1:19-cv-24017, in the U.S. District Court for the Southern District of Florida.

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 Matthew J. Gagnon

Seyfarth Synopsis: As we look ahead to the end of the year, and Seyfarth Shaw’s annual analysis of trends and developments in EEOC litigation (see here for last year’s publication), we can begin to see how the EEOC has shaped equal pay litigation in the federal courts in 2019. For years, the Fourth Circuit has been a hotbed for equal pay cases, and FY 2019 continued that trend. Employers should be mindful of this Circuit’s litigation as a trend for things to come across the country.

Since 2012, the EEOC has included equal pay protections as one of its six substantive area priorities in its Strategic Enforcement Plan (SEP). The SEP guides the EEOC’s enforcement activity in terms of the types of lawsuits it brings and the theories of law that it champions and pursues.

The EEOC reports – and our yearly analysis has consistently confirmed – that the six priorities identified in the SEP are lightning rods for increased EEOC litigation, and are more often the subject of the agency’s conscious, directed development of the law. For that reason, we believe that employers are well advised to understand how the EEOC interprets and applies its enforcement priorities, as they tend to be a reliable guide to the types of employers, industries, and business practices that the EEOC is actively targeting. This post will describe the legal developments in FY 2019 within the EEOC’s equal pay priority.

EEOC Litigation Developments In 2019

Equal Pay Act cases are often highly fact-driven and therefore notoriously difficult for employers to scuttle with pretrial motions. Several recent decisions arising out of EEOC-initiated litigation are illustrative of this trend.

For example, in EEOC v. Enoch Pratt Free Library, No. 17-CV-2860, 2019 WL 5593279 (D. Md. Oct. 30, 2019), the District Court for the District of Maryland denied the EEOC’s and the employer’s cross-motions for summary judgment. With respect to the motion filed by the EEOC, the District Court found that genuine issues of material fact persist regarding elements of the EEOC’s prima facie case. Id. at *5. In particular, the District Court held that the evidence showed that employees within the charging party’s position, library supervisors, perform a wide variety of job duties across various library branches: “Overall, the branches generally have varying responsibilities in light of their different physical plants, different clientele, and different community resources. . . . A factfinder should therefore assess whether the duties performed by [supervisors] are sufficiently similar to establish a prima facie case of unequal pay for equal work.” Id.

With respect to the employer’s motion, the District Court applied the reasoning of a recent decision out of the Fourth Circuit, EEOC v. Maryland Insurance Administration, 879 F.3d 114, 124 (4th Cir. 2018). The EEOC alleged that the employer paid three former female fraud investigators less than it paid four former male fraud investigators with comparable credentials and experience. The Fourth Circuit held that the EPA requires “that an employer submit evidence from which a reasonable factfinder could conclude not simply that the employer’s proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity.” Id. at 129. The employer argued that it could not have discriminated against the charging parties because it used the state’s Standard Salary Schedule, which classifies each position to a grade level and assigns each new hire to a step within that grade level. The Fourth Circuit rejected this defense because it found that the employer exercised discretion each time it assigns a new hire to a specific step and salary range based on its review of the hire’s qualifications and experience.

In Enoch Pratt Free Library, the employer had also argued that any wage differential was due to a factor other than sex, rather than due to discrimination, based on its use of a facially neutral salary scale, the Managerial and Professional Society Salary Policy (MAPS), to determine compensation for newly hired library supervisors. 2019 WL 5593279, at *6. The District Court held, however, that that policy did not necessarily compel any specific salary to be awarded to a new hire because it left open the possibility that the employer could apply discretion with respect to setting starting salaries. Id. Applying Maryland Insurance Administration, the District Court concluded that “[the EEOC’s comparator] was hired at a rate not only higher than the female [library supervisors] represented by the EEOC, but also significantly above the salary he had received during his first tenure at [employer]. Given these facts, combined with the inherent discretion within the MAPS policy, genuine factual questions exist about how defendants arrived at [the comparator’s] salary.” Id. at *7.

An employer’s burden at the motion to dismiss stage is even higher. For example, in EEOC v. George Washington University, No. 17-CV-1978 (CKK), 2019 WL 2028398 (D.D.C. May 8, 2019). the District Court for the District of Columbia denied an employer’s motion to dismiss even though the complaint at issue did not explicitly allege how the positions at issue were equal with respect to skill, effort, and responsibility. In that case, the EEOC had brought a lawsuit on behalf of a female university Director of Athletics, who alleged that a male colleague was treated more favorably and given greater opportunities because of his sex. Id. at *1. The University allegedly advertised a new position in its athletics department, but plaintiff had been informed that the job was off-limits to her because the University had already decided to hire her male coworker. Id. at *2. The position paid far more than plaintiff’s position.

The University moved to dismiss the complaint. The District Court held that the complaint “straightforwardly pleads that [plaintiff] was paid less as Executive Assistant than [comparator] was paid as a Special Assistant for substantially the same job responsibilities.” Id. at *4. The Court held that there was no reason for the complaint to get into the equal skill, effort, and responsibility, or other similar working conditions of those two positions, because at the motion to dismiss stage, a court cannot dismiss a complaint even if the plaintiff did not plead the elements of a prima facie case.

Implications For Employers

As these cases demonstrate, employers face considerable hurdles when trying to dispense with an equal pay claim early in the litigation. The fact-dependent nature of those claims often block an easy win at the motion to dismiss or summary judgment stage. When coupled with the increased stakes that come with litigating against the EEOC, these developments are yet another reminder that employers should be proactive about identifying and addressing pay equity risks. Even a facially neutral compensation policy may not be enough to save employers from expensive, protracted litigation if and when the EEOC comes knocking.

Our annual comprehensive analysis of trends in EEOC litigation will be published at the end of the calendar year. As always, we will continue to monitor EEOC litigation, including as it relates to equal pay issues, and keep our readers apprised of developments. We look forward to sharing lessons learned from FY 2019 at the beginning of 2020!

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

 

The Employment Law Lookout blog is taking a holiday break this week, but will resume delivering insightful discourse and updates on the day’s most pressing workplace issues next week.

As a reminder for employers we have previously posted these blogs on holiday safety topics and behaviors: Have Yourself a Safe, Undistracted, and Accident Free Holiday, Don’t Let Too Much Eggnog Ruin Your Office Holiday Party: Tips to Limit Employer Liability at Company Parties , and Ring in the New Year, But Don’t Invite the Constable.

In the meantime, we want to wish all of our readers, contributors, and editors a safe and happy (and warm) Thanksgiving holiday.  We hope you are able to spend time with family, friends, and loved ones and rest assured knowing that we’ll be on the lookout for more management insights to bring you as we move into the year end and into 2020.

Thank you and Happy Holiday.

By Condon McGlothlen, Adam R. Young, and Craig B. Simonsen

Seyfarth Synopsis: The Illinois General Assembly passed SB 1557, revising the language of the Recreational Cannabis Law to reduce but not completely eliminate employer liabilities.

As we previously blogged, the Illinois Cannabis Regulation and Tax Act (410 ILCS 705) (the “Legalization Act”) will legalize recreational cannabis for Illinois adults starting January 1, 2020. The Legalization Act specifically allows Illinois employers to enforce “reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call provided that the policy is applied in a nondiscriminatory manner.” The Act permits employers to prohibit employees from being under the influence of or using cannabis in the employer’s workplace or while on call. Further, the Act (i) allows employers to discipline or terminate an employee who violates the employer’s workplace drug policy, and (ii) specifically insulates employers from liability for disciplining or terminating employees based    on the employer’s good faith belief that the employee was either impaired at work (as a result of using cannabis) or under the influence of cannabis while at work.

However, the Act raised questions about new potential liabilities for Illinois employers. First, the Legalization Act amended the Illinois Right to Privacy in the Workplace Act, which prohibits discrimination against employees for their use of “lawful products” outside of work (defined as lawful products under state law), including cannabis and marijuana. This created a potential cause of action for applicants who test positive on a for marijuana at the post-offer, pre-employment stage. Because the applicant has not started working, such a test could only detect marijuana use outside the workplace. Return-to-duty drug testing presented similar liabilities, typically detecting off duty drug use during a leave.

Employers who test current employees, e.g., post-accident or based on reasonable suspicion, faced new exposure if a discharged employee claimed the employer lacked a “good faith belief” that the employee had been impaired by or under the influence of cannabis. For example, if the employer discharged some employees who tested positive but not others, a discharged employee could claim the employer lacked a “good faith belief” regarding impairment. Alternatively, because there is no legally or medically accepted definition of what constitutes his or her “impairment” (or being “under the influence” of marijuana), the employee could assert he was not in fact impaired at work, and that a positive test result alone cannot prove otherwise.

With the January 1, 2020 deadline approaching, Illinois business community representatives raised numerous concerns with lawmakers. The Illinois Chamber of Commerce proposed revising the Act to clarify permissible drug testing and to limit possible causes of action against employers. Both Houses have passed SB 1557, a bill which amends and clarifies many portions of the cannabis-related laws. The Act as amended would say:

Nothing in this Act shall be construed to create or imply a cause of action for any person against an employer for:

(1) actions taken pursuant to an employer’s reasonable workplace drug policy, including but not limited to subjecting an employee or applicant to reasonable drug and alcohol testing, reasonable and nondiscriminatory random drug testing, and discipline, termination of employment, or withdrawal of a job offer due to a failure of a drug test.

SB 1577 Sec. 705-10(50)(e)(1). This new provision is separate and apart from the Act’s safe harbor for employer decisions based on the employer’s good faith belief that an employee was impaired or under the influence of marijuana while performing his or her job duties.

For post-accident, random, or other forms of current employee testing, the Legalization Act now more effectively limits employer liability by expressly limiting causes of action based on discipline or termination on account of a failed drug test. However, the language regarding an employer’s “good faith belief” remains in the statute. Employees may therefore still pursue litigation alleging such a belief is required for lawful termination, and that the employer lacked this requisite belief in discharging the plaintiff.

With regard to pre-employment, post-offer testing, revisions to the Legalization Act seemingly eliminate employer liability for revoking offers due to failed drug tests. The Legalization Act as amended would explicitly permit “withdrawal of a job offer due to a failure of a drug test.” Section 705-10(50)(e)(1). While the original law amended the Illinois Right to Privacy in the Workplace Act to allow for discrimination claims founded on the use of “lawful products” (e.g. cannabis) outside work, the Right to Privacy in the Workplace Act specifically invokes 705-10(50)(e)(1) of the Legalization Act. Consequently, employer liability for withdrawing offers to applicants who test marijuana-positive – under either the Legalization Act or the Right to Privacy in the Workplace Act – has been effectively eliminated.

Governor Pritzker has not yet signed the bill into law. The Governor has sixty days in which to sign or veto or veto the bill; otherwise it becomes law effective January 13, 2020 – twelve days after the Legalization Act’s January 1, 2020 effective date. We do not know whether Governor Pritzker will take action on the amendments before the New Year. Regardless, we do not anticipate courts enforcing the Legalization Act as regards employment during early January with the amendments potentially taking effect two weeks later. We will continue to monitor developments in this area closely, and will keep employers informed.

For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) or Cannabis Law Practice Teams.

By Tonya M. Esposito and Renee B. Appel

Seyfarth Synopsis: Businesses should take note of recent developments in the CBD space. Consumer protection regulatory agencies issued another joint warning to a company selling CBD products making allegedly unsubstantiated claims. And, the FDA continues to stick to its public position that it is working toward both understanding the impact of CBD on users and crafting an effective regulatory framework. Despite this activity, Congressional leaders are still nipping at the heels of the FDA. Senator Chuck Schumer called on the FDA to issue and implement its CBD regulatory framework as soon as possible, and to report back to his office on its progress to date. In the interim, businesses will be left wondering what the rules of the road are.

Joint Warning Letter

Issued on October 10, 2019, the FDA and FTC partnered together to issue a joint warning to Rooted Apothecary LLC (“RA”), of Naples, Florida, for illegally selling unapproved CBD products that claim to solve a variety of health issues. RA has been accused of, among other things, claiming on its website that its products treat pain in infants, autism, attention-deficit/hyperactivity disorder (ADHD), as well as Parkinson’s and Alzheimer’s disease.

In their joint letter, both regulatory agencies made clear that RA’s purportedly fraudulent acts are illegal under statute. The FTC warned that such acts are illegal under the Federal Trade Commission Act, which makes it illegal to advertise products that can deceive consumers. Moreover, the FTC cautioned that any claims of treatment of diseases in humans must be backed by “competent and reliable scientific evidence.” Meanwhile, the FDA noted that under the Food, Drug, & Cosmetic Act, RA has 15 days to respond to both the FDA and FTC on how it will correct these violations.

In its joint letter, the FDA made clear that it was “working quickly to further clarify our regulatory approach for products containing cannabis and … CBD.” To that end, it has called on the public to report adverse reactions to CBD products to the agency’s MedWatch program. The FDA stated that in evaluating potential regulatory solutions, it holds public health as its prime goal, one that is achieved through “science-based decision-making.” Dr. Amy Abernethy, Principal FDA Deputy Commissioner, previously stated that the FDA would report on its inquiry into the science behind CBD in late summer/early fall of 2019. No report has been issued yet.

Schumer’s Call to Action

Senator Chuck Schumer’s call to action for the FDA stems from the passage of the 2018 Farm Bill. In his public statements last month, Senator Schumer explained that the CBD space, which is already sizeable in New York, is poised to grow into a billion-dollar industry. In light of this, Senator Schumer notes that businesses within his state are eager to join the CBD craze, but cannot act without rules of the road. He indicated that it is “imperative” that regulations be issued and implemented as soon as possible, and that the FDA’s efforts thus far have been “woefully” inadequate. Senator Schumer requested that within 90 days of his letter to Acting FDA Commissioner, Norman Sharpless, the FDA is to provide Senator Schumer’s office an outline of “agency’s current plans for a specific regulatory framework related to CBD along with a timeline for when comprehensive enforcement policies for CBD products will be finalized and implemented.”

Repeated calls to action from various parties (ranging from former FDA Commissioner Scott Gottlieb, to members of the public at large, and now Congressional leadership) have urged the FDA to provide guidance in the CBD space. As Senator Schumer recognized, CBD has the potential to become a billion dollar industry in New York state alone. The importance of this appears not lost on the FDA, but it reiterates the need for adequate scientific data in order to move forward. In the interim, the public and business continue to wait for regulatory clarity and are left trying to navigate muddy waters.

Seyfarth’s Cannabis practice has a deep bench of experienced attorneys who actively counsel clients in this space. Seyfarth will continue to monitor developments and report them as they become available.

By Paul S.Drizner

Seyfarth Synopisis: Illinois recently enacted legislation that changes the rules for withholding income tax from non-resident employees. The new rules replace the current, somewhat more complicated rules with a more straight-forward method that is based on, among other things, the number of working days that an employee spends in Illinois.

Current Withholding Rules

Currently, every employer maintaining an office or transacting business in Illinois that is required to withhold federal tax from compensation paid to a non-resident employee in Illinois is also required to withhold Illinois income tax from such payment. Compensation is considered paid to an employee in Illinois if:

  • the employee’s services for the employer are performed entirely within Illinois;
  • the employee performs some services for the employer outside of Illinois but those services are incidental to the services that the employee performs for the employer within Illinois; or
  • the employee performs some services for the employer within Illinois and the employee’s base of operations or, if the employee has no base of operations, the place from which the employee’s service is directed or controlled is within Illinois.

New Withholding Rules

Effective for tax years ending on or after December 31, 2020, employers are required to withhold Illinois income tax from compensation paid to a non-resident employee if:

  • the employee performs some services within Illinois;
  • the employee’s services that are performed within Illinois are not incidental to services that the employee performs outside of Illinois; and
  • the employee performs services within Illinois for more than 30 working days during the tax year.

The amount of compensation that is considered paid in Illinois under the new rules is the portion of the employee’s total compensation for services performed for the employer during the year which the number of the employee’s working days spent in Illinois during the year bears to the total number of the employee’s working days spent everywhere during the year.

What is a Working Day?

A working day is any day during the year in which the employee performs services on behalf of the employer. Days in which the employee performs no services on behalf of the employer (e.g., weekends, vacation days, sick days and holidays) are not considered working days. Further, a working day is considered spent within Illinois if (i) the employee spends more time that day performing services for the employer within Illinois (without regard to any time spent traveling) than the employee spends performing services for the employer outside of Illinois, or (ii) the only services that the employee performs for the employer on that day is traveling to Illinois and the employee arrives on that day.

A working day does not include any day during a disaster period in which an employee performs services in Illinois solely in response to a request made to the employer by a business or by an Illinois state or local government to perform disaster or emergency-related services in Illinois. Disaster or emergency-related services generally mean repairing, building or performing other business activities related to infrastructure that has been damaged or destroyed by a state or federally declared disaster or emergency event. A disaster period is the period that begins 10 days before the earlier of the date of the Illinois governor’s proclamation or the President’s declaration of a state of emergency or a federal major disaster and ends 60 days after the end of the declared disaster or emergency period.

Tracking Where an Employee Performs Services

If an employer maintains a time and attendance system that tracks where employees perform services on a daily basis, then the information provided by that system is used to determine whether non-resident employees are subject to Illinois tax withholding. A time and attendance system is a system (i) in which an employee is required to contemporaneously record the employee’s work location for every day that the employee works outside of the state where the employee primarily works, and (ii) that is designed to allow the employer to allocate an employee’s wages for tax purposes among all the states in which the employee works.

If an employer does not maintain a time and attendance system, the employer is required to obtain a written statement from its non-resident employees indicating the number of days that the employee reasonably expects to perform services in Illinois during the year. Unless an employer has actual knowledge of an employee’s fraud or gross negligence in preparing the statement, or there is collusion between the employer and the employee to evade tax, the employee’s certification is prima facie evidence of the number of days that the employee spent working in Illinois.

Unfortunately, the law does not explain how an employer should address the situation where it fails to withhold Illinois tax from wages paid to a non-resident employee for the employee’s first 30 Illinois working days if the employee ends up working in Illinois for more than 30 working days and the failure was either because the employee’s statement incorrectly estimated that the employee would work less than 30 days in Illinois or because the employer maintained a time and attendance system but did not begin withholding Illinois tax until after the employee had more than 30 working days in Illinois. Perhaps future guidance will answer this question.

Conclusion

The new rules should make it easier for Illinois employers to determine when they are required to withhold Illinois income tax from wages paid to non-resident employees. Illinois employers with non-resident employees should either implement a time and attendance system by January 1, 2020 or prepare a form statement that non-resident employees can provide to the employer before January 1, 2020 (and before each subsequent January 1) estimating the number of days they reasonably expect to work in Illinois during the year.

For more information on this or any related topic please contact the author, your Seyfarth attorney, or any member of the Seyfarth Shaw’s Labor & Employment Group or the Workplace Policies and Handbooks Team.